Deferred bond yields decrease

According to the updated securities industry report for the first nine months of 2024, recently published by VIS Rating, the gradual decrease in the number of delinquent bonds and bond repurchase commitments has helped reduce asset risk for securities companies.

Securities companies' delinquent bonds are decreasing, while margin debt is increasing, posing a risk.

According to the updated securities industry report for the first nine months of 2024, recently published by VIS Rating, the gradual decrease in the number of delinquent bonds and bond repurchase commitments has helped reduce asset risk for securities companies.

According to VIS Rating data, large securities companies are leading the industry's profit growth thanks to income from margin lending and investments, supported by significant capital increases. The average return on assets (ROAA) for the entire industry increased from 4.3% in 2023 to 4.9% in the first nine months of 2024, with large securities companies outperforming their peers in terms of profits from margin lending and fixed-income investments.

Notably, the decreasing number of delinquent bonds and bond repurchase commitments has helped reduce asset risk for securities companies. The value of delinquent bonds in Q3 was negligible compared to the approximately VND 8,000 billion in January 2024, or the peak of approximately VND 18,000 billion in delinquent bonds in May 2023. Liquidity remained stable despite companies increasing short-term borrowing to expand margin lending.

The amount of overdue bonds in Q3/2024 is no longer significant compared to the peak of VND 18,000 billion in May 2023.

Asset risk in the sector is gradually decreasing, thanks to a reduction in overdue principal and interest payments and bond repurchase commitments. Tan Viet Securities Joint Stock Company (TVSI) reduced its bond repurchase commitments by approximately 30% in the first nine months of 2024, after issuers in the energy and real estate sectors completed their previously overdue principal and interest payments.

Over 20% of securities companies in the analysis report have a high risk appetite due to their significant investments in corporate bonds. Asset risk from these investments decreased compared to the previous year thanks to a gradual reduction in the delinquent bond ratio and an improved recovery rate for delinquent bonds.

Meanwhile, margin lending to large clients continued to increase in Q3 2024, raising the risk for securities companies if they are forced to sell collateral during a stock market downturn, as happened in Q4 2022. The expectation is that capital increases by securities companies affiliated with banks and large domestic securities companies will strengthen their risk buffers and boost growth.

Large-scale securities companies have recorded strong growth in margin loan balances, accompanied by higher lending interest rates compared to their peers, thanks to their large capital base and extensive customer network.

Large-scale securities firms recorded strong growth in margin loan balances.

In addition, these companies often have the largest portfolios of fixed-income instruments in the industry, and benefit from improved corporate bond market conditions with increased returns from bond investments and custody service fees (e.g., TCBS, VPBANKS, VND).

Conversely, the ROAA of medium-sized securities companies (e.g., SHS, BSI, VDS) decreased by 2% compared to the previous quarter, mainly due to a decrease in the value of equity investments.

Margin lending growth at medium-sized securities companies is also slower than at large companies due to capital constraints and customer networks. Overall, VIS Rating expects more than half of the 251 companies to meet their full-year profit targets. The industry's ROAA for the whole of 2024 is expected to improve by 50-70 basis points year-on-year, reaching 4.8%-5%.

Leverage levels in the industry remain low, thanks to significant capital increases. The substantial capital raises by domestic securities firms (VIX, VND, MBS) in Q3 2024 strengthened the risk buffer and kept the industry's leverage ratio low at around 230%.

ACB Securities Company (ACBS) is also being proposed for a capital increase and will gradually play a more important role in the parent bank's business strategy. For Ho Chi Minh City Securities Company (HSC), the additional capital will support business expansion and maintain the margin lending ratio below the regulated limit of 200% of equity.

Along with subsequent fundraising rounds from domestic companies (SSI, SHS, VCI), the leverage ratio in the industry is expected to decrease in the coming quarters.

Overall, only 10% of companies have high leverage levels due to limitations in raising capital or having numerous bond repurchase commitments from clients. Liquidity risks from increased short-term debt of some foreign-owned companies and companies affiliated with banks remain well controlled.

For example, securities companies affiliated with banks (CTS, ORS) have access to unsecured credit limits from domestic banks, while companies with foreign capital (MASVN, KIS) benefit from support from their parent companies.

In addition, liquid assets such as cash and certificates of deposit (CDs) of these companies also account for approximately 15-30% of total assets. The refinancing risk from loans to institutional and individual clients is gradually decreasing for Techcombank Securities Joint Stock Company (TCBS), thanks to a fourfold increase in the issuance of long-term bonds compared to last year.

Overall, 30% of the companies have strong liquidity profiles, mostly securities firms affiliated with banks that have benefited from recent capital increases and are less dependent on short-term debt to finance core investment activities.

The VIS Rating report is based on data from the 30 largest securities companies by assets, accounting for approximately 90% of the industry's total assets.

Source: https://baodautu.vn/trai-phieu-cham-tra-cua-cong-ty-chung-khoan-giam-dan-du-no-ky-quy-tang-rui-ro-d230539.html