Research Report: Lombard Bank Malta plc

We are initiating our coverage on Lombard Bank Malta p.l.c. (“LOM” or the “Group”) with a Hold recommendation and a 12-month price target of €2.36. The Bank’s return on equity and earnings yield as per 2019 LTM results currently stand at a healthy level of 7.7% and 8.9% respectively, reflecting the Bank’s recent growth trajectory, primarily emanating from an increase in its loan book, both from a retail and commercial perspective. However, the broader context of the Banking industry in Malta, as well as internationally, remains relatively unattractive, with larger capital requirements as a consequence of more stringent regulation, increased costs mainly related to risk management, compliance and ICT; coupled with a backdrop of punishingly low interest rates which are affecting interest margins across the board. The Group’s financial performance is also linked to MaltaPost p.l.c.’s operational performance, which recently has registered a decline in activity c