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|Do Quang Hien - Chairman, SHB|
" The government and State Bank of Vietnam have grasped a firm hand on credit inflow into real estate, which is appropriate for the present scenario. Credit extension options for some risky areas, such as for clients borrowing money to participate in land auctions, should be strictly controlled.
On the other hand, corporate bonds and outstanding loans at the SHB comply with the law and were backed up by adequate collateral.
Regarding investment in corporate bonds, SHB’s investments are completely risk-free and highly liquid. This protects the bank’s long-term viability and security. "
Privately-held lender SHB has announced its total investment in corporate bonds reaching around $6 billion as of last week, with the total amount of funds invested in real estate bonds amounting to $4 billion.
Following Tan Hoang Minh’s corporate bond cancellation a few weeks ago, VietinBank and SHB claimed that they do not offer securities and payment guarantee services, as well as do not invest and distribute bonds issued by this property developer.
Meanwhile, Dao Manh Khang, chairman of ABBank, responded to ABBank shareholders at last week’s AGM that no related loans were made to FLC Group and Tan Hoang Minh.
As of last December, 15 of Vietnam’s commercial banks surveyed by SSI Securities Corporation (except Agribank) owned nearly $9.35 billion in corporate bonds, up 17 per cent on-year.
Techcombank held the largest amount of corporate bonds with $2.73 billion, up 34.4 per cent from the end of 2020. Other lenders also followed suit, such as MB, VPBank, TPBank, BIDV, Vietcombank, VietinBank, and HDBank.
Data analyst FiinGroup stated that, along with securities companies, commercial banks are major players in the primary issuance channel, accounting for 36 per cent in 2021 of the total issued value from real estate businesses.
The application of Circular No.16/2021/TT-NHNN released last November on the purchase and sale of corporate bonds by credit institutions and foreign bank branches seems necessary to not only control the quality of bad debts, especially for banks with poor asset quality and the size of real estate credit but more importantly, to control credit transfer activities between bonds and bank loans through refinancing, capital restructuring, and possibly debt reversals between the two channels.
“Our data showed that the size of outstanding bond credit was at over $11.9 billion at the end of 2021, which is only 2.16 and 2.63 per cent of interest-earning assets and the total credit balance of commercial banks, respectively. Thus, we expect the impact of the mentioned events on the credit quality of the commercial banking system will be insignificant,” FiinGroup noted.
However, this risk will only be minimised if the problems of the violated issuers are isolated and the related parties, such as the debt repayment guarantors, make their efforts to protect the investors’ interest.
The above statement is significant because the corporate bond market is wide. It is substantial in scale and has strong participation of individual and professional investors through retail activities.
Therefore, from the perspective of the banking industry’s credit quality, FiinGroup expected the scale to maintain or improve selectively in banks with high credit growth, decent asset quality, and low real estate credit allocation.
Meanwhile, experts at the Asian Development Bank believed that procedures for issuing public bonds in Vietnam are still complicated, requiring between 2-3 months. Thus, issuers would find private placements more desirable.
As a result, the experts suggested Vietnam to enhance public issuance, simplify the processes, and, conversely, restrict private placements.
In the long run, a robust bond market necessitates the establishment of a credit rating system. In order to establish a credit rating culture, a sizable bond ecosystem is necessary first.
Sing Chan Ng, who is managing director and head of APAC Business Origination at Fitch Ratings, remarked, “It is crucial to encourage issuers to provide credit ratings. Bondholders should also mandate issuers to have a credit rating for their bonds before putting money into this debt instrument.”
Era Dabla-Norris, division chief at the International Monetary Fund’s Fiscal Affairs Department, cautioned that the proportion of private bond issuances outweighs public ones. “Policymaking should be agile, and the size and composition of policy support are proactively adjusted to the pace of recovery,” she said at last week’s meeting with the Vietnamese government.