Hanoi (VNS/VNA) - Many banks have issued alarge amount of bonds to raise capital in a move to meet high demand duringyear-end’s peak lending season and prepare to meet the State Bank of Vietnam (SBV)’sregulations on tightening the use of short-term funds for long-term loans fromearly next year.

In October alone, State-owned Vietcombank made three issuesof nearly 3.3 million bonds at par value of 100,000 VND (4.27 USD), raising atotal of 329.3 billion VND. The interest rate on the six-year bonds is fixed at7.475 percent per year, much higher than the current rate of 6.6 percent peryear applied for the bank’s 5-year saving deposits.

The month also saw two other State-owned banks – BIDV andVietinBank – issue two-year bonds worth a total of 3.45 trillion VND and 450billion VND, respectively. Before this issue, BIDV made four bond issuesin 2018 totalling 1.01 trillion VND while the figure for VietinBank was up to 18.6trillion VND.

Military Bank also successfully raised nearly 1.39 trillion VNDthrough the issue of six-year and 10-year bonds. The interest rate on the bondsis floating and determined by the bank’s reference interest rate on the12-month saving deposit rate plus 1-1.5 percent per year for five-year bondsand 1.8 percent for 10-year bonds.

VIB in October raised 2.2 trillion VND from three-year bondsat a fixed interest rate of 6.3 percent per year.

According to the banks, the proceeds will be used tosupplement capital and improve their financial capacity.

Statistics from 28 banks showed that the total mobilisedcapital through the issue of valuable papers, including bonds, at the banks inthe first nine months of this year reached nearly 346.63 trillion VND, up morethan 11 percent over the beginning of the year.

The rise of the total mobilised capital through valuablepapers was much higher than the 9.75 percent growth rate of banks’ savingdeposits.

Besides the issue in the domestic market, some banks such asHDBank and VIB also planned to issue international bonds. HDBank, for example,expects to issue 3,000 convertible bonds worth 300 million USD through privateplacement in 2018 or 2019.

According to experts, banks prefer to issue bonds to meetrising capital demand at year-end and prepare long-term capital to satisfy theSBV’s regulation on reducing short-term funds for long-term loans from 45 percentto 40 percent, effective from January 1, next year.

For State-owned banks like Vietcombank, VietinBank and BIDV,increasing capital is one of their most urgent tasks at the moment, because ifthey cannot do so before 2020, their capital adequacy ratio (CAR) will fall belowthe minimum level stipulated by the SBV and under Basel II norms – a set ofbanking laws and regulations issued by the Basel Committee on bankingsupervision to enhance competition and transparency in the banking system andmake banks more resistant to market changes.

However, raising capital has not been easy as the banks arestruggling to find foreign investors while they are not allowed to hold on todividends to increase capital, so the banks have decided to issue bonds.-VNS/VNA