On 25 August, Lombard Bank Malta plc published its interim results covering the six months ended 30 June 2016.
During the period under review, the Group’s net interest income increased by 10.4% to €7.1 million. This was largely due to the 13.6% reduction in the Group’s interest expense to €3.4 million reflecting the lower cost of retail deposits in the prevailing low interest rate environment. Furthermore, gross interest income edged 1.2% higher to €10.5 million reflecting the growth in the Bank’s loan book during the past twelve months.
Moreover, non-interest income grew by 10.8% to a record €16.9 million. However, this growth was mainly due to the one-off gain of €1.3 million registered on the sale of Lombard’s stake in VISA Europe. Nonetheless, excluding this figure, the Group’s non-interest income still grew by 2.3% to €15.6 million reflecting the 17.4% increase in net fee and commission income to €1.7 million as well as the 5.4% increase in postal sales and services revenues (from the Group’s postal subsidiary MaltaPost plc) to a record €13.47 million. Similarly, dividend income increased to €0.22 million compared to €0.13 million during the first half of 2015. On the other hand, trading profits slumped to just below €0.2 million compared to €0.73 million during the first six months of 2015.
Overall, the Lombard Group reported a 10.7% increase in total operating income to €23.9 million. Excluding the aforementioned one-off gain of €1.3 million, the Group’s total operating income would have only increased by 4.7% to €22.6 million.
On the expenditure side, Lombard reported a 10.9% increase in administrative expenses to €16.5 million largely reflecting additional costs in relation to compliance and regulatory requirements. Depreciation also increased by 4.9% to €0.69 million.
As a result, the Group’s operating profit amounted to €6.79 million representing a 10.8% increase of the previous comparable figure. Excluding the aforementioned one-off gain of €1.3 million, the Group’s operating profit would have contracted by 10.3% to €5.5 million.
Given that the improvement in the Group’s total operating income (excluding the aforementioned one-off gain) was offset by the increase in the Group’s cost base, this led to a deterioration in the Group’s cost to income ratio to 75.8% compared to 71.7% in the first half of 2015. At Bank level, given the higher increase in expenses, the Bank’s cost-to-income ratio also deteriorated to 48.6% from 47% in the first six months of 2015.
Impairment allowances also increased by 19.5% to a multi-year high of €2.1 million reflecting the Bank’s prudent management of credit risk.
Overall, the Group’s pre-tax profit improved by 2.4% to €4.4 million. However, if the aforementioned €1.3 million gain from the disposal of the VISA Europe shares was excluded, the pre-tax profit of the Lombard Group would have contracted by 27.6% to €3.1 million largely reflecting the rising operational expenses as well as the lower profits at MaltaPost plc (given the one-off gains reported in the first half of the previous financial year which were not repeated during the period under review).
After accounting for an unchanged tax charge of €1.5 million and minority interest of €0.33 million (related to the shareholding in MaltaPost plc owned by third parties), the Group’s net profit attributable to shareholders amounted to €2.54 million, an increase of 11.2% from the previous comparable period. This translates into an earnings per share of €0.0577 (Jun 2015: 0.0520).
The Statement of Financial Position as at 30 June 2016 shows a 2.4% increase in total assets to €795.8 million compared to the figures as at the end of the last financial year. Loans and advances to customers grew by 6.2% to €324.8 million. Investments expanded by 6.8% to €81.4 million and balances with the Central Bank of Malta, treasury bills and cash increased by 59.9% to €185.3 million. These were only partially offset by the 6.8% decline in loans and advances to banks to €81.4 million. Total liabilities also increased by 2.3% to €697.7 million largely reflecting the 2.1% increase in customer deposits to €664 million. Given the larger growth in customer loans than in customer deposits, the Bank’s loan to deposit ratio improved to 48.9% from 47% as at the end of the 2015 financial year.
Overall, shareholders’ funds increased by 2.7% to €91.8 million mainly reflecting the profit registered during the period under review. This translates into a net asset value per share of €2.077 (Dec 2015: €2.042). The Directors also noted that the Bank’s Tier 1 Capital Ratio further improved to 16.9% compared to a regulatory minimum of 4.5%. The announcement also noted that the liquidity ratio of the Bank at 78.9% was well in excess of the 30% minimum requirement.
In line with the Group’s dividend policy, the Directors did not declare an interim dividend.
The Directors explained that the the results of the first half were in line with expectations and they remain confident that the Group will meet its targets for the whole of 2016 despite the current challenging environment and the costly obligations imposed by a demanding regulatory regime.