Illustrative image (Photo: doanhnnhansaigon.vn)Hanoi (VNA) - Total lending ofthe banking sector for securities trading has reached 10 trillion VND (444.4million USD), according to Governor of the State Bank of Vietnam (SBV) Le Minh Hung.
That was down 40 percent compared to thesame period last year, Hung told a National Assembly session last week, addingthat bank’s lending for the securities sector was being tightly controlled tomake sure bad debts stayed low.
Under existing regulations, a financialinstitution can only borrow from commercial banks to invest in the securitiessector if the firm’s bad debt to charter capital ratio is below 3 percent,while the total lending for securities firms that a commercial bank can make ismaximum 5 percent of the bank’s charter capital.
As the total charter capital of the entirebanking system as of the end of August was reported by the SBV at 505 trillionVND, the maximum amount of money that commercial banks can lend for thesecurities sector was estimated at 25 trillion VND.
As the total lending of banks to brokeragefirms was reported at 10 trillion VND, there are still opportunities forfinancial firms to borrow another 15 trillion VND to carry out their businessactivities in the securities sector, Hung said.
Brokerage firms reduce dependence on bankloans by bond issuance
Total margin lending of securities firms totheir clients for securities trading is estimated at 32 trillion VND by the top20 securities companies as of September 2017.
The figure was an increase of 35 percentfrom the beginning of the year as investors had raised their demand for marginlending. This is also the source of income for securities firms as the annualinterest rates that those firms offered to customers ranged from 13 percent to14 percent.
To increase margin lending, brokerage firmshave planned to issue corporate bonds to increase their capital in addition toloans from commercial banks as corporate bonds often have longer terms thanbank loans and offer financial stability.
Among those companies, Viet CapitalSecurities Co (VCSC) on October 23 announced it would issue 500 billion VND worthof corporate bonds to raise capital and restructure its debts.
The company bonds have a maturity of 24months and the annual yield rate is calculated by the average middle-termsaving rates of the Bank for Investment and Development of Vietnam (BIDV) andVietinbank plus 4.5 percent.
Since the beginning of the year, VSCS hadraised total 1 trillion VND from three bond issuances. As of the end ofSeptember, the company had lent total 3.2 trillion VND to clients forsecurities trading.
Also in late October, HCM City SecuritiesCorp (HSC) announced its plan to raise 800 billion VND by issuing one-yearbonds with annual yield rates of 10 percent. The issuance will be completed bythe end of December and the company had total margin lending of 3.54 trillionVND.
The top brokerage firm – Saigon Securities Inc(SSI) – has raised total 600 billion VND from bond issuance since the beginningof 2017. At the end of September, SSI had the highest margin lending in themarket, which reached 4.73 trillion VND.-VNA
VNA
