Lombard Bank Malta Plc

Earnings Release • Mar 15, 2012

COMPANY ANNOUNCEMENT

The following is a Company Announcement by Lombard Bank Malta p.l.c. pursuant to Malta Financial Services Authority Listing Rules Chapter 5:

Quote

The Board of Directors of Lombard Bank Malta p.l.c. has approved the audited financial statements for the financial year ended 31 December 2011 and resolved that these financial statements be submitted for approval at the forthcoming Annual General Meeting to be held on 24 April 2012. The attached Preliminary Statement of annual results is being published in terms of the Listing Rules.

The Board of Directors further resolved to recommend that the Annual General Meeting approves the payment of a final ordinary gross dividend of €0.115 per share (net dividend of €0.07475 per share) with a nominal amount €0.25 per share. This will be paid on 27 April 2012 to shareholders who are on the company's register of shareholders as at 24 March 2012 (the "Record Date"), the last trading date being 20 March 2012.

Unquote

Graham A Fairclough Company Secretary

15 March 2012

Preliminary Statement of Annual Results

This report is published in terms of Malta Financial Services Authority Listing Rule 5.54 and Article 4(2)(b) of the Prevention of Financial Markets Abuse (Disclosure and Notification) Regulations, 2005.

The financial statements have been extracted from the Annual Report of Lombard Bank Malta p.l.c. for the financial year ended 31 December 2011, audited by PricewaterhouseCoopers and approved by the Board of Directors on 15 March 2012. These were prepared in accordance with the provisions of the Banking Act, 1994 and the Companies Act, 1995, and International Financial Reporting Standards as adopted by the EU.

The following is a review of the performance of the Lombard Bank Group which consists of Lombard Bank Malta p.l.c. and Redbox Limited (via which company shares in MaltaPost p.l.c. are held).

Review of Financial Performance and Commentary

.

In 2011 the Group registered a profit after tax of €7.23 million (decline of 20%) and on a Bank level a profit after tax of €6.01 million (decline of 22%). The profit for the year represents a return on shareholders' funds of 9%.

In view of the overall sentiment Loans and Advances to Customers declined by 7% to €310.35 million while Customer Deposits remained virtually unchanged. The pressure on interest rate margins also accounts for a decline in net interest income of 11.7% to €14.18 million.

The ongoing Eurozone sovereign debt crisis further escalated in the financial year under review and is likely to prevail for some time to come. Although it appears that the EU summit and the ECB decisions of December 2011 have helped to reverse the spread of contagion and to restore to a degree consumer and business confidence, the overall risks remain considerable.

The long-term business strategy of Lombard Bank Malta p.l.c. has always focused on ensuring healthy fundamentals and this has substantially helped the Bank to remain on sound footing. Lombard Bank's Capital Adequacy ratio of 19.8% stands well above the required level of 8%. The Loan to Deposit ratio at 67% (2010: 70%) indicates a satisfactorily high level of liquidity. Understandably both elements (strong capital adequacy ratio and strong liquidity ratio) do come at a price, especially when interest rates stand as low as they are at present. This then results in reduced margins and lower profits.

In the light of the prevailing climate the Bank's prudence in its approach to lending seems to be well justified. This is also the reason for having increased provisions in respect of loans and advances.

Lombard Bank holds no exposure to any form of non-Maltese sovereign or corporate securities and will continue to implement its policy of a prudent and cautious approach to treasury management even though such a policy may result in lower interest revenue. The Bank prefers to protect its capital at the cost of lower interest earnings.

MaltaPost contributed to the overall performance of the Group, though profit before tax decreased by 4.8% for the financial year ended 30 September 2011.

The Board of Directors is proposing a final Gross Dividend of €0.115 per nominal €0.25 share - the same level as for 2010.

The Board and the Management of the Bank consider that the Lombard Bank Group has met the prevailing substantial challenges well and this in spite of continued pressure on interest margins and an unstable financial market.

The Bank operates in this environment with strong fundamentals, a loyal customer base and dedicated staff and therefore remains well placed to face future challenges with confidence and determination.

Statements of Financial Position As at 31 December

		Group		Bank
	2011 € 000	2010 € 000	2011 € 000	2010 € 000
Assets
Balances with Central Bank of Malta,
treasury bills and cash	164,175	109,314	163,445	108,774
Cheques in course of collection	456	750	456	750
Derivative financial instruments	-	-	179	-
Investments	16,328	46,332	12,565	41,101
Loans and advances to banks	35,570	44,975	33,983	43,477
Loans and advances to customers	310,354	333,731	310,752	334,012
Investment in subsidiaries	-	-	8,502	8,034
Intangible assets	1,518	1,295	244	3
Property, plant and equipment	21,373	14,740	12,504	12,299
Investment property	745	745	745	745
Assets classified as held for sale	111	109	111	109
Current tax assets	760	2,683	220	2,378
Deferred tax assets	2,572	1,585	2,181	1,084
Inventories	784	714	246	143
Trade and other receivables	8,361	7,503	906	385
Accrued income and other assets	4,847	3,324	3,100	3,247
Total assets	567,954	567,800	550,139	556,541

Statements of Financial Position (continued) As at 31 December

	2011	Group 2010	2011	Bank 2010
EQUITY AND LIABILITIES	€ 000	€ 000	€ 000	€ 000
Equity
Share capital Share premium Property revaluation reserve Investment revaluation reserve Other reserves Retained earnings	9,023 17,746 2,043 (36) 2,556 43,553	9,023 17,746 2,043 566 2,397 39,932	9,023 17,746 2,043 (159) 2,556 42,048	9,023 17,746 2,043 360 2,397 38,891
Equity attributable to equity holders of the Bank	74,885	71,707	73,257	70,460
Non-controlling interests	4,774	4,336	-	-
Total equity	79,659	76,043	73,257	70,460
Liabilities
Derivative financial instruments Amounts owed to banks Amounts owed to customers Provisions for liabilities and other charges Other liabilities Accruals and deferred income	9 6,942 462,322 2,426 6,245 10,351	- 149 472,697 2,652 7,907 8,352	9 2,985 463,761 676 4,149 5,302	- 149 475,085 636 5,679 4,532
Total liabilities	488,295	491,757	476,882	486,081
Total equity and liabilities	567,954	567,800	550,139	556,541
Memorandum items
Contingent liabilities	6,314	7,067	6,314	7,067
Commitments	79,470	82,246	79,470	82,246

Income Statements For the year ended 31 December

		Group	Bank
	2011	2010	2011	2010
	€ 000	€ 000	€ 000	€ 000
Interest receivable and similar income
- on loans and advances, balances with Central
Bank of Malta and treasury bills	23,464	23,846	23,452	23,838
- on debt and other fixed income instruments	1,453	2,507	1,252	2,267
Interest expense	(10,734)	(10,287)	(10,739)	(10,326)
Net interest income	14,183	16,066	13,965	15,779
Fee and commission income	2,068	2,292	1,113	1,390
Fee and commission expense	(76)	(63)	(74)	(63)
Net fee and commission income	1,992	2,229	1,039	1,327
Postal sales and other revenues	20,394	19,808	8	342
Dividend income	136	157	1,243	1,326
Net trading income	305	583	556	364
Net gains/(losses) on disposal of non-trading
financial instruments	2,004	(23)	1,707	(23)
Other operating income/(expenses)	37	(35)	101	35
Operating income	39,051	38,785	18,619	19,150
Employee compensation and benefits	(14,475)	(14,322)	(4,457)	(4,180)
Other operating costs	(9,664)	(9,002)	(2,229)	(2,518)
Depreciation and amortisation	(1,313)	(1,195)	(398)	(277)
Provisions for liabilities and other charges	(43)	(139)	(23)	(22)
Net impairment losses	(2,231)	(186)	(2,231)	(215)
Profit before taxation Income tax expense	11,325 (4,098)	13,941 (4,901)	9,281 (3,272)	11,938 (4,222)
Profit for the year	7,227	9,040	6,009	7,716
Attributable to:
Equity holders of the Bank	6,593	8,332	6,009	7,716
Non-controlling interests	634	708	-	-
Profit for the year	7,227	9,040	6,009	7,716
Earnings per share	18c3	23c2

Statements of Comprehensive Income For the year ended 31 December

Group
	2011 € 000	2010 € 000
Profit for the year	7,227	9,040
Other comprehensive income
Fair valuation of available-for-sale financial assets: Net changes in fair value arising during the year, before tax Reclassification adjustments - net amounts reclassified	(21)	423
to profit or loss, before tax Income tax relating to components of other comprehensive income	(900) 284	(2) (313)
Other comprehensive income for the year, net of income tax	(637)	108
Total comprehensive income for the year, net of income tax	6,590	9,148
Attributable to: Equity holders of the Bank Non-controlling interests	5,996 594	8,389 759
Total comprehensive income for the year, net of income tax	6,590	9,148
Bank
Profit for the year	6,009	7,716
Other comprehensive income, net of income tax
Fair valuation of available-for-sale financial assets: Net changes in fair value arising during the year, before tax Reclassification adjustments - net amounts reclassified	79	271
to profit or loss, before tax	(877)	(2)
Income tax relating to components of other comprehensive income	284	(314)
Other comprehensive income for the year, net of income tax	(514)	(45)
Total comprehensive income for the year, net of income tax	5,495	7,671

Statements of Changes in Equity For the year ended 31 December

Att rib b le ity ho lde f t he Ba nk uta to eq u rs o
S ha re ita l ca p € 0 0 0	S ha re ium p rem € 0 0 0	Pro ert p y lua ion t rev a re se rve € 0 0 0	Inv tm t es en lua ion t rev a res erv e € 0 0 0	Ot he r res erv es € 0 0 0	Re ine d ta rni ea ng s € 0 0 0	To l ta € 0 0 0	No n llin ntr co o g in ter ts es € 0 0 0	To l ta ity eq u € 0 0 0
8, 90 3	16 40 9 ,	2, 28 8	29 0	-	36 39 5 ,	64 28 5 ,	3, 91 7	68 20 2 ,
-	-	-	-	-	8, 33 2	8, 33 2	70 8	9, 04 0
-	-	-	27 8	-	-	27 8	51	32 9
- -	- -	- -	( 2) -	-	-	( 2)	- -	( 2) 26
-	-	( 24 5 )	-	-	-	( 24 5 )	-	( 24 5 )
-	-	( ) 24 5	27 6	2, 39 7	( 1) 2, 37	57	51	108
-	-	( 24 5 )	27 6	2, 39 7	5, 96 1	8, 38 9	75 9	9, 148
- 120	- 1, 33 7	- -	- -	- -	( ) 2, 31 5 -	( ) 2, 31 5 1, 45 7	( ) 40 5 -	( ) 2, 72 0 1, 45 7
-	-	-	-	-	( 109 )	( 109 )	65	( 44 )
120	1, 33 7	-	-	-	( 4) 2, 42	( 7) 96	( ) 34 0	( 7) 1, 30
9, 02 3	17 74 6 ,	2, 04 3	56 6	2, 39 7	39 93 2 ,	71 70 7 ,	4, 33 6	76 04 3 ,
					2, 39 7	( 1) 2, 37	26

Statements of Changes in Equity (continued) For the year ended 31 December

	Att rib b le ity ho lde f t he Ba nk uta to eq rs o u
Gr ou p	S ha re ita l ca p € 0 0 0	S ha re ium p rem € 0 0 0	Pro ert p y lua ion t rev a res erv e € 0 0 0	Inv tm t es en lua ion t rev a res erv e € 0 0 0	Ot he r res erv es € 0 0 0	Re ine d ta rni ea ng s € 0 0 0	To l ta € 0 0 0	No n llin ntr co o g int sts ere € 0 0 0	To l ta ity eq u € 0 0 0
At 1 J 20 11 an ua ry	9, 0 23	17 74 6 ,	2, 04 3	5 6 6	2, 3 97	3 9, 9 3 2	71 70 7 ,	4, 3 3 6	76 04 3 ,
Co he ive inc mp re ns om e Pro fit for he t ea r y	-	-	-	-	-	6, 9 3 5	6, 9 3 5	6 34	22 7, 7
Ot he he ive in r c om p re ns co me Fa ir v lua ion f a ila b le- for le fin ia l as t set a o va -sa an c s: N ha in f ir v lue is ing du rin he et t c ng es a a ar g y ea r R las ific ion d j las ifie d at ust nts et nts ec s a me - n am ou re c s	-	-	-	( 10 )	-	-	( 10 )	( 40 )	( 5 0 )
fit los to p ro or s Tra fer nd he ot ts ns s a r m ov em en	- -	- -	- -	( 5 9 2) -	- 15 9	- ( 15 4)	( 5 9 2) 5	- -	( 5 9 2) 5
To l ot he he ive in fo he ta r t r c om p re ns co me y ea r	-	-	-	( 6 0 2)	15 9	( 15 4)	( 5 97 )	( 40 )	( 6 37 )
To l c he ive in fo he ta r t om p re ns co me y ea r	-	-	-	( 6 0 2)	15 9	6, 43 9	5, 9 9 6	5 94	6, 5 9 0
Tra ion it h o rde d d ire ly in ity t ct ns ac s w wn ers , re co eq u
Co ibu ion by d d ist rib ion ntr t ut s t s an o o wn ers Div ide nd ity ho lde s t o e q rs u	-	-	-	-	-	( 2, 6 9 8 )	( 2, 6 9 8 )	( 41 0 )	( 3, 10 8 )
C ha in hip in in bs id iar ies ha ter ts t t ng es ow ne rs es su d lt in los f c l ot tro o n res a s o on u C ha in llin inte in s bs id iar tro ts ng e no n-c on g res u y	-	-	-	-	-	( 12 0 )	( 12 0 )	25 4	13 4
To l tr ion it h o ta ct an sa s w wn ers	-	-	-	-	-	( 2, 81 8 )	( 2, 81 8 )	( 15 6 )	( 2, 97 4)
At 31 De mb 20 11 ce er	9, 0 23	17 74 6 ,	2, 04 3	( 3 6 )	2, 55 6	43 55 3 ,	74 8 85 ,	4, 77 4	79 65 9 ,

Statements of Changes in Equity (continued) For the year ended 31 December

Ba nk	S ha re ita l ca p € 0 0 0	S ha re ium p rem € 0 0 0	Pro ert p y lua ion t rev a res erv e € 0 0 0	Inv tm t es en lua ion t rev a res erv e € 0 0 0	Ot he r res erv es € 0 0 0	Re ine d ta rni ea ng s € 0 0 0	To l ta € 0 0 0
At 1 J 20 10 an ua ry	8, 90 3	16 40 9 ,	2, 28 8	186	-	35 86 1 ,	63 64 7 ,
Co he ive in mp re ns co me
Pro fit for he t y ea r	-	-	-	-	-	7, 71 6	7, 71 6
Ot he he ive in r c om p re ns co me Fa ir v lua ion f a ila b le- for le fin ia l as t set a o va -sa an c s:
N ha in f ir v lue is ing du rin he et t c ng es a a ar g y ea r R las ific ion d j las ifie d at ust nts et nts ec s a me - n am ou re c s	-	-	-	176	-	-	176
fit los to p ro or s Tra fer nd he ot ts ns s a r m ov em en	- -	- -	- -	( 2) -	- 2, 39 7	- ( 2, 37 1)	( 2) 26
Mo in d fer d t lia b ility lue d lan d a nd nt ve me e re ax on re va b ild ing de mi d o he ba is lica b le t ita l g ins ter n t u s ne s ap p o c ap a	-	-	( 24 5 )	-	-	-	( 24 5 )
To l ot he he ive in fo he ta r t r c om p re ns co me y ea r	-	-	( 24 5 )	174	2, 39 7	( 2, 37 1)	( 45 )
To l c he ive in fo he ta r t om p re ns co me y ea r	-	-	( 24 5 )	174	2, 39 7	5, 34 5	7, 67 1
Tra ion it h o rde d d ire ly in ity t ct ns ac s w wn ers , re co eq u Co ibu ion by d d ist rib ion ntr t ut s t s an o o wn ers
Div ide nd ity ho lde s t o e q rs u	-	-	-	-	-	( 2, 31 5 )	( 2, 31 5 )
Rig hts iss f o rd ina ha ue o ry s res	120	1, 33 7	-	-	-	-	1, 45 7
To l tr ion it h o ta ct an sa s w wn ers	120	1, 33 7	-	-	-	( 2, 31 5 )	( 85 8 )
At 31 De mb 20 10 ce er	9, 02 3	17 74 6 ,	2, 04 3	36 0	2, 39 7	38 89 1 ,	70 46 0 ,

Statements of Changes in Equity (continued) For the year ended 31 December

Ba nk	S ha re ita l ca p € 0 0 0	S ha re ium p rem € 0 0 0	Pro ert p y lua ion t rev a res erv e € 0 0 0	Inv tm t es en lua ion t rev a res erv e € 0 0 0	Ot he r res erv es € 0 0 0	Re ine d ta rni ea ng s € 0 0 0	To l ta € 0 0 0
At 1 J 20 11 an ua ry	9, 0 23	6 17 74 ,	2, 04 3	3 6 0	2, 3 97	3 8, 8 91	70 46 0 ,
Co he ive in mp re ns co me
Pro fit for he t ea r y	-	-	-	-	-	6, 0 0 9	6, 0 0 9
Ot he he ive in r c om p re ns co me Fa ir v lua ion f a ila b le- for le fin ia l as t set a o va -sa an c s:
N ha in f ir v lue is ing du rin he et t c ng es a a ar g y ea r R las ific ion d j las ifie d at ust nts et nts ec s a me - n am ou re c s	-	-	-	5 0	-	-	5 0
fit los to p ro or s	-	-	-	( 5 6 9 )	-	-	( 5 6 9 )
Tra fer nd he ot ts ns s a r m ov em en	-	-	-	-	15 9	( 4) 15	5
To l ot he he ive in fo he ta r t r c om p re ns co me y ea r	-	-	-	( 9 ) 51	9 15	( 4) 15	( 4) 51
To l c he ive in fo he ta r t om p re ns co me y ea r	-	-	-	( 9 ) 51	9 15	85 5, 5	49 5, 5
Tra ion it h o rde d d ire ly in ity t ct ns ac s w wn ers , re co eq u Co ibu ion by d d ist rib ion ntr t ut s t s an o o wn ers
Div ide nd ity ho lde s t o e q u rs	-	-	-	-	-	( 2, 6 9 8 )	( 2, 6 9 8 )
To l tr ion it h o ta ct an sa s w wn ers	-	-	-	-	-	( 2, 6 9 8 )	( 2, 6 9 8 )
At 31 De mb 20 11 ce er	9, 0 23	17 74 6 ,	2, 04 3	( 15 9 )	2, 55 6	42 04 8 ,	73 25 7 ,

Statements of Cash Flows For the year ended 31 December

	2011 € 000	Group 2010 €000	2011 € 000	Bank 2010 € 000
Cash flows from operating activities Interest and commission receipts Receipts from customers relating to postal sales and other revenue Interest and commission payments Payments to employees and suppliers	24,097	25,465	24,167	25,489
	104,867 (9,940) (108,754)	107,008 (10,762) (113,385)	9 (9,946) (6,842)	300 (10,800) (6,730)
Cash flows from operating profit before changes in operating assets and liabilities	10,270	8,326	7,388	8,259
Decrease/(increase) in operating assets: Treasury bills Deposits with Central Bank of Malta	(17,074) 996	12,608 (2,039)	(17,074) 996	12,608 (2,039)
Loans and advances to banks and customers Other receivables	21,008 (513)	(8,979) (231)	20,891 (512)	(9,108) (239)
Increase/(decrease) in operating liabilities: Amounts owed to banks and to customers Other payables	(5,942) (1,520)	22,930 (2,916)	(10,892) (1,520)	22,091 (2,916)
Net cash from/(used in) operations Income tax paid	7,225 (2,880)	29,699 (6,268)	(723) (1,636)	28,656 (4,254)
Net cash from/(used in) operating activities	4,345	23,431	(2,359)	24,402
Cash flows from investing activities Dividends received Interest received from investments Proceeds on maturity/disposal	136 2,975	157 3,074	136 2,676	157 2,742
of investments Purchase of investments Purchase of property, plant and equipment Acquisition of non-controlling	31,025 - (8,495)	5,954 (3,642) (1,681)	29,664 - (844)	6,263 (3,447) (921)
interests Proceeds from liquidation of subsidiary	(72) -	(133) -	- 116	- -
Net cash flows from investing activities	25,569	3,729	31,748	4,794
Cash flows from financing activities Dividends paid to equity holders of the Bank	(2,698)	(858)	(2,698)	(858)
Dividends paid to non-controlling interests	(202)	(213)	-	-
Cash used in financing activities	(2,900)	(1,071)	(2,698)	(858)
Net increase in cash and cash equivalents	27,014	26,089	26,691	28,338
Cash and cash equivalents at beginning of year	95,515	69,426	93,477	65,139
Cash and cash equivalents at end of year	122,529	95,515	120,168	93,477