Lenders reinforcing presence with bond issuance

Shinhan Bank Vietnam last week successfully issued bonds totalling VND2.8 trillion ($121.7 million), with a tenor of two years.

CEO Kang Gew Won explained to VIR, “This is the first time that Shinhan Bank Vietnam has issued bonds in the Vietnamese market. This offering reinforces Shinhan Bank’s long-standing relationship with Vietnam. Our bank will use these proceeds from the bond sale to expand the bank’s credit activities, diversify its capital sources, serve its business objectives, and also ensure the bank’s long-term development.”

On April 20, Shinhan Bank Vietnam also formally announced the use of the liquidity reserve ratio and net stable capital ratio in liquidity risk management, in accordance with Basel III standards. In recent times, the bank has been continuously assigned a BB rating by Standard & Poor’s, with a “Positive” outlook.

Prior to Shinhan Bank, HSBC Vietnam became the first-ever foreign commercial bank to issue bonds, releasing a total of VND600 billion ($26.1 million) to an enthusiastic market in 2020.

At a par value of VND100,000 ($4.34), HSBC Vietnam’s Lotus bond offers a fixed coupon rate of 5.8 per cent and a tenor of three years. However, some experts believe that compared to HSBC’s reputation and asset size, the move may be seen as market exploration or a public relations ploy to stimulate Vietnam’s capital market.

HSBC has a track record of supporting the development of Vietnam’s capital market through its active participation in fixed income areas. By 2009, HSBC had raised VND8.4 trillion ($365.2 million) in the bond market, including bonds for Electricity of Vietnam, Techcombank, and BIDV. In 2012, HSBC acted as a joint bookrunner and lead manager for VietinBank’s first-ever $250 million international bond offering by a Vietnamese financial institution.

According to the latest statistics from the Vietnam Bond Association, there were 23 private corporate bond issuances for a total of VND16.47 trillion ($716.2 million) in April, equivalent to a 7-fold increase compared to March, while there was no public issuance. Specifically, commercial banks accounted for 90.7 per cent of the overall issuance value in April.

Vietnamese lenders MB and Sacombank were the top two issuers in this group with a total value of VND4.6 trillion ($200 million) and VND2.5 trillion ($108.7 million), respectively.

Individual bonds were also issued by companies in the energy and transportation, industrial, and financial sectors, although their volume was less than 10 per cent of the total issued value.

Real estate developers have refrained from bond issuance competition, though this channel used to be one of their most significant capitalisation approaches. Market watchdogs believe that the spillover impact from Tan Hoang Minh’s unprecedented bond cancellation, coupled with the Ministry of Finance’s stringent regulations on the debt market, has posed challenges for property providers to borrow financing.

Data provider FiinGroup noted that along with securities companies, commercial banks are a major player in the primary issuance channel, accounting for 36 per cent in 2021 of the total issued value of real estate businesses. The application of Circular No.16/2021/TT-NHNN dated November 2021 is necessary, according to FiinGroup, is aimed to not only “control the quality of bad debts and the size of real estate credit, but more importantly to control credit transfer activities between the bonds and bank loans channel through refinancing, capital restructuring, or possibly debt reversal between the two channels”.

“Corporate bond issuance is still an effective channel as the interest rates seem to bottom out but are still low. Moreover, there is a restricted credit from banks to the real estate sector, even before the legislation came into effect to limit real estate credit through the form of bond purchase from commercial banks,” FiinGroup stated. “Raising capital through issuing new shares may be more active even though the stock market is not as vibrant as it used to be. However, this activity is more suitable for public companies with its current regulations requiring information transparency, and their shareowner dilution problem is not significant.”