Lombard Bank Malta plc - Interim Results

On 24 August, Lombard Bank Malta plc published its 2017 interim financial statements covering the six months ended 30 June 2017.

Performance Overview

During the period under review, the Bank registered a 1.8% increase in net interest income to €7.2 million largely due to the 11.1% drop in interest expense to just over €3 million as customers continued to opt for shorter deposit maturities which carry a lower interest rate and also due to the 1.1% reduction in deposits to €713.6 million. Meanwhile, gross interest income contracted by 2.4% to €10.2 million as the additional interest earned from net increase in customer loans and advances was outweighed by further interest margin pressure on the Group’s treasury function.

Non-interest income also increased by 16.3% to €19.6 million mainly due to the 23.9% increase in net fee and commission income to €2.07 million (in turn largely reflecting the aforementioned increase in loans and advances to customers) as well as the 26.5% growth in income from the Group’s postal subsidiary, MaltaPost plc, to €17.04 million (in view of the positive trends in international mail services, registered mail and parcel volumes). The Group’s results were also boosted by an 81.6% increase in trading profits (largely related to foreign exchange) to €0.36 million. Meanwhile, Lombard reported a 36.4% decline in dividend income to €0.14 million.

The comparable set of results covering the six months to 30 June 2016 also included a €1.3 million one-off gain related to the disposal of the Group’s shares in VISA Europe. Naturally, this gain was not repeated during the period under review.

Overall, Lombard reported a 12% increase in total operating income to €26.8 million.

However, the improvements from the income side were outweighed by the 22.7% increase in non-interest expenses to €21 million. The increase was largely due to higher employee costs given the highly competitive and challenging labour market, other significant additional costs related to Risk Management and Compliance as well as higher operational expenses related to the postal subsidiary. As a result, the Bank’s cost to income ratio increased to 49% from 48.6% in the first half of 2016 whilst that of the whole Group increased by 7.2 percentage points to 78.9%.

Lombard’s income statement was also boosted by a decline in impairment provisions to €0.83 million compared to €2.1 million in the first half of 2016.

Overall, the Group’s pre-tax profit amounted to €4.7 million representing a 7.6% increase from the corresponding figure for the first six months of 2017. After accounting for a tax charge of €1.7 million (H1 2016: €1.5 million) and non-controlling interest of €0.34 million (H1 2016: €0.33 million), the Group’s net profit amounted to just over €3 million compared to €2.9 million in the first half of 2016. This translates into an earnings per share of €0.061 (H1 2016: €0.058).

The Statement of Financial Position as at 30 June 2017 compared to the corresponding figures as at 31 December 2016, shows that total assets increased by 0.4% to €866.48 million largely reflecting the 13.8% increase in loans and advances to customers to €390.86 million which was largely offset by the 8.5% drop in ‘Balances with Central Bank of Malta, treasury bills and cash’ to €199.5 million as well as the 18.1% drop in ‘loans and advances to banks’ to €132.4 million. Similarly, total liabilities increased by 0.5% to almost €766 million as the 1.1% drop in customer deposits to €713.6 million was offset by a 76.9% increase in other liabilities to €28.5 million.  Given the drop in customer deposits and increase in customer advances, the Bank’s loan to deposit ratio improved from 47.6% s at 31 December 2016 to 54.8% as at 30 June 2017.

Overall, the Group’s equity base remained relatively unchanged at €93.9 million as the profit registered during the period under review was offset by the dividend paid out in respect of the 2016 financial year as well as the €1.1 million fair value reduction in the Group’s available-for-sale financial assets which is directly accounted for through equity. The net asset value per share also remained relatively unchanged at the €2.125 level.

The announcement also noted that the Group’s Tier 1 Ratio stood at 13.5% which although higher than the regulatory minimum, is below the 16.2% level as at 31 December 2016. Similarly, the Total Capital Ratio dropped from 16.8% as at 31 December 2016 to 14% as at 30 June 2017. The decline in Lombard’s capital ratios is due to an expected increase in its risk weighted assets following the expansion in the lending and investment activities during the period under review.


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


The Directors noted that despite the persistently difficult operating environment, the Bank’s performance continues to be characterised by robust operating fundamentals, prudent financial management and a high quality customer base.

Looking ahead, during the second half of this financial year, the Board is confident that the current momentum of business growth will deliver a strong earnings performance as the Group remains committed to increase stakeholder value.


Lombard Bank Malta plc – Half-Year Results covering the six months ended 30 June 2017