Banks repurchase significant amount of bonds before maturity

A view of a Vietcombank’s transaction office in the northern province of Vĩnh Phúc. Vietcombank repurchased three bond lots ahead of maturity with a total value of VNĐ1.3 trillion in the last two months of this year. VNA/VNS Photo

HÀ NỘI — Commercial banks have spent trillions of Vietnam đồng to buy back bonds before maturity in the last months of this year.

Specifically, the Orient Commercial Joint Stock Bank (OCB) recently bought back all VNĐ500 billion of bonds in circulation before maturity, according to an announcement from the Hanoi Stock Exchange (HNX). The bond lot, which was issued on December 15, 2021 with a term of three years and fixed interest rate of 3.2 per cent per year, was a non-convertible bond, had no guarantees and did not include warrants. Previously, OCB bought back all 14 bond lots, which were issued in 2021 and 2022, ahead of schedule with a total par value of VNĐ12.4 trillion.

At Lien Viet Post Commercial Joint Stock Bank (LPBank), all two bond lots (code: LPBH2124014 and LPH2124015), which were issued in December 2021 with a term of three years, were also settled ahead of schedule. With a face value of VNĐ1 billion per bond, the total value of the bonds repurchased by LPBank was up to VNĐ2 trillion.

In addition, LPBank has just received notice from HNX about the delisting of bond coded LPB121035. The reason for cancellation is that the listed bonds are fully redeemed by the issuer before maturity. This is the bond lot worth more than VNĐ1.38 trillion that was issued on December 30, 2021 with a term of seven years.

In July this year, LPBank spent more than VNĐ4.1 trillion to buy back four bond lots before maturity.

Similarly, the International Commercial Joint Stock Bank (VIB) also repurchased three bond lots before maturity with a total value of VNĐ1.5 trillion. All the three bond lots had a term of seven years and a face value of VNĐ1 billion per bond.

Since the beginning of this year, VIB has had 17 pre-mature bond buybacks with a total value of up to VNĐ6 trillion.

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) also repurchased 3 bond lots ahead of maturity with a total value of VNĐ1.3 trillion in the last two months of this year.

However, after the buybacks, some above banks have recently announced the successful bond issuance worth trillions of đồng.

In particular, OCB successfully issued VNĐ2 trillion in the bond lot coded OCBL2326015 on December 14 this year.

Similarly, VIB on December 12 this year also issued VNĐ790 billion of VIBL2330005 bonds with an interest rate of 8 per cent per year and seven-year term.

Not only OCB or VIB, Vietcombank also plans to issue VNĐ3 trillion of separate bonds in December 2023 with a maximum term of six years and a floating interest rate.

According to financial analysts, the main motivation for banks to buy back bonds before maturity was low credit demand amid positive capital mobilisation and abundant liquidity of the banking system this year. Therefore, banks found themselves sitting on mountains of cash. In an attempt to reduce capital redundancy and optimise capital efficiency, banks had little choice but to use their excess money to buy back bonds.

Dr. Nguyễn Hữu Huân, head of the HCM City Economics University’s Department of Financial Markets, said the bond repurchase seems to be one of the banks’ measures to solve the problem of low capital disbursement and sluggish loan demand.

Data from the Ministry of Finance showed as of December 25 this year, the volume of pre-maturity corporate bond repurchase was VNĐ230.2 trillion, an increase of 5.8 per cent compared to the whole year of 2022.

According to Vietnam Bond Market Association (VBMA) data, the total value of issued corporate bonds by the end of November 2023 was VNĐ247.59 trillion, including 28 public issuances worth VNĐ27.07 trillion and 210 separate issuances worth VNĐ220.52 trillion. Of which, the banking industry accounted for the majority with nearly VNĐ120.06 trillion, equivalent to 48.6 per cent of the total issuance value since the beginning of this year. — VNS