Lom­bard Bank Malta p.l.c. half-yearly results for 2017

• Group Profit Be­fore Tax stood at €4.7m (H1 2016: €4.4m) • Profit At­trib­ut­able to Eq­uity Hold­ers was €2.7m (H1 2016: €2.5m) • Group Op­er­at­ing In­come reached €26.8m (H1 2016: €23.9m) • Cus­tomer De­posits stood at €713.6m (FYE 2016: €721.6m) • Loans and Adv

The Malta Business Weekly - - FRONT PAGE -

Com­men­tary

Profit be­fore Tax for the Lom­bard Bank Group in­creased by 7.6% to €4.7m for the first six months of 2017, com­pared to €4.4m in the same pe­riod last year. This re­sult was achieved de­spite the im­pact of his­tor­i­cally-low and, at times, even neg­a­tive in­ter­est rates and more costly reg­u­la­tory com­pli­ance re­quire­ments.

The bank ex­pe­ri­enced strong ac­tiv­ity in most of its busi­ness lines but re­mained cog­nisant of its pru­den­tial lim­its. Mal­taPost, the bank’s main sub­sidiary, also achieved its ob­jec­tives pro­vid­ing an in­crease in Profit be­fore Tax of 9.8% dur­ing the first six months of its fi­nan­cial year.

The results for the bank in 2016 had in­cluded a one-time sig­nif­i­cant item which amounted to €1.3m and was in­cluded un­der Other Op­er­at­ing In­come.

Net In­ter­est In­come at bank level for H1 2017 rose by 1.9% from €7.0m to €7.1m.

The un­favourable in­ter­est rate en­vi­ron­ment per­sisted, putting fur­ther down­ward pres­sure on In­ter­est Mar­gin. The bank man­aged these rates, which were ab­sorbed and not passed on to its cus­tomers. This cost was mit­i­gated by ad­di­tional in­ter­est earned from a vol­ume in­crease of 13.5% in Cus­tomer Loans and Ad­vances, thus re­sult­ing in a pos­i­tive net in­ter­est mar­gin.

Cus­tomer de­posits de­creased marginally by 1.2% since De­cem­ber 2016 with cus­tomers opt­ing for shorter de­posit ma­tu­ri­ties, and this con­trib­uted to a lower In­ter­est Ex­pense.

The bank re­mains well funded and sup­ported by a di­ver­si­fied port­fo­lio of re­tail de­posits. The in­crease of 39.5% in Fee and Com­mis­sion In­come for the bank was mainly at­trib­ut­able to higher lev­els of credit ac­tiv­ity as noted above.

Postal sales and other rev­enues con­tin­ued to ex­pe­ri­ence pos­i­tive trends in in­ter­na­tional mail ser­vices, reg­is­tered mail and par­cel vol­umes.

Costs re­lat­ing to Em­ployee Com­pen­sa­tion and Ben­e­fits re­flect the highly com­pet­i­tive labour market and are cur­rently prov­ing to be chal­leng­ing. Other sig­nif­i­cant costs as­so­ci­ated with Risk Man­age­ment and Com­pli­ance con­tin­ued to rise re­sult­ing in a Cost-to-In­come Ra­tio of 49.0%, up from 43.1%.

The bank in­creased Im­pair­ment Al­lowances to €24.6m thereby hedg­ing against any pos­si­ble ad­verse de­vel­op­ments in its lend­ing ac­tiv­ity, in line with its pru­den­tial fi­nan­cial man­age­ment prac­tices. Given the high level of tan­gi­ble se­cu­rity held against the loan port­fo­lio as well as an over­all sat­is­fac­tory as­set qual­ity, the bank con­sid­ers this level of pro­vi­sion­ing to be ad­e­quate.

Com­mon Eq­uity Tier 1 Ra­tio (CET1), for which the Reg­u­la­tory min­i­mum is 4.5% in terms of EU Reg­u­la­tion No. 575/2013, stood at 13.8% while To­tal Cap­i­tal Ra­tio was 14.0%, well above the tran­si­tional and fully loaded reg­u­la­tory re­quire­ments.

The bank ex­pe­ri­enced an ex­pected in­crease in its Risk Weighted As­sets as a re­sult of the ex­pan­sion in lend­ing and in­vest­ment ac­tiv­i­ties dur­ing the pe­riod re­viewed. Group Loan to De­posit Ra­tio stood at 54.8%.

The Board of Direc­tors notes 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.

For the sec­ond part of the cur­rent 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.

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