Banking sector - Tier 2 bonds in public market to increase in 2025

Summarizes the issuance activity in 2024 and key trends in 2025:

Increasing tier 2 bond issuance to support stronger credit growth and maintain regulatory capital compliance

☑️ In 2024, banks in Vietnam increased subordinated bond issuance to VND 92 trillion, up 18% from prior year to support stronger credit growth and maintain regulatory capital compliance. 55% of new tier 2 bonds were issued by State-owned banks (e.g., Agribank, BID, CTG) due to the significant amortization of their tier 2 capital. Several large and mid-sized banks (e.g., MBB, HDB) increased tier 2 bond issuance to support strong growth in risk-weighted assets.

Source: HNX, VIS Rating

“Looking ahead, we expect the banking sector will continue to issue more subordinated bonds through public offerings in 2025 to tap the strong retail investor demand following the increasing trend in 2024,” – Phan Duy Hung, CFA, MBA, Director - Senior Analyst, VIS Rating. 

Banks increased tier 2 bond issuance via public offerings to tap robust retail investors demand

Source: HNX, VIS Rating

Retail investors hold most of the outstanding tier 2 bonds issued via public offerings

Note: Data for Agribank is as of end-2024; Data for other banks is as of 6M2024

Source: Bank data, VIS Rating

☑️ Under the new securities law and guidelines, privately placed bonds sold to professional retail investors must have credit ratings and collateral or payment guarantees. As most bank bonds lack such credit enhancements, bank bonds sold to retail investors require public offerings. In 2024, banks increased subordinated bond issuance via public offerings by 43% yoy to VND 37 trillion, particularly for several small banks (e.g. BAB, BVB, KLB), and mid-sized and large banks (e.g. HDB, MBB).

Nevertheless, investors should be aware that subordinated bonds carry higher risks than bank deposits and senior bonds given their longer tenor, lower priority of claims in case of bank issuers’ asset liquidation, and coupon payment deferral.

List of recently disclosed new tier 2 bond issuance plan

Source: Bank data, VIS Rating

For more details on bank subordinated bond issuance in Vietnam, please refer to our previous report: Banking Sector Comment - June 2024

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