Lombard Bank has announced that it is proceeding with a share issue that will see it create two new shares for every three existing ones, with the increased capitalisation set to fuel its planned future growth.

The expansion of its capital base, by an estimated €50 million, has been on the cards for years, but it has been plagued with delays after its largest shareholder, the State-owned National Development and Social Fund (NDSF), refused to accept a deal that would have diluted its holding.

The NDSF had purchased its 49 per cent stake in the bank to ease the exit of the defunct Cyprus Popular Bank in 2018, saying at the time that this was not a strategic equity purchase and stating its plans to dispose of its shareholding in due course.

Whether due to a change in plans or because finding a buyer for its stake has proven difficult, the NSDF remains Lombard Bank’s largest shareholder.

In June, the bank announced that the NDSF had appointed two members to its Board of Directors.

Other major shareholders of Lombard Bank include Virtu Holdings, First Gemini, and LifeStar Capital, while the bank itself is the majority shareholder in Redbox Ltd, the owner of MaltaPost.

The bank has been expanding in recent years, including by growing its retail branch network. It has also identified market gaps in commercial and retail lending that it plans to address as part of its plan for growth. However, regulatory requirements necessitate an expansion of its capital base if it hopes to fulfill its objectives.

The rights issue

The new shares will first be offered on a pre-emptive basis to existing shareholders as at the close of trading on 19th September 2023, the last trading date being 15th September 2023.

Shareholders eligible for the rights issue shall be entitled to subscribe to two new ordinary shares for every three ordinary shares held, at a price of €0.75 per share.

Any new shares not taken up during this offer will then be made available to those shareholders eligible for the rights issue who would have accepted their proportionate entitlement in full and applied for excess shares.

Thereafter, the remaining excess shares, if any, shall be made available for subscription to employees of the bank and its subsidiaries, the bank’s directors and MaltaPost plc shareholders, and to the general public, in that order of preference.

“The rights issue will allow for further strengthening of the bank’s capital base both for regulatory purposes as well as for the implementation of the bank’s strategy for growth,” it said in the announcement. “This is expected to result in increased profits and, subject to business requirements and regulatory approval, dividend distributions of circa one third of annual profits.”

The bank noted that the offer price of €0.75 per share represents a circa 20 per cent discount to the price of €0.93 which, to date, is the trade-weighted average price of the bank’s shares over the last six months. It also represents a discount of over 50 per cent to the net asset value of the bank’s shares, which as at 30th June 2023 stood at €1.51 per share.

The prospectus for the rights issue is expected to be published shortly.