Lombard Bank Malta plc - Full-Year Results & Dividend Announcement

On 13 March 2008, Lombard Bank Malta plc published its Preliminary Profit Statement for the year ended 31 December 2007. In September 2007, Lombard purchased further shares in MaltaPost plc, with the latter becoming a Group subsidiary. Therefore the financial statements of MaltaPost are consolidated with those of the Lombard Group as from the year under review.

The key highlights are:
• Net interest income climbs 26.7 per cent to €15.5 million;
• Revenue from postal services of €1.2 million;
• Cost to income ratio of 36.8 per cent;
• Profit for the year of €7.1 million;
• Loans rise 24 per cent to €260 million;
• Shareholders’ funds up 22 per cent to €54.5 million.

The Directors recommended the payment of a gross dividend of €0.40 per share, 37 per cent higher than last year’s distribution. The dividend is payable on 6 May 2008 to those shareholders as at close of trading on 14 March. As in previous years, shareholders will be given the option of receiving the dividend either in cash or by the issue of new shares at a price of €12.60 per share. Moreover, the Directors are also recommending the capitalisation of €3.6 million from retained earnings by way of an increase in the nominal value of the shares from €0.5823 to €1.00 per share. This will be followed by a 4 for 1 share split with effect from 2 May 2008, thereby increasing the number of shares in issue to 34,514,912 and bringing the nominal value down to €0.25 per share.

During 2007, net interest income generated by the Lombard Group climbed 26.7 per cent to €15.5 million driven by a 24 per cent rise in loans and advances as well as an increase in interest rates during the first half of the year. The net interest margin edged up to 52.8 per cent. Moreover, the Group’s non-interest income surged 78 per cent to €3.7 million mainly as a result of the inclusion of €1.2 million attributable to income from postal services which was not accounted for in the previous year. Net fee and commission income increased by 5.3 per cent to €1.16 million with other income of €0.5 million (2006: €0.05 million). This also includes income arising from the consolidation of the MaltaPost financial statements.  Trading profits including foreign exchange income dropped by 6 per cent to €0.7 million. Total operating income generated by the Lombard Group amounted to €19.2 million, 34 per cent higher than the income of the previous year.

Non-interest expenses, comprising administrative costs and depreciation, increased by 40 per cent to €6.7 million. The strong increase in expenses also relates to the inclusion of MaltaPost’s costs which did not show up in last year’s financial statements. In fact, the Directors stressed that the Lombard Group continues to place a strong emphasis on containing costs as evidenced by the cost to income which remains at a very healthy level of 36.8 per cent.

The Group’s operating profit before impairment allowances and other provisions amounted to €12.2 million, 31 per cent higher than the previous year. Net impairment allowances increased from €0.3 million in 2006 to €1.9 million following the strong rise in loans and advances. The Directors stated that the increased charge shows the prudent policy adopted in the management of the Bank’s credit portfolio. The 2007 financial statements also show an amount of €0.4 million relating to the share of profits of MaltaPost.

Lombard’s pre-tax profit during 2007 amounted to a record figure of €10.6 million, 18 per cent higher from the previous record in 2006. After accounting for taxation and minority interests, the Lombard Group generated a profit during the year of €7.1 million (2006: €5.8 million). Earnings per share increased by 20 per cent to €0.822 from €0.687 in 2006.

Total assets of the Lombard Group as at 31 December 2007 amounted to €504.5 million with loans and advances to customers rising by €50 million (24 per cent) to €260 million. Total deposits meanwhile edged marginally lower to €418 million resulting in an improvement in the loans to deposits ratio to 62 per cent. Shareholders’ funds climbed 22 per cent to €54.5 million giving a pre-tax return on equity of 21.5 per cent.

On 15 October 2007 the company announced that Marfin Popular Bank of Cyprus (MPB) had agreed to acquire a stake of circa 43 per cent in Lombard. The deal was concluded on 29 February 2008 when MPB purchased 3,698,509 Lombard shares (42.86 per cent of the total issued share capital) for a total consideration of €48.3 million equivalent to €13.057 per share. MPB is the result of a merger between Cyprus Popular Bank Group, Marfin Financial Group and Egnatia Group. It offers a wide range of financial services including retail, corporate and investment banking, wealth management and treasury services. MPB’s vision is to become one of the largest and most successful banks in south-Eastern Europe and the Middle East. The largest shareholder of MPB is Dubai Financial Group with a 20 per cent stake followed by Marfin Investment Group with around 9 per cent. Dubai Financial Group recently applied to the Central Bank of Cyprus to obtain its approval to increase its stake in MPB to 30 per cent.

The Lombard 2007 financial statements are the first set of results incorporating the MaltaPost consolidation, although these do not relate to a full twelve-month period at MaltaPost, since the latter only became a Group subsidiary in September 2007 and MaltaPost’s financial year-end is 30 September. Lombard had acquired a 35 per cent shareholding in MaltaPost in August 2006 through its full-owned subsidiary Redbox Limited and increased its shareholding to 60 per cent in September 2007. In total, the shareholding in MaltaPost amounted to an investment of €5.49 million, equivalent to €0.327 per share excluding the net dividend of €0.84 million received in January 2008. MaltaPost’s market capitalisation currently stands at €21 million.

The Lombard Group with the involvement of Marfin as its largest shareholder coupled with the majority shareholding in MaltaPost should be considered a new force in the local financial services sector.

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