Lombard Bank registers €4m profit before tax for H1 2021

Lombard Bank Group has registered a profit before tax of €5.4 million, up from €5 million for the same period last year while Lombard Bank Malta p.l.c. registered a profit before tax of €4.0 million, up from €3.6 million in H1 2020.

Loans and advances to customers as well as customer deposits rose by 4%. Net interest income for the group at €10.0m was 8% higher compared to the previous year. Higher interest revenues generated from increased credit activity offset the effect of pressure on interest margins from persistent low interest rates.

In its interim unaudited financial statements for the six months ended 30 June 2021, the group said that Lombard Bank continued implementing its strategy of prudent growth by investing in its physical presence, technology and human resources.

Supported by a strong financial position, the bank saw further growth in relationships and market share both in its commercial and home loan lending portfolios, as well as deposits. Pressures on costs were inevitable though these were prudently managed.

The financial statements show that group’s Employee Compensation and Benefits rose by 2% in line with the group’s ethos to employ suitably qualified staff to support its growth initiatives. While operating costs remain under control, costs associated with obligations to satisfy regulatory requirements and enhance compliance capabilities continued to increase.

Increases in expected credit losses (ECL) as defined and determined by International Financial Reporting Standard 9 (IFRS9) during the period were driven by loan portfolio growth as well as application of expert judgement in respect of industry-specific exposures adversely hit by the ongoing uncertain economic situation. It is encouraging to note that the majority of those personal customers who benefitted from capital and interest moratoria have returned to pre-concession performance.

The resultant charge for ‘credit impairment losses’ as determined by IFRS 9 for the six months under review, at €0.9m was slightly lower compared to €1.1m in the corresponding period last year. The bank will continue to closely monitor its exposures in light of developments so as to accordingly align the ‘expected credit loss’ as determined by IFRS 9.

Both common equity Tier 1 ratio (CET1) as well as total capital ratio stood at 15.1%, the regulatory minimum in terms of Regulation (EU) No 575/2013 being 4.5% and 8.0%, respectively. Bank advances to deposits ratio was 65.3% (FYE 2020: 65.5%), indicative of a healthy liquidity buffer.

Business continued to be undertaken in line with the Bank’s straightforward non-complex and traditional banking model, while support continued to be provided to customers in these challenging times. The Bank’s balance sheet fundamentals remain strong.

MaltaPost, the Bank’s main subsidiary remained well positioned to weather the challenges resulting from the Pandemic and the accelerated reduction in traditional letter mail, by maximising all revenue potential through changes in its business mix and by implementing strict cost containment measures.

Lombard Group said the H1 2021 results demonstrate the strength of its strategy and business model. It is also a testament to the ability of our staff members to quickly adapt to the changed circumstances so as to continue delivering efficient service to customers and the community, underpinned by our commitment to provide a personalised service.

The Bank continues to rely on a diversified funding base for its liquidity, which over the years has proven to be relatively stable.

Fee and commission income for the Group was up by 4% resulting from general increases across the board.

In the Group’s statement, the board of directors said they will be mindful of the continued downside risks associated with COVID-19 and the effects and consequences of the Financial Actions Task Force’s (FATF) decision to add Malta to the list of jurisdictions under increased monitoring - both factors bound to condition the performance outlook for the second half of the year.

The Board said that, despite these considerations, it remains optimistic that supported by strong fundamentals and a time-tested, sound business model, the Group continues its journey of prudent growth, while remaining agile so as to meet with the everchanging needs of its customers and thereby continue to provide value-added to all its stakeholders.