Corporate bond issuance declines in first six months

Corporate bond issuance took a dive in the first half of 2022 amid lower bond interest rates.

According to MB Securities, over VND183.5 trillion ($7.82 billion) of corporate bonds were issued in the first six months of the year, down 10% year-on-year. Only VND5.3 trillion went to investors through public offerings.

The second quarter saw VND112.8 trillion of corporate bonds offered to the financial market, also 10% lower than the same period last year.

Six-month weighted average maturity (WAM) was 3.2 years, roughly 0.69 years less than the figure in 2021. Average bond interest rates stayed at 6.4%, around 1.7 percentage points short of last year's number.

Among the largest issuers, the banking sector took the lead with a total six-month issue of VND90.1 trillion ($3.84 million) and a WAM of 3.76 years. Banks offered VND80.7 trillion worth of bonds in Q2 alone.

The realty sector came next with about VND10.8 trillion ($460.3 million) in Q2. The figure paled in comparison with its total issues in early 2022, which hit VND44.5 trillion and recorded a WAM of 2.45 years.

Other sectors made up VND48.8 trillion of the total corporate bonds on sale in the first half of 2022. Notably, construction firms offered VND17 trillion with a WAM of 2.27 years.

Statistics of financial data supplier FinnPro showed that about VND2.8 trillion ($119.3 million) of corporate bonds were issued in the first half of August and the banking sector remained the largest issuer.

Vietcombank took the biggest share of the pie with VND1.5 trillion, followed by Agribank with VND600 billion and ACB with VND300 billion. VietinBank and VietCapital Bank also got in on the act with VND50 billion and VND60 billion, respectively.

Most issuers employed private placement to raise bond money since public offerings require high costs and standards. For that reason, the latter only involves banks.

Financial expert Nguyen Tri Hieu underscored capital expansion as the main reason for banks to issue such large volumes of bonds.

Banks had to raise their proceeds, he believed, to consolidate their financial ratios and deepen financial buffers amid a period of mounting credits that outpace their equity.

Another reason for banks overwhelming the bond market is that loan restructuring specified by Circulars No. 01, No. 03 and No. 14 has directed some cash flow away from banks in the short term.

Banks had no other choice but to issue bonds to make up for these late-returned cash flows.

The State Securities Commission recently announced that issuers, which are not public companies, will issue privately-placed bonds under the guidance of the Law on Enterprise and Decree No.153.

This means they are held responsible for their own issuance and no pre-issue registrations, approvals or official notifications are required.

The commission also stressed that only professional investors are eligible to purchase privately-placed bonds and that they are responsible for their own investment decisions.