Agribank banks on bonds for added growth

Agribank has released details of its planned October $187.5 million bond issue.

Agribank will issue bonds worth VND3 trillion ($187.5 million) on October 10, setting two separate maturities of 10 and 15 years.
The annual interest rates are 9.8 per cent and 10.4 per cent, respectively, increasing to 10.2 per cent and 10.8 per cent over the last five years, assuming Agribank does not buy the bonds back. Bonds have minimum face value of VND1m ($62.5).
The bonds will be listed on either the Ho Chi Minh City securities trading centre or at the Vietnam Custody Centre, once the bank finishes listing procedures with the State Securities Commission.
The bank is offering three incentives to each bond holder; a waiver of the custody fee, 1-2 per cent lower interest rates to those holding debt with the bank, as well as waiving transaction fees for regular banking services.
Agribank general planning division head Vu Tien Hong said the move aims to increase the bank’s equity from now to 2007 to meet the international standard for capital adequacy rate (8 per cent), in preparation for equitisation in 2008.
“The bonds will not be convertible, but holders will have priority option on bank shares once Agribank lists,” said Hong.
The bonds are planned for sale to domestic investors, and several organisations have pre-ordered bonds worth VND2.6 trillion ($162.5m).
Being the second state-owned commercial bank to issue non-convertible bonds for equity increase, Agribank’s 15 year maturity bond has a higher annual interest rate than bonds issued by the Bank for Investment and Development of Vietnam (BIDV), in May.
Agribank bonds will be 36 per cent higher in value than that of BIDV’s total first bond issuance.
Agribank held total assets of VND190tn ($11.8 billion) and registered capital of VND6.2tn ($392.5m) by the end of 2005. According to Vietnamese accounting standards, Agribank posted profit of VND4.2tn ($267.8m) last year.
The bonds are the first step in the bank’s plans to drum up capital prior to going public.
Agribank will shift to a financial holdings format covering banking, insurance and securities, however, the bank plans to do this without equitising at the top.
The bank announced its bid to restructure by 2008, saying it would not follow their example of either Vietcombank or the BIDV, but would restructure affiliates only.
Agribank’s lending focus would remain focused on private individuals.
However, the bank also plans to increase its activities in securities, gold and gemstones, as well as commercial services. It plans to set up a non-life insurance company and tourism commerce company this year as well.
With 2,000 branches, Agribank’s lending to agriculture accounted for 70 per cent of total loans, including VND95.6tn ($6.1bn) to farmers, or 59.4 per cent of the bank’s total lending last year. Bank managers expect to increase lending to farming households to 65 per cent this year..





No. 780/September 25 - October 1, 2006