Lombard Bank Malta plc - Interim Results

On 9 August 2005, Lombard Bank Malta plc published its financial results for the six months ended 30 June 2005. The Directors have not declared an interim dividend.

During the first six months ended 30 June 2005, the Lombard Group generated net interest income of Lm2.1 million representing a strong 27% increase compared to the net interest income earned during the same period last year. Lombard’s net interest margin climbed to 48.3% from 40% in June 2004. This is the highest margin ever achieved by the bank in its history.

The gross interest income increased by 5.3% to Lm4.3 million – the main reason for this rise being an increase in interest receivable on debt securities with only a marginal rise in interest receivable on loans and advances. Meanwhile interest payable dropped by 9.2% to Lm 2.2 million.

The Group’s non-interest income fell by 23.6% from Lm508,000 in June 2004 to Lm388,000 in the period under review. The main factor leading to this decrease was a sharp drop in trading profits Lm144,000 in June 2005 compared to Lm237,000 in June 2004. Net fee and commission receivable dipped 0.9% to Lm226,000.
Despite the drop in non-interest income, total income generated by the Lombard Group in the first six months of 2005 grew by 15.1% to Lm2.5 million, with non-interest income accounting for only 15.6% of total operating income. Administrative expenses edged 2.8% higher to Lm1 million whilst the charge for depreciation of Lm48,000 represents a significant hike over the charge incurred during the first six months of 2004. This could have occurred as a result of the various technological upgrades undertaken. Total non-interest expenses of Lm1.1 million results in a cost to income ratio of 42.7% – a significant improvement from the 47.2% in June 2004.

The Group’s operating profit before provisions for impairments and contingent liabilities amounted to Lm1.4 million, a 25% rise compared to the Lm1.1 million in the first six months of 2004. During the period under review, there was a net impairment release of Lm136,000 as opposed to a Lm43,000 charge for the period to 30 June 2004.

Lombard Group’s profit before tax thus increased by 43% to Lm1.6 million. After accounting for taxation, profits for the first half of 2005 amounted to just over Lm1 million (June 2004: Lm0.7 million). Earnings per share increased by 39% to 24c3. This is based on the weighted average number of shares in issues as at 30 June 2005 of 4,139,918.

The balance sheet as at the end of June 2005 shows total assets of Lm185.2 million. Loans and advances to customers at Lm74.6 million reflects an increase of Lm13.2 million (21.6%) over the level of loans and advances as at June 2004. Since the beginning of the year the growth in loans was of Lm5.5 million (7.9%). Meanwhile on the liabilities side, customers’ deposits increased by a mere Lm1.6 million (1%) over the past twelve months and since 31 December 2004 the amount of deposits dropped by a marginal 0.2%. The advances to deposits ratio as at the end of June 2005 works out at 0.45 up from 0.38 in June 2004. Shareholders’ funds of Lm14.4 million translate into a net asset value per share of 341c8 based on the current number of shares in issue of 4,205,360. The annualised return on average assets (profit before tax divided by average assets) increased from 1.2% in June 2004 to 1.7% as a result of the strong rise in profits. Likewise, the annualised return on equity (profit after tax divided by average shareholders’ funds) increased from 12.1% to 15%.

In the review of performance issued with the company announcement, the Board of Directors noted that "it is satisfied that despite market challenges characterised by stiff competition and a low interest rate environment, the Bank’s robust operating fundamentals, prudent management and high quality customer base continued to produce strong results". Moreover, the Directors commented that "these half-yearly results are encouraging and for the remainder of the current financial year, the Board is confident that the emphasis on a selective business approach will support further growth while at the same time generate sustainable earnings contributing to increased shareholder value".