Vietnamese Banks Pump Cash into Government Bonds

Commercial banks in Vietnam have been pumping their cash into government bonds due to their abundant sources of working capital, high bond yield and the risk of lending to local enterprises, the Investment newspaper reported.

 

An official from Asia Commercial Bank (ACB) said the bank preferred to invest its funds into government bonds rather than lending to enterprises in order to control its bad debt ratio.

 

ACB reported its ratio of possible loan losses was around 0.5 per cent by the end of September.

 

 

In recent auctions of the government bonds issued by the State Treasury and Vietnam Development Bank (VDB), yields have notably collapsed on small volumes, reliant mainly on local bids. At the latest, the treasury sold two-year bonds at annual yield of 11.5 per cent, and three-year bonds at 11.9 per cent. The VDB also sold 3-year bonds at 10.74 per cent and 5-year bonds at 10.89 per cent per annum, lower than the previous level.

 

“Most banks are eager to invest in bonds instead of making commercial loans, since bonds provide less risk and higher yield," said Systex Vice President David Ying.

 

Le Anh Tuan, operations director of Dragon Capital, said local commercial banks bought almost all g-bonds sold by foreign investors who sold US$862 million bonds in August and US$156 million in September, cutting their bond holdings to over US$1 billion of bonds currently.

 

The temporary capital surplus of the banking system is estimated around VND50 trillion (US$3.1 billion) by the end of October. Financial analysts estimated that the figure could have been higher after the central bank reduced its reserve requirement on dong deposits last week. (VIR)