BIDV takes the lead in bond issuance in 2019

14-Jan-2020 Intellasia | Tri Thuc Tre | 12:10 AM Print This Post

According to the two bond market reports in 2019 of Saigon Securities Incorporation (SSI)’s Analysis and Investment Advisory Centre,19commercial banks issued bonds in the year, including 12 listed banks and seven unlisted banks. Commercial banks offered 117.130 trillion dong of bonds and issued 115.022 trillion dong, equivalent to a success rate of 98.2%. The average term was 4.1 years and average interest rate was 7.04 percent per annum the lowest bond interest rates in the market.

Except Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) and Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) which conducted domestic public offerings and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) which offered international bonds, most commercial banks carried out private placements.

Eleven out of 19 banks issued bonds with terms of more than five years. The largest volume belonged to BIDV (BID), VietinBank (CTG), Southeast Asia Commercial Joint Stock Bank (SeABank, SEA), and Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank, LVP). The interest rates of long-term bonds were much higher, reaching 7.5 8.5 percent per annum.

BIDV issued the largest volume of bonds with a total of 18.371 trillion dong across the terms from six to 15 years, of which 45.7 percent were six-year bonds accompanied by the commitment to repurchase after one year of circulation. VietinBank issued 5.5 trillion dong of bonds with terms from seven to 15 years, mainly in the form of public offering.

According to analysts of SSI, the requirement to meet Basel II standards and Circular 41made many banks to boost the issuance of long-term bonds in order to increase Tier-2 capital and improve Capital Adequacy Ratio (CAR).

There were 81.360 trillion dong of bonds, equivalent to 70.7 percent of the total issuance of bonds, issued with terms from three years or less and interest rates of less than seven percent per annum. The issuance of bonds with terms of two to three years can help banks reduce the ratio of short-term funds issued for medium and long-term loans. Usually, long-term bonds are often offered higher interest rates than short term, but in fact, most of those bonds issued with terms of two to three years were offered lower interest rates. For example, the bonds issued by Saigon Hanoi Commercial Joint Stock Bank (SHB) had an average term of 2.23 years and average interest rate of 6.85%, lower than the one-year deposit interest rate which is seven percent per annum.

Securities companies purchased 31.5 trillion dong, accounting for nearly 40 percent of the bonds issued with terms from three years or less. Many lots of issued bonds only noted buyers as “domestic organisations”. According to SSI’s analysts, since this purchase was very large, it must have the participation of financial institutions (as of September 30th 2019), the total equity of securities companies in Vietnam was only 77.8 trillion dong.

Individual investors only purchased six to 10-year bonds of BID, CTG, SEA and Tien Phong Commercial Joint Stock Bank (TPB) with a total value of 12.084 trillion dong and interest rates ranging from eight to 9.5 percent per annum (with floating interest rates) a reasonable interest rate range for long-term bonds.


Category: Finance, Vietnam

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