On 26 August 2021, Lombard Bank Malta plc published its interim financial statements covering the six-month period ended 30 June 2021.
During the period under review, net interest income increased by 8% to just under €10 million (H1 2020: €9.25 million) as the growth in gross interest income (on the back of the increase in credit activity which offset the continued downward pressure on interest margins) outweighed the higher level of interest expense which amounted to €2.96 million.
Similarly, non-interest income surged by 15.6% to €22.7 million mostly due to the much higher contribution from the Bank’s postal subsidiary – MaltaPost plc. In this respect, Lombard explained that despite the challenging operating environment due to the impact of the pandemic as well as the accelerated reduction in traditional letter mail volumes, MaltaPost remained well positioned to maximise its potential through changes in its business mix and by implementing strict cost containment measures.
On the expenditure side, operating costs climbed by 15.9% to €26.3 million (H1 2020: €22.7 million) as although the Group continued to exercise control over its overheads, costs associated with the obligations to satisfy regulatory requirements and enhance compliance capabilities continued to increase.
In contrast, Lombard recorded lower expected credit losses which amounted to €0.87 million compared to €1.13 million in the first half of 2020. In this respect, the bank noted that the majority of personal customers who benefitted from capital and interest moratoria since the outbreak of the pandemic have returned to pre-concession performance. Moreover, Lombard will continue to closely monitor its exposures in light of developments so as to accordingly align the expected credit losses as determined by the applicable accounting rules.
Overall, Lombard posted a 7.8% increase in pre-tax profits to €5.43 million compared to €5.04 million in the first half of 2020. After accounting for a tax charge of €1.98 million and non-controlling interest of €0.26 million, the bank’s net profit for the period under review amounted to €3.19 million (H1 2020: €3.05 million), translating into an annualised return on average equity of 5.05% (H1 2020: 5.27%).
The Statement of Financial Position as at 30 June 2021, when compared to the corresponding figures as at 31 December 2020, shows that total assets grew by 4.1% to €1.18 billion driven by the increases in investments (+€28.9 million to €190.3 million) and customer loans (+€23.2 million to €644.3 million). Likewise, total liabilities inched 4% higher to €1.04 billion largely reflecting the 4.4% increase (or +€41.4 million) in customer deposits to €982.5 million. As a result of the sharper increase in customer deposits when compared to the growth in customer loans, the advances-to-deposits ratio eased slightly to 65.6% compared to 66% at the end of 2020.
The bank’s equity base expanded by 5% to €132.4 million which, in turn, translates into a net asset value per share of €2.823 (31 December 2020: €2.815). Meanwhile, although the bank’s Common Equity Tier 1 Ratio and the Total Capital Ratio eased to 15.1% compared to 15.8% as at 31 December 2020, they remained well above the regulatory minimum levels.
In their commentary, the Directors of Lombard explained that considering the continued uncertainty due to the pandemic and the persistent downward pressures on interest rate margins from low and negative interest rates, the performance of Lombard during the first half of 2021 is satisfactory and demonstrates the strength of the Group’s strategy, fundamentals, and business model.
The Bank continued implementing its strategy of prudent growth by investing in its physical presence, technology, and human resources. Supported by a strong financial position, Lombard recorded further growth in relationships and market share both in its commercial and home loan lending portfolios, as well as deposits.
Pressures on costs were inevitable though these were prudently managed. Business continued to be undertaken in line with the Bank’s straightforward non-complex and traditional banking model, while support continued to be provided to customers in the prevailing challenging times.
Looking ahead, the Group noted that mindful of the continued downside risks associated with the pandemic and the effects and consequences of the FATF decision to add Malta to the list of jurisdictions under increased monitoring, Lombard remains optimistic about its journey of prudent growth.