Vietnam banks to profit from bonds amid sluggish loan expansion

TN News

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Banks are taking advantage of their increased liquidity to buy a massive amount of government bonds to secure profit margins as a compensation for the slow rate of loan expansion for 2012.

The government has sold VND11.6 trillion ($5.57 million) in bonds within the first half of the fourth quarter alone, twice as much as it did in the entire fourth quarter of last year, Vnexpress reported, citing the Hanoi Stock Exchange data.

Banks have bought nearly 90 percent of bonds sold so far this year, estimated at VND117.8 trillion (US$5.66 billion).

As the end of the year approaches, Vietnamese banks are most concerned with liquidity to cover the huge spending demand typical of Vietnamese Lunar New Year, which usually falls in late January. But many banks have recently reported liquidity surpluses as loans are increasing at a slower rate than deposits.

Banking expert Nguyen Tri Hieu said banks with liquidity surpluses are eager to get on the bond bandwagon. "In my estimation, there are about one third of banks that have liquidity surpluses."

Phan Huy Khang, general director of major Ho Chi Minh City-based Sacombank, told the news website that his bank had purchased bonds worth VND300 billion.

Banks can significantly profit from investing in government bonds, he said, adding that his bank's deposits have grown by 30 percent.

A separate VnExpress report from October cited Nguyen Van Binh, governor of the central bank, as saying loans had expanded 2.5 percent as of the end of the third quarter. The State Bank of Vietnam expects loan growth to be 8-10 percent for 2012.

Banks were buying more bonds than last year when bank loans increased by 14 percent, he said.

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