Commercial banks cannot find buyers, throw money into bonds

Commercial banks cannot find buyers, throw money into bonds

The volume of bonds bought by commercial banks since early the fourth quarter of the year has been increasing sharply. Banks, which now do not worry about the liquidity, have gathered up their money to buy government bonds.

Commercial banks have been the main subjects of the bond market over the last few years. A report by the Hanoi Stock Exchange showed that banks bought 89 percent of the bonds issued in 2012.

In previous years, banks stopped buying bonds in the last months of the year in order to have money to ensure their liquidity. However, things are different now: money still has been flowing to government bonds.

Twenty five government bond bids were organized in the last three months of 2011 on the Hanoi Stock Exchange, which could mobilize 5.4 trillion dong in total. Meanwhile, 11,600 billion dong worth of bonds have been issued so far this quarter from the 11 bond auctions.

As such, commercial banks have bought 117,755 billion dong worth of bonds, which is 50 percent higher than the amount of bonds they bought in the whole year 2011.

Government bonds have been selling well, even though commercial banks have to pay higher for the bonds. The 3-month bond interest rate stayed at 11.2 percent, while bank deposit interest rate was 14 percent.

Meanwhile, commercial banks this year have purchased bonds at the interest rates of 9.35-10 percent.

The report on the banking sector by Vietcombank Securities has also mentioned the tendency of commercial banks injecting money in bonds.

The survey team has found out that the temporary liquidity abundance can be seen at some big banks which have profuse capital but have the slow disbursement. Therefore, in order optimize their profits, banks decide to buy more bonds in the last months of the year.

General Director of Sacombank Phan Huy Khang has confirmed that the bank has bought government and local bonds.

Sacombank has seen the mobilized capital growth rate of 30 percent over the first nine months of the year, while the lending has grown by 8.11 percent only.

“Sacombank has just bought 300 billion dong worth of bonds issued by the HCM City People’s Committee,” Khang said.

“Keeping money in government bonds proves to be a good choice which allows making profit and ensuring liquidity as well,” he continued.

The member of a board of directors of a small joint stock bank in Hanoi has also said it would buy bonds, if the liquidity situation is improved next month.

The banker has revealed that the bank’s deposit growth rate in the first nine months of the year is triple the lending growth rate; therefore, it is really a good choice to buy bonds to reduce the capital cost.

Meanwhile, Nguyen Tri Hieu, a well-known banking expert said only the banks with profuse capital and strong liquidity should join the bond market.

“These could be the state owned banks or some biggest joint stock banks,” Hieu said. “I think some 1/3 of the operational banks now have capital in excess, while others would still lack capital until the end of the year”.

Governor of the State Bank of Vietnam Nguyen Van Binh, when explaining the credit growth before the National Assembly some days ago, also said that banks have spent big money to buy government bonds. 

vietnamnet