Lombard Bank Malta Plc

Earnings Release • Mar 14, 2013

14 March 2013

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 2012 and resolved that these financial statements be submitted for approval at the forthcoming Annual General Meeting to be held on 25 April 2013. 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:

• 1. Approves the payment of a final ordinary gross dividend of €0.12 per share (net dividend of €0.078 per share) with a nominal amount of €0.25 per share. This will be paid on 30 April 2013 to shareholders who are on the Company's Register of Shareholders as at 25 March 2013 (the 'Record Date'), the last trading date being 20 March 2013.
• 1. Approves a bonus share issue of one (1) share for every ten (10) shares held which will be allotted on the 28 May 2013 to shareholders on the Company's Register of Shareholders as at close of business on 27 May 2013, the last trading date being 22 May 2013. The bonus issue will be funded by a capitalisation of reserves amounting to €902,318.

Unquote

G A Fairclough Company Secretary

14 March 2013

Preliminary Profit Statement

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 2012, audited by PricewaterhouseCoopers and approved by the Board of Directors on 14 March 2013. 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

Profit before tax for the Group was €9.4 million. This result is considered to be very satisfactory when bearing in mind that the Bank continued to pursue its strategy of maintaining a strong capital base and a high level of liquidity in the context of negative economic sentiment throughout the global financial markets.

In comparison to the previous financial year, profit for the year was down by 14.9%. This decrease was mainly attributable to the effect of non-recurring transactions in 2011 (disposal of securities) and also the adverse movements in international postal tariffs.

Loans and advances to customers increased by 3% to €319.9 million. Property project finance remained a principal element of the Bank's portfolio while careful management of risk remained crucial to ensuring the long-term viability of business propositions. We consider the increase of €985,000 in Impairment Allowances to be adequate. The Loan to Deposit ratio of 69% at year-end constitutes one of the key strengths of our Balance Sheet.

14 March 2013

Preliminary Profit Statement (continued)

The Bank remained mindful of its strategy to cultivate long-term and robust relationships with a wide network of customers. Deposits remained competitive with realistic rates of interest and stable at €462 million. The Bank also continues to develop international banking business relationships that had a positive effect on fee income.

Net Asset Value (NAV) per share increased to €2.15. Group Earnings per Share (EPS) decreased by 2.5 cents during 2012 to 15.8 cents. Return on Assets (ROA) was also down from 1.3% to 1.1%. The Bank's post tax Return on Equity (ROE) at 7.5% was down from 8.4%.

The Capital Adequacy Ratio at 18.5% stood above the required minimum of 8%. Our Treasury continues to employ our funds only with first class counterparties even though these may pay lower rates of interest. Furthermore we still adopt a policy of not holding any exposure to non-Maltese sovereign or corporate debt.

Taking into account the stability of the Bank's performance and a slightly more positive macro-economic outlook, the Board of Directors is recommending a Gross Dividend of €0.12 per share – an increase of c. 4% over FYE2011. Furthermore, it is proposing a bonus share issue by converting a part of Retained Earnings into paid-up share capital. It shall therefore be recommending to shareholders, at the forthcoming Annual General Meeting, the issue of one share for every ten shares held.

Joseph Said, Director and Chief Executive Officer of the Bank said: "Reflecting on the past year, the Group has remained on the path of stable and reliable growth, providing a good return to stakeholders and this notwithstanding difficult economic times. We remain cautiously optimistic that our resilience serves us in good stead to capitalise upon emerging opportunities in 2013 and beyond.

Lombard Bank will continue to place emphasis upon customer needs and preferences and fulfill them in a cost effective manner."

Income Statements For the year ended 31 December 2012

	Group		Bank
	2012 € 000	2011 € 000	2012 € 000	2011 € 000
Interest receivable and similar income
- on loans and advances, balances with Central Bank of Malta and treasury bills	23,195	23,464	23,183	23,452
- on debt and other fixed income instruments	648	1,453	485	1,252
Interest expense	(10,040)	(10,734)	(9,908)	(10,739)
Net interest income	13,803	14,183	13,760	13,965
Fee and commission income	2,468	2,068	1,471	1,113
Fee and commission expense	(87)	(76)	(87)	(74)
Net fee and commission income	2,381	1,992	1,384	1,039
Postal sales and other revenues	20,038	20,394	20	8
Dividend income Net trading income	159 536	136 305	1,466 220	1,243 556
Net gains on disposal of non-trading
financial instruments	23	2,004	1	1,707
Other operating income	144	37	144	101
Operating income	37,084	39,051	16,995	18,619
Employee compensation and benefits	(14,765)	(14,475)	(4,445)	(4,457)
Other operating costs	(10,602)	(9,664)	(2,600)	(2,229)
Depreciation and amortisation	(1,335)	(1,313)	(417)	(398)
Provisions for liabilities and other charges	40	(43)	-	(23)
Net impairment losses	(985)	(2,231)	(971)	(2,231)
Profit before taxation	9,437	11,325	8,562	9,281
Income tax expense	(3,289)	(4,098)	(3,012)	(3,272)
Profit for the year	6,148	7,227	5,550	6,009
Attributable to:
Equity holders of the Bank Non-controlling interests	5,719 429	6,593 634	5,550 -	6,009 -
Profit for the year	6,148	7,227	5,550	6,009
Earnings per share	15c8	18c3

Statements of Comprehensive Income For the year ended 31 December 2012

Group
	2012 € 000	2011 € 000
Profit for the year	6,148	7,227
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	(399)	(21)
to profit or loss, before tax Income tax relating to components of other comprehensive income	(9) 142	(900) 284
Other comprehensive loss for the year, net of income tax	(266)	(637)
Total comprehensive income for the year, net of income tax	5,882	6,590
Attributable to: Equity holders of the Bank Non-controlling interests	5,454 428	5,996 594
Total comprehensive income for the year, net of income tax	5,882	6,590
Bank
Profit for the year	5,550	6,009
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 to profit or loss, before tax	(404) (1)	79 (877)
Income tax relating to components of other comprehensive income	142	284
Other comprehensive loss for the year, net of income tax	(263)	(514)
Total comprehensive income for the year, net of income tax	5,287	5,495

Statements of Financial Position As at 31 December 2012

		Bank
		2011
	€ 000	€ 000
		163,445
	1,063	456
		179
	29,871	12,565
	39,379	33,983
	320,221	310,752
-	9,352	8,502
		244
		12,504
		745
		111
		220
		2,181
		246
		906
	3,120	3,100
	556,314	550,139
	Group 2012 € 000 133,641 1,063 - 32,669 46,911 319,864 1,548 22,915 745 584 1,454 2,998 810 5,474 4,568 575,244	2011 2012 € 000 164,175 133,200 456 - - 16,328 35,570 310,354 - 1,518 227 21,373 13,172 745 745 111 584 760 654 2,572 2,610 784 175 8,361 1,941 4,847 567,954

Statements of Financial Position (continued) As at 31 December 2012

	Group 2012 2011		2012	Bank 2011
EQUITY AND LIABILITIES	€ 000	€ 000	€ 000	€ 000
Equity
Share capital Share premium Revaluation and other reserves Retained earnings	9,023 17,746 4,463 46,307	9,023 17,746 4,563 43,553	9,023 17,746 4,342 44,735	9,023 17,746 4,440 42,048
Equity attributable to equity holders of the Bank	77,539	74,885	75,846	73,257
Non-controlling interests	5,027	4,774	-	-
Total equity	82,566	79,659	75,846	73,257
Liabilities
Derivative financial instruments Amounts owed to banks Amounts owed to customers Provisions for liabilities and other charges	- 3,256 462,116 2,264	9 6,942 462,322 2,426	- 3,256 463,276 666	9 2,985 463,761 676
Other liabilities Accruals and deferred income	14,800 10,242	6,245 10,351	8,307 4,963	4,149 5,302
Total liabilities	492,678	488,295	480,468	476,882
Total equity and liabilities	575,244	567,954	556,314	550,139
Memorandum items
Contingent liabilities	4,916	6,314	4,916	6,314
Commitments	81,232	79,470	81,232	79,470

The financial statements were approved and authorised for issue by the Board of Directors on 14 March 2013 and signed on its behalf by:

Christian Lemmerich, Chairman Joseph Said, Chief Executive Officer

Statements of Changes in Equity For the year ended 31 December 2012

Group	Attributable to equity holders of the Bank
	Share capital € 000	Share premium € 000	Revaluation and other reserves € 000	Retained earnings € 000	Total € 000	Non controlling interests € 000	Total equity € 000
At 1 January 2011	9,023	17,746	5,006	39,932	71,707	4,336	76,043
Comprehensive income Profit for the year	-	-	-	6,593	6,593	634	7,227
Other comprehensive income Fair valuation of available-for-sale financial assets: Net changes in fair value arising during the year Reclassification adjustments - net amounts reclassified	-	-	(10)	-	(10)	(40)	(50)
to profit or loss Transfers and other movements	- -	- -	(592) 159	- (154)	(592) 5	- -	(592) 5
Total other comprehensive income for the year	-	-	(443)	(154)	(597)	(40)	(637)
Total comprehensive income for the year	-	-	(443)	6,439	5,996	594	6,590
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners Dividends to equity holders	-	-	-	(2,698)	(2,698)	(410)	(3,108)
Changes in ownership interests in subsidiaries that do not result in a loss of control Change in non-controlling interests in subsidiary	-	-	-	(120)	(120)	254	134
Total transactions with owners	-	-	-	(2,818)	(2,818)	(156)	(2,974)
At 31 December 2011	9,023	17,746	4,563	43,553	74,885	4,774	79,659

Statements of Changes in Equity (continued) For the year ended 31 December 2012

Group	Attributable to equity holders of the Bank
	Share capital € 000	Share premium € 000	Revaluation and other reserves € 000	Retained earnings € 000	Total € 000	Non controlling interests € 000	Total equity € 000
At 1 January 2012	9,023	17,746	4,563	43,553	74,885	4,774	79,659
Comprehensive income Profit for the year	-	-	-	5,719	5,719	429	6,148
Other comprehensive income Fair valuation of available-for-sale financial assets: Net changes in fair value arising during the year Reclassification adjustments - net amounts reclassified	-	-	(259)	-	(259)	(1)	(260)
to profit or loss Transfers and other movements	- -	- -	(6) 165	- (165)	(6) -	- -	(6) -
Total other comprehensive income for the year	-	-	(100)	(165)	(265)	(1)	(266)
Total comprehensive income for the year	-	-	(100)	5,554	5,454	428	5,882
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners Dividends to equity holders	-	-	-	(2,698)	(2,698)	(417)	(3,115)
Changes in ownership interests in subsidiaries that do not result in a loss of control Change in non-controlling interests in subsidiary	-	-	-	(102)	(102)	242	140
Total transactions with owners	-	-	-	(2,800)	(2,800)	(175)	(2,975)
At 31 December 2012	9,023	17,746	4,463	46,307	77,539	5,027	82,566

Statements of Changes in Equity (continued) For the year ended 31 December 2012

Bank	Revaluation
	Share capital	Share premium	and other reserves	Retained earnings	Total
	€ 000	€ 000	€ 000	€ 000	€ 000
At 1 January 2011	9,023	17,746	4,800	38,891	70,460
Comprehensive income
Profit for the year	-	-	-	6,009	6,009
Other comprehensive income
Fair valuation of available-for-sale financial assets:
Net changes in fair value arising during the year	-	-	50	-	50
Reclassification adjustments - net amounts reclassified to profit or loss	-	-	(569)	-	(569)
Transfers and other movements	-	-	159	(154)	5
Total other comprehensive income for the year	-	-	(360)	(154)	(514)
Total comprehensive income for the year	-	-	(360)	5,855	5,495
Transactions with owners, recorded directly in equity Contributions by and distributions to owners
Dividends to equity holders	-	-	-	(2,698)	(2,698)
Total transaction with owners	-	-	-	(2,698)	(2,698)
At 31 December 2011	9,023	17,746	4,440	42,048	73,257

Statements of Changes in Equity (continued) For the year ended 31 December 2012

Bank	Share capital € 000	Share premium € 000	Revaluation and other reserves € 000	Retained earnings € 000	Total € 000
At 1 January 2012	9,023	17,746	4,440	42,048	73,257
Comprehensive income
Profit for the year	-	-	-	5,550	5,550
Other comprehensive income
Fair valuation of available-for-sale financial assets: Net changes in fair value arising during the year Reclassification adjustments - net amounts reclassified	-	-	(262)	-	(262)
to profit or loss	-	-	(1)	-	(1)
Transfers and other movements	-	-	165	(165)	-
Total other comprehensive income for the year	-	-	(98)	(165)	(263)
Total comprehensive income for the year	-	-	(98)	5,385	5,287
Transactions with owners, recorded directly in equity Contributions by and distributions to owners
Dividends to equity holders	-	-	-	(2,698)	(2,698)
Total transactions with owners	-	-	-	(2,698)	(2,698)
At 31 December 2012	9,023	17,746	4,342	44,735	75,846

Statements of Cash Flows For the year ended 31 December 2012

	Group		Bank
	2012	2011	2012	2011
	€ 000	€ 000	€ 000	€ 000
Cash flows from operating activities
Interest and commission receipts Receipts from customers relating to postal sales and	23,694	24,097	23,697	24,167
other revenue	28,004	104,867	20	9
Interest and commission payments	(10,486)	(9,940)	(10,354)	(9,946)
Payments to employees and suppliers	(23,832)	(108,754)	(7,051)	(6,842)
Cash flows from operating profit before changes in operating assets and liabilities	17,380	10,270	6,312	7,388
Decrease/(increase) in operating assets:
Treasury bills	20,698	(17,074)	20,698	(17,074)
Deposits with Central Bank of Malta	3,014	996	3,014	996
Loans and advances to banks and customers	(13,438)	21,008	(10,398)	20,891
Other receivables	(1,864)	(513)	(1,864)	(512)
(Decrease)/Increase in operating liabilities:
Amounts owed to banks and to customers	(4,512)	(5,942)	(791)	(10,892)
Other payables	4,147	(1,520)	4,147	(1,520)
Net cash from/(used in) operations	25,425	7,225	21,118	(723)
Income tax paid	(4,266)	(2,880)	(3,276)	(1,636)
Net cash flows from/(used in) operating activities	21,159	4,345	17,842	(2,359)
Cash flows from investing activities
Dividends received	159	136	159	136
Interest received from investments	2,123	2,975	1,933	2,676
Proceeds on maturity/disposal of investments	1,040	31,025	69	29,664
Purchase of investments	(17,952)	-	(17,952)	-
Purchase of property, plant and equipment	(2,653)	(8,495)	(1,068)	(844)
Acquisition of non-controlling interests	-	(72)	-	-
Proceeds from liquidation of subsidiary	-	-	-	116
Net cash flows (used in)/from investing activities	(17,283)	25,569	(16,859)	31,748
Cash flows from financing activities
Dividends paid to equity holders of the Bank	(2,698)	(2,698)	(2,698)	(2,698)
Dividends paid to non-controlling interests	(275)	(202)	-	-
Net cash flows used in financing activities	(2,973)	(2,900)	(2,698)	(2,698)
Net increase/(decrease) in cash and cash
equivalents	903	27,014	(1,715)	26,691
Cash and cash equivalents at beginning of year	122,529	95,515	120,168	93,477
Cash and cash equivalents at end of year	123,432	122,529	118,453	120,168