Lombard Bank Malta plc - Full-Year Results

On 26 April 2024, Lombard Bank Malta plc published its Annual Report and Financial Statements for the year ended 31 December 2023.

Performance Overview

Net interest income surged by 16.1% to a record of €25.9 million (2022: €22.3 million) as the growth in gross interest income (+€4.7 million to €33.7 million) outweighed the increase in interest expense (+€1.1 million to €7.8 million). Lombard explained that the improvement reflected the growth in lending and higher interest earned on money market operations.

Lombard also reported a 19.2% increase in non-interest income to €44.5 million (2022: €37.4 million) as the increase in revenues generated from postal services (+€8 million to €38.7 million) offset the lower income generated by most of the Bank’s business lines (-€0.85 million to €5.8 million).

As a result, operating income increased by 18.1% to €70.4 million compared to €59.6 million in the previous year.

On the expenditure side, total operating costs increased by 14.5% to €54.7 million (2022: €47.8 million) reflecting the higher level of business. The Group’s cost efficiency ratio improved to 77.7% compared to 80.2% in 2022 while the cost to income ratio of the Bank improved to 53.9% from 57.4% in 2022.

The financial performance was dented by negative movements in expected credit losses of €1.26 million in contrast to the net reversal in expected credit losses of €16.2 million in the previous year that was primarily related to the full recovery of a large non-performing loan.

Overall, the Group profit before tax amounted to €14.5 million compared to €27.7 million in 2022. Meanwhile, when adjusting the comparative figures to exclude the significant one-time reversals in expected credit losses in 2022, profit before tax rose by 17%. After accounting for a tax expense of €4.9 million and the profit attributable to minority interests of €0.55 million, the net profit attributable to shareholders amounted to €9.06 million which translates into a return on average equity of 5.55%.

The Statement of Financial Position as at 31 December 2023 shows that total assets grew by 5.1% to €1.27 billion driven by the growth in customer loans (+6.6% to €758.3 million). Total liabilities remained virtually unchanged at €1.06 billion, largely composed of customer deposits totalling €1.02 billion. Given the stronger increase in customer loans than the growth in customer deposits, the loans-to-deposits ratio increased to 74.4% compared to 70.6% as at the end of 2022. Meanwhile, shareholders’ funds increased by 39.8% to €190.4 million, reflecting the proceeds raised from the Rights Issue that was concluded towards the end of 2023. Consequently, the net asset value per share dropped to €1.2317 compared to €1.4687 as at the end of 2022 (adjusted for the 2023 bonus issue). The Bank’s Total Capital Ratio improved to 21.0% (31 December 2022: 15.4%).

Dividend

The Directors of Lombard are recommending a final net dividend per share of €0.0106 to all shareholders as at close of trading on 24 May 2024, subject to regulatory approval as well as shareholders’ approval during the upcoming Annual General Meeting scheduled to be held on 27 June 2024. The dividend translates into a payout ratio of 18.1% and is expected to be paid on 10 July 2024.

Outlook

The Chairman of Lombard explained that following the capital increase that was concluded in 2023, the opportunities for growth which have been identified are to be exploited. The focus will be on growing the Bank’s loan book, while seeking a greater balance between commercial and retail lending, particularly home loans. The Board also plans to grow non-interest income streams through the funds business, wealth management services, and the offering of pension products. Further investment will also be undertaken in the areas of human and information technology resources, in the Bank’s distribution channels and in seeking synergies with MaltaPost. The Board will continue in its endeavours to ensure that the Bank’s Qualifying Shareholder meets its 2018 commitment to dispose of its shareholding. The Chairman stated that settlement of this long-outstanding matter stands to benefit all stakeholders, not least correspondent banking relationships, as well as provide visibility to prospective investors.