Bond market bustles as Vietnamese banks go on issuing spree

Vietnamese banks have gotten busy issuing bonds after the government removed a few bottlenecks at the end of the second quarter, with a spurt seen last month.

Statistics from the Hanoi Stock Exchange (HNX) show that local banks made 10 bond issuances worth more than VND12 trillion ($498.2 million) in August.

ACB took the lead with three issuances worth VND6.5 trillion ($270 million), followed by OCB with VND2 trillion ($83 million), Maritime Bank (MSB) with VND1 trillion ($41.5 million), Bac A Bank with VND800 billion ($33.2 million), and BIDV with VND700 billion ($29 million).

HDBank's board of directors has just approved a plan to issue a maximum of VND5 trillion ($207.6 million) in non-convertible 7-year bonds without warrants and collateral. The bond issuance aims to supplement Tier 2 capital, improve capital adequacy ratio and serve customers' capital needs, the bank said.

Tier 2 capital refers to one of the components of a bank's required reserves. Tier 2 is designated as the second or supplementary layer of a bank's capital and is composed of items such as revaluation reserves, hybrid instruments, and subordinated term debt.

Bond issuance by banks had frozen in the first half of the year with many auditing agencies refusing to verify them. The freeze followed the government issuing Decree 65 on private placement and trading of corporate bonds in mid-September 2022. The decree required all issuers to disclose audited information every six months and every year about the use of outstanding bond capital.

After the issuance, the money raised by banks from bonds and other sources such as deposits and certificates of deposit were merged into one, making it difficult for the audit agencies to verify the relevant transactions.

However, this difficulty was removed at the end of the second quarter of 2023, and the last two months have seen a resurgence in the issue of bonds by banks.

In addition, banks have massively bought back bonds before maturity. OCB did so with bonds worth VND3 trillion ($124.6 million), followed by Sacombank with VND1.3 trillion, HDBank with VND1 trillion, MSB with VND1 trillion, and VIB with VND300 billion.

The massive bond redemption by banks has been attributed to excess liquidity. Buying back bonds before maturity would help banks reduce excess capital and improve efficiency of capital use and their capital adequacy ratio.

In fact, many banks bought back 2-3 year bonds before maturity; and issued new bonds with terms of 5-10 years.

Vietnam's private placement corporate bond market recorded total trading volume of 23,328,110 bonds over one month from its July 19 debut, equivalent to nearly VND5.77 trillion ($242 million).

On average, trading volume reached 1 million bonds per session, while trading value reached VND250.6 billion ($10.52 million).

In the one-month period, Vietcombank bonds had the highest trading value at VND3.41 trillion ($143 million), followed by BIDV bonds with VND1.83 trillion ($76.9 million). Domestic investors accounted for 100% of transactions on the market.