Securities companies up bank borrowings with low interest rates

With lower interest rates, many securities companies in Vietnam have increased bank loans to finance margin lending and investment activities.

A survey of 30 large securities companies by The Investor showed that as of December 31, 2023, their total outstanding loans reached VND202.48 trillion ($8.23 billion), an increase of VND74.4 trillion or 58% compared to the beginning of the year. Most of the borrowings were short-term loans, with only a few using long-term bonds.

Saigon Securities, listed on the Ho Chi Minh Stock Exchange (HoSE) as SSI, was in the lead with short-term loans of VND43.17 trillion, an increase of VND15.3 trillion ($1.75 billion) compared to the year’s beginning. Of this borrowing, bank loans accounted for VND39.67 trillion with interest rates ranging from 8.5% to 9.3% per year. SSI's three largest creditors were Vietcombank (VND9,275 billion), BIDV (VND7,900 billion) and VietinBank (VND9,989 billion).

On January 17, the company's board of directors approved a 12-month overdraft facility from Techcombank with balance at all times not exceeding VND5.8 trillion ($235.63 million).

The borrowings gave SSI additional resources to increase its lending activities from VND11,057 billion to VND15,134 billion ($614.83 million) and investment activities from VND33,700 billion to over VND48,500 billion ($1.97 billion).

In second place was Tecombank Securities (TCBS), with total debts of over VND19 trillion ($771.9 million) at the end of 2023, an increase of VND10.44 trillion over the beginning of the year. Short-term loans and long-term bonds made up VND18.06 trillion and VND956 billion.

At the beginning of 2023, TCBS had just one USD-denominated short-term loan worth VND6.87 trillion ($279.1 million) with Taishin International Bank, but during the year it borrowed from a series of other banks including HSBC, Sumitomo Mitsui Bank, TPBank, VPBank, Vietcombank and HDBank. The company said loan interest rates for the USD loans ranged from 4.85% to 12.5% and VND from 3.5% to 12% per year.

Similar to SSI, TCBS also nearly doubled the margin lending scale from VND8,362 billion to VND16,263 billion ($660.7 million). Available-for-sale (AFS) financial assets increased from VND10,524 billion to VND15,061 billion ($661.82 million).

ACB Securities (ACBS) saw its total assets more than double in 2023 from VND5.65 trillion to VND11.77 trillion ($487.2 million) after its parent bank - ACB poured an additional VND1 trillion to increase its charter capital to VND4 trillion ($162.5 million). The company sharply expanded its borrowings from VND1,343 billion to VND5,923 billion ($240.63 million), 4.4 times higher.

Vietcombank, BIDV and VietinBank were the major creditors of ACBS. In 2023, the company borrowed nearly VND12 trillion ($487.5 million) from the three lenders at preferential interest rates of 3.2% to 5.8% per year.

This year, the parent bank ACB will pour an additional VND3 trillion to increase ACBS's capital to VND7 trillion ($284.4 million). Besides, at the end of last year, the ACBS board of directors approved loans of VND9 trillion ($365.63 million) from the three lenders - BIDV (VND5 trillion), VietinBank (VND3 trillion), and Indovina Bank Ltd (VND1 trillion). The money will be used to finance the investment and trading of valuable papers, the company said.

At the end of 2023, ACBS's lending activities had reached VND4,575 billion ($185.86 million), more than double the figure at the beginning of the year.

Securities companies taking advantage of low interest rates and excess banking system liquidity to sharply increase loans has proved effective. Many firms have recorded revenue growth from lending activities or investment efficiency, contributing to their overall profits.

The financial statements for the fourth quarter of 2023 showed many securities companies including SSI, KIS Vietnam Securities, BIDV Securities (BSC) and KAFI Securities reporting huge profits; and others reversing losses into profits like VIX Securities, Viet Dragon Securities and KB Securities.

For the whole year, the number of businesses recording profit growth far outnumbered those with reduced profits. A survey of 50 securities companies that have released their Q4 financial statements indicated that only 36% had 2023 business results worse than 2022.