Bonds issuance in Vietnam totaled VND108.9 trillion (US$4.73 billion) in the first eight months of 2019, of which the real estate sector is estimated to make up to 34% of the total, according to Viet Dragon Securities Company (VDSC).
However, most of bond issuers in tourism invest in resorts, so the nature of these investment is in real estate development. Thus, the actual percentage of bonds related to the real estate sector can be up to 34% of the total value of bonds issued, VDSC argued.
Looking at the outstanding corporate bonds (excluding bonds issued by credit institutions) at 10 banks under VDSC’s watch list, in 2018, the outstanding bonds of these banks reached VND149.4 trillion (US$6.5 billion), down slightly 0.8% against the end of 2017 and accounting for 4% of the banking system’s total credit.
In the first half of 2019, the total outstanding corporate bonds at these 10 banks reached VND152.3 trillion (US$6.62 billion), up only 2% year-to-date. Accordingly, outstanding corporate bonds did not change much at most banks. Only two banks that expanded their investment in corporate bonds were Military Bank with an increase of 78.7% year-to-date, and TienPhongBank with a rise of 25.3% year-to-date. These are also two of the three banks with the strongest credit growth in the January – June period amongst VDSC’s watch list (of 13.9% and 15.9% year-to-date, respectively, only after VIB).
Three banks with the largest proportion of investment in corporate bonds (excluding bonds issued by credit institutions) include Techcombank (VND60.7 trillion or US$2.64 billion, equivalent to 24.7% of total credit), Military Bank (VND15.6 trillion or US$678.84 million, equivalent to 6.1% of total credit) and TienPhongBank (VND6.4 trillion or US$278.5 million, equivalent to 6.7% of total credit).
It is more likely that these banks are holding a large portfolio of bonds in real estate development, according to VDSC.
Taking a broader view at the debt securities portfolio, it is obvious that ACB and Vietcombank have a more prudent debt securities investment structure than peers. ACB is a special case since the entire debt securities portfolio is only invested in government bonds, keeping the yields of debt securities investment in the January – June period at a quite low level (5.7%). On the contrary, the two banks with the highest proportion of corporate bonds achieved highest debt securities yields include Techcombank (8.1%) and TienPhongBank (7.9%). This is attributed to the higher yields of corporate bonds (commonly at more than 9%) compared to bonds issued by credit institutions (6-8%).
Lastly, the redistribution of corporate bonds underwritten by securities companies to individual customers has become a trend. For Techcombank, most corporate bonds are invested through Techcombank Securities, after that, Techcombank Securities will divide and redistribute these bonds to retail investors. In the first half of 2019, Techcombank underwrote VND19.3 trillion (US$839.84 million) of bonds and redistributed VND24.4 trillion (US$1.06 billion) of bonds to individual customers (including some bonds issued in 2018).
Similarly, Military Bank is also promoting the redistribution of secondary bonds (G-bond products, similar to Techcombank’s I-bonds). For these cases, it is expected that the yields of debt securities investment will continue to increase in the second half of 2019, and service income will benefit from both underwriting fee and distribution fee.
