Brokerage sees value in Land Bank share offering

Despite weak profitability, state-owned Land Bank of Taiwan (土地銀行), which is slated to make its initial public offering (IPO) in July, could be a positive investment in light of its large market share, according to a report released by Yuanta Core Pacific Securities (元大京華證券) yesterday.

Benefits from investing in the bank, the nation's biggest lender in terms of market share, include possible realization of economies of scale, stable earnings and the potential to attract strategic alliance partners, the report read.

The bank's 134 branches around the nation make it is a possible merger candidate, the report said, adding that its highest net book value per share compared to other listed banks provides limited downside for shareholders.

The major weakness of the bank, however, is low profitability, according to the brokerage.

"Even though the bank is in the process of developing more profitable businesses, we are concerned with the pace of the progress," the brokerage said.

"Even after the disposal plan is implemented by the government, the MOF [Ministry of Finance] will remain the largest shareholder.

The MOF's decisions under pressure from the Legislative Yuan may handicap any aggressive attempts to improve efficiency," it said.

The ministry plans to dispose of 13.5 percent of its holdings of the bank through the IPO.