Banks massively issue trillion-dollar bonds

Long-term capital mobilization

Agribank has just announced the issuance of VND10,000 billion in bonds in 2023 to have more long-term capital. The bonds have a term of 8 years, a face value of VND100,000/bond, and interest is paid periodically once a year.

Agribank bond interest rates are calculated using the reference interest rate (average interest rate of personal savings deposits in VND, 12-month term, interest paid at the end of the term, listed by 4 banks BIDV, Vietinbank, Agribank, Vietcombank on the interest rate determination date) plus a margin of 2%/year. At present, Agribank's bond interest rate is up to 7.25%/year.

Up to now, Agribank's total assets have reached 1.9 million billion VND. Capital sources have reached 1.8 million billion VND; total outstanding loans to the economy have reached 1.5 million billion VND.

Other banks are also racing to issue bonds to serve long-term goals. VietinBank announced that it has just successfully offered its second batch of bonds to the public with terms of 8 years and 10 years.

The total value of the second bond offering is VND4,000 billion at par value, including VND1,500 billion of 8-year bonds and VND2,500 billion of 10-year bonds. After the offering, the total amount collected is VND3,092 billion.

The interest rate of 8-year bonds is equal to the reference interest rate + 1.2%/year, the interest rate of 10-year bonds is equal to the reference interest rate + 1.3%/year. In which, the reference interest rate is the average interest rate of VND savings deposits, paid in advance, term of 12 months.

According to the offering results, 1,171 individual investors and 45 institutional investors bought 8-year bonds. 441 individual investors and 44 institutional investors bought 10-year bonds.

As of November 1, VietinBank's total outstanding bond debt is approximately VND40,000 billion.

According to VietinBank's announcement, the bond interest rate for the interest calculation period of November 18 for 10-year bonds (2021 - 2031) is 6.25%/year, 1%/year higher than the reference interest rate.

The reference interest rate determined by VietinBank is the average interest rate of personal savings deposits paid in advance, term of 12 months (or the interest rate of equivalent term) announced on the official websites of VietinBank, BIDV, Vietcombank and Agribank.

With the above reference interest rate calculation, it can be seen that how these 4 banks decide on the mobilization interest rate (12-month term) will have a great impact on the bond interest rate situation of these organizations.

9695 1661335689 860x0.jpeg — Banks compete to issue bonds. (Photo: HH)

Are bank bonds attractive?

Bond investment is a suitable investment channel for many customers, especially when savings interest rates are gradually decreasing.

In the third quarter alone, BIDV issued VND700 billion in bonds, including VND500 billion in 20-year bonds with an interest rate of 7.7% per year. ACB Bank issued VND6,500 billion in 2-year bonds with an interest rate of 6.5% per year.

MSB Bank issued 1,000 billion VND in 3-year bonds with an interest rate of 7.5%/year. Bac A Bank issued 800 billion VND in 3-year bonds with an interest rate of 6.5%/year. HDBank issued 500 billion VND in 7-year bonds.

Also in the third quarter, VietinBank issued 2,500 billion VND, Techcombank issued 6,000 billion VND.

Recently, LPBank issued 500 billion VND in bonds, the 5th out of 5 issuances with a total of 4,500 billion VND.

On October 25, BIDV announced the successful issuance of VND2,500 billion in green bonds in accordance with the Green Bond Principles of the International Capital Market Association (ICMA) in the domestic market. The proceeds from the bond issuance will be used to finance green projects, save energy, reduce emissions, and protect the environment, in line with BIDV's green bond framework.

This bond is rated by Moody's, unsecured, not a subordinated debt and does not require a payment guarantee, demonstrating a high level of confidence in the capacity and reputation of the issuing organization. Investors participating in the transaction are all insurance companies and fund management companies belonging to the world's leading insurance corporations.

Source