Lombard Bank Malta plc - Interim Results Review

Lombard Bank plc published its interim results to 30 June 2008 following a Board of Directors’ meeting held on 26 August. Similar to previous years, no interim dividend was declared.

MaltaPost plc became a subsidiary of Lombard Bank in September 2007 and therefore these financial results include for the first time the full impact of the MaltaPost investment. The Lombard Group 2008 interim results include the consolidation of MaltaPost’s financials for the six month period between October 2007 and March 2008, the latest set of accounts issued by the postal services operator.

The key highlights of Lombard’s 2008 half-year results are:
• Net interest income up 9.8% to €6.7 million;
• Net fee and commission income climbs 27.4% to €0.8 million;
• Income from postal services amounts to €10.4 million;
• Pre-tax profit of €7.7 million;
• Loans and advances up 9.3% to €285 million.

During the six months ended 30 June 2008, net interest income generated by the Lombard Group increased by 9.8% to €6.76 million mainly driven by a strong rise in loans as well as from effective Treasury management which according to the Directors remains a top priority of the Bank. The net interest margin edged marginally higher to 48.5%. Moreover, the Group’s non-interest income surged to €12.1 million from €1.02 million in the comparative period last year mainly as a result of the inclusion of €10.4 million attributable to income from postal services which was not accounted for in the first half of 2007.

Net fee and commission income increased by 27.4% to €0.8 million with other income of €0.7 million (2007: €24,000). This also includes income contributions from the consolidation of MaltaPost. Trading profits including foreign exchange income dropped by 58.5% to €0.1 million mainly as a result of the loss of income following Malta’s adoption of the euro on 1 January 2008.

Total operating income generated by the Lombard Group climbed significantly higher to €18.9 million (June 2007: €7.2 million) with postal services accounting for 58.6% of total income. It is worth highlighting that total income at the Bank increased by 8.1% to €7.7 million.

Non-interest expenses, comprising administrative costs and depreciation, increased to €11.8 million from €2.9 million in the six months to 30 June 2007. The strong increase in expenses also reflects the inclusion of MaltaPost’s costs which did not show up in last year’s interim financial results. The Group cost to income ratio thus increased from 39.7% in 2007 to 62.5%. However, the Bank’s cost to income ratio remained unchanged at a very healthy level of 40.9% reflecting the Directors’ continued strong emphasis on cost containment.

The Group’s operating profit before impairment allowances and other provisions amounted to €7.1 million, 67% higher than the same period last year. The Group registered a net release in impairment allowances of €0.56 million (June 07: €0.4 million), which also left a positive impact on Lombard’s profitability. Group pre-tax profit for the six months ended June 2008 amounted to a record figure of €7.76 million, 60% higher than in the first half of 2007. The tax charge for the period under review amounted to €2.7 million while share of profits attributable to minority interests totaled €0.7 million. This relates to the 40% shareholding in MaltaPost not held by Lombard Bank. The Lombard Group generated a profit of €4.35 million (June 2007: €3.21 million) during the first half of 2008. Earnings per share, based on the weighted average number of shares in issue during the period, increased from €0.094 in June 2007 to €0.126.

Total assets of the Lombard Group as at 30 June 2008 amounted to €493 million with loans and advances to customers rising by €24 million (9.3%) since the start of the year to €285 million. On the other hand, customers’ deposits edged 1.5% lower to €404 million resulting in an improvement in the loans to deposits ratio to 70%. Shareholders’ funds climbed 23% to €58 million with a pre-tax return on equity at an all-time high of 29.5%.

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