Issuing bonds, especially convertible bonds, to mobilise capital is considered a “wise” choice for many banks in the context of cash mobilisation facing difficulties despite continually increased interest rates.

After two years of “silence”, mobilisation of capital through bonds has taken off again with a series of banks launching successful issuances such as the Technical and Commercial Joint Stock Bank of Vietnam (Techcombank) with 2.1 trillion VND worth of bonds issued at a fixed interest rate of 10.5 percent per year and the Military Bank (MB) with 1 trillion VND worth of two-year bonds issued at a fixed interest rate of 10 percent per annum.

According to several banks, bond issuance not only helps enterprises take the initiative in calculating capital mobilisation costs but also supplements medium- and long-term capital sources, thus reducing pressure on banks in setting time-limits on interest rate payments.

In addition, to ensure a roadmap of increasing banks’ chartered capital to 3 trillion VND by late 2010 under the State Bank of Vietnam’s regulations, many banks have also sped up the issuance of convertible bonds.

Saigon Commercial Bank (SCB) has offered 1 million convertible bonds to its shareholders with a conversion ratio of 1:110.5.

The Saigon-Hanoi Commercial Bank (SHB) has received approval to issue convertible bonds worth 1.5 trillion VND in total for its existing shareholders and strategic partners. After one year, these bonds will be converted into shares at a ratio of 10 shares to one bond.

According to Duong Thu Huong, General Secretary of the Vietnam Banking Association, with high interest rates and the possibility of conversion, such bonds bring attractive benefits to their owners. “This is a wise choice for many banks because the method does not reduce the value of banks’ shares but still mobilises capital from shareholders,” she said.

However, according to Do Ngoc Quynh, General Secretary of the Vietnam Bond Market Association, because bank bond interest rates are controlled by the ceiling interest rate, the issuance of bonds is more difficult than that of shares./.