Bank bond yields exceed 2022 peak

Data compiled from disclosures on the Hanoi Stock Exchange (HNX) over the past three months show that many banks have joined the bond issuance race.

Nam A Bank (HoSE: NAB) recently raised VND495 billion ($19.16 million) through bond tranche NABL12607 at 9.7% and VND100 billion ($3.87 million) through tranche NABL12606 at 9.6%.

In late September and early October, LPBank (HoSE: LPB) raised a combined VND600 billion ($23.22 million) through four bond packages at 9.68%.

Sacombank (HoSE: STB) has also repeatedly issued bonds at rates of 9.4-9.5%, raising a total of VND7.83 trillion ($303.04 million) in September and October. Earlier, the bank issued three batches worth VND4.23 trillion at a fixed rate of 10% for six-year maturities.

Notably, PVcomBank issued a bond tranche worth VND200 billion ($7.74 million), with a 10-year maturity and an interest rate of 10.5%. Issued on September 17, the bonds will mature on September 17, 2036.

The lender also issued several other bond tranches in September and October, raising a combined VND4.08 trillion ($157.9 million) at 9.6%. Most of the bonds issued by the bank during this period carry floating rates and maturities of seven to 10 years.

Over the past three months, several other banks have also raised bond rates. HDBank (HoSE: HDB) increased its rate from 8.9% to 9.2%, while Asia Commercial Bank (HoSE: ACB) raised its rate from 8% to 8.5%.

MBBank (HoSE: MBB) issued bonds at rates of 9-9.2% in September, up significantly from 8.1% in July.

According to S&I Ratings, the average bond coupon rate for banks reached 8.85% in the third quarter, surpassing the 2022 peak of 8.7% and exceeding the average of 8.5% in the first half of the year. Coupon rates for bank bonds in Q3 generally ranged from 8% to 9.7%, with some tranches exceeding 10%.

Rising funding cost pressures

Bonds are one of banks’ channels for raising medium- and long-term capital. Higher coupon rates mean banks must accept higher funding costs to attract investors.

The trend could put additional pressure on net interest margins (NIM), particularly if funding costs rise faster than yields on interest-earning assets. The pressure is more pronounced as regulators require credit institutions to cut lending rates by 1.5-2 percentage points per year for manufacturing, business activities and priority sectors.

However, bond coupon rates vary across banks. While many lenders are issuing bonds at rates above 9%, some state-owned commercial banks, including Vietcombank, continue to maintain rates of around 8%, while BIDV 8-8.2%.

Issuance volume is another factor to consider when assessing funding cost pressures. At LPBank, bond tranches carrying a 9.68% rate totaled VND600 billion ($23.22 million), while a tranche issued at 9.2% was worth VND1.5 trillion ($58.05 million). Similarly, PVcombank’s highest-rate tranche, at 10.5%, was worth just VND200 billion, while larger tranches were issued at around 9.6%.

A proper assessment of funding cost pressures therefore requires consideration of both coupon rates and issuance volumes. Nevertheless, the rise in average coupon rates indicates mounting pressure on banks’ bond funding costs.

Looking ahead, demand for medium- and long-term capital could continue to increase as numerous real estate, transport infrastructure, energy and industrial projects move forward. Banks will need to balance funding sources, control borrowing costs, and maintain business performance.