VietNamNet Bridge – While the profits from the credit activities decreased significantly in 2012, the proportion of income from the investment in government bonds tends to increase.

The audited finance reports released by commercial banks since late March all show the banks’ profit decreases because of the lower income from credit. VietinBank, for example, reportedly had the income from net interests decreasing by 8.1 percent in 2012, which then led to the pretax profit down by 2.67 percent.

The banks only obtained the credit growth rate of 8.91 percent in lending to businesses. The interbank market has also been narrowed. A report of Bao Viet Securities Company showed that the interbank average interest rate decreased by 2-5 percentage points in 2012 applied to all terms of loans.

While the banks’ lending was less satisfactory, their investments in government bonds prospered. Commercial banks were the major subjects of the primary government bond market.

The above said report of Bao Viet securities pointed out that the 10 biggest bond buyers were all commercial banks, which bought 68.88 percent of the total bonds sold. These include VietinBank, Vietcombank and the Military Bank.

The government securities’ value held by Vietinbank has increased by 22.6 percent, while Vietcombank’s by 55 percent if compared with 2011.

The Military Bank, though obtaining the positive income from net interests in 2012 with the high credit growth rate of 26 percent, still poured a lot of money into the government bonds. The bank is a special case when its value of the government securities it holds has increased sharply by 253 percent.

The cash flow kept heading for the government bonds in the first quarter of 2013 as well. According to the Hanoi Stock Exchange, the bids at the exchange in the first quarter helped mobilize VND63 trillion worth of capital, an increase of VND11 trillion over the same period of the last year.

Domestic commercial banks continued to be the biggest buyers, who won the bids to obtain 80.12 percent of bonds sold.

A report of Vietcombank Securities Company showed that the secondary market has also been very bustling with the bond trading value reaching VND101,380 billion dong in the first quarter, which was equal to 43 percent of the total trade value of the whole year 2012.

The bustling government bond market has been explained that the government bond yield has become much lower than the interbank interest rates, which has prompted credit institutions to borrow money on the market to trade bonds for profits.

This has also been attributed to the profuse capital banks now have, which has prompted them to buy more bonds to minimize the capital costs. The interest rates of the government bonds, 8.8-9.4 percent per annum on average, is high enough to offset the deposit interest rates banks have to pay to depositors, abut 7.5-8 percent.

Commercial banks buy bonds also the government securities could be used as the collateral for them to borrow money from other banks or the State Bank when necessary.

The reports of securities companies all have noted that big banks tend to buy more government bonds than smaller ones.

Cao Thi Thuy Nga, Deputy General Director of the Military Bank, said big banks have profuse capital while the credit growth rate remains low; therefore, they have to inject money in the bonds together with disbursing money to fund businesses.

Meanwhile, small banks, which have to make profit with the modest capital, have to push up lending, because the interests banks expect from lending are higher than the bond interest rates.

NCDT