Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
1
CONTENTS
Chairman’s Statement to the Members 2
Chief Executive Officer’s Review 4
Directors’ Report 8
Statement of Compliance with the Principles of Good Corporate Governance 69
Remuneration Report 79
Company Information 84
Financial Statements:
Statements of Financial Position 86
Income Statements 88
Statements of Comprehensive Income 89
Statements of Changes in Equity 90
Statements of Cash Flows 94
Notes to the Financial Statements 95
Additional Regulatory Disclosures 221
Five Year Summaries 253
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 2024
2
Chairman’s Statement to the Members
I am pleased to report that the Lombard Bank Group turned in another solid performance in 2024. Both members
of the Group, Lombard Bank Malta p.l.c (‘the Bank’) and MaltaPost p.l.c, made increased profits in the context of
a favourable operating and macroeconomic environment, which contributed to the achievement of the respective
business plan targets. The Group’s pre-tax profit amounted to €19.4 million compared with €14.5 million in 2023.
At the Bank the determined but prudent pursuit of sustainable growth remained the Board’s guiding principle. As
I had anticipated last year, the increase in capital resulting from the successful Rights Issue at the end of 2023
permitted the Bank to apply its healthy levels of liquidity to satisfy the demand for credit while remaining
compliant with regulatory capital requirements. The Bank’s lending operations, as shareholders are aware, are
traditionally the largest single source of revenue. Last year was no exception. Interest income from this activity
reflected the record increase of €114.4 million in the loan book as average interest rates were broadly unchanged.
This was supplemented by inflows from the Bank’s money market operations, which benefitted from the prevailing
positive interest rates, and by higher net fees and commission income.
These inflows were partly offset by interest paid out on deposits, which increased strongly by €100.6 million in a
further demonstration of customer trust. No less than €50 million of this amount were fixed deposits with a five-
to-eight-year term which carry more attractive rates, and are therefore more costly for the Bank, but are less
volatile and therefore represent a more stable source of funds.
These balance sheet movements gave rise to an 8% increase in the Bank’s total operating income to €35.6 million.
The Bank’s running costs absorbed just over 54% of this income, much the same as in the previous year. In line
with past trends, employee compensation and benefits accounted for about half of total expenditure. While the
staff complement was virtually unchanged, the recruitment and retention of qualified employees in a competitive
labour market necessarily entailed a higher cost. Compliance with regulatory requirements, and the maintenance
and upgrading of card services and IT systems also absorbed considerable human and financial resources.
These income and expenditure movements resulted in a profit before tax of €16.1 million, compared with €13.9
million in 2023, which took the Bank’s total equity to a new high of €202.8 million. On the basis of this performance
and in line with the proposal made at the time of the Rights Issue to distribute about one-third of annual profits,
the Board has decided to recommend an increased gross dividend of 3.40 cent per share.
The growth achieved in 2024 was supported by the Bank’s prudent and cautious management culture. This is
governed by our structured risk management framework and Risk Appetite Statement and again last year
contributed to the maintenance of strong fundamentals. These are reflected primarily in the Total Capital Ratio
and the Liquidity Coverage Ratio, which stood at 20.0% and 231.8%, respectively at year end. Both these ratios are
well above the minimum regulatory requirements, thus leaving room for further balance sheet growth. The
Leverage Ratio, another key indicator of exposure to risk, meanwhile stood at 13.9%, more than four times the
required level. Two other risk-mitigating factors were the further progress achieved in credit diversification,
particularly the increase in retail lending, mainly home loans, which now accounts for 33% of the loan book; and
high levels of collateral, on average equivalent to three times the amount of total lending.
Apart from being characterised by low-risk banking practices, the Bank’s business model places equal importance
on ensuring long-term sustainability. This for two reasons: first, to meet shareholder and customer expectations;
and second, to remain competitive in a fast-changing financial market. To this end, work continued during the year
on several initiatives designed to deliver more modern and cost-effective banking services. Most of these projects
involve investment in advanced technologies and operational systems. These included a round-the-clock instant
payments system, which allows the almost instantaneous transfer of funds between accounts; the replacement
of our core banking system, for which agreements are being reviewed and further updating of our KYC Platform
and transaction monitoring system, and of our cybersecurity infrastructure. Another aspect of the Bank’s efforts
to improve the customer banking experience was the further improvement of the facilities at our eleven branches.
We are also close to creating new investment opportunities with the launching of bond and equity funds.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Chairman’s Statement to the Members (continued)
Other projects are related to the Bank’s regulatory responsibilities, such as the updating of reporting systems; the
alignment of our policies with emerging regulations such as DORA; and implementation of the Action Plan to
achieve compliance with ESG obligations. The ongoing initiatives I have mentioned together constitute an integral
part of the gradual transformation of the Bank in accordance with the objectives of the Business Plan 2023 – 2025.
As I remarked in my introduction, MaltaPost p.l.c. also contributed to the Group’s positive performance in 2024.
Our subsidiary in fact registered a pre-tax profit of €4.7 million, compared with €2.3 million the previous year. The
continued evolution of the company into a tech-driven postal services provider is clearly producing the desired
results. Greater operational efficiencies were derived from strategic investments in logistics and e-commerce
services, in the company’s digital infrastructure and in making more services available online. The approval of
some tariff increases by the regulator also impacted the profit figure positively. Meanwhile, MaltaPost’s focus on
green technologies and on meeting its ESG obligations continued apace. Among developments in this area were
further additions to the company’s fleet of electrically-operated vehicles and improvements in the existing
photovoltaic system. We believe that MaltaPost is well positioned to exploit new opportunities for innovation and
growth while meeting its sustainability objectives and offering efficient postal services, and increasingly also
financial and insurance products.
You will recall that I have often spoken about the heavy burden of regulation. For a small bank like ours, the
growing cost of compliance is exacerbated by the insufficient application of the principle of proportionality to take
account of the Bank’s small size and conservative business model. It now seems that regulators have finally
acknowledged that regulation has become excessively onerous and is stifling innovation at the expense of
competitiveness. Earlier this year the ECB and the EC announced the imminent introduction of a significant easing
of regulation, including a far-reaching simplification of legislation on sustainable finance reporting and due
diligence. In Malta similar thinking seems to be developing within the national regulator. This was embodied in
the recent floating of a proposal whereby supervision of less complex banks in the EU would be scaled according
to each bank's size and risk profile, avoiding a repressive one-size-fits-all approach. The implied radical change in
banking regulation is welcome. It now remains for the new thinking to be translated into meaningful action.
On this occasion last year I said that the Board would continue to give close attention to the long-outstanding
matter of the disposal by the Qualifying Shareholder of its shares in the Bank. We have in fact stepped up our
efforts in this regard while reaffirming our belief that this is in the best interest of all stakeholders of the Group.
Apart from providing clarity to prospective investors, such a development is particularly desirable in the context
of the structural changes that are likely to materialise in the Maltese banking industry in the near term.
Looking back on another successful year during which all our key objectives were achieved, the Board believes
that we can face the future with confidence. We shall continue to apply the Bank’s time-tested business model to
the generation of sustainable growth for the benefit of our shareholders, customers and staff. Apart from our
belief that the Bank’s strategy is well suited to the evolving characteristics of the domestic financial market and
the expectations of the Maltese community we serve, our measured optimism is also comforted by the positive
outlook for the domestic economy, even though we do not discount the possibility of unexpected challenges
arising from geo-political events abroad.
In conclusion, on behalf of the Board I would like to express my gratitude to the Bank’s staff and management
team, ably led by the Chief Executive Officer, Joseph Said, for their decisive role in delivering the past year’s
encouraging results and in holding high the reputation of the Lombard brand. I would also like to thank my fellow
directors and all our stakeholders for their loyalty and support.
Signed on behalf of the Bank's Board of Directors on 16 April 2025 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 2024.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Chief Executive Officer’s Review
The results for the financial year ended 31 December 2024 combine the financial performance of Lombard Bank
Malta p.l.c. and Redbox Limited which is the company holding the Bank’s shares in MaltaPost p.l.c.
Summary Overview - 2024
The year 2024 was generally a positive one in that besides an overall improved financial performance, the targets
set in the 2023 Rights Issue Prospectus were all achieved.
Our larger capital base and the widening of our market presence brought a higher number of relationships and
business across the main income lines of commercial, retail and transaction banking as well as wealth
management. Growth was always aligned with our approach to business and strategic priorities, which are
underscored by prudence and measured progress.
While higher interest rates from the prevailing monetary policies of the ECB in 2024 were a positive influence on
the profitability of banks, particularly those benefitting from high liquidity, we applied our liquidity to the granting
of credit always within the limits of our appetite. Benefit from these higher rates on residual liquidity was passed
on to our customers via longer-term deposits. This higher deposit cost, together with maintaining keen rates on
our commercial and retail lending, kept our net interest margins in check.
The Maltese economy continued to perform well, maintaining growth rates among the highest in Europe primarily
driven by services, exports and domestic demand. This positive macro-economic environment was a catalyst for
resilient performance on both sides of our balance sheet. The NPL ratio, strictly calculated in terms of Banking
Rules, rose over that of last year. That said we are confident that we have a healthy credit portfolio and remain
focused on maintaining a sound loan book, never compromising on our lending principles while also securing
conservative collateral positions, as appropriate.
Engagements with the regulator were several, particularly in areas concerning the adoption of CRR3, DORA and
CSRD. In this regard, considerable resources, time and effort continued to be directed towards meeting deadlines.
ESG-related initiatives remained consistent with the general regulatory mandates and internal sustainable finance
targets.
MaltaPost remains an important contributor to the Group’s financial performance. The transformative process of
our subsidiary proceeded as planned. Following months of discussions, the Malta Communications Authority
approved an Automated Tariff Revision Mechanism, which allows MaltaPost to carry out tariff revisions for those
services falling under the Universal Service Obligation allowing better financial planning at MaltaPost. E-commerce
business continued to underpin the strategy for growth, where further investment in the last-mile parcel delivery
activity was made. For the financial year ended September 2024, MaltaPost realised a pre-tax profit of €4.7million
(2023: €2.3million).
Review of Financial Performance
The Lombard Bank Group (‘the Group’) registered a strong performance for FYE2024 with Group Profit before Tax
reaching €19.42 million, an increase of 34% over the previous year.
Loans and Advances to Customers rose to €872.68 million generating a 13% increase in gross interest revenues of
€38.14 million. Higher money market interest rates also contributed to the growth in interest income. Interest
Expense was up by 39% reflecting both a higher volume of customer deposits, which exceeded €1,120 million, and
the impact of higher rates offered on customer deposits. Net Interest Income rose by 5% to €27.26 million over
the previous year.
Net Fee and Commission Income increased by 23% to reach €6.37 million, driven by higher activity across most
business lines.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Chief Executive Officer’s Review (continued)
Group Employee Compensation and Benefits rose by 9% to €26.53 million, while Group operating costs were
reduced by 10% to €24.43 million - a reflection of effective cost management and enhanced operational
efficiencies. The Bank’s Cost Efficiency Ratio was 54.5% (FYE2023: 53.9%), influenced by higher cost of human
resources and continued investment in IT systems. For the Group, the ratio was 73.5% (FYE2023: 77.7%), reflecting
the nature of the postal services industry, which is characterised by high volume, low margins, and significant
human resources requirement.
Impairment Allowances, as determined by International Financial Reporting Standard 9 (IFRS 9), stood at €9.03
million. The change in ‘expected credit losses’ (ECL) resulted in a net release of €0.93 million compared to a net
charge of €1.26 million in the previous year. This release mainly resulted from lower charges on customer loans
and advances classified in Stages 1 and 2 and was spread across the lending portfolio.
Liquidity and Own Funds
The Bank relies on a diversified liquidity funding base which has proven to be relatively stable, largely from local
retail deposits, with emphasis placed on long-term tenors.
Total Assets stood at €1,388.42 million (2023: €1,265.13 million), while Equity Attributable to the Shareholders of
the Bank stood at €209.45 million. Net Asset Value (NAV) per share stood at €1.36 (2023: €1.23). Return on Assets
Treasury Management
While positive interest rates provided opportunities to apply liquidity in interest-earning instruments, our main
objective remained capital protection. We engaged mostly in short-term interbank transactions and only with
reputable counterparties and local government, where our positions consisted mainly of Government of Malta
Treasury Bills and Stocks. We continued to cultivate healthy counterparty relationships, which are important for
our access to international currency and money markets via our network of correspondent banks.
Risk Management
Managing risk remains the primary goal of our risk management processes. To this end we enhanced our
comprehensive Risk Management Framework that provides a structured approach to identifying, monitoring, and
measuring potential risks, as well as implementing necessary measures based on our Risk Appetite.
Our independent Risk Management function forms part of the Second Line in our Three Lines of Defence model.
It directly reports to the Audit & Risk Committee and the Board of Directors, providing regular updates on various
risk areas and overseeing key metrics related to the tolerance limits defined in our Risk Appetite Statement. This
Statement is a dynamic document that is reviewed and updated as necessary, adapting to changes in policy and
prevailing macroeconomic conditions. Established limits ensure that the Bank can operate effectively, while
protecting its assets and depositors’ funds, while remaining compliant with statutory obligations.
At the end of 2024, the Bank’s Total Capital Ratio (‘TCR’) stood at 20.00%, exceeding regulatory requirements. This
robust capital position supports the Bank's growth strategy and caters for potential increases in further regulatory
capital requirements.
The Leverage Ratio, which is regularly monitored, indicates the Bank’s exposure to excessive leverage. This ratio
stood at 13.89% at the end of 2024, well above the minimum regulatory requirement of 3%.
Our internal policies mandate that the Bank always holds adequate liquidity to meet obligations as they arise. Key
liquidity metrics are closely monitored, with the Liquidity Coverage Ratio (‘LCR’) and the Net Stable Funding Ratio
(‘NSFR’) standing at 231.82% and 147.00% respectively at the end of 2024, both significantly above minimum
regulatory requirements and within our Risk Appetite. Also, our Loan-to-Deposit Ratio at 77.8%, reflects the Bank's
prudent approach to liquidity management.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Chief Executive Officer’s Review (continued)
The Internal Capital and Liquidity Adequacy Assessment Processes (ICAAP/ILAAP) are critical components of our
Capital and Liquidity planning. These processes are reviewed annually to ensure that our funding needs align with
the scale, nature and complexity of our operations. In line with our stress-testing framework, both capital and
liquidity positions are assessed under stress scenarios to ensure the Bank remains resilient to extreme, though
plausible shocks.
Human Resources
We concluded with the Malta Union of Bank Employees a Collective Agreement for the period 2025 – 2028. This
latest Agreement includes improved terms and benefits for staff and new benefits such as a workplace pension
plan, further reductions in weekly working hours and improved remuneration. We are sensitive to the importance
of offering attractive compensation and reward packages, not only to ensure staff retention but also to attract
others considering embarking on a banking career and choosing Lombard. We remain committed to offering a
work environment that meets with the priorities and aspirations of staff, whether these be career progression or
work-life balance goals.
The local labour market continues putting pressure on our recruitment efforts, besides presenting challenges to
retain staff. Whereas, of itself, this is a positive indication, the services sector in particular, remained very
competitive both for roles in specialised areas as well as for general staff.
The investment in the skills and development of our staff by way of internal and external training and development
opportunities coupled with on-the-job training, was ongoing. Our staff remain key in the achievement of results
and the success of the Group.
The FTE staff complement at the Bank stood at 206 as at end of 2024, while that of the Group reached 964.
Projects
Technology-driven projects were predominant in 2024, some to implement functionality to meet regulatory
mandates while others to satisfy business needs and enhance operational efficiency.
We made a significant investment to implement the SEPA Incoming Instant Payments, allowing for the transfer of
euro funds between accounts almost immediately. Instant payments are available on a 24/7 basis. This enhanced
service stands to benefit customers by way of more efficient and reliable payments.
Following an agreement with VISA, we embarked on a project to become VISA exclusive issuers. For many years
we issued both MasterCard and VISA cards. However, our volumes coupled with increasing costs did not justify
issuing cards on both brands. Once fully implemented, we should benefit from cost savings, without weakening
our cards offering.
Work on our core banking system project continued in earnest. The project is targeted to transform our core
transaction processing systems as well as customer engagement interfaces. The underlying technology will also be
modernised, using cloud technologies.
Investment in other areas such as cybersecurity and infrastructure modernisation was ongoing.
We issued the 2024 Melita gold bullion coins in conjunction with the Central Bank of Malta. Melita coins have
become sought-after also internationally.
MaltaPost proceeded with investment in mail-sorting hubs that accommodate larger mail items. Also, its electric
delivery vehicles now exceed 160 in number, probably the largest corporate zero-emission fleet on the Islands.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Chief Executive Officer’s Review (continued)
Corporate Social Responsibility
The Group maintained its community involvement by supporting various initiatives and entities among them the
Malta Community Chest Fund, Id-Dar tal-Providenza, Volserv and others. We also sponsored a water-conservation
project at a Heritage Malta site. This support programme also aligns with our ESG initiatives. We also continue
curating our buildings of architectural value, which also serve as offices. MaltaPost maintained its commitment to
run the Malta Postal Museum which has now become firmly established as part of Malta’s heritage destinations.
Outlook
Indicators in early 2025 suggest that we are well-placed to continue along the growth trajectory established in
2024 and in line with our targets. We have focused on sustainable growth, ensuring that our operations align not
to just financial goals but also responsibly to the communities we serve and to the rightful expectations of our
shareholders.
We remain fully committed to uphold our prudent and selective approach to business; to preserve a robust
financial position; to invest in advanced technology; to prioritise customer-centric solutions and to foster a
healthy, rewarding and pleasant work environment for our staff.
While poised to embrace the evolving banking environment with confidence, we will continue to explore new
avenues for growth, leveraging data analytics and digital transformation to enhance our services. We shall
continue to be guided by our commitment to responsible banking to steer away from short-term gains as we aim
to innovate while maintaining the trust placed in us.
We therefore look ahead with cautious optimism on the prospects for our business, especially in the light of the
expected positive performance of the Maltese economy, even though international developments may yet
present unexpected challenges. With this in mind, we shall always err on the side of caution and in the best
interests of all stakeholders.
Signed on behalf of the Bank's Board of Directors on 16 April 2025 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 2024.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
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Directors’ Report
The Group
The Lombard Bank Group (‘the Group’) consists of Lombard Bank Malta p.l.c. (‘the Bank’), Redbox Limited, Lombard
Select SICAV p.l.c. and the MaltaPost p.l.c. Group.
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
this Annual Report.
Group profit before tax for the financial year ended 31 December 2024 amounted to €19.4 million (2023: €14.5
million). Profit attributable to equity holders of the Bank was €11.3 million (2023: €9.1 million).
Net interest income at €27.3 million was 5.4% higher than the previous year. Growth in the lending portfolio,
combined with higher interest earned on money market deposits contributed to this increase. Net fee and
commission income increased by 23.0% driven by higher activity across most business lines.
Net loans and advances to customers increased by 15.1% to €872.7 million. Customer deposits increased by 9.9%
to €1,120.0 million. Group post tax return on equity for 2024 remained steady at 5.6% compared with 2023. Group
total assets increased to €1,388.4 million (2023: €1,265.1 million). Total capital ratio at 20.0% (2023: 21.0%)
exceeded the minimum regulatory requirements.
Bank cost efficiency ratio was 54.5% (2023: 53.9%), influenced by higher human resources costs and other operating
costs countering the positive impact of increased revenues.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
9
Directors’ Report (continued)
Expected Credit Losses (‘ECL’) as defined and determined by International Financial Reporting Standard 9 (IFRS 9)
resulted in a release of €0.9 million compared to a net charge of €1.3 million taken in the previous year. This release
mainly resulted from lower charges taken on customer loans and advances classified in Stages 1 and 2 and was
spread across the Bank’s lending portfolio.
For MaltaPost p.l.c, FY 2024 was a successful year when planned objectives were in the main achieved. In a rapidly
evolving postal and logistics landscape, both locally and globally, MaltaPost continued to adapt by making strategic
investments, with particular emphasis on enhancing the last-mile delivery network in the logistics field. Additionally,
customer service remained a priority, alongside the continued growth of the insurance and document management
business. MaltaPost continues to be an important contributor to the Group’s financial performance, registering a
pre-tax profit of €4.7million for FY 2024 (2023: €2.3 million).
Equity attributable to equity holders of the Bank stood at €209.4 million (2023: €190.4 million). Group net asset
value (NAV) per share stood at €1.36 (2023: €1.23). Group earnings per share (EPS) worked out at €0.07.
Profits after taxation of €12.2 million and €10.2 million for the Group and the Bank respectively, were registered for
the twelve months ended 31 December 2024.
Based on the above, a gross dividend of 3.40 cent per nominal €0.125 share (net dividend of 2.21 cent for a total
amount of €3,416,000) for the twelve months ended 31 December 2024 is being proposed for approval by
shareholders at the 2025 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 84 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 2024
10
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 2024 are included in this Annual Report and
are available on the Bank’s website and on the website of the Malta Stock Exchange (the Officially Appointed
Mechanism). 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 2024,
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 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.
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 27 June 2024, the authorised share capital of the Bank was €37,500,000
divided into 300,000,000 Ordinary Shares of a nominal value of €0.125 each. As at that date the issued and fully
paid-up share capital of the Bank was €19,321,532.88 divided into 154,572,263 ordinary shares of a nominal value of
€0.125 each, all of one class. As at 31 December 2024, the authorised and issued share capital remained unchanged.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
11
Directors’ Report (continued)
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 79 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’.
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 2024
31 March 2025
National Development & Social Fund (NDSF)
49.01%
49.01%
Virtu Holdings Ltd
9.89%
9.89%
First Gemini p.l.c.
5.31%
5.31%
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
12
Directors’ Report (continued)
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 2024
Shares in MaltaPost
p.l.c.
at 31 December 2024
Safaco Ltd
147,611
96,991
First Gemini p.l.c.
8,201,836
78,775
Shares in Lombard
Bank Malta p.l.c.
at 31 March 2025
Shares in MaltaPost
p.l.c.
at 31 March 2025
Safaco Ltd
147,611
96,991
First Gemini p.l.c.
8,201,836
78,775
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 2024.
Other Information
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 2024
13
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 sectors 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 is a Tied Insurance Intermediary for
long-term insurance business and can therefore provide its Home Loan customers a comprehensive service offering.
Lending is funded by a diversified deposit base and underpinned by solid financial fundamentals and stakeholder value.
The Bank has never relied, and does not intend to rely, on the interbank market for its funding requirements. In line with
strategic priorities the Bank seeks further prudent growth, while continuing to adhere to the highest standards of
professional conduct, as evidenced by the quality of its assets and relationships. The Bank undertakes 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 firmly
believes that physical presence remains an important element of its delivery channels, more so in respect of customers
who demand a personalised service, being the service delivery ethos of the Bank. In this manner the Bank seeks to foster
new relationships across a wider demographic spectrum. Presently the Bank operates 11 branches. A further 2 Bank
owned properties are earmarked to open as branches at the opportune time.
The Bank’s business model seeks to build 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 auspices of the Universal Postal Union on behalf of the Government
of Malta. MaltaPost is regulated by the Communications Authority. The Company operates a network of 6 Postal
Hubs, 41 Post Offices and 20 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, and on
an opposing trajectory, increasing costs. 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.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
14
Directors’ Report (continued)
2.
Anti-Corruption and Bribery Matters
The Group remains committed to 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 workplace 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 to what might appear to be suspected illegal, unethical or otherwise improper acts or their
concealment. The same standards are expected from any third parties providing services for or on behalf of the
Group. Staff members who fail to comply with the Group’s policies and standards may face disciplinary action,
up to and including dismissal or termination of employment. Training sessions keep staff members abreast of
their respective obligations at all times.
The Risk Management and Compliance functions exercise oversight of the implementation of respective Policies,
the former by including ABC in risk assessments and the latter by ensuring constant standards of compliance.
The Risk and Compliance functions also work together to ensure the proper functioning of these policies, while
the Internal Audit reviews results. Matters arising, if any, out of the adoption of these policies are reported by
the Compliance function in its reports to the Audit & Risk Committee and Board of Directors. Policies are
reviewed annually, or more often as required, by the relative business and internal control functions with suitable
recommendations, as is necessary, made to the Board of Directors. During the year under review, there were no
reported cases on the basis of the abovementioned policies and therefore no necessary investigations.
3.
Social and Employee-related Matters
Social and employee matters are given full attention by the Group. The Group’s human capital is a key resource
for the carrying out of business, having an average of 1,000 employees throughout the year. The ability to attract
and retain human resources of the right skill-mix and experience condition to a large extent the Group’s
performance. The risk of not attracting or retaining the appropriate quality staff in line with the Group’s business
needs is mitigated generally by the approach to managing this resource. In this regard the Group remains
committed to fostering a culture that values common interest, inclusivity and both social and mental well-being,
enabled by a number of supporting measures. MaltaPost has over 31% of its employees being non-Maltese
speakers hailing from 18 different countries.
Collective Agreements are in place at the Bank and MaltaPost p.l.c., which between them account for the larger
part of the staff complement of the Group. They set the conditions of work and generally regulate the
employer/employee relationship. The prevailing Agreements contain a number of measures of assistance to staff
members including days of special paid leave additional to those stipulated at law, such as Birthday Leave, Study
Leave, Special Circumstances Leave and extended Bereavement Leave. Agreements improve on the conditions
of employment set at law, underlining the Group’s dedication to continually improving working conditions and
ensuring a fair and equitable work environment. The Group enjoys harmonious industrial relations with the full
co-operation of respective trade unions, staff members and their representatives.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
15
Directors’ Report (continued)
Oversight of key indicators, by which human resource performance is evaluated is maintained by the Human
Resources function and reported to senior management and the Risk Management function as appropriate for
suitable action if and as required. Performance management takes into consideration leadership and other
competencies required by particular positions as well as the Group’s corporate values. The Group does not place
quotas on the number of staff members whose personal circumstances require them to work on reduced hours or
need to absent themselves from work for an extended period of time on Child Care Leave or other absences
related to immediate family matters. In this regard, the Group is committed to supporting and developing work-
life balance measures further.
The Bank also extends a number of products and services to Group staff members on favourable terms including,
among others, advantageous terms on home loans and other personal borrowing. The Group keeps an active
line of communication with staff members through circulars, branch/department staff meetings and one-to-one
meetings among others and is committed to maintaining a working environment where staff is valued, respected
and supported to fulfil potential.
All members of staff are treated on equal terms with regard to career development and appointments and the
Group supports and practices gender equality and diversity. The Group, however, does not set specific targets in
this regard, as it firmly believes that progress is dependent largely on skill, competencies, attributes and
performance, rather than gender and/or other diversity factors. Being the largest employer in the Group,
MaltaPost p.l.c. holds the Equality Certification Mark following certification by local authorities in recognition of
its non-discriminatory values and as a provider of equal opportunities to its staff.
The Group abides by all applicable laws, rules and regulations relating to employment. While conscious of the
fact that the legal obligations are the minimum acceptable standard, the Group strives to surpass standards in
this area and continues to increase awareness among staff. The Group, for example, with circa 9.7%, of the total
staff complement composed of persons with disabilities, showcases the strong commitment to inclusivity and its
commitment to create a positive impact in society, surpassing both national averages and legal benchmarks.
Remuneration levels are regularly reviewed to ensure that they encourage retention and are in line with the
Group’s Remuneration Policy.
Investment in human capital was and still remains a fundamental pillar of sustainability and to this effect the
Group has committed to invest in developing the skills of its workforce through both internal and external
training.
As in previous years, during 2024, Group staff members participated in several training sessions and on-the- job
training programmes. Training is driven by the requirement to meet identified training needs rather than by the
pursuit of specific numerical targets, which are therefore not set.
The Group remains committed towards extending its support to a number of charitable, social and cultural
organisations.
Regarding consumer relations and protection, the Group adheres to all respective regulatory requirements such
as, inter alia, those arising from Markets in Financial Instruments Directive II (MiFID II), as also reflected in the
MFSA Conduct of Business Rulebook, the Cross Border Payments Regulation II (CBPR II), Payment Services
Directive II (PSD II), Payment Accounts Directive (PAD) and Banking Rule BR/22 Complaints Handling Procedures
for Credit Institutions Authorised Under the Banking Act, 1994.
The Group Complaints Management policies and relevant details on respective web sites provide the information
required for a consumer to submit complaints. During 2024 the Bank had two complaints brought in front of the
Arbiter for Financial Services. Both cases were resolved before/at mediation stage. In the case of MaltaPost p.l.c.,
customer complaints accounted for 0.002% of all mail items handled.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
16
Directors’ Report (continued)
Group customers are free to select and use the preferred delivery channel and there are no incentives to move
customers away from physical delivery channels. Maintaining a presence in core community areas is given
importance so as to facilitate accessibility and delivery of important services to the community.
4.
Health and Safety
Maintaining the highest levels of health and safety and physical security of staff is of paramount importance.
Measures for the management of health and safety are adopted by way of standards set in Collective Agreements,
policies, appointment of Health & Safety Officers and appointment of local first aiders and fire wardens. Regular
checks of related processes and systems are carried out with outcomes reported to the Health & Safety Officers,
who will take action as and if required. Furthermore, health and safety risk assessments are carried out to ensure
that situations that may pose risks to the health and safety of staff and others on Group premises are identified and
mitigated. Occupational health awareness training is also provided. No Health and Safety incidents were reported
at the Bank, while MaltaPost Group registered a decrease in the ‘Lost Time Incident Rate’
1
when compared to
previous years. Enhancement of safety measures across the Group continue to be implemented. Some Group staff
benefit from personal accident insurance cover and others benefit from private health care insurance, as well as
death in service cover.
5.
Human Rights
The Group is aware of the importance of ensuring that human rights are upheld across its operations. In this
respect the Group carries out its business without discrimination, respecting the standards set by national law or
higher standards as applicable, such as effective information and consultation processes, particularly where these
affect the place and conditions of work. Business conduct policies are in place to support this stance, which
extend also to counterparties. The Group avoids business with counterparties operating in economic sectors
that may be linked to or present a significant risk to violation of human rights or to social vices. Additionally, the
Bank’s AML/CFT processes, inter alia, assist in the identification of the proceeds of potential human rights abuses.
Any suspicions resulting from these processes are reported to law enforcement as per current legislative
requirements. Services that promote financial inclusion have been introduced also by way of the PostaPay&Save
account which serves as a basic payment account. With circa 14,000 active accounts, this account was introduced
to encourage financial inclusion well before this was required by regulation. The account allows persons who
may have been unable to open bank accounts to enjoy the facilities of basic payment accounts with relative
services.
The Group did not encounter any issues, claims or reports on any human rights related matters and/or violations.
A grievance procedure is in place to provide effective remedies as and when needed. The Group is committed
to investigating any reports of human rights violations. As previously stated, the Bank has in place a
Whistleblowing Policy which covers among others, related issues. In accordance with this Policy reports are
submitted to Risk Management and Internal Audit. During the year ending 2024, no reports in accordance with
this Policy were submitted.
Premises, including self service areas and ATMs, meet all accessibility regulations, apart from where physical
restrictions make this impossible, in which case discussions with the relevant regulatory bodies are held.
__________________________
1
The Lost Time Incident Rate (LTIR) is calculated as the number of work-related incidents resulting in lost time per two million hours worked. This
multiplier reflects standard practice within MaltaPost to ensure comparability within the postal and logistics sector.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
17
Directors’ Report (continued)
6.
Environmental Matters
The Group is mindful of the important role it has to play to contribute towards reducing the impact of its
operations on the environment as much as is possible. On matters linked to sustainable finance, the Bank
adopted sustainable finance preferences in its investment advisory services and shall in 2025 launch ‘green’
financing solutions.
Besides assisting in the reduction of direct costs, being environmentally friendly and taking measures to reduce
the Group’s carbon footprint termed as Scope 2 emissions, fits within the overall corporate social responsibility
initiatives of the Group. The Group continues with its programme of investment aimed at reducing reliance on
fossil fuel power and demand on the national power grid, as far as practical and opportune.
The Group makes use of 426 PV panels which in 2024 contributed to circa 13% (Bank) and 7% (MaltaPost) of the
electricity usage generated from renewable sources. The investment in energy efficient systems, such as
installations of modern Heating Ventilation Air Conditioning (HVAC) systems and Light Emitting Diodes (LED) light
fittings continues. Cards issued as part of the Bank’s credit and debit card programmes are manufactured from
fully recycled materials. Improvements in waste separation facilities and recycling processes have also been
implemented, supported by improved data collection processes that enables better monitoring of the Group’s
waste management performance.
MaltaPost increased the number of electric vehicles to over 160, which together with the adoption of revised
work practices led to the elimination of 90 internal combustion engine vehicles on the road thus reducing over
200 tonnes of CO
2
emissions on a yearly basis. The Bank complemented this initiative with the replacement of
its small number of carbon fuel operated vehicles with battery operated models.
The Group continues with its efforts to preserve buildings of architectural importance now serving as modern
and functional branches/offices. ‘Restoration with respect’ continues to be the Group’s motto when acquiring
and renovating buildings of architectural heritage value, delivering them back to society in their original
splendour.
Preservation and reuse of such property reduces resources and material consumption, generates less waste and
consumes less energy than developing greenfield and / or brownfield sites.
MaltaPost p.l.c. runs a postal museum also in a restored building in Valletta housing a collection of artefacts
related to Malta’s postal history. Additions to the collection of artefacts are made as opportunities arise, thereby
enriching further the country’s postal heritage.
The Group’s business is mostly carried out in Malta. The Malta climate-related risks are not expected to have a
consequence on the impairment or fair value of assets nor to give rise to credit losses and / or potential provisions
or contingent liabilities. Therefore, the impact of climate change on the financial performance is not expected to
be material. That said, like any other business the Group is however not shielded from the economic risks of
climate change, which in turn can have an impact on the financial performance.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
18
Directors’ Report (continued)
The Bank is mindful of the increasing requirements emanating from the Environmental, Social & Governance
(ESG) regulatory framework. It continues following developments closely, improve understanding so as to further
determine how ESG considerations influence the manner in which it carries out its business and the extent to
which such considerations are incorporated within its risk management framework. ESG initiatives geared
towards the Bank meeting with regulatory expectations remain on-going. The ESG Working Group continues to
coordinate, advise and provide recommendations and related actions on ESG matters. This Working Group is also
responsible for ensuring compliance with regulatory expectations and liaising with Senior Management, the
Board-appointed Committees and the Board of Directors in this regard. The Group continues to seek further
enhancement in its data collection efforts so as to further widen the scope for the purposes of ESG credentials.
7.
Risk Reporting
The Group has established an enterprise-wide risk management framework that serves as the foundation for the
risk management reporting process. This framework is continuously evaluated to ensure it meets the demands
of the markets where the Group operates, including regulatory standards and industry best practices.
It is reinforced by clearly defined procedures and is subject to ongoing reviews, which include transparent
organizational structures and reporting lines.
The Group's straightforward organizational structure ensures that roles and responsibilities are clearly defined,
managed, and communicated. There are established processes for identifying, monitoring, managing, and
reporting risks, along with effective internal control mechanisms that support management in safeguarding
resources and ensuring compliance with relevant procedures in the first line of defence.
To support these efforts, a formal Risk Management Policy which is reviewed periodically, is in place. This
comprehensive Policy enforces strict internal controls and discretionary limits, optimizing returns in alignment
with the Bank's Risk Appetite, thereby enhancing stakeholder value and successfully executing its strategy. This
Appetite defines the maximum risk the Bank is willing to accept to achieve its business objectives. It is reviewed
on an ongoing basis and updated accordingly, following a thorough assessment of the current risk profile, in light
of strategic direction, macroeconomic developments, and regulatory changes.
The primary risk categories the Group faces include:
Capital Risk – This arises from the inability to maintain sufficient capital to operate as a going concern, provide
appropriate returns to shareholders, support business development, comply with regulatory requirements, and
withstand unexpected shocks. The Bank's capital positions are continuously monitored against regulatory and
management limits defined in the Bank’s Risk Appetite Statement. When necessary, this monitoring is
complemented by a robust capital planning process tailored to the Bank's risk profile and regulatory needs. Risk-
based capital measures are reinforced by a volume-based leverage ratio to prevent excessive balance sheet
growth (see Notes to the Financial Statements note 2.7; Additional Regulatory Disclosures notes 6 and 7).
Credit Risk – This arises from negative changes in credit quality should any of our customers or counterparties
fail to meet their contractual obligations. Given the Group's significant lending and securities portfolio, credit risk
represents the largest risk. It primarily stems from customer loans and advances, while risks related to exposures
to credit institutions and investments are considered low. A thorough assessment of a customer's repayment
capacity is conducted before granting facilities, which are generally secured by tangible assets. These securities
are periodically reviewed to ensure compliance with the terms outlined in the sanction letter and to verify that
the collateral adequately covers the facilities (see Notes to the Financial Statements note 2.3; Additional
Regulatory Disclosures note 2).
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
19
Directors’ Report (continued)
Liquidity Risk – This occurs when the Bank is unable to meet current or anticipated payment obligations as they
come due. Liquidity management involves ongoing monitoring of liquidity positions against established
regulatory and internal limits defined in the Risk Appetite Statement. The Bank’s liquidity profile is managed by
its Assets & Liabilities Committee, ensuring that cash flows and obligations are met promptly. The Bank maintains
robust liquidity buffers and stable funding, keeping the Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) significantly above regulatory minimums (see Notes to the Financial Statements note 2.5; Additional
Regulatory Disclosures note 4).
Market Risk – This arises from adverse fluctuations in fair value or future cash flows due to changes in market
prices or rates, such as interest rates, credit spreads, and foreign exchange rates. If these risks materialize, the
Group may face significant losses in its investment portfolio, declines in interest income, and adverse movements
in asset and liability values. The Bank does not maintain a Trading Book, so market risk is primarily limited to
Interest Rate Risk, Currency Risk, and Equity Price Risk. The Bank manages market risk by implementing measures
to mitigate the negative effects of market fluctuations. Currency risk is minimized through a natural hedge
strategy, matching customer deposits in one currency with corresponding assets in the same currency. Equity
Price risk is considered low, as the Group’s equity assets constitute less than 1% of total assets (see Notes to the
Financial Statements note 2.4; Additional Regulatory Disclosures note 3).
Macroeconomic and Market Conditions Risk – This refers to risks linked to a decline in the economic and business
climate, both domestically and globally. Prolonged adverse conditions may materially impact the Group’s
financial performance and asset quality.
Non-Financial Risks – These arise from inadequate or failed internal processes, personnel, or systems. Non-
financial risks encompass a wide range of issues, including financial crime, regulatory compliance, fraud,
personnel, systems, and processes, all of which could affect income and capital. These risks are thoroughly
detailed in the Risk Appetite Statement and Risk Management Policy, which are fundamental components of the
Risk Management Framework. The risks are benchmarked against established parameters, periodically reviewed
and set by the Board. Operational policies and procedures ensure the Bank remains compliant with its Risk
Appetite limits.
Since the occurrence of non-financial risks is unpredictable, the Bank has adequate insurance coverage for
operational failures. Additionally, as part of its Capital Risk management, a capital charge for unforeseen losses
from these risks is maintained (see Notes to the Financial Statements note 2.6; Additional Regulatory Disclosures
note 5).
Regulatory Compliance Risk – This arises from potential legal or regulatory penalties, material financial losses, or
reputational damage resulting from non-compliance with regulations, codes of conduct, laws, and best practice
standards. This risk is managed by the Regulatory Compliance Function, which serves as a second line of defence
and operates independently of day-to-day operations. The Bank fosters a culture that emphasizes compliance
risk mitigation across all levels of the organization. The function also acts as the central point for all interactions
with regulatory and enforcement bodies.
Financial Crime Compliance Risk – This relates to offences such as money laundering, terrorist financing, fraud,
bribery, corruption, market abuse, insider trading, and sanctions. The Bank is committed to combating financial
crime and ensuring that its products and services are not exploited for money laundering, terrorism financing, or
fraud. Various policies and procedures are in place that outline the Bank’s risk appetite regarding customer
onboarding, acceptable economic sectors, and jurisdictions.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
20
Directors’ Report (continued)
Information Security Risk – This involves the risk of data and financial loss due to deliberate or accidental
breaches, alterations, falsifications, leaks, destruction, disruptions, errors, or misuse of information systems. The
Bank is aware of potential threats from both internal and external sources and has implemented Data Protection,
Information Security Policies and other Policies to enhance operational resilience to mitigate these risks. These
Policies ensure the protection of corporate information and systems against data breaches and cyber threats.
Procedures supporting these Policies guarantee that sufficient internal controls and measures are consistently
maintained to mitigate such threats.
ESG risks – These arise from environmental, social, and governance (ESG) issues, including climate change,
impacts on society and nature, and human rights violations. Climate and environmental risks present broader
challenges through market, credit, reputational, and regulatory channels that could affect the Group's business
and reputation. The Group is also vulnerable to governance risks stemming from inadequate management and
control, potentially impacting income and capital. To meet ESG-related disclosure requirements, the Bank utilises
various data sources, as available.
Key Performance Indicators (KPIs)
The Group has in place a set of financial and non-financial key performance indicators (KPIs) that are set by the
Board of Directors in its Risk Appetite Statement, monitored by the Risk Management Function and submitted
to the Audit & Risk Committee for continuous assessment. These are a set of quantifiable metrics that ensure
that material risks faced are kept within set parameters as detailed in the Risk Appetite Statement. A selection
of key metrics as at 31 December 2024 are presented hereunder.
Solvency
TCR
20.0%
Leverage
13.9%
Liquidity
LCR
231.8%
NSFR
147.0%
Profitability
Asset Quality
ROAE*
NPL
5.6%
5.6%
*
After tax
The KPIs are reported in the form of a risk scorecard by using the “traffic light” approach and comparing the
actual metric to the limits set in the Risk Appetite Statement.
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
21
Directors’ Report (continued)
Consolidated disclosures pursuant to Article 8 of the EU Taxonomy Regulation
Introduction
In order to achieve the targets established by the European Union (‘EU’) of reaching net zero greenhouse gas (‘GHG’)
emissions by 2050, with an interim target of reducing GHG emissions by 55% by 2030, compared to 1990 levels, the
EU has developed the EU Taxonomy Regulation
1
(‘the EU Taxonomy’). This is a classification system which establishes
the criteria for determining whether an economic activity qualifies as environmentally sustainable, in terms of six
environmental objectives against which entities assess whether economic activities qualify as environmentally
sustainable.
In order to qualify as such, an economic activity must be assessed to substantially contribute to at least one of these
environmental objectives, whilst doing no significant harm to the remaining objectives. This is achieved by reference
to technical screening criteria established in delegated acts to the EU Taxonomy. The economic activity is also
required to meet minimum safeguards established in the EU Taxonomy.
The six environmental objectives established by the EU Taxonomy are the following, where climate-related
environmental objectives (1-2 below) are established in the Climate Delegated Act
2
(‘CDA’), whilst non-climate
environmental objectives (3-6 below) are established in the Environmental Delegated Act
3
(‘EDA’).
1. Climate change mitigation;
2. Climate change adaptation;
3. Sustainable use and protection of water and marine resources;
4. Transition to a circular economy;
5. Pollution prevention and control; and
6. Protection and restoration of biodiversity and ecosystems.
The Bank reports Taxonomy information in line with the Disclosures Delegated Act supplementing article 8 of the
Taxonomy Regulation, which establishes relevant disclosure requirements of entities within reporting scope of the
Taxonomy. This currently comprises entities, hereon referred to as ‘NFRD/CSRD entities’, obliged to publish non-
financial information pursuant to the Non-Financial Reporting Directive (‘NFRD’)
4
, or sustainability information
pursuant to the Corporate Sustainability Reporting Directive (‘CSRD’)
5
, whichever is currently applicable.
The Bank reported its initial Taxonomy alignment of economic activities in the required disclosure templates in the
prior period, and continues to do so in the current period, in respect of climate-related environmental objectives.
Initial comparative templates in line with Annex VI of the Disclosures Delegated Act are therefore also disclosed in
the current period. Initial Taxonomy eligibility information in respect of non-climate objectives is also published in
the current period.
1
EU Regulation 2020/852
2
Commission Delegated Regulation 2021/2139
3
Commission Delegated Regulation 2023/2486
4
EU Directive 2014/95/EU
5
EU Directive 2022/2464
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2024
22
Directors’ Report (continued)
Scope of consolidation
In line with its prior period Taxonomy reporting, the Bank, as a parent undertaking of a mixed group, consolidates
the activities of its financial subsidiaries, and separately consolidates the activities of its non-financial subsidiaries,
reporting relevant Taxonomy KPIs as relevant in both cases. Accordingly, the Bank reports relevant Taxonomy KPIs
applicable to credit institutions in respect of the Bank, and relevant Taxonomy KPIs applicable to non-financial
undertakings in respect of the Bank’s non-financial subsidiaries within the contextual information. This is with
reference towards FAQ 10 of the third Commission Notice
6
, which contemplates Taxonomy disclosures of mixed
groups in which the activities of subsidiaries may differ in risks or impacts from those of the Group.
EU Taxonomy KPIs disclosed
The following KPIs related to the Bank are reported in the templates disclosed.
- The Green Asset Ratio (‘GAR’) is a ratio calculated as the percentage of EU Taxonomy aligned assets as a
proportion of total covered assets.
- The numerator of the GAR includes loans and advances, debt securities, equities and repossessed
collateral financing Taxonomy aligned economic activities based on turnover KPI and CapEx KPI of
underlying assets.
- The denominator of the GAR includes total loans and advances, total debt securities, total equities,
total repossessed collateral and other covered on-balance sheet assets outlined in the section ‘Assets
excluded from the numerator for GAR calculation (covered in the denominator)’.
- The calculation of the KPI for off-balance sheet exposures relates to Lombard Bank Malta plc’s assets under
management, reported in Template 1 relating to GAR as off-balance sheet items and also in Template 5 as
off-balance sheet items in their own right. Other off-balance sheet exposures such as commitments are
excluded from the off-balance sheet KPI.
- The Green Ratio for Assets under Management (‘AuM KPI’) is calculated as the percentage of assets
under management from undertakings financing Taxonomy aligned economic activities as a
proportion of the total assets under management of the Bank.
- The Green Ratio for Financial Guarantees to financial and non-financial undertakings (‘FinGuar KPI’)
is not calculated since it relates to guarantees supporting loans and advances and debt securities. The
Bank did not issue guarantees in respect of loans and advances and debt securities throughout the
financial year.
The following KPIs related to the Bank’s non-financial subsidiaries are reported in the contextual disclosures to the
templates disclosed.
- The turnover KPI is a ratio calculated as the percentage of EU Taxonomy aligned turnover as a proportion of
total revenue.
- The CapEx KPI is a ratio calculated as the percentage of EU Taxonomy aligned CapEx as a proportion of total
CapEx.
- The OpEx KPI is a ratio calculated as the percentage of EU Taxonomy aligned OpEx as a proportion of total
OpEx.
6
C/2024/6691 Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under
Article 8 of the EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (third
Commission Notice).
Lombard Bank Malta p.l.c.
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Directors’ Report (continued)
Furthermore, a contextual consolidated group-level KPI is disclosed in the section ‘Consolidated group-level KPI on
Taxonomy aligned activities in the form of a weighted average KPI’ of the Bank’s Taxonomy disclosure, in line with
FAQ 9 of the third Commission Notice.
Green Asset Ratio
Covered assets
Covered assets comprise all on-balance sheet assets other than those excluded altogether from the GAR, where such
exclusions relate to exposures to central governments, central banks and supranational issuers. Lending towards, or
financing of, local governments where the use of proceeds is unknown (i.e. general purpose lending) is also excluded
from the GAR.
These assets are all excluded from both the numerator and denominator of the GAR.
Assets excluded from the numerator for GAR calculation (covered in the denominator)
Exposures to undertakings that are not in scope of NFRD/CSRD, derivatives, on-demand interbank loans, cash and
cash-related assets, as well as other assets including tangible and intangible assets are excluded from the assessment
of Taxonomy eligible economic activities. Similarly, retail exposures, except for the mortgage lending portfolio,
building renovations loans, and credit consumption loans for cars, are also excluded from the EU Taxonomy
framework, and not assessed for Taxonomy eligibility. These assets are therefore all excluded from the numerator of
the GAR but included in the denominator. The Bank’s cheques in course of collection from NFRD/CSRD banks as at
reporting date are allocated towards row 47 of Template 1 ‘Other categories of assets’ since these are not considered
to be loans and advances to banks in nature.
Taxonomy eligible and aligned economic activities
Taxonomy eligible economic activities are those activities which can be assessed as environmentally sustainable and
are therefore included in annexes to the EU Taxonomy with relevant technical screening criteria available.
Taxonomy aligned economic activities are those activities which have been assessed as environmentally sustainable,
and therefore also comply with the applicable technical screening criteria. Throughout all templates disclosed,
‘Environmentally sustainable assets’ therefore refers to Taxonomy aligned assets.
Taxonomy eligibility and alignment of general purpose lending (where the use of proceeds is unknown), have been
assessed using the turnover and CapEx eligibility and alignment ratios published in the most recently available annual
reports by the Bank’s in-scope counterparties.
Taxonomy eligibility and alignment of specific purpose lending (where the use of proceeds is known), have been
assessed in line with the technical screening criteria established in the EU Taxonomy, comprising ‘substantial
contribution’ and ‘do no significant harm’ criteria. Compliance with minimum safeguards is required further to this,
which is an integral part of assessing EU Taxonomy alignment. This is applicable both in the case of exposures towards
NFRD/CSRD entities, and in the case of retail exposures such as loans to households collateralised by residential
property and loans to households for building renovations, where in the latter case, minimum safeguards compliance
is to be ascertained by the Bank by reference to adequate documentary evidence provided by such counterparties,
or by reference to data obtained from public authorities, as clarified by FAQ 36 in the third Commission Notice.
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Directors’ Report (continued)
Taxonomy non-eligible economic activities
Taxonomy non-eligible economic activities are those activities which cannot be assessed as environmentally
sustainable. This relates to exposures towards activities which are not covered by the EU Taxonomy framework.
Data limitations
In the case of the Bank's exposures where the use of proceeds is not known, in the case of NFRD/CSRD entity
counterparties, the Bank relies on published counterparty eligibility and alignment ratios to assess eligibility and
alignment of exposures. In this respect, the Bank determines whether counterparties are subject to NFRD/CSRD
through the use of both research and a financial data terminal. Upon identification of relevant counterparties, the
Bank researches annual reports of such entities in order to obtain relevant EU Taxonomy KPIs.
However, in certain cases, the Bank is unable to obtain the required information from counterparties, particularly
due to:
- Data availability: Counterparties which did not report Taxonomy information, or reported in an incomplete
manner. By way of example, certain counterparties reported Taxonomy alignment balances which exceeded
Taxonomy eligibility balances. In this case, the Bank only considered alignment up to the eligible amount.
- Data accuracy: The precision of data may vary among counterparties, each reporting subject to various
assumptions and data limitations, affecting the reliability of Taxonomy information. By way of example,
certain counterparties’ Taxonomy balances do not cast when summed at an environmental objective level
and compared to reporting in the counterparty’s ‘total column’, most often due to rounding differences. In
this case, the Bank considers the lower of the sum of parts and the total for the purposes of its reporting.
- Methodological differences: Variations in the methodologies and assumptions employed by various
counterparties can lead to discrepancies in Taxonomy information.
Where Taxonomy information by environmental objective is not available, Taxonomy eligibility and alignment
information reported by counterparties is considered to be eligible, or aligned, to CCM, except in the case of
counterparties which are insurance undertakings, where it is considered eligible or aligned in terms of CCA.
FAQ13 of the third Commission Notice clarifies that in the case that the Bank has an exposure to a counterparty
which does not disclose Taxonomy information, but is the subsidiary of a parent which does disclose Taxonomy
information, the Taxonomy KPI disclosed by the counterparty's closest parent undertaking should be assumed.
In addition, the Bank’s car loan and renovation loan exposures are allocated towards row 24 ‘Households’ of Template
1 of Annex VI of the Disclosures Delegated Act without further allocation. This is given insufficient data available to
fully assess any of these exposures for alignment against the technical screening criteria and in particular, the Do No
Significant Harm criteria.
As data becomes more available and improvements in data quality take place over time, differences in the data
reported in future financial years, when compared to the current financial year, are expected, as more counterparties
adopt the EU Taxonomy requirements for their own disclosures, and enhance their relevant processes relating to EU
Taxonomy reporting.
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Annual Report and Financial Statements 2024
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Directors’ Report (continued)
Financial counterparty eligibility and alignment data
In accordance with the requirements of the EU Taxonomy, insurance undertakings, investment firms and financial
conglomerates are required to disclose weighted average KPIs which should be used by the Bank in assessing the
Taxonomy eligibility and alignment of exposures to relevant counterparties.
Where the disclosure of weighted average KPIs by such financial counterparties was not available or where
counterparties report more than one set of KPIs, the approach towards which data was considered by the Bank is set
out below.
- In the case of financial conglomerates, the Bank considers the Green Asset Ratio; if not available, non-life
underwriting KPIs; if not available, the Green Investment Ratio is considered;
- In the case of credit institutions, the Green Asset Ratio is considered;
- In the case of insurance undertakings, the Bank considers non-life underwriting KPIs; if not available, the
Green Investment Ratio is considered;
- In the case of investment companies, the Bank considers the Green Asset Ratio related to investment
services dealt on own account;
- In the case of asset managers, the Bank considers the Green Investment Ratio.
Business Strategy
The process around EU Taxonomy reporting within the Bank is led by an ESG working group comprising a number of
the Bank’s senior officials, who are tasked with such process and the strategy related to the Bank’s disclosures. The
ESG working group expects the Bank’s business strategy to develop in line with the EU Taxonomy, where engagement
with clients and counterparties related to the Taxonomy eligibility and alignment of exposures will develop
accordingly.
EU Taxonomy templates – Annex VI
This section outlines the templates to be disclosed by credit institutions, such requirement emanating from Annex
VI of the Disclosures Delegated Act.
Each template is duplicated in order to disclose Turnover-based and CapEx-based information, except for Template
0, which is adjusted to also include CapEx-based information.
The Bank is also required to disclose the Taxonomy eligibility and Taxonomy alignment of its relevant exposures by
climate-related environmental objective, and Taxonomy eligibility by non-climate objective.
The Bank does not currently extend loans and advances to counterparties in scope of NFRD/CSRD, except for money
market placements with counterparty banks.
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Annual Report and Financial Statements 2024
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Directors’ Report (continued)
Template 0: Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation (T)
Template 0 summarises the KPIs required to be disclosed by the Bank as a credit institution.
The Fees and Commissions KPI is required to be disclosed from 1 January 2026, whilst in respect of the Trading Book KPI, also applicable from the same date, the Bank does not
operate a trading book. Therefore, the applicable rows for these KPIs are not populated.
0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation as at 31 December 2024
Total environmentally
sustainable assets
(Turnover)
€ million
KPI
(Turnover)****
%
Total environmentally
sustainable assets
(CapEx)
€ million
KPI
(CapEx)*****
%
% coverage
(over total assets)***
%
% of assets excluded from
the numerator of the GAR
(Article 7(2) and (3) and
Section 1.1.2. of Annex V)
%
% of assets excluded from the
denominator of the GAR
(Article 7(1) and Section 1.2.4
of Annex V)
%
Main KPI
Green asset ratio (GAR) stock
0.52
0.04%
0.48
0.04%
79.86%
55.70%
20.14%
Total environmentally
sustainable assets
(Turnover)
€ million
KPI (Turnover)
%
Total environmentally
sustainable assets (CapEx)
€ million
KPI (CapEx)
%
% coverage (over total assets)
%
% of assets excluded from
the numerator of the GAR
(Article 7(2) and (3) and
Section 1.1.2. of Annex V)
%
% of assets excluded from the
denominator of the GAR
(Article 7(1) and Section 1.2.4
of Annex V)
%
Additional KPIs
GAR (flow)
0.00
0.00%
0.00
0.00%
96.12%
65.30%
3.88%
Trading book *
Financial guarantees
0.00
0.00
0.00
0.00%
Assets under management
0.56
5.54%
1.55
15.45%
Fees and commissions income **
* For credit institutions that do not meet the conditions of Article 94(1) of the CRR or the conditions set out in Article 325a(1) of the CRR
** Fees and commissions income from services other than lending and AuM Institutions shall disclose forward looking information for this KPIs, including information in terms of targets, together with relevant explanations
on the methodology applied.
*** % of assets covered by the KPI over banks´ total assets
**** based on the Turnover KPI of the counterparty
***** on the CapEx KPI of the counterparty, except for lending activities where for general lending Turnover KPI is used
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Directors’ Report (continued)
Template 0: Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation (T-1)
Template 0 summarises the KPIs disclosed by the Bank for its banking activities, based on the Bank’s prior reporting period.
0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation as at 31 December 2023
Total environmentally
sustainable assets
(Turnover)
€ million
KPI
(Turnover) ****
%
Total environmentally
sustainable assets
(CapEx)
€ million
KPI
(CapEx)*****
%
% coverage
(over total assets)***
%
% of assets excluded from the
numerator of the GAR (Article
7(2) and (3) and Section 1.1.2.
of Annex V)
%
% of assets excluded from the
denominator of the GAR
(Article 7(1) and Section 1.2.4
of Annex V)
%
Main KPI
Green asset ratio (GAR) stock
0.65
0.07%
0.76
0.06%
75.42%
50.04%
24.58%
Total environmentally
sustainable assets
(Turnover)
€ million
KPI (Turnover)
%
Total environmentally
sustainable assets (CapEx)
€ million
KPI (CapEx)
%
% coverage (over total assets)
%
% of assets excluded from the
numerator of the GAR (Article
7(2) and (3) and Section 1.1.2.
of Annex V)
%
% of assets excluded from the
denominator of the GAR
(Article 7(1) and Section 1.2.4
of Annex V)
%
Additional KPIs
GAR (flow)
0.00
0.00%
0.00
0.00%
91.52%
63.48%
8.48%
Trading book*
Financial guarantees
-
-
-
-
Assets under management
2.16
4.84%
0.27
2.50%
Fees and commissions income **
* For credit institutions that do not meet the conditions of Article 94(1) of the CRR or the conditions set out in Article 325a(1) of the CRR
** Fees and commissions income from services other than lending and AuM Institutions shall disclose forward looking information for this KPIs, including information in terms of targets, together with relevant explanations
on the methodology applied.
*** % of assets covered by the KPI over banks´ total assets
**** based on the Turnover KPI of the counterparty
***** on the CapEx KPI of the counterparty, except for lending activities where for general lending Turnover KPI is used
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Directors’ Report (continued)
Template 1: Assets for the calculation of GAR
Template 1 discloses assets used in the calculation of the GAR disaggregated by counterparty type and asset class. Total assets are further categorised between the following.
- Covered assets in both numerator and denominator;
- Assets excluded from the numerator for GAR calculation (covered in the denominator); and
- Assets not covered for GAR calculation
This template has been duplicated to disclose turnover-based and CapEx-based information, where in both cases, the Bank’s ‘Main KPI’ Green Asset Ratio can be calculated with
reference to amounts reported in Row 48 of Template 1 ‘Total GAR assets’, where Column ‘ac’ ‘Of which environmentally sustainable (Taxonomy-aligned)’ relates to the numerator,
and Column ‘a’ ‘Total gross carrying amount’ relates to the denominator.
The gross carrying amount column excludes impairment allowances for all banking exposures. As a result, total assets reported in this template is not equal to total assets reported
in the Bank’s balance sheet, with the difference amounting to impairment allowances on banking exposures.
Row 34 'SMEs and NFCs (other than SMEs) not subject to NFRD disclosure obligations' also includes non-NFRD/CSRD financial undertakings in the EU, in the absence of a more
appropriate row for such financial undertakings.
In the case of off-balance sheet exposures, the Bank does not issue any financial guarantees supporting loans and advances or debt securities.
The gross carrying amount disclosed for assets under management forms the denominator of the respective KPIs and includes exposures to both NFRD/CSRD and non-NFRD/CSRD
counterparties while excluding exposures to central governments, central banks and supranational issuers. In the case of assets under management which are funds, these are
treated as non-NFRD entities since the Bank does not look through to underlying investees regarding their status as NFRD/CSRD entities, given data limitations.