Lombard Bank Malta’s new share issue will dilute current government, private stakes

EGM will seek approval for new share issue, share split


News that Lombard Bank intends to access the capital markets has some investors worried that this is an attempt by the bank to dilute the shareholding of some investors, Business Today has learned.

Among the bank’s shareholders is the National Social and Development Fund, a government agency which owns a 49.01% stake, valued at €51,098,121.

Lombard Bank announced on 12 August that its Board of Directors had decided that it would be in the best interests of the bank to proceed with the issue, allotment and listing of new ordinary shares.

An extraordinary general meeting is to be held on 10 November for shareholders to approve the necessary resolutions.

Shareholders will also be asked to approve a proposed share split, announced on 20 September, which is intended to allow easier access to a larger number of investors which should result in improved trading liquidity in the bank’s shares.

But it is the announced share issue – not the share split – that has current and prospective investors worried.

Lombard Bank has not yet indicated how large a share issue it is planning.

Business Today reached out to the bank’s CEO, Joe Said, who said that as an entity listed on the Malta Stock Exchange, Lombard Bank is bound by regulatory obligations, a number of which also relate to disclosure of price sensitive information.

He said that once the bank considers it necessary to update the market it will do so by way of company announcements.

The bank currently has an allocation of 80 million ordinary shares of 25c each (€20 million), with 45,363,867 shares issued, for a value of €11,340,966.75.

The National Development and Social Fund – a government agency set up in 2015 – currently owns a 49.01% shareholding in Lombard Bank. It acquired these shares from the now defunct Cyprus Popular Bank.

This shareholding was valued at €51,098,121 at the end of 2020.

Over 1,200 shareholders, and investment funds, hold the remaining shares.

Besides the NDSF, the other major shareholders are Virtu Holdings Ltd with 9.89%, LifeStar Insurance p.l.c. with 5.59% and First Gemini p.l.c. with 5.31%.

Lombard Bank has a 71.5% stake in MaltaPost plc., the national postal operator.

When contacted, Ray Ellul, CEO of the NDSF, also would not comment, pending the outcome of the EGM.

A financial analyst told Business Today that the proposed share split was not worrisome to investors. On the other hand, it would facilitate and incentivise trading activity, since shares would now be more accessible to a wider spectrum of investors.

But the share issue could prove quite contentious.\

“Any investor will now see their shareholding diluted, unless they invest in the new issue and but more shares to maintain their current level of shareholding percentage,” the analyst said.

That might not matter to most small and retail investors, but it would definitely matter to larger, corporate investors and funds invested in Lombard Bank.

He said it would be interesting to see what stance the government, through the NDSF, would take: whether it would buy new shares to maintain a 49.01% stake in the bank, or if it would choose to maintain its current investment and see its share diluted.

Bank’s strategy

Lombard Bank has also updated its strategy for further growth over the forthcoming three years.

The strategy takes into account the bank’s current market position and plans for growth, though without the need for assuming a higher risk appetite than at present.

The bank says it intends to grow its fee based non-interest income line of business, scale up its range of traditional commercial and retail banking services, increase its physical footprint by expanding its branch network, foster new relationships across a wider demographic spectrum, address wider stakeholder interests consistent with its corporate values, and further develop and maximise synergies with its subsidiary, MaltaPost p.l.c.

Lombard Bank says implementation of its strategy is set to include further investment in distribution channels, IT infrastructure, customer relationship management systems and human resources.

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