In a bid to bolster their financial standing, many banks in Vietnam have embarked on a race to issue bonds, raising substantial capital in the process. This surge in bond issuance has seen interest rates climb to around 8% per year, significantly higher than standard savings rates. The move is aimed at attracting both individual and institutional investors, ensuring compliance with regulatory safety indicators, and meeting lending and investment needs.
The recent wave of bond issuances by Vietnamese banks has led to a notable increase in interest rates. Many banks are offering rates around 8% per year, which is considerably higher than the rates offered for regular savings accounts. This strategy is designed to attract a diverse range of investors, including individuals and organizations, by providing a more lucrative investment option. The higher interest rates are a reflection of the banks’ efforts to raise significant capital to support their financial operations and growth plans.
BVBank, for instance, has announced a public offering of bonds in multiple phases, with the first phase involving the issuance of 15 million bonds. These bonds come with a fixed interest rate of 7.9% for the first year, followed by a floating rate based on the 12-month individual savings interest rate of major banks plus a margin. This approach aims to mobilize substantial funds from the public bond channel, targeting both individual customers and organizations.
Similarly, ACB has approved a plan to issue individual bonds with a maximum total scale of VNĐ15 trillion. The bonds, with a par value of VNĐ100 million each, are intended to serve lending and investment needs while ensuring compliance with safety indicators set by the State Bank of Vietnam. The issuance targets institutional investors who meet the legal requirements for professional securities investors.
Strategic Bond Issuances by Major Banks
Several major banks in Vietnam have strategically issued bonds to raise capital, each with its unique approach and terms. Agribank, for example, has offered VNĐ10 trillion in bonds to a wide range of investors, including institutional, individual, and foreign investors. The bonds come with an interest rate of nearly 7% per year, making them an attractive investment option for those seeking higher returns.
HDBank has also entered the bond market with a public bond issue that has a term of seven years. The bank aims to raise VNĐ1 trillion through this issuance, offering a floating interest rate calculated by adding a margin to the reference interest rate. This strategy is designed to provide investors with a competitive return while supporting the bank’s financial objectives.
The Vietnam Bond Market Association (VBMA) reported that last month alone, there were 33 private corporate bond issuances worth VNĐ31.3 trillion and one public issuance worth VNĐ395 billion. This data highlights the growing trend of bond issuance among banks as they seek to strengthen their capital base and meet regulatory requirements.
Implications for the Banking Sector
The surge in bond issuances by Vietnamese banks has several implications for the banking sector and the broader economy. Firstly, the higher interest rates offered on bonds compared to regular savings accounts may lead to a shift in investor preferences, with more individuals and organizations opting for bonds as a more profitable investment option. This could result in increased competition among banks to offer attractive bond terms to attract investors.
Secondly, the substantial capital raised through bond issuances can help banks meet their lending and investment needs, supporting economic growth and development. By raising significant funds, banks can expand their lending activities, provide more loans to businesses and individuals, and invest in various projects that contribute to economic progress.
Lastly, the trend of bond issuance reflects the banks’ efforts to comply with regulatory safety indicators set by the State Bank of Vietnam. By raising capital through bonds, banks can ensure they have sufficient funds to meet regulatory requirements, maintain financial stability, and mitigate potential risks.
