Lombard Bank Malta plc - Interim Results

On 25 August, Lombard Bank Malta plc published its interim results covering the six months ended 30 June 2015.

Performance Overview

During the period under review, the Group’s net interest income contracted by 5.8% to an 8-year low of €6.4 million. This was due to the 11.3% reduction in gross interest income to €10.4 million, on the back of the downward pressure on lending margins and a net decrease in customer advances, which offset the 18.9% decline in interest expense to €3.96 million reflecting the drop in interest rates on customer deposits.

On the other hand, non-interest income grew by 19.9% to a record €15.2 million largely due to the 13.8% increase in postal sales and services revenues (from the Group’s postal subsidiary MaltaPost plc) to €12.8 million. Nonetheless, the Group also reported  an 11.3% increase in net fee and commission income to €1.4 million and a substantial rise in trading profits to €0.73 million (June 2014: €0.24 million) coupled with other improvements in dividend income and other operating income.

Overall, the Lombard Group reported a 10.9% increase in total operating income to €21.6 million.

On the expenditure side, Lombard reported a 6.4% increase in administrative expenses to €14.8 million reflecting additional compliance costs, salaries, training, IT, licence fees, and increased contributions to the Depositor Compensation Scheme. Other increases in costs relate to product development and maintenance of the retail infrastructure. Depreciation also increased by 7.9% to €0.65 million.

The improvement in the Group’s non-interest income led to a reduction in the cost to income ratio to 71.7% compared to 74.6% in the first half of 2014. At a Bank level, given the higher increase in expenses, the Bank’s cost-to-income ratio increased to 47% from 45.2% in the first six months of 2014.

As a result, the Group’s operating profit amounted to €6.1 million representing a 23.9% increase of the previous comparable figure.

Impairment allowances increased by 11.6% to €1.77 million reflecting the Bank’s prudent management of credit risk.

Overall, the Group’s pre-tax profit improved by 31.9% to €2.77 million. After accounting for a tax charge of €1.5 million and minority interest of €0.49 million (related to the shareholding in MaltaPost plc owned by third parties), the Group’s net profit attributable to shareholders amounted to €2.28 million, up 22.6% from the previous comparable period. This translates into an earnings per share of €0.0526 (Jun 2014: 0.0429).

The Statement of Financial Position as at 30 June 2015, shows a 3.5% increase in total assets to €715.9 million compared to the figures as at the end of the last financial year. Loans and advances to customers dropped by 15.5% to €269.2 million which was offset by the 90.8% increase in ‘balances with the Central Bank of Malta, treasury bills and cash to €160.8 million as well as a 31.7% growth in investments to €72.6 million. Total liabilities also increased by 3.6% to €624.7 million largely reflecting the 2.9% increase in customer deposits to €590.4 million. Given the drop in customer loans and a further increase in customer deposits, the Bank’s loan to deposit ratio dropped to 46%.

Overall, shareholders’ funds increased by 3.1% to €85.3 million mainly reflecting the profit registered during the period under review. This translates into a net asset value per share of €1.95 (Dec 2014: €1.89). The Directors also noted that the Bank continues to maintain capital and liquidity ratios well above regulatory minimums.

Dividend

In line with the Group’s dividend policy, the Directors did not declare an interim dividend.

Outlook

The Directors explained that the Bank is well equipped to meet the challenges resulting from the ever-increasing obligations of the regulatory regime and market conditions by focusing its strategy and policy framework on the realities and needs of the Maltese market. Nonetheless, in the short-term, the Bank’s performance is expected to continue to be determined by the available business opportunities, while every effort will be made so that the expectations of all stakeholders continue to be met.

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Lombard Bank Malta plc – Interim Report covering the six months ended 30 June 2015.