Lombard Bank Malta plc - Interim Results

On 23 August, Lombard Bank Malta plc published its financial statements for the first six months of 2011. The results show a 5.9% increase in profits attributable to shareholders of €4.2 million which translates into an earnings per share of €0.116 (H1 2010: €0.11). The increase in profitability was mainly due to the 12% increase in net fee and commission income and a significant rise in gains on disposals of non-trading financial assets to €1.1 million (H1 2010: €2,000). Postal sales and other revenue from MaltaPost also edged 0.1% higher to €10.2 million. Meanwhile, Lombard’s net interest income declined by 11.3% to €7.2 million due to a drop in customer lending which reflects the Bank’s prudent credit policies.

The Lombard Group’s cost to income ratio increased from 62% as at June 2010 to 63.8% as at June 2011 due to higher labour costs as well as investment in IT services such as internet banking and card products. At the Bank level, the cost to income ratio also deteriorated to 35.9% from 33%. Impairment allowances declined to €188,000 from €645,000 in the first half of 2010.

The balance sheet as at 30 June 2011 shows a €33.65 million decline in loans and advances to customers to €300.08 million due to the subdued business sentiment in the Bank’s traditional market segments and lower demand for credit combined with the prudent approach to lending by the Bank. Customer deposits dropped by €19.9 million to €453 million reflecting fluctuations in corporate deposits.

During the six-month period ended 30 June 2011, the Bank reclassified its “held-to-maturity” financial asset portfolio to “available-for-sale” investments as a result of changes in line with its views on the development of interest rates within the European context and with the Bank’s intentions. As at 31 December 2010, the Bank’s “held-to-maturity” financial assets comprised Malta Government Treasury Bills with a carrying amount of €67.2 million and investment debt securities, primarily Malta Government Stocks, with a carrying amount of €30.9 million. As at 30 June 2011, the Bank reclassified Treasury Bills with an amortised cost and fair value of €105 million, together with debt securities, mainly Malta Government Stocks, having an amortised cost of €13.2 million and fair value of €14.1 million.

In the interim report, the Directors explained that it acknowledges that the unrest on the international financial markets could also negatively impact the business climate of Malta and consequently effect the Bank’s performance. Despite the challenging environment, the Bank believes that with its strong fundamentals (Capital Adequacy Ratio of 18.77% and a Loan to Deposits Ratio of 66.3%), it is well placed to weather the turmoil. The Directors stated that given the challenging world economic and financial climate the Group’s main objective is that of protecting its strong financial basis rather than seeking short term gains in operational performance.

Similarly to the previous years, the Directors did not declare an interim dividend.

Download a copy of the 2011 Half-Year Report of Lombard Bank Malta plc.