Lombard Bank Malta plc - Interim Results

On 21 August 2019, Lombard Bank Malta plc published its 2019 interim financial statements covering the six-month period ended 30 June 2019.

Performance Overview

During the period under review, net interest income increased by 13.5% to €10.2 million, largely on the back of the 9.1% growth in interest income to €12.9 million (H1 2018: €11.8 million) which was also coupled by a further reduction in interest expense to €2.69 million (H1 2018: €2.83 million). In this respect, Lombard also explained that the growth in interest income reflects the bank’s efforts at managing and containing the unfavourable impact of the prevailing negative interest rate scenario as well as expanding its customer loan book. In fact, customer loans increased by almost 14% year-on-year to €540.9 million compared to €474.7 million as at the end of June 2018.

Lombard also registered growth in net fees and commissions as these surged by almost 24% to €2.62 million. On the other hand, postal sales and other related revenues contracted sharply to €16.4 million compared to €23.7 million. Meanwhile, Lombard’s other sources of income (namely dividend, trading and other operating income) increased by an aggregate of 6.7% to €0.7 million.

On the expenditure side, HR costs and depreciation and amortisation charges increased by nearly 8% to €12.1 million. This was mostly due to compliance obligations as well as unfavourable labour market conditions. On the other hand, other operating costs contracted significantly to €9.61 million (H1 2018: €17.1 million) reflecting the lower amount of revenues from foreign mail. Meanwhile, the performance of Lombard was dented by a much higher credit impairment loss of €1.95 million compared to €1 million in the first half of 2018 as the bank aligned its approach to provisioning in line with the requirements of accounting rule IFRS 9.

Overall, Lombard made a pre-tax profit of €6.19 million, representing an increase of 1.7% over the previous comparable period. After accounting for a tax charge of €2.14 million and non-controlling interest of €0.26 million, the bank’s net profit for the period under review amounted to €3.8 million compared to €3.72 million in H1 2018. This translates into an earnings per share of €0.086 and an annualised return on average equity of 6.92%.

The Statement of Financial Position as at 30 June 2019, when compared to the corresponding figures as at 31 December 2018, shows that total assets increased by 2.4% to €972.7 million (31 December 2018: €950.1 million) mostly driven by the further growth in customer loans. Similarly, total liabilities increased by 2.3% to €853.8 million, mostly reflecting the 1.8% growth in customer deposits to €802.4 million. Nonetheless, given the much higher increase in customer loans, the loans-to-deposit ratio improved to 67.4% from just under 65% as at the end of 2018.

The bank’s equity base increased by 2.9% to €111.5 million which, in turn, translates into a net asset value per share of €2.5237 (31 December 2018: €2.4517). Despite the increase in the bank’s equity base, the total capital ratio dropped to 14.3% compared to 14.7% as at the end of 2018.

Dividend

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

Outlook

In their commentary, the Directors of Lombard explained that economic conditions in Malta continued to be favourable as low interest rates persisted and the property market remained strong. The bank registered tangible increases in activity in all significant lines of business while activity at MaltaPost plc remained strong except for the ongoing decline of letter mail.

The Directors also added that Lombard continues to be selective in its customer relationships and remains committed to service only high-quality business. Meanwhile, investment in new business opportunities and the development of existing initiatives are expected to ensure continued strong growth. Accordingly, the Directors expressed their optimism that Lombard will register a satisfactory full-year result within the context of the challenges being faced in both the banking and postal services sectors.

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Lombard Bank Malta plc – Half-Yearly Results covering the six-month period ended 30 June 2019.