Lombard Bank Malta plc - Full-Year Results

On 14 March, Lombard Bank Malta plc published its full-year results for the financial year ended 31 December 2013.

Performance Overview

Net interest income grew by 9.2% to €15.07 million through a combination of a 1.4% increase in gross interest income to €24.17 million as well as a 9.3% drop in interest expense to €9.11 million. Additionally, non-interest income increased by 1% to €23.5 million as the 2.8% rise in income from postal sales and services coupled with the marginal increase in dividend income offset the 2.3% drop in net fee and commission income to €2.33 million as well as the 47.6% drop in trading profits (foreign exchange activities) to €0.28 million.

Overall, the Group’s total operating income grew by 4% to €38.57 million.

On the expenditure side, administrative costs increased by 1.8% to €25.83 million largely reflecting the investment in human resources, increased costs of compliance and new investment in technology to offset the marginal decrease in other operating costs. Depreciation increased by 6.4% to €1.4 million. Nonetheless, the relatively larger increase in income led to the improvement in the cost to income ratio to 70.7% at Group level (2012: 72%) and 42.3% at Bank level (2012: 43.9%).

The income statement of Lombard Bank Malta plc was adversely impacted by impairments of €4.2 million (2012: €0.99 million) reflecting the prudential management of exposures that the Bank had to certain credit facilities that were considered to require a longer period to reach a positive conclusion. Nonetheless, the Directors reiterated that a high percentage of client facilities are well secured.

As a result, pre-tax profits of the Lombard Group slumped by 25.5% to €7.03 million and after accounting for a tax charge of €2.55 million (2012: €3.29 million), the net profit amounted to €4.09 million representing a 28.4% drop from the previous year’s comparable figure. This translates into an earnings per share of €0.103 (2012: €0.144).

The statement of financial position shows that total assets grew by 6% to €609.8 million largely reflecting the 33.3% increase in investments to €43.55 million and the 56% growth in loans and advances to banks to €73.2 million which offset the 1.6% drop in loans and advances to customers to €314.77 million (reflecting the subdued demand for credit as well as the tighter regulatory constraints being enforced on Banks). Total liabilities also increased by 6.65% to €525.44 million mainly due to the 6.9% growth in customer deposits to €493.9 million. Similarly, shareholders’ funds (excluding minority interests) increased by 2.2% to €79.27 million mostly reflecting the profit registered during the period under review. This is equivalent to a net asset value per share of €1.997. The return on equity (net profit divided by average shareholders’ funds) dropped by 2.3 percentage points to 5.2% and return on assets (pre-tax profit on average assets) contracted by 0.5 percentage points to 1.2%.

Dividend & Bonus Issue

The Directors recommended the payment of a final gross dividend of €0.04 per share (net: €0.026) representing a 63.3% drop from the previous year’s dividend. This is attributable to the drop in profitability but more importantly to the regulatory reduction in line with the recently amended provisions of Banking Rule 09 which oblige all banks to create a new capital reserve against non-performing loans. Lombard’s reserve is currently estimated at €2.62 million with 40% (€1.05 million) being provided against the dividend declared in respect of the 2013 financial year whilst the balance will be provided for in equal instalments from the dividend distributions over the next two years.

Shareholders as at the close of trading on 20 March will be eligible to receive the dividend on 30 April subject to shareholder approval at the upcoming Annual General Meeting scheduled to be held on 24 April.

Shareholders will also be asked to approve a 1 for 20 bonus issue which will be financed through the capitalisation of €0.5 million in reserves. The cut-off date for the bonus issue is 22 May 2014.

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Lombard Bank Malta plc – Preliminary Profit statement for the financial year ended 31 December 2013.