Lombard's statement on 2022 finances spins positive results, hides investment losses

Lombard Bank p.l.c. public announcement fails to highlight more than €25 million in losses from investments and a loss of €168,000 for total comprehensive income for the year, down from a profit of €12,908,000 in 2021

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A recent company statement published by Lombard Bank p.l.c. announcing that its Board had approved the annual report and audited financial statements for 2022, failed to highlight losses incurred in the same year through its investments.

In fact, while the statement highlighted the fact that Lombard Group had registered €27.7 million in profit before tax in 2022, up from €12.6 million in 2021, and other positive results in specific areas, the announcement failed to say that the Group's total comprehensive income for the year, net of income tax, had ended in a loss of €168,000, when compared to a profit of €12.9 million in 2021.

And the fact that Lombard Group registered more than €25 million in losses from its investments was not included in the summary included in the published announcement, and was only referred to in the two-page Directors' Report, also included in the announcement, without any figures being quoted, contrary to references to positive results quoted.

Lombard Bank issued the public announcement on 28 April, as it is bound to do by law, stating that its board of directors had approved the annual report and audited financial statements for the financial year ended 31 December 2022.

The announcement highlighted the fact the Group had registered €27.7 million in profit before tax in 2022, up from €12.6 million in 2021, that Net Interest Income rose by 14% to €22.3 million, and that Group operating costs fell by 15% to €20.9 million, with the Bank’s Cost Efficiency Ratio easing to 57.4% (2021: 60.8%), "a reflection of effective cost management".

Other positive results were highlighted in the Summary of Financial Performance included in the announcement, and detailed figures were included in the one-page Directors' Report.

But the fact that Lombard Group registered more than €25 million in losses from its investments was not included in the summary, and was only referred to in the Directors' Report, without any figures being quoted, contrary to references to positive results quoted.

Full details are of course provided in the full Annual Report and Financial Statements 2022, which are yet to be approved at the AGM on 23 June, and which are available on the Malta Stock Exchange's website. But financial analysts who spoke to Business Today said such 'media spin' was becoming commonplace, with companies and institutions only quoting positive results in compulsory public announcements while 'hiding' negative results within the full reports.

In the page dedicated to the Directors' Report in its public announcement, Lombard said:

"The year was a particularly challenging one for the main subsidiary, MaltaPost p.l.c., which, although made to bear significant increases in costs, still continued to sustain the Universal Service Obligation despite the persistent decline of Letter Mail volumes and delays of over two years by the Regulator to approve increases in postal tariffs. A long-awaited Regulatory decision allowing a tariff revision towards the latter part of the financial year was a much-needed development. Meanwhile the Company proceeded with its investments in life and general insurance."

But a look at the full report presents a stark picture.

In the 'Other comprehensive income' section, under debt investments measured at FVOCI (Fair Value Through Other Comprehensive Income) for items that may be subsequently reclassified to profit or loss, the Lombard Group registered net losses before tax if €25,825,000, as opposed to a €2.7 million profit in 2021.

Under net losses/gains from changes in fair value of investments in equity instruments designated at FVOCI, Lombard Bank reported a loss before tax of €1.7 million, as opposed to a profit of €149,000 in 2021.

A further loss of €17,794,000 was recorded under other comprehensive income for 2022, net of income tax, as opposed to a profit of €5 million in 2021.

The report quotes total comprehensive income for the year, net of income tax, as a loss of €168,000, as opposed to a profit of €12,908,000 in 2021.

Questions sent to Lombard Bank CEO Joseph Said, asking to clarify absence of losses and negative results from the published company announcement, remained unanswered.

New appointment

A day before Lombard Bank issued its public announcement on the financial statements, the bank issued another statement, announcing the appointment of  Carlos Camenzuli as Chief Risk Officer.

Camenzuli worked within the Bank's Risk Management Function for over seven years and held the position of Head – Risk for nearly four years.

The Malta Financial Services Authority has granted regulatory approval for this appointment.

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