Issuing bonds at banks becomes brisker because through this capital mobilisation channel lenders will not have to worry about the capital source for compulsory reserve and the fluctuation of interest rate.

Following other banks, Vietnam Commercial Joint Stock Bank for Industry and Trade (VietinBank) on May 26 officially announced issuing six trillion dong of two-year bonds in 2010 under the retail method.
Noticeably, in comparison with the current allowable ceiling dong deposit rate of 11.5 percent per year, the coupon rate of VietinBank’s bonds is fixed at 12.5 percent pa for the first year. In the following year, these bonds will be applied the floating coupon rate basing on the average saving rate for 12 month term plus a maximum amplitude of 1 percent/year. With this calculation, it is easy to see that buying bonds will enjoy much higher interest than saving money at banks at this time.

Earlier, a series of other banks also mapped out plans and received approval from the State Bank of Vietnam (SBV) to issue long term bonds with big volume.

Most recently, HCM City Housing Development Commercial Joint Stock Bank (HDBank) officially got SBV’s approval to issue three trillion dong of long term valuable papers. The coupon rate of these papers will comply with the market interest rate and the central bank’s current regulation on interest rate management.

Previously, An Binh Commercial Joint Stock Bank (ABBank), LienVietBank and Techcombank also got approval to issue two-three trillion dong of convertible bonds in 2010.

Saigon-Hanoi Commercial Joint Stock Bank (SHB) seemed to be the pioneer in issuing bonds to raise capital in 2010 via issuing 15 million convertible bonds at the face value of 125,000 par.

Accordingly analyses, most commercial banks choose issuing convertible bonds in 2010 to increase the attractiveness for these bonds.

For example, SHB committed that after 12 months, these bonds will be converted into shares at the ratio of one bond for 10 shares.

Bank for Investment and Development of Vietnam (Bidv) recently also announced to list 13.62 million long term bonds at the face value of 100,000 dong par on Hanoi Stock Exchange (HNX). These bonds were successfully issued in 2009.

Specialists said that through bond issuance channel, lenders will gain many purposes such as improving medium and long term capital sources and hiking chartered capital. Therefore, when the deadline for commercial banks to scale up chartered capital to three trillion dong to meet the central bank’s regulation is coming; issuing bonds is considered the optimal solution for many lenders.

Ho Hung Anh, chair of Techcombank’s director board, said that with the capital source from bond issuance, his bank will be able to not only meet capital demand for projects but also diversify investment channels, support liquidity and bring efficiency for his bank. Thus, bonds will be likely to be new choice of commercial banks from now till the end of year.

According to Vietnam Bond Association, the country’s bond market now accounts for only 17 percent of GDP, compared to 53 percent in China, 58 percent in Thailand, 74 percent in Singapore and 82 percent in Malaysia.
Corporate bonds now make up 10 percent of the total bonds in the market while bonds of Vietnam Development Bank (VDB) are 33 percent and the remaining is governmental and local bonds.

Laodong