Commercial banks dominated the corporate bond market in July, accounting for 87% of the total issuance value, a report from local credit rating agency FiinRating has shown.

Banks are expected to increase their bond issuance for the remainder of the year. Photo: Viet Linh/The Hanoi Times

Under the report, the banks issued over VND27 trillion ($1.14 billion) in bonds during the month, more than double the amount from the same period last year.

Major issuers included MBBank with VND10 trillion ($ 421 million), Vietinbank with VND5 trillion ($211 million), and SHB with VND3 trillion ($126 million). Banks also led in bond repurchases, representing 90% of the nearly VND32.1 trillion ($1.35 billion) repurchased in July.

According to data from FiinRatings and VIS Rating, by the end of July, banks had issued bonds worth approximately VND168.68 trillion ($7.1 billion). The increase in bond issuance is largely driven by the need to comply with the State Bank of Vietnam’s capital adequacy requirements.

Since late last year, banks have been required to reduce the maximum proportion of short-term capital used for medium- and long-term loans to 30% from 34% and to keep the loan-to-deposit ratio below 85%. Meanwhile, deposit growth has slowed due to low interest rates. As a result, many banks have turned to bond issuance to strengthen their medium and long-term capital structure and finance ongoing projects.

FiinRatings predicts that banks will continue to increase their bond issuance for the remainder of the year to raise more medium- and long-term capital, particularly for maturities over three years, as credit growth begins to recover.

Several banks have already registered or plan to issue bonds before year-end, including Vietinbank with VND8 trillion ($337 million), LPBank with VND6 trillion ($252 million), ACB with VND15 trillion ($631 million), and SHB and BIDV with VND5 trillion ($211 million) and VND4 trillion ($168 million), respectively.

VIS Rating forecasts that in the next 1-3 years, the banking sector will need VND283 trillion ($11.9 billion) in bonds to help banks maintain internal capital and capital adequacy ratios.