Annual Report and Financial Statements
31 December 2021
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
1
CONTENTS
Chairman’s Statement to the Members 2
Chief Executive Officer’s Review 5
Directors’ Report 9
Statement of Compliance with the Principles of Good Corporate Governance 25
Remuneration Report 35
Company Information 39
Financial Statements:
Statements of Financial Position 41
Income Statements 43
Statements of Comprehensive Income 44
Statements of Changes in Equity 45
Statements of Cash Flows 49
Notes to the Financial Statements 50
Additional Regulatory Disclosures 166
Five Year Summaries 198
Independent Auditor’s Report to the Shareholders of Lombard Bank Malta p.l.c.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
2
Chairman’s Statement to the Members
The performance of the Lombard Bank Group in 2021 was again conditioned by a difficult operating
environment largely associated with the persistence of the COVID-19 pandemic and its economic repercussions.
For Lombard Bank Malta p.l.c. (the Bank) the main sources of pressure on income streams were continuing low
to negative interest rates and further increases in operating costs. These were partly offset by a substantial
reversal of provisions on the loan book, which had a positive effect on the final results. The Bank’s subsidiary,
MaltaPost p.l.c., meanwhile continued to face logistical difficulties due to the pandemic and experienced
generally higher costs, leading to reduced profitability. In the circumstances, the Group’s pre-tax profit of €12.6
million, a year-to-year increase of 22%, must be considered a satisfactory outcome.
For the Bank, net interest income, the largest revenue source by far, resumed its upward trend in 2021 as
interest earned on loans and advances rose more than that paid to depositors: the former reflected a sustained
demand for credit even though average lending rates eased further, as well as higher earnings on the securities
portfolio; the latter resulted from a combination of an expanded deposit base and largely unchanged average
interest rates. A return to a rising trend also occurred in net fees and commission income, including from our
card, wealth management and investment services operations. While all these revenue sources made a positive
contribution to earnings, the Bank’s total operating income, at €26.7 million, fell short of the previous year’s
level which however had included a sizeable one-off inflow.
Operating expenses meanwhile grew further mainly reflecting the cost of attracting and retaining professional
expertise in a competitive labour market and the need to invest in new technologies and systems to meet the
growing expectations of customers and the demands of regulators. In particular, the Bank introduced an
automated anti-money laundering transaction monitoring platform, several upgrades to core networking
devices, including additional protection against cyberattacks and biometric authentication systems for online
card payments.
At the same time, the prudent stance we took at the peak of the pandemic with regard to provisions against
credit exposures, together with the improved outlook for the Maltese economy and judicious management of
our loan book, meant that no further exceptional provisions were necessary in 2021. As a result, the Bank’s
profit before tax increased by 32% to €12.2 million, in line with the Board’s objective. This represented a return
on equity of 6.2% and boosted shareholders’ funds to a new peak of €132 million. The Board believes that these
encouraging results confirm the resilience of the Bank’s low-risk business model and has recommended, subject
to regulatory approval, a gross dividend of 3 cent per share as well as a bonus issue of 1 share for every 75
shares held.
Despite the uncertainty created by the pandemic, the Bank’s fundamentals remained strong. Customer
confidence was maintained with deposits and lending increasing in tandem such that the relevant ratio was
unchanged at a prudent level of 65.7%. The total capital ratio and the liquidity coverage ratio were both well
above the statutory minimum levels at 16.2% and 225.3%, respectively while the leverage ratio, at 11.1%, was
three-and-a-half times the required level. These solid financial buffers suggest that the Bank has the potential to
maintain its growth momentum while keeping within the bounds of the Board’s risk appetite.
During 2021 the Bank was faced with additional demands on its human and financial resources due to regulatory
and compliance reporting obligations and other related decisions. Among the latter was the unexpected
imposition at short notice of higher regulatory capital buffers, which has limited our ability to fully satisfy
customer loan demand. Another development whose full impact cannot yet be measured was the decision of
the FATF to place Malta on their Grey List. One early consequence was to induce some correspondent banks to
terminate their relationships with local banks. At Lombard, our international banking business has experienced a
recent decline.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
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Chairman’s Statement to the Members (continued)
The Bank adapted to this challenging operating environment on different levels. The quality of the loan book
continued to improve, particularly through a further reduction in the proportion of so-called Non-Performing
Exposures close to the target level set for 2022, in spite of the uncertain economic climate. Another
development that has served to mitigate credit risk was the notable increase in household and personal lending
in line with our diversification strategy. The strong take up of home loans was particularly welcome since this is a
low-risk loan category and also makes a relatively small claim on the Bank’s capital base.
During the year the Board also continued to oversee the implementation of the Business Plan 2020-2022 which
defines the Bank’s strategic priorities. A major focus has been the furtherance of ongoing projects in such
business areas as home loans, credit cards and investment services designed to grow their contribution to
operating income. Another priority has been the further strengthening of the Bank’s governance, risk
management and compliance functions. This included the creation of new professional development
opportunities at all levels of the Bank, including the Board, the introduction of new policies and controls and the
automation of several work processes. A challenge in this regard continues to be the limited availability in the
market of specialised expertise. A third prong of the Business Plan is the expansion of our physical network in
order to bring Lombard’s services and products to a wider customer base. Further properties were acquired for
this purpose in prime locations and some existing branches were upgraded. Work in all these areas will continue
during the current year.
The year under review has also created challenges for the Bank’s subsidiary, MaltaPost p.l.c., deriving mainly
from the pandemic. Supply chain disruptions due to reduced air connectivity and a further decline in letter mail
volumes combined with the lowest postal tariff rates in the EU all affected revenue flows. Labour and
operational costs meanwhile continued to increase, particularly to finance infrastructure projects and the
extension of the post office network, all designed to deliver a more efficient customer service and generate
more income. As a result the company registered a small decline in pre-tax profits to €2.35 million.
Going forward, while the Bank’s time-tested business model based on intermediation between savers and
borrowers to finance viable economic activity promises to continue creating shareholder value, the Board is
aware of the need to embrace change in the pursuit of long-term sustainability. An important challenge having
capital-absorbing implications is the forthcoming introduction of new Basel III standards focussed on asset risk-
weighting, particularly involving exposures secured by real estate and equity holdings. Another standard that will
impact the manner in which our business is conducted relates to the evolving Environmental, Social &
Governance (ESG) requirements. The Bank will continue to follow developments closely so as to ensure that
relevant aspects are incorporated in its risk management framework. ESG workshops are planned for 2022 with
assistance from external consultants. An ESG action plan will ensure effective implementation. A further change
on the horizon promises to be the end of the ECB’s current accommodative monetary policy and the
unpredictable effects of higher interest rates on business cash flows, particularly in conjunction with the
economic fallout of the heightened geopolitical tensions in Europe.
Facing these challenges while continuing to respond to customers’ changing needs will require more investment
in appropriate technologies and specialised human resources. As we proceed along the chosen growth path, the
preservation of stakeholders’ assets and the creation of value will remain a guiding principle. While innovative
solutions will be sought, however, we will maintain our selective approach to onboarding depositors and
borrowers and avoid exposure to economic sectors that have proved to be inherently risky.
The Board will continue to engage in a dialogue with the regulator also with a view to arriving at a meaningful
application of the principle of proportionality in recognition of the size and non-complex business model of the
Bank.
The Board experienced the sad loss of one of its non-executive members Michael Zammit who passed away
while in office in February 2022. During his years in office Mr Zammit shared with the Board his extensive
knowledge and experience of business in Malta. On behalf of the Board, I express appreciation for his
commitment and the valuable contribution he made to the Bank.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
4
Chairman’s Statement to the Members (continued)
In conclusion, on behalf of the Board I would like to thank the Bank’s staff and management team, ably led by
the Chief Executive Officer, Joseph Said, whose professional competence and dedication made the past year’s
encouraging results possible in spite of the disruption caused by the pandemic. I would also like to thank you the
Bank’s shareholders for your steadfast support and all our customers for their continued loyalty.
Signed on behalf of the Bank's Board of Directors on 20 April 2022 by Michael C. Bonello (Chairman) as per the
Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and
Financial Statements 2021.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
5
Chief Executive Officer’s Review
The results for the financial year ended 31 December 2021 of the Lombard Bank Group combine the financial
performance of Lombard Bank Malta p.l.c. together with its subsidiary and associate companies.
Summary Overview
Despite that the year continued to be dominated by challenging conditions, not least due to the uncertainties
resulting from the COVID-19 pandemic, the performance of the Group proved to be resilient.
Notwithstanding the stiff competition across the whole spectrum of banking services, we stood firm in refusing
to involve ourselves in those areas which could potentially distract us from our straightforward, prudent and
conservative business model.
We developed new contacts in retail credit, while in commercial lending our relationships with existing
customers remained strong. Improved forward-looking macroeconomic indicators brought about reversals in
impairment provisioning when compared to the significant adverse forward-looking metrics as at the end of
2020.
Work on resolution of legacy Non-Performing Loans continued with the NPL stock maintained within the targets
set. Prudent management of the loan book and sensible collateral positions ensured new Non-Performing Loans
remained within acceptable margins.
Our transaction banking activities were below levels of previous years, mainly due to alternative and competing
payment methods and reduced volumes following the grey-listing of Malta.
In our Investments activity, we launched advisory and discretionary services, with both gaining traction as
customers chose to avail themselves of our services. Our asset management company and SICAV were
authorised by the Malta Financial Services Authority and we now are assessing alternative approaches to adding
our own UCITS funds to our suite of products.
We were enrolled as a Tied Insurance Intermediary for long-term insurance business products for IVALIFE
Insurance Limited. The insurance products we have been authorised to distribute supplement the service
offerings in Retail Lending and Investments activities.
Regulatory engagements were several and focused on areas across the Bank’s operational, risk and governance
structures, processes and controls. In this regard, considerable resources, time and effort continued to be
directed towards ensuring strict compliance with regulatory requirements.
MaltaPost also faced a challenging year, with the continued difficulties caused by supply chain disruptions, as
well as the continued decline of Letter Mail volumes and consequent reduction of respective income streams.
Postal tariffs remain among the lowest in Europe and a tariff revision is necessary to address the loss-making
postal services provided under the Universal Service Obligation. In this regard MaltaPost was in continuous
engagement with the Malta Communications Authority so as to implement pricing revisions. As to MaltaPost’s
involvement in the general and life insurance sector, more time is required to allow these activities to mature to
a point where they start contributing positively to the income streams of our subsidiary. For the financial year
ended September 2021, MaltaPost realised a pre-tax profit for the year of €2.35 million, a decrease of 15% over
the previous year.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
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Chief Executive Officer’s Review (continued)
Review of Financial Performance
Group Profit before Tax for the 2021 FY stood at €12.64 million, an increase of 22%.
Loans and Advances to Customers rose by 4% reaching €642.89 million. This portfolio was the main driver
behind the 4% increase in Interest Receivable and Similar Income on Loans and Advances which now stand at
€23.83 million. Interest Expense saw a 2% increase resulting from increased volume of Amounts Owed to
Customers, which reached €977.14 million. Net Interest Income when compared to 2020 also increased by 4%
to €19.56 million.
Net Fee and Commission Income improved by 10% to reach €5.21 million, supported by new lines of business
which started to show a positive trend.
Group Employee Compensation and Benefits increased by 7% to €24.4 million, a reflection of the tight labour
market and the need to maintain competitive and suitable compensation to Group staff. The Bank’s Cost
Efficiency Ratio was 60.8% (FYE 2020: 52.4%) while that of the Group stood at 81.9% (FYE 2020: 75.8%). While
operating costs remained well under control, increased fees and costs associated with obligations to satisfy
regulatory requirements and the enhancement of Compliance capabilities all contributed to increasing the cost
base.
The Bank’s Impairment Allowances as determined by International Financial Reporting Standard 9 (IFRS 9) for
the year ended 31 December 2021 stood at €26.16 million. Consequently, the change in ‘Expected Credit Losses’
(ECL) resulted in a net impairment reversal of €1.46 million compared to a charge of €3.97 million in the previous
year. At the reporting date, though the level of risk in the lending portfolio increased, the quality of the Bank’s
financial assets remains sound.
Liquidity and Own Funds
Over the years, the Bank relied on a diversified liquidity funding base which has proven to be relatively stable.
Advances to Deposits Ratio stood at 65.8% compared to 66.0% same period last year.
Total Assets stood at €1,175.39 million (2020: €1,130.96 million), while Equity Attributable to the Shareholders
of the Bank rose by 9.0% to €137.3 million. Net Asset Value (NAV) per share stood at €3.07 (2020: €2.85). Group
Earnings per Share (EPS) increased to 16.8 cents. Return on Assets (ROA) stood at 0.7% (2020: 0.6%) while post
tax Return on Equity (ROE) was 5.7% (2020: 5.4%).
Treasury Management
In determining the placement of funds, our main objective remained that of capital protection. We therefore
stood by our prudent approach of investing the bulk of our liquidity in the local economy mainly by way of
holdings in Government of Malta securities and in entities listed on the Malta Stock Exchange. The portfolio in
quality foreign bonds was retained at constant nominal values.
International money market placements with authorised counterparties remained selective, though practically
always in short tenors.
As expected, the grey-listing of Malta impacted our correspondent banking activity. Such counterparty
relationships are key to ensuring continued access to international currency and money markets via a network of
overseas banks. Some counterparties exited Malta altogether as a jurisdiction, resulting therefore in their
terminating relationships also with us. We held several presentations with various overseas banks explaining our
risk appetite for business and also the measures we have in place to ensure that our systems and processes were
sufficiently robust to combat financial crime effectively.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
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Chief Executive Officer’s Review (continued)
Risk Management
Risk-taking is an integral aspect of a Bank’s intermediation activity and as a result a whole range of financial and
non-financial risks need to be managed. This involves, to varying degrees, knowingly accepting and managing
such risks. In this regard the Bank continues to implement an Enterprise-wide Risk Management Framework that
involves a comprehensive and coordinated approach to identify, monitor and measure potential risks and
subsequently mitigate these risks to within the limits of the Bank’s own risk appetite. The management and
control of risk is encompassed within approved policies and procedures that are integrated in the decision-
making processes. Our overall risk management framework lays out this foundation and seeks to maximise
return on assets while safeguarding depositors’ funds at all times - always in compliance with statutory
requirements and within the risk tolerance limits approved by the Board of Directors.
The Risk Management Function reports to the Audit & Risk Committee and Board of Directors and provides a
detailed insight into the Bank’s risk management environment and situation of tolerance limits as per our Risk
Appetite Statement. During the year, the Risk Appetite Statement was reviewed and updated to reflect current
views on respective risks and to provide further granularity to the measurement processes.
Solvency requirements show that the Bank’s ‘Pillar I’ Total Capital Ratio (‘TCR’) at the end of 2021 stood at 16.2%
increasing from 15.8% the previous year. The Bank continues to maintain a strong capital position and is fully
compliant with regulatory capital requirements. The leverage ratio, that is monitored and reported to the Board
regularly, stood at 11.1% which is more than 3 times the minimum regulatory requirement of 3%.
Key liquidity metrics such as the Liquidity Coverage Ratio (‘LCR’), the Net Stable Funding Ratio (‘NSFR’) and the
Loan-to-Deposit Ratio are constantly monitored and regularly reported to the Board. The Bank ensures that it
remains sufficiently liquid at all times and in line with its risk appetite. At the end of 2021, these key metrics
stood at 225.3%, 148.4% and 65.7% respectively and well within our risk appetite.
Also, our Internal Capital Adequacy Assessment Process (ICAAP) is reviewed annually and robust stress testing is
regularly carried out on Capital and Liquidity to assess the Bank’s resilience to extreme but plausible shocks.
Human Resources
The logistical difficulties presented by the Pandemic resulted in about 50% of staff members working remotely
on a roster basis as necessary. This allowed the Bank to operate seamlessly with all branches remaining open for
service even during lockdown periods. The commitment and support of those staff members whose work
required them to be present at the office is recognised and much appreciated. Also duly acknowledged are the
efforts of all staff members to remain safe at the office and outside, and to work diligently and to the highest
standards at all times.
Competition for talent remained stiff with our recruitment programme remaining open throughout the year so
as to fill vacancies in all areas. The challenge is not limited to merely attracting competent persons of the
required skills and competencies but also to retain staff. We remain committed to offer a work environment that
meets with the priorities and aspirations of staff, whether these be related to career progression or work-life
balance goals.
We provided learning opportunities for staff members to improve their skills and technical qualities.
The staff complement at the Bank stood at 205 as at the end of 2021 while that of the Group reached 1,004. Our
staff remains key in the achievement of results and the success of the Group.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
8
Chief Executive Officer’s Review (continued)
Projects
Investment in technology was made in three main areas: renovation of core elements of the infrastructure,
meeting the specific needs of certain business lines and improving capabilities in regulatory reporting and
financial crime compliance.
In January 2021 our new branch in Attard opened for business, receiving positive feedback from customers. We
are confident that a larger part of the community in the area will experience the convenience of our service
offerings at this branch. Meanwhile we acquired other properties, in line with our objective of selectively
extending our geographic footprint so as to give us representation in those localities that we know would
welcome our presence. We continue to believe that in the Maltese market, a physical presence is important,
more so by those customers who value the personalised service offered by Lombard Bank. Renovation of
property acquired will be staged in a manner which allows for a smooth assimilation of the activity into the
Bank’s operations.
We continued with our Melita gold bullion coin issue in conjunction with the Central Bank of Malta. The 2021
coin was struck in four denominations, with this issue being well received and sold out soon after it became
available. Besides being of interest to local collectors, the issue attracted the interest of overseas collectors.
Also, jointly with the Central Bank of Malta we issued the first Melita silver bullion coin, weighing ten ounces.
Our subsidiary MaltaPost proceeded with its project of introducing battery-operated vehicles, with its fleet
reaching a total of 54 such vehicles, thereby reducing reliance on the use of vehicles powered by fossil fuels.
Community Involvement
Our commitment to actively support the local community and to place emphasis on assisting socially meaningful
projects continued throughout the year. We do so in various ways, including proposals aimed at preserving and
enhancing heritage and extending assistance to staff members who on their own initiative support worthy
causes.
Outlook
A positive set of results, a healthy brand and sound fundamentals encourage us to face the coming year with
optimism. However, prospects much depend on the resilience of the economic recovery and the general
operating environment. Other challenges may also arise from likely increases in euro interest rates and the
disruption that these may cause once transmitted to the real economy.
We remain committed to our obligations in respect of the environment, social responsibilities as well as matters
concerning good governance. In the coming year these issues will be given focus and the manner in which any
resulting changes may impact our business model, if at all, needs to be suitably determined.
Meeting with these challenges will require further investment in technology and human resources - which we
are determined to address accordingly. We therefore enter 2022 with enthusiasm and determination supported
by a solid set of results, healthy ratios, a strong balance sheet, a loyal customer base and a fine team of staff
members.
Signed on behalf of the Bank's Board of Directors on 20 April 2022 by Joseph Said (Chief Executive Officer) as per
the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and
Financial Statements 2021.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
9
Directors’ Report
The Group
The Lombard Bank Group (the Group) consists of Lombard Bank Malta p.l.c .
Lombard Capital Asset Management Limited, Lombard Select SICAV p.l.c. and the MaltaPost p.l.c. Group.
Principal Activities
Review of Performance
An overview of the development in the Bank’s business and that of its subsidiaries during the year under review
together with an indication of likely future developments may be found in the ‘Chief Executive Officer’s Review
of Operations’ of this Annual Report.
Group profit before tax for the financial year ended 31 December 2021 amounted to €12.6 million (2020: €10.4
million). Profit attributable to equity holders of the Bank was €7.5 million (2020: €6.6 million).
Net interest income at €19.6 million was 3.6% higher than the previous year. Increase in credit activity
compensated for pressure on interest rates especially in treasury operations. New lines of business contributed
to an increase of 10.0% in net fee and commission income.
Net loans and advances to customers increased by 3.5% to €642.9 million. Customer deposits increased by 3.8%
to €977.1 million. Group post tax return on equity for 2021 was 5.7% (2020: 5.4%). Group total assets increased
to €1,175.4 million (2020: €1,131.0 million). Total capital ratio at 16.2% (2020: 15.8%) exceeded the minimum
regulatory requirements.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
10
Directors’ Report (continued)
Bank cost efficiency ratio at 60.8% (2020: 52.4%) was mainly a reflection of human resource expenses as well as
increased regulatory compliance costs.
A reversal of €1.5 million was made for ‘Expected Credit Losses’ (ECL) as determined by International Financial
Reporting Standard 9 (IFRS 9) compared to a charge of €4.0 million in the previous year.
In a year of continued and significant disruption arising from the spread of the COVID-19 pandemic, MaltaPost
p.l.c. managed lower profitability as increased costs were not recovered through increases in either volumes or
price. As traditional postal volumes continued to drop, other non-postal income arose from document
management services, bill collection, financial services and insurance.
Equity attributable to equity holders of the Bank grew by a further 9.0% to €137.3 million. Group net asset value
(NAV) per share stood at €3.07 (2020: €2.85). Group earnings per share (EPS) increased to 16.8 cents.
Profits after taxation of €7.9 million and €7.8 million for the Group and the Bank, respectively were registered
for the twelve months ended 31 December 2021.
Based on the above, as was the case for 2020, a gross dividend of 3 cent per nominal 25 cent share (net dividend
of 1.95 cent for a total amount of € 872,956) for the twelve months ended 31 December 2021 is being proposed
for approval by shareholders at the 2022 Annual General Meeting, subject to regulatory approval.
Furthermore, a bonus share issue of one (1) share for every seventy five (75) shares held is being proposed by
the Board of Directors. The bonus issue will be funded by a capitalisation of reserves amounting to €149,000.
Resolutions to this effect will be proposed to the 2022 Annual General Meeting, subject to regulatory approval.
Board of Directors and Senior Management
The composition of the Bank’s Board of Directors and Senior Management is shown in the section on ‘Company
Information’ on page 39 of this Annual Report and further information is given in the ‘Statement of Compliance
with the Principles of Good Corporate Governance’.
Risk Management
The Financial Risk Management note to the Financial Statements (note 2), illustrates the process of how the
Group identifies and manages its risks and uncertainties. The main categories of risk described in this note are
credit risk, market risk, liquidity risk and operational risk. The same note includes extensive detail of the
processes undertaken by the Bank to manage these risks.
The Directors are required by the Companies Act, 1995 to prepare financial statements which give a true and fair
view of the state of affairs of the Group and the parent company as at the end of each reporting period and of
the profit or loss for that period.
Statement of Directors’ Responsibilities for the Financial Statements
In preparing the financial statements, the Directors are responsible for:
• ensuring that the financial statements have been drawn up in accordance with International Financial
Reporting Standards as adopted by the EU;
• selecting and applying appropriate accounting policies;
• making accounting estimates that are reasonable in the circumstances; and
• ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to
presume that the Group and the parent company will continue in business as a going concern.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
11
Directors’ Report (continued)
The Directors are also responsible for designing, implementing and maintaining such internal controls as they
deem necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error, and that comply with the Companies Act, 1995 and the Banking Act, 1994. They
are also responsible for safeguarding the assets of the Group and the parent company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements of the Bank for the year ended 31 December 2021 are included in this Annual Report
and made available on the Bank’s website. The Directors are responsible for the maintenance and integrity of
the Annual Report on the website in view of their responsibility for the controls over, and the security of, the
website. Access to information published on the Bank’s website is available in other countries and jurisdictions
where legislation governing the preparation and dissemination of financial statements may differ from
requirements or practice in Malta.
Statement of the Directors pursuant to Capital Markets Rule 5.68
The Directors confirm that, to the best of their knowledge:
• the financial statements give a true and fair view of the financial position of the Bank as at 31 December
2021, and of its financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the EU; and
• the Annual Report includes a fair review of the development and performance of the business and the
position of the Bank, together with a description of the principal risks and uncertainties that they faced.
Investment Services Rules for Investment Service Providers
In accordance with Rule R1-2.2.3 of the Investment Services Rules for Investment Service Providers regulated by
the Malta Financial Services Authority, licence holders are required to disclose any regulatory breaches of the
Rules or other regulatory requirements in this Annual Report. The Directors confirm that during the reporting
period, there were no breaches of the Investment Services Rules or other regulatory requirements, which were
subject to an administrative penalty or other regulatory sanction other than those in the public domain.
Information provided in accordance with Capital Markets Rule 5.70.1
There were no material contracts to which the Bank, or any of its subsidiaries were a party, and in which any one
of the Bank’s Directors was directly or indirectly interested, except for transactions disclosed in the notes to the
financial statements.
Going Concern
In compliance with Capital Markets Rule 5.62 and after having duly considered the Bank’s performance, the
Directors declare that they expect the Bank will continue to operate as a going concern for the foreseeable
future.
Capital Markets Rules – Disclosures
In terms of Capital Markets Rule 5.64, the Directors are required to disclose the following information.
As at the Annual General Meeting held on 28 May 2021, the authorised share capital of the Bank was
€20,000,000 made up of 80,000,000 ordinary shares of a nominal value of 25 cent each. As at that date the
issued and fully paid-up share capital of the Bank was €11,044,479 divided into 44,177,914 ordinary shares of a
nominal value of 25 cent each, all of one class.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
12
Directors’ Report (continued)
Following the approval by the Bank’s shareholders at the above-mentioned 2021 Annual General Meeting, the
amount of €147,262 from the Bank’s Retained Earnings Account was capitalised for the purpose of issuing
589,047 fully paid ordinary shares of a nominal value of €0.25 per share representing 1 bonus share for every 75
shares held allotted to the eligible members appearing on the Bank’s Register of Members as at close of trading
on the Malta Stock Exchange on 23 June 2021. Following this allotment, and as at 31 December 2021, the Issued
and fully paid-up Share Capital of the Bank increased to €11,191,740.25 divided into 44,766,961 ordinary shares
of a nominal value of 25 cent each, all of one class.
Amendments to the Memorandum and Articles of Association of the Bank are effected in conformity with the
provisions in the Companies Act, 1995. Furthermore, in terms of the Articles of Association:
• Directors may be authorised by the Bank to issue shares subject to the provisions of the Memorandum and
Articles of Association and the Companies Act;
• Directors may decline to register the transfer of a share (not being a fully paid share) to a person of whom
they do not approve;
• Directors may decline to recognise any instrument of transfer, unless accompanied by the necessary
evidence;
• no registration of transfers of shares shall be made and no new particulars shall be entered in the register of
members when the register is closed for inspection; and
• the Bank may, from time to time, by extraordinary resolution reduce the share capital, any Capital Reserve
Fund, or any Share Premium Account in any manner.
Currently there are no matters that require disclosures in relation to:
• holders of any securities with special rights;
• employee share schemes;
• restrictions on voting rights or relevant agreements thereto; or
• significant agreements to which the Bank is a party and which take effect, alter or terminate upon a change
of control of the Bank.
The Remuneration Report on page 35 refers to the financial contributions towards retirement gratuities that the
Board of Directors approves from time to time. The same Board had previously resolved that a retirement
gratuity be eventually paid on an ex gratia basis to the Chief Executive Officer on his retirement.
The rules governing the changes in Board membership are contained in the ‘Statement of Compliance with the
Principles of Good Corporate Governance’.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
13
Directors’ Report (continued)
Shareholders holding five per cent (5%) or more of the share capital of the Bank:
Shares in Lombard Bank Malta p.l.c.
31 December 2021
31 March 2022
National Development & Social Fund (NDSF)
49.01%
49.01%
Virtu Holdings Ltd
9.89%
9.89%
LifeStar Insurance p.l.c.
5.59%
5.59%
First Gemini p.l.c.
5.31%
5.31%
Directors’ Interest in Group Companies
Joseph Said, who is a Director of the Bank, is also a Director of the following companies that have a shareholding
in the Group as follows:
Shares in Lombard
Bank Malta p.l.c.
at 31 December 2021*
Shares in MaltaPost p.l.c.
at 31 December 2021*
Safaco Ltd
42,751
44,745
First Gemini p.l.c.
2,375,389
36,341
*There were no changes from 31 December 2021 to 31 March 2022.
In addition Joseph Said holds preference shares in Safaco Ltd.
Audit & Risk Committee
The Audit & Risk Committee is composed of non-executive Directors and is intended to ensure effective internal
controls, compliance and accountability. The Committee also acts to ensure that high ethical standards are
maintained, as explained in the ‘Statement of Compliance with the Principles of Good Corporate Governance’ in
another section of this Annual Report.
Auditors
PricewaterhouseCoopers have expressed their willingness to continue in office as auditors of the Bank and a
resolution proposing their reappointment will be put at the forthcoming Annual General Meeting.
Events occurring after the end of the accounting period
There were no significant events affecting the Bank or any of its subsidiary undertakings which have occurred
after 31 December 2021.
Non-Financial Statement
The Companies Act requires that a non-financial statement be included in this report containing information on
the Group’s development, performance, position and impact of its activity, relating to, as a minimum,
environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters and
this in the form of particular disclosures on certain aspects.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
14
Directors’ Report (continued)
1. Business Model
The Bank is a Malta-based bank and for financial stability purposes is considered by the Central Bank of Malta
as a core domestic bank, catering mostly for the local economy, and therefore actively supporting economic
actors in their activities. The lending activity of the Bank consists mainly of Commercial and Retail Lending.
Commercial Lending is largely characterised by loan facilities to the commercial sector with short to medium
term maturities. Retail Lending consists mainly of home loan facilities with medium to long term maturities.
Asset diversification strategy is intended to increase the resilience of the Bank’s loan book and its lending
capacity. The Bank was enrolled as a Tied Insurance Intermediary for long term insurance business and can
therefore provide its Home Loan customers with a more comprehensive service offering. Lending is funded
by a diversified deposit base and underpinned by solid capital and liquidity ratios. The Bank has never relied,
and does not intend to rely, on the interbank market for its funding requirements, and retains ample liquidity
from its retail operations. This approach to business underpins the Bank’s image and facilitates pricing
decisions. In this respect the Bank seeks to progress slowly, prudently yet surely, as evidenced by the quality
of its assets and relationships. The Bank follows risk review processes to ensure that business is in line with
its risk appetite frameworks and its compliance standards, which themselves are also reviewed periodically in
light of regulatory developments and emerging risks. The Bank continues seeking to expand its product and
services portfolio into the retail market. In this regard, the Bank has taken steps to widen its investment
service offerings by manufacturing its own UCITS funds, and for this reason incorporated its own SICAV and
fund manager, Lombard Select SICAV p.l.c. and Lombard Asset Management Limited respectively, both duly
licensed by the Malta Financial Services Authority.
The Bank’s business model is based on building stakeholder value by delivering financial services and
solutions in a prudent manner and by setting the highest standards in professional behaviour and
implementing the highest standards of compliance. The Bank’s competitive strengths are in its unique
business operating model, its conservative outlook towards risk and its robust fundamentals. The
characteristics of its business model give the Bank a competitive advantage, enabling it to continue to deliver
value to all its stakeholders in a challenging environment which remains highly competitive and increasingly
regulated. The Bank’s brand, which stands for the provision of personalised and tailored financial services,
remains strong.
The Bank’s subsidiary, MaltaPost p.l.c. (MaltaPost) is Malta’s leading postal services company, being the sole
licensed Universal Service Provider of postal services on the Maltese Islands in terms of the Postal Services
Act (Chapter 254 Laws of Malta) and under the terms of the Universal Postal Union Convention and
Constitution on behalf of the Government of Malta. It has a network of 42 Post Offices and 25 Sub-Post
Offices around Malta and Gozo providing an extensive range of postal and financial services.
Postal services remain characterised by a decline in Letter Mail volumes and in the corresponding income.
MaltaPost continues to pursue its diversification into logistics, document management, insurance and
financial services. In insurance, MaltaPost has a 25% shareholding in IVALIFE Insurance Limited, a company
licensed to conduct long-term business of insurance and a 49% shareholding in PostaInsure Agency Limited,
an insurance agency for MAPFRE Middlesea p.l.c. Document management services are offered through a fully
owned subsidiary, Tanseana Limited. While MaltaPost remains committed to be the trusted postal and
logistics operator offering a comprehensive product portfolio, these investments in non-postal sectors are
intended to supplement income streams from the core activity.
As evident from the above disclosures, there were no notable changes to the core business strategies and
business models of Group entities. The pandemic has not had an impact on the validity of the Group’s
business models, though consequent to the adverse impact that the pandemic has had on economic growth
in Malta, as indeed worldwide, it is expected that the Group will face pressures on income streams in times
ahead.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2021
15
Directors’ Report (continued)
2. Anti-Corruption and Bribery Matters
The Group has a zero tolerance policy to bribery and corruption, financial crime and breaches of the relative
laws and regulations. The Group developed and maintains robust policies designed to prevent and detect
potential bribery and corruption in the form of an Anti-Bribery and Corruption (ABC) Policy and
Whistleblowing Policy.
The implementation of these policies is by means of processes, procedures and respective controls, which
are embedded in the Group’s structures and manuals in order to ensure that staff members act responsibly
within the work place and outside. Guidelines and instructions regarding ABC and Whistleblowing are
applicable and available to all staff members. All staff members, including Directors and, where relevant,
associated persons are required to comply with the principles outlined. The Group supports a ‘speak-up
attitude’ to encourage reporting of concerns relating