NDSF risks 42% dilution in its investment as Lombard seeks new share issue again

The board of directors of Lombard Bank is once again proposing a new share issue that would see the shareholding of current investors, including the National Development and Social Fund – the State golden passport fund – diluted by 42 per cent.

The NDSF would see its shareholding in Lombard drop from 49.01% to 28.5%.

BusinessToday had already revealed a similar attempt by Lombard Bank directors to push through a new share issue in October last year.

Back then, the NDSF – which owns a 49.01% stake, valued at €51,098,121 – had insisted that any action by Lombard Bank, headed by CEO Joseph Said, that results in a dilution of its shares should have the approval of at least 75% of the bank’s shareholders.

Now, in an announcement issued on 31 May, Lombard said that in the upcoming annual general meeting to be held on 22 June, it will be seeking authority for the directors to increase the issued share capital of the Bank through the issuance of up to 65,000,000 new ordinary shares of a nominal value of €0.125 per share in the same class as the shares in the Bank currently in issue.

The price would be determined by the board of directors.

No comment has as yet been forthcoming from the NDSF, but in a seemingly related development, Lombard Bank announced on Monday that NDSF appointed lawyer John Bonello and Paul Abela, who is president of the Chamber of SMEs, as directors.

They are the first directors to be appointed by the fund since it acquired its shareholding five years ago.

The market announcement said that the NDSF appointees have not declared any information which would require disclosure and will take office as non-executive directors once regulatory approval is received.

For five years, the NDSF, despite being the single largest shareholder in Lombard, did not appoint directors to the bank’s board, taking a back-seat role in decision-making processes.

However, this changed last November when the board of governors of NDSF blocked the bank’s directors from proceeding with the share issue.

The move to dilute the shareholding of existing investors prompted calls last year for the NDSF to be better represented at board level.

It appears now that in line with the Articles of Association the NDSF has proceeded to appoint two directors, effectively ending its self-imposed isolation from the company’s decision-making process.

The NDSF administers the receipts of Malta’s citizenship-by-investment programme, which it disburses as grants or invests in blue-chip stocks.

In 2018 it acquired a 49% equity in the private Lombard Bank – valued at just over €51 million – to facilitate the exit of the now-defunct Cyprus Popular Bank. The move was intended at safeguarding the domestic position of Lombard Bank, which is the owner of Malta’s major postal service, Maltapost.

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.

Additional reporting by Kurt Sansone