Questions regarding the adoption of the euro and lending to the property sector were raised by members at Lombard Bank’s recent AGM. When a shareholder asked whether the bank envisaged pressure on interest margins as a result of euro adoption in January 2008, he was informed that the adoption of the euro would be a “first experience” for everybody and although convergence of Lm and euro interest rates is well underway, one would have to “wait and see” how the money market in Malta would react at the time.
One could not exclude the possibility of “territoriality” arising in spite of a common currency in a single economic area. In other words we could witness somewhat differing euro interest rates applied in different areas in, for example, lending.
After adopting the euro, the bank expects its Treasury activities to increase. Given that its base currency is currently the Lm it can only invest the majority of its funds in Lm instruments. Once euro becomes its base currency then funds can be invested in euro denominated instruments worldwide.
The annual general meeting was also told that with the adoption of the euro the bank’s foreign exchange earnings were bound to decrease as the euro was probably the most traded foreign currency in recent years. This would obviously cease upon its adoption as Malta’s own currency. Given the bank’s size it could not be everything to everyone and therefore could not specialise in all areas For example, Trade Finance activity was limited as in the main this was undertaken by those that focused on say, the manufacturing industry. “Having said that, we are in relationship with Malta’s largest manufacturing industries in connection with foreign exchange transactions in which we are very competitive.”
A shareholder then enquired about the bank’s Loans & Advances exposure to the construction and real estate sector. A further question sought the views of the bank on the future of the (rising) property market in Malta. To these two questions Mr Said, chief executive officer and director, replied that the bank’s lending mix in terms of economic sectors was no different to that of other similar sized banks and was comfortable with its property lending more so since it had developed a team that was specialised in assessing such proposals. Construction was among Malta’s largest industry/activity that sought bank finance – it therefore followed that the bank would carry a significant loan portfolio in that sector. In this regard the bank had a (lending) team that specialised in assessing projects intended for the mid-level property market. It considered that this market sector would continue to experience a healthy demand.
Another shareholder, while congratulating management on its “fantastic” Cost to Income Ratio at 35.10 per cent asked what the bank’s secret for achieving such an enviable ratio was. Questions were also put with regard to the bank’s recent investment in Maltapost plc. Mr Said replied that management was extremely cost conscious and sought value for money at every level of its operations.
As for synergies that existed with Maltapost plc (a recent investment by the bank) Mr Said said that Maltapost had a known and generally well-respected brand, a trained workforce together with a reasonably extensive branch
network. These assets would not be ignored by the bank.
In his statement to the
shareholders earlier in the meeting, chairman Christian Lemmerich said: “Lombard Bank does not embrace a policy of seeking short-term gains (vis-à-vis the investment in Maltapost). Instead we prefer situations that allow us to lay strong foundations for profitable growth in the medium to long term.”
Shareholders seemed upbeat about the results achieved by going as far as proposing a vote of thanks to the management and Board of Directors of the bank “for the good and hard work performed throughout the year” The motion was unanimously approved.
The bank’s Board of Directors is made up of: Joseph M. Demajo, Graham Fairclough, Christian Lemmerich, Stefano Loffredi, Gianfilippo Maiga, Joseph Said and Michael Zammit.