VIETNAM VietinBank aims for US$2 billion from international market

VietinBank aims for US$2 billion from international market

VietFinanceNews.com - Vietnam Bank for Industry and Trade, or VietinBank, plans to mobilize US$2 billion from the international market in the coming years, via multiple channels including international bond issuance, the bank’s top executive said.

Chairman Pham Huy Hung told the Daily after his bank had announced the issuance of US$250 million worth of international bonds that the bank wants to restructure its capital sources by increasing the proportion of medium-term capital.

Besides, the bank needs to find more funds to finance large projects in need of capital in foreign currency, as well as tighten its relations with the international investor community.

VietinBank initially planned to issue US$500 million worth of bonds on the global market, and despite the total order of US$700 million, the bank has decided to issue only US$250 million worth only. The bond carries a nominal coupon of 8% and a bond yield of 8.25%.

Hung explained this decision is based on the standard scale of a maiden international bond issue and VietinBank’s plan for capital use in the coming time. Furthermore, the constant unpredictable changes in the international financial market require issuers to have a more prudent approach method, he said on the sidelines of a VietinBank analysts conference held in HCMC on Tuesday.

Regarding the bond yield of 8.25% per year, Chairman Hung said this rate is appropriate with the current situation of the international market and the capacity of VietinBank.

He explained international investors have restricted investing in sub-investment grade bonds and expressed concern about Vietnam. The interest rate of 8.25% is deemed appropriate and cheaper than those offered by competitors from other emerging countries with the same credit ratings and similar credit characteristics, said Hung.

In his observation, the bond yields of several banks in the region range from 5% to 7% a year, such as Sri Lanka’s Bank of Ceylon at 6.875% and the Development Bank of Mongolia at 5.75%. However, he noted that these countries have higher credit ratings than Vietnam, so they can issue papers at lower interest rates.

Financial institutions like Nomura and Citibank once stated that VietinBank should set a higher interest rate, at 8.5% or even 9-10%, because the operation quality of Vietnamese banks is not as good as foreign banks, said Hung.

The mobilized money from the bond issue will be ‘mixed’ with other low-cost sources at the bank to have an average capital cost of some 5.5%-6%, and as the bank’s lending rate for U.S. dollar loans is some 7.5-8%, the bank can enjoy a profit margin of 1.5%-2%.

The international bond launch of VietinBank marks the first time a Vietnamese financial institution has issued bonds on the international market. Given the current tough times, the successful issuance proves that international investors still have confidence in VietinBank and has opened the door for other Vietnamese issuers to join the world’s market.

The international bond issuance of VietinBank received much attention, enjoying a 2.8 times oversubscription. Some 40% of the bonds issued were distributed to Asian investors, and a respective 37% and 23% were sold to buyers in Europe and the U.S.

Hung told the Daily that his bank will use the capital gained from this issuance to restructure the current short-term capital sources and support feasible and efficient projects, especially those in fertilizer production, oil and gas, cement, and steel.

http://www.vietfinancenews.com/2012/05/vietinbank-aims-for-us2-billion-from.html