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Analyst Pin-board: Corporate Bonds Investment in some Listed Banks

Banks are key players in the corporate bonds market with their large financial resources. In such context, strong investment in corporate bonds, especially high-interest bonds, is a method used by some banks to boost credit and achieve high yields on debt securities to improve NIM. However, expanding too quickly through buying bonds of businesses, especially in the real estate sector, is potentially risky, although the direct impacts on bad debt ratio or provision is not obvious yet. On the other hand, when bonds are redistributed to retail customers, the majority of individual investors are not able to assess the risks of this product as thoroughly as banks. It should be noted that the real estate sector is risky in nature, capital-intensive and is slowing down. As such, at the beginning of August, the SBV sent a warning letter to commercial banks regarding risk management in corporate bond investment activities. Accordingly, banks need to maintain a reasonable investment in corporate bonds in order to balance yields and risks, as well as protect benefits of the secondary investors of these bonds.