Illustrative image (Source: VNA)Hanoi (VNS/VNA) - Local banks havecontinued issuing a large amount of bonds to raise capital to meet the StateBank of Vietnam (SBV)’s stricter regulations on credit safety limits andcapital adequacy.
Last week alone saw the Asia Commercial JointStock Bank (ACB) and the Vietnam Joint Stock Commercial Bank for Industry andTrade (VietinBank) announce bond issue plans worth up to 15.5 trillion VND (665million USD).
ACB’s board of directors approved a plan toissue two-year and three-year bonds worth 5.5 trillion VND, with a maximuminterest rate of 6.75 percent.
ACB said the money raised from this issuancewould be used to increase the bank’s working capital to satisfy rising creditdemand.
In April, ACB also approved the first privateplacement in 2019 with total face value of 2.5 trillion VND.
According to the audited financial statement, bythe end of March, the bond value issued by ACB was more than 7.96 trillionVND.
Meanwhile, VietinBank last week also receivedthe SBV’s approval to issue 10 trillion VND worth of bonds.
Over the past year, VietinBank has issued bondsto maintain and raise its capital adequacy ratio (CAR), which is currently atthe minimum level prescribed by law. The bank raised 450 billion VND last yearthrough bonds.
By the end of the first quarter, VietinBank'svaluable papers totalled 46.2 trillion VND, equivalent to the beginning of theyear, of which 32.2 trillion VND was in bonds.
Earlier, the Ho Chi Minh City HousingDevelopment Joint Stock Commercial Bank (HDBank) became the first bank in thecountry this year to raise 2.5 trillion VND from two-year and three-year bonds atinterest rates of 6.3-7 percent.
According to banking expert Nguyen Tri Hieu,banks prefer to issue bonds to raise long-term capital to satisfy the SBV’sregulation on reducing short-term funds earmarked for long-term loans from 45 percentto 40 percent.
Banks also issue bonds to meet capital adequacyratio (CAR) requirements under the Basel II standards that the SBV wantsthem to be operating by next year, he said.
For State-owned banks like Vietcombank,VietinBank and BIDV, increasing capital is one of their most urgent tasks atthe moment, because if they cannot do so before 2020, their CAR will fall belowthe minimum level of 8 percent stipulated by the Basel II norms – a set ofbanking laws and regulations to enhance competition and transparency inthe banking system and make banks more resistant to market changes.
However, raising capital has not been easy asthe banks are struggling to find foreign investors while they are not allowedto hold on to dividends to increase capital, so banks have decided to issuebonds.
Experts also forecast the capital mobilisationchannel via bond issuance will continue growing in popularity.-VNS/VNA
VNA
