Lombard Bank registers record performance

- Board recommends 10c gross dividend, pretax profits up 26%

Lombard Bank last week registered a pre-tax profit of Lm1.41 million for the financial year ended 30 September - an increase of 26 per cent on the Lm1.12 million recorded for the 2001 financial year.

Net interest income increased by 12 per cent to Lm2.86 million. Despite tight lending conditions and generally declining interest rates, the Bank once again managed to strengthen its net interest margin. Also other income streams registered strong improvement over 2001.

Fees and commissions increased by 22 per cent, while last year’s negative dealing result of Lm74,000 was reversed to a profit of Lm0.5 million, in large part reflecting a 74 per cent increase in gains on foreign exchange business. Operating Income is up by 28 per cent to Lm3.81 million.

The Board of Directors is proposing a gross dividend of 10c per share for approval by the Annual General Meeting, an increase of 11 per cent over 2001’s 9c0. As in previous years, the Board is also recommending that shareholders be given the option of receiving the dividend either in cash or by the issue of new shares. The attribution price (at which the new shares to be issued will be determined) has been established as the trade weighted average price of the Bank’s shares for the three months up to and including the 6 November, 2002. The dividend will be paid to all registered shareholders as at 29 November, 2002.

The Board of Directors has noted with satisfaction that the Bank has managed to achieve this outstanding performance in spite of strong competitive pressures as well as the impact of prudent provisioning and accounting policies which it has upheld consistently. The Bank has established a strong operating base and market positioning which continue to provide future opportunities for profit. The Board commends the Management and all Staff for their effort and contribution in achieving this year’s results.

Expenditure has been maintained at the previous year’s level, with reductions in various administrative overheads. Depreciation for the year is down by 14 per cent. The audited accounts of 2001 contained the absorption of 50 per cent of the impact of an increase in loan loss provisions brought about by the introduction of the revised Banking Directive 9. The Directive was implemented to ensure uniform provisioning policies among banks, and allowed the banks to absorb the impact of the revised policies over a period of three financial years ending in 2003.

In line with its policy of prudent accounting, Lombard Bank has opted to absorb the balance of 50 per cent in the current year, rather than defer any of it into 2003. Net Impairment Losses resulting from write-downs in values of loans and advances - formerly known as bad and doubtful debt provisions - represent a charge to profit of Lm650,000. They include the impact of Banking Directive 9 as well as the financial effect of International Accounting Standard (IAS) 39, which became applicable as from this financial year. In spite of the increase in these allowances, pre-tax profit is up by 26 per cent, while post-tax profit is up by 25 per cent, resulting in earnings per share of 23.1 cents (2001 - 18.7 cents).

Customer loans and advances are up by 13 per cent, while investments are down 2 per cent. Short-term liquidity, mainly in the form of Government paper, is up significantly from Lm13 million to Lm50 million. This is commensurate with a 35 per cent increase in customer deposits, which have now reached Lm145 million. Total assets are similarly up by 32 per cent to Lm160 million. Shareholders’ funds are up 8 per cent to Lm10.2 million.

For the first time, the Bank’s results reflect the consolidated position of holdings – acquired during the 2002 financial year - in its two subsidiaries, namely Lombard Stockbrokers Limited (51 per cent) and Lombard Asset Managers Limited (75 per cent). While the addition of the subsidiaries on the Bank’s consolidated position has so far been slight, the Board is confident of their potential to make a more meaningful contribution in the future, especially should sentiment in the investment markets be reversed.

Encouraging start for the La Valette Euro Income Fund

Following the recent launch of the La Valette Euro Income Fund, Valletta Fund Management announced that this Euro denominated bond fund, investing in over 40 securities, had a net running yield of 4.87 per cent* as at 18 October 2002.

The La Valette Euro Income Fund has been structured to distribute income** every quarter and is made up of a portfolio comprising principally of bonds of investment grade quality as rated by reputable rating agencies. Through its diversified portfolio, the Fund aims to provide a prudent balance between risk and return, whilst potentially delivering a relatively higher yield than that currently yielded by a Euro denominated bank deposit***.

Speaking about product, VFM Assistant General Manager Kenneth Farrugia outlined, "That seeking to maximize returns in an environment of low interest rates requires a sophisticated understanding of the mechanics of the bond market, which coupled with a careful selection of bonds can yield very good results.

"In addition, investors investing in this Fund may opt to have distributions credited into their bank account or else, reinvested in the Fund", stated Mr Farrugia.

Investors may invest in the La Valette Euro Income Fund from a minimum investment of EUR1,000 or through a monthly investment plan of a minimum of EUR 25 per month. Further information may be obtained from any branch of Bank of Valletta or freephone 800 7 2344.

* Running Yield as at 18 October 2002 net of the Fund’ fees and expenses. This yield, which constitutes the income that the investments of the Fund produce in relation to the market price, may vary and is not guaranteed. ** Income is not guaranteed. *** Unlike a bank deposit, where capital and interest are fixed, the value of this investment can go down as well as up.

Past Performance is not necessarily a guide to future performance. Investment should be made on the full details contained in the prospectus. Investment may be subject to Maltese exchange control regulations. Exchange rate fluctuations can affect the value of the investment. La Valette Funds SICAV plc and La Valette Euro Income Fund are licensed by the MFSA. This press release has been issued and approved by Valletta Fund Management Limited (VFM). VFM is licensed to conduct investment services business for collective investment schemes by the MFSA. Valletta Fund Management Limited, Level 6, The Mall Offices, The Mall, Floriana VLT 16. Tel 21227311, Fax 21234565, e-mail: [email protected]