Banks conducting massive bond issuances

On October 2 Military Bank (MB) announced plans to issue 30,000 bonds via private placement, with a total value approximating $125 million.

Banks complementing capital sources through massive bond issuances - Photo: Dau Tu

The bonds will have a term ranging from 5 to 10 years, with the interest rates to be determined by the CEO for each issuance phase.

These bonds are non-convertible, non-warranted, and may be issued in one or multiple tranches.

MB stated that the proceeds from the bond issuance will be used to strengthen its capital sources and to lend out to customers with financing needs, or to support the bank’s operational and business activities.

As of September 30, the total value of bonds issued by MB surpassed $2.15 billion.

Techcombank raised nearly $410 million in bonds last month. From September 26 to 27, the bank issued five bond lots, worth more than $404 million. The bonds have a three-year term and are expected to mature on September 27, 2027, with an annual coupon rate of 5 per cent.

The proceeds from the bond issuance will be used to lend to individual and corporate customers, with disbursement scheduled before December 31.

Since the beginning of the year, Techcombank has successfully raised 14 bond lots with a total value reaching $1.32 billion.

In the year to date, the bank, however, had repurchased 10 bond lots valued more than $830 million.

In August, southern lender ACB issued two private bond lots, with a total value approximating $28 million, with an interest rate from 6.0-6.1 per cent, per year for the first year.

Meanwhile, OCB raised $208.3 million by issuing unsecured bonds to investors, with a term from two to three years and a fixed interest rate of 5.6 per cent, per year.

BaoViet Bank issued 15 million bonds to the public with an interest rate of 7.9 per cent per year. From the second year onwards, the interest rate will be the reference rate plus a margin of 2.5 per cent.

Similarly, at the end of August, HDBank issued $41.6 million in bonds, with an interest rate 2.8 per cent higher than the average 12-month deposit rate of commercial banks at the time of payment.

Other banks, such as BIDV and VPBank, have also conducted multiple private bond issuances - specifically for professional securities investors - with interest rates about 1-1.5 per cent higher than regulated deposit rates.

Though banks incur higher costs when issuing bonds, it helps them balance fundraising and capital safety.

Compared to current 12-month deposit interest rates of around 5.5 per cent to 6 per cent, per year, bonds come with higher capital costs. However, banks have increasingly turned to this fundraising method in recent times.

According to the latest report from the Vietnam Bond Market Association, in the first eight months of this year, the total value of corporate bond issuances approximated $10.3 billion.

Bonds from the banking sector led the market, accounting for 73 per cent of the total bond value, while real estate bonds ranked second, making up a modest 18 per cent.

FiinRatings noted that credit growth in banks has accelerated since June, signalling a recovery in loan demand and corporate bond issuance in the forthcoming period.

As a result, the banking sector is expected to continue augmenting bond issuances for the rest of the year to consolidate their medium- and long-term capital sources as credit growth has gradually improved.

Meanwhile, VIS Rating forecasts that banks will need approximately $11.8 billion in bond issuances over the next three years to empower capital sources. This resource will help banks maintain capital adequacy ratios.

Banks seek to bolster financial standing with capital hikes Many banks have announced plans for their upcoming annual shareholders' meetings (AGMs), with diverse issues such as dividend payments, capital hikes, and profit targets topping the agendas.

Bond issuances surge despite lack of credit ratings A report by the Vietnam Bond Market Association shows that in the first four months of this year, the total value of corporate bond issuances amounted to $1.5 billion and included six initial public offerings and 30 private placements.

Corporate bond issuances more than double in seven months Companies issued 161.5 trillion VND (6.43 billion USD) worth of bonds during January-July, or 2.6 folds higher than the same time last year, the Ministry of Finance (MoF) said on August 5.