VietNamNet Bridge - Thirsty for long-term capital, many commercial banks are issuing bonds with attractive interest rates. 


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The interest rate race this year began earlier than in previous years. The race was kicked off by small banks in August. Later, large joint stock banks and state-owned banks also pushed the interest rates up. 

Some banks have raised the deposit interest rates again, and launched promotion programs to attract capital.

Not only mobilizing capital through deposits, banks have also issued bonds to improve their medium- and long-term capital. 

Banks have  rushed to issue long-term bonds because of the new regulation to take effect in 2019, under which banks can use 40 percent of short-term mobilized capital for long-term lending instead of 45 percent.
BIDV, one of four state-owned banks, is issuing VND4 trillion in bonds, including VND3 trillion worth of 7-year bonds and VND1 trillion worth of 10-year bonds, with face value of VND10 million. Bond holders receive interest annually

Prior to that, many other banks also issued long-term bonds, worth hundreds of billion dong to trillions of dong. Vietcombank, for example, has completed the issuance of 6-year bonds worth VND550 billion with the interest rate of 7.475 per annum.

BIDV issued VND1 trillion worth of bonds in four campaigns, while Military Bank issued VND1.4 trillion worth of 5-year-and-one-day bonds. VIB, after successfully mobilizing VND2.8 trillion from bond issuance, is preparing for another issuance campaign.

Analysts say that banks have a low amount of capital for lending, especially long-term capital. The demand for capital is increasing before the year-end business season.

The problems in liquidity can be seen at even large banks. The reports from BIDV, VietinBank and Vietcombank showed their deposit growth rates of 10.9 percent, 9.7 percent and 9.2 percent, respectively, in the first nine months of the year. These were  all lower than the lending growth rates of 11.5 percent, 11.9 percent and 15.1 percent, respectively.

Nguyen Tri Hieu, a banking expert, said that long-term capital from bonds can be listed as a tier-2 bank, which can increase regulatory capital and help improve CAR (capital adequacy ratio).

A report from the State Bank of Vietnam showed that the CAR of state-owned banks was at 9.39 percent at the end of May.

Banks have also rushed to issue long-term bonds because of the new regulation to take effect in 2019, under which banks can use 40 percent of short-term mobilized capital for long-term lending instead of 45 percent.

However, Hieu warned that the capital raised from bond issuance has high costs (banks have to pay more for longer term capital). To improve the CAR, the best way for banks is to increase tier-1 capital.


US$1=VND22,000


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