Lombard Bank Malta plc - Interim Results

On 7 August 2007, Lombard Bank Malta plc published its financial results for the six moths ended 30 June 2007. As in previous years, the Directors decided not to declare an interim dividend to shareholders.

During the first half of 2007, total operating income generated by the Lombard Group increased by 8.3% to Lm3.1 million. Net interest income amounted to Lm2.6 million, representing a rise of 8.8% from the first half of last year. The Directors attribute this rise in income to new business opportunities as loans and advances to customers grew by Lm12 million since the start of the year. The increase in the Central Bank of Malta central intervention rate also contributed to the growth in interest income registered in the first half of 2007.
Meanwhile, the Group’s non-interest income rose by 5.5% to Lm0.4 million following a 9.4% rise in net fee and commission income. On the other hand, net trading income, mainly comprising income from foreign exchange activities, dropped by 5.1% to Lm0.15 million.

Non-interest expenses, comprising administrative costs and depreciation, increased by 15.6% to Lm1.3 million. Administrative expenses surged 16% to Lm1.2 million, mainly due to increased compliance and staff costs. The charge for depreciation rose by 7.4% to Lm0.06 million. Despite this increase in costs, the Lombard Group’s cost to income ratio remained at a very healthy level of 41% (June 2006: 38.4%). Including the share of profits of Lm0.1 million from the Group’s associate, Maltapost plc, the cost to income ratio improves to 39.7%.

The Group’s operating profit before impairment allowances and other provisions amounted to Lm1.8 million in the first six months of 2007, 3.8% higher than that generated in the first half of last year. Net impairment releases of Lm0.18 million were registered during the first half of the year compared to a provision of Lm0.1 million in the same period last year. This impairment release helped the Group’s operating profit rise by 20% to Lm2 million. After accounting for the Lm0.1 million related to the Group’s 35% investment in Maltapost plc, Lombard’s pre-tax profit in the first six months of 2007 amounted to Lm2.1 million (June 2006: Lm1.7 million).

Profits after taxation and losses attributable to minority interests amounted to Lm1.38 million, representing a 28.7% increase over the previous year. Earnings per share increased from 12c7 in June 2006 to 16c1.

As at 30 June 2007, the total assets of the Lombard Group amounted to Lm204.8 million. Loans and advances to customers increased by Lm12 million or 13.3% in the first six months of the year to Lm102.2 million whilst balances with the Central Bank of Malta, holdings in Treasury Bills and cash dropped from Lm44.2 million to Lm32.3 million. Total deposits meanwhile decreased by Lm4.4 million or 2.5% to Lm176.2 million resulting in an improved loans to deposits ratio of 58% compared to 50% as at 31 December 2006. Shareholders’ funds increased by 6.1% to Lm20.3 million resulting in a net asset value per share of Lm2.35.

The increase profits generated in the first six months of the year resulted in enhanced profitability ratios. Annualised pre-tax return on equity (profit before tax divided by average equity) edged up slightly to 21% from 20.7% in June 2006 with annualised post-tax return on equity of 14.5% (June 2006: 13.4%). Similarly the Group’s annualised return on assets (profit before tax divided by average assets) increased to 2% from 1.8% in June 2006.

After acquiring a 35% shareholding in Maltapost plc from Transend Worldwide Ltd. of New Zealand in August 2006, Lombard Bank announced on 30 July 2007 that its wholly-owned subsidiary Redbox Limited entered into an Agreement with the Government of Malta for the acquisition of 25% of the issued share capital of Maltapost plc. The Press Release issued by the Government’s Ministry claimed that the price agreed to with Lombard Bank amounts to Lm1.2 million, equivalent to a 50% premium over Maltapost’s net asset value. Should the agreement be approved by the Cabinet, Lombard’s shareholding in Maltapost will increase to 60%. In the same press release issued by the Government, it was announced that the Government will seek the disposal of its remaining 40% shareholding in Maltapost via an Initial Public Offering.

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