Lombard Bank Malta plc - Interim Directors’ Statement

On 20 May 2020, Lombard Bank Malta plc issued an Interim Directors’ Statement providing an update on its business and how ‘COVID-19’ is impacting its performance. In this respect, Lombard explained that as the Maltese economy is set to contract this year, the bank’s financial performance stands to be negatively impacted. Furthermore, whilst it is unlikely that the original targets set for the year will be achieved, given the current high level of uncertainties, it is imprudent for the bank to attempt any medium-term forecasts.

Lombard noted that following the good start to 2020 with growth rates in line with expectations, developments related to ‘COVID-19’ left an impact on its operations and the economic environment in general. Apart from the reduction in international trade and increased caution by local businesses in seeking new medium-term credit facilities, other relevant factors such as declining employment levels coupled with a subdued business sentiment are still evolving.

The main highlights of the bank’s latest financial information are the following:

  • Net interest income is marginally down as a result of higher interest payable on increased volumes of customer deposits and pressure from negative interest rates on excess liquidity.
  • Fees and commission income has decreased as Q2 2020 progresses while transaction banking activity and international payments have also experienced lower volumes.
  • Costs remain well under control and in line with expectations.
  • Net loans and advances to customers remained virtually unchanged and customer deposits continued to increase from the end of the 2019.
  • The total capital ratio remained strong and well above the minimum regulatory requirements.

Lombard added that despite the unfavourable operating environment, its balance sheet has remained strong with total assets at the same levels of the previous year. Moreover, healthy liquidity ratios continued to be actively managed and monitored, whilst the loans-to-deposits ratio stands at a prudent 59%. In this respect, Lombard explained that its loans and advances portfolio includes facilities for medium-term projects which should not be unduly impacted by the short-term economic environment. Moreover, to date, the bank did not experience any need to increase provisions for expected credit losses as a direct result of the ‘COVID-19’ pandemic. Nonetheless, it remains well equipped to increase provisions should the economic situation deteriorate such that the repayment ability of its borrowing customers becomes impaired. At the same time, Lombard introduced its own support measures to complement those introduced by the Government of Malta to assist the economy.

With respect to its postal subsidiary – MaltaPost plc – Lombard explained that it continued to deliver postal services uninterruptedly, with only minor disruptions mainly in deference to consideration of health and safety issues. However, other areas of operational activity have been significantly affected, not least by the sharp decline in flight connections to and from Malta. This is having a negative impact on some of MaltaPost’s more important revenue streams and which are in part being rigorously mitigated through the efficient and judicious management of costs, together with other related efficiencies.

Lombard concluded by saying that it will continue to closely monitor developments as they unfold, whilst remaining committed to ensure that the best interests of its stakeholders are given priority and safeguarded at all times. Lombard will also continue to keep the market updated with any material developments.