The Analysis Department of VNDirect Securities Company has released a report on Lien Viet Post Commercial Joint Stock Bank (LienVietPostBankLPB). The report gives very positive comments about the bank.
According to the report, LPB has maintained high credit growth over the years as it has been expanding its lending scale. The Loan to Deposit Ratio (LDR) of the bank reached 67.4 percent in late 2017, much lower than the ceiling limit of 80 percent. Thus, LPB is able to maintain a high credit growth rate in the next two years, while continuing to prepare for the Basel II. The LDR of LPB in 2017 was 67.4 percent, much lower than the forecast of analysts of 73.7 percent. Thus VNDirect’s report predicted that LPB’s lending will increase from 18 percent to 20 percent in 2018 and from 16 percent to 18 percent in 2019 and 2020.
LPB’s Net Interest Margin (NIM) will continue to be improve thanks to the acceleration of retail lending. LPB is currently promoting retail lending, especially specific products such as retirement credit, loans to employees and the armed force. LPB can leverage its extensive network of 228 branches and transaction offices and 1,321 postal transaction offices to expand its operation to remote areas. The State Bank of Vietnam (SBV) has approved LPB to convert 185 postal transaction offices to banking transaction offices, allowing LPB to enhance service quality in these areas. The wide network creates a great opportunity for LPB to capture the segment of customers who have never used banking services.
Experts have lowered their forecast on LPB’s risk provisions for 2018-2020 period as the provisioning for the bonds of Vietnam Asset Management Company (VAMC) is slower than expected. Although attaining pre-provision profit growth in 2017 of up to 24 percent, the bank did not increase its provisions and provision costs only increased by 4.4 percent compared to 2016. The current provisions for VAMC’s bonds is only equivalent to 43.6 percent of VAMC’s bonds.
The sale of shares to strategic investors will be the driving force for LBP price increase. Experts commented that LPB currently locks foreign ownership at 5 percent in order to sell shares to strategic investors. “We believe that LPB is relatively attractive to strategic investors due to its large network and low cost of capital, which are very positive in promoting retail banking. In addition, LPB also has good asset quality and its current valuation is still low compared to other banks”, the report stated.
Regarding LPB shares, experts mentioned that they are traded at much lower prices than other banks. LPB shares are traded at Price-to-Book Ratio (P/B) of 1.1 times and P/B in 2018 is 0.9 time, much lower than the average levels of other banks which are 2.4 times and 2.2 times.
