On 9 March, Lombard Bank Malta plc published its full-year results for the financial year ended 31 December 2016.
During the period under review, the Group registered a growth of 8.1% in net interest income to €14.2 million as gross interest income advanced by 0.8% to €20.9 million and interest expense dropped by 11.8% to €6.70 million. Similarly, non-interest income grew by 13.5% to €33.1 million. Excluding the one-time gain of €1.29 million resulting from the sale of shares previously held in VISA Europe, non-interest income of the Group still advanced by 9.1% largely reflecting the notable growth in net fee and commission income (+18.7%) and postal sales and other revenues (+9.0%). Overall, on an adjusted basis, total operating income increased by 8.8% to nearly €46.0 million (FY2015: 42.3 million).
On the other hand, the growth in income on an adjusted basis was mostly offset by the 10.6% increase in non-interest expenses to €34.6 million (FY2015: €31.3 million), reflecting higher administrative, compliance and regulatory expenses as well as continued investments in the Group’s I.T. infrastructure. Accordingly, Lombard’s adjusted operating profit before impairment allowances increased by 3.6% to €11.4 million when compared to the €11.0 million figure of the previous comparable period.
During the period under review, Lombard increased its impairment charges by 28.2% to €3.95 million (FY2015: €3.08 million), reflecting increases in both specific (+21.0%) and collective allowances (+100%). In calculating impairments, the Bank explained that it specifically assessed exposures that were not fully compliant with agreed terms. Furthermore, most of the specific impairment allowance related to the interest element of such exposures.
As a result, adjusted pre-tax profits of the Lombard Group dropped by 11.4% to €6.95 million (FY2015: €7.84 million). Nonetheless, on an unadjusted basis, post-tax profits attributable to shareholders increased by 7.9% to €4.73 million. This translates into an earnings per share of €0.107 (FY2015: €0.100).
The statement of financial position shows that total assets grew by 10.3% to €862.7 million largely reflecting the €102.3 million increase in balances held with the Central Bank of Malta and other quasi-cash securities. In parallel, the Bank increased the total amount of loans and advances to customers by €37.6 million to €343.5 million but loans and advances to banks decreased by a larger amount of €68.1 million to €161.7 million. Similarly, total liabilities increased by 11.1% to €762.4 million on the back of the 10.9% increase in customer deposits which increased to €721.6 million from €650.5 million as at 31 December 2015. Nonetheless, the loans-to-deposits ratio still improved marginally to 47.6% from 47.0% in the previous comparable period. Shareholders’ funds (excluding minority interests) increased by 5.0% to €93.8 million. This is equivalent to a net asset value per share of €2.124 (31 December 2015: €2.042). The return on average equity (net profit attributable to shareholders divided by average shareholders’ funds excluding minority interests) advanced to 5.16% (FY2015: 5.09%).
As at the end of 2016, Lombard’s Common Equity Tier 1 (CET1) Ratio and the Total Capital Ratio stood at 16.2% and 16.8% respectively.
The Directors recommended the payment of an unchanged final gross dividend of €0.04 per share (net: €0.026) which represents a payout ratio of 24.3% (FY2015: 26.0%). Shareholders as at the close of trading on Friday 24 March 2017 will be eligible to receive the dividend on Friday 5 May 2017 subject to shareholders’ approval at the upcoming Annual General Meeting scheduled to be held on Thursday 27 April 2017.
The Board of Directors explained that while it expects the low interest rate environment to persist throughout 2017, the Bank looks to the future with enthusiasm and the conviction that its strategies are well geared to satisfy the expectations of its customers while also grasping those opportunities that will add value to the Group and its stakeholders.