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LPB – Profitability driven by strong loan growth – Update

Company Note 23/02/2021    183


  • 4Q20 net profit rose 61% yoy to VND466bn, on the back of strong loan growth.
  • For FY20 LPB recorded VND1,862bn of net profit, forming 108% of our full-year forecast.
  • Reiterate the Hold rating with a higher TP of VND15,900 following a higher P/B target valuation for Vietnam banking sector.

Giá Thị trường

Giá Mục tiêu

Tỷ suất cổ tức

Khuyến nghị


VND 14.600

VND 15.900




Robust 4Q20 net profit growth on strong loan growth

Net interest income (NII) rose 28% yoy thanks to a striking outstanding loan growth (+26% yoy) – the second highest among HOSE listed banks, mainly driven by individual and SME loans. Non-interest income (non-II) nearly doubled yoy due to a growth in net fee income (+39% yoy) and a VND138bn gain from investment securities. As a consequence, 4Q20 LPB’s net profit increased significantly by 61% yoy to VND466bn.

Asset quality slightly improved

In FY20, the bank ramped up its provision expenses to VND700bn (+61% yoy). Thus, non-performing loan (NPL) ratio was well-managed at 1.4% at end-FY20, lower than the 1.65% level seen during FY20. LPB’s group 2 loan also decreased by 13.5% to VND1,316bn. Besides, its loan loss reserve (LLR) ratio also improved from 85% at end-FY19 to 90% at end-FY20.

We expect EPS to grow at 24% CAGR over FY21-23F

We project a net profit CAGR of 24% over FY21-23F, driven by 18% CAGR in net interest income, on the back of 15% loan CAGR and 19bp NIM expansion over the period. We forecast 18% CAGR in non-II, including 20% CAGR in fee income, for FY21-23F, thanks to income from payment services and bancassurance. On the balance sheet side, we project the non-performing loan and LLR ratios to sustain at 1.6-1.7% and 83%, respectively in FY21-23F.

Reiterate the Hold rating with a higher TP of VND15,900

Our new target price is based on an equal weighting of residual income valuation (COE: 15%; LTG: 3.0%) and a higher target P/BV for FY21F book value. We lift our target FY21F P/BV from 0.8x to 1.0x to reflect a sharp re-rating in the banking sector. As a result, our target price is increased by 21.3% to VND15,900 (previously VND13,100). Thus, we maintain our Hold rating to LPB as the share price is close to fair value. A possible upside to our TP is the success of the private placement for foreign investors. Downside risk is lower-than-expected NIM and higher-than-expected credit cost.

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