Vietnam banks thirsty for medium- and long-term capital

By My Ha, Minh Hue
Mon, February 5, 2024 | 8:07 am GMT+7

Vietnamese banks are holding abundant short-term liquidity, but they still need medium- and long-term capital sources to boost credit growth.

The wave of banking interest rate cuts continued in January. The Big 4 banks, namely Vietcombank, Agribank, VietinBank, and BIDV, all brought deposit interest rates for 1-3 month terms down to below 2%. Joint stock commercial banks such as Techcombank, TPBank, VIB, and SHB have also lowered interest rates.

This would indicate that the banking system's liquidity is still abundant and banks can afford to reduce interest rates.

Banks issued their largest ever volume of bonds in 2023 with a total value of VND176 trillion ($7.23 billion), according to the Vietnam Bond Market Association (VBMA). Photo by The Investor/Trong Hieu.

Banks issued their largest ever volume of bonds in 2023 with a total value of VND176 trillion ($7.23 billion), according to the Vietnam Bond Market Association (VBMA). Photo by The Investor/Trong Hieu.

However, banks have mobilized large amounts of capital through the bond channel. According to the Vietnam Bond Market Association (VBMA), banks issued their largest ever volume of bonds in 2023 with a total value of VND176 trillion ($7.23 billion), or 56.5% of the total issuance value in the market.

At the start of 2024, a series of banks including SHB, LPBank, VietinBank and BIDV announced that they had raised more than VND17 trillion ($698.15 million) in bonds by the end of 2023.

LPBank grasped public attention when it successfully issued four batches of bonds with a total value of VND9.75 trillion ($400.4 million), terms of 2 to 3 years, and interest rates from 5.1% to 6% per year. SHB announced that it had successfully issued VND2.45 trillion ($100.62 million) of 7-year bonds, with an interest rate of 7.95% per year.

Assoc. Prof. Dr. Nguyen Huu Huan from the Ho Chi Minh City University of Economics told The Investor that banks boast abundant liquidity in short terms of less than 1 year, while their need for long-term loans remains large.

Banks mobilize capital from people and businesses mainly for short terms of less than 1 year, while loans needed for long-term investment goals such as buying houses and cars can be over 10 years.

According to the State Bank of Vietnam, about 88% of deposits in the banking system are for terms of 12 months or less, while over 52% of the system's VND loans are for medium- and long-term contracts.

This shows that the banks’ medium- and long-term capital sources are not enough to meet the needs of medium- and long-term loans, especially for real estate projects with loan terms lasting from 10-25 years, he said.

On the other hand, since October 1, 2023, the ratio of short-term capital to medium and long-term loans has been capped at a maximum of 30%, down from 34% in 2021.

In 2023, credit grew quite slowly and only made a breakthrough in the last months of the year. Broker Saigon Securities (SSI) expects credit growth to reach 14% this year, partly supported by falling lending rates. The growth potential comes from the infrastructure construction industry, manufacturing and FDI enterprises, and priority sectors such as agriculture, export, high technology, small-sized enterprise (SME) development, and supporting industries.

In addition, SSI said that real estate developers need VND200 trillion ($8.21 billion) to pay bonds due in 2024. This could also be an important driver of credit growth this year, unless regulators continue to strictly inspect and control credit grants to related parties and satellite companies.

The broker analyzed that banks will compete with each other to gain market shares in the home loan segment for projects with full legal status and prime locations. Only banks with good medium- and long-term capital will be able to offer loan programs with competitive interest rates, attracting customers from other peers.

“Therefore, banks must issue bonds with longer terms to meet medium- and long-term lending needs in the future,” it noted.

Comments (0)
  • Read More
Thai food giant CP enters public-private partnership to promote food system transformation

Thai food giant CP enters public-private partnership to promote food system transformation

Thai-invested C.P. Vietnam Livestock JSC and the Partnership for Sustainable Agriculture Vietnam (PSAV) signed a memorandum of understanding Friday on working together to advance sustainable agriculture in the country.

Companies - Sat, November 2, 2024 | 7:16 pm GMT+7

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.

Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

Economy - Sat, November 2, 2024 | 2:00 pm GMT+7

Major Vietnamese developer Novaland appoints new CEO

Major Vietnamese developer Novaland appoints new CEO

Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.

Companies - Sat, November 2, 2024 | 10:24 am GMT+7

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.

Southeast Asia - Sat, November 2, 2024 | 9:41 am GMT+7

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.

Companies - Sat, November 2, 2024 | 9:13 am GMT+7

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.

Industries - Sat, November 2, 2024 | 8:00 am GMT+7

Vietnam becomes Australia’s fastest-growing inbound market

Vietnam becomes Australia’s fastest-growing inbound market

The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.

Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7

Study finds shift in Thai consumers’ spending patterns

Study finds shift in Thai consumers’ spending patterns

Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).

Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7

Energy security, digitalization key to Indonesia's economic growth

Energy security, digitalization key to Indonesia's economic growth

The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.

Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.

Politics - Fri, November 1, 2024 | 9:25 pm GMT+7

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.

Politics - Fri, November 1, 2024 | 9:02 pm GMT+7

Thailand bans export of raw palm oil until December

Thailand bans export of raw palm oil until December

Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.

Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy Singapore Pte Ltd, under China-based Envision Energy, aims to kick off construction of the 300-MW Envision Nam Po wind power plant in Vietnam’s northern mountainous province of Dien Bien in June 2025.

Energy - Fri, November 1, 2024 | 8:30 pm GMT+7

Indonesia to ban plastic waste imports from 2025

Indonesia to ban plastic waste imports from 2025

The Indonesian government will start imposing a ban on the import of plastic waste from the beginning of next year, according to Minister of Environment Hanif Faisol Nurrofiq.

Southeast Asia - Fri, November 1, 2024 | 8:29 pm GMT+7

Islamic economy makes up 48% of Indonesia’s GDP

Islamic economy makes up 48% of Indonesia’s GDP

The contribution of Islamic business activities to Indonesia’s GDP has been estimated at 48%, local authorities reported at the 11th Indonesia Sharia Economic Festival (ISEF).

Southeast Asia - Fri, November 1, 2024 | 8:28 pm GMT+7