Banks massively embrace bond buy-backs

The Hanoi Stock Exchange (HNX) just reported that southern lender OCB had entirely bought back a $21 million bond package issued in December 2021 with three-year term to maturity, and 3.2 per cent, per year coupon rate.

The bond package is unconvertible, unsecured, and without warrant.

Earlier, OCB bought back prematurely its entire 14 bond packages issued on 2021 and 2022, with a total face value surpassing $523 million.

Meanwhile, Hanoi-based lender LPBank has entirely bought back its two bond packages issued in December 2021 with a three-year term to maturity, having a total value reaching $84.3 million.

Earlier, in July, LPBank spent nearly $173 million on buying back prematurely its four bond packages.

Simultaneously, the bank got a notice from HNX on cancelling listing of its bond package, number LPB121035, issued in December 2021 with a seven-year term to maturity, having a total value reaching $58.4 million.

That was because the issuer has bought back the entire package premature.

In its case, in the year to date Hanoi-headquartered lender VIB has finalised 17 bond buy-backs prematurely with a total value touching $253 million.

Similarly, in the last two months of this year, leading state lender Vietcombank bought back prematurely three bond packages valued a total $54.8 million.

Financial analysts assumed that the massive bond buy-backs of banks came proportionally with the fact that in the first three quarters, banks eyed a positive growth in their deposit volume amid a modest credit expansion of the banking sector.

Nguyen Huu Huan, head of Financial Markets Faculty at Ho Chi Minh City University of Economics, opined that bond buy-back serves as a viable solution for banks to tackle slow lending pace in the face of sluggish borrowing needs.

In addition, bond buy-back helps drive down the ratio of such item versus banks’ charter capital volume.

MB Securities JSC assumed that idle capital has pushed banks to buy back their bonds to optimise capital usage efficiency.

According to figures from Vietnam Bond Market Association (VBMA), by the end of November, total issued corporate bond value came to $10.4 billion, including 28 public offerings valued a total $1.14 billion, equal 10.9 per cent, and 210 rounds of private placements, accounting for 89.1 per cent.

The bond volume from the banking sector held a big share, reaching 48.6 per cent, valued at $5.06 billion.

Economist Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, remarked that stock and corporate bonds would have brighter prospects in 2024.

“Bank interest rates fetching lower provide good opportunities for firms to issue bonds, as well as a favourable factor for securities investment channel to become more appealing,” said Nghia.

Tran Phu Viet, product manager at FiinGroup, a leading integrated service provider of financial data, business information, industry research and other data-driven analytics services, said that bond issuance took place robustly in the late months of 2023, particularly in the bank group, with average transaction volume surging triple or quadruple on a weekly basis.

“The corporate bond market still has room for development in 2024, as the corporate bond market has become increasingly transparent along with bolstered credit rating activities. However, it needs more time to draw retail investors back to the market,” said Viet.

The banking system is under pressure to assist the real estate market through recent turbulence. Dr. Le Xuan Nghia, member of the National Financial and Monetary Policy Advisory Council, talked with VIR’s Hong Dung about the situation and projections for what is to come.

Increasingly, companies across Vietnam are embracing corporate responsibility, sustainability, and building community relations. The presence of names such as Samsung, PetroVietnam, Sabeco, BRG, SeABank, Vingroup, Sun Group, Coninco, Kinderworld, and Gelex in community activities over the years is obvious.

At a conference on developing a safe, transparent, and efficient capital market on April 22, Nguyen Thi Hong, Governor of the State Bank of Vietnam, said that credit institutions are both direct investors in and major issuers of the corporate bond market.