Banks rush to raise capital through bond issuance

Experts believe that the bond issuance of commercial banks is needed to add tier two capital for their medium and long-term credit.

The bond issuance of local banks enjoyed thriving developments during the first half of 2019.

In late May, the State Bank of Vietnam reportedly approved Vietinbank’s plan to issue bonds in 2019 with a total value of VND10 trillion (US$430 million).

Elsewhere, HDBank raised VND4.4 trillion (US$189.2 million) from four issues of non-convertible and debentures. Up to 25 million two-year and three-year bonds were issued during the first and second phases in April, valued VND2.5 trillion (US$107.5 million) in total. The remaining bonds were then released during the third and fourth issuance.

TPBank has recently approved a plan to collect shareholders’ opinion on raising US$200 million in tier two capital through the issuance of international bonds in 2019. These non-convertible bonds are expected to be listed on the Singaporean stock market.

Besides, the Board of Directors of joint stock commercial bank ACB rectified a scheme to conduct the initial issuance of 2,500 three-year bonds for 2019, with a total value of VND2.5 trillion (US$107.5 million).

Experts believe that the bond issuance of commercial banks is needed to add tier two capital for their medium and long-term credit.

According to the investment and financial education website investopedia.com, tier one capital is used to describe the capital adequacy of a bank and refers to core capital, including equity capital and disclosed reserves.

Tier two capital includes undisclosed funds that do not appear on a bank's financial statements, revaluation reserves, hybrid capital instruments, subordinated term debt - also known as junior debt securities - and general loan-loss, or uncollected reserves. Tier two capital is supplementary capital because it is seen less reliable than tier one capital.