Banks massively issue bonds before pressure...

Dominate both roles: Seller and Buyer

Banks are stepping up the issuance of corporate bonds (TPDN) to supplement Tier 2 capital. However, this move takes place in the context of tightly controlled mobilization interest rates, increasing pressure on capital costs and affecting net interest margins, especially for banks with low demand deposit ratio (CASA).

Analysts expect corporate bond issuance to pick up this year, with banks continuing to play a leading role. In fact, since last year, commercial banks have almost dominated the corporate bond market, acting as both issuers and buyers, contributing to the expansion of the market.

In March, the market recorded a number of notable issuances from credit institutions. Loc Phat Commercial Joint Stock Bank (LPBank) issued two batches of bonds with a total value of VND3,000 billion in the form of public offering. Interest rates are calculated based on the average 12-month savings interest rates of four major banks, plus a margin of 2.9% - 3.2%/year, with terms of 7 years and 10 years, respectively.

Military Commercial Joint Stock Bank (MB) also raised VND2,199 billion through issuing bonds to the public, with an interest rate equal to the average 12-month savings interest rate of four major banks plus 1.5%/year, with a term of 6 years. In addition, Asia Commercial Joint Stock Bank (ACB) issued a total of VND6,767 billion in bonds, while Orient Commercial Joint Stock Bank (OCB) raised VND6,183 billion.

The market continues to witness many new issuance plans. Typically, VietinBank plans to launch a second public bond issuance with a maximum value of VND4,000 billion, while ACB aims to mobilize VND20,000 billion through 10 separate issuances.

Based on developments in the first months of the year, experts predict that banks will continue to increase the issuance of corporate bonds in 2025 to meet capital needs for credit growth. In addition, reducing savings interest rates also creates a larger gap between credit growth and deposit mobilization, requiring banks to increase bond issuance to balance capital sources.

According to a newly published report by FiinRatings, the outstanding balance of the corporate bond market in 2025 is expected to increase by 15-20%. In particular, commercial banks will continue to issue corporate bonds to increase Tier 2 capital, meeting the demand for credit expansion according to the Government's orientation, while mobilization interest rates are still strictly controlled to avoid sudden increases.

This puts great pressure on ensuring capital safety indicators, especially the credit/deposit ratio (LDR) and the ratio of short-term capital to medium- and long-term loans. Some banks have plans to increase Tier 1 capital (equity capital), but this process takes time and depends on stock market developments.

In addition, new regulations on private bond issuance and public offerings, expected to be applied in the second half of 2025, will help improve the quality of bond products and attract more investors in the context of low savings interest rates.

The demand for refinancing and restructuring of capital in capital-intensive industries such as real estate, energy, construction and materials is expected to increase sharply in the coming quarters. FiinRatings believes that banks will still be the main buyers in the corporate bond market. Being granted high credit growth targets will create conditions for banks to increase investment or restructure credit through the corporate bond channel.

Banks actively issue individual corporate bonds to increase the ratio of medium and long-term mobilized capital.

Deposit interest rates are expected to increase again in the second quarter.

The increased issuance of corporate bonds (TPDN) has caused banks' cost of funds (COF) to increase in 2025. Yuanta Securities forecasts that COF may increase by 10-50 basis points, due to the impact of the USD/VND exchange rate and the need to mobilize long-term capital through bonds.

However, issuing long-term bonds is a solution to help banks meet the regulation on the ratio of short-term capital used for long-term loans, which is limited to a ceiling of 30%, especially for banks focusing on long-term loans. However, this increases the cost of capital, while lending interest rates are controlled, which can narrow the net interest margin (NIM) of the banking industry.

Banks with high CASA ratios, such as Techcombank, MB, VPBank, TPBank, VietinBank, will have an advantage in controlling capital costs and optimizing NIM. By the end of 2024, MB's CASA ratio will reach 38%, Techcombank will be 35.9%, Vietcombank 35%, MSB 24.9%, VietinBank 23.9%, ACB 22%, TPBank 20.9%, BIDV 19.5%, SeABank 18.8%, and Sacombank 18%.

On the contrary, banks with low CASA ratios such as Bac A Bank (2.92%), VietA Bank (4.07%), VietBank (4.95%), Nam A Bank (6.31%), KienLong Bank (6.43%) will face great pressure when capital costs increase. In this situation, the strategy of maintaining high CASA ratios and optimizing operating costs will be important factors to help banks maintain profitability and competitiveness.

Faced with credit growth pressure, the State Bank's business trend survey results show that the system-wide capital mobilization interest rate is forecast to remain stable in the second quarter, with an increase of 0.02% for terms over 6 months and an increase of 0.17% for terms under 6 months in 2025. Meanwhile, the system-wide lending interest rate is forecast to decrease slightly from 0.03% to 0.08% in the second quarter and the whole year of 2025.

Source: https://baodaknong.vn/ngan-hang-o-at-phat-hanh-trai-phieu-truoc-ap-luc-tang-truong-tin-dung-248228.html