Foreign brokerages rack up agreements

Banks and brokerages are taking advantage of foreign loan limit expansions. Photo: Dung Minh

Last week, a consortium of four Taiwanese banks – the Union Bank of Taiwan, Taichung Commercial Bank Co., Ltd.’s Labuan branch, Taishin International Bank, and Huanan Commercial Bank – rolled out a $30-million syndicated loan with a 12-month tenure for VietinBank Securities – the brokerage arm of state-owned VietinBank.

The negotiations began at the end of 2020 and were completed after three months, despite the ongoing pandemic restrictions. The syndicated loan facilities are expected to fund the brokerage’s future operations and business expansion plans in the fast-growing equity market of Vietnam.

Ho Thi Thu Hien, chairwoman of the board at VietinBank Securities said, “The access to foreign capital could give the company an upper hand in taking advantage of lower interest rates, compared to other foreign brokerages which are backed by their foreign parent banks.”

The expansion of foreign loan limits, Hien added, would continue to add fuel to VietinBank Securities’ synergy to provide best customer-centric and diverse services. This deal is slated to pave the way for the company to boost its activities related to international loan advisory and financing arrangements.

Last December, Vietnam’s largest brokerage Saigon Securities Incorporation (SSI) was ahead of the curve when it signed a mortgage loan agreement of $85 million with a group of nine foreign banks, also led by Taipei-headquartered Union Bank of Taiwan.

Earlier in 2019, SSI also entered into a syndicated loan of $55 million from a group of financial institutions led by SinoPac Bank and became the first securities company in the country to be granted such large-scale credit in the form of an unsecured loan.

An SSI representative told VIR that the expansion of foreign loans with high value and low cost of capital laid a firm foundation for the company to boost its competitiveness through the provision of more cheap capital, especially for margin loans to investors.

Although the representative did not disclose specific rates or loan costs, SSI has an ace up its sleeve due to preferential interest rates thanks to its good risk management capacity, large-scale assets, and extensive network nationwide.

Up to now, only a few of Vietnam’s top securities firms are able to obtain sizable unsecured loans from foreign banks. Specifically, SinoPac, one of the leading Taiwanese lenders, has continuously displayed its eagerness to latch onto Vietnam’s lucrative equity market by cooperating with local prominent brokerages.

Ho Chi Minh City Securities Company also inked an agreement to receive a $50 million unsecured loan from 10 foreign financial institutions, also led by SinoPac, in 2019.

On the same track, SinoPac arranged a $40 million unsecured syndicated loan, together with other foreign banks, to lend to Viet Capital Securities Company in May 2020.

Local securities companies are not the only beneficiaries of unsecured syndicated loans from international funds. Last year, the $500 million syndicated term loan of Techcombank was named the second-largest in Southeast Asia, and the largest ever in Vietnam.

The loan facility was arranged by United Overseas Bank as coordinator and facility agent, and ANZ, CTBC Bank, First Abu Dhabi Bank, and Taishin Bank as mandated lead arrangers, underwriters, and bookrunners.

HDBank has also entered a $71-million syndicated loan led by a consortium of eight Taiwanese banks and an Indian bank arranged by Mega International Commercial Bank.

Market experts believed access to relatively cheap financing sources is one of the pivotal elements to help securities companies grow and stay competitive, especially in comparison with other foreign-backed brokerages such as Mirae Asset Securities, KB Securities, and KIS.

Regarding abundant capital to support margin loans, some foreign banks operating in Vietnam such as Wooribank, CTBC, Indovinabank, and Shinhan Bank Vietnam have actively backed securities firms to bolster margin lending.

For instance, Wooribank provided more than VND2.81 trillion ($121 million) to major brokerages, including KIS, MBS, ACBS, while KBSV. Indovinabank has also issued loans to securities firms such as MBS, KBSV, and TCBS.