Lombard Bank intends to grow its loan book by €280 million over the next three years to reach the €1 billion mark as it seeks to exploit synergies made possible through its majority shareholding in MaltaPost and capitalise on other banks’ closure of retail branches.
The strategy was shared via an announcement on the Malta Stock Exchange saying that the bank had met licensed financial intermediaries for an information session about its impending two-for-three rights issue.
Lombard Bank said that existing shareholders eligible to subscribe to the new shares will be invited to attend a separate session in due course.
The presentation shared with the announcement lays out Lombard Bank’s rationale for its bid to increase its capitalisation, noting that a larger capital base enables “material economies of scale.”
The bank believes its “target market is attractive and offers substantial growth opportunities with relatively low risk,” explaining that it is seeking to improve its market penetration through a wider geographic presence.
The growth in its loan book will primarily come from an increase in commercial and home loans. Lombard Bank says that it has registered “consistent demand” for commercial loans, while its home loan offering generates “strong interest with high conversion rates”. In fact, home loans now account for close to a quarter of all its outstanding loans, up from under 14 per cent just four years ago.
The targeted mix by 2026 is 65 per cent commercial and 35 per cent home loans.
Outlining its competitive advantage, the bank argued that its “unique service proposition as a small bank” includes greater flexibility thanks to short lines of communication and its lack of a “one-size-fits-all” approach: ”We do not commodotise our service offerings.”
Lombard Bank also sought to position itself in contrast to other banks, some of which have closed down branches in recent years: “While others choose to retreat, we prefer to selectively expand our branch network,” it said.
Lombard Bank is the ultimate owner of MaltaPost, and offers a number of financial services through the postal operator’s branch network, including home loans. Through MaltaPost, it also has a 25 per cent stake in IVALife Insurance Limited and a 49 per cent stake in PostaInsure Insurance Agency. It said that it intends to transfer knowledge from the bank to the postal operator to continue evolving its service offering.
As previously advertised in its initial announcement about the rights issue, the target is to issue one third of its profits as dividends every year.
Lombard Bank has generated a return on equity over the last four years of between 5.4 per cent (2020) and 12.8 per cent (2022). Meanwhile, its total capital ratio, leverage ratio, liquidity cover ratio and all other regulatory requirements are above the regulatory minimums.
Comparing its price-to earnings (P/E) ratio to that of other domestic banks, Lombard’s is just four, while having a discount to net asset value (NAV) of 50 per cent. BOV, Malta’s largest bank, has a P/E ratio of 23.8, and a discount to NAV of 37 per cent. APS, which went public last year, has a P/E ratio of 28.3 and a discount to NAV of 13 per cent.
Since it announced that it would be proceeding with the rights issue last week, Lombard Bank's share price has jumped by over 10 per cent.