Analysis of Liechtensteinische Landesbank (LLBN:SWX)

Liechtenstein, let's be honest, nobody cares... Nobody is interested in this tiny principality stuck between Switzerland and Austria and which has less than 40,000 inhabitants. The climate is rotten, the landscapes depressing.

And yet, Liechtenstein is the richest of the German-speaking countries and even has the luxury of having the highest GDP per capita in the world! Liechtenstein has no debt, it even has a "negative" debt, a reserve!

The country's economy is based mainly on the powerful financial sector located in its capital, Vaduz, which is also the residence of the princely family. Liechtenstein uses the Swiss franc as its national currency.

Historically, much of Liechtenstein's prosperity can be explained by its very low corporate tax rate, which has encouraged tens of thousands of companies to set up shop there, most often in the form of a simple PO Box. Oh, that reminds me of another country known for its watches and chocolate...

Founded in 1861, Liechtensteinische Landesbank is listed on the Swiss stock exchange and has a state guarantee (57.5% of the share capital is held by the Principality of Liechtenstein). In this respect, it is comparable to most Swiss cantonal banks. LLB itself holds 74% of the share capital of the St. Gallen-based Linth Bank (also listed on the Swiss stock exchange).

Like all other Liechtenstein banks, LLB has suffered greatly in recent years since Liechtenstein gave up attracting undeclared money and implementing the automatic exchange of information. But the worst seems to be over today, as evidenced in particular by the assets under management, which increased by 8.2% (to 50.3 billion) and the net profit, which increased by 7% in 2017.

The bank is extremely well capitalized, with a Tier 1 capital ratio of 22.2%. The cost/income ratio of around 70% is however not optimal and should be improved over the coming years (LLB is targeting 65%).

The dividend has just been increased by 18%. At the current price of 54.20, this results in a very attractive yield of 3.7%. The payout ratio of 52% is reasonable and in line with the range of 40 to 60% targeted by LLB.

At the current price, the PBR is 0.9 and the 2018 PER is estimated at 14. Despite its recent performance, the stock is still interesting, even if the growth potential is no longer as high as it was one or two years ago. Personally, I would wait for prices close to 50 fr to initiate a position.

LLB aims to grow organically as well as through acquisitions. It is a bank that is both solid and dynamic, as its slogan says: “LLB - Tradition meets Innovation”.

As a conclusion, it is possible to invest in another Liechtenstein bank that is also listed on the Swiss stock exchange, VP Bank. Broadly speaking, it can be said that it is quite similar to LLB, both in terms of profile and valuation. Both are an interesting alternative to Swiss cantonal banks.