Banks continue massive bond issuances in early 2025

According to data from the Vietnam Bond Market Association, as of January 24, four public corporate bond issuances had been recorded, with a value surpassing $222.1 million.

State lender VietinBank issued two bond tranches with eight-year and 10-year terms valued at a combined $160 million, and privately held BVBank issued a $50.1 million bond tranche with a six-year term.

Last month, the directors of southern lender HDBank approved a plan to issue bonds to the public in the first and second quarters of 2025, with a maximum value reaching $400 million, with a term from seven to eight years, and floating coupon rates.

Meanwhile, Military Bank has announced its third bond issuance, set to take place until March 5, with a six-year term, following 21 bond issuances in 2024, totalling $902 million.

According to MB Securities data, the total value of corporate bonds issued exceeded $18.8 billion last year, up 49 per cent on-year.

The banking sector continued to be the backbone of the corporate bond market, issuing over $12.7 billion, accounting for 67 per cent of the total.

Southern lenders ACB, HDBank, and OCB led the way with $1.45 billion, $1.37 billion, and $1.25 billion in issuances, respectively.

This year, banks are expected to continue aggressive bond issuances to supplement their tier-2 capital, which is held in reserve, and complement medium- and long-term funding to serve burgeoning credit demands.

Risk assessment firm VIS Rating forecasts that banks will need around $11.3 billion in bond issuances in the next three years to raise their tier-2 capital source to maintain capital adequacy ratios.

Phan Duy Hung, director and senior analyst at VIS Rating, said that banks will ramp up private placements along the year to strengthen capital sources under the new Securities Law to tap into the strong demand from retail investors.

Bank bonds are being increasingly favoured by individual investors as they offer more attractive yields than traditional savings deposits.

In the past two months, bonds issued by banks typically had terms ranging from seven to 10 years and coupon rates from 5.8 per cent to 7.5 per cent in the first year.

Other bonds issued by banks have terms from two to five years and coupon rates ranging from 5.2 per cent to 6.2 per cent, per year. Currently, most banks are offering 12-month deposit rates below 6 per cent.

In addition, as deposit rates eye a slight increase to attract customers, bank bond interest rates have been upwardly adjusted.

Early last month, BVBank announced a public bond offering with a fixed first-year coupon rate of 8.2 per cent per year. From the second year onward, the rate will be floating, calculated as the reference rate plus a margin of 2.5 per cent per year. The total value of this bond issuance amounted to $52 million, with a six-year term.

Another advantage of bank bonds for individual investors is their higher reliability compared to other corporate bonds.

Additionally, bank bonds offer greater flexibility as bondholders can pledge them as collateral for bank loans or resell them to issuing banks.

Banks are buying back corporate bonds massively amid slow credit growth and a positive deposit landscape.

A report by the Vietnam Bond Market Association shows that in the first four months of this year, the total value of corporate bond issuances amounted to $1.5 billion and included six initial public offerings and 30 private placements.

Companies issued 161.5 trillion VND (6.43 billion USD) worth of bonds during January-July, or 2.6 folds higher than the same time last year, the Ministry of Finance (MoF) said on August 5.