State Bank Governor Le Minh Hung said that securities loans amount to VND10 trillion (US$441 million), adding “The proportion of securities lending is very low compared to the total credit loan, a sharp year-on-year decrease.”
Although concerned about credit loans being poured into high-risk sectors such as real estate and stocks, which could lead to bubbles, Hung said that credit loans invested in securities are very tightly monitored and bad debt is at low rate.
According to regulations, credit institutions must have the bad debt rate below three per cent in order to offer securities lending. The rate of securities lending is maximum 5 per cent of the Banks’ charter capital.
The total charter capital of the banking system as of August 2017 was about VND505 trillion (US$22.27 billion) according to the State Bank of Vietnam (SBV). Therefore, the ceiling rate of securities lending by banks was estimated at VND25 trillion (US$1.1 billion).
Although the stock indexes grew strongly with very high liquidity, the total lending of securities by banks since the beginning of this year has decreased by 40 per cent.
In fact, total outstanding loans offered for securities investors are about VND32 trillion (US$1.4billion), according to statistics at 20 major securities companies as of September 2017.
This figure has increased by nearly 35 per cent compared to the beginning of this year due to the investors’ increasing demand for margin. At the same time, this is also a profitable activity for securities companies as the lending interest rate ranges from 13 to 14 per cent per annum.
To finance securities investors, securities companies borrow loans from banks and mobilize capital through the issuance of bonds.
Recently, securities companies have been leading in issuance of bonds to increase their scope of lending, while replacing bank loans to increase stability due to longer term of bonds.
Viet Capital Securities Joint Stock Company (VCSC) revealed its plan to mobilize VND500 billion (US$22 million) by issuance of bonds to increase capital and restructure loans. From the beginning of 2017, VCSC has 1,000 billion (US$44 million) in three separate offerings. As of September, VCSC lent VND3,200 billion (US$141.1) to investors for investment in securities.
Ho Chi Minh City Securities Corporation (HSC) announced plans to mobilize VND800 billion (US$35.29 million) by issuance of bonds. At the same time, it also announced it will increase the ceiling on the total amount of bank loans and bonds from VND3,000 billion to VND4,900 billion (US$132.3 million to US$216.1 million). HSC is providing investors with loans of up to VND3,541 billion (US$156.16 million).
Sai Gon Securities Incorporation (SSI) has also mobilized VND600 billion (US$26,46 million) by issuance of bonds since the beginning of this year. As of September 2017, SSI was the biggest lender for securities investors in the stock market, with the total amount of VND4,729 billion (US$208.55 million.
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