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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements
31 December 2025
Company Registration Number: C 1607
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
CONTENTS
Chairman’s Statement to the Members 2
Chief Executive Officer’s Review 5
Directors’ Report 10
Statement of Compliance with the Principles of Good Corporate Governance 37
Remuneration Report 48
Company Information 53
Financial Statements:
Statements of Financial Position 55
Income Statements 57
Statements of Comprehensive Income 58
Statements of Changes in Equity 59
Statements of Cash Flows 63
Notes to the Financial Statements 64
Five Year Summaries 191
Independent Auditor’s Report to the Shareholders of Lombard Bank Malta p.l.c.
1
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chairman’s Statement to the Members
I am pleased to report that during 2025 both members of the Lombard Bank Group, Lombard Bank Malta p.l.c
(‘the Bank’) and MaltaPost p.l.c. registered an encouraging financial performance in the context of a challenging
market environment. The Group’s pre-tax profit amounted to €23.8 million compared with €19.4 million the
previous year, an increase of 22.7%.
The Bank’s total operating income continued on its upward trend, growing at a faster pace by 9.4% compared to
8.3% in 2024. As in previous years, the single largest contributing factor were the Bank’s lending operations, which
responded to sustained credit demand to reach €929.1 million, generating a record €33 million in the process even
though average interest rates on loans were largely unchanged. Our corporate shareholdings also gave a strong
boost to the bottom line in the form of dividends, which however included a one-time inflow reflecting the sale of
a property by an associate company. Net fees and commissions and the Bank’s money market operations were
again other important sources of income.
Interest paid out on deposits meanwhile amounted to €13.7 million and rose faster than interest earned on lending
such that net interest income was slightly less than in 2024. The increase in this expense item is explained by a
pronounced customer preference for longer-term deposits with tenors beyond two years. This deposit category
attracted a further €92.4 million, taking its share in the Bank’s total deposits of €1.2 billion to 32.9% from 27.3%
in 2024. These longer-term deposits carry higher interest rates and are therefore more costly for the Bank but are
less volatile and so represent a more stable source of funds. From a risk perspective the Board considers that
offering this option to depositors contributes to the Bank’s long-term financial sustainability.
These opposing movements in receipts and payments resulted in an increase in total operating income of €3.4
million to an all-time high of €39 million.
As for expenditures, the Bank’s administrative costs absorbed 52.4% of this income, a smaller proportion than in
the previous year and the lowest in five years. Employee compensation and benefits were again the largest single
cost item, accounting for almost half of total outlays. While the average staff complement was unchanged over
the year, the retention of qualified employees in a competitive labour market inevitably gives rise to a higher
expense. Regulatory compliance and the maintenance and upgrading of information systems also entailed
significant costs.
The outcome of these income and expenditure movements was an 18.4% increase in profits before tax to €19.1
million. This resulted in further growth in the Bank’s total equity to €215.2 million, making for a ratio of equity to
total assets of 14.7%. In consideration of this positive performance, the Board is proposing to recommend a gross
dividend of 3.42 cent per share.
It is important to note that the 2025 profit was realised simultaneously with continued observance of the Bank’s
prudent risk management culture, compliance with a growing burden of regulatory obligations and the
maintenance of strong fundamentals. Evidence of the latter are the Total Capital Ratio and the Liquidity Coverage
Ratio which, at 19.9% and 380.5%, respectively were both above the minimum regulatory requirements. The
Leverage Ratio, another important risk indicator, meanwhile was more than four times the required minimum at
13.4%. Other aspects of the Bank’s low-risk business model were the ratio of advances to deposits which, at 79.6%
at year end, remained within the Bank’s risk appetite, and the further progress made in the planned process of
credit diversification such that retail lending, mainly home loans, now accounts for 34% of the total.
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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chairman’s Statement to the Members (continued)
During the past year the Bank’s subsidiary, MaltaPost p.l.c., also achieved an encouraging result, recording a pre-
tax profit of €6.4 million compared with €4.7 million in 2024. The increased profitability largely reflects operational
efficiencies and strategic investments in logistics and e-commerce services. While traditional mail volumes
continued to decline, the company experienced strong growth in parcel volumes, driven primarily by a surge in e-
commerce activity. Significant progress was also made in digital transformation initiatives, including the
deployment of AI tools to eliminate repetitive tasks. Investment in the life and general insurance business
continued apace in line with MaltaPost’s commitment to expand its presence in the financial services sector. At
the same time, the company invested further in green technologies, including through additions to its fleet of
electric delivery vehicles. Looking ahead, MaltaPost is well positioned to deliver sustainable growth, enhanced
service delivery and continued digital and operational transformation.
The Bank’s results I highlighted earlier were consistent with the strategic objectives the Board had set for 2025
and marked the successful implementation of the three-year business plan which came to an end in that year.
During this period the Bank continued to perform its primary function of financial intermediation, transforming
customer deposits into loans in support of economic activity across an increasingly diversified range of sectors.
This objective was achieved concurrently with further investments in advanced technologies and operational
systems, in our network of eleven branches – soon to become thirteen - and in human resources, while at the
same time producing a growing balance sheet, which now stands at €1.5 billion, and satisfactory returns to
shareholders.
In the light of this positive track record, the Strategy and Business Plan 2026 – 2029 recently approved by the
Board reaffirms the validity of the Bank’s business model and therefore focuses on consolidation and sustainable
growth. The former is designed to leverage our time-tested prudent approach to the business of banking, strong
ongoing financial performance and a trusted brand in order to ensure continuity, resilience and long-term value
creation. Our growth agenda is centred on exploiting market opportunities to sustain profitability and delivering
on our core strategic priorities, namely operational efficiency, enhanced customer engagement in the context of
rapidly changing expectations and investing in digital capabilities so as to reinforce the Bank’s competitive
advantage. Details of the initiatives and projects forming part of this agenda, some of which are under way, feature
in the Chief Executive Officer’s Review.
You will recall that on this occasion last year I referred to announcements by the ECB and the EC of the imminent
introduction of a significant easing of regulation and also to a proposal by the national regulator whereby
supervision of less complex banks in the EU would be scaled according to each bank's size and risk profile, as
opposed to a one-size-fits-all approach. Though we have not become aware of any developments in this regard
since then, we remain hopeful that this new thinking will soon be translated into meaningful action.
On that same occasion I had also referred to the long-outstanding matter of the disposal by the National
Development and Social Fund (‘NDSF’) of its 49.01% qualifying shareholding in the Bank, a commitment that had
been made publicly in 2018. Despite our relentless efforts to bring this matter to a conclusion acceptable to both
sides, I have to report that this commitment has still not been honoured. We reaffirm our belief that disposal of
these shares would provide needed clarity to prospective investors and would be in the best interest of all our
stakeholders. We are therefore resolved to continue pursuing this objective with the same level of commitment.
Despite these uncertainties, the Board believes that the Bank is well placed to face the future with confidence. We
shall continue to promote sustainable growth, confident that the strategy I have outlined today is well suited to
the changing characteristics of the financial market and the expectations of our shareholders, customers and staff.
This cautious optimism is also justified by the positive outlook for the domestic economy, even though geo-political
events abroad could give rise to unexpected challenges.
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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chairman’s Statement to the Members (continued)
In conclusion, on behalf of the Board I would like to express my appreciation to the Bank’s staff and management
team, ably led by the Chief Executive Officer Joseph Said, for their invaluable contribution to the achievement of
the past year’s results and for enhancing 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 24 April 2026 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 2025.
4
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chief Executive Officer’s Review
The results of the Lombard Bank Group (‘the Group’) for the financial year ended 31 December 2025 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
We are satisfied with the financial year’s performance of both the Bank and its subsidiary, which reflects consistent
results achieved without deviation from our prudent and conservative approach to business.
For the Bank, this year’s results include a gain from the disposal of property by an associate company, which will
not be repeated in the coming financial year. Our performance continues to validate our time-tested business
model and reaffirms our focus on preference for building long-term relationships and sustainable growth over
short-term gains, even when these may stand to be more remunerative.
The banking market in Malta continues to play a central role in supporting households, businesses and the wider
economy, amid geo-political tensions and regulatory and supervisory developments. The competitive
environment continued to be intense, with minimal differentiation in basic offerings. These apart, efficiency,
digital capability and customer experience were the focus of competition which, for the smaller players, remained
very much driven by interest rates.
Our fundamental approach to business remained unchanged, with commercial and retail loan books meeting the
targeted growth, resulting in higher interest income. By no means was growth achieved at the expense of Credit
quality. The stock of facilities termed as “non-performing” closed the year within the regulatory limits.
Customer Deposits also grew in line with target levels. Competition for deposits remained stiff with longer term
deposits coming at a cost. We attract longer tenor deposits for the partial matching of liability and asset maturities,
always in line with our prudent approach to the management of assets and liabilities. Increase in volume together
with an increasing average interest rate payable led to a narrowing margin.
At MaltaPost the financial year ended 30 September 2025, returned a pre-tax profit of €6.4 million, significantly
higher than €4.7 million in the previous period. Parcel and logistics growth helped counterbalance the further
decline of income from Letter Mail. Continued investment in logistics infrastructure, by way of new postal hubs,
increasing delivery vehicles and digital systems; and diversification into non-postal services were the strategic
themes for the year.
Total Assets for the Bank grew by 8% to reach €1.5 billion.
Review of Financial Performance
The Group delivered a Group Profit before Tax of €23.77 million, representing a 22% increase over the previous
year.
Loans and Advances to Customers rose to €929.11 million, generating a 5% increase in gross interest revenues to
€40.03 million. This mitigated the impact of lower interest income from Treasury activities, reflecting the effect of
declining market interest rates. Interest Expense rose by 28%, driven by both a higher volume of customer
deposits, which exceeded €1,207 million, and the more competitive rates offered on these deposits. As a result,
Net Interest Income decreased by 4% to €26.13 million compared with the previous year.
Net Fee and Commission Income remained stable at €6.37 million.
5
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chief Executive Officer’s Review (continued)
Group Employee Compensation and Benefits rose by 7% to €28.30 million, while Group operating costs rose
marginally by 1% to €24.58 million, reflecting effective cost management alongside strengthened operational
efficiencies. The Bank’s Cost Efficiency Ratio improved to 52.4% (FYE2024: 54.5%), influenced by revenue growth
that outpaced cost increases arising from human resources and continued investment in IT systems. At Group
level, the ratio stood at 73.8% (FYE2024: 73.5%), reflecting the nature of the postal services industry, which is
characterised by high volumes, low margins and significant human resources needs.
Impairment Allowances, as determined by International Financial Reporting Standard 9 (IFRS 9), stood at €8.15
million. The movement in ‘Expected Credit Losses’ (ECL) resulted in a net release of €0.96 million, compared to a
net release of €0.93 million in the previous year. This release was primarily attributable to the full recovery of
customer exposures previously classified as Stage 3, reflecting the Bank’s effective credit risk management.
Total Assets stood at €1,497.62 million (2024: €1,388.42 million), while Equity Attributable to the Shareholders of
the Bank amounted to €223.72 million (2024: €209.45 million). Net Asset Value (NAV) per share increased to €1.45
(2024: €1.36). Earnings per Share (EPS) rose to €0.10. Return on Assets (ROA) stood at 1.1% (2024: 0.9%) while
post-tax Return on Equity (ROE) improved to 7.1% (2024: 5.6%).
Treasury Management
Treasury operations remained central to the management of the Bank’s liquidity position and interest income
generation opportunities. Our Treasury function remained responsible for the prudent deployment of surplus
liquidity and the management of market and liquidity risks in line with the Bank’s risk appetite and regulatory
requirements.
Deployment of excess liquidity was focused on the allocation of assets across cash balances, high-quality liquid
assets, interest-bearing local fixed coupon securities and placements with high-quality counterparties. This
approach supported income generation while maintaining appropriate levels of liquidity and ensuring capital
protection.
The risk management of our Treasury operations is covered by the Bank’s overall governance framework. Market
Risk, Liquidity Risk and Interest Rate Risk arising from Treasury activities are monitored on an ongoing basis
applying established limits and in line with the Bank’s Investment Policy. We maintained a strong liquidity position
through a diversified and stable funding base, conservative liquidity buffers and active asset-liability management,
ensuring continued compliance with both regulatory and internal liquidity requirements.
Risk Management
Effective risk management is fundamental to the Bank’s business strategy, underpinning its resilience, governance
and ability to deliver and maintain sustainable value to stakeholders. The Bank recognises that its operations are
inherently exposed to a wide range of risks and that robust systems, controls and governance are essential to
safeguard its financial stability, reputation and long-term sustainability.
In this respect, the Bank developed a comprehensive enterprise-wide Risk Management Framework designed to
identify, assess, monitor, and mitigate risks in a systematic and consistent manner, and aligned to the Risk Appetite
Statement. This provides a benchmark against which business activities are evaluated and ensures that risk-taking
remains consistent with the Bank’s overarching goals, regulatory requirements and commitment to stakeholder
value. Clearly articulated acceptable levels of risk foster disciplined decision-making. This Statement is periodically
reviewed to remain aligned with the Bank’s strategy, regulatory expectations, and evolving economic conditions.
Defined quantitative limits and supporting buffers safeguard the Bank’s capital, protect depositor funds, and
support sustainable long-term operations. In this way the Bank ensures that risks are managed in a controlled and
consistent manner and maintains accountability for risk exposure, at every level.
A strong risk-awareness culture underpins this Framework. Throughout 2025, the Bank reinforced risk awareness
across the organisation, embedding clear accountability, strengthening escalation practices, and encouraging
proactive identification of emerging risks.
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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chief Executive Officer’s Review (continued)
The Bank applies the Three Lines of Defence model as the foundation of its risk governance framework. Business
and operational units constitute the First Line of Defence consisting of operational staff and business units which
are responsible for identifying, managing and controlling risks. The Second Line of Defence includes specialised
functions such as Financial Risk Management, Risk Management and Compliance, providing oversight, monitoring
and challenge to ensure adherence to the Bank’s risk framework and regulatory requirements. The Internal Audit
function acts as the Third Line of Defence, providing independent assurance on the adequacy and effectiveness of
the Bank’s governance, risk management and internal control framework.
At 31 December 2025, the Bank’s Total Capital Ratio (TCR) stood at 19.9%, comfortably above regulatory minimum
requirements. This capital strength supports the Bank’s strategic ambitions while providing a prudent cushion
against adverse market developments or potential supervisory capital increases. The Leverage Ratio remained
robust at 13.4% significantly above the 3% minimum threshold and indicative of a sound, well capitalised balance
sheet.
Liquidity risk continues to be prudently managed, well within established investment and funding policies. The
Bank relies on a diversified and relatively stable liquidity funding base, largely composed of local retail deposits,
with emphasis placed on longer-term tenors. We maintain adequate high quality liquid assets to meet our
obligations under both normal and stressed conditions. The Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) stood at 380.5% and 158.5% respectively at year end, well above regulatory minima and within Risk
Appetite boundaries. The Loan to Deposit Ratio of 79.6% reflects a prudent approach to funding and lending
activities.
During the year, the Bank enhanced its operational and ICT resilience, conducting further ICT and cyber risk
assessments, reinforcing outsourcing oversight, improving controls related to business continuity, incident
response, system recovery and simulating phishing campaigns for increased staff awareness. These initiatives
strengthen alignment with evolving regulatory expectations and enhance the Bank’s preparedness against
operational and technology-related disruptions.
We also carried out assessments of physical risks within the broader Climate & Environmental (C&E) risk
framework, which examined its resilience under different scenarios and evaluating potential impacts on the Bank’s
Capital Adequacy. Insights from this work support the Bank’s long term strategic planning and align with emerging
supervisory expectations on climate risk integration.
The Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process
(ILAAP) remain core elements of the Bank’s forward-looking planning. Conducted annually, they confirm that
capital and liquidity resources remain adequate given the Bank’s scale, nature and risk profile. Through rigorous
stress testing and reverse-testing exercises we assess the resilience of our buffers under severe yet plausible
scenarios, ensuring preparedness for potential shocks and supporting continued financial stability, even under
stressed conditions.
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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chief Executive Officer’s Review (continued)
Human Resources
The new Collective Agreement (2025-2028) with the Malta Union of Bank Employees came into force in 2025. The
Agreement provides enhanced terms and benefits for staff and reflects the Bank’s continued commitment to
provide a supportive work environment which caters for the financial and mental well-being of staff members.
As at year end, our headcount stood at 214, with total Group staff at 1,030. The labour market remains increasingly
competitive and mobile, making the attraction, motivation and retention of talent a continuing priority.
Recruitment programmes were therefore strengthened, with a continued focus on building a diverse workforce
combining experienced professionals with individuals at the early stages of their careers.
We also continued to invest in staff development through structured learning and development initiatives aimed
at enhancing both technical and professional skills.
Training programmes were delivered through a combination of classroom-based sessions, on-the-job learning,
and external courses. Focus was placed on key areas such as risk management, compliance and fraud prevention,
reflecting the evolving regulatory and operational environment.
Our staff remains central to the achievement of business objectives, operational resilience and sustainable
performance.
Projects
During the year, we continued to invest significantly in technology to support operational resilience, business
transformation and regulatory compliance. Investment in technology was made in three main areas: renovation
of core elements of the infrastructure, addressing the specific needs of certain business lines and strengthening
capabilities in regulatory reporting and financial crime compliance.
A key initiative was the implementation of instant payments, which required substantial investment in systems,
processes and controls. This programme also involved the conclusion of agreements with multiple counterparty
service providers to ensure reachability and compliance with applicable European payment standards. The
implementation of instant payments necessitated close co-ordination across business, technology, compliance
and external stakeholders.
We concluded the selection process of a new Wealth Management System that is set to enhance client service
supporting a growing customer base and improve integration with other banking platforms. The selection process
focused on scalability, regulatory alignment, and the ability to support future growth.
We also became a VISA exclusive card issuer. This strategic transition involved extensive operational and
technological effort, including the issuance of new cards to all our cardholder base, updates to card processing
systems and comprehensive customer communications, while ensuring continuity of service and compliance with
scheme requirements.
Concurrently, we advanced the selection of a new core banking system as part of a broader effort to modernise
legacy infrastructure, improve processing efficiency and create a more flexible and resilient operating platform.
This initiative was closely aligned with the selection and enhancement of digital channels systems, aimed at
improving the customer experience across online and mobile platforms while strengthening security, monitoring
and control frameworks.
MaltaPost proceeded with the investment in its delivery channels by way of outlets, electric vehicles as well as
EasiPik Lockers, providing a convenient collection point on a 24/7 basis.
The 2025 Melita gold bullion coins issue, in conjunction with the Central Bank of Malta, was sold out soon after
released.
8
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Chief Executive Officer’s Review (continued)
Corporate Social Responsibility
Our commitment to Corporate Social Responsibility is strongly endorsed by our stakeholders and is centred on
making a positive and lasting contribution to the communities where we operate and which share our values.
We place particular emphasis on preserving and enhancing cultural and historical heritage. We also encourage
and support our staff in their own community involvement, recognising and assisting initiatives undertaken by
those who, on a personal basis, champion worthy social, cultural and charitable causes. Consistent with our values,
these initiatives are undertaken discreetly, rather than by seeking publicity.
The Group also recognises its responsibility to minimise any potential adverse impact of its operations on society
and the environment. As part of our broader corporate social responsibility efforts, we actively pursue initiatives
that support sustainability and environmental protection, such as increasing the use of electric vehicles within our
fleet, waste separation and generation of electricity from renewable sources as well as water conservation. These
measures reflect our commitment to operating responsibly while contributing to a healthier and more sustainable
community.
Outlook
Our strategic priorities for the planning cycle commencing in 2026 are focused on positioning the Bank for
sustainable growth and consolidation by building on our proven strengths. Central to this is a comprehensive
digital transformation programme, including the implementation of a new core banking system, a wealth
management system and enhancement of our digital channels, to improve efficiency and customer experience.
Alongside this, we will continue to pursue prudent balance sheet growth, with particular focus on deposits and
lending, making full and effective use of our branch network and physical presence. We will continue to actively
manage and calibrate our assets to optimise the Bank’s capital resources.
Increasing brand awareness remains a priority, reinforcing our position as a trusted provider of personalised, high-
quality banking services.
These strategic priorities will be underpinned by continued investment in governance, risk and compliance,
ensuring that growth is achieved in line with our cautious approach to business. The successful adoption of
technology, supported by the professional commitment of our staff and streamlined processes that simplify
customer interaction, will be critical enablers. Together, these initiatives will ensure the Bank stays well positioned
to deliver sustainable value over the coming planning cycle.
Signed on behalf of the Bank's Board of Directors on 24 April 2026 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 2025.
9
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report
The Group
The Lombard Bank Group (‘the Group’) consists of Lombard Bank Malta p.l.c. (‘the Bank’), Redbox Limited, and
the MaltaPost p.l.c. Group.
Principal Activities
The Bank was registered in Malta in 1969 and listed on the Malta Stock Exchange (‘MSE’) in 1994. It is licensed as a
credit institution under the Banking Act, 1994 and is an authorised currency dealer and financial intermediary. It is
also licensed to carry out investment services in terms of the Investment Services Act, 1994 and is an enrolled Tied
Insurance Intermediary of IVALIFE Insurance Limited under the Insurance Distribution Act, 2018.
The Bank is a member of the Depositor Compensation Scheme and the Investor Compensation Scheme set up under
the laws of Malta. It is also a member of the MSE for the purpose of the carrying out of stockbroking on the MSE. The
Bank has a network of branches in Malta and Gozo providing an extensive range of banking and financial services. A
list of branches, outlets and departments is found on page 54 of this Annual Report.
During the year under review, Redbox Limited, a company virtually wholly owned by the Bank continued to serve as
the special purpose vehicle holding as at 31 December 2025 the Bank’s 72.65% shareholding in MaltaPost p.l.c., with
the remaining 27.35% of the ordinary share capital of MaltaPost p.l.c. being held by the general public. MaltaPost p.l.c.
is Malta’s leading postal services company, being the sole licensed Universal Service Provider of postal services in
Malta. More information about the MaltaPost Group may be found on www.maltapost.com.
During 2025, Lombard Select SICAV p.l.c (‘the SICAV’) was placed in voluntary dissolution and Lombard Capital Asset
Management Limited was struck off.
Review of Performance
An overview of the developments in the Group 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 2025 amounted to €23.8 million (2024: €19.4
million), while Profit attributable to equity holders of the Bank reached €15.4 million (2024: €11.3 million).
Net interest income amounted to €26.1 million, representing a decrease of 4.2% compared with the previous
year. Growth in the lending portfolio led to an increase in interest income from loans and advances to customers.
This was partly offset by lower interest income from Treasury activities, reflecting the impact of lower interest
rates. At the same time, interest expense increased due to higher volumes of customer deposits and more
competitive interest rates offered. Net fee and commission income remained stable at €6.4 million, supported
by the Bank’s various business lines.
Net loans and advances to customers increased by 6.5% to €929.1 million, while customer deposits grew by 7.8%
to €1,207.3 million. Group post tax return on equity for 2025 increased 7.1% (2024: 5.6%). Group total assets
increased to €1,497.6 million (2024: €1,388.4 million). Total capital ratio at 19.9% (2024: 20.0%) exceeded the
minimum regulatory requirements.
The Bank cost efficiency ratio improved to 52.4% (2024: 54.5%), reflecting higher revenues which helped offset
the impact of increased human resources and other operating costs.
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Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Expected Credit Losses (‘ECL’) as defined and determined by International Financial Reporting Standard 9 (IFRS
9), resulted in a net release of €1.0 million compared to a net release of €0.9 million in the previous year. This
release was primarily attributable to the full recovery of customer exposures previously classified as Stage 3,
reflecting the Bank’s effective credit risk management.
FY 2025 was a positive year for MaltaPost p.l.c., with the company continuing to deliver a resilient and positive
performance. The Automated Tariff Revision Mechanism, covering all services under the Universal Service
Obligation, applied for a full financial year and enabled MaltaPost to achieve improved financial planning and
returns. As the sector continued its shift from traditional letter mail to parcel volumes driven by e-commerce
activity, MaltaPost remained focused on strengthening its logistics operations, enhancing its last-mile delivery
network and investing in digital transformation initiatives. MaltaPost continues to be an important contributor
to the Group’s financial performance, registering a pre-tax profit of €6.4 million for FY 2025 (2024: €4.7 million).
Equity attributable to equity holders of the Bank stood at €223.7 million (2024: €209.4 million). Group net asset
value (NAV) per share increased to €1.45 (2024: €1.36), while Group earnings per share (EPS) amounted to €0.10.
Profits after taxation of €16.6 million and €13.5 million for the Group and the Bank respectively, were registered
for the twelve months ended 31 December 2025.
Based on the above, a gross dividend of 3.42 cent per nominal €0.125 share (net dividend of 2.22 cent for a total
amount of €3,436,000) for the twelve months ended 31 December 2025 is being proposed for approval by
shareholders at the 2026 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 53 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, operational risk and capital 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.
11
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
The Directors are also responsible for designing, implementing and maintaining such internal controls as they
deem necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error, and that comply with the Companies Act, 1995 and the Banking Act, 1994. They
are also responsible for safeguarding the assets of the Group and the parent company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements of the Bank for the year ended 31 December 2025 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
2025, 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.
Going Concern
In compliance with Capital Markets Rule 5.62 and after having duly considered the Bank’s performance, the
Directors declare that they expect the Bank will continue to operate as a going
concern for the foreseeable future.
Capital Markets Rules – Disclosures
In terms of Capital Markets Rule 5.64, the Directors are required to disclose the following information.
As at 31 December 2025, 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.
12
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
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 48 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 2025
31 March 2026
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%
13
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
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.
Shares in MaltaPost p.l.c.
at 31 December 2025
at 31 December 2025
Safaco Ltd
147,611
96,991
First Gemini p.l.c.
8,201,836
78,775
Shares in Lombard
Bank Malta p.l.c.
Shares in MaltaPost p.l.c.
at 31 March 2026
at 31 March 2026
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 members of the Group which have occurred after 31 December 2025.
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.
14
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
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.
For the forthcoming planning cycle, the Bank’s strategic priorities will be consolidation and sustainable
growth. Consolidation strategy leverages the Bank’s proven business model, strong financial track record and
a trusted brand. The sustainable growth agenda will centre on sustaining profitability, leveraging favourable
economic conditions and delivering on our core strategic priorities, mainly improving operational efficiency,
enhancing customer engagement and investing in digital capabilities, thereby reinforcing resilience and
competitive advantage.
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 7 Postal Hubs, 40 Post Offices and 19 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 a shift to e-commerce activities,
which now have become a key driver of growth. Meanwhile, 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.
15
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
As evident from the above disclosures, there were no notable changes to the core business strategies and
business models of Group entities.
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 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. 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. 38% of the MaltaPost workforce consists
of foreign nationals.
New Collective Agreements were signed by both the Bank and MaltaPost p.l.c., which between them account
for the larger part of the staff complement of the Group. The Collective Agreements set the conditions of
work and generally regulate the employer/employee relationship. The Agreements make available a number
of benefits 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.
16
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
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
work-life balance.
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. retained the Equality Certification Mark underscoring its dedication to upholding non-
discriminatory practices.
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. MaltaPost p.l.c., for example, has
for the past 10 years operated a Document Management Services Centre, located in Xewkija, Gozo, with a
staff complement in the majority composed of persons with disabilities, showcasing the strong commitment
to inclusivity and to creating a positive impact in society. Remuneration levels are regularly reviewed to
ensure that they encourage retention and are in line with the Group’s Remuneration Policies.
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 2025, 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 2025 the Bank had one complaint brought
in front of the Arbiter for Financial Services. Following mediation, the case was heard by the Arbiter, who
found in favour of the Bank. In the case of MaltaPost p.l.c., customer complaints accounted for 0.00002% of
all mail items handled.
17
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
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 remains 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 Officer and appointment of local first aiders
and fire wardens. Regular checks of related processes and systems are carried out with outcomes reported
accordingly, for 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 recorded 47 lost time injuries resulting in a ‘Lost
1
Time Incident Rate’
of 6.56. 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
13,500 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 2025, 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.
18
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
6.
Environmental Matters
The Group is mindful of the important role it has to play to contribute towards a sustainable environment and
economy.
During 2025, the Bank launched two new Green Home Loan products, one aimed at first-time and second-time
buyers purchasing a new home and another for renovations.
The Group makes use of 426 PV panels which in 2025 contributed to circa 27% (Bank) and 7% (MaltaPost) of the
electricity usage generated from renewable sources. 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 continued increasing the number of electric vehicles to 172. These vehicles are now operational
across over 50 towns and villages in Malta and Gozo, eliminating the need for an additional 90 or more fossil
fuel vehicles, resulting in the avoidance of more than 200 tonnes of CO
2
emissions.
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 reduce resources and material consumption, generate less waste and
consume 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.
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. In this respect, the Bank developed an in-house methodology that assesses and quantifies the
Bank’s exposure to physical risks emanating from the climate and environment.
19
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
7.
Risk Reporting
An established Enterprise-Wide Risk Management Framework that forms the foundation of its risk reporting
activities is in place. This Framework undergoes constant evaluation to ensure its relevant with the business
environment, regulatory demands, and industry best standards.
Clear policies, procedures, and governance mechanisms, including a simple organisational structure with well-
defined reporting channels are in place. Established processes allow for the identification, monitoring, managing
and reporting risks, enhanced with strong internal controls that support our first line to safeguard resources and
follow internal guidelines.
To support these efforts, a number of Policies supporting various risk areas are in place. These are reviewed at
least on a yearly basis. These Policies form the basis of alignment of our Risk Appetite, fostering stakeholder
value while successfully executing our Strategy. The Risk Appetite specifies the risk level the Bank is willing to
accept to achieve its objectives and is subject to least a yearly review based on in-depth analysis of the risk
profile, business, priorities, economic trends, and regulatory shifts.
The Group faces various risks, with the primary ones listed and detailed below.
Capital Risk – Capital risk stems from the potential shortfall in capital to sustain operations, satisfy regulatory
requirements, fund growth activities, provide shareholder returns, and cover unexpected losses. Capital
levels are monitored continuously against regulatory and internal Risk Appetite limits. Where required, a
thorough capital planning process supports this, aligned with the Bank’s risk profile and regulatory needs.
Risk-weighted ratios capital ratios are reinforced by a volume-based leverage ratio to prevent excessive
leverage. (see Notes to the Financial Statements note 2.7).
Credit Risk – Credit risk emerges from declining credit quality of customers or counterparties, should they
default or fail to meet their existing obligations. Credit risk represents the largest risk due to the significant
exposure in our lending and securities portfolios, though our exposures to credit institutions are considered
low. Before approving facilities, repayment capabilities is thoroughly assessed, with tangible collateral
normally required. Collateral is reviewed regularly, ensuring compliance sanction letters, and ensuring
suitable coverage. (see Notes to the Financial Statements note 2.3).
Liquidity Risk – Liquidity risk results when the Bank fails to honour existing or anticipated obligations on time.
Positions are monitored against regulatory and internal Risk Appetite limits. The Bank’s liquidity profile is
managed by its Assets and Liabilities Committee, ensuring timely funding and cash flows, while oversight is
carried out by the Risk Management Department. The Bank holds ample liquidity buffers and stable funding,
ensuring that key metrics such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
continue to remain well above required levels. (see Notes to the Financial Statements note 2.5).
Market Risk – Market risk results from unfavourable shifts in interest rates, currencies, spreads, or equity
prices resulting in possible declines in interest income or adverse movements in asset and liability values.
The Bank does not maintain a Trading Book, so market risk is mainly limited to movements in interest rate,
foreign exchange, and equities. Measures are in place to mitigate the risks arising from adverse market
movements. Foreign exchange risk is mitigated via a natural hedge strategy whereas equity risk is negligible
since the Group’s equity is less than 1% of total assets. (see Notes to the Financial Statements note 2.4).
Macroeconomic and Market Conditions Risk – This covers negative economic shifts domestically or globally
that may harm business activity, asset quality, and performance. Prolonged downturns could significantly
impact financial performance and asset quality.
20
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Non-Financial Risks – These include operational, financial crime, compliance, fraud, and IT issues from
people, processes, or failed systems. These risks are thoroughly described in the Risk Management Policy
and the Risk Appetite Statement. These are also benchmarked against established parameters and reviewed
periodically.
Due to unpredictability nature of these risks, adequate insurance cover is in place. Also, as part of Capital
Risk management, a capital charge for unseen losses is held. (see Notes to the Financial Statements note
2.6).
Regulatory Compliance Risk – This risk arises from potential penalties, fines, or reputational harm due to
breaching regulations, codes of conduct, or best practices. Oversight of this risk is carried out by the
Regulatory Compliance Function, that acts within the second line of defence. The Bank fosters a culture that
promotes compliance through the organisation. The Function also serves as the central point for all
interaction with regulatory and supervisory bodies.
Financial Crime Compliance Risk – Financial Crime Compliance (FCC) Risk encompasses money laundering,
terrorist financing, fraud, bribery, abuse, insider trading, and sanctions violations. The Bank is committed to
combatting financial crime, ensuring that its products are not exploited for these types of risks. Adequate
policies and procedures are in place regarding the Bank’s appetite regarding customer onboarding, business
activities, and jurisdictions as per its Risk Appetite.
Information Security Risk – Information & Cyber Security Risk relates to potential losses arising from failures
in the confidentiality, integrity, availability, and reliability of data, systems, and information. Given the
pervasive role of IT, this risk impacts all other risk areas and requires an integrated management approach.
The Bank has established a formal ICT Risk Management Framework covering all ICT systems, infrastructure,
and data to minimise business disruption, protect sensitive information, and ensure regulatory compliance.
This framework is supported by Board-approved policies and procedures, including Information & Cyber
Security, Incident Management, Communication, Cloud Security, and ICT Third-Party Management policies,
as well as appropriately selected staff, suppliers, and technologies.
Recognising that all systems are inherently vulnerable, the Bank maintains business continuity and disaster
recovery arrangements. A Business Continuity Policy ensures the availability of systems supporting critical
functions through defined Recovery Time Objectives (RTOs) and Recovery Point Objectives (RPOs).
Additionally, a Data Protection Policy governs the lawful processing of personal data and ensures that
information is legitimate, secure, appropriately classified, retained, and managed in line with legal and
business requirements.
ESG Risks – These arise from Environmental, social, and governance matters, including climate change, social
matters, and human rights violations. Multiple data sources aid in the assessment and reporting of these
risks as data becomes available.
21
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Key Performance Indicators (KPIs)
Board-approved financial and non-financial KPIs in the Risk Appetite Statement are monitored regularly by
the Risk Management Department and reported to the Audit & Risk Committee for continuous oversight.
A selection of key metrics as at 31 December 2025 are presented hereunder.
Solvency
TCR
19.9%
Leverage
13.4%
Liquidity
LCR
380.5%
NSFR
158.5%
Profitability
ROAE*
7.1%
Asset Quality
NPL
4.7%
*After tax
KPIs appear in a risk scorecard using the established “traffic light approach” with the end of period metric
compared to the limits set out in our Risk Appetite Statement.
Additional Regulatory Disclosures
The Bank has prepared a separate Pillar 3 Disclosures Report 2025 in accordance with Banking Rule BR/07/2024
- Publication of Annual Report and Audited Financial Statements of Credit Institutions Authorised Under the
Banking Act 1994 as well as the requirements under Part Eight of Regulation (EU) 2019/876 which amends
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential
requirements for credit institutions and investment firms (‘Capital Requirements Regulation’). This said Report
provides further detailed information on the Bank’s risk profile, risk management practices, capital adequacy,
governance arrangements and remuneration framework. It also includes disclosures on risk measurement
methodologies and regulatory capital requirements. This Pillar 3 Disclosures Report is intended to enhance
transparency and is available for viewing on the Bank’s website.
Consolidated disclosures pursuant to Article 8 of the EU Taxonomy Regulation
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
1
levels, the EU has developed the EU Taxonomy Regulation
(‘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.
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.
1
EU Regulation 2020/852
22
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
The six environmental objectives established by the EU Taxonomy are the following, where climate-related
2
environmental objectives (1-2 below) are established in the Climate Delegated Act
(‘CDA’), whilst non-climate
3
environmental objectives (3-6 below) are established in the Environmental Delegated Act
(‘EDA’).
1. Climate change mitigation (‘CCM’)
2. Climate change adaptation (‘CCA’)
3. Sustainable use and protection of water and marine resources (‘WTR’)
4. Transition to a circular economy (‘CE’)
5. Pollution prevention and control (‘PPC’)
6. Protection and restoration of biodiversity and ecosystems (‘BIO’)
The EC adopted a Delegated Act supplementing Article 8 of the Taxonomy Regulation (‘the Disclosures Delegated
Act’) in 2021, which establishes the disclosure requirements of entities within the scope of the Taxonomy
Regulation. At this stage, this solely comprises entities subject to an obligation to publish non-financial
information pursuant to Article 19a or Article 29a of Directive 2013/34/EU (being those entities subject to the
Non-Financial Reporting Directive, ‘NFRD’).
In July 2025, the EC published a new Delegated Act amending Commission Delegated Regulation (EU) 2021/2178
(disclosures information and presentation) as regards the simplification of the content and presentation of
information to be disclosed concerning environmentally sustainable activities and Commission Delegated
Regulations (EU) 2021/2139 and (EU) 2023/2486 as regards simplification of certain technical screening criteria
for determining whether economic activities cause no significant harm to environmental objectives
In accordance with the newly published Delegated Act, and the Draft Commission Notice published by the EC in
December 2025 on the interpretation and implementation of certain legal provisions of the Disclosures
Delegated Act under Article 8 of the EU Taxonomy Regulation, as amended by the Omnibus Delegated Act, on
the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (fourth notice),
specifically FAQ 5, the Bank avails itself of the opt out allowed to financial undertakings for financial year ending
31 December 2025 on the publication of taxonomy disclosures on the basis that no activities are claimed as
being associated with economic activities that qualify as environmentally sustainable under Articles 3 and 9 of
Regulation (EU) 2020/852 (the Taxonomy Regulation).
Despite the above, the Group acknowledges that the opt out applies solely the financial undertakings in scope
of taxonomy reporting and does not extend to non-financial undertakings. Therefore, given that the Bank’s
subsidiary, MaltaPost p.l.c, is classified as an NFRD entity, it remains obligated to report in accordance with the
Disclosures Delegated Act.
The following sections detail the disclosures obligations pursuant to Article 8 of the Taxonomy Regulation on
behalf of MaltaPost plc and its subsidiaries (‘MaltaPost Group’) as a parent non-financial undertaking.
Furthermore, at EU level, the NFRD has been replaced by the Corporate Sustainability Reporting Directive
(‘CSRD’). Whilst the legislative amendments transposing the original Corporate Sustainability Reporting
Directive (‘CSRD’) framework into Maltese law have been published, the commencement notice bringing these
provisions into force has not yet been issued.
In the interim, the Omnibus I Directive, which entered into force on 18 March 2026, is expected to result in
further revisions to national legislation to reflect the simplified reporting requirements and increased size
thresholds for companies in scope of such reporting obligations.
2
Commission Delegated Regulation 2021/2139
3
Commission Delegated Regulation 2023/2486
23
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Going forward, as from financial years starting 1st January 2026, the Disclosures Delegated Act will apply only
to those companies within the scope of the CSRD, with the Group not meeting the thresholds approved in the
Omnibus Directive.
Activities Overview
MaltaPost Group is required to disclose the share of its turnover, capital expenditure (CapEx) and operating
expenditure (OpEx) for its non-financial subsidiaries, which are associated with taxonomy eligible and taxonomy
aligned economic activities for all six environmental objectives.
Proportion of Taxonomy-eligible and Taxonomy-aligned economic activities in total turnover, CapEx and
OpEx in FY 2025
FY 2025
Total
Proportion of
Proportion of
Proportion of
(€000)
Taxonomy-eligible
Taxonomy-
Taxonomy non-
(non-aligned)
aligned economic
eligible economic
economic
activities
activities
activities
Turnover
42,662
85%
0%
15%
CapEx
4,338
73%
0%
27%
OpEx
1,473
83%
0%
17%
MaltaPost also provides comparatives for its financial year ended 30 September 2024:
Proportion of Taxonomy-eligible and Taxonomy-aligned economic activities in total turnover, CapEx and
OpEx in FY 2024
FY 2024
Total
Proportion of
Proportion of
Proportion of
(€000)
Taxonomy-eligible
Taxonomy-
Taxonomy non-
(non-aligned)
aligned economic
eligible economic
economic
activities
activities
activities
Turnover
40,144
86%
0%
14%
CapEx
2,104
42%
0%
58%
OpEx
1,401
82%
0%
18%
Definitions
‘Taxonomy-eligible economic activity' means an economic activity that is described in the delegated acts
supplementing the Taxonomy Regulation (that is, either the CDA or the EDA), irrespective of whether that
economic activity meets any or all of the technical screening criteria laid down in those delegated acts.
The CDA is structured in a way that Annex I contains a list of activities and the respective technical screening
criteria in relation to the CCM objective, whereas Annex II relates to the CCA objective, with potentially different
activities being considered in the different annexes.
The EDA similarly comprises respective lists of activities and technical screening criteria in relation to the non-
climate environmental objectives therein.
24
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
‘Taxonomy-aligned economic activity’ refers to a Taxonomy-eligible activity which complies with the technical
screening criteria as defined in the CDA or EDA and it is carried out in compliance with the minimum safeguards
regarding human and consumer rights, anti-corruption and bribery, taxation and fair competition. To meet the
technical screening criteria, an economic activity must contribute substantially to one or more environmental
objectives while ‘doing no significant harm’ to any of the other environmental objectives. Furthermore, the
activity must be performed in a manner that meets minimum safeguards in relation to human rights, bribery
and corruption, fair competition and taxation.
‘Taxonomy non-eligible economic activity’ means any economic activity that is not described in the delegated
acts supplementing the Taxonomy Regulation.
Taxonomy eligibility of turnover generating
MaltaPost Group has examined all economic activities which it carries out to determine which of these are
Taxonomy eligible in accordance with Annexes I and II to the Climate Delegated Act and Annexes I to IV to the
Environmental Delegated Act. The table below indicates the activities performed by MaltaPost Group which
have been identified as Taxonomy eligible and the environmental objective with which the activity may be
associated. Given that none of MaltaPost Group’s economic activities in terms of turnover, CapEx, or OpEx are
Taxonomy aligned, no further detail with respect to Taxonomy alignment is provided.
Taxonomy eligible activities were identified by extracting the total turnover, CapEx and OpEx required to be
captured in the denominators of the respective KPIs and assessing the NACE code of the activities to which the
amounts relate. MaltaPost Group then assessed which of the identified NACE codes relate to activities included
within the annexes to the Climate Delegated Act. For the identified eligible activities, MaltaPost Group then
began the process to assess them against the technical screening criteria.
Through the activities highlighted in the following table, MaltaPost Group generates turnover and may incur
both CapEx and OpEx for such activities:
Economic Activity
Description
Turnover
CapEx
OpEx
Environmental
NACE
(%)*
(%)*
(%)*
objective(s)
code
6.4 Operation of
Postal revenue earned
personal mobility
through delivery of
11% 0% 0% CCM, CCA H53.10
devices, cycle logistics
post on foot and by e-
pedal cargo bikes
6.5 Transport by
Postal revenue earned
motorbikes,
through delivery
passenger cars and
services by
light commercial
motorbikes, cars and
55% 19% 75% CCM, CCA H53.10
vehicles
light commercial
vehicles including
electric vehicle
quadricycles
6.15 Infrastructure
Postal revenue earned
enabling low-carbon
through infrastructure
road transport and
and related activities in
public transport
sorting centres and
19% 0% 0% CCM, CCA H53.10
hubs essential to
minimise the transport
activities required
* of the total turnover, CapEx and OpEx included in the denominator of the respective KPI
Economic activities classified under activity 6.4 ‘Operation of personal mobility devices, cycle logistics relate to
on-foot deliveries and e-pedal cargo bikes, being two delivery methods used in MaltaPost Group’s Last Mile
Delivery which are eligible under such activity.
25
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Economic activities classified under activity 6.5 ‘Transport by motorbikes, passenger cars and light commercial
vehicles’ relate to motorcycles, delivery vans and light cargo electric vehicles (Micro Logistics Electric Vehicles),
which are another three delivery methods used in MaltaPost Group’s Last Mile Delivery which are eligible under
this activity. In this respect, the CapEx classified as Taxonomy eligible entails capital investments pertaining to
the execution of such turnover-generating economic activity. Such CapEx relates to motor vehicle additions
throughout the year, whilst OpEx in this respect pertains to direct non-capitalised costs incurred in the day-to-
day servicing of such motor vehicles, namely running expenses relating to repair and maintenance, and short-
term operating leases.
Economic activities classified under activity 6.15 ‘Infrastructure enabling low-carbon road transport and public
transport’ relate to infrastructure and related activities in MaltaPost Group’s sorting centre and hubs, which are
considered essential to enable the efficient transport of letters, small packets and parcels, making it a driver in
minimising the required transport activities in the postal business.
The MaltaPost Group also operates four heavy vehicles in scope of activity 6.6 ‘Freight transport services by
road’, however these are considered not to directly contribute to turnover generation.
The MaltaPost Group assessed its turnover-generating economic activities in respect of the Environmental
Delegated Act; however, none are currently deemed to be eligible in this respect.
Whilst the MaltaPost Group currently assesses its operating activities in accordance with activities classified
under section 6 ‘Transport’ of the Climate Delegated Act, PostEurop, the trade association that represents
European public postal operators, submitted a position paper on the EU Taxonomy recommending that the
postal sector be captured under a specific sector, as opposed to ‘Transport’. Therefore, in the future, should the
Climate Delegated Act be amended a result such a proposal, the MaltaPost Group will re-assess the Taxonomy
eligibility of its turnover-generating activities.
Other turnover-generating activities classified as Taxonomy non-eligible
The MaltaPost Group’s Taxonomy non-eligible economic activities include warehousing services, document
management services, philatelic activities, retail sale of stamps, non-postal stationery and provision of non-
postal services.
Taxonomy eligibility of investment activities not directly related to turnover-generating activities
Further to the activities from which MaltaPost Group generates turnover, and generally incurs both CapEx and
OpEx, it also engages in investment activities not directly related to its turnover-generating activities as
highlighted in the following table:
Economic Activity
Description
CapEx
OpEx
Environmental
NACE code
(%)*
(%)*
objective(s)
7.7 Acquisition and
Additions to leased
ownership of
54% 8% CCM, CCA L68
property
buildings
* of the total CapEx and OpEx included in the denominator of the respective KPI
Economic activities classified under activity 7.7 Acquisition and ownership of buildings relate to additions to
leased property.
MaltaPost Group assessed its investment activities are not directly related to turnover-generating economic
activities in respect of the Environmental Delegated Act; however, none are currently deemed to be eligible in
this respect.
26
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Taxonomy alignment
Determining whether an activity meets the requirements to be classified as Taxonomy-aligned requires
considerable detailed information about the activity in order to properly assess it against the established
technical screening criteria.
Over the past years, MaltaPost Group has been in the process of gathering the necessary information with the
aim of identifying which economic activities may be considered as Taxonomy-aligned. As a result of this ongoing
process, MaltaPost Group has not been able to substantiate the Taxonomy-alignment of any of its activities in
the reporting financial year.
Despite not being able to fully substantiate the Taxonomy-alignment of any of its activities, MaltaPost Group
has identified instances where partial alignment may be considered.
Economic activities classified under activity 6.4 ‘Operation of personal mobility devices, cycle logistics’ have been
assessed to meet the substantial contribution criteria under the CCM objective, being that both delivery
methods are used in MaltaPost Group’s Last Mile Delivery of postal and parcel items. However, an assessment
of elements pertaining to the DNSH criteria needs to be carried out to determine whether such criteria are met.
The same also applies to activities 6.5 ‘Transport by motorbikes, passenger cars and light commercial vehicles
and 6.15 ‘Infrastructure enabling low-carbon road transport and public transport’.
With regards to activity 7.7 ‘Acquisition and ownership of buildings’ MaltaPost has not yet identified any
instances of partial or full alignment.
Further to meeting technical screening criteria economic activities must meet minimum safeguards relating to
human and consumer rights, anti-corruption and bribery, taxation and fair competition in order to be Taxonomy-
aligned. Such assessment must be carried out in accordance with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights, as outlined in the Platform on
Sustainable Finance’s report on Minimum Safeguards published in October 2023. MaltaPost Group is in the
process of establishing a framework to comply with the necessary minimum safeguards.
As a result of no activities being considered as Taxonomy-aligned in the 2025 financial year, disclosure
requirements surrounding the assessment of Taxonomy-alignment in accordance with section 1.2.2.1 of the
Disclosures Delegated Act are not deemed to be applicable to MaltaPost Group.
KPIs and accounting policies
The key performance indicators (KPIs’) consist of the Turnover KPI, the CapEx KPI and the OpEx KPI. In presenting
the Taxonomy KPIs, MaltaPost uses the templates provided in Annex II to the Disclosures Delegated Act.
Moreover, since MaltaPost Group is not performing any of the activities related to fossil gas and nuclear energy
(activities 4.26 – 4.31), MaltaPost Group only publishes Template 1 of Annex II of the Disclosures Delegated Act
with regards to activities in certain energy sectors.
In section A.1 ‘Environmentally sustainable activities (Taxonomy-aligned)’ of respective Turnover, CapEx and
OpEx templates, columns 5 and 6 are marked as ‘N’ given that MaltaPost Group does not have any Taxonomy-
aligned balances, whilst the remaining columns 7 to 17 are marked as ‘-‘ since, under Substantial Contribution
criteria, Taxonomy-alignment reporting is not required for non-climate environmental objectives and under
DNSH criteria and Minimum Safeguards, there is no current Taxonomy-alignment assessment to be reported.
27
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Annex – Taxonomy Reporting Templates
Proportion of turnover from products or services associated with Taxonomy-aligned economic activities – disclosure covering 2025
Financial year 2025
2025
Substantial Contribution Criteria
DNSH Cr ite ria (Do e s Not Signific an tly Ha rm)
Proportion of
Category
Category
Taxonomy
enabling
trans itional
aligned (A.1.) or
a ct ivity (1 9)
a ct ivity (2 0)
eligible (A.2.)
Turnover 2024
Proportion of
Economic Activities (1) Code (2) Turnover (3)
(18)
Turnover (4)
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
(€) 000 %
Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % E T
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
A. TAXANOMY ELI G IBLE AC TI VI TE S
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Turnover of environmentally sustainable activites
0 0% N N - - - - - - - - - - - 0%
(Taxonomy-aligned) (A.1)
Of which Enabling
0 0% N N - - - - - - - - - - - 0% E
Of which Transitional
0 0% N - - - - - - - 0% T
A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
EL;
EL;
EL;
EL;
EL;
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
CCM 6.4
/
Operation of personal mobility devices, cycle logistics
4,746 11%
EL
EL N/EL N/EL N/EL N/EL 12%
CCA 6.4
Transport by motorbikes, passenger cars and light
CCM 6.5/
23,339 55%
EL EL N/EL N/EL N/EL N/EL 54%
commercial vehicles
CCA 6.5
Infrastructure enabling low-carbon road transport
CCM 6.15/
8,201
19%
EL EL N/EL N/EL N/EL N/EL 20%
and public transport
CCA 6.15
Turnover of Taxonomy-eligible but not
environmentally sustainable activties (not
36,286 85% 85% 0% 0% 0% 0% 0% 86%
Taxonomy aligned activites) (A.2)
A. Turnover of Taxonomy-eligible actvities (A.1+A.2)
36,286 85% 85% 0% 0% 0% 0% 0% 86%
B. TAXAN OMY N ON- E LI GI BLE AC TI VI TE S
Turnover of Taxonomy non-eligible actvities
6,376 15%
TOTAL
42,662 100%
Proportion of
turnover/Total turnover
Taxonomy
Taxonomy
aligned per
eligible p er
objective
objective
CCM 0% 85%
CCA 0% 85%
WTR
CE
PPC
BIO
Climate Change Mitigation (5)
Climate Change Adaptation (6)
Water and marine resources(7)
Polution (8)
Circular Economy (9)
Biodiversity (10)
Climate Change Mitigation (11)
Climate Change Adaptation (12)
Water and marine resources (13)
Polution (14)
Circular Economy (15)
Biodiversity (16)
Minimum Safeguards (17)
28
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities – disclosure covering 2025
Financial year 2025
2025
Substantial Contribution Criteria
DNSH Cr ite ria (Do e s Not Signific an tl y Har m)
Proportion of
Category
Category
Taxonomy
enabling
trans itional
aligned (A.1.) or
a ct ivity (1 9)
a ct ivity (2 0)
eligible (A.2.)
CapEx 2024 (18)
Proportion of
Economic Ac tivities (1) Code (2) CapEx (3)
CapEx (4)
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
(€) 000 %
Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % E T
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
A. TAXAN OMY E LI G I BLE AC TI VI TE S
A.1. Environmentally sustainable activities (Taxonomy-aligned)
CapEx of environmentally sustainable activites
0 0% N N - - - - - - - - - - - 0%
(Taxonomy-aligned) (A.1)
Of which Enabling
0 0% N N - - - - - - - - - - - 0% E
Of which Transitional
0 0% N - - - - - - - 0% T
A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
EL;
EL;
EL;
EL;
EL;
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
CCM 6.4/
Operation of personal mobility devices, cycle logistics
0 0%
EL EL N/EL N/EL N/EL N/EL 0%
CCA 6.4
Transport by motorbikes, passenger cars and light
CCM 6.5/
815 19%
EL EL N/EL N/ EL N/EL N/ EL 41%
commercial vehicles
CCA 6.5
Infrastructure enabling low-carbon road transport
CCM 6.15/
0 0%
EL EL N/EL N/ EL N/EL N/ EL 0%
and public transport
CCA 6.15
CCM 7.7/
Acquisition and ownership of buildings
2,334
54%
EL EL N/EL N/ EL N/EL N/ EL 1%
CCA 7.7
CapEx of Taxonomy-eligible but not
environmentally sustainable activties (not
3,149 73% 73% 0% 0% 0% 0% 0% 42%
Taxonomy aligned activites) (A.2)
A. CapEx of Taxonomy-eligible actvities (A.1+A.2)
3,149 73% 73% 0% 0% 0% 0% 0% 42%
B. TAXAN OMY N ON - ELI GI BLE AC TI VI TE S
CapEx of Taxonomy non-eligible actvities
1,189 27%
TOTAL
4,338 100%
Proportion of CapEx/Total
Cap Ex
Taxonomy
Taxonomy
aligned per
eligible per
objective
objective
CCM 0% 73%
CCA 0% 73%
WTR
CE
PPC
BIO
Clim(niotaigitMgenaCheta5)
Climate Change Adaptation (6)
Water and marine resources(7)
Polution (8)
Circular Economy (9)
Biodiversity (10)
Climate Change Mitigation (11)
Climate Change Adaptation (12)
Water and marine resources (13)
Polution (14)
Circular Economy (15)
Biodiversity (16)
Minimum Safeguards (17)
29
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities – disclosure covering 2025
Financial year 2025
2025
Climniotaigit(5MnaChetage)
Substantial Contribution Criteria
Climate Change Adaptation (6)
DNSH Cr ite ria (Do e s Not Sign ific ant ly Ha rm)
Proportion of
Category
Category
Taxonomy
enabling
trans itional
aligned (A.1.) or
a ct ivity (1 9)
a ct ivity (2 0)
eligible (A.2.)
OpEx 2024 (18)
Proportion of
Economic Activities (1) Code (2) OpEx(3)
OpEx (4)
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
Y; N ;
(€) 000 %
Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % E T
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
A. TAXAN OMY E LI G I BLE AC TI VI TES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
OpEx of environmentally sustainable activites
0 0% N N - - - - - - - - - - - 0%
(Taxonomy-aligned) (A.1)
Of which Enabling
0 0% N N - - - - - - - - - - - 0% E
Of which Transitional
0 0% N - - - - - - - 0% T
A.2. Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
EL;
EL;
EL;
EL;
EL;
EL;
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
CCM 6.4/
Operation of personal mobility devices, cycle logistics
0 0%
EL EL N/ EL N/EL N/ EL N/EL 0%
CCA 6.4
Transport by motorbikes, passenger cars and light
CCM 6.5/
1,103 75%
EL EL N/ EL N/EL N/ EL N/EL 75%
commercial vehicles
CCA 6.5
Infrastructure enabling low-carbon road transport
CCM 6.15/
0 0%
EL EL N/ EL N/EL N/ EL N/EL 0%
and public transport
CCA 6.15
CCM 7.7/
Acquisition and ownership of buildings
123 8%
EL EL N/ EL N/EL N/ EL N/EL 7%
CCA 7.7
OpEx of Taxonomy-eligible but not environmentally
sustainable activties (not Taxonomy aligned
1,226 83% 83% 0% 0% 0% 0% 0% 82%
activite s) (A.2)
A. OpEx of Taxonomy-eligible actvities (A.1+A.2)
1,226 83% 83% 0% 0% 0% 0% 0% 82%
B. TAXAN OMY N ON - ELI GI BLE AC TI VI TE S
OpEx of Taxonomy non-eligible actvities
247 17%
TOTAL
1,473 100%
Proportion of OpEx/Total
Op Ex
Taxonomy
Taxonomy
aligned per
eligible per
objective
objective
CCM 0% 83%
CCA 0% 83%
WTR
CE
PPC
BIO
Water and marine resources(7)
Polution (8)
Circular Economy (9)
Biodiversity (10)
Climate Change Mitigation (11)
Climate Change Adaptation (12)
Water and marine resources (13)
Polution (14)
Circular Economy (15)
Biodiversity (16)
Minimum Safeguards (17)
30
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Nuclear and fossil gas related activities for financial year 2025
Row Nuclear energy related activities
The undertaking carries out, funds or has exposures to research, development,
1
demonstration and deployment of innovative electricity generation facilities that
NO
produce energy from nuclear processes with minimal waste from the fuel cycle.
The undertaking carries out, funds or has exposures to construction and safe
operation of new nuclear installations to produce electricity or process heat,
2
including for the purposes of district heating or industrial processes, such as,
NO
hydrogen production, as well as their safety upgrades, using best available
technologies.
The undertaking carries out, funds or has exposures to safe operation of existing
nuclear installations that produce electricity or process heat, including for the
3
NO
purposes of district heating or industrial processes, such as, hydrogen production
from nuclear energy, as well as their safety upgrades.
Fossil gas related activities
The undertaking carries out, funds or has exposures to construction or operation
4
of electricity generation facilities that produce electricity using fossil gaseous
NO
fuels.
The undertaking carries out, funds or has exposures to construction,
5
refurbishment, and operation of combined heat/cool and power generation
NO
facilities using fossil gaseous fuels.
The undertaking carries out, funds or has exposures to construction,
6
refurbishment and operation of heat generation facilities that produce heat/cool
NO
using fossil gaseous fuels.
The specification of the KPIs is determined in accordance with Annex I to the Disclosures Delegated Act. MaltaPost
Group adopts the methodology to determine Taxonomy-alignment in accordance with the legal requirements and
describes its policies in this regard as follows:
Turnover KPI
Definition
The proportion of Taxonomy-aligned economic activities of the total turnover has been calculated as the part of
net turnover derived from products and services associated with Taxonomy-aligned economic activities
(numerator) divided by the net turnover (denominator), in each case for the Financial Year from 01 October 2024
to 30 September 2025. Given that MaltaPost Group has not identified any Taxonomy-aligned economic activities,
the current proportion of alignment is 0%.
Reconciliation
The 2025 MaltaPost Group’s consolidated net turnover captured in the denominator of the KPI of €42,662 million
reconciles with the amount disclosed in the ‘Revenue’ financial statement line item included in the ‘Income
Statements’ in the consolidated financial statements of MaltaPost’s Annual Financial Report and Consolidated
Financial Statements.
31
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Amount
Turnover Reconciliation
(€’000)
Turnover as per KPI denominator 42,662
Turnover as per MaltaPost’s consolidated financial statements relating to:
- Postal 36,286
- Philatelic 280
- Insurance commission 658
- Other 5,438
Difference -
From the amounts disclosed above, the amount of €36,286,000 allocated to Postal activities is disclosed as
Taxonomy eligible under activities 6.4, 6.5 and 6.15 in the Turnover KPI, which represents the total taxonomy-
eligible revenue for the MaltaPost Group.
CapEx KPI
Definition
The CapEx KPI is defined as Taxonomy-aligned CapEx (numerator) divided by MaltaPost Group’s total CapEx
(denominator).
Total CapEx consists of additions to tangible and intangible fixed assets during the financial year, before
depreciation, amortisation, and any remeasurements, including those resulting from revaluations and
impairments, as well as excluding changes in fair value. It includes acquisitions of tangible fixed assets (IAS 16),
intangible fixed assets (IAS 38) and right-of-use assets (IFRS 16). Acquisitions of investment properties (IAS 40) and
additions as a result of business combinations would also be captured. For further details on our accounting
policies regarding MaltaPost Group’s CapEx, refer to disclosure Note 1.4 ‘Property, plant and equipment’, Note
1.5 ‘Intangible assets’ and Note 1.16 ‘Right-of-use’ in the MaltaPost’s consolidated financial statements of 30
September 2025.
The Disclosures Delegated Act established three categories under which to classify CapEx:
a) CapEx related to assets or processes that are associated with Taxonomy-aligned economic activities
(‘category a’). In this case, MaltaPost Group considers that assets and processes are associated with
Taxonomy-aligned economic activities where they are essential components necessary to execute an
economic activity.
MaltaPost Group follows the generation of external revenues as a guiding principle to identify economic
activities that are associated with CapEx under this category (a).
Eligible CapEx under this category has been disclosed in the table named ‘Taxonomy-eligible economic
activity’ in the ’Taxonomy-eligible and Taxonomy-aligned economic activities’ section above.
b) CapEx that is part of a plan to upgrade a Taxonomy-eligible economic activity to become Taxonomy-aligned
or to expand a Taxonomy-aligned economic activity (‘category b’).
MaltaPost Group has currently not developed such a plan, and therefore, no CapEx is considered to be eligible
under this category.
32
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
c) CapEx related to the purchase of output from Taxonomy-aligned economic activities and individual measures
enabling certain target activities to become low-carbon or to lead to GHG reductions (‘category c’).
MaltaPost Group distinguishes between the purchase of output and individual measures as follows:
- ‘Purchase of output’ relates to when MaltaPost Group just acquires the product or service that is
mentioned in the activity description.
- ‘Individual measure’ refers to when MaltaPost Group acquires a product through an activity that is
regularly performed by the supplier, but where MaltaPost Group controls the content and design of the
product in detail.
Eligible CapEx under this category has been disclosed in the table named ’Individually Taxonomy-eligible
CapEx/OpEx and the corresponding economic activities’ in the ‘Taxonomy-eligibility of investment activities
not directly related to turnover generating activities’ section above. The full amount of CapEx considered
under this category relates purely to ‘purchase of output’.
Purchases of output qualify as Taxonomy-aligned CapEx in cases where it can be verified that the respective
supplier performed a Taxonomy-aligned activity to produce the output that MaltaPost Group acquired. Since
Taxonomy-alignment also includes DNSH criteria and minimum safeguards, MaltaPost Group cannot assess
the Taxonomy-alignment on its own. For the purchased output in financial year 2025, MaltaPost could not
obtain any conclusive confirmation of Taxonomy-alignment.
To avoid double counting in the CapEx KPI, MaltaPost Group ensured that CapEx captured as part of ‘category
a’, which relates to turnover-generating activities, was not also included with the activities identified within
‘category c.
Reconciliation
The 2025 MaltaPost Group’s total CapEx captured in the denominator of the KPI can be reconciled to the
consolidated financial statements of MaltaPost Annual Financial Report of 30 September 2025, by reference to
the respective disclosures capturing the additions for property, plant and equipment, intangible assets, and right-
of-use assets.
Amount
CapEx Reconciliation
(€’000)
CapEx as per KPI denominator 4,338
Additions as per MaltaPost’s consolidated financial statements relating to:
- Property, plant and equipment Disclosure Note 4 1,430
- Intangible assets Disclosure Note 6 523
- Right-of-use assets Disclosure Note 5 2,385
Difference -
The following is a detailed breakdown of the property, plant and equipment, intangible assets, and right of use
assets amongst the different activities disclosed in the CapEx KPI.
33
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Amount
Detailed breakdown of property, plant and equipment additions
(€’000)
PPE additions as per MaltaPost’s consolidated financial statements 1,430
Allocation of PPE in the CapEx KPI
6.4 Operation of personal mobility devices, cycle logistics 0
6.5 Transport by motorbikes, passenger cars and light commercial vehicles 139
6.15 Infrastructure enabling low-carbon road transport and public transport 0
7.7 Acquisition and ownership of buildings 625
Taxonomy non-eligible 666
Difference 0
Amount
Detailed breakdown of intangible assets additions
(€’000)
Intangible asset additions as per MatalPost’s consolidated financial statements 523
Allocation of Intangibles in the CapEx KPI
6.4 Operation of personal mobility devices, cycle logistics 0
6.5 Transport by motorbikes, passenger cars and light commercial vehicles 0
6.15 Infrastructure enabling low-carbon road transport and public transport 0
7.7 Acquisition and ownership of buildings 0
Taxonomy non-eligible 523
Difference 0
Amount
Detailed breakdown of right-of-use asset additions
(€’000)
Right-of-use asset additions as per MaltaPost’s consolidated financial statements 2,385
Allocation of right-of-use in the CapEx KPI
6.4 Operation of personal mobility devices, cycle logistics 0
6.5 Transport by motorbikes, passenger cars and light commercial vehicles 676
6.15 Infrastructure enabling low-carbon road transport and public transport 0
7.7 Acquisition and ownership of buildings 1,709
Taxonomy non-eligible 0
Difference 0
34
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
OpEx KPI
Definition
The OpEx KPI is defined as Taxonomy-aligned OpEx (numerator) divided by MaltaPost Group’s total OpEx
(denominator).
Total OpEx consists of direct non-capitalised costs that relate to building renovation measures, short term leases
as well as forms of maintenance and repair. In general, this includes staff costs, costs for services and material
costs for daily servicing and also for regular and unplanned maintenance and repair measures. It does not include
expenses relating to the day-to-day operation of PPE, such as raw materials, cost of employees operating any
equipment and electricity or fluids that are necessary to operate the PPE. Amortisation and depreciation are also
not included in the OpEx KPI.
In addition to the OpEx items captured in the current denominator of the OpEx KPI, MaltaPost Group
acknowledges that certain additional staff costs should also be captured, given that certain employee
responsibilities relate to the servicing of PPE. Such costs have been excluded in the current year given that
MaltaPost Group is currently unable to allocate staff costs towards maintenance and repair activities. Once
MaltaPost Group develops an approach for allocating such staff costs, these will be captured as OpEx and as part
of the KPI accordingly.
MaltaPost also excludes direct costs for training and other human resources adaptation needs from the
denominator and the numerator. This is because Annex I to the Disclosures Delegated Act lists these costs only for
the numerator, which does not allow a mathematically meaningful calculation of the OpEx KPI.
Given that MaltaPost Group has not identified any CapEx as being Taxonomy-aligned, naturally, no OpEx is able to
be considered as Taxonomy-aligned.
35
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Directors’ Report (continued)
Reconciliation
The 2025 MaltaPost Group’s total OpEx captured in the denominator of the KPI cannot be directly reconciled to
the consolidated financial statements of MaltaPost Group included in its Annual Report, since the notes to the
financial statements comprise amounts which relate to both Taxonomy-eligible and Taxonomy non-eligible
activities. Therefore, the portion of Taxonomy-eligible OpEx within each item in Note 21 to MaltaPost’s financial
statements is identified below.
Amount in scope of
OpEx KPI
Full amount as per
denominator as per
Note 21 of
Note 21 of
MaltaPost’s
MaltaPost’s
consolidated
consolidated
financial statements
financial statements
OpEx reconciliation
(€’000)
(€’000)
OpEx as per EU Taxonomy KPI denominator
1,473
OpEx as per consolidated financial statements of which: 36,753 1,473
Employee benefits expense 18,753 -
Depreciation and amortisation 2,461 -
Foreign direct mail costs 9,852 -
Property operating lease rentals 123 123
Motor vehicle operating lease and rental costs 504 504
Movement in provision for expected credit loss 59 -
Other expenses 5,001 846
The amount of €123,000 classified as ‘Property operating lease rentals’ is allocated in full to economic activity 7.7
‘Acquisition and ownership of buildings’, whilst remaining amounts totalling to €1,103,000 classified as ‘Motor
vehicle operating lease and rental costs’ and ‘Other expenses’ are allocated in full to economic activity 6.5
‘Transport by motorbikes, passenger cars and light commercial vehicles’ in the OpEx KPI.
Signed on behalf of the Bank's Board of Directors on 24 April 2026 by Michael C. Bonello (Chairman) and Joseph Said
(Director and Chief Executive Officer) as per the Directors' Declaration on ESEF Annual Financial Report submitted
in conjunction with the Annual Report and Financial Statements 2025.
36
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance
A.
INTRODUCTION
In terms of the Capital Markets Rules of the Malta Financial Services Authority (Rule 5.94), Lombard Bank Malta
p.l.c. (the ‘Bank’), as a company having its securities admitted to trading on a regulated market, is obliged to report
on the extent to which it has adopted the ‘Code of Principles of Good Corporate Governance’ (the ‘ Principles’)
embodied in Appendix 5.1 to Chapter 5 of the same Capital Markets Rules, as well as the measures which have
been taken by the Bank to ensure compliance with these Principles.
While the Principles are not mandatory, the Board of Directors of the Bank has endeavoured to ensure that they
are upheld to the fullest extent possible, and this while acknowledging that good corporate governance is indeed
beneficial to all the Bank’s stakeholders. The instances in which the Bank has departed from the Principles are
explained below under Section C - ‘Non- Compliance with the Code’.
After having carried out a review of the extent to which the Bank has been compliant with the Principles throughout
the financial year ended 31 December 2025, the Board of Directors, in terms of Capital Markets Rule 5.97, presents
its report as follows:
B.
COMPLIANCE WITH THE CODE
Principle 1: The Board
As at 31 December 2025, the Board of Directors of the Bank consisted of six (6) Directors, five (5) of whom being
non-executive Directors together with the Chief Executive Officer of the Bank being also a Director.
In order to assist it in the execution of its duties and responsibilities, the Board of Directors has set up a number
of committees. These include the Audit & Risk Committee and the Suitabilities & Evaluations Committee and this
apart from the management Committees appointed being the Assets & Liabilities Committee and the Credit
Committee. All board-appointed Committees are regulated by their own Terms of Reference as approved and
periodically reviewed by the Board.
Principle 2: Chairman and Chief Executive Officer
The roles of Chairman and Chief Executive Officer are held by different individuals, ensuring a clear division of
responsibilities. The Chairman is responsible for leading and managing the Board of Directors, while the Chief
Executive Officer oversees the day-to-day management and operations of the Bank. This separation of roles
prevents the concentration of power and authority in a single individual, distinguishing the governance and
leadership of the Board from the management of the Bank’s business.
The Chairman’s responsibilities, inter alia, include: (i) leading the Board and helping it reach its full potential,
particularly by facilitating the effective contribution of Directors and encouraging discussion; (ii) setting of the
Agenda for Board meetings; (iii) ensuring that the Directors receive precise, timely and objective information so
that they can make sound decisions and effectively monitor the performance of the Bank; (iv) ensuring that all
strategic and policy issues are appropriately discussed and formally approved; and (v) maintaining effective
communication with the Bank’s shareholders at all times. As stated below, the Chairman meets the independence
criteria set out in the Principles.
The Board of Directors appoints the Chief Executive Officer. The Chief Executive Officer is responsible for managing
the day-to-day business of the Bank in conformity with the agreed plans, policies and strategies approved by the
Board. The Board of Directors also appointed two Deputy Chief Executive Officers, who support the Chief Executive
Officer in the exercise of his duties while also leading the Credit and Operations functions respectively.
37
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
Principle 3: Composition of the Board
The following Directors served on the Board during the period under review:
Michael C. Bonello
John Bonello
Aldo-Joseph Giordano
Kimon Palamidis
Peter Perotti
Joseph Said
All Board members are Non-Executive Directors who are not engaged in the daily management of the Bank, with
the exception of Joseph Said who is also Chief Executive Officer of the Bank. Furthermore, the Board considers
Michael C. Bonello, John Bonello, Aldo-Joseph Giordano, Kimon Palamidis and Peter Perotti as independent
Directors. Michael C. Bonello and Kimon Palamidis are still considered to be independent despite the fact that they
have served on the Board for more than twelve consecutive years. In determining the independence of its
members, the Board takes into consideration the relevant criteria and Principles as well as what are generally
considered sound, acceptable standards. All Non-Executive Directors have declared in writing to the Board that
they undertake:
to maintain in all circumstances their independence of analysis, decision and action;
not to seek or accept any unreasonable advantages that could be considered as compromising their
independence; and
to clearly express their opposition in the event that they find that a decision of the Board may harm the Bank.
It is considered that the current size of the Board is appropriate for the requirements of the business and that it
reflects an appropriate balance of skills and experience, enabling it to effectively fulfil its duties and
responsibilities. This is considered so also taking into account, inter alia, the Bank’s simple model and the principle
of proportionality, based on the Bank’s size and the nature, scale and complexity of its activities and products.
The composition and election of the Board of Directors is determined by the Bank’s Articles of Association wherein
it is established that it is the shareholders who must appoint Directors to serve on the Board. Within these
parameters, options for further strengthening the Board are always considered. In addition, the Bank, by virtue of
the Board-appointed Suitabilities & Evaluations Committee, carries out suitability assessments of its existing
Directors and any new nominated Directors in order to ensure that the suitability, fit and proper criteria are
observed, pursuant to all applicable laws, rules, regulations and guidelines.
The overall composition of the Board and the collective knowledge, skills and experience required are evaluated
during individual suitability assessments and collective suitability assessments so as to ensure that the Board is
effectively discharging all its duties and obligations at all times.
Since the appointment of Directors to the Board is a matter that is reserved entirely to the Bank’s shareholders in
terms of the Memorandum and Articles of Association, diversity, to an extent, depends on the profiles of nominees
proposed and their suitability in terms of applicable laws, rules, regulations, guidelines, etc. The benefits of
diversity, including that in educational and professional backgrounds, age, gender, experience and geographical
provenance would be considered by the Suitability and Evaluations Committee in its assessment of suitability of
any nominees.
38
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
The Bank has a formal succession policy for directors (apart from senior management and heads of internal control
functions) - Succession Policy for the Board of Directors & Key Function Holders - which seeks to ensure continuity
of the roles by having in place the processes for orderly and planned succession. The Bank’s Suitabilities &
Evaluations Committee oversees the implementation and maintenance of this Policy, although the Chairman and
Board of Directors continue to remain ultimately responsible. While the right to appoint the Bank’s Directors is
vested in the shareholders, this Policy serves to set out the best efforts to be in place in order to advise and support
shareholders in the process, subject to the parameters of applicable laws, rules, regulations etc., and the Bank’s
Memorandum and Articles of Association and to consider appropriate succession planning that is consistent with
all legal requirements regarding composition, appointment or succession of the Board of Directors. Succession
planning is indeed considered by the Suitabilities & Evaluations Committee and the Board of Directors with
appropriate succession actions being identified for implementation.
The Board considers that as a policy and as reflected in its Board of Directors’ Charter, and its Succession Policy
for the Board of Directors and Key Function Holders, it endeavours to have a varied board, particularly in terms of
diverse educational and professional backgrounds and extensive and specialised experience of its members. The
Board is cognisant of the fact that the appropriate mix of Board Members ensures diverse perspectives, experience
and knowledge. It continues to remain committed to maintaining diversity among its members particularly in
terms of age, geographical provenance, gender, experience, educational and professional backgrounds. The Board
is confident that, also taking into account proportionality and the Bank’s size and the nature, scale and complexity
of its activities and products, it is appropriately diverse, not least in terms of skills, knowledge and experience. This
allows for a good understanding of current affairs, the Bank’s activities, business model, strategy and associated
risks, applicable regulatory framework and the environment in which the Bank operates and longer-term risks and
opportunities related to the Bank’s business. It also benefits from international expertise. The Board remains
committed to further formalising its Diversity Policy accordingly. The Board also seeks to supplement and enhance
its skillset for further effective oversight of certain specialised areas by the engagement of external advisors for
matters such as information and communication technology and security which serves to further enhance the
Board’s oversight functions.
Principle 4: The Responsibility of the Board
In pursuing the execution of the four basic roles of corporate governance, namely, accountability, monitoring,
strategy formulation and policy development, the Board of Directors, having the first level of responsibility for such
execution, inter alia:
regularly reviews and evaluates corporate strategy, major operational and financial plans, risk management
policies, performance objectives and monitors implementation and corporate performance within the
parameters of all relevant laws, regulations and codes of best business practice;
applies high ethical standards and takes into account the interests of stakeholders and acts responsibly and
with integrity and on a fully informed basis, in good faith, with due diligence and in the best interests of the
Bank and its shareholders;
recognises that the Bank’s success depends upon its relationship with all groups of its stakeholders, including
employees, suppliers, customers and the wider community in which the Bank operates;
monitors effectively the application and implementation by Management of its policies and strategy;
recognises and supports enterprise and innovation within Management and examines how best to motivate
the Bank’s Management;
seeks to establish an effective decision-making process in order to develop the Bank’s business efficiently; and
ensures that a balance is struck between enterprise and control in the Bank.
39
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
Furthermore, the Board of Directors, inter alia:
defines in clear and concise terms the Bank’s strategy, policies, management performance criteria and
business policies and effectively monitors the implementation of such by Management;
establishes a clear internal and external reporting system so that the Board has continuous access to
accurate, relevant and timely information;
has appointed Committees, including the Audit & Risk Committee, Credit Committee, Assets & Liabilities
Committee and Suitabilities & Evaluations Committee;
continuously assesses and monitors the present and future operations’ opportunities, threats and risks;
evaluates the Management’s implementation of corporate strategy and financial objectives;
ensures that the Bank has appropriate policies and procedures in place to assure that the Bank and its staff
members maintain the highest standards of corporate conduct, including compliance with applicable laws,
regulations, business and ethical standards;
ensures that the financial statements of the Bank and the annual audit thereof are completed within the
stipulated time periods; and
requires Management to constantly monitor performance and report fully and accurately to the Board.
Furthermore, Directors keep themselves updated on an ongoing basis of their statutory and fiduciary duties, the
Bank’s operations and prospects, the general business environment and skills and competences of Senior
Management. The expectations of the Board are also discussed regularly.
Principle 5: Board Meetings
The Board convened ten (10) times during the period under review with attendance of the Directors as follows:
Michael C. Bonello 10
John Bonello 10
Aldo-Joseph Giordano 10
Kimon Palamidis 8
Peter Perotti 10
Joseph Said 9
The dates when the Board meetings are scheduled to be held are determined prior to the beginning of the year in
question. When required, further meetings are scheduled.
Ahead of Board meetings an agenda and supporting documentation are made available to all Directors. Other than in
the case of meetings specially convened to discuss particular matters, generally the agendas of regular Board
meetings set out items of a long-term strategic nature, as well as performance-related issues, together with credit
applications which fall within the discretionary limits of the Board and regular updates from the various functions
of the Bank including the internal control functions. The continuously increasing regulatory requirements also
demand that agendas include several compliance and risk-related matters. During meetings, Directors are
encouraged to present their views pertinent to the subject matter and are given every opportunity to contribute to
the relevant issues on the agenda and to challenge each other and Management as necessary. Following each
meeting, minutes which record attendance as well as all decisions taken are circulated to all Board members.
40
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
Principle 6: Information and Professional Development
Each newly appointed Member of the Board is briefed by the Chief Executive Officer, Senior Management officials,
Heads of Internal Control Functions and any other staff members as necessary, on various aspects of the Bank’s
business and functions, while the Company Secretary provides each newly appointed Director with relevant
corporate governance information.
Board members are reminded that the Company Secretary is at their disposal to provide any advice or assistance that
may be required in the discharge of their duties and responsibilities. The Company Secretary is responsible for
advising the Board, through the Chairman, on all governance matters. The Secretary is responsible for ensuring that
Board procedures are complied with as well as that effective information flows within the Board, its committees and
with Senior Management. The Secretary also facilitates induction and assists with professional development, as
required. Directors are given the opportunity to update and develop their skills and knowledge, particularly through
detailed presentations, briefings and training by senior executives and other relevant Bank officials.
They are invited to attend training sessions organised specifically for the Board and are also informed of and
encouraged to attend externally run seminars throughout their directorship.
Furthermore, Directors have access to the advice and services of any advisors and also the External Auditors. The
External Auditors are invited to attend all Audit & Risk Committee meetings as well as Board meetings, when
required.
The Board continues to be mindful of the crucial importance of recruiting, retaining and motivating quality
management. The ongoing training and development of staff at all levels is considered of the utmost importance and
this also in the light of the need for orderly succession.
Principle 7: Evaluation of the Board’s Performance
An assessment exercise of the Board’s performance was carried out through a ‘self-evaluation’ questionnaire in which
Board members participated. Furthermore, assessment exercises of performance of the committees were also carried
out by virtue of ‘self-evaluation’ questionnaires completed by the members and some regular attendees of the Audit &
Risk Committee, the Assets & Liabilities Committee and the Credit Committee. These exercises also included an
evaluation of the Chairman of each respective Committee. These ‘self-evaluation’ questionnaires were then analysed
by the Suitabilities & Evaluations Committee established by the Board to report to the Board accordingly. This exercise
did not reveal the need for any material changes in the Bank’s governance structures and organisation.
Principle 8: Committees
The Board has appointed the following committees:
Audit & Risk Committee
The primary purpose of the Audit & Risk Committee is to further safeguard the interests of the Bank’s shareholders
and to assist the Directors in conducting their role effectively so that the Bank’s decision-making capability,
oversight of internal control functions and the accuracy of its reporting and financial results are maintained at a
high level at all times. The Committee assists the Board in fulfilling its supervisory and monitoring responsibility
for effective financial reporting, risk management, control and governance and this by, inter alia, reviewing any
financial information, statements and disclosures to be issued, systems of governance, systems of internal control
established by Management and the Board, the risk management processes, the external and internal audit
processes as well as the compliance processes.
The Audit & Risk Committee met six (6) times during the period under review.
The Committee, inter alia, reviews the Bank’s financials regularly with the Chief Financial Officer attending
meetings and explaining the Bank’s position as required. All financial results are reviewed by the Committee and
any recommendations for approval by the Board put forward.
41
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
With respect to Risk Management, the Committee, inter alia, reviews and challenges reports from the Risk
Management Function which enable the Committee (and the Board) to consider the process of risk identification,
management and mitigation, to assess the risks involved in the Bank’s business and to understand how they are
controlled and monitored by Management. The Committee also makes recommendations to the Board on the
Bank’s overall current and future risk appetite and strategy and assists the Board in overseeing the implementation
of that strategy by Management. Compliance Risk being one of the Bank’s main risks is also overseen by virtue of
regular reporting to the Committee by both the regulatory compliance and financial crime compliance functions.
The Committee examines and endorses material regulatory submissions prior to their presentation to the Board
for approval, including the Internal Capital Adequacy Assessment Process (ICAAP) and the Internal Liquidity
Adequacy Assessment Process (ILAAP). In doing so, it satisfies itself as to the completeness of these submissions
and their alignment with the Bank’s Risk Appetite.
The Committee also oversees the Internal Audit Function by, inter alia, reviewing internal audit reports and
overseeing the drawing up and implementation of documents such as the Internal Audit Charter, Internal Audit
Strategy and Audit Plan ensuring that it considers effectively the areas set out in the audit universe.
The Committee also oversees and monitors the effectiveness and independence of the Heads of Internal Control
Functions, including the Head of Internal Audit, the Chief Risk Officer, the Compliance Officer and the Money
Laundering & Reporting Officer, as well as the composition and performance of the respective functions, ensuring
that they continue to remain effective and robust, independent from the business and are adequately resourced.
The Audit & Risk Committee is also tasked with reviewing and overseeing the external auditor’s independence and
objectivity, as well as assessing the quality and effectiveness of the audit, taking into account applicable
professional standards, regulatory obligations, and other relevant requirements. In addition to reviewing the
external audit plan and other reports issued by the external auditor, the Committee also considers any proposed
non-audit services to ensure that these do not compromise the auditor’s independence or objectivity.
The Committee also reviews related party transactions to ensure that they are conducted on an arm’s length basis
and obtains adequate assurance that the Bank is complying with the relevant requirements set out in the
applicable Capital Markets Rules. Non-performing loans (NPLs) are also closely monitored by the Committee as
part of its ongoing oversight responsibilities.
During the year under review, the Audit & Risk Committee was composed of four (4) non-executive Board
members: Michael C. Bonello, Aldo-Joseph Giordano, Kimon Palamidis and Peter Perotti in accordance with the
Audit & Risk Committee’s Terms of Reference.
Kimon Palamidis is the Chairman of this Committee and is considered by the Board to be independent as explained
earlier on in this statement. Together with other independent members, he is also competent in accounting and /
or auditing in terms of the Capital Markets Rules. The Bank’s Head of Internal Audit and Chief Risk Officer attend
meetings of the Audit & Risk Committee. The Bank’s External Auditors and members of Senior Management and
others, including, inter alia, the Chief Executive Officer, the two Deputy Chief Executive Officers, the Chief Financial
Officer, and the Compliance Officer and Money Laundering Reporting Officer, are also invited to attend meetings
for certain agenda items or discussions as is deemed necessary by the Committee. The Company Secretary acts as
Secretary to the Audit & Risk Committee.
Assets & Liabilities Committee (ALCO)
Membership of this Committee is made up of a number of Chief Officers and senior officers, including from the
Finance and Treasury departments and the Corporate Advisory & Research and Asset and Fund Management
functions. The Chief Executive Officer chairs the ALCO whose main objective is to manage risks within approved
limits at the same time as maximising returns by efficient and judicious management of the Bank’s assets and
liabilities. The Chief Risk Officer is also invited to attend meetings. A Secretary is appointed by the Committee.
42
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
Credit Committee
The Credit Committee is responsible for considering and approving credit applications within delegated limits of
authority. It is composed of a number of management Chief Officers and senior officers. The Chief Executive Officer
chairs this Committee and a Secretary is appointed by the Committee.
Suitabilities & Evaluations Committee
The Suitabilities & Evaluations Committee is entrusted with the responsibility of conducting suitability assessments
in respect of nominated and existing Directors, Key Function Holders, and any other individuals as may be required
in terms of applicable regulatory or internal governance requirements. In discharging this function, the Committee
ensures that such individuals possess the requisite integrity, competence, experience, and time commitment
necessary for the proper discharge of their respective roles and responsibilities.
The Committee is also responsible for overseeing the annual performance evaluation of the Board of Directors
and its committees. Following the completion of the formal self-evaluation process undertaken by Board and
committee members, the Committee reviews the outcomes of such assessments, identifies areas for
enhancement, and makes appropriate recommendations aimed at strengthening overall Board effectiveness and
governance standards.
The Committee is also tasked with overseeing and implementing the Bank’s Succession Policy for the Board of
Directors and Key Function Holders, and with making such recommendations to the Board of Directors as may be
necessary to ensure effective governance, continuity, and compliance with prevailing regulatory standards.
Succession planning for both the Board of Directors and Key Function Holders forms an integral part of the
Committee’s mandate. In this regard, the Committee, together with the Board of Directors, considers succession
matters on an ongoing basis, ensuring continuity of leadership and the orderly transition of responsibilities.
Appropriate succession measures are identified and recommended for implementation in line with the Bank’s
strategic objectives and regulatory expectations.
Furthermore, where deemed appropriate, the Board of Directors delegates specific matters to the Suitabilities &
Evaluations Committee for its consideration and recommendation, such as matters relating to remuneration. In
carrying out its duties, the Committee remains guided at all times by applicable laws, rules, regulations, and
relevant governance guidelines.
The Chairman of the Committee, Peter Perotti, is an independent non-executive Director and Committee member
and the Company Secretary acts as Secretary.
Remuneration Committee
The functions of the Remuneration Committee by the Board of Directors in view of the fact that the remuneration
of Directors for the holding of their office on the Board is not performance-related. The Board, at times, delegates
some remuneration-related tasks to the Audit & Risk Committee and Suitabilities & Evaluations Committee.
A separate ‘Remuneration Report’ features on page 48 of this Annual Report in compliance with the Principles.
Principle 9 and 10: Relations with Shareholders and Markets and Institutional Shareholders
The Bank fully appreciates the importance of maintaining open lines of communication with shareholders, the
markets and institutional shareholders. The Board, in this regard, considers that throughout the period under
review the Bank has continued to communicate appropriately by means of regular company announcements and
press releases and its general meetings. The Office of the Company Secretary also continues to facilitate effective
communication between the Bank and its shareholders. The publication of the Bank’s Corporate Calendar, while
containing dates which could be subject to change, also serves to further enhance transparency, investor relations
and market preparedness.
The Bank also communicates with its shareholders with respect to its General Meetings. The documentation
relative to General Meetings is sent to all shareholders at least twenty-one (21) days prior to the holding of the
Meeting.
43
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
The Bank’s website (www.lombardmalta.com), contains information about the Bank and its business and is
updated regularly.
It is therefore the Bank’s policy:
to publish information that can have a significant effect on the Bank’s share price through the Malta Stock
Exchange and on the Bank’s website;
to make other published information available to the public on the Bank’s website;
to strive for open, transparent communications;
to ensure continuity and high quality in the information disclosed; and
to be accessible to all stakeholders.
Minority shareholders are entitled to call special meetings should a minimum threshold of share ownership be
established in accordance with the Bank’s Memorandum and Articles of Association. Furthermore, minority
shareholders may formally present an issue to the Board if they own the predefined minimum threshold of shares.
Principle 11: Conflicts of Interest
The Board of Directors recognises that its members have a primary responsibility to always act in the interest of
the Bank and its shareholders as a whole, irrespective of who appointed them to the Board.
Strict policies are in place, particularly in the Bank’s Articles of Association and Board of Directors’ Charter, to
enable the management of conflict of interest, both actual as well as potential, should the occasion arise.
In addition, the Bank’s Policy on the Prevention of Market Abuse was adopted and implemented in conformity
with Market Abuse laws and regulations. Directors and staff members are, upon appointment, and also regularly
reminded of their obligations when dealing in securities of the Bank and other scheduled financial instruments.
Joseph Said, who is a Director of the Bank, holds a directorship in two companies that have a shareholding in the
Group, as disclosed in the Directors’ Report.
In addition, the Board also has a Conflicts of Interest Policy which serves to ensure, inter alia, that the Bank has in
place the relative arrangements, processes and procedures to identify, assess, document, escalate, manage,
mitigate and prevent conflicts of interest as necessary and as applicable, both at an institutional level, as well as
at the level of its staff members.
Principle 12: Corporate Social Responsibility
The Bank recognises the importance of adhering to established principles of corporate social responsibility and
remains fully committed to conducting its operations in an ethical and responsible manner at all times. It strives
to contribute positively to economic and social development, while enhancing the quality of life of its staff
members and their families.
This commitment extends to key areas including data privacy and protection, diversity and inclusion, talent
management, customer relationships, innovation, community and employee engagement, and responsible
lending practices.
The Bank implements these principles of corporate social responsibility through strong governance and risk
management practices.
It extends support to various initiatives and projects together with direct community involvement. The Bank is also
sensitive to the fact that success in these areas requires investment in the community, customers and staff
members while not overlooking the impact that its activities may have on the environment.
44
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
C.
NON-COMPLIANCE WITH THE CODE
Principle 8a: (Remuneration Committee)
The Board did not establish a Remuneration Committee as specified in Code Provision 8.A.1. In terms of Code
Provision 8.A.2 of the Principles, given that the remuneration of Directors for the holding of their office on the
Board is not performance-related, the functions of the Remuneration Committee are carried out by the Board of
Directors. The Board, at times, delegates some remuneration-related tasks to the Audit & Risk Committee and
Suitabilities & Evaluation Committee.
Principle 8b: (Nomination Committee)
A Nomination Committee has not been set up since the appointment of Directors to the Board is a matter that is
reserved entirely to the Bank’s shareholders in terms of the Memorandum and Articles of Association.
In this connection every member of the Bank holding in the aggregate at least fifteen percent (15%) of the ordinary
issued share capital of the Bank shall be entitled to appoint one (1) Director for each and every fifteen percent
(15%) of the ordinary issued share capital owned by that member.
Any fractional shareholding in excess of fifteen percent (15%) not applied in appointing such a Director or
Directors, and only that fraction, shall be entitled to vote in the election of the remaining Directors together with
the remaining body of shareholders. These are entitled to appoint the remaining Board members in accordance
with the provisions of the Bank’s statute.
This notwithstanding, in light of regulatory requirements, the Suitabilities & Evaluations Committee referred to
above was set up specifically to carry out suitability assessments of nominated and existing Directors, key function
holders or any other persons as may be required and also to assess the Board’s annual performance and that of
its committees. This Committee remains guided by applicable laws, rules, regulations and guidelines. This
Committee is also tasked with implementing the Bank’s Succession Policy for the Board of Directors and Key
Function Holders and to make any appropriate recommendations to the Board of Directors and also to carry out
other duties as the Board of Directors may deem necessary, such as remuneration-related matters.
Principle 9: (Code Provision 9.3)
There are no procedures disclosed in the Bank’s Memorandum or Articles as recommended in Code Provision 9.3 to
resolve conflicts between minority shareholders and controlling shareholders.
D.
INTERNAL CONTROL (CAPITAL MARKETS RULE 5.97.4)
The Board is ultimately responsible for the Bank’s internal controls as well as their effectiveness, while authority to
operate the Bank is delegated to the Chief Executive Officer. The Bank’s system of internal controls is designed to
manage all the risks in the most appropriate manner. Such controls, however, cannot completely eliminate the
possibility of material error or fraud. The Board, therefore, assumes responsibility for executing the four basic roles
of corporate governance, i.e. accountability, monitoring, strategy formulation and policy development.
In summary, the Board is therefore responsible for:
reviewing the Bank’s strategy on an ongoing basis as well as setting the appropriate business objectives in
order to enhance value for all stakeholders;
appointing and monitoring the Chief Executive Officer whose function it is to manage the operations of the
Bank; and
identifying and ensuring that significant risks are managed satisfactorily.
Given the fiduciary responsibility involved, the Board of Directors also sets high business and ethical standards for
adoption right across the organisation.
45
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
The Board upholds a policy of clear demarcation between its role and responsibilities and those of Management. It
has defined the level of authority that it retains over strategy formulation and policy determination together with
delegated authority and has vested accountability for the Bank’s day-to-day business in the Assets & Liabilities
Committee, Credit Committee and in the management team comprising of the:
•
Chief Executive Officer;
•
Deputy Chief Executive Officers; and
•
Chief Officers and other officers.
The Board frequently participates in asset allocation decisions as well as credit proposals above a certain
threshold, after the appropriate recommendations have been made.
The Bank’s internal control framework covering all the Bank’s activities ensures:
•
effective and efficient operations and prudent conduct of business;
•
proper risk management;
•
reliable financial and non-financial information; and
•
compliance with all internal policies, processes and procedures, laws, rules and regulations.
To this effect, a three-lines-of-defence model has been adopted by the Bank as follows:
•
First line of defence - Business Units Operations: This is provided by front line staff members and business
unit management. The internal controls and systems, the culture and control environment developed and
implemented by these business units play a vital role in anticipating and managing operational risks.
•
Second line of defence - Risk Management & Compliance: The Bank maintains permanent and effective
compliance and risk management functions which report directly to the Audit & Risk Committee and Board of
Directors. The Compliance Function identifies, assesses and manages compliance risk. The Risk Management
Function is responsible for overseeing the Bank’s activities and for identifying, monitoring, controlling and
reporting such risk. Through the Bank’s Risk Management Framework, an appropriate balance is struck
between sound practices and profitability, by applying strict internal controls and discretionary limits, and
optimising the returns thereof, in line with the Bank’s risk appetite.
•
Third line of defence - Internal Audit: This is an integral part of the Bank’s control environment and provides
Management and the Audit & Risk Committee and Board of Directors with an independent and objective
review of the Bank’s business activities and support functions.
E.
GENERAL MEETINGS (CAPITAL MARKETS RULE 5.97.6)
General meetings are called by giving at least twenty-one (21) days’ notice and conducted in accordance with the
provisions contained in the Bank’s Articles of Association.
The ‘Ordinary Business’ which is dealt with at the Annual General Meeting consists of the adoption of the annual
financial statements, declaration of a dividend, appointment of Board members, appointment of auditors and the
fixing of their remuneration together with the voting of remuneration to the Directors for the holding of their
office. All other business shall be deemed ‘Special Business’.
All shareholders registered in the shareholders’ register on record date as defined in the Capital Markets Rules
have the right to attend, participate and vote in the general meeting.
46
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statement of Compliance with the Principles of Good Corporate Governance (continued)
A shareholder or shareholders holding not less than five per cent (5%) of the voting issued share capital of the Bank
may: (i) request the Bank to include items on the agenda and; (ii) table draft resolutions for items included in the
agenda of a general meeting. Such requests shall be submitted to the Bank at least forty-six (46) days before the
date set for the general meeting.
Every shareholder shall be entitled to appoint only one (1) person to act as proxy holder to attend and vote at a
general meeting instead of him. The proxy holder shall enjoy the same rights to speak and ask questions in the
general meeting as those to which the member thus represented would be entitled.
Signed on behalf of the Bank's Board of Directors on 24 April 2026 by Michael C. Bonello (Chairman) and Joseph
Said (Director and Chief Executive Officer) as per the Directors' Declaration on ESEF Annual Financial Report
submitted in conjunction with the Annual Report and Financial Statements 2025.
47
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Remuneration Report
As outlined in the Statement of Compliance with the Code of Principles of Good Corporate Governance, and in
accordance with the Code of Principles of Good Corporate Governance contained in the Capital Markets Rules
issued by the Malta Financial Services Authority, the Board of Directors assumes the role and responsibilities of a
Remuneration Committee. This approach is adopted on the basis that Directors’ remuneration for their service on
the Board is not linked to performance and does not comprise share options, pension benefits, profit-sharing
schemes, or any other emoluments contingent upon the Bank’s performance. Among the obligations set out in
the Capital Markets Rules, the Board, where applicable, performs the principal responsibilities contemplated in
the Supporting Principles under Principle 8A of the Code of Principles of Good Corporate Governance. The Board,
at times, delegates some remuneration-related tasks to the Audit & Risk Committee and Suitabilities & Evaluations
Committee. This Remuneration Report was approved by the Board of Directors at the Board Meeting held on 24
April 2026.
Directors
The Bank’s Remuneration Policy for Directors is drawn up in terms of the Capital Markets Rule 12.26A et seq and
sets out the Bank’s remuneration policy with respect to its Directors, Chief Executive Officer and Deputy Chief
Executive Officers with their remuneration being paid in accordance with the same. During 2023, this Policy was
revised as approved by the Annual General Meeting on 22 June 2023 (Refer to
https://www.lombardmalta.com/annual-general-meeting-2023).
This Policy is reviewed by the Board annually and, in terms of the Capital Markets Rules, is required to be put to
a vote by the General Meeting at every material change and, in any case, at least every four years. No changes are
being proposed for approval at the 2026 Annual General Meeting.
In terms of the Bank’s Memorandum and Articles of Association, the Bank’s shareholders determine the maximum
annual aggregate remuneration of the Directors. The maximum amount is determined by resolution at each
Annual General Meeting of the Bank. The aggregate amount fixed for this purpose during the 2025 Annual General
Meeting was one hundred and ninety thousand euro (€190,000).
As per policy, members of the Board, in their role as directors, only receive a fixed fee, the amount of which is
determined on the basis of market practice as well as the Bank’s size and internal organisation and the nature,
scale and complexity of its activities and business model.
The fees paid to Directors for the holding of their office during 2025 amounted to € 135,000 (2024: €102,173). This
amount is within the limit of €190,000 approved by the Annual General Meeting of 25 June 2025.
It is confirmed that none of the Directors in their role as directors of the Bank are entitled to profit-sharing, share
options, pension benefits, variable remuneration, any other remuneration or related payments. Only one of the
Directors has a service contract with the Bank, which Director is the only Executive Director and is the CEO Joseph
Said.
48
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Remuneration Report (continued)
In terms of Code Provisions 8.A.5 of the Malta Financial Services Authority Capital Markets Rules, the total
emoluments received by Directors relative to their directorship for the financial year 2025, as compared to 2024
and 2023, are specified below. The late Graham A. Fairclough is being included for comparative reporting
purposes.
€
€
€
2025
2024
2023
Michael C. Bonello (Chairman)
37,500
30,000
30,000
John Bonello*
19,500
15,000
2,794
Aldo-Joseph Giordano**
19,500
9,115
N/A
Joseph Said
19,500
15,000
15,000
Peter Perotti
19,500
15,000
15,000
Kimon Palamidis
19,500
15,000
15,000
Graham A. Fairclough***
N/A
3,058
15,000
Total
135,000
102,173
92,794
* John Bonello was appointed as a non-executive director of the Bank with effect from 23 October 2023.
** Aldo-Joseph Giordano was appointed as a non-executive director of the Bank with effect from 21 May 2024.
*** The late Graham A. Fairclough resigned from his position as non-executive director with effect from 13 March 2024.
In determining the remuneration of the CEO and Deputy CEOs, the Board of Directors considers factors which
include among others, professional qualifications, experience, initiative, acumen, number of years of service, the
design and implementation of the overall business strategy, objectives and risk appetite at Bank as well as Group
level. The remuneration of the CEO and Deputy CEOs is fixed with no variable remuneration other than a
discretionary annual bonus which may be awarded as set out in the above-mentioned Policy.
The CEO and Deputy CEOs are also entitled to the use of a company car, health insurance and a telecommunication
allowance.
In a previous financial year, the Bank had decided to grant the CEO an ex-gratia gratuity upon his eventual
retirement, which amount was fully provided for and reflected in the financial statements of previous years.
In terms of Code Provision 8.A.5 of the Capital Markets Rules, during financial year 2025, the total emoluments
received from the Group by the Executive Director amounted to €418,013 (2024: €400,513; 2023: €385,513), split
as follows:
€
€
€
2025
2024
2023
Gross annual, fixed salary & fixed role-based allowances
380,513
367,513
352,513
Director Fees - Lombard Bank Malta p.l.c.
19,500
15,000
15,000
Chairman / Director Fees MaltaPost p.l.c.
18,000
18,000
18,000
Further remuneration for 2025 received by two Non-Executive Directors from other companies within the Group
amounted to €7,500, split as follows:
€
€
€
2025
2024
2023
Director Fees - MaltaPost p.l.c.
N/A
1,681
8,850
Company Secretary Fees - MaltaPost p.l.c.
N/A
791
4,000
Director Fees - Lombard Select SICAV p.l.c.
N/A
1,973
10,000
€
€
€
2025
2024
2023
Director Fees - Lombard Select SICAV p.l.c.
€7,500
10,000
10,000
There is no formal provision for the reclamation of variable remuneration.
49
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Remuneration Report (continued)
During the financial year 2025, the total emoluments received by the Deputy Chief Executive Officers, from the
Group amounted to €392,026 split as follows:
€
€
€
2025
2024
2023
Gross annual & fixed salary
187,513
179,113
99,924*
Director Fees – MaltaPost p.l.c.
8,500
3,258**
N/A
€
€
€
2025
2024
2023
Gross annual & fixed salary
187,513
179,113
99,924*
Director Fees – MaltaPost p.l.c.
8,500
8,500
8,850
* From date of appointment on the 1 April 2023.
** From date of appointment on the 14 August 2024.
The above remuneration levels for 2025 comply with the provisions of the approved Remuneration Policy for
Directors and take into consideration the interests of all the Bank's stakeholders together with the external context
and there were no deviations from the procedure for the implementation of the said Policy.
Senior Management
Senior Management for the purposes of this section of the Remuneration Report, refers to the Chief Officers of
the Bank, excluding the Chief Executive Officer and Deputy Chief Executive Officers.
The Board of Directors is satisfied that the remuneration packages offered to Senior Management continue to
ensure that the Bank attracts and retains management staff with the necessary qualities and skills. The Bank’s
policy is to engage Senior Management on the basis of indefinite contracts of employment, following the
successful completion of a probationary period. The terms and conditions of employment for Senior Management
are set out in the respective employment contracts. Upon completion of probation, the applicable notice period
is that prescribed by the relevant legislation.
Share options, share incentive schemes and profit sharing do not feature in the Bank’s Remuneration Policy, and
the individual contracts of employment of Senior Management do not contain provisions for termination
payments and / or other payments linked to early termination other than as determined by the law.
From time to time the Board of Directors of the Bank approves the allocation of a financial contribution towards
retirement gratuities that it may decide to grant and contribute towards a staff pension fund that may be formally
established in the future. Gratuities that it may make, on an ex-gratia basis, to its employees are made accordingly.
Amounts contributed for this purpose in respect of 2025 amounted to €100,000 (2024: €100,000). Once
contributed, these amounts are held in a separate bank account that is not controlled by the Bank and are
therefore not included in the Bank’s financial statements. Amounts intended as contributions to a prospective
pension fund will be governed by rules to be determined in accordance with the applicable legislation.
No other pension benefits are currently payable by the Bank.
Senior Management staff are eligible for annual salary increases, which are not directly performance-related. The
remuneration of Senior Management staff members is determined also by the role, responsibilities covered,
market practice, seniority, experience and qualifications. Annual bonuses are paid to Senior Management staff
members according to individual overall performance during the previous financial year. Bonus payments do not
exceed 100% of the fixed component of the total remuneration for each individual.
Non-cash benefits include private health care insurance as well as death-in-service benefits and personal accident
insurance cover.
50
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Remuneration Report (continued)
Total emoluments received by Senior Management, excluding the CEO and Deputy CEOs, during the period under
review are as detailed below, in terms of Code Provision 8.A.5.
Fixed Remuneration
Variable Remuneration
Share Options
Others
2025
2024
2023
2025
2024
2023
2025
2024
2023
2025
2024
2023
€
€
€
€
€
€
€
€
€
€
€
€
525,565
481,563
478,146
85,000
74,000
116,000
-
-
-
-
-
-
For other employees, fixed pay is determined by a Collective Agreement and annual bonuses are differentiated by
individual performance and grade.
No changes were effected to the Bank’s Remuneration Policy during the financial year under review other than
minor changes for further alignment with regulatory requirements. Furthermore, the Bank does not plan to effect
changes in its Remuneration Policy in the forthcoming financial year, unless required to do so in terms of any
regulatory obligations or otherwise.
In terms of Chapter 12 of the Capital Markets Rules, this Remuneration Report is being put to an advisory vote at
the 2026 Annual General Meeting in accordance with the requirements of the Capital Markets Rule 12.26 L.
The Directors’ Remuneration Report for 2024 was approved at the Annual General Meeting held on 25 June 2025.
There were no issues raised on the Report during the said Annual General Meeting.
Other information on remuneration in terms of Appendix 12.1 of the Capital Markets Rules
In terms of the requirements within Appendix 12.1 of the Capital Markets Rules, the following tables present the
annual change regarding each individual director’s remuneration, the performance of the Bank, and of average
remuneration on a full-time equivalent basis of employees of the Bank, other than Directors over the three most
recent financial years. The late Graham A. Fairclough is being included for comparative reporting purposes.
2025
2024
2023
% change
% change
€
€
€
(2025-2024)
(2024-2023)
Michael C. Bonello (Chairman)
37,500
30,000
30,000
25%
0%
John Bonello*
19,500
15,000
2,794
30%
N/A
Aldo-Joseph Giordano**
19,500
9,115
N/A
N/A
N/A
Joseph Said
19,500
15,000
15,000
30%
0%
Kimon Palamidis
19,500
15,000
15,000
30%
0%
Peter Perotti
19,500
15,000
15,000
30%
0%
Graham A. Fairclough***
N/A
3,058
15,000
N/A
N/A
Total
135,000
102,173
92,794
* John Bonello was appointed as a non-executive director of the Bank with effect from 23 October 2023.
** Aldo-Joseph Giordano was appointed as a non-executive director of the Bank with effect from 21 May 2024.
*** The late Graham A. Fairclough resigned from his position as non-executive director with effect from 13 March 2024.
51
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Remuneration Report (continued)
% annual change of the
% annual change of the
% annual change of the
% annual change of the
Bank’s performance
Bank’s performance based
Bank’s performance based
Bank’s performance based
based on profit before tax
on profit before tax
on profit before tax
on profit before tax
(2025-2024)
(2024-2023)
(2023-2022)
(2022-2021)
18%
16%
(52%)
136%
% annual change of the
% annual change of the
% annual change of the
% annual change of the
average remuneration on
average remuneration on
average remuneration on
average remuneration on
a full-
time equivalent
a full-
time equivalent
a full-
time equivalent
a full-
time equivalent
basis of employees of the
basis of employees of the
basis of employees of the
basis of employees of the
Bank other than Directors
Bank other than Directors
Bank other than Directors
Bank other than Directors
(2025-2024)
(2024-2023)
(2023-2022)
(2022-2021)
1%
6%
0%
4%
€'000
2025
2024
% change
Group
Bank
Group
Bank
Group
Bank
Employee remuneration (excluding CEO)
27,918
9,191
26,161
9,145
7%
1%
CEO remuneration
381
381
368
368
4%
4%
Entity’s performance – Profit before tax
23,767
19,061
19,415
16,101
22%
18%
€'000
2024
2023
% change
Group
Bank
Group
Bank
Group
Bank
Employee remuneration (excluding CEO)
26,161
9,145
24,031
8,542
9%
7%
CEO remuneration
368
368
353
353
4%
4%
Entity’s performance – Profit before tax
19,415
16,101
14,527
13,850
34%
16%
The Group’s / Bank’s performance is measured using Profit before tax.
52
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Company Information
Number of shareholders analysed by range:
31 December 2025
31 March 2026
Range
Shareholders
Shares
Shareholders
Shares
1 – 500
118
21,974
118
21,974
501 – 1000
41
33,677
40
32,861
1001 – 5000
403
1,198,980
413
1,227,939
5001 and over
977
153,317,632
966
153,289,489
Total
1,539
154,572,263
1,537
154,572,263
The Bank has one class of shares and each share is entitled to one vote.
BOARD OF DIRECTORS
Michael C. Bonello
Chairman
John Bonello
Aldo-Joseph Giordano
Kimon Palamidis
Peter Perotti
Joseph Said
COMPANY SECRETARY
Helena Said
SENIOR MANAGEMENT
Joseph Said
Chief Executive Officer
Anthony Bezzina
Deputy Chief Executive Officer
Eugenio Farrugia
Deputy Chief Executive Officer
David Attard
Chief Officer - Group Corporate Services
Moira Balzan
Chief Financial Officer
Carlos Camenzuli
Chief Risk Officer
Helena Said
Chief Legal Officer
Anthony Zahra
Chief Information Officer
53
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Company Information (continued)
REGISTERED OFFICE
67 Republic Street, Valletta VLT 1117
Tel: 25581 117
BRANCHES
43, Pitkali Road, Attard ATD 2219 Bertu Fenech Square, Balzan BZN 1409
Tel: 25581 560 Tel: 25581 500
82, St Sebastian Street, Qormi, QRM 2335 198, Naxxar Road, San Gwann SGN 9030
Tel: 25581 360 Tel: 25581 650
4, Fleur-De-Lys Junction, Santa Venera SVR 1587 41, Robert Arrigo Street, Sliema SLM 3174
Tel: 25581 300 Tel: 25581 251
225, Tower Road, Sliema SLM 1601 67, Republic Street, Valletta VLT 1117
Tel: 25581 260 Tel: 25581 100
Ninu Cremona Street, Victoria VCT 2561 19, Sanctuary Street, Zabbar, ZBR 1010
Tel: 25581 600 Tel: 25581 400
13, Gregorio Bonici Square, Zejtun ZTN 1051
Tel: 25581 245
CREDIT
9A St. Fredrick Street, Valletta VLT 1470
Tel: 25581 115
HOME LOANS
4 Main Street, Qormi QRM 1100
Tel: 25581 370
INTERNATIONAL BUSINESS BANKING
Graham Street, Sliema SLM 1711
Tel: 25581 226
LEGAL OFFICE
59 Republic Street, Valletta VLT 1117
Tel: 25581 116
TRADE SERVICES
43, Pitkali Road, Attard ATD 2219
Tel: 25581 576
WEALTH MANAGEMENT
Financial Advice & Stockbroking Services: 225A, Tower Road, Sliema SLM 1601
Tel: 25581 167
Portfolio Management: 225A, Tower Road, Sliema SLM 1601
Tel: 25581 288
Research & Corporate Advisory: 67, Republic Street, Valletta VLT 1117
Tel: 25581 814
54
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Financial Statements
Statements of Financial Position

|  |  | Group |  | Bank
| Notes | 2025 | 2024 | 2025 | 2024
|  | € 000 | € 000 | € 000 | € 000
Assets |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 5 | 182,564 | 154,480 | 181,858 | 153,361
Cheques in course of collection |  | 150 | 266 | 150 | 266
Financial investments | 6 | 213,136 | 208,110 | 211,126 | 205,978
Loans and advances to banks | 7 | 62,423 | 46,189 | 55,936 | 40,964
Loans and advances to customers | 8 | 929,111 | 872,682 | 929,120 | 872,690
Trade and other receivables | 16 | 16,427 | 12,979 | 7,238 | 3,443
Accrued income and other assets | 17 | 5,727 | 5,435 | 4,593 | 4,612
Assets classified as held for sale | 8 | 703 | 703 | 703 | 703
Current tax assets |  | 291 | - | 288 | -
Inventories | 15 | 1,149 | 1,731 | 291 | 878
Investments in subsidiaries | 9 | - | - | 17,926 | 17,927
Investments in associates | 10 | 4,714 | 4,250 | 503 | 1,645
Intangible assets | 11 | 2,136 | 2,186 | 3 | 10
Property, plant and equipment | 12 | 72,635 | 71,450 | 43,670 | 44,798
Deferred tax assets | 14 | 6,455 | 7,961 | 6,248 | 7,772
Total assets |  | 1,497,621 | 1,388,422 | 1,459,653 | 1,355,047

55
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Financial Position (continued)
Group
Bank

| Notes | 2025 | 2024 | 2025 | 2024
|  | € 000 | € 000 | € 000 | € 000
Equity and Liabilities |  |  |  |  |
Equity |  |  |  |  |
Share capital | 18 | 19,322 | 19,322 | 19,322 | 19,322
Share premium | 19 | 56,534 | 56,534 | 56,534 | 56,534
Revaluation and other reserves | 19 | 13,354 | 11,010 | 9,404 | 7,048
Retained earnings |  | 134,506 | 122,582 | 129,910 | 119,917
Equity attributable to equity holders of the Bank |  | 223,716 | 209,448 | 215,170 | 202,821
Non-controlling interests |  | 10,144 | 9,473 | - | -
Total equity |  | 233,860 | 218,921 | 215,170 | 202,821
Liabilities |  |  |  |  |
Amounts owed to banks | 20 | 345 | 438 | 345 | 438
Amounts owed to customers | 21 | 1,207,256 | 1,120,006 | 1,210,294 | 1,121,816
Current tax liabilities |  | 2,401 | 1,256 | - | 597
Accruals and deferred income | 24 | 15,825 | 13,847 | 11,468 | 9,643
Other liabilities | 23 | 30,174 | 26,497 | 17,101 | 14,880
Provisions for liabilities and other charges | 22 | 2,962 | 2,633 | 2,023 | 1,573
Deferred tax liabilities | 14 | 4,798 | 4,824 | 3,252 | 3,279
Total liabilities |  | 1,263,761 | 1,169,501 | 1,244,483 | 1,152,226
Total equity and liabilities |  | 1,497,621 | 1,388,422 | 1,459,653 | 1,355,047

Memorandum items |  |  |  |  |
Contingent liabilities | 25 | 22,055 | 19,827 | 22,055 | 19,827
Commitments | 25 | 356,458 | 292,036 | 356,852 | 292,833

The notes on pages 64 to 190 are an integral part of these financial statements.
These financial statements on pages 55 to 190 were approved and authorised for issue by the Board of Directors on 24 April
2026. The financial statements were signed on behalf of the Bank's Board of Directors by Michael C. Bonello (Chairman) and
Joseph Said (Director and Chief Executive Officer) as per the Directors' Declaration on ESEF Annual Financial Report submitted
in conjunction with the Annual Report and Financial Statements 2025.
56
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Income Statements
Group
Bank

| Notes | 2025 | 2024 | 2025 | 2024
|  | € 000 | € 000 | € 000 | € 000
Interest receivable and similar income |  |  |  |  |
- on loans and advances, balances with Central |  |  |  |  |
Bank of Malta and treasury bills | 26 | 37,254 | 35,446 | 37,189 | 35,374
- on debt and other fixed income instruments | 26 | 2,780 | 2,697 | 2,722 | 2,627
Interest expense | 26 | (13,906) | (10,883) | (13,805) | (10,837)
Net interest income |  | 26,128 | 27,260 | 26,106 | 27,164
Fee and commission income | 27 | 6,666 | 6,642 | 5,686 | 5,610
Fee and commission expense | 27 | (293) | (269) | (293) | (269)
Net fee and commission income |  | 6,373 | 6,373 | 5,393 | 5,341
Postal sales and other revenues | 28 | 42,649 | 39,183 | 1,520 | 500
Dividend income | 29 | 425 | 465 | 5,229 | 1,910
Net trading income | 30 | 612 | 628 | 579 | 665
Other operating income |  | 312 | 386 | 122 | 18
Operating income |  | 76,499 | 74,295 | 38,949 | 35,598
Employee compensation and benefits | 31 | (28,299) | (26,529) | (9,572) | (9,513)
Other operating costs | 33 | (24,584) | (24,431) | (9,672) | (8,707)
Depreciation and amortisation | 11,12 | (3,588) | (3,624) | (1,160) | (1,166)
Net movement in provisions for liabilities and other charges | 22 | (527) | (1,181) | (501) | (1,150)
Net movement in expected credit losses | 32 | 960 | 927 | 1,017 | 1,039
Operating profit |  | 20,461 | 19,457 | 19,061 | 16,101
Share of profit/(loss) attributable to investment |  |  |  |  |
accounted for using the equity method, net of tax | 10 | 3,306 | (42) | - | -
Profit before taxation |  | 23,767 | 19,415 | 19,061 | 16,101
Income tax expense | 34 | (7,184) | (7,257) | (5,610) | (5,877)
Profit for the year |  | 16,583 | 12,158 | 13,451 | 10,224
Attributable to: |  |  |  |  |
Equity holders of the Bank |  | 15,382 | 11,293 |  |
Non-controlling interests |  | 1,201 | 865 |  |
Profit for the year |  | 16,583 | 12,158 |  |
Earnings per share | 35 | €0.10 | €0.07 |  |
The notes on pages 64 to 190 are an integral part of these financial statements. |  |  |  |  |

57
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Comprehensive Income
Group
Bank
Notes
2025
2024
2025

|  |  |  |  | 2024
|  | € 000 | € 000 | € 000 | € 000
Profit for the year |  | 16,583 | 12,158 | 13,451 | 10,224
Other comprehensive income |  |  |  |  |
Items that may be subsequently reclassified to profit |  |  |  |  |
or loss |  |  |  |  |
Investments in debt securities measured at FVOCI |  |  |  |  |
Net gains from changes in fair value, before tax | 6 | 3,235 | 8,946 | 3,257 | 8,858
Net movements in credit losses released to profit or loss, before tax |  | (5) | (247) | (5) | (247)
Income taxes relating to these items | 34 | (1,138) | (3,014) | (1,138) | (3,014)
Items that will not be subsequently reclassified to profit or loss |  |  |  |  |
Net gains/(losses) from changes in fair value of investments in equity instruments designated at FVOCI, before tax | 6 | 257 | (74) | 257 | (74)
Remeasurements of defined benefit obligations, before tax |  | 9 | (84) | - | -
Surplus arising on revaluation of land and buildings, before tax | 12 | - | 5,058 | - | 3,162
Other items |  | 102 | - | 102 | -
Income taxes relating to these items | 34 | (161) | (670) | (159) | (453)
Other comprehensive income for the year, net of income tax |  | 2,299 | 9,915 | 2,314 | 8,232
Total comprehensive income for the year, net of income tax |  | 18,882 | 22,073 | 15,765 | 18,456
Attributable to: |  |  |  |  |
Equity holders of the Bank |  | 17,684 | 20,747 |  |
Non-controlling interests |  | 1,198 | 1,326 |  |
Total comprehensive income for the year, net of income tax |  | 18,882 | 22,073 |  |
The notes on pages 64 to 190 are an integral part of these financial statements. |  |  |  |  |

58
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Changes in Equity
Group

|  |  |  |  | Attributable to equity holders of the Bank |  |  |
|  |  |  | Revaluation |  |  | Non- |
|  | Share | Share | and other | Retained |  | controlling | Total
|  | capital | premium | reserves | earnings | Total | interests | Equity
| Notes | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
At 1 January 2024 |  | 19,322 | 56,534 | 1,420 | 113,107 | 190,383 | 8,409 | 198,792
Comprehensive income |  |  |  |  |  |  |  |
Profit for the year |  | - | - | - | 11,293 | 11,293 | 865 | 12,158
Other comprehensive income |  |  |  |  |  |  |  |
Surplus on revaluation of land and buildings |  | - | - | 3,882 | - | 3,882 | 451 | 4,333
Fair valuation of financial assets measured at FVOCI: |  |  |  |  |  |  |  |
Net movements in fair value arising during the year |  | - | - | 5,773 | - | 5,773 | 25 | 5,798
Reclassification adjustments: |  |  |  |  |  |  |  |
- net movement attributable to changes in credit risk |  | - | - | (161) | - | (161) | - | (161)
- net amounts reclassified to retained earnings on disposal | 6 | - | - | (140) | 140 | - | - | -
Remeasurements of defined benefit obligations |  | - | - | (40) | - | (40) | (15) | (55)
Total other comprehensive income for the year |  | - | - | 9,314 | 140 | 9,454 | 461 | 9,915
Total comprehensive income for the year |  | - | - | 9,314 | 11,433 | 20,747 | 1,326 | 22,073
Transfers and other movements | 19 | - | - | 253 | (253) | - | - | -
Transactions with owners, recorded directly in equity |  |  |  |  |  |  |  |
Distributions to owners |  |  |  |  |  |  |  |
Dividends to equity holders | 36 | - | - | - | (1,638) | (1,638) | (306) | (1,944)
Changes in ownership interests in subsidiaries that do not result in loss of control |  |  |  |  |  |  |  |
Impacts of change in non-controlling interests in subsidiary |  | - | - | 23 | (67) | (44) | 44 | -
Total transactions with owners |  | - | - | 23 | (1,705) | (1,682) | (262) | (1,944)
At 31 December 2024 |  | 19,322 | 56,534 | 11,010 | 122,582 | 209,448 | 9,473 | 218,921

The notes on pages 64 to 190 are an integral part of these financial statements.
59
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Changes in Equity (continued)
Group
Attributable to equity holders of the Bank

|  |  |  | Revaluation |  |  | Non- |
|  | Share | Share | and other | Retained |  | controlling | Total
|  | capital | premium | reserves | earnings | Total | interests | Equity
| Notes | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
At 1 January 2025 |  | 19,322 | 56,534 | 11,010 | 122,582 | 209,448 | 9,473 | 218,921
Comprehensive income |  |  |  |  |  |  |  |
Profit for the year |  | - | - | - | 15,382 | 15,382 | 1,201 | 16,583
Other comprehensive income |  |  |  |  |  |  |  |
Fair valuation of financial assets measured at FVOCI: |  |  |  |  |  |  |  |
Net movements in fair value arising during the year |  | - | - | 2,198 | - | 2,198 | (5) | 2,193
Reclassification adjustment: |  |  |  |  |  |  |  |
- net movement attributable to changes in credit risk |  | - | - | (3) | - | (3) | - | (3)
Realisation of reserve upon disposal of revalued property |  | - | - | (123) | 123 | - | - | -
Remeasurements of defined benefit obligations |  | - | - | 5 | - | 5 | 2 | 7
Other items |  | - | - | - | 102 | 102 | - | 102
Total other comprehensive income for the year |  | - | - | 2,077 | 225 | 2,302 | (3) | 2,299
Total comprehensive income for the year |  | - | - | 2,077 | 15,607 | 17,684 | 1,198 | 18,882
Transfers and other movements | 19 | - | - | 267 | (267) | - | - | -
Transactions with owners, recorded directly in equity |  |  |  |  |  |  |  |
Distributions to owners |  |  |  |  |  |  |  |
Dividends to equity holders | 36 | - | - | - | (3,416) | (3,416) | (527) | (3,943)
Total transactions with owners |  | - | - | - | (3,416) | (3,416) | (527) | (3,943)
At 31 December 2025 |  | 19,322 | 56,534 | 13,354 | 134,506 | 223,716 | 10,144 | 233,860
The notes on pages 64 to 190 are an integral part of these financial statements. |  |  |  |  |  |  |  |

60
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Changes in Equity (continued)
Bank
Revaluation
Share
Share
and other
Retained
Total
capital
premium
reserves
earnings
Equity
Notes
€ 000
€ 000
€ 000
€ 000
€ 000
At 1 January 2024
19,322
56,534
(1,297)
111,444
186,003
Comprehensive income
Profit for the year
-
-
-
10,224
10,224
Other comprehensive income
Surplus on revaluation of land and buildings
-
-
2,683
-
2,683
Fair valuation of financial assets measured at FVOCI:
Net movements in fair value arising during the year
-
-
5,710
-
5,710
Reclassification adjustments:
- net movement attributable to changes in credit risk
-
-
(161)
-
(161)
- net amounts reclassified to retained earnings on disposal
6
-
-
(140)
140
-
Total other comprehensive income for the year
-
-
8,092
140
8,232
Total comprehensive income for the year
-
-
8,092
10,364
18,456
Transfers and other movements
19
-
-
253
(253)
-
Transactions with owners, recorded directly in equity
Distributions to owners
Dividends to equity holders
36
-
-
-
(1,638)
(1,638)
Total transactions with owners
-
-
-
(1,638)
(1,638)
At 31 December 2024
19,322
56,534
7,048
119,917
202,821
The notes on pages 64 to 190 are an integral part of these financial statements.
61
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Changes in Equity (continued)
Bank
Revaluation
Share
Share
and other
Retained
Total
capital
premium
reserves
earnings
Equity
Notes
€ 000
€ 000
€ 000
€ 000
€ 000
At 1 January 2025
19,322
56,534
7,048
119,917
202,821
Comprehensive income
Profit for the year
-
-
-
13,451
13,451
Other comprehensive income
Fair valuation of financial assets measured at FVOCI:
Net movements in fair value arising during the year
-
-
2,215
-
2,215
Reclassification adjustment:
- net movement attributable to changes in credit risk
-
-
(3)
-
(3)
Realisation of reserve upon disposal of revalued property
-
-
(123)
123
-
Other items
-
-
-
102
102
Total other comprehensive income for the year
-
-
2,089
225
2,314
Total comprehensive income for the year
-
-
2,089
13,676
15,765
Transfers and other movements
19
-
-
267
(267)
-
Transactions with owners, recorded directly in equity
Distributions to owners
Dividends to equity holders
36
-
-
-
(3,416)
(3,416)
Total transactions with owners
-
-
-
(3,416)
(3,416)
At 31 December 2025
19,322
56,534
9,404
129,910
215,170
The notes on pages 64 to 190 are an integral part of these financial statements.
62
Lombard Bank Malta p.l.c.
Annual Report and Financial Statements 2025
Statements of Cash Flows
Group
Bank
2025
2024
2025
2024

| Notes | € 000 | € 000 | € 000 | € 000
Cash flows from operating activities |  |  |  |  |
Interest, fees and commission receipts |  | 43,989 | 40,552 | 44,029 | 40,591
Receipts from customers relating to postal sales |  |  |  |  |
and other revenue |  | 44,494 | 43,886 | 1,520 | 500
Interest, fees and commission payments |  | (11,668) | (9,860) | (11,672) | (9,864)
Payments to employees and suppliers |  | (53,819) | (56,680) | (18,596) | (17,122)
Cash flows attributable to funds collected on behalf of third parties |  | 568 | 319 | - | -
Cash flows from operating profit before changes |  |  |  |  |
in operating assets and liabilities |  | 23,564 | 18,217 | 15,281 | 14,105
Movements in operating assets: |  |  |  |  |
Treasury bills |  | (16,886) | 2,935 | (16,886) | 2,935
Balances with Central Bank of Malta |  | (240) | (132) | (240) | (132)
Loans and advances to banks and customers |  | (54,751) | (114,172) | (55,751) | (113,672)
Other receivables |  | 767 | 1,192 | 749 | 1,206
Movements in operating liabilities: |  |  |  |  |
Amounts owed to banks and to customers |  | 87,251 | 100,939 | 88,479 | 100,562
Other payables |  | 2,830 | (1,323) | 2,848 | (1,337)
Net cash generated from operating activities, before tax |  | 42,535 | 7,656 | 34,480 | 3,667
Income tax paid |  | (6,047) | (6,155) | (6,192) | (5,888)
Net cash flows generated from/(used in) |  |  |  |  |
operating activities |  | 36,488 | 1,501 | 28,288 | (2,221)
Cash flows from investing activities |  |  |  |  |
Dividends received |  | 425 | 465 | 2,529 | 465
Interest received from debt securities |  | 3,637 | 3,791 | 3,508 | 3,643
Purchase of financial investments |  | (13,596) | (12,631) | (13,596) | (12,631)
Proceeds from maturity/disposal of financial |  |  |  |  |
investments |  | 9,942 | 30,156 | 9,842 | 29,839
Net proceeds from liquidation of subsidiary |  | - | - | 1 | 101
Proceeds from disposal of property, plant and equipment |  | 49 | 2 | 325 | 2
Purchase of property, plant and equipment |  |  |  |  |
and intangible assets |  | (2,260) | (2,289) | (309) | (416)
Investment in associate | 10 | (1,000) | (1,000) | - | -
Acquisition of subsidiary, net of cash acquired |  | (256) | - | - | -
Net cash flows (used in)/generated from investing |  |  |  |  |
activities |  | (3,059) | 18,494 | 2,300 | 21,003
Cash flows from financing activities |  |  |  |  |
Principal elements of lease payments |  | (1,212) | (552) | (741) | (213)
Dividends paid to equity holders of the Bank | 36 | (3,416) | (1,638) | (3,416) | (1,638)
Dividends paid to non-controlling interests |  | (523) | (300) | - | -
Net cash flows used in financing activities |  | (5,151) | (2,490) | (4,157) | (1,851)
Net movement in cash and cash equivalents |  | 28,278 | 17,505 | 26,431 | 16,931
Cash and cash equivalents at beginning of year |  | 189,210 | 171,705 | 185,367 | 168,436
Cash and cash equivalents at end of year | 37 | 217,488 | 189,210 | 211,798 | 185,367
The notes on pages 64 to 190 are an integral part of these financial statements. |  |  |  |  |

63
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
Notes to the Financial Statements
1.
Summary of material accounting policies ................................................................................................. 65
2. Financial risk management ....................................................................................................................... 80
3. Accounting estimates and judgements ................................................................................................... 152
4. Segmental information ............................................................................................................................ 155
5. Balances with Central Bank of Malta, treasury bills and cash................................................................. 156
6. Financial investments .............................................................................................................................. 156
7. Loans and advances to banks .................................................................................................................. 158
8. Loans and advances to customers ........................................................................................................... 159
9. Investments in subsidiaries ...................................................................................................................... 159
10. Investments in associates ........................................................................................................................ 161
11. Intangible assets ...................................................................................................................................... 163
12. Property, plant and equipment ............................................................................................................... 164
13. Leases ...................................................................................................................................................... 168
14. Deferred tax assets and liabilities ............................................................................................................ 171
15. Inventories ............................................................................................................................................... 173
16. Trade and other receivables .................................................................................................................... 173
17. Accrued income and other assets ............................................................................................................ 173
18. Share capital ............................................................................................................................................ 174
19. Reserves ................................................................................................................................................... 174
20. Amounts owed to banks .......................................................................................................................... 175
21. Amounts owed to customers ................................................................................................................... 175
22. Provisions for liabilities and other charges .............................................................................................. 175
23. Other liabilities ........................................................................................................................................ 177
24. Accruals and deferred income ................................................................................................................. 177
25. Commitments and contingent liabilities .................................................................................................. 177
26. Net interest income ................................................................................................................................. 178
27. Net fee and commission income .............................................................................................................. 179
28. Postal sales and other revenues .............................................................................................................. 179
29. Dividend income ...................................................................................................................................... 179
30. Net trading income .................................................................................................................................. 180
31. Employee compensation and benefits ..................................................................................................... 180
32. Net movement in expected credit losses ................................................................................................. 181
33. Profit before taxation .............................................................................................................................. 183
34. Income tax expense ................................................................................................................................. 184
35. Earnings per share ................................................................................................................................... 185
36. Dividends ................................................................................................................................................. 186
37. Cash and cash equivalents....................................................................................................................... 186
38. Related parties ........................................................................................................................................ 186
39. Regulatory compensation schemes ......................................................................................................... 189
40. Statutory information .............................................................................................................................. 190
64
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies
The material accounting policies adopted in the preparation of these financial statements are set out below.
Unless otherwise stated, these policies have been consistently applied to all the years presented and relate
to both the Group and the Bank.
1.1 Basis of preparation
The consolidated financial statements include the financial statements of Lombard Bank Malta p.l.c. (the
Bank) and its subsidiary undertakings (together referred to as ‘the Group’ and individually as ‘Group
entities’). The Bank’s financial statements have been prepared in accordance with the requirements of
International Financial Reporting Standards (‘IFRSs’) as adopted by the EU and with the requirements of the
Banking Act 1994 (Chapter 371 of the Laws of Malta) and the Companies Act, 1995 (Chapter 386 of the Laws
of Malta). These consolidated financial statements are prepared under the historical cost convention, as
modified by the fair valuation of certain financial assets and financial liabilities and the revaluation of the
land and buildings class within property, plant and equipment.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of
certain accounting estimates. It also requires the Directors to exercise their judgment in the process of
applying the Group’s accounting policies (see note 3.1 – Critical accounting estimates and judgments in
applying the Group’s accounting policies).
Standards, interpretations and amendments to published standards effective in 2025
In 2025, the Group adopted amendments and interpretations to existing standards that are mandatory for
the Group’s accounting period beginning on 1 January 2025. The adoption of these revisions to the
requirements of IFRSs as adopted by the EU did not result in changes to the Group’s accounting policies
impacting materially the Group’s financial performance and position.
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published and
endorsed by the EU by the date of authorisation of these financial statements but are not yet effective for
the Group’s current reporting period.
The Group did not early adopt any new standards, amendments and interpretations to existing standards
applicable to periods after 1 January 2026 and the Group’s management is of the opinion that there are no
requirements that will have a possible significant impact on the Group’s financial results and financial
position in the period of initial application.
Amendments to IFRS 9 and IFRS 7 - classification and measurement of financial instruments
In May 2024, the IASB issued amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial
Instruments: Disclosures”, which are effective for annual reporting periods beginning on or after 1 January
2026. The amendments clarify when certain financial liabilities can be considered extinguished when
settlement is made via an electronic payment system, and they also provide additional guidance on the
classification of financial assets with contractual terms that modify the timing or amount of cash flows,
including those linked to ESG-related contingencies, as well as financial assets with specified non‑recourse
features. The Group is currently assessing the potential impact of these amendments.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
IFRS 18 ‘Presentation and Disclosure in Financial Statements’
In April 2024, the IASB issued IFRS 18 ‘Presentation and Disclosure in Financial Statements’, effective for
annual reporting periods beginning on or after 1 January 2027. IFRS 18 has been endorsed by the EU on 13
February 2026. The new standard aims to give users of financial statements more transparent and
comparable information about an entity’s financial performance. It will replace IAS 1 ‘Presentation of
Financial Statements’ but carries over many requirements from that standard. In addition, there are new
requirements relating to the structure of the income statement, management-defined performance
measures and the aggregation and disaggregation of financial information. While IFRS 18 will not change
recognition criteria or measurement bases, it may have a significant impact on presenting information in
the financial statements, in particular the income statement and the cash flow statement. The Group will
be assessing the detailed implications of applying the new standard on the Bank’s consolidated financial
statements subsequent to endorsement by the EU.
1.1.1 Consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the Group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-
related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at
fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and
the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the
identifiable net assets acquired is recorded as goodwill. If this aggregate is less than the fair value of the
identifiable net assets of the subsidiary acquired in the case of a bargain purchase, the difference is
recognised directly in the profit or loss.
Inter-company transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. The accounting policies of the subsidiaries are consistent with the
policies adopted by the Group. In the Bank’s standalone financial statements, investments in subsidiaries
are accounted for by the cost method of accounting, i.e. at cost less impairment. Provisions are recorded
where, in the opinion of the Directors, there is an impairment in value. Where there has been an
impairment in the value of an investment, it is recognised as an expense in the period in which the
diminution is identified. Impairment losses recognised in prior periods are reversed through profit or loss
if there has been a change in the estimates used to determine the investment’s recoverable amount since
the last impairment loss was recognised. The results of subsidiaries are reflected in the Bank’s standalone
financial statements only to the extent of dividends receivable. On disposal of an investment, the difference
between the net disposal proceeds and the carrying amount is charged or credited to profit or loss.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.2 Investments in associates
Associates are all entities over which the Group has significant influence but not control or joint control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting in the consolidated financial
statements. Under the equity method of accounting, the investment is initially recognised at cost, and the
carrying amount is adjusted thereafter to recognise the Group’s share of the post-acquisition profits or
losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income
of the investee in other comprehensive income. The Group’s investment in associates includes goodwill
identified on acquisition. Dividends received or receivable from associates are recognised as a reduction in
the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including
any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal
or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment
in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the
difference between the recoverable amount of the associate and its carrying value and recognises the
amount adjacent to ‘share of profit/(loss) of investment accounted for using the equity method’ in the
income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its
associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s
interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been changed where necessary
to ensure consistency with the policies adopted by the Group.
If the ownership interest in an associate is reduced but significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income is reclassified
to profit or loss where appropriate. Dilution gains and losses arising on investments in associates are
recognised in the income statement.
In the Bank’s standalone financial statements, investments in associates are accounted for by the cost
method of accounting, i.e. at cost less impairment. Provisions are recorded where, in the opinion of the
Directors, there is impairment in value. Where there has been impairment in the value of an investment,
it is recognised as an expense in the period in which the diminution is identified. The results of the associate
are reflected in the Bank’s standalone financial statements only to the extent of dividends receivable. On
disposal of an investment, the difference between the net disposal proceeds and the carrying amount is
charged or credited to profit or loss.
1.3 Foreign currency translation
The financial statements are presented in euro (€), which is the Group’s presentation currency.
1.3.1 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency
of the primary economic environment in which the entity operates (the Bank’s ‘functional currency’). The
consolidated financial statements are presented in euro (€), which is the Bank’s functional currency and
the Group’s presentation currency.
1.3.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
income statement.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.4 Financial assets
1.4.1 Initial recognition and measurement
The Group recognises a financial instrument in its statement of financial position when it becomes a party
to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are
recognised on the trade date, which is the date on which the Group commits to purchase or sell the asset.
Accordingly, the Group uses trade date accounting for regular way contracts when recording financial asset
transactions.
At initial recognition, the Group measures a financial asset at its fair value plus or minus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are incremental and directly
attributable to the acquisition or issue of the financial asset, such as fees and commissions. Transaction
costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
At initial recognition, an Expected Credit Loss allowance (‘ECL’) is recognised for financial assets measured
at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting
loss being recognised in profit or loss when an asset is newly originated.
When the fair value of financial assets differs from the transaction price on initial recognition, the Group
recognises the difference as follows:
• when the fair value is evidenced by a quoted price in an active market for an identical asset (i.e. a
Level 1 input) or based on a valuation technique that uses only data from observable markets, the
difference is recognised as a gain or loss; and
• in all other cases, the difference is deferred and the timing of recognition of deferred day one profit
or loss is determined individually. It is either amortised over the life of the instrument, deferred until
the instrument's fair value can be determined using market observable inputs, or realised through
settlement.
1.4.2 Classification and subsequent measurement
The Group classifies its financial assets in the following measurement categories:
• Fair value through profit or loss (‘FVPL’);
• Fair value through other comprehensive income (‘FVOCI’); or
• Amortised cost.
1.4.2.1 Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer's
perspective, such as loans, government and corporate bonds and trade receivables purchased from clients
in factoring arrangements without recourse.
Classification and subsequent measurement of debt instruments depend on:
• the Group's business model for managing the asset; and
• the cash flow characteristics of the asset.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
Based on these factors the Group classifies its debt instruments into one of the following three
measurement categories:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest (‘SPPI’), and that are not designated at FVPL, are
measured at amortised cost. The carrying amount of these assets is adjusted by any Expected Credit
Loss allowance recognised and measured as described in note 1.4.3. Interest income from these
financial assets is included in ‘Interest income’ using the effective interest rate method.
• Fair value through other comprehensive income (‘FVOCI’): Financial assets that are held for collection
of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely
payments of principal and interest, and that are not designated at FVPL, are measured at fair value
through other comprehensive income (‘FVOCI’). Movements in the carrying amount are taken through
OCI, except for the recognition of impairment losses or reversals, interest income and foreign
exchange gains and losses on the instrument’s amortised cost which are recognised in profit or loss.
When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss. Interest income from these financial assets is included in
‘Interest income’ using the effective interest rate method.
• Fair value through profit or loss (‘FVPL’): Assets that do not meet the criteria for amortised cost or
FVOCI are measured at fair value through profit or loss. A gain or loss on a financial assets that is
subsequently measured at fair value through profit or loss is recognised in profit or loss and presented
in the income statement within ‘Net trading income’ in the period in which it arises, unless it arises
from assets that were designated at fair value or which are not held for trading, in which case it is
presented separately in ‘Net investment income’. Interest income from these financial assets is
included in ‘Interest income’ using the effective interest.
The amortised cost is the amount at which the financial asset or financial liability is measured at initial
recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective
interest method of any difference between that initial amount and the maturity amount and, for financial
assets, adjusted for any credit loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying amount of a
financial asset (i.e. its amortised cost before any credit loss allowance) or to the amortised cost of a financial
liability.
The calculation does not consider expected credit losses and includes transaction costs, premiums or
discounts and fees and points paid or received that are integral to the effective interest rate, such as
origination fees. For purchased or originated credit-impaired (‘POCI’) financial assets - assets that are
credit-impaired at initial recognition - the Bank calculates the credit-adjusted effective interest rate, which
is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and
incorporates the impact of expected credit losses in estimated future cash flows.
When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial
asset or financial liability is adjusted to reflect the new estimate discounted using the original effective
interest rate. Any changes are recognised in profit or loss.
The Bank reclassifies debt instruments when and only when its business model for managing those assets
changes. The reclassification takes place from the start of the first reporting period following the change.
Such changes are expected to be very infrequent and none occurred during the period.
(a) Business model assessment
Key management personnel determine the Group’s business model by considering the way financial
instruments are managed in order to generate cash flows. That is, whether the Group's objective is solely
to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and
cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for
trading purposes), then the financial assets are classified as part of 'other' business model and measured
at FVPL. Such assessment is performed at a ‘portfolio level' as it best reflects the way the business is
managed and information is provided to management.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
The information that will be considered in such assessment includes:
• the objectives for the portfolio including whether management’s strategy focuses on earning
contractual interest revenue, maintaining a particular interest rate profile, matching the duration of
the financial assets to the duration of the liabilities that are funding those assets or realising cash flows
through the sale of assets;
• the method for the evaluation of the performance of the portfolio and how such performance is
reported to the Group’s management;
• the risks that affect the performance of the business model (and the financial assets held within that
business model) and how those risks are managed; and
• the frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations
about future sales activity. However, information about sales activity is not considered in isolation,
but as part of an overall assessment of how the Group’s stated objective for managing the financial
assets is achieved and how cash flows are realised.
Financial assets that are held for trading and those that are managed and whose performance is evaluated
on a fair value basis will be measured at FVPL because they are neither held to collect contractual cash
flows nor held both to collect contractual cash flows and to sell financial assets. Securities held for trading
are held principally for the purpose of selling in the near term or are part of a portfolio of financial
instruments that are managed together and for which there is evidence of a recent actual pattern of short-
term profit-taking.
The Bank may also irrevocably designate financial assets at fair value through profit or loss if doing so
significantly reduces or eliminates a mismatch created by assets and liabilities being measured on different
bases.
(b) Cash flows that represent solely payment of principal and interest (‘SPPI’)
In respect of assets where the intention of the business model is to hold the financial assets to collect the
contractual cash flows or to hold to collect and to sell, the Group assesses whether the financial
instruments’ cash flows represent solely payments of principal and interest (the SPPI test). In making this
assessment, the Group considers whether the contractual cash flows are consistent with a basic lending
agreement. ‘Principal’ is the fair value of the financial asset at initial recognition. It is not the amount that
is due under the contractual terms of an instrument. ‘Interest’ is the compensation for time value of money
and credit risk of a basic lending-type return. A basic lending-type return could also include consideration
for other basic lending risks (for example, liquidity risk) and consideration for costs associated with holding
the financial asset for a particular period of time (for example, servicing or administrative costs) and/or a
profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce
exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial
asset is classified and measured at fair value through profit or loss.
Unlike the business model assessment, the SPPI assessment is performed for each individual product or
portfolio of products. The following considerations are made when assessing consistency with SPPI:
• contingent events that would change the amount and timing of cash flows such as contractual term
resetting interest to a higher amount in the event of a missed payment;
• leverage features, being contractual cash flow characteristics that increase the variability of the
contractual cash flows with the result that they do not have economic characteristics of interest;
• contractual terms that allow the issuer to prepay (or the holder to put a debt instrument back to the
issuer) before maturity and the prepayment amount substantially represents unpaid amounts of
principal and interest, which may include reasonable compensation for early termination of the
contract;
• contractual terms that allow the issuer or holder to extend the contractual term and the terms of the
extension option result in contractual cash flows during the extension period that are solely payments
of principal and interest, which may include reasonable compensation for the extension of the
contract; and
• features that modify consideration for the time value of money (for example, periodic reset of interest
rates).
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payments of principal and interest.
1.4.2.2 Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective, that
is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in
the issuer's net assets. Examples of equity instruments include basic ordinary shares.
The Group subsequently measures all equity investments at fair value through profit or loss, except where
the Group's management has elected, at initial recognition, to irrevocably designate an equity investment
at fair value through other comprehensive income. The Group's policy is to designate equity investments
as FVOCI when those investments are held for purposes other than to generate investment returns. When
this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified
to profit or loss, including on disposal.
Impairment losses (and reversal of impairment losses) are not reported separately from other changes in
fair value. Dividends, when representing a return on such investments, continue to be recognised in profit
or loss as dividend income when the Group's right to receive payment is established.
1.4.3 Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses (‘ECLs’) associated with its debt
instruments carried at amortised cost and FVOCI and with the exposure arising from loan commitments
and financial guarantee contracts. The Group recognises a loss allowance for such losses at each reporting
date. The measurement of ECLs reflects:
• an unbiased and probability-weighted amount that is determined by evaluating a range of possible
outcomes;
• the time value of money; and
• reasonable and supportable information that is available without undue cost or effort at the reporting
date about past events, current conditions and forecasts of future economic conditions.
Note 2.3.4 provides more detail of how the Expected Credit Loss allowance is measured.
Expected Credit Loss allowances are presented in the statement of financial position as follows:
• financial assets measured at amortised cost: as a deduction from the gross carrying amount of the
assets;
• loan commitments and financial guarantee contracts: generally, as a provision;
• financial instrument with both a drawn and undrawn component, whereby the Group cannot identify
the ECL on the loan commitment component separately from that on the drawn component: the Group
presents a combined loss allowance for both components, as a deduction from the gross carrying
amount of the drawn component; and
• debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial
position against the carrying amount of the asset because the carrying amount of these assets is their
fair value. Instead, an amount equal to the allowance that would arise if the assets were measured at
amortised cost is recognised in other comprehensive income as an accumulated impairment amount,
with a corresponding charge to profit or loss.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.4.4 Modification of loans and advances to customers
The contractual terms of a loan may be modified for a number of reasons, including changing market
conditions, customer retention and other factors not related to a current or potential credit deterioration
of the customer.
The Group renegotiates loans and advances to customers in financial difficulties (referred to as
‘forbearance activities’) to maximise collection opportunities and minimise the risk of default. Under the
Group’s forbearance policy, loan forbearance is granted on a selective basis if the debtor is currently in
default on its debt or if there is a high risk of default, there is evidence that the debtor made all reasonable
efforts to pay under the original contractual terms, and the debtor is expected to be able to meet the
revised terms. The revised terms usually include extending the maturity, revision of interest rate and
changing the timing of interest payments. Both personal and corporate & commercial loans are subject to
the forbearance policy.
When modification happens, the Group assesses whether or not the new terms are substantially different
to the original terms. The Group does this by considering, among others, the following factors:
• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash
flows to amounts the borrower is expected to be able to pay.
• Whether any substantial new terms are introduced.
• Significant extension of the loan term when the borrower is not in financial difficulty.
• Significant change in the interest rate.
• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk
associated with the loan.
If the terms are substantially different, the Group derecognises the original financial asset and recognises
a 'new' asset at fair value, and recalculates a new effective interest rate for the asset. The date of
renegotiation is consequently considered to be the date of initial recognition for expected credit losses
calculation purposes, including for the purpose of determining whether a significant increase in credit risk
has occurred. However, the Group also assesses whether the new financial asset recognised is deemed to
be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by
the debtor being unable to make the originally agreed payments. Differences in the carrying amount are
also recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in
derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows of
the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount
is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-
adjusted effective interest rate for purchased or originated credit-impaired financial assets). The impact of
modifications of financial assets on the Expected Credit Loss calculation is discussed in note 2.3.9.
1.4.5 Derecognition of financial assets (other than on a modification)
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash
flows from the assets have expired, or when they have been transferred and either (i) the Group transfers
substantially all the risks and rewards of ownership, or (ii) the Group neither transfers nor retains
substantially all the risks and rewards of ownership and the Group has not retained control.
1.4A Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle
of the business if longer), they are classified as current assets. If not, they are presented as non-current
assets.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less expected credit loss allowances. Credit loss allowances
include specific provisions for impairment against credit impaired individual exposures when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms
of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators
that the exposure is credit impaired. For trade and other receivables the Group applies the simplified
approach permitted by the provisions of IFRS 9 which requires expected lifetime losses to be recognised
from initial recognition of the receivables. Note 2.3.4 provides more detail on how lifetime losses are
measured.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of
the loss is recognised in profit or loss. When a receivable is uncollectible, it is written off against the
allowance account for trade and other receivables. Subsequent recoveries of amounts previously written
off are credited in profit or loss.
1.4B Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at face value less expected
credit loss allowance. Cash and cash equivalents comprise balances with less than three months’ maturity
from the date of acquisition, including cash in hand, deposits held at call with banks and other short-term
highly liquid investments with original maturities of three months or less.
1.5 Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of postal stationery and
inventories held for resale is determined on a weighted average cost basis. The cost of other inventories is
determined on a first-in first-out basis. The cost of inventories comprises the invoiced value of goods
purchased and in general includes transport and handling costs. Net realisable value is the estimated selling
price in the ordinary course of business, less applicable variable selling expenses.
1.6 Intangible assets
1.6.1 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
identifiable net assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made
to those cash-generating units or groups of cash-generating units that are expected to benefit from the
business combination in which the goodwill arose, identified according to operating segment. A cash-
generating unit to which goodwill has been allocated is tested for impairment annually, and whenever
there is an indication that the unit may be impaired by comparing the carrying amount of the unit, including
the goodwill, with the recoverable amount of the unit. The recoverable amount is the higher of fair value
less costs to sell and value in use.
1.6.2 Computer software
Costs incurred to acquire and bring to use specific software are capitalised and amortised on the basis of
the expected useful lives. Software has a maximum expected useful life of four years.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.7 Property, plant and equipment
All property, plant and equipment used by the Group is initially recorded at historical cost, including
transaction costs and borrowing costs. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Freehold and long leasehold properties (land and buildings) comprise mainly branches and offices. Land
and buildings are shown at fair value based on periodic valuations by external independent valuers, less
subsequent depreciation for buildings. Valuations are carried out on a regular basis such that the carrying
amount of property does not differ materially from that which would be determined using fair values at
the end of the reporting period. Any accumulated depreciation at the date of revaluation is eliminated
against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of
the asset.
All other property, plant and equipment is stated at historical cost less accumulated depreciation.
Borrowing costs which are incurred for the purpose of acquiring or constructing a qualifying asset are
capitalised as part of its cost. Borrowing costs are capitalised while acquisition or construction is actively
underway. Capitalisation of borrowing costs is ceased once the asset is substantially complete, and is
suspended if the development of the asset is suspended.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in
which they are incurred.
Increases in the carrying amount arising on revaluation of land and buildings are credited to other
comprehensive income and shown as a revaluation reserve in shareholders’ equity. Decreases that offset
previous increases of the same asset are charged to other comprehensive income and debited against the
revaluation reserve; all other decreases are charged to profit or loss.
Land is not depreciated as it is deemed to have an indefinite life. Depreciation on other assets is calculated
using the straight-line method to allocate their cost or revalued amounts to their residual values over their
estimated useful lives, as follows:

| Years
Buildings | 100 or over period of lease arrangement
Leasehold property | Over period of lease arrangement
Computer equipment | 4
Other | 4 – 8

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (see note 1.8).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are recognised in profit or loss. When revalued assets are sold, the amounts included in the revaluation
reserve relating to that asset are transferred to retained earnings.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.8 Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill or certain intangible assets, are not subject
to amortisation and are tested annually for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows (cash-generating units). The impairment test
can also be performed on a single asset when the fair value less costs to sell or the value in use can be
determined reliably. Non-financial assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
1.9 Leases
1.9.1 When a Group company is the lessee
The Group recognises lease liabilities in relation to leases within ’other liabilities’. The lease liability is
measured at the present value of the remaining lease payments, discounted at the Group’s incremental
borrowing rate. The associated right-of-use (ROU) assets are recognised and included within ‘property,
plant and equipment’ and are measured at the amount equal to the lease liability.
Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit
or loss over the lease term.
The lease term is the non-cancellable period of a lease, together with both (a) periods covered by an option
to extend the lease if the lessee is reasonably certain to extend by exercising that option; and (b) periods
covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
In assessing the length of the non-cancellable period of a lease, the Group applies the definition of a
contract to determine the period for which the contract is enforceable. A lease is no longer enforceable
when the lessee and the lessor each has the right to terminate the lease without permission from the other
party with no more than an insignificant penalty.
The ROU asset is depreciated over the shorter of the ROU asset’s useful economic life and the lease term
on a straight-line basis.
The leases with a remaining lease term of less than 12 months are accounted as short-term operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged
to profit or loss on a straight-line basis over the period of the lease.
1.10 Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary
shares are shown in equity as a deduction, net of tax, from the proceeds. When shares are issued at a
premium, the difference between the proceeds and the par value of the shares is recognised in the share
premium account.
1.11 Financial liabilities
1.11.1 Initial recognition and measurement
The Group recognises a financial liability on its statement of financial position when it becomes a party to
the contractual provisions of the instrument. Financial liabilities not at fair value through profit or loss are
recognised initially at fair value, being the fair value of consideration received, net of transaction costs that
are directly attributable to the acquisition or the issue of the financial liability.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.11.2 Classification and subsequent measurement
Financial liabilities are classified as subsequently measured at amortised cost, except for:
• financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial
liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities
designated as such at initial recognition; and
• financial guarantee contracts and loan commitments.
Financial liabilities measured at amortised cost comprise principally amounts owed to banks, amounts
owed to customers, and other liabilities.
1.11.3 Derecognition
The Group derecognises a financial liability from its statement of financial position when the obligation
specified in the contract or arrangement is discharged, is cancelled or expires.
1.11A Trade and other payables
Trade payables comprise obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are classified as current liabilities if payment is due
within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented
as non-current liabilities. Trade and other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
1.12 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of
financial position when there is a legally enforceable right to offset the recognised amounts and there is
an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The Group has agreements in place with third parties to collect, through the Group’s outlet network,
amounts due to these third parties owed by their customers. Any amounts collected in respect of these
agreements are retained by the Group until settlement with the respective third parties, during which time
the Group is exposed to the risks and rewards emanating from the amounts collected. Such amounts are
therefore presented within assets with a corresponding liability towards the third party presented within
trade and other payables.
1.13 Provisions for liabilities and other charges
Provisions for legal and other claims are recognised when: the Group has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated. Provisions are not recognised for future
operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The increase in the provision due to passage of time is recognised as
interest expense.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.14 Provision for pension obligations
A subsidiary of the Bank provides for the obligation arising in terms of Article 8A of the Pensions Ordinance,
(Chapter 93 of the Laws of Malta), covering those former Government employees who opted to become
full-time employees of the subsidiary of the Bank, and who continued to be entitled to pension benefits
which go beyond the National Insurance Scheme.
The pension related accounting costs are assessed using the projected unit credit method. Under this
method, the cost of the subsidiary’s obligation is charged to profit or loss so as to spread the cost over the
years of service giving rise to entitlement to benefits in accordance with actuarial techniques. The
obligation is measured as the present value of the estimated future cash outflows using interest rates of
long-term Government bonds which have terms to maturity approximating the terms of the related
liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
charged or credited to equity in other comprehensive income in the period in which they arise. Past-service
costs are recognised immediately in profit or loss.
The Group contributes towards the government pension defined contribution plan in accordance with local
legislation as applicable and to which it has no commitment beyond the payment of fixed contributions.
These obligations are recognised as an expense in the Income Statement as they accrue.
1.15 Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest
income’ and ‘interest expense’ in profit or loss using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying amount of a
financial asset (i.e. its amortised cost before any expected credit loss allowance) or to the amortised cost
of a financial liability.
The calculation does not consider expected credit losses and includes transaction costs, premiums or
discounts and fees and points paid or received that are integral to the effective interest rate, such as
origination fees. For purchased or originated credit-impaired (‘POCI’) financial assets - assets that are
credit-impaired at initial recognition - the Group calculates the credit-adjusted effective interest rate,
which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount
and incorporates the impact of expected credit losses in estimated future cash flows.
1.16 Fees and commissions
Fee and commission income and expense that are an integral part of the effective interest rate on a
financial asset or liability are included in the calculation of the effective interest rate and treated as part of
effective interest.
Other fees and commissions are generally recognised on an accrual basis when the service has been
provided. Accordingly, fee and commission income, comprising account servicing fees, investment
management fees, placement fees and other similar fees, are recognised as the related services are
performed.
Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct
costs) and recognised as an adjustment to the effective interest rate on the loan. When a loan commitment
is not expected to result in the drawdown of a loan, the related loan commitment fees are recognised on
a straight-line basis over the commitment period.
Fee and commission expense, relating mainly to transaction and service fees, are expensed as the services
are received.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
1.17 Postal sales and other revenue
Postal sales and service revenue comprises the fair value of the consideration received or receivable for
the sale of services in the ordinary course of the subsidiary’s activities. Revenue is shown net of sales taxes
and discounts. It comprises revenue directly received from customers, commissions earned on postal and
non-postal transactions and income from foreign outbound mail receivable from overseas postal
administrators.
Income from sale of stamps, commissions earned on postal and non-postal transactions and revenue from
foreign outbound mail from overseas postal administrators are recognised when the service is rendered.
Allowance is made for the assessed amount of revenue from prepaid product sales at the end of the
reporting period for which the service has not yet been provided.
IFRS 15 requires that at contract inception the goods or services promised in a contract with a customer
are assessed and each promise to transfer to the customer the good or service is identified as a
performance obligation. Promises in a contract can be explicit or implicit if the promises create a valid
expectation to provide a good or service based on the customary business practices, published policies or
specific statements.
A contract asset must be recognised if the company recorded revenue for fulfilment of a contractual
performance obligation before the customer paid consideration or before, irrespective of when payment
is due, the requirements for billing and the consequent recognition of a receivable exist.
A contract liability must be recognised when the customer paid consideration or a receivable from the
customer is due before the company fulfilled a contractual performance obligation and hence recognised
revenue, such as in the case of prepaid stamps.
The Group measures revenue on a basis that reflects the amount of consideration that it expects to be
entitled to; this measurement of revenue is however limited to amounts to which the Group has
enforceable rights, and it excludes amounts collected on behalf of third parties.
Revenue is recognised when the Group satisfies a performance obligation, which occurs when it transfers
control of a promised good or service to a customer. Control of a promised good or service is transferred
to a customer when the customer is able to direct the use of the promised good or service. A performance
obligation is satisfied at a point in time unless it meets certain criteria that indicate that it is satisfied over
time.
1.18 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
In the latter case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period.
Deferred income tax is recognised, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill;
deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
1. Summary of material accounting policies (continued)
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except
for deferred income tax liability where the timing of the reversal of the temporary difference is controlled
by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis.
1.19 Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in
accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial
institutions and other bodies on behalf of customers.
In the ordinary course of business, the Bank issues financial guarantee contracts, consisting of letters of
credit, guarantees and acceptances.
Financial guarantee contracts are initially measured at fair value and subsequently measured at higher of:
• the amount of the loss allowance (calculated as described in note 1.4.3); and
• the premium received on initial recognition less income recognised in accordance with the principles of
IFRS 15.
'Loan commitments' are the Bank’s commitments to provide credit under pre-specified terms and
conditions, and are measured at the amount of the loss allowance (calculated as described in note 1.4.3).
For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision.
However, for contracts that include both a loan and an undrawn commitment and the Bank cannot
separately identify the expected credit losses on the undrawn commitment component from that on the
loan component, the expected credit losses on the undrawn commitment are recognised together with
the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross
carrying amount of the loan, the expected credit losses are recognised as a provision.
1.20 Dividend distribution
Dividend distribution to the Bank’s shareholders is recognised as a liability in the Group’s financial
statements in the period in which the dividends are approved by the Bank’s shareholders.
1.21 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Board
of Directors which is the Group’s chief operating decision-maker.
An operating segment’s operating results are reviewed regularly by the Board of Directors to make
decisions about resources to be allocated to the segment and to assess its performance executing the
function of the chief operating decision-maker.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management
2.1 Introduction
2.1.1 Preamble
The Group’s business involves taking on risks in a targeted manner and managing them professionally. The
core functions of the Group’s risk management are to identify all key risks for the Group, measure these
risks, manage the risk positions and determine capital allocations. The Group regularly reviews its risk
management policies and systems to reflect changes in markets, products and best market practice. The
Group’s aim is to achieve an appropriate balance between risk and return and minimise
potential adverse
effects on the Group’s financial performance.
The Group defines risk as the possibility of losses or profits
foregone, which may be caused by
internal or external factors.
The Group considers risk management a core competency that helps produce consistently high returns for
its various stakeholders. The Group aims to manage all major types of risk by applying methods that meet
best practice. The Group considers it important to have a clear distribution of responsibilities within the
area of risk management. One of the main tasks of the Group’s executive management is to set the
framework for this area. An understanding of risk-taking and transparency in risk-taking are key elements
in the Group’s business strategy and thus in its ambition to be a strong financial entity. The Group’s internal
risk management processes support this objective.
Risk management within the Bank is mainly carried out on a unified basis, using an integrated and entity-
wide framework. This framework is based on local and international guidelines, such as the Basel IV Accord,
corresponding Directives and Regulations of the European Union, including technical standards, as well as
contemporary international banking practices. The Bank has adopted the Standardised Approach and the
Basic Method with respect to the calculation of capital requirements in relation to, and management of,
credit and market risks, and the Basic Indicator Approach with respect to operational risk. The Bank
regularly updates its Internal Capital and Liquidity Adequacy Assessment Processes (ICAAP and ILAAP), that
are approved by the Board of Directors.
2.1.2 Organisation
The Bank’s Board of Directors is responsible for ensuring that adequate processes and procedures exist to
ensure effective internal control systems for the Group. These internal control systems ensure that
decision-making capability and the accuracy of the reporting and financial results are maintained at a high
level at all times. The Board assumes responsibility for:
• setting business objectives, goals and the general strategic direction for Management with a view to
maximise value;
• selecting and appointing the Chief Executive Officer who is entrusted with the day-to-day operations of
the Group;
• management of the Group’s operations;
• ensuring that significant business risks are identified and appropriately managed; and
• setting the highest business standards and code for ethical behaviour, and monitoring adherence with
these.
In deciding how best to discharge its responsibilities, the Board upholds a policy of clear demarcation
between its role and responsibilities and those of Management. It has defined the level of authority that it
retains over strategy formulation and policy determination, and delegated authority and vested
accountability for the Bank’s day-to-day business in the Assets & Liabilities Committee and Credit
Committee, and, for the Group’s day-to-day operations, in an Executive Team comprising the Chief
Executive Officer, Deputy Chief Executive Officers and Chief Officers. The Audit & Risk Committee reviews
the processes and procedures to ensure the effectiveness of the Group’s system of internal control, as well
as the implementation of the Board’s risk strategy by management. The Audit & Risk Committee is
supported by the Internal Audit, Risk Management and Compliance functions.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Authority to operate the Bank and its subsidiaries is delegated to the Chief Executive Officer within the
limits set by the Board. The Board is ultimately responsible for the Group’s system of internal control and
for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure
to achieve business objectives, and can provide only reasonable, and not absolute, assurance against
material misstatement or loss.
The Group is committed to the highest standards of business conduct and seeks to maintain these standards
across all operations. Group policies and procedures are in place for the reporting and addressing of
fraudulent activities.
The Group has an appropriate organisational structure for planning, executing, controlling and monitoring
business operations in order to achieve Group objectives.
2.1.3 Risk policies
The Bank’s Board of Directors is empowered to set out the overall risk policies and limits for all material risk
types. The Board also decides on the general principles for managing and monitoring risks. The Board
provides written principles for overall risk management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-
derivative financial instruments.
Internal controls, procedures and processes are managed within the following areas:
• Finance
• Treasury
• Credit
• Internal Audit
• Risk Management
• IT
• Compliance
• Anti-Money Laundering
2.1.4 Risk appetite
The risk appetite determines the maximum risk that the Group is willing to assume to meet business targets.
To ensure coherence between the Group’s strategic considerations regarding risk-taking and day-to-day
decisions, from time to time, the Group formulates and updates its risk appetite for the purposes of
strategic direction. The Group’s risk appetite is set in a process based on a thorough analysis of its current
risk profile. The Group identifies a number of key risk components and for each, determines a target that
represents the Group’s view of the component in question. The following are the key risk components:
• Credit risk
• Market risk
• Capital risk
• Liquidity risk
• Operational risk
• Information & cyber security risk
• Information technology risk
• Information management risk
• Financial crime risk
• Compliance risk
• Environmental, social and governance (‘ESG’) risk
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.1.5 Reporting
The Group allocates considerable resources to ensure the ongoing compliance with approved limits and to
monitor its asset portfolio. In particular, the Bank has a fixed reporting cycle to ensure that the relevant
management bodies, including the Board of Directors and the Executive Team, are kept informed on an
ongoing basis of developments in the asset portfolio, on such matters as non-performing loans and other
relevant information.
2.2 Risk exposures
In terms of the Capital Requirement Regulation (‘CRR’), ‘an exposure’ is the amount at risk arising from the
reporting credit institution's assets and off-balance sheet items. Consistent with this, an exposure would
include the amount at risk arising from the Bank’s:
• claims on a customer including actual and potential claims which would arise from the drawing down
in full of undrawn advised facilities, which the Bank has committed itself to provide;
• contingent liabilities arising in the normal course of business, and those contingent liabilities which
would arise from the drawing down in full of undrawn advised facilities which the Bank has committed
itself to provide; and
• other on and off-balance sheet financial assets and commitments.
The Group is exposed to a number of risks, which it manages at different organisational levels.
The main categories of risk are:
• Credit risk: Credit risk stems from the possible non-prompt repayment or non-payment of existing and
contingent obligations by the Group’s counterparties, resulting in the loss of equity and profit. It is the
risk that deterioration in the financial condition of a borrower will cause the asset value to decrease or
be extinguished. Country risk and settlement risk are included in this category. Country risk refers to
the risk of losses arising from economic or political changes that affect the country from which the asset
originates. Settlement risk refers to the risk of losses through failure of the counterparty to settle
outstanding dues on the settlement date owing to bankruptcy or other causes.
• Market risk: Risk of losses arising from unfavourable changes in the level and volatility of interest rates,
foreign exchange rates or investment prices.
• Liquidity risk: Liquidity risk may be divided into two sub-categories:
• Market (product) liquidity risk: Risk of losses arising from difficulty in accessing a product or
market at the required time, price and amount.
• Funding liquidity risk: Risk of losses arising from a timing mismatch between investing,
placements and fund raising activities resulting in obligations missing the settlement date or
satisfied at higher than normal rates.
• Operational risk: Risk of loss resulting from the lack of skilful management or good governance within
the Group and the inadequacy of proper control, which might involve internal operations, personnel,
systems or external occurrences that in turn affect the income and capital funds of financial institutions.
The Bank has adopted an operational risk management framework and procedures, which provide for
the identification, assessment, management, monitoring and reporting of the Bank’s operational risks.
• ESG risk: ESG risks refer to the risks of any negative financial impact on the Group and/or Bank stemming
from environmental, social and governance factors that may have a negative impact on the financial
performance of the Group or solvency of the Bank. The Group continues to evaluate its potential
exposure towards climate and environmental risks.
The Bank’s approach to management of the above risks is addressed in this note.
82
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3 Credit risk
2.3.1 Introduction
Credit risk is the risk of suffering financial loss, should any of the Group’s customers, clients or market
counterparties fail to fulfil their contractual obligations to the Group. Credit risk arises mainly from
consumer loans and advances and loan commitments arising from such lending activities, but can also arise
from credit enhancement provided, such as financial guarantees and letters of credit.
The Group is also exposed to other credit risks arising from investments in debt securities and other
exposures arising from its investing activities.
Credit risk constitutes the Bank’s largest risk in view of its significant lending and securities portfolios, which
is monitored in a structured and formal manner through several mechanisms and procedures. The credit
risk management and control functions are centralised.
2.3.2 Credit risk management
The granting of a credit facility (including loans and advances, loan commitments and guarantees) is based
on the Bank’s insight into the customer’s financial position, which is reviewed regularly to assess whether
the basis for the granting of credit has changed. Furthermore, the customer must be able to demonstrate,
in all probability, the ability to repay the debt. Internal approval limits are in place starting from Bank
operational managers leading up to the Credit Committee and the Board of Directors depending on the
magnitude and the particular risks attached to the facility. Facilities are generally adequately secured either
by property and/or guarantees and are reviewed periodically by management in terms of the exposure to
the Bank and to ensure that collateral still covers the facility.
In order to minimise the credit risk undertaken, counterparty credit limits are defined with respect to
investment activities, which limits consider a counterparty’s creditworthiness, the value of collateral and
guarantees pledged, which can reduce the overall credit risk exposure, as well as the type and the duration
of the asset. In order to examine a counterparty’s creditworthiness, the following are considered: country
risk, quantitative and qualitative characteristics, as well as the industry sector in which the counterparty
operates.
The Group has set limits of authority and has segregation of duties so as to maintain impartiality and
independence during the approval process and control new and existing assets or credit facilities.
During the financial year ended 31 December 2025, local economic growth moderated, as Malta continues
on its exit path from the post-pandemic recovery amidst a weakening global outlook. Indeed, during 2025
the global economy has been adjusting to trade subject to greater protectionism and fragmentation, in a
context of dim medium-term growth prospects.
The first half of the year saw a resilient start, largely attributed to companies engaging in pre-emptive
importing and exporting. This front-loading of trade was in anticipation of tariffs, and once completed,
weaker data started to emerge, resulting in softened labour markets. Inflation is above target in the United
States, with risks tilted to the upside. Meanwhile, the rest of the world is expected to have subdued
inflation. The International Monetary Fund’s (IMF) outlook is subject to uncertainty, and actual
performance may be better or worse than anticipated. In this regard, the IMF sees that the probability of
actual performance being worse than anticipated is greater than it being better than anticipated. The risks
to the outlook are tilted to the downside due to further escalation of protectionist measures and larger-
than-expected shocks to labour supply from restrictive immigration policies. Some vulnerabilities in
financial markets and public debt could exert pressure on macro-financial stability. Disappointing earnings
results and productivity gains related to AI adoption can lead to an abrupt repricing of tech stocks, leading
to an abrupt end to the recent observed exuberance in financial markets. At the same time, faster
productivity growth can be expected if the adoption of AI leads to promising results.
83
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
In Europe, the European Commission reports economic growth exceeding expectations in the first nine
months of the year, mainly driven by trade front-loading, but also thanks to stronger investment in
equipment and intangible assets. Growth is also supported by a resilient labour market, decreasing inflation
and favourable financing conditions. The Commission sees these as “key conditions” for continued
economic growth, despite the challenging external environment and uncertainty.
Furthermore, the EU and US signed a joint agreement on reciprocal, fair and balanced trade, establishing a
15% headline tariff in August. The joint agreement places the EU at a competitive advantage compared to
other trading partners. The headline tariff rate for non-EU members is similarly set at 15%, but the scope
of exemptions and carveouts varies, leading to higher effective tariffs. This competitive advantage however
should be seen in the context of modest growth in export markets for goods and a strong euro.
The European Commission expects Euro area inflation to slow from 2.4% in 2024 to 2.1% in 2025 and then
remain broadly stable at 1.9% in 2026 and 2.0% in 2027. Consequently, the ECB has kept its interest rates
on the deposit facility, the main refinancing operations and the marginal lending facility unchanged at
2.00%, 2.15% and 2.40% respectively.
Rise in defence and interest expenditure, coupled with revenue shortfalls are resulting in growing deficits.
The EU debt-to-GDP ratio is projected to increase from 82% in 2024 to 85%, while in the euro area, it is
expected to rise to 91% by 2027, from 88% in 2024.
Looking ahead, a number of downside risks weigh on the growth outlook of the EU economy. Geopolitical
tensions remain high, both with the ongoing war in Ukraine that is weighing economically on neighbouring
countries, the uncertainty around the October Gaza peace plan, and the unfolding war in the Middle East.
The recent appreciation of the euro could weigh on external competitiveness more than expected.
Meanwhile, progress on reform and competitiveness, higher defence spending focused on EU production,
and new trade agreements with third countries can buttress economic growth more than expected.
This is the global and European context within which the small open Maltese economy operates.
Nevertheless, Malta continues to outperform much of its European peers. Indeed, the Central Bank of Malta
expects Malta’s real GDP growth rate to moderate from the 6.8% registered in 2024, to 3.7% in 2025 and
remaining at 3.7% until 2027. This trend is also confirmed by the European Commission, which expects it to
be driven mainly by robust private and public consumption, investment, and supported by growth in
tourism, gaming and financial and professional services.
The disinflationary process is expected to continue, with the HICP averaging 2.5% in the first half of 2025
and expected to remain close to the 2% ECB target for the years ahead. This, combined with widening
income tax bands, is expected to boost real disposable income, which will continue supporting private
consumption. Some pockets of vulnerability remain, particularly in unprocessed foods and air
transportation, the latter of which may have moderate impacts on tourist arrivals.
Net exports are also expected to continue contributing positively to GDP growth, driven by trade services.
Recreational, professional, IT, and financial services are projected to continue expanding, contributing
positively to net exports. The Central Bank of Malta estimates an effective tariff rate for Malta at 6.0%,
much lower that the 15% applied to the EU bloc, a result of a majority of exported Maltese goods to the US
exempted from the tariff regime (basic pharmaceutical products, basic metals and computer, electronic
and optical products).
Employment growth is expected to moderate, as economic growth eases and productivity gains ground.
Policies aimed at limiting inward migration flows such as skills card requirements, the regulation of temping
agencies, and the moratorium on food couriers and cab drivers should result in slow down in foreign
workers inflows. The unemployment rate is expected to edge down from 2.9% in 2025 to 2.8% by 2027,
remaining below its natural rate of 3.1%. This negative unemployment gap is expected to be a key factor in
wage growth outlook.
Government deficit-to-GDP ratio is set to decline from 3.5% in 2024 to 2.1% in 2028, resulting from a lower
share of inflation-mitigation measures and capital expenditure. Meanwhile, government debt-to-GDP ratio
is expected to peak at 47.6% in 2026 and decline to 46.9% by 2028.
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Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The Central Bank of Malta assesses risks to the Maltese economy as broadly balanced. Downside risks
mainly emanate from geopolitical tensions and further changes to the US tariff regime that could lead to
supply chain disruptions resulting in higher input costs. This would also negatively affect government deficit
if energy support measures continued. On the upside, the labour market could perform better than
expected, resulting in stronger private consumption growth.
Based on the above, economic uncertainty continues to remain a source of concern. This uncertainty
impacts the business model, income levels and/or cash flow generation capacity of a portion of the Bank's
customers. This has impacted the performance of the Bank’s expected credit loss models, requiring
enhanced monitoring of model outputs.
In view of the above, the Bank continued to closely monitor activities on its loan portfolio. During the year
ended 31 December 2025, where required, the Bank continued to provide support to customers
experiencing liquidity pressures as a result of the prevailing macro-economic scenario, albeit to a much
lesser extent than the previous year.
In view of the nature of the Bank’s portfolio, where a relatively small number of loans comprise a significant
proportion of the loan book value, the Bank continued to apply an individual-debtor-focused credit
management process. Such process enabled the identification of any deterioration in credit risk at the level
of the Bank’s material exposures at an early stage and the estimation of expected credit loss allowances
using the best possible judgement.
Notwithstanding the resilience of the local economy, during 2025, the Bank continued to assess and
individually rate on an ongoing basis those borrowers deemed mostly impacted by the current macro-
economic uncertainties. Exposures deemed mostly impacted and in respect of which significant increase in
credit risk (‘SICR’) and unlikeness-to-pay (‘UTP’) indicators have been observed are assigned an elevated
internal credit rating, requiring closer and more frequent monitoring on a monthly or quarterly basis
(depending on the extent of credit risk deterioration).
The Bank continued to monitor closely corporate and commercial exposures previously assigned to any of
the underperforming grades (P2, P3) (note 2.3.8) to update credit risk assessments by reference to actual
financial performance and, where available, financial forecasts.
In relation to personal exposures, the Bank typically resorts more to portfolio measures or reviews in
respect of groups of exposures exhibiting shared risk characteristics, unless specific debtor level information
which suggests developments in the respective credit risk becomes known to the Bank.
The current macro-economic environment continues to give rise to an elevated level of uncertainty in
respect of the economic outlook. Hence, the level of subjectivity underlying the ECL model parameters,
including how these react to forward-looking economic conditions remains elevated. This necessitates
more regular monitoring and rigorous evaluation of forecast economic conditions, together with
heightened expert judgement, in order to best determine the range of possible economic outcomes used
for the purposes of estimating ECL. Further information in respect of macro-economic forecasts reflected
within the ECL calculations is provided in note 2.3.4. (Forward looking information incorporated in the ECL
model).
85
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.3 Credit risk measurement
The measurement of credit exposure for risk management purposes considers that an exposure varies with
changes in market conditions, expected cash flows and the passage of time. The assessment of credit risk
of a portfolio of assets entails further estimations as to the likelihood of defaults occurring, of the
associated loss ratios and of default correlations between counterparties. The Group measures credit risk
using Probability of Default (‘PD’), Exposure at Default (‘EAD’) and Loss Given Default (‘LGD’). This is similar
to the approach used for the purposes of measuring Expected Credit Loss (‘ECL’) under IFRS 9. Refer to note
2.3.4 for more details.
(a) Loans and advances to customers
The Group uses internal credit risk gradings (note 2.3.8) to reflect its assessment of the Probability of
Default of individual counterparties. Internal credit risk gradings are based on payment behaviour, loan
specific information and expert judgement.
Corporate and commercial
Information considered by the Group when determining the internal credit risk grades include the payment
behaviour of the borrower and other information about borrowers which impact their creditworthiness,
including level of income and/or financial performance.
The Group determines its internal rating grades at a borrower level. The Group incorporates any updated
or new information/credit assessments on an ongoing basis. In addition, the Group also updates
information about the creditworthiness of the borrower from sources such as financial statements.
The creditworthiness of the borrower is considered in every periodic review - normally on a yearly basis; or
more frequent basis as deemed necessary. This determines the updated internal credit risk gradings.
Personal
After initial recognition, for retail business, the payment behaviour of the borrower is monitored on an
ongoing basis. Any other known information about the borrower which impacts the respective credit
worthiness, such as unemployment and previous delinquency history, is also captured.
(b) Other financial assets
Other financial assets include Balances with Central Bank of Malta, treasury bills, financial investments and
loans and advances to banks. The Group utilises internally generated models (as described in note 2.3.4.3)
to reflect its assessment of the Probability of Default of individual counterparties. These grades are
continuously monitored and updated. The PDs associated with each grade are determined based on
realised published default rates over the prior 12 months.
In determining the Probability of Default of individual counterparties, the Group distinguishes between
exposures considered ‘investment-grade’ and ‘non-investment grade’ based on credit ratings by recognised
external rating agencies.
86
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.4 Expected Credit Loss measurement
IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial
recognition as summarised below:
•
a financial instrument that is not credit-impaired on initial recognition is classified in 'Stage 1' and has
its credit risk continuously monitored by the Group;
•
if a significant increase in credit risk (‘SICR’) since initial recognition is identified, the financial instrument
is moved to 'Stage 2' but is not yet deemed to be credit-impaired. Please refer to note 2.3.4.1 for a
description of how the Bank determines when a significant increase in credit risk has occurred;
•
if the financial instrument is credit-impaired, the financial instrument is then moved to 'Stage 3'. Please
refer to note 2.3.4.2 for a description of how the Group defines credit-impaired and default;
•
financial instruments in ‘Stage 1’ have their ECL measured at an amount equal to the portion of lifetime
expected credit losses that result from default events possible within the next 12 months. Instruments
in ‘Stages 2’ or ‘3’ have their ECL measured based on expected credit losses on a lifetime basis. Please
refer to note 2.3.4.3 for a description of inputs, assumptions and estimation techniques used in
measuring the ECL;
•
a pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward
looking information. Note 2.3.4.4 includes an explanation of how the Group has incorporated this in its
ECL models; and
•
purchased or originated credit-impaired financial assets are those financial assets that are credit-
impaired on initial recognition. Their ECL is always measured on a lifetime basis (‘Stage 3’).
Further explanation is also provided in respect of how the Group determines appropriate groupings of loans
and advances to customers for ECL measurement (refer to note 2.3.4.5).
The Expected Credit Loss requirements apply to financial assets measured at amortised cost and FVOCI,
and certain loan commitments and financial guarantee contracts. At initial recognition, an impairment
allowance (or provision in the case of commitments and guarantees) is required for ECL resulting from
default events that are possible within the next 12 months (12-month ECL). In the event of a significant
increase in credit risk, an allowance (or provision) is required for ECL resulting from all possible default
events over the expected life of the financial instrument (lifetime ECL). Financial assets where 12-month
ECL is recognised are considered ‘Stage 1’. As outlined previously, financial assets which are considered to
have experienced a significant increase in credit risk would be classified as ‘Stage 2’ and financial assets for
which there is objective evidence of impairment, thus considered to be in default or otherwise credit-
impaired, would be classified as ‘Stage 3’.
The Group recognises loss allowances at an amount equal to 12-month ECL for debt investment securities
that are determined to have low credit risk at the reporting date. The Group considers a debt security to
have low credit risk when it is considered ‘investment-grade’, as defined by recognised external rating
agencies.
The following diagram summarises the impairment requirements under IFRS 9 (other than purchased or
originated credit-impaired financial assets):

Stage 1 | Stage 2 | Stage 3
(Initial recognition) | (Significant increase in credit risk | (Credit-impaired financial
| since initial recognition) | assets)
12-month expected credit losses | Lifetime expected credit losses | Lifetime expected credit
|  | losses

87
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.4.1 Significant increase in credit risk (‘SICR’)
To determine whether the credit risk (i.e. risk of default) on a financial instrument has increased
significantly since initial recognition, the Group considers reasonable and supportable information that is
relevant and available without undue cost or effort, including both quantitative and qualitative
information. Such analysis is based on the Group’s historical experience, credit assessment and forward-
looking information.
The Group primarily identifies whether a SICR has occurred for an exposure within the loans and advances
to customers, through the Group’s internal risk gradings. The Group allocates each exposure to an internal
rating grade based on a variety of data that is determined to be predictive of the risk of default and applying
experienced credit judgement. These factors vary depending on the nature of the exposure and the type
of borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being moved
to a different internal rating grade.
The Group identifies SICR and classifies such non-defaulted exposures into ‘Stage 2’ when they fulfil at
least one of the following conditions:
• the exposure is considered forborne;
• the credit quality of any other exposure(s) of the same customer is/are not considered ‘regular’ (except
where otherwise stated in the Group’s Credit Policy e.g. cash covered facilities); and
• the borrower’s internal rating grade is not considered ‘performing’, as defined in note 2.3.8.
As referred to previously, existing geopolitical factors as well as the current market scenarios, with the
consequential economic conditions, continue to pose an elevated level of uncertainty, particularly with
respect to the identification of customers that would have experienced a SICR.
The Bank’s individual debtor-focused approach enables the identification of SICR of significant exposures,
specifically within its corporate and commercial portfolio. These exposures are assessed periodically for
SICR through individual credit risk assessments, on the basis of recently obtained management information,
including forecasts. Exposures in respect of which SICR has been observed are attributed higher ECL, and
are assigned an elevated internal rating of P2 or P3, hence requiring closer and more frequent monitoring
on a monthly or quarterly basis (depending on the extent of credit risk deterioration) to facilitate timely
identification of further deterioration in financial condition. The assessments continue to be performed by
the Commercial Credit Department and are discussed and reviewed at Credit Committee or Board level as
applicable.
For the purpose of achieving a comprehensive assessment the Bank also utilises, as applicable,
segmentation techniques in relation to identifying indicators of SICR within both corporate & commercial
and personal portfolios.
In relation to personal portfolios, SICR is generally determined on the basis of delinquency related
indicators since less information is available at asset level to enable the timely identification of a SICR. The
Bank continues to apply rigorously its credit assessment and oversight processes, which include monitoring
of arrears. Personal borrowers are considered to exhibit signs of SICR and consequently downgraded to
Stage 2 if they met the following criteria:
• repayments being past due by 30 days or more; and
• other qualitative criteria, including but not limited to actual or potential loss of personal income.
In respect of individually significant loans within the corporate and commercial portfolio, during 2025, the
Bank focused particularly on those borrowers that are deemed to be more susceptible to the current
economic environment.
88
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
A set of criteria specifically designed to address credit risk deteriorations, is in place to determine whether
borrowers exhibit signs of SICR. In summary, the Bank’s monitoring typically includes the assessment of
following risk criteria:

Corporate and commercial exposures |  | Personal exposures |  | All exposures |
• | information obtained during periodic review of | • | internally collected | • | payment record – this
| customer files – e.g. audited financial statements, | data on customer | includes overdue status
| management accounts, budgets and projections. | behaviour – e.g. | as well as a range of
| Examples of areas of particular focus are: gross | utilisation of credit | variables about payment
| profit margins, financial leverage ratios, debt | card facilities; | ratios;
| service coverage, compliance with contractual | • | affordability metrics; | • | utilization of the granted
| conditions, quality of management and senior |  | and | limit;
| management changes; | • | external data from | • | requests for and
• | data from credit reference agencies, press articles; |  | credit reference | granting of forbearance;
| and |  | agencies including |  | and
• | actual and expected significant changes in the |  | industry-standard | • | existing and forecast
| political, regulatory and technological environment |  | credit scores. |  | changes in business,
| of the borrower or in its business activities. |  |  |  | financial and economic
|  |  |  |  | conditions.

The assessment of SICR incorporates forward-looking information (refer to note 2.3.4.4 for further
information) and is performed at the counterparty level on a periodic basis. The criteria used to identify
SICR are monitored and reviewed periodically for appropriateness by the independent Risk Management
function.
As a backstop, and as required by IFRS 9, the Group presumptively considers that a SICR occurs when an
asset is past due by 30 days or more. The Group determines days past due by counting the number of days
since the earliest elapsed due date in respect of which full payment has not been received.
In the case of other financial assets (including loans and advances to banks and investments in debt
securities), the Group applies the low credit risk simplification to all its exposures considered ‘investment-
grade’, thus they are not subject to the SICR assessment. Moving from ‘investment-grade’ to ‘non-
investment grade’ does not automatically mean that there has been a SICR.
2.3.4.2 Definition of default and credit-impaired assets
The Group’s assessment to determine the extent of increase in credit risk of a financial instrument since
initial recognition is performed by considering the change in the risk of default occurring over the remaining
life of the financial instrument. As a result, the definition of default is important.
The Group applies the definition of default in a manner consistent with internal credit risk management
practices for the relevant instruments and the definition considers qualitative and quantitative factors
where appropriate.
The Group determines that a financial instrument is credit-impaired (in default and in ‘Stage 3’ for IFRS 9
purposes) by considering relevant objective evidence, primarily whether:
• contractual payments of either principal or interest are past due for 90 days or more for any material
credit obligations to the Group;
• there are other indications that the borrower is unlikely to pay such as that a concession has been
granted to the borrower for economic or legal reasons of an enduring nature relating to the borrower’s
financial condition, which indicates the borrower is in significant financial difficulty (unlikeliness to pay
criteria); and
• the loan is otherwise considered to be in default in line with an instrument’s terms and conditions.
Therefore, the definitions of credit-impaired and default are aligned so that ‘Stage 3’ represents all loans
which are considered defaulted or credit-impaired.
89
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
In assessing whether a borrower is in default, the Group will consider indicators that are:
• qualitative – such as non-adherence to terms and conditions of sanction and/or other breaches of
covenants, overdue status and non-payment of another obligation of the same obligor to the Group;
• quantitative – such as changes in probabilities of default; and
• based on data developed internally and obtained from external sources.
The default definition has been applied consistently to model the Probability of Default (‘PD’), Exposure at
Default (‘EAD’) and Loss Given Default (‘LGD’) throughout the Bank’s expected loss calculations.
As referred to previously, existing geopolitical conditions as well as the current market environments and
the consequential economic impacts have continued to give rise to an elevated level of uncertainty,
particularly with respect to the identification of customers that would have showed signs of unlikeness-to-
pay (‘UTP’). The Bank performs assessments to determine whether the current macro-economic
circumstances may transform into long-term borrower financial difficulties, thereby potentially requiring a
downgrade of individual exposures or exposures sharing similar credit risk characteristics to Stage 3 to
reflect the level of change in credit risk.
Except for forborne exposures, an instrument is considered to no longer be in default (i.e. to have been
cured) when it no longer meets any of the default criteria for a consecutive period of three months. This
period has been determined based on an analysis which considers the likelihood of a financial instrument
returning to default status after cure using different possible cure definitions.
In the case of forborne exposures, the cure period comprises 12 consecutive monthly repayments made in
a timely manner with a minimal grace period of one day (i.e. one or more repayments may be made no
more than one day late).
The Group considers other financial assets to be in default when a payment due including a coupon
payment is not effected.
2.3.4.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
The Expected Credit Loss (‘ECL’) is measured on either a 12-month (12M) or on a lifetime basis depending
on whether a significant increase in credit risk has occurred since initial recognition or whether an asset is
considered to be credit-impaired. Expected credit losses are the discounted product of the Probability of
Default (‘PD’), Exposure at Default (‘EAD’) and Loss Given Default (‘LGD’). When calculating the Bank’s ECL,
special considerations were made to assess the impact of the current economic conditions. Further details
are set out in note 2.3.4.4.
The ECL is determined by projecting the PD, EAD and LGD for each future month and for each individual
exposure. These three components are multiplied together and adjusted for the likelihood of survival (i.e.
the exposure has not prepaid or defaulted in an earlier month). This effectively calculates an ECL for each
future month, which is then discounted back to the reporting date and summed. The discount rate used in
the ECL calculation is the original effective interest rate or an approximation thereof.
The 12-month ECL is calculated by multiplying the 12-month PD, LGD, and EAD. Lifetime ECL is calculated
on a similar basis for the residual life of the exposure.
The PD, EAD and LGD parameters are derived from internally developed statistical models and other
historical data, adjusted to reflect forward-looking information as described below.
The PD represents the likelihood of a borrower defaulting on its financial obligation (as per ‘definition of
default and credit-impaired’ above), either over the next 12 months (12M PD), or over the remaining
lifetime (Lifetime PD) of the obligation. Accordingly, the 12-month and lifetime PDs represent the
Probability of Default occurring over the next 12 months and the remaining maturity of the instrument,
respectively.
90
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
PD estimates are estimates at a certain date, which, for the loans and advances to customers, are calculated
based on statistical rating models and assessed using rating tools tailored to the various categories of
counterparties and exposures. These statistical models are based on internally-compiled data comprising
both quantitative and qualitative factors. The PD calculation is based on a transition matrix approach. The
main assumptions underlying such approach are that the PD depends on the particular period after
origination (‘months on book’) and the current characteristics of the exposure or borrower. Default is
considered to be an absorbing state, whereby if an exposure is defaulted, it remains in this state during
future years. Market data is used for the PD of loans and advances to banks and investment securities. If a
counterparty or exposure migrates between internal rating grades or external credit ratings, then this will
lead to a change in the associated PD.
The 12 month and lifetime PDs are developed by utilising statistical methodologies to analyse historical
observed data to estimate the probability of a borrower’s transition from one internal rating class to
another (or of staying in the same class) within a given horizon. The conditional PD is adjusted to consider
forward-looking information through macro-economic modelling.
EAD represents the expected exposure in the event of a default (including any expected drawdowns of
committed facilities). The Group derives the EAD from the current exposure to the counterparty and
potential changes to the current amount allowed under the contract. The EAD of a financial asset is the
gross carrying amount at default.
EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months
(12M EAD) or over the remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the
Group includes the current drawn balance plus any further amount that is expected to be drawn up to the
current contractual limit by the time of default, should it occur.
The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by
product type:
• for amortising products and bullet repayment loans, this is based on the contractual repayments owed
by the borrower over a 12-month or lifetime basis; and
• for revolving products, the Exposure at Default is predicted by taking current drawn balance and adding
a ‘credit conversion factor’ which allows for the expected drawdown of the remaining limit by the time
of default. These assumptions vary by product type and current limit utilisation band, based on analysis
of the Group's recent default data.
The Loss Given Default (‘LGD’) represents the Bank’s expectation of the extent of loss on a defaulted
exposure. Hence, the LGD represents expected credit losses on the EAD given the event of default, taking
into account, among other attributes, the mitigating effect of collateral values at the time it is expected to
be realised and the time value of money. The 12-month and lifetime LGD are determined based on the
factors which impact the recoveries made post default.
For secured products, LGD is primarily based on collateral type and projected collateral values, historical
discounts to market/book values due to forced sales, time to repossession and recovery costs observed.
The LGD for exposures secured by real estate will be derived from the adjusted loan-to-value ratio of the
individual facilities, and takes into account the expected recovery by applying a costs to sell haircut and a
market value haircut to the property value, and by discounting (using the effective interest rate) the
updated market value of the property after haircuts, over a period of time equivalent to the perceived time
to sell. The LGD for other exposures is based on the Group’s perceived risk on the collateral. For unsecured
products, LGDs are typically set at product level due to the limited differentiation of recoveries achieved
across different borrowers. These LGDs are influenced by collection strategies.
The ECL is measured from the initial recognition of the financial asset. The maximum period considered
when measuring ECL (be it 12-month or lifetime ECL) is the maximum contractual period over which the
Group is exposed to credit risk. With respect to non-revolving credit facilities, the contractual life of the
facility is considered. In the case of revolving credit facilities, provided that such facilities do not have a
fixed term or repayment structure, the Group defines the lifetime of such exposures as 12 months, in case
the next substantive credit review is within the next 12 months. For the credit cards portfolio, the Group
also applies a lifetime of 12 months.
91
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Forward-looking economic information is also included in determining the 12-month and lifetime PD and
LGD. Refer to note 2.3.4.4 for an explanation of forward-looking information and its inclusion in ECL
calculations.
The assumptions underlying the ECL calculations are monitored and reviewed on a regular basis.
For individually significant credit impaired loans, management determines the size of the allowance
required based on a range of factors such as the realisable value of security, the viability of the customer’s
business model and the capacity to generate cash flow to service debt obligations, under different
scenarios. Judgement is applied in estimating the expected future cash flows from each borrower and the
time to recover these cash flows under the different scenarios as well as to attach probabilities to those
scenarios. The assumptions around forecasted recoveries from the sale of collateralised properties,
including around valuation haircuts and time to recovery, are key drivers in the estimation of credit loss
allowances in respect of individually assessed loans. The economic conditions within the local property
market, driven by the current macro-economic environment, increases the level of expert judgement
required to predict with reasonable accuracy the recoverability of exposures through the sale of collateral.
To reflect the economic conditions currently being experienced, conservative judgements were applied by
management in order to overcome limitations in respect of determining collateral valuations, and the
uncertainty around the time to repossess properties held as collateral and to resell such properties in the
open market.
2.3.4.4 Forward-looking information incorporated in the ECL model
The calculation of ECL incorporates forward-looking information. The Group performs a historical analysis
to identify the key economic variables affecting credit risk and expected credit losses for each portfolio.
These economic variables and their associated impact on the PD, EAD and LGD may vary by portfolio.
In this respect, the Group has actually identified key drivers of credit risk and credit losses for each portfolio
of financial instruments and, using an analysis of historical data, has analysed relationships between macro-
economic variables, credit risk and credit losses. The key drivers constitute Gross Domestic Product (‘GDP’)
at constant prices, unemployment rates and inflation rates.
The impact of these economic variables on the PD, EAD and LGD has been determined by performing
statistical regression analysis to understand the impact changes in these variables have had historically on
default rates and on the components of LGD and EAD.
Three possible scenarios are considered to capture non-linearity across credit portfolios. The ‘base line’
scenario represents the most-likely outcome. It is based on authoritative sources forecasting these
economic variables referred to above and providing the best estimate view of the economy. Apart from
the ‘base line’ scenario, the Group considers two other macro-economic scenarios – Upside and Downside
scenarios – which respectively represent a more optimistic and a more pessimistic outcome. Such scenarios
reflect the current top and emergent risks and opportunities. The more optimistic and more pessimistic
scenarios are economically plausible, and the more pessimistic scenario will not necessarily be as severe as
scenarios used in stress testing.
Modelling of the economic scenarios, i.e. the forecast values of economic variables for optimistic and
pessimistic scenarios, is performed on the basis of the historical values and annual forecast values for the
base scenario, mainly based on the published three-year forecast of the Central Bank of Malta.
The pessimistic and optimistic scenarios are deemed to represent management's best forecast of an
economically plausible upside and downside scenario.
Each scenario is weighted by a probability of occurrence, determined by a combination of macro-economic
research and expert credit judgment, taking into account the range of possible outcomes each chosen
scenario represents. The Group measures ECL as either a probability weighted 12-month ECL (Stage 1), or
a probability weighted lifetime ECL (Stages 2 and 3). These probability-weighted ECLs are determined by
running each scenario through the relevant ECL model and multiplying the outcome by the appropriate
scenario weighting (as opposed to weighting the inputs).
92
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
As with any macro-economic forecasts, the projections and likelihood of occurrence are subject to an
elevated degree of uncertainty and therefore, the actual outcomes may be significantly different to those
projected.
Local economic growth moderated, as Malta moves further away from the post-pandemic recovery, in a
context of a weakening global outlook, characterised by trade policy uncertainty and geopolitical tensions.
The Central Bank of Malta forecasts that Malta’s real GDP growth will moderate from 6.8% in 2024 to 3.7%
in 2025 and remain at 3.7% in both 2026 and 2027. This trend is also confirmed by the European
Commission, which expects it to be driven mainly by robust private and public consumption, investment,
and supported by growth in tourism, gaming and financial and professional services.
Employment growth is expected to moderate, as economic growth eases and productivity gains ground.
This is coupled with the introduction of policies aimed at limiting inward migration. The unemployment
rate is expected to edge down to 2.8% by 2027, remaining below its natural rate of 3.1%. This negative
unemployment gap is expected to be a key factor in wage growth outlook.
Being a small open economy, Malta is influenced by developments within the Euro Area, EU and the global
market. In Europe, real GDP is forecasted to grow by 1.4% in the EU in 2025 and 2026, edging up to 1.5%
in 2027. The euro area is expected follow a similar trajectory, with real GDP growing by 1.3% in 2025, 1.2%
in 2026, and by 1.4% in 2027.Growth is supported by a resilient labour market, decreasing inflation and
favourable financing conditions. The Commission sees these as “key conditions” for continued economic
growth, despite the challenging external environment and uncertainty.
Euro area inflation is expected to slow from 2.4% in 2024 to 2.1% in 2025 and then remain broadly stable
at 1.9% in 2026 and 2.0% in 2027. Consequently, the ECB has kept its interest rates on the deposit facility,
the main refinancing operations and the marginal lending facility unchanged at 2.00%, 2.15% and 2.40%
respectively.
Furthermore, the EU and US signed a joint agreement on reciprocal, fair and balanced trade, establishing a
15% headline tariff in August. Thanks to a number of carveouts, the joint agreement places the EU at a
competitive advantage compared to other trading partners.
On a more global scale, the IMF’s Global Economic Outlook projects global growth to slow from 3.6% in
2024 to 2.6% in 2025. The IMF sees risks to the outlook remaining tilted to the downside due to further
escalation of protectionist measures and larger-than-expected shocks to labour supply from restrictive
immigration policies.
The macroeconomic strength observed in recent years largely reflects continued post-pandemic recovery
dynamics and base effects, resulting in observations that are not fully representative of longer-term
economic conditions. These atypical data points fall outside the historical ranges used for ECL model
calibration and may introduce distortions in time-series behaviour, with potential implications for model
performance and projections.
In this regard, a very important judgement within the Bank’s estimation of ECL allowances continues to be
the determination of forward-looking scenarios reflecting potential future economic conditions under
different scenarios and their impact on PDs and LGDs.
93
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The most significant period-end assumptions used for the ECL estimate as at 31 December 2025 and 2024
are set out below. The ‘base’, ‘upside’ and ‘downside’ scenarios were used for all portfolios:
•
The ‘Base’ Scenario captures business-as-usual macro-economic expectations, whereby the current
rhythm of economic activity is maintained;
•
The ‘Downside’ Scenario is based on a subdued level of economic activity hypothesized to correspond
to prolonged period of an economic contraction;
•
The ‘Upside’ Scenario is based on the assumption that it would be possible to marginally improve
further over the economic conditions considered in the ‘Base’ Scenario.

|  | As of 31 December 2025 |
| 2026 | 2027 | 2028
Gross Domestic Product, constant prices (YoY)* |  |  |
‘Base’ | 3.70% | 3.70% | 3.70%
Range of forecasts for alternative scenarios | [0.6 - 6.9]% | [0.6 - 6.9]% | [0.6 - 6.9]%
Unemployment rate (YoY)* |  |  |
‘Base’ | 2.8% | 2.8% | 2.8%
Range of forecasts for alternative scenarios | [1.4 - 4.2]% | [1.4- 4.2]% | [1.4– 4.2]%
Inflation rate (YoY)* |  |  |
‘Base’ | 2.3% | 2.1% | 2.1%
Range of forecasts for alternative scenarios | [0.9 - 3.7]% | [0.7 - 3.5]% | [0.7 – 3.5]%
|  | As of 31 December 2024 |
| 2025 | 2026 | 2027
Gross Domestic Product, constant prices (YoY)* |  |  |
‘Base’ | 3.90% | 3.90% | 3.90%
Range of forecasts for alternative scenarios | [0.9 - 6.9]% | [0.9 - 6.9]% | [0.9 - 6.9]%
Unemployment rate (YoY)* |  |  |
‘Base’ | 3.2% | 3.2% | 3.2%
Range of forecasts for alternative scenarios | [1.8 - 4.6]% | [1.8 - 4.6]% | [1.8 - 4.6]%
Inflation rate (YoY)* |  |  |
‘Base’ | 2.2% | 2.2% | 2.2%
Range of forecasts for alternative scenarios | [0.8 - 3.6]% | [0.8 - 3.6]% | [0.8 - 3.6]%
*YoY = year on year % change |  |  |

The weightings assigned to each economic scenario were 68% (2024: 68%) for the ‘Base’ Scenario, 16%
(2024: 16%) for the ‘Downside’ scenario and 16% (2024: 16%) for the ‘Upside’ scenario. The number of
scenarios used is based on the analysis of each major product type to ensure that non-linearities are
captured. The number of scenarios and their attributes are reassessed at each reporting date. The
economic scenarios were simulated over a full economic cycle.
The Bank considers the macro-economic forecasts to represent its best estimate of the possible outcomes
after analysing its different portfolios to establish that the chosen scenarios are appropriately
representative of the range of possible scenarios.
The Bank’s weightings take into account the current performance of the Maltese economy over the
foreseeable future. The Board considers that the probability weightings assigned to the respective
scenarios reflect an unbiased evaluation of range of possible outcomes.
Based on the above, the estimation of credit loss allowances as of 31 December 2025 and 2024 continued
to require an elevated level of subjectivity and expert judgement. Despite the recovery in economic
conditions, ECL estimates remain subject to a degree of economic uncertainty. In this respect, judgements
applied by management in estimating ECL continue to reflect a degree of caution, both in the determination
of probability of defaults for selection of economic scenarios and in terms of the calibration of scenario
weightings.
94
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the
impact of any regulatory, legislative, or political changes, have also been considered, but are not deemed
to have a material impact and therefore no adjustment has been made to the ECL for such factors. This is
reviewed and monitored for appropriateness on an ongoing basis.
The outcome of the Bank’s credit loss allowances estimation process is sensitive to judgements and
estimations made through the reflection of several forward-looking economic conditions. Management has
assessed the sensitivity of the Bank’s expected credit losses by assigning a 100% weighting to the baseline,
downside and upside scenarios respectively. The Bank’s credit loss allowances would decrease by €2.6
million (2024: €3.2 million) if the allowances had to be calculated solely on the baseline scenario; ECLs
would increase by €0.8 million (2024: €1.1 million) if these had to be estimated using only the downside
scenario and would reduce by €4.0 million (2024: €4.6 million) if the upside scenario only were to be taken
into consideration. This demonstrates the Bank’s resilience in overcoming negative shocks and its ability to
absorb such allowance changes, if necessary.
2.3.4.5 Categorisation of loans and advances to customers for ECL measurement
As part of the ECL model, the Group classifies its exposures to loans and advances to customers into
homogeneous groups with similar credit risk characteristics that include instrument type and credit risk
gradings. In this respect, the Group considers the following categories for ECL measurement:
• personal portfolio, which includes loans and advances to individual customers such as mortgages, credit
cards and other consumer credit;
• construction and real estate portfolio, which includes loans and advances to customers in respect of
financing construction of real estate projects for the purpose of re-sale or rental; and
• corporate and commercial portfolio, which includes loans and advances to business entities, other than
construction and real estate related borrowers.
2.3.5 Maximum exposure to credit risk
An ‘exposure’ is defined as the amount at risk arising from the Group’s assets and off-balance sheet items.
The Group’s maximum credit risk with respect to on- and off-balance sheet items can be classified into the
following categories:
• Financial assets recognised on-balance sheet comprising principally balances with Central Bank of
Malta, treasury bills, financial investments and loans and advances to banks and customers. The
maximum exposure to credit risk of these financial assets equals their gross carrying amounts.
• Documentary credits and guarantee obligations incurred on behalf of third parties. The latter carry the
same credit risk as loans, whilst documentary credits are collateralised by the underlying shipments of
goods to which they relate, and therefore carry less risk than a loan to a customer. The maximum
exposure to credit risk is the full amount that the Group would have to pay if the guarantees are called
upon or if documentary credits are exercised.
• Loan commitments and other credit related commitments that are irrevocable over the life of the
respective facilities. The maximum exposure to credit risk is the full amount of the committed facilities.
However, the likely amount of loss is less than the total unused commitments as most commitments to
extend credit are contingent upon customers maintaining specific credit standards. These exposures
are monitored in the same manner in respect of loans and advances.
95
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

The Group’s credit risk exposures relating to on-balance sheet assets and off-balance sheet instruments, reflecting the maximum exposure to credit risk before collateral held or |  |  |  |  |  |  |  |
other credit enhancements, include the following: |  |  |  |  |  |  |  |
|  | Group |  |  |  | Bank |  |
|  | 2025 |  | 2024 |  | 2025 |  | 2024
| Gross | ECL | Gross | ECL | Gross | ECL | Gross | ECL
| exposure | allowance | exposure | allowance | exposure | allowance | exposure | allowance
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Credit risk exposures relating to on-balance sheet assets: |  |  |  |  |  |  |  |
Subject to IFRS 9 expected credit loss allowance |  |  |  |  |  |  |  |
Financial assets measured at amortised cost: |  |  |  |  |  |  |  |
Balances with Central Bank of Malta |  |  |  |  |  |  |  |
and treasury bills | 174,922 | - | 146,872 | - | 174,921 | - | 146,872 | -
Cheques in course of collection | 150 | - | 266 | - | 150 | - | 266 | -
Debt securities | 33,903 | (13) | 21,132 | (25) | 33,903 | (13) | 21,132 | (25)
Loans and advances to banks | 62,426 | (3) | 46,198 | (9) | 55,939 | (3) | 40,973 | (9)
Loans and advances to customers |  |  |  |  |  |  |  |
• Corporate and commercial | 608,846 | (6,773) | 594,777 | (7,486) | 608,846 | (6,773) | 594,777 | (7,486)
• Personal | 327,621 | (583) | 286,325 | (934) | 327,630 | (583) | 286,333 | (934)
Trade and other receivables | 16,690 | (263) | 13,182 | (203) | 7,238 | - | 3,443 | -
Accrued income and other assets | 3,611 | - | 3,884 | - | 3,584 | - | 3,855 | -
Debt securities measured at FVOCI | 170,965 | (219) | 178,828 | (224) | 168,955 | (219) | 176,696 | (224)
Credit risk exposure | 1,399,134 | (7,854) | 1,291,464 | (8,881) | 1,381,166 | (7,591) | 1,274,347 | (8,678)
Credit risk exposure relating to off-balance |  |  |  |  |  |  |  |
sheet instruments: |  |  |  |  |  |  |  |
Contingent liabilities | 22,055 | (11) | 19,827 | (11) | 22,055 | (11) | 19,827 | (12)
Undrawn commitments to lend | 355,682 | (22) | 291,647 | (71) | 356,793 | (22) | 292,754 | (71)
Credit risk exposure | 377,737 | (33) | 311,474 | (82) | 378,848 | (33) | 312,581 | (83)

96
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Accrued income substantially arises from loans and advances to customers.
2.3.6 Credit concentration risk
Within the Bank, concentration risk of losses results from inadequate diversification of the credit
exposures. This risk is managed by actively measuring, reporting and monitoring on a regular and ongoing
basis risk concentration levels against reasonable thresholds for industry sectors, counterparties, products,
and collateral types.
Credit concentration risk by industry sector
The Group and Bank’s financial investments measured at FVOCI, excluding equity investments, are analysed
by industry sector in the following table:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Government | 145,416 | 147,232 | 144,339 | 146,029
Corporate |  |  |  |
Tourism | 229 | 425 | 185 | 382
Property and construction | 908 | 918 | 563 | 569
Financial institutions | 21,602 | 27,415 | 21,058 | 26,878
Other sectors | 2,810 | 2,838 | 2,810 | 2,838
Gross financial investments measured at FVOCI | 170,965 | 178,828 | 168,955 | 176,696

The Group and Bank’s financial investments measured at amortised cost are analysed by industry sector in
the following table:

| Group and Bank |
| 2025 | 2024
| € 000 | € 000
Government | 25,600 | 14,875
Corporate |  |
Tourism | 270 | 72
Financial institutions | 7,733 | 5,884
Other sectors | 300 | 301
Gross financial investments measured at amortised cost | 33,903 | 21,132

97
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The industry sector analysis of the Group and Bank’s loans and advances to customers (gross of
expected credit
losses
) is described in the following table:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Manufacturing | 14,544 | 10,976 | 14,544 | 10,976
Tourism | 81,329 | 63,810 | 81,329 | 63,810
Trade | 50,865 | 51,497 | 50,865 | 51,497
Property and construction | 294,792 | 296,231 | 294,792 | 296,231
Personal, professional and home loans | 349,674 | 297,582 | 349,683 | 297,590
Financial institutions | 128,952 | 144,022 | 128,952 | 144,022
Other sectors | 16,311 | 16,984 | 16,311 | 16,984
Gross loans and advances to customers | 936,467 | 881,102 | 936,476 | 881,110

A significant portion of the Bank’s loans and advances to customers comprise exposures to corporates.
As at 31 December 2025 and 2024, no loans and advances to customers were deemed to be prohibited
large exposures, prior to any eligible exemptions, in accordance with the requirements of Part Four: Large
Exposures, of the CRR. A limited number of customers account for a certain percentage of the Bank’s loans
and advances. Whilst no individual customer or group of dependent customers is considered by
management as a significant concentration of credit risk in the context of the CRR, these exposures are
monitored and reported more frequently and rigorously.
Credit concentration risk by geographical region
The Group also monitors credit concentration risk by geographical region. The majority of the Group’s
exposures are in Malta in view of the Group’s lending operations being conducted with Maltese customers.
Moreover, the significant part of the Group investments in debt securities are issued by local government
and local corporate entities.
The Group and Bank’s balances with correspondent banks in different jurisdictions are split by geographical
region as shown in the following table:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Spain | 3,756 | 14,481 | 3,756 | 14,481
Germany | 19,892 | 3,455 | 19,892 | 3,455
Ireland | 9,605 | 10,884 | 9,605 | 10,884
Malta | 20,597 | 5,230 | 14,111 | 5
United States of America | 2,457 | 3,213 | 2,457 | 3,213
United Kingdom | 1,347 | 4,377 | 1,347 | 4,377
Italy | 2,838 | 2,153 | 2,838 | 2,153
Belgium | 433 | 478 | 433 | 478
Switzerland | 1,479 | 1,924 | 1,479 | 1,924
Other | 22 | 3 | 21 | 3
Gross loans and advances to banks | 62,426 | 46,198 | 55,939 | 40,973

98
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.7 Information on credit quality of balances with banks, investments and treasury bills
The Group holds debt instruments that are issued by local government, local banks and other local
corporate entities. All such securities are listed on the Malta Stock Exchange, which is currently the only
locally-based Recognised Investment Exchange (‘RIE’). The other debt securities held by the Group, issued
by foreign governments and entities, are listed on other recognised exchanges. The Bank acquires debt
securities and similar instruments issued by counterparties having strong financial background. These
issuers are approved and regularly reviewed considering the process previously highlighted, focusing on
market developments.
Within its daily operations the Bank transacts with banks and other financial institutions. The Bank primarily
places short-term funds with pre-approved banks subject to limits in place and subject to the respective
institution’s credit rating being within controlled parameters. By conducting these transactions the Bank is
running the risk of losing funds due to the possible delays in the repayment to the Bank of the existing and
future obligations of the counterparty banks. Actual exposures are monitored against the limits on a daily
basis and in a real-time manner. The credit status of the pre-authorised banks is monitored on an ongoing
basis.
The Bank runs the risk of loss of funds due to the possible political, economic and other events in a
particular country where funds have been placed or invested with several counterparties. Countries are
assessed according to their size, economic data and prospects, and their credit ratings from international
rating agencies. Existing country credit risk exposures are monitored and reviewed periodically. The Bank’s
assets are predominantly in Malta. The Bank’s exposures to other countries are mainly limited to bank
balances and money market placements with a total carrying amount of €41,828,000 (2024: €40,968,000)
at the end of the reporting period.
At the end of the reporting period, none of these financial assets mentioned were past due or impaired.
The following tables set out information about the credit quality of financial assets of the Bank measured
at amortised cost and financial investments at FVOCI excluding equity investments. The credit quality of
financial assets is based on external credit ratings assigned to issuers or counterparties by recognised
external rating agencies:

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta and treasury |  |  |  |
bills at amortised cost |  |  |  |
Gross carrying amount | 174,921 | - | - | 174,921
Loss allowance | - | - | - | -
Carrying amount – net of loss allowance | 174,921 | - | - | 174,921

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta and treasury |  |  |  |
bills at amortised cost |  |  |  |
Gross carrying amount | 146,872 | - | - | 146,872
Loss allowance | - | - | - | -
Carrying amount – net of loss allowance | 146,872 | - | - | 146,872

99
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The credit rating of the Government of Malta as at 31 December 2025 and 2024 was considered as
‘investment grade’ and the loss allowance in respect of balances with the Central Bank of Malta and
treasury bills was insignificant.

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Debt securities measured at FVOCI |  |  |  |
AAA to AA- | 5,818 | - | - | 5,818
A+ to A- | 143,779 | - | - | 143,779
BBB+ to BBB- | 9,600 | - | - | 9,600
Unrated | 9,758 | - | - | 9,758
Carrying amount – fair value | 168,955 | - | - | 168,955
Loss allowance | (219) | - | - | (219)
Debt securities measured at amortised cost |  |  |  |
AAA to AA- | 7,912 | - | - | 7,912
A+ to A- | 24,157 | - | - | 24,157
Unrated | 1,834 | - | - | 1,834
Gross carrying amount | 33,903 | - | - | 33,903
Loss allowance | (13) | - | - | (13)
Carrying amount – net of loss allowance | 33,890 | - | - | 33,890
Loans and advances to banks at amortised cost |  |  |  |
AAA to AA- | 2,466 | - | - | 2,466
A+ to A- | 35,037 | - | - | 35,037
BBB+ to BBB- | 16,949 | - | - | 16,949
Lower than BB- | 7 | - | - | 7
Unrated | 1,475 | 5 | - | 1,480
Gross carrying amount | 55,934 | 5 | - | 55,939
Loss allowance | (3) | - | - | (3)
Carrying amount – net of loss allowance | 55,931 | 5 | - | 55,936

100
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Unrated debt securities primarily represent bonds listed on the Malta Stock Exchange which are unrated
by international credit rating agencies.

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Debt securities measured at FVOCI |  |  |  |
AAA to AA- | 11,423 | - | - | 11,423
A+ to A- | 144,140 | - | - | 144,140
BBB+ to BBB- | 15,312 | - | - | 15,312
Unrated | 5,821 | - | - | 5,821
Carrying amount – fair value | 176,696 | - | - | 176,696
Loss allowance | (224) | - | - | (224)
Debt securities measured at amortised cost |  |  |  |
AAA to AA- | 7,480 | - | - | 7,480
A+ to A- | 12,015 | - | - | 12,015
Unrated | 1,637 | - | - | 1,637
Gross carrying amount | 21,132 | - | - | 21,132
Loss allowance | (25) | - | - | (25)
Carrying amount – net of loss allowance | 21,107 | - | - | 21,107
Loans and advances to banks at amortised cost |  |  |  |
AAA to AA- | 3,215 | - | - | 3,215
A+ to A- | 34,141 | - | - | 34,141
BBB+ to BBB- | 2,153 | - | - | 2,153
Lower than BB- | 1 | - | - | 1
Unrated | 1,463 | - | - | 1,463
Gross carrying amount | 40,973 | - | - | 40,973
Loss allowance | (9) | - | - | (9)
Carrying amount – net of loss allowance | 40,964 | - | - | 40,964

As at 31 December 2025 and 2024, there were no purchased credit-impaired assets.
After the end of the reporting period there were no significant changes in credit ratings reflected in the
tables above which have a material impact on the credit quality of the financial assets.
2.3.8 Information on credit quality of loans and advances to customers
The Bank manages the credit quality of its loans and advances to customers by using internal risk grades,
which provide a progressively increasing risk profile ranging from ‘P1’ (best quality, less risky) to ‘NP’. These
risk grades are an essential tool for the Bank to identify both non-performing exposures and better-
performing customers. The internal risk grades used by the Bank are as follows:
•
Performing: Internal grade ‘P1’;
•
Under performing: Internal grades ‘P2’, ‘P3’ and ‘PF’; and
•
Non-performing: Internal grades ‘NP’, ‘NF’ and ‘NR’.
101
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
P1
The Bank’s loans and advances to customers which are categorised as ‘P1’ are principally debts in respect
of which the payment of interest and/or capital is not overdue by 30 days and no recent history of customer
default exists. Management does not expect any losses from non-performance by these customers.
P2
Loans and advances which attract a ‘P2’ grading are those which are receiving the close attention of the
Bank’s management and are being reviewed periodically in order to determine whether such advances
should be reclassified to either the ‘P1’ or the ‘P3’ classification. Credit facilities that attract this category
include those where the payment of interest and/or capital becomes overdue by 30 days and over but not
exceeding 60 days.
P3
Loans and advances which attract a ‘P3’ grading are those having the weaknesses inherent in those loans
and advances classified as ‘P2’ with the added characteristics that repayment is inadequately protected by
the current sound worth and paying capacity of the borrower. Loans and advances so graded have a well-
defined weakness or weaknesses that could jeopardise the repayment of the debt. They are characterised
by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Credit
facilities that attract this category include those where the payment of interest and/or capital becomes
overdue by 60 days and over but not exceeding 90 days.
PF
Loans and advances which attract a ‘PF’ grading are those facilities (other than Non-Performing Exposures)
in respect of which forbearance measures have been extended. Forbearance measures consist of
concessions towards a debtor facing or about to face difficulties in meeting its financial commitments
(financial difficulties).
A concession is deemed to have taken place when any of the following two actions are taken;
(a) a modification of the previous terms and conditions of a contract, as the debtor is considered unable to
comply therewith, due to its financial difficulties (‘troubled debt’) to allow for sufficient debt service ability,
that would not have been granted had the debtor not been in financial difficulties; and/or
(b) a total or partial refinancing of a troubled debt contract, that would not have been granted had the
debtor not been in financial difficulties.
NP
Loans and advances which attract a ‘NP’ grading are those facilities where the Bank deems the
recoverability of principal to be remote as a result of worsening conditions of loans and advances classified
as ‘P3’. Credit facilities that attract this category include those where the payment of interest and/or capital
becomes overdue by 90 days and over. Accordingly, these loans and advances are generally past due by
more than 90 days and comprise those exposures which are deemed by the Bank as credit-impaired (see
definition in note 2.3.4.2).
NF
Loans and advances which attract a ‘NF’ grading are credit-impaired facilities where the Bank deems the
recoverability to be remote as a result of worsening conditions but in respect of which forbearance
measures have been extended. Forbearance measures consist of concessions towards a debtor facing
difficulties in meeting its financial commitments .
102
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
NR
Loans and advances which attract a ‘NR’ grading are credit-impaired facilities where the Bank deems
recovery to be remote as a result of worsening conditions and where legal action against the obligor has
commenced.
The following table sets out information about the credit quality of the Bank’s loans and advances to
customers measured at amortised cost. Explanation of the terms: 12-month ECL, lifetime ECL and credit-
impaired are included in note 2.3.4.3.

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month ECL | Lifetime ECL | Lifetime ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Corporate and commercial |  |  |  |
P1 | 420,563 | 6,269 | - | 426,832
P2 | - | 121,783 | - | 121,783
P3 | - | 4,388 | - | 4,388
PF | - | 16,296 | - | 16,296
NP | - | - | 1,324 | 1,324
NF | - | - | 32,879 | 32,879
NR | - | - | 5,344 | 5,344
Gross carrying amount | 420,563 | 148,736 | 39,547 | 608,846
Loss allowance | (399) | (639) | (5,735) | (6,773)
Carrying amount | 420,164 | 148,097 | 33,812 | 602,073

Personal |  |  |  |
P1 | 317,472 | 239 | - | 317,711
P2 | - | 2,884 | - | 2,884
P3 | - | 513 | - | 513
PF | - | 147 | - | 147
NP | - | - | 1,044 | 1,044
NF | - | - | 5,230 | 5,230
NR | - | - | 101 | 101
Gross carrying amount | 317,472 | 3,783 | 6,375 | 327,630
Loss allowance | (279) | (115) | (189) | (583)
Carrying amount | 317,193 | 3,668 | 6,186 | 327,047

Total |  |  |  |
P1 | 738,035 | 6,508 | - | 744,543
P2 | - | 124,667 | - | 124,667
P3 | - | 4,901 | - | 4,901
PF | - | 16,443 | - | 16,443
NP | - | - | 2,368 | 2,368
NF | - | - | 38,109 | 38,109
NR | - | - | 5,445 | 5,445
Gross carrying amount | 738,035 | 152,519 | 45,922 | 936,476
Loss allowance | (678) | (754) | (5,924) | (7,356)
Carrying amount | 737,357 | 151,765 | 39,998 | 929,120

103
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month ECL | Lifetime ECL | Lifetime ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Corporate and commercial |  |  |  |
P1 | 422,210 | 2,400 | - | 424,610
P2 | - | 89,758 | - | 89,758
P3 | - | 24,123 | - | 24,123
PF | - | 12,146 | - | 12,146
NP | - | - | 5,316 | 5,316
NF | - | - | 33,223 | 33,223
NR | - | - | 5,601 | 5,601
Gross carrying amount | 422,210 | 128,427 | 44,140 | 594,777
Loss allowance | (712) | (412) | (6,362) | (7,486)
Carrying amount | 421,498 | 128,015 | 37,778 | 587,291

Personal |  |  |  |
P1 | 277,054 | 942 | - | 277,996
P2 | - | 164 | - | 164
P3 | - | 367 | - | 367
PF | - | 1,259 | - | 1,259
NP | - | - | 1,199 | 1,199
NF | - | - | 5,087 | 5,087
NR | - | - | 261 | 261
Gross carrying amount | 277,054 | 2,732 | 6,547 | 286,333
Loss allowance | (268) | (34) | (632) | (934)
Carrying amount | 276,786 | 2,698 | 5,915 | 285,399

Total |  |  |  |
P1 | 699,264 | 3,342 | - | 702,606
P2 | - | 89,922 | - | 89,922
P3 | - | 24,490 | - | 24,490
PF | - | 13,405 | - | 13,405
NP | - | - | 6,515 | 6,515
NF | - | - | 38,310 | 38,310
NR | - | - | 5,862 | 5,862
Gross carrying amount | 699,264 | 131,159 | 50,687 | 881,110
Loss allowance | (980) | (446) | (6,994) | (8,420)
Carrying amount | 698,284 | 130,713 | 43,693 | 872,690

As at 31 December 2025, the Bank’s undrawn commitments to lend amounted to €356,793,000 (2024:
€292,754,000) and predominantly comprise of sanctioned but not yet drawn facilities which are classified
as ‘Stage 1’ (12-month ECL) upon drawdown by customers. Undrawn facilities in respect of existing ‘Stage
2’ and ‘Stage 3’ (Lifetime ECL) facilities as at 31 December 2025 were €25,191,000 (2024: €11,642,000) and
€16,000 (2024: €689,000) respectively. ECL allowances on undrawn commitments specifically connected
to revolving credit facilities to lend as at 31 December 2025 amounted to €22,000 (2024: €71,000).
Contingent liabilities as at 31 December 2025 amounting to €22,055,000 (2024: €19,827,000) are mainly
classified as ‘Stage 1’ (12-month ECL) by the Bank. ECL allowances on contingent liabilities as at 31
December 2025 amounted to €11,000 (2024: €12,000).
As at 31 December 2025 and 2024, there were no purchased or originated credit-impaired assets.
104
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The following table analyses the Bank’s impaired loans and advances, gross of impairment allowances, by
industry sector:

| 2025 | 2024
| € 000 | € 000
Manufacturing | 148 | 156
Trade | 4,147 | 4,794
Property and construction | 33,511 | 37,516
Personal, professional and home loans | 6,405 | 6,574
Financial institutions | 1,453 | 1,313
Other sectors | 258 | 334
Gross impaired advances to customers | 45,922 | 50,687

The following table provides a detailed analysis of the credit quality of the Bank’s lending portfolio as at 31
December 2025:

| Non-forborne | Forborne |
| exposures | exposures | Total
| 2025 | 2025 | 2025
| € 000 | € 000 | € 000
Performing - Stage 1 |  |  |
Loans which are not past due | 722,096 | - | 722,096
Loans which are past due up to 30 days | 15,939 | - | 15,939
| 738,035 | - | 738,035
Performing - Stage 2 |  |  |
Loans which are not past due |  |  |
P1 | 6,460 | - | 6,460
P2 | 119,073 | - | 119,073
P3 | 2,926 | - | 2,926
PF | - | 16,143 | 16,143
Loans which are past due up to 90 days |  |  |
Past due between 1 and 30 days | 4,478 | 300 | 4,778
Past due between 31 to 90 days | 3,139 | - | 3,139
| 136,076 | 16,443 | 152,519
Non-performing - Stage 3 |  |  |
Past due loans by 90 days or more and credit-impaired loans | 7,813 | 38,109 | 45,922
Gross loans and advances | 881,924 | 54,552 | 936,476
Expected credit losses |  |  |
12-month ECL | (678) | - | (678)
Lifetime ECL | (4,580) | (2,098) | (6,678)
Net loans and advances | 876,666 | 52,454 | 929,120

105
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Interest income recognised during the financial year ended 31 December 2025 in respect of forborne
exposures amounted to €2,287,000 (2024: €2,793,000).
The following table provides a detailed analysis of the credit quality of the Bank’s lending portfolio as at 31
December 2024:

| Non-forborne | Forborne |
| exposures | exposures | Total
| 2024 | 2024 | 2024
| € 000 | € 000 | € 000
Performing - Stage 1 |  |  |
Loans which are not past due | 689,885 | - | 689,885
Loans which are past due up to 30 days | 9,379 | - | 9,379
| 699,264 | - | 699,264
Performing - Stage 2 |  |  |
Loans which are not past due |  |  |
P1 | 994 | - | 994
P2 | 81,011 | - | 81,011
P3 | 24,265 | - | 24,265
PF | - | 12,567 | 12,567
Loans which are past due up to 90 days |  |  |
Past due between 1 and 30 days | 4,155 | 838 | 4,993
Past due between 31 to 90 days | 7,329 | - | 7,329
| 117,754 | 13,405 | 131,159
Non-performing – Stage 3 |  |  |
Past due loans by 90 days or more and credit-impaired loans | 6,515 | 38,310 | 44,825
Past due loans by 90 days or more and credit-impaired loans |  |  |
that are subject to judicial action | 5,629 | 233 | 5,862
| 12,144 | 38,543 | 50,687
Gross loans and advances | 829,162 | 51,948 | 881,110
Expected credit losses |  |  |
12-month ECL | (980) | - | (980)
Lifetime ECL | (5,224) | (2,216) | (7,440)
Net loans and advances | 822,958 | 49,732 | 872,690

During 2020, the Bank participated in the Malta Development Bank COVID-19 Guarantee Scheme, whereby
the risk of newly originated loans under the scheme to viable businesses experiencing liquidity pressures
resulting from the effects of the pandemic are mitigated by a government guarantee.
In this respect, as at 31 December 2025, gross loans subject to the Malta Development Bank COVID-19
Guarantee Scheme amounted to €1.6 million (2024: €3.7 million), of which a maximum amount of €1.4
million (2024: €3.4 million) is considered guaranteed, though subject to an overall capping of €0.7 million
(2024: €1.7 million). As at 31 December 2025, originated gross loans, under this scheme, classified as Stage
1, Stage 2 and Stage 3 amounted to €1.4 million (2024: €2.4 million), €0.1 million (2024: €1.1 million) and
€0.1 million (2024: €0.2 million) respectively.
The total ECL allowance in respect of loans subject to the Malta Development Bank COVID-19 Guarantee
Scheme was insignificant.
106
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.9 Modification of financial assets
The contractual terms of a loan may be revised for a number of reasons, including changes in market
conditions, customer retention and other factors that are not related to the credit quality of a customer.
Forbearance measures comprise concessions made on the contractual terms of a loan in response to a
customer’s financial difficulties. The Group categorises loans on which concessions have been granted
under conditions of financial difficulties as ‘forborne loans’ when their contractual payment terms have
been revised, because of significant concerns about the customer’s ability to meet contractual payments
when due.
When considering whether there is significant concern regarding a customer’s ability to meet contractual
loan repayments when due, the Group assesses the customer’s delinquency status, account behaviour,
repayment history, current financial situation and continued ability to repay.
If the customer is not meeting contractual repayments or it is evident that the client will be unable to do
so without the renegotiation, there will be a significant concern regarding the ability to meet contractual
payments. Indicators of significant concerns regarding a borrower’s ability to pay include:
• the customer is currently in default on any of its debt;
• the customer has declared or is in the process of declaring bankruptcy or entering into a similar process;
• there is significant doubt as to whether the customer will continue to be a going concern; and
• the Group forecasts that the customer’s entity-specific cash flows will be insufficient to service the debt
(both interest and principal) in accordance with the contractual terms of the existing agreement
through maturity.
A range of forbearance measures are employed by the Group in order to improve the management of
customer relationships, maximise collection opportunities and, if possible, avoid default or call-in of
facilities. They include extended payment terms, a reduction in principal repayments, the deferral of call-
in of facilities and other forms of loan modifications. The Group’s policies and procedures in this area allow
the Group to provide a customer with terms and conditions that are more favourable than those provided
initially. Loan forbearance is only granted in situations where the customer has shown a willingness to repay
the loan and is expected to be able to meet the revised obligations. The Group’s credit risk management
policies set out restrictions on the number and frequency of forbearance measures and the minimum
period an account must have been opened before any forbearance measure can be considered.
For the purposes of determining whether changes to a customer’s agreement should be treated as
forbearance the following types of modification could be regarded as concessionary in cases where the
customer is in financial difficulty:
• reduction of the stated interest rate for the remaining original life of the debt;
• extension of the maturity date or dates at a stated interest rate lower than the current market rate for
new debt with similar risk;
• extension of maturity date or dates without any changes to the interest rate;
• reduction of the face amount or maturity amount of the debt; and
• reduction of accrued interest.
Term extension is the most common type of modification granted by the Group. Other types of concession,
namely transfer to an interest-only arrangement or interest rate changes, occur less often.
In assessing whether forbearance is a sustainable strategy, the customer’s entire exposures are reviewed
and the customer’s ability to meet the terms in relation to the revised obligations and other unchanged
credit facilities is considered. In all cases, forbearance is only granted when the customer is expected to be
able to meet the revised terms. When considering acceptable modified terms the Group considers the
ability of the customer to be able to service the revised interest payments as a necessity. When principal
payment modifications are utilised, the Group requires the customer to be able to comply with the revised
terms as a necessary pre-condition for the restructuring to proceed.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk.
107
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The risk of default of modified assets is assessed at the reporting date and compared with the risk under
the original terms at initial recognition.
When the modification is not substantial it does not result in derecognition of the original asset (refer to
note 1.4.5).
The Group monitors the subsequent performance of forborne loans and may determine that the credit risk
has significantly improved after restructuring:
• modified assets are moved from ‘Stage 3’ (Lifetime ECL) to ‘Stage 2’ (Lifetime ECL) only if they have
performed in accordance with the new terms for 12 consecutive months;
• modified assets are moved from ‘Stage 3’ (Lifetime ECL) to ‘Stage 1’ (12-month ECL) only if they have
performed in accordance with the new terms for 36 consecutive months or more; and
• modified assets are moved from ‘Stage 2’ (Lifetime ECL) to ‘Stage 1’ (12-month ECL) only if they have
performed in accordance with the new terms for 24 consecutive months or more.
A non-performing forborne exposure is categorised as non-forborne upon the lapse of 36 consecutive
months of performance in accordance with the new terms.
The gross carrying amount of the assets subject to modifications described above, not considered as
forbearance activities, as at 31 December 2025 amounted to €11,940,000 (2024: €14,687,000).
The Group continues to monitor if there is a subsequent significant increase in credit risk in relation to
forborne loans that moved from Stage 3 (Lifetime ECL) or ‘Stage 2’ (Lifetime ECL) to ‘Stage 1’.
The movement in the carrying amount of forborne loans and advances, before expected credit loss
allowances, is analysed below:

| Forborne exposures |
| 2025 | 2024
| € 000 | € 000
At 1 January | 51,948 | 61,441
Loans to which forbearance measures have been extended during the year | 16,001 | 15,633
Repayments | (1,457) | (10,439)
Retired from forborne | (11,940) | (14,687)
At 31 December | 54,552 | 51,948

Forborne loans, gross of expected credit allowances, are analysed by industry sector as follows:

| 2025 | 2024
| € 000 | € 000
Trade | 4,138 | 7,152
Property and construction | 30,814 | 37,176
Personal, professional and home loans | 5,377 | 6,346
Financial institutions | 14,223 | 1,013
Other sectors | - | 261
| 54,552 | 51,948

As at 31 December 2025 and 2024, forborne loans mainly comprised of exposures to customers based in
Malta.
108
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.10 Loss allowances
Reconciliation of 12-month and lifetime ECL provision
The loss allowance recognised in the period is impacted by a variety of factors, as described below:
• Transfers between ‘Stage 1’ and ‘Stages 2’ or ‘3’ due to financial instruments experiencing significant
increases (or decreases) of credit risk or becoming credit-impaired (or cured) in the period, and the
consequent ‘step up’ (or ‘step down’) between 12-month and Lifetime ECL;
• Additional allowances for new financial instruments recognised during the period, as well as releases
for financial instruments derecognised in the period upon full repayment;
• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from
regular refreshing of inputs to models;
• Impacts on the measurement of ECL due to changes made to models and assumptions;
• Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis;
• Foreign exchange retranslations for assets denominated in foreign currencies and other movements;
and
• Financial assets written off during the period and reversal of allowances related to assets that were
written off.
109
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

The following tables explain the changes in the Group’s loss allowance between the beginning and the end |  |  |  |
of the annual period: |  |  |  |
|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Debt securities measured at FVOCI |  |  |  |
Loss allowance as at 1 January 2025 | 224 | - | - | 224
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (5) | - | - | (5)
Total net income statement credit during the year | (5) | - | - | (5)
Loss allowance as at 31 December 2025 | 219 | - | - | 219
Debt securities measured at amortised cost |  |  |  |
Loss allowance as at 1 January 2025 | 25 | - | - | 25
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (12) | - | - | (12)
Total net income statement credit during the year | (12) | - | - | (12)
Loss allowance as at 31 December 2025 | 13 | - | - | 13
Loans and advances to banks at amortised cost |  |  |  |
Loss allowance as at 1 January 2025 | 9 | - | - | 9
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (6) | - | - | (6)
Total net income statement credit during the year | (6) | - | - | (6)
Loss allowance as at 31 December 2025 | 3 | - | - | 3
Undrawn commitments |  |  |  |
Loss allowance as at 1 January 2025 | 70 | - | 1 | 71
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (70) | - | 21 | (49)
Total net income statement (credit)/charge during the year | (70) | - | 21 | (49)
Loss allowance as at 31 December 2025 | - | - | 22 | 22
Contingent liabilities |  |  |  |
Loss allowance as at 1 January 2025 | 11 | - | - | 11
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | - | - | - | -
Total net income statement (credit)/charge during the year | - | - | - | -
Loss allowance as at 31 December 2025 | 11 | - | - | 11

110
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2025 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Corporate and commercial |  |  |  |
Loss allowance as at 1 January 2025 | 714 | 411 | 6,361 | 7,486
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (65) | 65 | - | -
Transfer from Stage 2 to Stage 1 | 17 | (17) | - | -
Transfer from Stage 3 to Stage 2 | - | 9 | (9) | -
Net remeasurement of ECL arising from stage |  |  |  |
transfers | (13) | 165 | - | 152
Total remeasurement of loss allowance arising |  |  |  |
from transfers in stages | (61) | 222 | (9) | 152
New financial assets originated | 139 | 157 | 44 | 340
Changes to risk parameters (model inputs: |  |  |  |
PDs/LGDs/EADs)* | (361) | (144) | 326 | (179)
Financial assets derecognised | (32) | (7) | (775) | (814)
Total net income statement (credit)/charge |  |  |  |
during the year | (315) | 228 | (414) | (501)
Other movements |  |  |  |
Write-offs | - | - | (386) | (386)
Unwinding of discount | - | - | 174 | 174
Loss allowance as at 31 December 2025 | 399 | 639 | 5,735 | 6,773

111
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2025 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Personal |  |  |  |
Loss allowance as at 1 January 2025 | 265 | 35 | 634 | 934
Transfers of financial instruments |  |  |  |
Transfer from Stage 2 to Stage 1 | 5 | (5) | - | -
Transfer from Stage 3 to Stage 1 | 82 | - | (82) | -
Transfer from Stage 3 to Stage 2 | - | 18 | (18) | -
Net remeasurement of ECL arising from stage |  |  |  |
transfers | (86) | 79 | 12 | 5
Total remeasurement of loss allowance arising |  |  |  |
from transfers in stages | 1 | 92 | (88) | 5
New financial assets originated | 93 | - | 2 | 95
Changes to risk parameters (model inputs: |  |  |  |
PDs/LGDs/EADs)* | (68) | (5) | (649) | (722)
Financial assets derecognised | (12) | (7) | (1) | (20)
Total net income statement charge/(credit) |  |  |  |
during the year | 14 | 80 | (736) | (642)
Other movements |  |  |  |
Unwinding of discount | - | - | 291 | 291
Loss allowance as at 31 December 2025 | 279 | 115 | 189 | 583

112
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2025 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Total |  |  |  |
Loss allowance as at 1 January 2025 | 979 | 446 | 6,995 | 8,420
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (65) | 65 | - | -
Transfer from Stage 2 to Stage 1 | 22 | (22) | - | -
Transfer from Stage 3 to Stage 1 | 82 | - | (82) | -
Transfer from Stage 3 to Stage 2 | - | 27 | (27) | -
Net remeasurement of ECL arising from stage |  |  |  |
transfers | (99) | 244 | 12 | 157
Total remeasurement of loss allowance arising |  |  |  |
from transfers in stages | (60) | 314 | (97) | 157
New financial assets originated | 232 | 157 | 46 | 435
Changes to risk parameters (model inputs: |  |  |  |
PDs/LGDs/EADs)* | (429) | (149) | (323) | (901)
Financial assets derecognised | (44) | (14) | (776) | (834)
Total net income statement (credit)/charge during the year | (301) | 308 | (1,150) | (1,143)
Other movements |  |  |  |
Write-offs | - | - | (386) | (386)
Unwinding of discount | - | - | 465 | 465
Loss allowance as at 31 December 2025 | 678 | 754 | 5,924 | 7,356

The movements reflected within the line item “Changes to risk parameters” have been analysed and
described in notes 2.3.4.3, 2.3.4.4 and 2.3.9.
*The movements reflected within the line item “Changes to risk parameters” reflect changes in ECL due to
improvements in macroeconomic variables impacting Stage 1 and Stage 2 PDs.
113
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

The following tables explain the changes in the Group’s loss allowance between the beginning and the end |  |  |  |
of the annual period: |  |  |  |
|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12 -month ECL | Lifetime | Lifetime | Total
|  | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Debt securities measured at FVOCI |  |  |  |
Loss allowance as at 1 January 2024 | 471 | - | - | 471
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (247) | - | - | (247)
Total net income statement credit during the year | (247) | - | - | (247)
Loss allowance as at 31 December 2024 | 224 | - | - | 224
Debt securities measured at amortised cost |  |  |  |
Loss allowance as at 1 January 2024 | 72 | - | - | 72
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (47) | - | - | (47)
Total net income statement credit during the year | (47) | - | - | (47)
Loss allowance as at 31 December 2024 | 25 | - | - | 25
Loans and advances to banks at amortised cost |  |  |  |
Loss allowance as at 1 January 2024 | - | - | - | -
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | 9 | - | - | 9
Total net income statement charge during the year | 9 | - | - | 9
Loss allowance as at 31 December 2024 | 9 | - | - | 9
Undrawn commitments |  |  |  |
Loss allowance as at 1 January 2024 | - | 5 | 1 | 6
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | 70 | (5) | - | 65
Total net income statement charge/(credit) during the year | 70 | (5) | - | 65
Loss allowance as at 31 December 2024 | 70 | - | 1 | 71
Contingent liabilities |  |  |  |
Loss allowance as at 1 January 2024 | 23 | - | - | 23
Changes to risk parameters (model inputs: PDs/LGDs/EADs) | (11) | - | - | (11)
Total net income statement credit during the year | (11) | - | - | (11)
Loss allowance as at 31 December 2024 | 12 | - | - | 12

114
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2024 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Corporate and commercial |  |  |  |
Loss allowance as at 1 January 2024 | 1,270 | 1,020 | 7,858 | 10,148
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (14) | 14 | - | -
Transfer from Stage 2 to Stage 1 | 22 | (22) | - | -
Transfer from Stage 2 to Stage 3 | - | (483) | 483 | -
Transfer from Stage 3 to Stage 2 | - | 31 | (31) | -
Net remeasurement of ECL arising from stage |  |  |  |
transfers | (19) | (28) | 96 | 49
Total remeasurement of loss allowance arising |  |  |  |
from transfers in stages | (11) | (488) | 548 | 49
New financial assets originated | 441 | 38 | 1 | 480
Changes to risk parameters (model inputs: |  |  |  |
PDs/LGDs/EADs)* | (733) | (75) | 366 | (442)
Financial assets derecognised | (253) | (84) | (231) | (568)
Total net income statement (credit)/charge |  |  |  |
during the year | (556) | (609) | 684 | (481)
Other movements |  |  |  |
Write-offs | - | - | (2,379) | (2,379)
Unwinding of discount | - | - | 198 | 198
Loss allowance as at 31 December 2024 | 714 | 411 | 6,361 | 7,486

115
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2024 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime | Total
| ECL | ECL | ECL |
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Personal |  |  |  |
Loss allowance as at 1 January 2024 | 310 | 867 | 126 | 1,303
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (1) | 1 | - | -
Transfer from Stage 1 to Stage 3 | (1) | - | 1 | -
Transfer from Stage 2 to Stage 1 | 8 | (8) | - | -
Transfer from Stage 2 to Stage 3 | - | (826) | 826 | -
Transfer from Stage 3 to Stage 1 | 10 | - | (10) | -
Net remeasurement of ECL arising from stage |  |  |  |
transfers | (17) | 8 | 53 | 44
Total remeasurement of loss allowance arising |  |  |  |
from transfers in stages | (1) | (825) | 870 | 44
New financial assets originated | 151 | - | 90 | 241
Changes to risk parameters (model inputs: |  |  |  |
PDs/LGDs/EADs)* | (187) | (7) | (396) | (590)
Financial assets derecognised | (8) | - | (64) | (72)
Total net income statement (credit)/charge |  |  |  |
during the year | (45) | (832) | 500 | (377)
Other movements |  |  |  |
Unwinding of discount | - | - | 8 | 8
Loss allowance as at 31 December 2024 | 265 | 35 | 634 | 934

116
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2024
Stage 1
Stage 2
Stage 3
12-month
Lifetime
Lifetime
Total
ECL
ECL
ECL
€ 000
€ 000
€ 000
€ 000
Loans and advances to customers at amortised cost
Total
Loss allowance as at 1 January 2024
1,580
1,887
7,984
11,451
Transfers of financial instruments
Transfer from Stage 1 to Stage 2
(15)
15
-
-
Transfer from Stage 1 to Stage 3
(1)
-
1
-
Transfer from Stage 2 to Stage 1
30
(30)
-
-
Transfer from Stage 2 to Stage 3
-
(1,309)
1,309
-
Transfer from Stage 3 to Stage 1
10
-
(10)
-
Transfer from Stage 3 to Stage 2
-
31
(31)
-
Net remeasurement of ECL arising from stage
transfers
(36)
(20)
149
93
Total remeasurement of loss allowance arising
from transfers in stages
(12)
(1,313)
1,418
93
New financial assets originated
592
38
91
721
Changes to risk parameters (model inputs:
PDs/LGDs/EADs)*
(920)
(82)
(30)
(1,032)
Financial assets derecognised
(261)
(84)
(295)
(640)
Total net income statement (credit)/charge during
the year
(601)
(1,441)
1,184
(858)
Other movements
Write-offs
-
-
(2,379)
(2,379)
Unwinding of discount
-
-
206
206
Loss allowance as at 31 December 2024
979
446
6,995
8,420
The movements reflected within the line item “Changes to risk parameters” have been analysed and
described in notes 2.3.4.3, 2.3.4.4 and 2.3.9.
*The movements reflected within the line item “Changes to risk parameters” reflect changes in ECL due to
improvements in macroeconomic variables impacting Stage 1 and Stage 2 PDs.
117
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The unwinding of discount on ‘Stage 3’ financial assets is reported within 'Interest Income' so that interest
income is recognised on the amortised cost basis (after deducting the ECL allowance).
Remeasurement of loss allowances arising from foreign-exchange and other movements were not
considered significant.
Changes in the gross carrying amount that contributed to changes in loss allowance
The following table explains changes in the gross carrying amount of the Group’s financial assets to help
demonstrate their significance to the changes in the loss allowance for the same portfolios as highlighted
above:

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta and treasury |  |  |  |
bills |  |  |  |
Gross carrying amount as at 1 January 2025 | 146,872 | - | - | 146,872
New financial assets originated | 3,920,284 | - | - | 3,920,284
Financial assets derecognised | (3,892,234) | - | - | (3,892,234)
Gross carrying amount as at 31 December 2025 | 174,922 | - | - | 174,922
Debt securities measured at FVOCI |  |  |  |
Gross carrying amount as at 1 January 2025 | 178,828 | - | - | 178,828
Financial assets derecognised | (9,647) | - | - | (9,647)
Fair value and other movements | 1,784 | - | - | 1,784
Gross carrying amount as at 31 December 2025 | 170,965 | - | - | 170,965
Debt securities measured at amortised cost |  |  |  |
Gross carrying amount as at 1 January 2025 | 21,132 | - | - | 21,132
New financial assets originated | 13,596 | - | - | 13,596
Other movements | (825) | - | - | (825)
Gross carrying amount as at 31 December 2025 | 33,903 | - | - | 33,903
Loans and advances to banks at amortised cost |  |  |  |
Gross carrying amount as at 1 January 2025 | 46,198 | - | - | 46,198
New financial assets originated | 5,110,967 | - | - | 5,110,967
Financial assets derecognised | (5,094,739) | - | - | (5,094,739)
Gross carrying amount as at 31 December 2025 | 62,426 | - | - | 62,426

118
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2025
Stage 1
Stage 2
Stage 3
12-month
Lifetime
Lifetime
ECL
ECL
ECL
Total
€ 000
€ 000
€ 000
€ 000
Loans and advances to customers at
amortised cost
Corporate and commercial
Gross carrying amount as at 1 January 2025
422,211
128,426
44,140
594,777
Transfers of financial instruments
Transfer from Stage 1 to Stage 2
(42,530)
42,530
-
-
Transfer from Stage 2 to Stage 1
24,419
(24,419)
-
-
Transfer from Stage 2 to Stage 3
-
(94)
94
-
Transfer from Stage 3 to Stage 2
-
1,265
(1,265)
-
Total changes in gross carrying amounts arising from
transfers in stages
(18,111)
19,282
(1,171)
-
New financial assets originated
78,132
14,487
191
92,810
Changes in gross carrying amount in respect of facilities
present as at 1 January 2025
(29,609)
92
883
(28,634)
Financial assets derecognised
(32,055)
(13,556)
(4,110)
(49,721)
Write-offs
-
-
(386)
(386)
Total net change during the year
(1,643)
20,305
(4,593)
14,069
Gross carrying amount as at 31 December 2025
420,568
148,731
39,547
608,846
119
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Personal |  |  |  |
Gross carrying amount as at 1 January 2025 | 277,046 | 2,732 | 6,547 | 286,325
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (624) | 624 | - | -
Transfer from Stage 1 to Stage 3 | (175) | - | 175 | -
Transfer from Stage 2 to Stage 1 | 115 | (115) | - | -
Transfer from Stage 3 to Stage 1 | 82 | - | (82) | -
Transfer from Stage 3 to Stage 2 | - | 132 | (132) | -
Total changes in gross carrying amounts arising from transfers in stages | (602) | 641 | (39) | -
New financial assets originated | 57,442 | 622 | 2 | 58,066
Changes in gross carrying amount in respect of facilities |  |  |  |
present as at 1 January 2025 | (3,130) | 291 | (134) | (2,973)
Financial assets derecognised | (13,292) | (504) | (1) | (13,797)
Total net change during the year | 40,418 | 1,050 | (172) | 41,296
Gross carrying amount as at 31 December 2025 | 317,464 | 3,782 | 6,375 | 327,621

120
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2025 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Total |  |  |  |
Gross carrying amount as at 1 January 2025 | 699,257 | 131,158 | 50,687 | 881,102
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (43,154) | 43,154 | - | -
Transfer from Stage 1 to Stage 3 | (175) | - | 175 | -
Transfer from Stage 2 to Stage 1 | 24,534 | (24,534) | - | -
Transfer from Stage 2 to Stage 3 | - | (94) | 94 | -
Transfer from Stage 3 to Stage 1 | 82 | - | (82) | -
Transfer from Stage 3 to Stage 2 | - | 1,397 | (1,397) | -
Total changes in gross carrying amounts arising from transfers in stages | (18,713) | 19,923 | (1,210) | -
New financial assets originated | 135,574 | 15,109 | 193 | 150,876
Changes in gross carrying amount in respect of facilities |  |  |  |
present as at 1 January 2025 | (32,739) | 383 | 749 | (31,607)
Financial assets derecognised | (45,347) | (14,060) | (4,111) | (63,518)
Write-offs | - | - | (386) | (386)
Total net change during the year | 38,775 | 21,355 | (4,765) | 55,365
Gross carrying amount as at 31 December 2025 | 738,032 | 152,513 | 45,922 | 936,467

121
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta and treasury bills |  |  |  |
Gross carrying amount as at 1 January 2024 | 138,157 | - | - | 138,157
New financial assets originated | 6,016,795 | - | - | 6,016,795
Financial assets derecognised | (6,008,080) | - | - | (6,008,080)
Gross carrying amount as at 31 December 2024 | 146,872 | - | - | 146,872
Debt securities measured at FVOCI |  |  |  |
Gross carrying amount as at 1 January 2024 | 199,965 | - | - | 199,965
Financial assets derecognised | (29,283) | - | - | (29,283)
Fair value and other movements | 8,146 | - | - | 8,146
Gross carrying amount as at 31 December 2024 | 178,828 | - | - | 178,828
Debt securities measured at amortised cost |  |  |  |
Gross carrying amount as at 1 January 2024 | 8,357 | - | - | 8,357
New financial assets originated | 12,542 | - | - | 12,542
Other movements | 233 | - | - | 233
Gross carrying amount as at 31 December 2024 | 21,132 | - | - | 21,132
Loans and advances to banks at amortised cost |  |  |  |
Gross carrying amount as at 1 January 2024 | 38,139 | - | - | 38,139
New financial assets originated | 4,319,694 | - | - | 4,319,694
Financial assets derecognised | (4,311,635) | - | - | (4,311,635)
Gross carrying amount as at 31 December 2024 | 46,198 | - | - | 46,198

122
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Corporate and commercial |  |  |  |
Gross carrying amount as at 1 January 2024 | 379,074 | 122,035 | 27,943 | 529,052
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (43,190) | 43,190 | - | -
Transfer from Stage 1 to Stage 3 | (2,407) | - | 2,407 | -
Transfer from Stage 2 to Stage 1 | 13,310 | (13,310) | - | -
Transfer from Stage 2 to Stage 3 | - | (27,511) | 27,511 | -
Transfer from Stage 3 to Stage 2 | - | 1,951 | (1,951) | -
Total changes in gross carrying amounts arising from transfers in stages | (32,287) | 4,320 | 27,967 | -
New financial assets originated | 116,054 | 15,156 | 2,004 | 133,214
Changes in gross carrying amount in respect of facilities |  |  |  |
present as at 1 January 2024 | (17,735) | (4,505) | (6,352) | (28,592)
Financial assets derecognised | (22,895) | (8,580) | (4,801) | (36,276)
Write-offs | - | - | (2,621) | (2,621)
Total net change during the year | 43,137 | 6,391 | 16,197 | 65,725
Gross carrying amount as at 31 December 2024 | 422,211 | 128,426 | 44,140 | 594,777

123
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  | 2024 |  |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Personal |  |  |  |
Gross carrying amount as at 1 January 2024 | 232,239 | 7,189 | 1,275 | 240,703
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (789) | 789 | - | -
Transfer from Stage 1 to Stage 3 | (420) | - | 420 | -
Transfer from Stage 2 to Stage 1 | 799 | (799) | - | -
Transfer from Stage 2 to Stage 3 | - | (3,868) | 3,868 | -
Transfer from Stage 3 to Stage 1 | 11 | - | (11) | -
Total changes in gross carrying amounts arising from transfers in stages | (399) | (3,878) | 4,277 | -
New financial assets originated | 62,704 | 3 | 1,391 | 64,098
Changes in gross carrying amount in respect of facilities |  |  |  |
present as at 1 January 2024 | (10,219) | (501) | 125 | (10,595)
Financial assets derecognised | (7,279) | (81) | (521) | (7,881)
Total net change during the year | 44,807 | (4,457) | 5,272 | 45,622
Gross carrying amount as at 31 December 2024 | 277,046 | 2,732 | 6,547 | 286,325

124
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | 2024 |
| Stage 1 | Stage 2 | Stage 3 |
| 12-month | Lifetime | Lifetime |
| ECL | ECL | ECL | Total
| € 000 | € 000 | € 000 | € 000
Loans and advances to customers at amortised cost |  |  |  |
Total |  |  |  |
Gross carrying amount as at 1 January 2024 | 611,313 | 129,224 | 29,218 | 769,755
Transfers of financial instruments |  |  |  |
Transfer from Stage 1 to Stage 2 | (43,979) | 43,979 | - | -
Transfer from Stage 1 to Stage 3 | (2,827) | - | 2,827 | -
Transfer from Stage 2 to Stage 1 | 14,109 | (14,109) | - | -
Transfer from Stage 2 to Stage 3 | - | (31,379) | 31,379 | -
Transfer from Stage 3 to Stage 1 | 11 | - | (11) | -
Transfer from Stage 3 to Stage 2 | - | 1,951 | (1,951) | -
Total changes in gross carrying amounts arising from transfers in stages | (32,686) | 442 | 32,244 | -
New financial assets originated | 178,758 | 15,159 | 3,395 | 197,312
Changes in gross carrying amount in respect of facilities |  |  |  |
present as at 1 January 2024 | (27,954) | (5,006) | (6,227) | (39,187)
Financial assets derecognised | (30,174) | (8,661) | (5,322) | (44,157)
Write-offs | - | - | (2,621) | (2,621)
Total net change during the year | 87,944 | 1,934 | 21,469 | 111,347
Gross carrying amount as at 31 December 2024 | 699,257 | 131,158 | 50,687 | 881,102

Undrawn commitments to lend as at 31 December 2025 amounted to €355,682,000 (2024: €291,647,000)
and predominantly comprise of sanctioned but not yet drawn facilities which are classified as ‘Stage 1’ (12-
month ECL) upon drawdown by customers. Changes in gross carrying amount of undrawn commitments to
lend mainly relate to existing facilities drawn down by customers and new facilities sanctioned during 2025
and 2024.
Contingent liabilities as at 31 December 2025 amounting to €22,055,000 (2024: €19,827,000) are all
classified as ‘Stage 1’ (12-month ECL) by the Group. Changes in gross carrying amount of contingent
liabilities mainly related to the expiry or enforcement of existing financial guarantees and the issuance of
new financial guarantees during 2025 and 2024.
Changes in gross carrying amount arising from foreign-exchange and other movements were not significant.
2.3.11 Write-off policy
The Group writes off loans and advances to customers when it determines that these are uncollectible, it
has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of
recovery. This is generally the case when the Group determines that the borrower does not have assets or
sources of income that could generate sufficient cash flows to repay the amounts subject to the write-offs.
The Group may write-off financial assets that are still subject to enforcement activity. The Group still seeks
to recover amounts it is legally owed in full, but which have been partially written off due to no reasonable
expectation of full recovery.
The outstanding contractual amounts of assets written off during the year ended 31 December 2025
amounted to €386,000 (2024: €2,621,000).
125
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.12 Collateral
The Group employs a range of policies and practices to mitigate credit risk. The amount and type of
collateral required depends on an assessment of the credit risk of the counterparty. The Bank’s Board
established a policy regarding the acceptability of types of collateral and valuation parameters.
Longer-term finance and lending to corporate and commercial entities are generally secured; revolving
individual credit facilities are generally unsecured.
The main types of collateral obtained are as follows:
•
for corporate and commercial lending, charges over real estate properties, cash or securities; and
•
for personal lending (including home loans and consumer credit), mortgages over residential properties,
cash or securities.
Collateral held as security for financial assets other than loans and advances depends on the nature of the
instrument. Debt securities, treasury and other eligible bills are generally unsecured.
Management assesses the market value of collateral as part of the loan origination process. This assessment
is reviewed periodically through ongoing credit file reviews. The Group requests additional collateral in
accordance with the underlying agreement when necessary.
The Group's policies regarding obtaining collateral have not significantly changed during the reporting
period and there has been no significant change in the overall quality of the collateral held by the Group
since the prior period.
A portion of the Group’s financial assets has sufficiently low ‘loan-to-value’ (‘LTV’) ratios, which result in nil
loss allowance being recognised in accordance with the Group’s Expected Credit Loss model. As at 31
December 2025, the gross carrying amount of such financial assets is €594,667,000 (2024: €573,906,000).
The extendible value of the collateral is the lower of the fair value of a pledged asset for lending purposes
and the gross carrying amount of the secured loans.
The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it
becomes more likely that the Group will take possession of collateral to mitigate potential credit losses.
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses are
shown below:
126
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  |  | As at 31 December 2025 |
|  | Gross | Impairment | Carrying | Extendible value
|  | exposure | allowance | amount | of collateral held
Credit-impaired assets |  | € 000 | € 000 | € 000 | € 000
Corporate and commercial |  |  |  |  |
- | Overdrafts | 5,088 | 597 | 4,491 | 15,398
- Personal | Term loans | 33,892 | 5,094 | 28,798 | 154,297
- | Term loans | 1,498 | 85 | 1,413 | 3,466
- | Overdrafts | 1 | - | 1 | 6
Total credit-impaired assets |  | 40,479 | 5,776 | 34,703 | 173,167

|  |  |  | As at 31 December 2024 |
|  | Gross | Impairment | Carrying | Extendible value
|  | exposure | allowance | amount | of collateral held
Credit-impaired assets |  | € 000 | € 000 | € 000 | € 000
Corporate and commercial |  |  |  |  |
- | Overdrafts | 5,721 | 819 | 4,902 | 15,997
- Personal | Term loans | 37,988 | 5,497 | 32,491 | 165,445
- | Term loans | 1,467 | 178 | 1,289 | 3,029
Total credit-impaired assets |  | 45,176 | 6,494 | 38,682 | 183,471

Financial assets that are credit-impaired, but with no collateral held in this respect, are shown below:

|  |  | As at 31 December 2025 |
|  | Gross | Impairment | Carrying
|  | exposure | allowance | amount
|  | € 000 | € 000 | € 000
Credit-impaired assets |  |  |  |
Corporate and commercial |  |  |  |
- | Overdrafts | 563 | 43 | 520
- Personal | Credit cards | 4 | 1 | 3
- | Overdrafts | 101 | 80 | 21
- | Term loans | 4,756 | 5 | 4,751
- | Credit cards | 19 | 19 | -
Total credit-impaired assets |  | 5,443 | 148 | 5,295

127
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

|  |  | As at 31 December 2024 |
|  | Gross | Impairment | Carrying
|  | exposure | allowance | amount
|  | € 000 | € 000 | € 000
Credit-impaired assets |  |  |  |
Corporate and commercial |  |  |  |
- | Overdrafts | 428 | 46 | 382
- Personal | Credit cards | 3 | - | 3
- | Overdrafts | 110 | 86 | 24
- | Term loans | 4,957 | 355 | 4,602
- | Credit cards | 13 | 13 | -
Total credit-impaired assets |  | 5,511 | 500 | 5,011

It is the Bank's policy to dispose of properties acquired through judicial action in an orderly fashion. The
proceeds are used to reduce or repay the outstanding claim. In general, the Bank does not occupy
properties acquired through judicial action for business use.
128
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

The following tables show the distribution of LTV ratios for the Bank’s loans and advances to customers. |  |  |  |  |  |
Corporate and commercial |  |  |  |  |  |
| Non-forborne | Forborne |  | Non-forborne | Forborne |
| exposures | exposures | Total | exposures | exposures | Total
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Performing – Stage 1 |  |  |  |  |  |
Not collateralised | 37,552 | - | 37,552 | 57,785 | - | 57,785
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 300,867 | - | 300,867 | 265,156 | - | 265,156
51% to 75% LTV | 51,802 | - | 51,802 | 79,859 | - | 79,859
76% to 90% LTV | 11,138 | - | 11,138 | 6,925 | - | 6,925
91% to 100% LTV | 9,926 | - | 9,926 | 9,561 | - | 9,561
| 373,733 | - | 373,733 | 361,501 | - | 361,501
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 9,278 | - | 9,278 | 2,924 | - | 2,924
Total performing – Stage 1 | 420,563 | - | 420,563 | 422,210 | - | 422,210
Underperforming – Stage 2 |  |  |  |  |  |
Not collateralised | 11,482 | 12 | 11,494 | 2,531 | - | 2,531
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 97,490 | 3,084 | 100,574 | 81,210 | 4,965 | 86,175
51% to 75% LTV | 19,226 | - | 19,226 | 12,065 | 6,876 | 18,941
76% to 90% LTV | 2,395 | - | 2,395 | 4,968 | - | 4,968
91% to 100% LTV | - | - | - | 417 | - | 417
| 119,111 | 3,084 | 122,195 | 98,660 | 11,841 | 110,501
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 1,847 | 13,200 | 15,047 | 15,089 | 306 | 15,395
Total underperforming – Stage 2 | 132,440 | 16,296 | 148,736 | 116,280 | 12,147 | 128,427
Non-performing – Stage 3 |  |  |  |  |  |
Not collateralised | 563 | 3 | 566 | 427 | 4 | 431
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 843 | 28,173 | 29,016 | 1,161 | 27,450 | 28,611
51% to 75% LTV | 1,023 | 4,703 | 5,726 | 4,151 | 5,769 | 9,920
76% to 90% LTV | 10 | - | 10 | 956 | - | 956
91% to 100% LTV | 1,035 | - | 1,035 | 31 | 233 | 264
| 2,911 | 32,876 | 35,787 | 6,299 | 33,452 | 39,751
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 3,194 | - | 3,194 | 3,958 | - | 3,958
Total non-performing – Stage 3 | 6,668 | 32,879 | 39,547 | 10,684 | 33,456 | 44,140
At 31 December | 559,671 | 49,175 | 608,846 | 549,174 | 45,603 | 594,777

129
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

Personal |  |  |  |  |  |
| Non-forborne | Forborne |  | Non-forborne | Forborne |
| exposures | exposures | Total | exposures | exposures | Total
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Performing – Stage 1 |  |  |  |  |  |
Not collateralised | 9,272 | - | 9,272 | 14,408 | - | 14,408
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 94,612 | - | 94,612 | 77,548 | - | 77,548
51% to 75% LTV | 98,787 | - | 98,787 | 72,340 | - | 72,340
76% to 90% LTV | 110,110 | - | 110,110 | 108,026 | - | 108,026
91% to 100% LTV | 3,878 | - | 3,878 | 3,281 | - | 3,281
| 307,387 | - | 307,387 | 261,195 | - | 261,195
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 813 | - | 813 | 1,451 | - | 1,451
Total performing – Stage 1 | 317,472 | - | 317,472 | 277,054 | - | 277,054
Underperforming – Stage 2 |  |  |  |  |  |
Not collateralised | 210 | - | 210 | 122 | - | 122
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 2,571 | - | 2,571 | 641 | 988 | 1,629
51% to 75% LTV | 123 | 147 | 270 | - | 270 | 270
76% to 90% LTV | 732 | - | 732 | 711 | - | 711
| 3,426 | 147 | 3,573 | 1,352 | 1,258 | 2,610
Total underperforming – Stage 2 | 3,636 | 147 | 3,783 | 1,474 | 1,258 | 2,732
Non-performing – Stage 3 |  |  |  |  |  |
Not collateralised | 105 | 4,772 | 4,877 | 181 | 4,899 | 5,080
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 258 | 458 | 716 | 486 | 188 | 674
51% to 75% LTV | 569 | - | 569 | 185 | - | 185
76% to 90% LTV | 213 | - | 213 | 347 | - | 347
| 1,040 | 458 | 1,498 | 1,018 | 188 | 1,206
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | - | - | - | 261 | - | 261
Total non-performing – Stage 3 | 1,145 | 5,230 | 6,375 | 1,460 | 5,087 | 6,547
At 31 December | 322,253 | 5,377 | 327,630 | 279,988 | 6,345 | 286,333

130
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

Total |  |  |  |  |  |
| Non-forborne | Forborne |  | Non-forborne | Forborne |
| exposures | exposures | Total | exposures | exposures | Total
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Performing – Stage 1 |  |  |  |  |  |
Not collateralised | 46,824 | - | 46,824 | 72,193 | - | 72,193
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 395,479 | - | 395,479 | 342,704 | - | 342,704
51% to 75% LTV | 150,589 | - | 150,589 | 152,199 | - | 152,199
76% to 90% LTV | 121,248 | - | 121,248 | 114,951 | - | 114,951
91% to 100% LTV | 13,804 | - | 13,804 | 12,842 | - | 12,842
| 681,120 | - | 681,120 | 622,696 | - | 622,696
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 10,091 | - | 10,091 | 4,375 | - | 4,375
Total performing – Stage 1 | 738,035 | - | 738,035 | 699,264 | - | 699,264
Underperforming – Stage 2 |  |  |  |  |  |
Not collateralised | 11,692 | 12 | 11,704 | 2,653 | - | 2,653
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 100,061 | 3,084 | 103,145 | 81,851 | 5,953 | 87,804
51% to 75% LTV | 19,349 | 147 | 19,496 | 12,065 | 7,146 | 19,211
76% to 90% LTV | 3,127 | - | 3,127 | 5,679 | - | 5,679
91% to 100% LTV | - | - | - | 417 | - | 417
| 122,537 | 3,231 | 125,768 | 100,012 | 13,099 | 113,111
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 1,847 | 13,200 | 15,047 | 15,089 | 306 | 15,395
Total underperforming – Stage 2 | 136,076 | 16,443 | 152,519 | 117,754 | 13,405 | 131,159
Non-performing – Stage 3 |  |  |  |  |  |
Not collateralised | 668 | 4,775 | 5,443 | 608 | 4,903 | 5,511
Fully collateralised: |  |  |  |  |  |
Less than 50% LTV | 1,101 | 28,631 | 29,732 | 1,647 | 27,638 | 29,285
51% to 75% LTV | 1,592 | 4,703 | 6,295 | 4,336 | 5,769 | 10,105
76% to 90% LTV | 223 | - | 223 | 1,303 | - | 1,303
91% to 100% LTV | 1,035 | - | 1,035 | 31 | 233 | 264
| 3,951 | 33,334 | 37,285 | 7,317 | 33,640 | 40,957
Partially collateralised |  |  |  |  |  |
Greater than 100% LTV | 3,194 | - | 3,194 | 4,219 | - | 4,219
Total non-performing – Stage 3 | 7,813 | 38,109 | 45,922 | 12,144 | 38,543 | 50,687
At 31 December | 881,924 | 54,552 | 936,476 | 829,162 | 51,948 | 881,110

131
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.3.13 Trade and other receivables
The Bank’s subsidiary assesses the credit quality of its customers taking into account financial position, past
experience and other factors. It has policies in place to ensure that sales of products and services are
effected to customers with an appropriate credit history in the case of credit sales. The subsidiary monitors
the performance of these financial assets on a regular basis to identify expected and incurred collection
losses which are inherent in the subsidiary’s receivables taking into account historical experience in
collection of accounts receivable.
Standard credit terms are in place for individual clients, however, wherever possible, new corporate and
commercial customers are analysed individually for creditworthiness before the subsidiary’s standard
payment and service delivery terms and conditions are offered. The entity’s review includes external
creditworthiness databases when available. The subsidiary establishes an allowance for credit losses that
represents its estimate of both incurred and expected losses in respect of trade and other receivables. This
allowance represents expected credit losses (‘ECL’) against individual exposures.
The subsidiary applies the IFRS 9 simplified approach to measuring expected credit losses which uses a
lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade
receivables and contract assets have been grouped based on shared credit risk characteristics and the days
past due.
The expected loss rates are based on the payment profiles of sales over a period of time before the
reporting date and the corresponding historical credit losses experienced within this period. The historical
loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors
affecting the ability of the customers to settle the receivables.
The movement in provisions for impairment in respect of trade receivables is disclosed in note 16. Other
overdue trade receivables amount to €624,000 (2024: €309,000). Trade receivables amounting €106,000
(2024: €139,000) were overdue by at least three months, whereas €518,000 (2024: €170,000) were
overdue by at least nine months.
The subsidiary’s receivables, which are not impaired financial assets, are principally in respect of
transactions with customers for whom there is no recent history of default. Management does not expect
any material losses from non-performance by these customers.
2.3.14 Contingencies and commitments
Guarantees and standby letters of credit carry the same credit risk as loans. Documentary credits and
commercial letters of credit – which are written undertakings by the Bank on behalf of a customer
authorising a third party to draw drafts on the Bank up to a stipulated amount under specific terms and
conditions – are collateralised by the underlying shipments of goods to which they relate and therefore
carry less risk than a direct loan. Commitments to extend credit represent unused portions of
authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit
risk on commitments to extend credit, the Bank is potentially exposed to loss in an amount equal to the
total unused commitments. However, the likely amount of loss is less than the total unused commitments
as most commitments to extend credit are contingent upon customers maintaining specific credit
standards. These exposures are monitored in the same manner outlined above in respect of loans and
advances.
2.4 Market risk
The Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices. Market risks arise from open
positions in interest rate, currency and equity products, all of which are exposed to general and specific
market movements and changes in the level of volatility of market rates or prices such as interest rates,
credit spreads, foreign exchange rates and equity prices.
132
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Accordingly, market risk for the Group consists of three elements:
• Interest rate risk, which is the risk of losses because of changes in interest rates;
• Exchange rate risk, which is the risk of losses on the Group’s positions in foreign currency because of
changes in exchange rates; and
• Equity price risk, which is the risk of losses because of changes in investment prices.
2.4.1 Interest rate risk
Interest rate risk is the risk that the value or cash flows of a financial instrument will fluctuate due to
changes in market interest rates. Cash flow interest rate risk is the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk
is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest
rates. The Group, through its banking operations, takes on exposure to the effects of fluctuations in the
prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may
increase as a result of such changes but losses may occur in the event that unexpected movements arise.
The Bank’s operations are subject to the risk of interest rate fluctuations to the extent that interest-earning
assets and interest-bearing liabilities mature or reprice within different time periods or on different terms.
The Bank accepts deposits from customers at both fixed and floating rates and for varying terms. This poses
a risk to the Bank, which risk is managed by monitoring on a continuous basis the level of mismatch of
interest rate repricing taking cognisance of the terms of the Bank’s main assets, loans and advances to
customers, that are principally repriceable at the Bank’s discretion. The Bank also invests in highly liquid
quality assets and other short-term instruments for the purposes of mitigating exposures to fluctuations in
interest rates. The Bank is accordingly in a position to manage the interest rate terms of its principal
financial assets and simultaneously to effect changes to interest terms of liabilities reflecting the Bank’s
strategy together with market developments. The Group seeks to manage its net interest spread,
considering the cost of capital, by investing funds in a portfolio of assets with a longer term than the
liabilities funding them (therefore normally giving rise to a negative maturity gap position) but with shorter
repricing periods or terms. The Bank manages the shorter term nature of the liabilities funding the assets
for the purposes of ensuring a steady base of deposits with differing terms over the medium to longer term.
The Bank’s Assets & Liabilities Committee is primarily responsible for oversight over the Bank’s interest rate
risk management process and monitors actively the interest rate risk measures utilised by the Bank.
Credit facilities and commitments to lend funds to customers are granted at market interest rates prevailing
at drawdown date.
The financial years ended 31 December 2025 and 2024, have been characterised by a continued
disinflationary process that has stabilised inflation rates closer to central bank targets. In a context of a
resilient labour market, the Euro Area economy has continued to grow despite the challenging global
environment. In its latest monetary policy decision, the ECB sees the outlook as still uncertain, due to
ongoing global trade disputes and geopolitical tensions.
Following a series of rate cuts in 2024 and the first half of 2025, ever since its June 2025 decision the ECB
decided to keep the three key ECB interest rates unchanged, which stance has also been confirmed in its
December 2025 decision – the deposit facility, the main refinancing operations and the marginal lending
facility set at 2.00%, 2.15% and 2.40% respectively.
133
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The following tables summarise the Group’s exposures to interest rate risks. These analyse the Group’s financial instruments, which are interest-bearing, at their carrying amounts
categorised by the earlier of contractual repricing or maturity dates.

Group |  | Average |  |  |  |  |
|  | effective |  | Between | Between |  |
| Carrying | interest | Less than | 3 months | 1 year | More than | Non-interest
| amount | rate | 3 months | and 1 year | and 5 years | 5 years | bearing
As at 31 December 2025 | € 000 | % | € 000 | € 000 | € 000 | € 000 | € 000
Financial assets |  |  |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 182,564 | 1.97 | 164,004 | 10,918 | - | - | 7,642
Debt and other fixed income instruments measured at FVOCI | 170,965 | 1.06 | 571 | 46,047 | 83,687 | 40,660 | -
Debt and other fixed income instruments measured at amortised cost | 33,890 | 3.70 | - | 3,001 | 24,364 | 6,525 | -
Loans and advances to banks | 62,423 | 1.49 | 61,923 | 500 | - | - | -
Loans and advances to customers | 929,111 | 3.80 | 752,013 | 79,574 | 93,894 | 1,870 | 1,760
Total financial assets | 1,378,953 |  | 978,511 | 140,040 | 201,945 | 49,055 | 9,402
Financial liabilities |  |  |  |  |  |  |
Amounts owed to banks | 345 | 0.16 | 336 | - | - | - | 9
Amounts owed to customers | 1,207,256 | 1.38 | 497,571 | 105,606 | 313,140 | 81,082 | 209,857
Total financial liabilities | 1,207,601 |  | 497,907 | 105,606 | 313,140 | 81,082 | 209,866
Interest repricing gap |  |  | 480,604 | 34,434 | (111,195) | (31,027) |
Cumulative gap |  |  | 480,604 | 515,038 | 403,843 | 371,816 |

134
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

Group |  | Average |  |  |  |  |
|  | effective |  | Between | Between |  |
| Carrying | interest | Less than | 3 months | 1 year | More than | Non-interest
| amount | rate | 3 months | and 1 year | and 5 years | 5 years | bearing
As at 31 December 2024 | € 000 | % | € 000 | € 000 | € 000 | € 000 | € 000
Financial assets |  |  |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 154,480 | 3.12 | 146,872 | - | - | - | 7,608
Debt and other fixed income instruments measured at FVOCI | 178,828 | 1.06 | 2,661 | 6,224 | 118,170 | 51,773 | -
Debt and other fixed income instruments measured at amortised cost | 21,107 | 4.30 | - | - | 14,000 | 7,107 | -
Loans and advances to banks | 46,189 | 2.43 | 45,189 | 1,000 | - | - | -
Loans and advances to customers | 872,682 | 3.73 | 694,909 | 44,822 | 129,975 | 433 | 2,543
Total financial assets | 1,273,286 |  | 889,631 | 52,046 | 262,145 | 59,313 | 10,151
Financial liabilities |  |  |  |  |  |  |
Amounts owed to banks | 438 | 0.15 | 410 | - | - | - | 28
Amounts owed to customers | 1,120,006 | 1.29 | 515,217 | 66,702 | 275,996 | 49,231 | 212,860
Total financial liabilities | 1,120,444 |  | 515,627 | 66,702 | 275,996 | 49,231 | 212,888
Interest repricing gap |  |  | 374,004 | (14,656) | (13,851) | 10,082 |
Cumulative gap |  |  | 374,004 | 359,348 | 345,497 | 355,579 |

135
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Bank
Effective
Between
Between
Carrying
interest
Less than
3 months
1 year
More than
Non-interest
amount
rate
3 months
and 1 year
and 5 years
5 years
bearing
As at 31 December 2025
€ 000
%
€ 000
€ 000
€ 000
€ 000
€ 000
Financial assets
Balances with Central Bank of Malta, treasury bills and cash
181,858
1.97
164,003
10,918
-
-
6,937
Debt and other fixed income instruments measured at FVOCI
168,955
1.01
571
46,047
82,651
39,686
-
Debt and other fixed income instruments measured at amortised cost
33,890
3.70
-
3,001
24,364
6,525
-
Loans and advances to banks
55,936
1.67
55,936
-
-
-
-
Loans and advances to customers
929,120
3.80
752,023
79,574
93,893
1,870
1,760
Total financial assets
1,369,759
972,533
139,540
200,908
48,081
8,697
Financial liabilities
Amounts owed to banks
345
0.16
336
-
-
-
9
Amounts owed to customers
1,210,294
1.38
497,670
106,006
313,140
81,082
212,396
Total financial liabilities
1,210,639
498,006
106,006
313,140
81,082
212,405
Interest repricing gap
474,527
33,534
(112,232)
(33,001)
Cumulative gap
474,527
508,061
395,829
362,828
136
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Bank
Average
effective
Between
Between
Carrying
interest
Less than
3 months
1 year
More than
Non-interest
amount
rate
3 months
and 1 year
and 5 years
5 years
bearing
As at 31 December 2024
€ 000
%
€ 000
€ 000
€ 000
€ 000
€ 000
Financial assets
Balances with Central Bank of Malta, treasury bills and cash
153,361
3.12
146,872
-
-
-
6,489
Debt and other fixed income instruments measured at FVOCI
176,696
1.01
2,661
6,224
118,070
49,741
-
Debt and other fixed income instruments measured at amortised cost
21,107
4.30
-
-
14,000
7,107
-
Loans and advances to banks
40,964
2.74
40,964
-
-
-
-
Loans and advances to customers
872,690
3.73
694,916
44,822
129,975
433
2,544
Total financial assets
1,264,818
885,413
51,046
262,045
57,281
9,033
Financial liabilities
Amounts owed to banks
438
0.15
410
-
-
-
28
Amounts owed to customers
1,121,816
1.29
515,504
67,102
275,996
49,231
213,983
Total financial liabilities
1,122,254
515,914
67,102
275,996
49,231
214,011
Interest repricing gap
369,499
(16,056)
(13,951)
8,050
Cumulative gap
369,499
353,443
339,492
347,542
137
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.4.2 Interest rate profile
At the end of the reporting periods the interest rate profile of the Group’s interest-bearing financial
instruments was:

Group |  | Fixed rate |  | Variable rate
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Interest-bearing assets |  |  |  |
Balances with Central Bank of Malta and treasury bills | 166,130 | 138,320 | 8,792 | 8,552
Debt and other fixed income instruments measured at: |  |  |  |
FVOCI | 170,965 | 178,828 | - | -
Amortised cost | 33,890 | 21,107 | - | -
Loans and advances to banks | 41,429 | 27,243 | 20,994 | 18,946
Loans and advances to customers | 183,705 | 185,170 | 743,646 | 684,969
| 596,119 | 550,668 | 773,432 | 712,467
Interest-bearing liabilities |  |  |  |
Amounts owed to banks | 23 | - | 313 | 410
Amounts owed to customers | 550,973 | 484,266 | 446,426 | 422,880
| 550,996 | 484,266 | 446,739 | 423,290

At the end of the reporting periods the interest rate profile of the Bank’s interest-bearing financial
instruments was:
Bank
Fixed rate
Variable rate
2025
2024
2025
2024
€ 000
€ 000
€ 000
€ 000
Interest-bearing assets
Balances with Central Bank of Malta and treasury bills
166,130
138,320
8,791
8,552
Debt and other fixed income instruments measured at:
FVOCI
168,955
176,696
-
-
Amortised cost
33,890
21,107
-
-
Loans and advances to banks
39,929
24,743
16,007
16,221
Loans and advances to customers
183,714
185,170
743,646
684,976
592,618
546,036
768,444
709,749
Interest-bearing liabilities
Amounts owed to banks
23
-
313
410
Amounts owed to customers
551,373
484,666
446,525
423,167
551,396
484,666
446,838
423,577
2.4.3 Fair value sensitivity analysis for fixed rate instruments
The Group’s instruments exposing the Bank to fair value interest rate risk consist of quoted debt securities
measured at FVOCI (also refer to note 6) since these are fair valued with fair value changes recognised in
other comprehensive income. In this respect, the fair value sensitivity analysis for fixed rate instruments
is performed in respect of debt financial investments measured at FVOCI. An increase of 200 basis points
in the yield to maturity of each respective debt security would lead to a decrease in value of debt financial
investments measured at FVOCI amounting to €14.1 million (2024: €13.9 million). Likewise, a decrease of
200 basis points in interest rates would lead to an increase in value of debt financial investments
measured at FVOCI amounting to €15.5 million (2024: €15.1 million). All other financial instruments
subject to fixed interest rates are measured at amortised cost.
138
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.4.4 Cash flow sensitivity analysis for variable rate instruments
At the end of the reporting period, if interest rates had increased/decreased by 250 basis points (assuming
a parallel shift of 250 basis points in yields) with all other variables held constant, the pre-tax result for the
year would change by the following amounts determined by applying the shift to the net variable interest
exposure of the Group/Bank at the end of the reporting periods:

Group | 2025 | 2024
| € 000 | € 000
(+) 250 bp | 8,167 | 7,229
(-) 250 bp | (8,167) | (7,229)

Bank
2025
2024
€ 000
€ 000
(+) 250 bp
8,040
7,154
(-) 250 bp
(8,040)
(7,154)
2.4.5 Currency risk
The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates
on its financial position and cash flows particularly within the Bank’s operations. Foreign exchange risk to
the Bank is the risk that earnings and values fluctuate as a result of changes in foreign exchange rates. The
Bank’s foreign exchange risk arises when financial assets or liabilities are denominated in currencies which
are different from the Bank’s functional currency.
The Bank essentially manages this risk by ensuring that foreign currency liabilities are utilised to fund assets
denominated in the same foreign currency thereby matching asset and liability positions as much as is
practicable. This mechanism is reflected in the figures reported in the tables below which present this
matching process.
The Bank maintains its exposure to foreign currencies within prescribed limits set by the Bank’s ALCO. ALCO
sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions
which are monitored on a real-time basis.
The Bank enters into forward foreign exchange contracts with customers in the normal course of its
business. Generally, it is the Bank’s policy to cover the exposure arising from forward contracts. As a result,
the Group would not be exposed to any significant exchange risk in respect of outstanding derivative
financial instruments. The Bank also retains a deposit margin covering a portion of the notional amount of
the respective contract from the customer thereby reducing the extent of credit risk should the derivative
client default. The Bank did not have any outstanding derivative financial instruments as at 31 December
2025 and 2024.
139
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The following tables summarise the Group’s exposures to foreign currency risk. Included in the tables are
the Group’s financial instruments which are subject to foreign exchange risk at carrying amounts,
categorised by currency.

Group | Total | EUR | GBP | USD | Other
| € 000 | € 000 | € 000 | € 000 | € 000
As at 31 December 2025 |  |  |  |  |
Financial assets |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 182,564 | 182,039 | 179 | 316 | 30
Financial investments measured at FVOCI | 179,246 | 173,240 | 2,796 | 3,210 | -
Financial investments measured at amortised cost | 33,890 | 23,832 | 3,393 | 6,665 | -
Loans and advances to banks | 62,423 | 22,711 | 5,839 | 31,998 | 1,875
Loans and advances to customers | 929,111 | 925,064 | 3,156 | 891 | -
Other assets | 19,134 | 17,680 | 167 | 940 | 347
Total financial assets | 1,406,368 | 1,344,566 | 15,530 | 44,020 | 2,252
Financial liabilities |  |  |  |  |
Amounts owed to banks | 345 | 345 | - | - | -
Amounts owed to customers | 1,207,256 | 1,147,688 | 15,367 | 42,612 | 1,589
Other liabilities | 48,400 | 46,117 | 302 | 1,482 | 499
Total financial liabilities | 1,256,001 | 1,194,150 | 15,669 | 44,094 | 2,088
Net currency position |  | 150,416 | (139) | (74) | 164
Commitments and contingent liabilities | 377,704 | 377,704 | - | - | -

Group | Total | EUR | GBP | USD | Other
| € 000 | € 000 | € 000 | € 000 | € 000
As at 31 December 2024 |  |  |  |  |
Financial assets |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 154,480 | 132,038 | 202 | 22,210 | 30
Financial investments measured at FVOCI | 187,003 | 177,187 | 4,024 | 5,792 | -
Financial investments measured at amortised cost | 21,107 | 13,627 | - | 7,480 | -
Loans and advances to banks | 46,189 | 9,346 | 18,888 | 15,987 | 1,968
Loans and advances to customers | 872,682 | 868,368 | 3,727 | 587 | -
Other assets | 16,074 | 12,591 | 380 | 2,252 | 851
Total financial assets | 1,297,535 | 1,213,157 | 27,221 | 54,308 | 2,849
Financial liabilities |  |  |  |  |
Amounts owed to banks | 438 | 424 | - | - | 14
Amounts owed to customers | 1,120,006 | 1,039,443 | 27,058 | 51,553 | 1,952
Other liabilities | 41,600 | 39,623 | 273 | 1,234 | 470
Total financial liabilities | 1,162,044 | 1,079,490 | 27,331 | 52,787 | 2,436
Net currency position |  | 133,667 | (110) | 1,521 | 413
Commitments and contingent liabilities | 311,392 | 310,859 | 3 | 530 | -

140
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Under the scenario that the euro appreciates by 20% against all currencies the effect would result in a
decrease of €10,000 (2024: €365,000) in the carrying amount of financial instruments with the adverse
impact recognised in profit or loss. Should the euro depreciate against all currencies by 20%, the effect
would result in a gain of €10,000 (2024: €365,000) in the carrying amount of financial instruments and the
favourable impact would be recognised in profit or loss.
The following tables summarise the Bank’s exposures to foreign currency risk. Included in the tables are
the entity’s financial instruments which are subject to foreign exchange risk at carrying amounts,
categorised by currency.
Bank
Total
EUR
GBP
USD
Other
€ 000
€ 000
€ 000
€ 000
€ 000
At 31 December 2025
Financial assets
Balances with Central Bank of Malta,
treasury bills and cash
181,858
181,333
179
316
30
Financial investments measured at FVOCI
177,236
171,230
2,796
3,210
-
Financial investments measured at amortised cost
33,890
23,832
3,393
6,665
-
Loans and advances to banks
55,936
16,238
5,839
31,984
1,875
Loans and advances to customers
929,120
925,073
3,156
891
-
Other assets
9,919
9,725
34
160
-
Total financial assets
1,387,959
1,327,431
15,397
43,226
1,905
Financial liabilities
Amounts owed to banks
345
345
-
-
-
Amounts owed to customers
1,210,294
1,150,723
15,367
42,615
1,589
Other liabilities
28,569
28,021
119
417
12
Total financial liabilities
1,239,208
1,179,089
15,486
43,032
1,601
Net currency position
148,342
(89)
194
304
Commitments and contingent liabilities
378,815
378,815
-
-
-
141
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Bank
Total
EUR
GBP
USD
Other
€ 000
€ 000
€ 000
€ 000
€ 000
At 31 December 2024
Financial assets
Balances with Central Bank of Malta,
treasury bills and cash
153,361
130,919
202
22,210
30
Financial investments measured at FVOCI
184,871
175,055
4,024
5,792
-
Financial investments measured at amortised cost
21,107
13,627
-
7,480
-
Loans and advances to banks
40,964
4,257
18,888
15,851
1,968
Loans and advances to customers
872,690
868,376
3,727
587
-
Other assets
6,510
6,057
58
395
-
Total financial assets
1,279,503
1,198,291
26,899
52,315
1,998
Financial liabilities
Amounts owed to banks
438
424
-
-
14
Amounts owed to customers
1,121,816
1,041,251
27,058
51,554
1,953
Other liabilities
25,120
24,791
103
213
13
Total financial liabilities
1,147,374
1,066,466
27,161
51,767
1,980
Net currency position
131,825
(262)
548
18
Commitments and contingent liabilities
312,499
311,966
3
530
-
Under the scenario that the euro appreciates by 20% against all currencies the effect would result in a
decrease of €82,000 (2024: €61,000) in the carrying amount of financial instruments with the adverse
impact recognised in profit or loss. Should the euro depreciate against all currencies by 20%, the effect
would result in a gain of €82,000 (2024: €61,000) in the carrying amount of financial instruments and the
favourable impact would be recognised in profit or loss.
2.4.6 Equity price risk
The exposure of the Group to this risk is not significant in view of the extent of the Group’s holdings of
equity investments designated at FVOCI (refer to note 6) which are not deemed significant in the context
of the Group’s statement of financial position. These investments are principally locally quoted equity
instruments issued by local well-known corporates. Frequent management reviews are carried out to
ensure continued high quality of the portfolio.
2.5 Liquidity risk
Liquidity risk is defined as the risk of losses due to:
- the Group’s funding costs increasing disproportionately;
- lack of funding preventing the Group from establishing new business; and
- lack of funding which will ultimately prevent the Group from meeting its obligations.
In relation to the Bank’s operations, liquidity risk is the risk that the Bank is unable to meet its obligations
when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual
commitments, or other cash outflows. The Group is exposed to daily calls on its available cash resources
from overnight deposits, current and call deposits, maturing term deposits, loan draw-downs and
guarantees together with other related off-balance sheet instruments. Such outflows would deplete
available cash resources for client lending and investments. In extreme circumstances, lack of liquidity could
result in sales of assets, or potentially an inability to fulfil lending commitments. The risk that the Group
will be unable to do so is inherent in all banking operations and can be affected by a range of institution-
specific and market-wide events including, but not limited to, credit events, systemic shocks and natural
disasters.
142
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The objective of the Group’s liquidity and funding management is to ensure that all foreseeable funding
commitments and deposit withdrawals can be met when due. It is the Bank’s target to maintain a diversified
and stable funding base with the objective of enabling it to respond quickly and smoothly to unforeseen
liquidity requirements.
The Group manages this risk by ensuring that its assets and liabilities are matched in terms of maturities as
much as is practicable. However, the Bank ought to manage its net interest spread by investing funds in a
portfolio of assets with a longer term than the liabilities funding them (therefore giving rise to a negative
maturity gap position). To mitigate exposures arising in this respect, the Bank holds significant liquid assets
in the form of Malta Government treasury bills, money market placements and other short-term
instruments for managing liquidity risk to support payment obligations and contingent funding in a stressed
market environment.
The Bank’s Advances-to-Deposit ratio of 79.6% (2024: 77.8%) at the end of the reporting period reflects
Management’s prudent stance in the context of liquidity management.
Liquidity Coverage Ratio
The Liquidity Coverage Ratio (‘LCR’) is designed to promote the short-term resilience of a bank’s liquidity
profile. This ratio became a minimum regulatory standard under the European Commission Delegated
Regulation 2015/61.
The LCR aims to ensure that a bank has adequate unencumbered high-quality liquid assets (‘HQLA’) to meet
its liquidity requirements within a 30-calendar-day liquidity stress scenario. Generally, HQLA consist of cash
or assets that can be converted into cash at little or no loss of value in markets.
The LCR as at 31 December 2025 as calculated by the Bank was 380.5% (2024: 231.8%). During the financial
years ended 31 December 2025 and 2024, the LCR was in excess of both the regulatory minimum and the
risk appetite thresholds set by the bank.
Net Stable Funding Ratio
The Net Stable Funding Ratio (‘NSFR’) is a metric showing how a bank is able to maintain sufficient stable
funding relative to required stable funding, and reflects a bank’s long-term funding profile (typically, with
a term of more than one year).
The NSFR is calculated in line with the requirements of the Capital Requirements Regulation (EU) No
575/2013 (‘CRR’).
The NSFR as at 31 December 2025 as calculated by the Bank was 158.5% (2024: 147.0%). During the
financial years ended 31 December 2025 and 2024, the NSFR was in excess of both the regulatory minimum
and the risk appetite thresholds set by the bank.
The Bank’s ALCO focuses on the Bank’s management process with respect to market and funding liquidity
risks.
Further details on the LCR and NSFR presented above are disclosed in the Bank’s Pillar 3 Disclosures Report.
143
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The Group’s liquidity management process, focusing on the liquidity of the Bank and that of its principal
subsidiary, includes:
• management of day-to-day funding, by monitoring future cash flows to ensure that requirements can
be met. This includes replenishment of funds as they mature or are borrowed by customers. The starting
point for those projections is an analysis of the contractual maturity of the financial liabilities and the
expected collection date of the financial assets;
• maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against
any unforeseen interruption to cash flow;
• monitoring the liquidity ratios of the Bank against internal and regulatory requirements; and
• managing the concentration and profile of debt maturities.
The Bank also monitors the level and type of undrawn lending commitments and the impact of contingent
liabilities such as guarantees as part of the liquidity management process previously referred to. As at 31
December 2025, the Bank had outstanding guarantees on behalf of third parties amounting to €15,114,000
(2024: €12,619,000), which are cancellable upon the request of the third parties. The Group’s liquidity
exposures arising from these commitments and contingencies are expected to expire principally within a
period of twelve months from the end of the reporting period.
The following tables analyse the Group’s and Bank’s principal financial assets and liabilities into relevant
maturity groupings based on the remaining period at the end of the reporting period to the contractual
maturity date.
144
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)

Group |  | Between | Between |  |  |
| Less than | 3 months | 1 year and | More than | No maturity |
| 3 months | and 1 year | 5years | 5 years | date | Total
As at 31 December 2025 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Financial assets |  |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 162,854 | 10,918 | - | - | 8,792 | 182,564
Financial investments measured at FVOCI | 571 | 46,047 | 83,687 | 40,660 | 8,281 | 179,246
Financial investments measured at amortised cost | - | 3,001 | 24,364 | 6,525 | - | 33,890
Loans and advances to banks | 61,923 | 500 | - | - | - | 62,423
Loans and advances to customers | 128,997 | 69,994 | 170,453 | 559,667 | - | 929,111
Other assets | 12,967 | 6,123 | - | - | 44 | 19,134
Total financial assets | 367,312 | 136,583 | 278,504 | 606,852 | 17,117 | 1,406,368
Financial liabilities |  |  |  |  |  |
Amounts owed to banks | 345 | - | - | - | - | 345
Amounts owed to customers | 707,428 | 105,606 | 313,140 | 81,082 | - | 1,207,256
Other liabilities | 23,089 | 667 | 2,611 | 11,420 | 10,613 | 48,400
Total financial liabilities | 730,862 | 106,273 | 315,751 | 92,502 | 10,613 | 1,256,001
Maturity gap | (363,550) | 30,310 | (37,247) | 514,350 | - | -
Cumulative gap | (363,550) | (333,240) | (370,487) | 143,863 | - | -
As at 31 December 2024 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Financial assets |  |  |  |  |  |
Balances with Central Bank of Malta, treasury bills and cash | 145,928 | - | - | - | 8,552 | 154,480
Financial investments measured at FVOCI | 2,661 | 6,224 | 118,170 | 51,773 | 8,175 | 187,003
Financial investments measured at amortised cost | - | - | 14,000 | 7,107 | - | 21,107
Loans and advances to banks | 45,189 | 1,000 | - | - | - | 46,189
Loans and advances to customers | 149,781 | 70,137 | 157,808 | 494,956 | - | 872,682
Other assets | 13,419 | 2,379 | - | - | 276 | 16,074
Total financial assets | 356,978 | 79,740 | 289,978 | 553,836 | 17,003 | 1,297,535
Financial liabilities |  |  |  |  |  |
Amounts owed to banks | 438 | - | - | - | - | 438
Amounts owed to customers | 728,077 | 66,702 | 275,996 | 49,231 | - | 1,120,006
Other liabilities | 22,340 | 624 | 1,863 | 8,333 | 8,440 | 41,600
Total financial liabilities | 750,855 | 67,326 | 277,859 | 57,564 | 8,440 | 1,162,044
Maturity gap | (393,877) | 12,414 | 12,119 | 496,272 |  |
Cumulative gap | (393,877) | (381,463) | (369,344) | 126,928 |  |

145
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Bank
Between
Between
Less than
3 months
1 year and
More than
No maturity
3 months
and 1 year
5 years
5 years
date
Total
As at 31 December 2025
€ 000
€ 000
€ 000
€ 000
€ 000
€ 000
Financial assets
Balances with Central Bank of Malta, treasury bills and cash
162,149
10,917
-
-
8,792
181,858
Financial investments measured at FVOCI
571
46,047
82,651
39,686
8,281
177,236
Financial investments measured at amortised cost
-
3,001
24,364
6,525
-
33,890
Loans and advances to banks
55,936
-
-
-
-
55,936
Loans and advances to customers
129,005
69,995
170,453
559,667
-
929,120
Other assets
3,753
6,122
-
-
44
9,919
Total financial assets
351,414
136,082
277,468
605,878
17,117
1,387,959
Financial liabilities
Amounts owed to banks
345
-
-
-
-
345
Amounts owed to customers
710,066
106,006
313,140
81,082
-
1,210,294
Other liabilities
11,669
667
2,611
7,366
6,256
28,569
Total financial liabilities
722,080
106,673
315,751
88,448
6,256
1,239,208
Maturity gap
(370,666)
29,409
(38,283)
517,430
Cumulative gap
(370,666)
(341,257)
(379,540)
137,890
Bank
Between
Between
Less than
3 months
1 year and
More than
No maturity
3 months
and 1 year
5 years
5 years
date
Total
As at 31 December 2024
€ 000
€ 000
€ 000
€ 000
€ 000
€ 000
Financial assets
Balances with Central Bank of Malta, treasury bills and cash
144,809
-
-
-
8,552
153,361
Financial investments measured at FVOCI
2,661
6,224
118,070
49,741
8,175
184,871
Financial investments measured at amortised cost
-
-
14,000
7,107
-
21,107
Loans and advances to banks
40,964
-
-
-
-
40,964
Loans and advances to customers
149,789
70,137
157,808
494,956
-
872,690
Other assets
3,855
2,379
-
-
276
6,510
Total financial assets
342,078
78,740
289,878
551,804
17,003
1,279,503
Financial liabilities
Amounts owed to banks
438
-
-
-
-
438
Amounts owed to customers
729,487
67,102
275,996
49,231
-
1,121,816
Other liabilities
12,117
624
1,863
6,280
4,236
25,120
Total financial liabilities
742,042
67,726
277,859
55,511
4,236
1,147,374
Maturity gap
(399,964)
11,014
12,019
496,293
Cumulative gap
(399,964)
(388,950)
(376,931)
119,362
146
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The Bank’s amounts owed to customers of €658,919,000 (2024: €637,150,000) as at 31 December 2025 are repayable on demand and included in the “within 3 months” bucket
in the tables. However, the Bank’s experience is that a significant portion of such deposits remains stable. Additionally, a significant part of other deposits maturing within 3
months from the end of the reporting period is typically renewed. The tables below analyse the Group’s and Bank’s principal non-derivative financial liabilities into relevant
maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity date. The amounts disclosed in the tables are the contractual
undiscounted cash flows.

Group |  | Between | Between |  |
| Less than | 3 months | 1 year | More than |
| 3 months | and 1 year | and 5 years | 5 years | Total
As at 31 December 2025 | € 000 | € 000 | € 000 | € 000 | € 000
Financial liabilities |  |  |  |  |
Amounts owed to banks | 345 | - | - | - | 345
Amounts owed to customers | 708,625 | 107,940 | 339,329 | 98,555 | 1,254,449
Other liabilities | 24,739 | 1,294 | 3,307 | 2,941 | 32,281
Total financial liabilities | 733,709 | 109,234 | 342,636 | 101,496 | 1,287,075
As at 31 December 2024 | € 000 | € 000 | € 000 | € 000 | € 000
Financial liabilities |  |  |  |  |
Amounts owed to banks | 438 | - | - | - | 438
Amounts owed to customers | 728,887 | 68,674 | 301,387 | 57,162 | 1,156,110
Other liabilities | 12,850 | 1,519 | 3,709 | 6,367 | 24,445
Total financial liabilities | 742,175 | 70,193 | 305,096 | 63,529 | 1,180,993

Bank
Between
Between
Less than
3 months
1 year
More than
3 months
and 1 year
and 5 years
5 years
Total
As at 31 December 2025
€ 000
€ 000
€ 000
€ 000
€ 000
Financial liabilities
Amounts owed to banks
345
-
-
-
345
Amounts owed to customers
711,262
108,344
339,329
98,555
1,257,490
Other liabilities
13,187
757
1,382
733
16,059
Total financial liabilities
724,794
109,101
340,711
99,288
1,273,894
As at 31 December 2024
€ 000
€ 000
€ 000
€ 000
€ 000
Financial liabilities
Amounts owed to banks
438
-
-
-
438
Amounts owed to customers
730,909
68,492
298,339
61,418
1,159,158
Other liabilities
12,127
1,349
2,728
5,078
21,282
Total financial liabilities
743,474
69,841
301,067
66,496
1,180,878
147
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.6 Operational risk
Operational risk is the risk of losses due to:
• deficient or erroneous internal procedures;
• human or system errors;
• external events, including legal events;
• internal and external fraud;
• employment practices and workplace safety;
• clients, products and business practices;
• damage to physical assets;
• business disruption and system failures; and
• execution, delivery and process management.
Operational risk is thus often associated with specific and one-off events, such as failure to observe business
or working procedures, defects or breakdowns of the technical infrastructure, criminal acts, fire and storm
damage or litigation. Operational risks are non-financial risks. Operational risk management relies on a
framework of policies implemented by the different operational functions and which implementation is
overseen by the Risk Management Function.
With respect to 2025, a financial measurement of this risk is arrived at by the Bank for the purpose of
allocating risk capital using the standardised approach for operational risk as prescribed under the CRR3
framework. Under this approach, the capital requirement for operational risk is determined on the basis of
the Bank’s Business Indicator (BI), a financial-statement-derived proxy reflecting the scale and nature of the
Bank’s activities, which is then mapped to the Business Indicator Component (BIC) through a set of
progressive regulatory coefficients. The capital requirement for operational risk under this method was
calculated at €4,330,000.
For 2024, using the Basic Indicator Approach as outlined in the CRR2 framework, the capital requirement
for operational risk under this method was calculated at €4,907,000.
2.7 Capital risk management
The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the
consolidated statement of financial position, are:
• to comply with the capital requirements set by the MFSA with respect to the Bank’s operations;
• to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns
for shareholders and benefits for other stakeholders; and
• to maintain a strong capital base to support the development of its business.
Accordingly, the purpose of the Group’s capital management is essentially that of ensuring efficient use of
capital taking cognisance of the Group’s risk appetite and profile as well as its objectives for business
development. The Group is subject to externally imposed capital requirements only in respect of the Bank’s
activities as a credit institution. The Bank is a licensed financial services provider and must therefore comply
with the capital requirements under the relevant laws and regulations.
The Bank’s Executive Team and ALCO are responsible for managing the Bank’s regulatory capital. The Bank
aims to maintain a strong capital base to support the risks inherent in its business, investing in accordance
with its strategy and meeting regulatory capital requirements at all times. Internal capital adequacy
assessments are aligned with the regulatory and supervisory requirements and with the Bank’s assessment
of risk, including credit, market and operational risks.
The Bank manages its capital requirements based on internal targets, which are set above the prescribed
minimum capital requirements, i.e. levels established within the CRR and the additional capital
requirements required by the MFSA for supervisory purposes.
148
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Minimum capital requirements are computed for credit, market and operational risks. The CRR requires a
bank to maintain a ratio of total regulatory capital to risk-weighted exposure amounts (the ‘Capital
requirements ratio’) at or above the prescribed minimum of 8%. The Bank is compliant with the
requirements laid down in the CRR.
In August 2025, the Bank received from the MFSA a SREP Decision letter, whereby in addition to the
regulatory requirements stated above, the Bank is expected to maintain a Pillar 2 Requirement (‘P2R’) of
3.00% to be held in excess of the minimum own funds requirement and to be maintained at all times in
accordance with Article 104a of the Capital Requirements Directive (‘CRD’).
In addition to the prescribed minimum, Banking Rule BR/15: ‘Capital Buffers of Credit Institutions
authorised under the Banking Act 1994’ requires banks to hold additional buffers, namely the ‘capital
conservation buffer’ and the ‘countercyclical buffer’. Automatic restrictions on capital distributions apply if
the Bank’s CET1 capital falls below the level of its combined buffer requirement.
The Bank is required to maintain a capital conservation buffer of 2.5% and the institution-specific
countercyclical buffer as determined by Article 140 (1) of Directive 2013/36/EU (known as CRD), both of
which are composed of CET1 capital.
CRD contemplates a countercyclical buffer in line with Basel III, in the form of an institution-specific
countercyclical buffer and the application of increased requirements to address macro-prudential or
systemic risk. This is set in the range of 0-2.5% of relevant credit exposure risk-weighted exposure amounts,
whereby the rate shall consist of the weighted average of the ‘countercyclical buffer’ rates that apply in the
jurisdiction where the relevant exposures are located. Given that the local group’s exposures are essentially
all contained within Malta, the buffer is set at a minimum amount of 0.02%.
Moreover, during 2023, the Central Bank of Malta introduced a Sectoral Systemic Risk Buffer (‘sSyRB’) of
1% on risk-weighted domestic mortgage exposures to households to be increased to 1.5% during 2024. The
buffer remained in place during 2025.
In addition, a Pillar 2 Guidance (‘P2G’) of 2% and made up entirely of CET 1 Capital is to be held over and
above the Overall Capital Requirement (‘OCR’) of 13.64%.
During the financial year ended 31 December 2025, the Bank’s OCR and P2G were met at all times. The
Bank’s OCR and P2G were 15.64% (2024: 15.93%) as at 31 December 2025.
The Capital requirements ratio expresses Own funds as a proportion of risk-weighted assets and off-balance
sheet instruments in relation to Credit Risk together with notional risk-weighted assets in respect of
Operational Risk and Market Risk.
The risk-weighted assets are measured by means of a hierarchy of risk weights classified according to the
nature of – and reflecting an estimate of credit, market and other risks associated with – each asset and
counterparty, taking into account any eligible collateral or guarantees. A similar treatment is adopted for
off-balance sheet instruments, with some adjustments to reflect the more contingent nature of the
potential losses. Risk-weighted assets are measured using the ’Standardised Approach’ for credit risk with
risk-weights being assigned to assets and off-balance sheet instruments according to their asset class and
credit risk mitigation. For the determination of credit assessments, independent rating agencies are
nominated as required.
Total risk-weighted exposure amounts are determined by multiplying the capital requirements for market
risk and operational risk by 12.5 (i.e. the reciprocal of the minimum capital ratio of 8%) and adding the
resulting figures to the sum of risk-weighted exposure amounts for credit risk.
149
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
2.8 Fair values of financial assets and liabilities
2.8.1 Financial instruments measured at fair value
The Group’s financial instruments which are carried at fair value include the Group’s debt securities and
equity instruments measured at FVOCI (note 6). The Group is required to disclose fair value measurements
by level of the following fair value measurement hierarchy for financial instruments that are measured in
the statement of financial position at fair value:
• Quoted prices (unadjusted) in active markets for identical assets (Level 1).
• Inputs other than quoted prices included within Level 1 that are observable for the asset either directly
i.e. as prices, or indirectly i.e. derived from prices (Level 2).
• Inputs for the asset that are not based on observable market data i.e. unobservable inputs (Level 3).
The IFRS 13 hierarchy of valuation techniques is based on whether the inputs to those valuation techniques
are observable or unobservable. Observable inputs reflect market data obtained from independent sources;
unobservable inputs reflect the Bank’s market assumptions.
The Bank considers only relevant and observable market prices in its valuations. Fair values of financial
assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer
price quotations.
The fair value of the Bank’s financial assets measured at FVOCI, which are principally traded in active
markets, is mainly based on quoted market prices. Hence, as at 31 December 2025 and 2024, the principal
financial instruments that are measured at fair value, consisting of the investments measured at FVOCI,
were valued using principally Level 1 inputs.
No transfers of financial instruments between different levels of the fair value hierarchy have occurred
during the financial years ended 31 December 2025 and 2024.
2.8.2 Financial instruments not measured at fair value
Loans and advances to banks and customers
These categories of assets are presented net of expected credit loss allowances. As at 31 December 2024,
the Group’s aggregate carrying amount in this respect was €991,534,000 (2024: €918,870,000). The loans
and advances to customers, which are subject to floating interest rates, are measured at the amount of
€743,646,000 (2024: €684,969,000). This carrying value approximates to fair value in view of the fact that
these loans and advances are repriceable at the Group’s discretion. The carrying amount of loans and
advances to customers, which are subject to fixed interest rates, is deemed fairly close to fair value in view
of their maturity profile. A significant part of loans and advances to customers are repayable on call and at
short notice, as highlighted in Note 8. Loans and advances to banks with a fixed term are carried at the
amount of €41,829,000 (2024: €27,243,000). Other loans and advances to banks are predominantly
repayable on call and at short notice, as disclosed in Note 7 to the financial statements. Generally, interest
rates on loans and advances reflect current market rates, and the Directors consider the carrying amounts
to be a reasonable estimate of their fair value principally in view of the relatively short periods to repricing
or maturity from the end of the reporting periods. The current market interest rates utilised for fair value
estimation, which reflect essentially the respective instruments’ contractual interest rates, are deemed
observable and accordingly these fair value estimates have been categorised as Level 2.
150
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
Trade and other receivables
This category principally represents short-term trade receivables arising from postal operations in respect
of which the carrying amount is a reasonable approximation of fair value.
Amounts owed to banks and customers
These categories of financial liabilities are carried at amortised cost and amount to €1,207,601,000 as at 31
December 2025 (2024: €1,120,444,000). 17.4% (2024: 19.0%) of these liabilities are non-interest bearing,
41.2% (2024: 46.0%) of these liabilities have a contractual repricing term of three months or less, 8.7%
(2024: 6.0%) reprice between three months and one year, 25.9% (2024: 24.6%) reprice between one year
and five years while 6.7% (2024: 4.4%) are repriceable after more than five years. A very significant portion
of amounts owed to banks and customers are repayable on demand as disclosed within Note 20 and 21 to
the financial statements. Accordingly, in view of their profile, the fair value of these financial liabilities is
not deemed to be significantly different from their carrying amounts. This applies to variable rate deposits
in view of the short periods to repricing, but also applies to liabilities subject to fixed interest rates, based
on discounting future contractual cash flows at current market interest rates, taking into account the short
periods to maturity. The current market interest rates utilised for discounting purposes, which were almost
equivalent to the respective instruments’ contractual interest rates, are deemed observable and
accordingly these fair value estimates have been categorised as Level 2.
Debt securities measured at amortised cost
Debt securities measured at amortised cost had a fair value of €34,146,000 as at 31 December 2025 (2024:
€21,400,000), compared to the carrying amount of €33,890,000 (2024: €21,107,000). The fair value of these
investments, which are principally traded in active markets, is mainly based on quoted market prices which
are categorised as Level 1 inputs.
Other financial instruments
The fair values of certain other financial assets, including balances with the Central Bank of Malta and
accrued income, are considered to approximate their respective carrying values due to their short-term
nature.
2.9 Encumbered and unencumbered assets
Banking Rule 07 transposed the provisions of the EBA Guidelines on Disclosure of Encumbered and
Unencumbered Assets (EBA/GL/2014/03) and introduced the requirement to disclose information about
asset encumbrance.
This disclosure is meant to facilitate an understanding of available and unrestricted assets that could be
used to support potential future funding and collateral needs. An asset is defined as encumbered if it has
been pledged as collateral against an existing liability, and as a result is no longer available to the group to
secure funding, satisfy collateral needs or be sold to reduce the funding requirement.
151
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
2. Financial risk management (continued)
The disclosure is not designed to identify assets which would be available to meet the claims of creditors or
to predict assets that would be available to creditors in the event of a resolution or bankruptcy.
Bank
Carrying
Carrying
amount of
Fair value of
amount of
Fair value of
encumbered
encumbered
unencumbered
unencumbered
assets
assets
assets
assets
€ 000
€ 000
€ 000
€ 000
At 31 December 2025
Equity instruments
-
-
8,281
8,281
Debt securities
7,676
7,676
196,141
196,397
Other assets
2,836
2,836
1,244,719
1,244,719
Total
10,512
10,512
1,449,141
1,449,397
At 31 December 2024
Equity instruments
-
-
8,175
8,175
Debt securities
8,013
8,013
190,780
191,073
Other assets
2,613
2,613
1,145,466
1,145,466
Total
10,626
10,626
1,344,421
1,344,714
The Bank does not encumber any collateral received. As at 31 December 2025, the Bank did not have any
outstanding liabilities associated with encumbered assets and collateral received.
The Bank undertakes the following types of encumbrance:
i. Pledging of a deposit with the Central Bank of Malta in favour of the Depositor Compensation Scheme.
ii. Pledging of Malta Government Stocks held in terms of Directive No. 8 (Chapter 204 of the Central Bank
of Malta Act) as security for a facility not currently utilised.
3. Accounting estimates and judgements
3.1 Critical accounting estimates and judgements in applying the Group’s accounting policies
Estimates and judgements are continually evaluated and based on historical experience and other factors
including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. These estimates and assumptions present a risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year. The Group’s management also makes judgements, apart from those involving estimations, in the
process of applying the entity's accounting policies that may have a significant effect on the amounts
recognised in the financial statements.
3.2 Measurement of expected credit losses
The measurement of the Expected Credit Loss allowance for financial assets measured at amortised cost
and debt securities measured at FVOCI is an area that requires the use of complex models and significant
assumptions about future economic conditions and credit behaviour. Explanation of the inputs,
assumptions and estimation techniques used in measuring ECL is further detailed in note 2.
152
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
3. Accounting estimates and judgements (continued)
A number of significant judgements are required in measurement of Expected Credit Loss, such as:
• Determining criteria for significant increase in credit risk;
• Choosing appropriate models and assumptions for the measurement of ECL; and
• Establishing the number and relative weightings of forward-looking scenarios and associated ECL.
Detailed information about the judgements and estimates made by the Bank in the above areas is set out
in note 2.
3.3 Assessment of estimates and judgements
In the opinion of the Directors, the accounting estimates and judgements made in the course of preparing
these consolidated financial statements, which have been highlighted above, are not difficult, subjective or
complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1.
However, the Directors would like to draw attention to those accounting judgements that have a significant
risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next
financial year. In this respect these primarily comprise assumptions and estimates relating to the calculation
of expected credit loss allowances in respect of loans and advances to customers (see notes 2.3, 8 and 32).
As previously explained, local economic growth moderated during 2025, amidst a context of weakening
global outlook characterised by heightened uncertainty related to tariffs and geopolitical tensions. Within
the Euro Area, economic performance was mixed. The anticipation of tariffs resulted in trade front loading,
which once it had faded away, weaker data started to emerge. Inflation has settled close to ECB targets. As
a result, the ECB has kept its interest rates on the deposit facility, the main refinancing operations and the
marginal lending facility unchanged at 2.00%, 2.15% and 2.40% respectively.
As for the rest of the world, the IMF sees the risks to the outlook tilted to the downside, weighed down
uncertainties regarding protectionist measures, geopolitical tensions and larger-than-expected shocks to
labour supply from restrictive immigration policies.
Local economic growth moderated, as Malta moves further away from the post-pandemic recovery, in a
context of a weakening global outlook, characterised by trade policy uncertainty and geopolitical tensions.
The Central Bank of Malta forecasts that Malta’s real GDP growth will moderate from 6.8% in 2024 to 3.7%
in 2025 and remain at 3.7% in both 2026 and 2027. This trend is also confirmed by the European
Commission, which expects it to be driven mainly by robust private and public consumption, investment,
and supported by growth in tourism, gaming and financial and professional services.
The exercise of judgement in making estimations requires the use of assumptions that are highly subjective
and very sensitive to the risk factors detailed in note 2.3.4. In addition, many of the factors have a high
degree of interdependency and there is no single factor to which loan credit loss allowances as a whole is
sensitive.
The underlying models and their calibration, including how they react to forward-looking economic
conditions, continue to remain highly subjective.
Significant judgement is required in establishing the number, severity and relative weightings of forward-
looking economic scenarios given the rapidly changing economic conditions and wide economic forecasts
due to the potential impacts of the factors referred to previously, in response to global geopolitical tensions.
Significant judgement is therefore also required in making assumptions about the effects of inflation,
interest rates, economic growth, and supply chain disruptions. As alluded to earlier, there is an absence of
an observable historical trend that can accurately represent the severity and speed of such forecasts, which
represent a high degree of estimation uncertainty, particularly in assessing downside scenarios. Such
complexities have never been modelled.
153
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
3. Accounting estimates and judgements (continued)
In view of the above, management considered the sensitivity of the ECL outcome to the macro-economic
forecasts by recalculating the ECL under the different scenarios, applying a 100% weighting to each scenario.
The effect of economic uncertainty on the ECL outcome is disclosed in the sensitivity analysis presented in
Note 2.3.4.4. The ECL calculated for the upside and downside scenarios should not be taken to represent
the upper and lower limits of possible ECL outcomes as there is a high degree of estimation uncertainty in
the numbers representing tail risk scenarios when assigned a 100% weighting.
Management applied a higher level of expert judgement in order to assess the impact of the current
geopolitical and macro-economic environment on the local group’s level of defaults, including evaluating
the impact of monetary policy on both the incidence of default events and the severity of losses as described
below.
The identification of customers experiencing significant increase in credit risk or credit impairment in the
context of the elevated level of uncertainty is also highly judgemental due to limitations in available credit
information on customers in certain instances.
As previously explained in view of the nature of the Bank’s portfolio, where a relatively small number of
loans comprise a significant proportion of the loan book value, the Bank continued to apply an individual
debtor-focused credit management process.
Judgement was required in determining whether individually significant loans have experienced a SICR or a
UTP event, especially within the Bank’s corporate and commercial portfolio. In this respect, as part of
management’s response to the current economic environment, the Bank assesses and individually rates
those individually significant borrowers which are deemed mostly impacted by market and economic
pressures through individual periodic credit assessments on the basis of recently obtained management
information, including forecasts. As part of these credit assessments, judgement is exercised in evaluating
all relevant information on indicators of impairment, particularly where factors indicate deterioration in the
financial condition and outlook of borrowers affecting their ability to pay.
For individually significant credit impaired loans, management determines the size of the allowance
required based on a range of factors such as the realisable value of security, the viability of the customers’
business model and the capacity to generate cash flows to service debt obligations, under different
scenarios. Judgement is applied in estimating the expected future cash flows from each borrower and the
time to recover these cash flows under the different scenarios as well as to attach probabilities to those
scenarios. The assumptions around forecasted recoveries from the sale of collateralised properties,
including valuation haircuts and time to recovery, are key drivers in the estimation of credit loss allowances
in respect of individually assessed loans. The current economic conditions within the local property market
increases the level of expert judgement required to predict with reasonable accuracy the recoverability of
exposures through the sale of collateral.
In line with the results of reviews described above, the outcome of the individual assessments indicate that
the level of business experienced by the borrowers is robust and indicative of more effective business
models. The current economic developments are unlikely to have any significant impact on any of the Bank’s
individually significant customers, which would then in turn materially impact the overall Bank’s credit risk
level, other than what is already considered in the forward-looking information incorporated within the ECL
model.
As highlighted previously, during 2025 the Bank continued to perform regular and detailed reviews on its
lending customers on individual and sectorial bases. The results of such reviews, also in the context of the
economic performance during 2025, suggest a continued improvement in the business and prospects of the
same borrowers and accordingly the Bank determined that the level of credit risk emanating directly from
economic uncertainties has decreased considerably. Particularly, in respect of corporate and commercial
exposures, during 2025, the Bank continued to carry out assessments on such borrowers on an ongoing
basis through individual ad-hoc credit reviews.
154
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
4. Segmental information
The Group has two reporting segments, as described below, which are the Group’s strategic business units
and cash-generating units. The strategic business units offer different services and are managed separately
because they require different technology and marketing strategies. For each of the strategic business units,
the Board of Directors reviews internal management reports. The following summary describes the
operations in each of the Group’s reportable segments:
• Banking services comprise the Group’s banking and other activities carried out as a licensed credit
institution, an authorised currency dealer and financial intermediary. Stockbroking activities may also
be carried out since the Bank is a member of the Malta Stock Exchange; and
• Postal services comprise the Group’s postal activities, being the sole licensed Universal Service Provider
of postal services in Malta.
The Group’s internal reporting to the Board of Directors and senior executives is analysed according to the
below segments. Information about reportable segments:

| Banking services |  | Postal services |  |  | Total
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Interest receivable | 39,908 | 37,996 | 126 | 147 | 40,034 | 38,143
Interest expense | (13,795) | (10,826) | (111) | (57) | (13,906) | (10,883)
Postal sales and other revenue | 968 | 72 | 41,681 | 39,111 | 42,649 | 39,183
Net fee and commission income | 5,391 | 5,340 | 982 | 1,033 | 6,373 | 6,373
Other operating income | 1,034 | 1,246 | 315 | 233 | 1,349 | 1,479
Segment operating income | 33,506 | 33,828 | 42,993 | 40,467 | 76,499 | 74,295
Depreciation and amortisation | (1,127) | (1,132) | (2,461) | (2,492) | (3,588) | (3,624)
Net movement in expected |  |  |  |  |  |
credit losses | 1,017 | 1,039 | (57) | (112) | 960 | 927
Employee compensation |  |  |  |  |  |
and benefits | (9,572) | (9,513) | (18,727) | (17,016) | (28,299) | (26,529)
Other costs | (9,570) | (9,383) | (15,541) | (16,229) | (25,111) | (25,612)
Operating profit | 14,254 | 14,839 | 6,207 | 4,618 | 20,461 | 19,457
Share of profit/(loss) attributable to investment accounted for using the equity method, net |  |  |  |  |  |
of tax | 3,112 | (101) | 194 | 59 | 3,306 | (42)
Profit before taxation | 17,366 | 14,738 | 6,401 | 4,677 | 23,767 | 19,415
Income tax expense | (4,907) | (5,548) | (2,277) | (1,709) | (7,184) | (7,257)
Profit for the year | 12,459 | 9,190 | 4,124 | 2,968 | 16,583 | 12,158
Segment total assets | 1,439,636 | 1,335,804 | 57,985 | 52,618 | 1,497,621 | 1,388,422
Capital expenditure during the year | 310 | 416 | 2,166 | 2,104 | 2,476 | 2,520
Segment total liabilities | 1,241,221 | 1,150,144 | 22,540 | 19,357 | 1,263,761 | 1,169,501

There were no material inter-segment transactions.
The Group mainly provides banking and postal services within the local market and economic sectors. From
a customers’ perspective, during 2025 MaltaPost p.l.c. generated 50.2% (2024: 50.7%) of its revenue
internationally.
The Group’s reliance on any single customer is not considered significant for disclosure purposes.
155
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
5. Balances with Central Bank of Malta, treasury bills and cash

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta | 132,171 | 146,872 | 132,170 | 146,872
Malta Government treasury bills at amortised cost | 42,751 | - | 42,751 | -
Cash in hand | 7,642 | 7,608 | 6,937 | 6,489
| 182,564 | 154,480 | 181,858 | 153,361

Balances with the Central Bank of Malta include a reserve deposit amounting to €7,210,000 (2024:
€7,237,000) held in terms of Regulation (EC) No.1745/2003 of the European Central Bank. The average
reserve deposit balance held for the relevant maintenance period amounted to
€7,949,000 (2024:
€7,871,000).
At 31 December 2025, the Bank had pledged a deposit with the Central Bank of Malta amounting to
€1,582,000 (2024: €1,313,000) in favour of the Depositor Compensation Scheme to comply with local
regulatory requirements.
As at 31 December 2025 and 2024, the credit loss allowance on balances with Central Bank of Malta and
Malta Government treasury bills was insignificant.
6. Financial investments
Financial investments include the following:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Measured at FVOCI |  |  |  |
Debt and other fixed income instruments | 170,965 | 178,828 | 168,955 | 176,696
Equity instruments | 8,281 | 8,175 | 8,281 | 8,175
Measured at amortised cost |  |  |  |
Debt and other fixed income instruments | 33,890 | 21,107 | 33,890 | 21,107
| 213,136 | 208,110 | 211,126 | 205,978

Debt and other fixed income instruments measured at FVOCI are analysed as follows:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Issued by public bodies: |  |  |  |
- local government | 139,855 | 141,008 | 138,778 | 139,805
- foreign governments | 5,561 | 6,224 | 5,561 | 6,224
- supranational | 1,106 | 4,010 | 1,106 | 4,010
Issued by public issuers: |  |  |  |
- local banks | 11,814 | 12,197 | 11,270 | 11,660
- local corporates | 2,601 | 2,836 | 2,212 | 2,444
- foreign banks | 4,742 | 7,243 | 4,742 | 7,243
- foreign corporates | 5,286 | 5,310 | 5,286 | 5,310
| 170,965 | 178,828 | 168,955 | 176,696

156
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
6. Financial investments (continued)
As at 31 December 2025, credit loss allowances in respect of debt instruments measured at FVOCI
computed in accordance with the IFRS 9 expected credit loss model, were €219,000 (2024: €224,000).
Debt and other fixed income instruments measured at amortised cost are analysed as follows:
Group
Bank

| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Issued by public bodies: |  |  |  |
- local government | 22,012 | 12,016 | 22,012 | 12,016
- foreign governments | 3,588 | 2,860 | 3,588 | 2,860
- supranational | 2,994 | 2,695 | 2,994 | 2,695
Issued by public issuers: |  |  |  |
- local banks | 224 | 224 | 224 | 224
- local corporates | 1,610 | 1,412 | 1,610 | 1,412
- foreign banks | 3,475 | 1,925 | 3,475 | 1,925
Expected credit loss allowances | (13) | (25) | (13) | (25)
| 33,890 | 21,107 | 33,890 | 21,107

At 31 December 2025, the Bank held Malta Government Stocks measured at FVOCI with a carrying amount
of €7,620,000 (2024: €7,956,000) pledged with the Central Bank of Malta, in terms of Directive No. 8 of the
Central Bank of Malta Act (Cap. 204) as security for a facility that was not utilised during the reporting
periods.
The debt securities held by the Group are listed on the Malta Stock Exchange or on other recognised
exchanges.
The movement in debt and other fixed income financial investments measured at FVOCI is summarised as
follows:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
At 1 January | 178,828 | 199,965 | 176,695 | 197,700
Amortisation | (792) | (883) | (790) | (881)
Redemptions/disposals | (9,943) | (29,642) | (9,844) | (29,423)
Fair value movement | 3,235 | 8,946 | 3,257 | 8,858
Foreign exchange differences | (363) | 442 | (363) | 442
At 31 December | 170,965 | 178,828 | 168,955 | 176,696

157
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
6. Financial investments (continued)
The movement in debt and other fixed income financial investments measured at amortised cost is
summarised as follows:

|  | Group and Bank
| 2025 | 2024
| € 000 | € 000
At 1 January | 21,107 | 8,285
Acquisitions | 13,596 | 12,542
Amortisation | 23 | 12
Foreign exchange differences | (848) | 221
Expected credit loss allowances | 12 | 47
At 31 December | 33,890 | 21,107

The movement in equity financial investments designated at FVOCI is summarised as follows:

|  | Group and Bank
| 2025 | 2024
| € 000 | € 000
At 1 January | 8,175 | 8,520
Acquisitions | - | 88
Disposals | - | (416)
Fair value movement | 257 | (74)
Foreign exchange differences | (151) | 57
At 31 December | 8,281 | 8,175

Equity instruments measured at FVOCI consist of equities listed on the Malta Stock Exchange.
During 2024, the Bank disposed of its equity investment in Tigne Mall plc as a result of the squeeze-out
process initiated by the major shareholder of Tigne Mall plc. The sold shares had a fair value of €416,000,
and the Bank realised a gain of €216,000 which had already been reflected in Other Comprehensive Income.
The disclosure requirements emanating from IFRS 13 in respect of equity investments designated at FVOCI
were not deemed necessary by the directors taking cognisance of the insignificance of the carrying amount
of these equity investments in the context of the statement of financial position as at 31 December 2025
and 2024
.

7. Loans and advances to banks |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Repayable on call and at short notice | 20,997 | 18,955 | 16,010 | 16,230
Term loans and advances | 41,429 | 27,243 | 39,929 | 24,743
Gross loans and advances to banks | 62,426 | 46,198 | 55,939 | 40,973
Credit loss allowances | (3) | (9) | (3) | (9)
Net loans and advances to banks | 62,423 | 46,189 | 55,936 | 40,964

158
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
8. Loans and advances to customers

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Repayable on call and at short notice | 120,297 | 114,456 | 120,306 | 114,464
Term loans and advances | 816,170 | 766,646 | 816,170 | 766,646
Gross loans and advances to customers | 936,467 | 881,102 | 936,476 | 881,110
Credit loss allowances | (7,356) | (8,420) | (7,356) | (8,420)
Net loans and advances to customers | 929,111 | 872,682 | 929,120 | 872,690
Credit loss allowances |  |  |  |
Stage 1 | 678 | 979 | 678 | 979
Stage 2 | 754 | 446 | 754 | 446
Stage 3 | 5,924 | 6,995 | 5,924 | 6,995
| 7,356 | 8,420 | 7,356 | 8,420

Assets acquired in settlement of debt amounting to €703,000 (2024: €703,000) are presented as assets
classified as held for sale.
9. Investments in subsidiaries

| Country of |  |  |  |  |
Name of company | incorporation | Nature of business | Equity interest |  |  | Carrying amount
|  |  | 2025 | 2024 | 2025 | 2024
|  |  | % | % | € 000 | € 000
Redbox Limited | Malta | Holding company | 100 | 100 | 17,926 | 17,926
Lombard Select SICAV p.l.c. | Malta | Collective Investment | - | 100 | - | 1
|  | Scheme |  |  |  |

The registered office of these entities is situated at 67, Republic Street, Valletta, Malta.
At 31 December 2025 and 2024, Redbox Limited held 73.0% of the equity share capital and voting rights of
MaltaPost p.l.c., a listed company incorporated and operating in Malta, comprising the Group’s postal
services reportable segment (see note 4). The remaining 27.0% is held by the general public.
Lombard Select SICAV p.l.c.
During 2025, Lombard Select SICAV p.l.c. voluntarily surrendered its license. The Bank, acting as the sole
shareholder of Lombard Select SICAV p.l.c. had approved the voluntary dissolution and consequential
winding up of the company. The effects of this development on the Bank’s financial statements are
insignificant.
159
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
9. Investments in subsidiaries (continued)
MaltaPost p.l.c. subsidiaries are shown below:

Subsidiary | Registered office | Percentage of | Nature of business
|  | shares held |
Tanseana Limited | 305, Qormi Road, | 100% of ordinary | Document management
| Marsa, MTP 1001, | shares |
| Malta |  |
Ciabro Limited | 22, Warehouse il-Moll | 100% of ordinary | Warehousing
| tal -Pont, | shares |
| Marsa, MRS1400, |  |
| Malta |  |
PostaInsure Agency Limited | 4, Triq l-Ifran, | 49% of ordinary | General insurance agent
| Valletta, VLT 1450, | shares (rights to |
| Malta | appoint 60% of |
|  | the investee’s |
|  | Board of |
|  | Directors) |
Dormax Press Company Limited | B55, Triq Giuseppe | 99.99% of | Printing services
| Garibaldi, | ordinary shares |
| Qasam Industrijali, |  |
| Marsa, Malta |  |

The profit or loss allocated to non-controlling interests of MaltaPost p.l.c. during the financial year under
review, accumulated non-controlling interests of the subsidiary at the end of the reporting period and
dividends paid to non-controlling interests are presented within the Group’s statement of changes in
equity. Financial information about the assets, liabilities, revenues, profit or loss, total comprehensive
income and cash flows of the subsidiary are disclosed within the annual report and financial statements of
MaltaPost p.l.c., which are publicly available in view of the company’s listed status. Financial information
about the subsidiary is also disclosed within note 4 to these financial statements dealing with segmental
information. The non-controlling interests of this subsidiary are not deemed material to the reporting entity
with respect to the Bank’s consolidated financial statements for the purpose of disclosures in terms of the
requirements of IFRS 12 ‘Disclosure of interests in other entities’.
The end of the reporting period of the audited financial statements of MaltaPost p.l.c. and its associate
IVALIFE Insurance Limited that have been utilised in the preparation of these consolidated financial
statements is 30 September 2025, since the financial statements prepared as of this date constitute the
most recent audited financial statements of the respective companies. The Bank has considered the
utilisation of the subsidiary’s financial information as at 31 December 2025 as impractical for the purposes
of preparation of its consolidated financial statements.
Dormax Press Company Limited
On 17 February 2025, MaltaPost entered into a share purchase agreement with the previous shareholders
of Dormax Press Company Limited (Dormax), a limited liability company registered in Malta under the
Companies Act (Cap.386) with registration number C 27512, for the purchase of 99.99% of the issued share
capital for a consideration of €300,000. The transfer of shares was completed on 17 February 2025, at
which date MaltaPost also obtained control over the company.
The purchase consideration was deemed equivalent to the fair value of the 99.99% equity holding in
Dormax as at acquisition date.
160
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
9. Investments in subsidiaries (continued)
The estimated fair values of identifiable assets and liabilities of Dormax as at date of acquisition were as
follows:

| € 000
Non-current assets (principally property, plant and equipment) (Note 12) | 111
Current assets (principally inventory and trade and other receivables) | 418
Cash and cash equivalents | 21
Trade and other payables | (313)
Identifiable net assets acquired | 237
Goodwill (Note 11) | 63
Purchase consideration | 300

10. Investments in associates |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
At 1 January | 4,250 | 3,292 | 1,645 | 1,645
Additions | 1,000 | 1,000 | - | -
Share of results | 3,306 | (42) | - | -
Dividend received | (2,700) | - | - | -
Reduction in share capital | (1,142) | - | (1,142) | -
At 31 December | 4,714 | 4,250 | 503 | 1,645
At 31 December |  |  |  |
Cost | 5,378 | 5,520 | 503 | 1,645
Share of reserves | (664) | (1,270) | - | -
Carrying amount | 4,714 | 4,250 | 503 | 1,645

161
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
10. Investments in associates (continued)
The Group's associates at 31 December 2025 and 2024 are shown below:

| Country of | Nature of |  |  |  | Group
Name of company | incorporation | business |  | Equity interest |  | carrying amount
|  |  | 2025 | 2024 | 2025 | 2024
|  |  | % | % | € 000 | € 000
Gozo Hotels |  |  |  |  |  |
Company Limited |  | Malta Accommodation | 33.3 | 33.3 | 745 | 1,475
IVALIFE Insurance |  |  |  |  |  |
Limited | Malta | Insurance | 25.0 | 25.0 | 3,969 | 2,775

MaltaPost p.l.c. controls 25% of the share capital (and holds an equivalent amount of voting rights) of
IVALIFE Insurance Limited, an unlisted company which was incorporated in Malta towards the end of 2019
and commenced operations in 2021. The company was established to provide Class I and Class III long term
business of insurance within Malta with a registered office at Centris Business Gateway II, Level 1 D, Triq is-
Salib tal-Imrieħel, Central Business District, Birkirkara, Malta. During the 2025 financial year, MaltaPost p.l.c.
further injected capital amounting to €1,000,000 in its associate IVALIFE Insurance Limited. The Group’s 25%
share of the profits registered by the associate during the current financial year, amounting to €194,000
was reflected within the Group’s 2025 financial results.
Gozo Hotels Company Limited is an unlisted company incorporated and operating in Malta. Its principal
activity is the operation of the Hotel Calypso in Marsalforn, Gozo, and its registered address is ‘Calypso’,
Għar Qawqla Street, Żebbuġ, Gozo. In previous financial years the exposure with Gozo Hotels Company
Limited with a carrying amount of €1,645,000 had been recognised as an investment in associate on the
basis that the Bank controls 33.3% of the shares (and holds an equivalent amount of voting rights). The
Group is deemed to have significant influence over the investee in accordance with the requirements of IAS
28 ‘Investments in Associates’.
On 23 October 2025, Gozo Hotels Company Limited effected a reduction of share capital, effectively
reducing the number of shares held by the Bank by 34,366 shares, with a nominal value of €11.646866,
giving rise to a decrease in share capital amounting to €400,000, and in the related share premium of
€742,000. In addition, on 30 December 2025, the associate declared a dividend, with the net dividend
attributable to Lombard Bank Malta p.l.c. amounting to €2,700,000.
The Group’s share of profit amounting to €3,112,000 (2024: share of loss €101,000), was reflected within
the Group’s 2025 financial result in respect of this investment. The increase in the Group’s share of profit is
primarily attributable to the gain on disposal of key assets by Gozo Hotels Company Limited.
These associates are not considered material for the reporting entity, with respect to the Bank’s
consolidated financial statements, as at 31 December 2024 and 2025 for the purposes of disclosures in
terms of the requirements of IFRS 12 ‘Disclosure of interests in other entities’.
162
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
11. Intangible assets

|  | Group |  |  | Bank
|  |  | Other |  |
|  | Computer | intangible |  | Computer
| Goodwill | software | assets | Total | software
| € 000 | € 000 | € 000 | € 000 | € 000
At 1 January 2024 |  |  |  |  |
Cost | 857 | 8,449 | 140 | 9,446 | 3,449
Accumulated amortisation | - | (7,200) | (54) | (7,254) | (3,430)
Net book amount | 857 | 1,249 | 86 | 2,192 | 19
Year ended 31 December 2024 |  |  |  |  |
At 1 January 2024 | 857 | 1,249 | 86 | 2,192 | 19
Additions | - | 578 | - | 578 | -
Amortisation for the year | - | (567) | (17) | (584) | (9)
At 31 December 2024 | 857 | 1,260 | 69 | 2,186 | 10
At 31 December 2024 |  |  |  |  |
Cost | 857 | 9,027 | 140 | 10,024 | 3,449
Accumulated amortisation | - | (7,767) | (71) | (7,838) | (3,439)
Net book amount | 857 | 1,260 | 69 | 2,186 | 10
Year ended 31 December 2025 |  |  |  |  |
At 1 January 2025 | 857 | 1,260 | 69 | 2,186 | 10
Additions | - | 524 | - | 524 | -
Acquisition of subsidiary (Note 9) | 63 | - | - | 63 | -
Amortisation for the year | - | (619) | (18) | (637) | (7)
At 31 December 2025 | 920 | 1,165 | 51 | 2,136 | 3
At 31 December 2025 |  |  |  |  |
Cost | 920 | 9,551 | 140 | 10,611 | 3,449
Accumulated amortisation | - | (8,386) | (89) | (8,475) | (3,446)
Net book amount | 920 | 1,165 | 51 | 2,136 | 3

11.1 Impairment test for the cash-generating unit to which goodwill has been allocated
The recognised goodwill represents payments made by the Group in anticipation of future economic
benefits from assets that are not capable of being individually identified and separately recognised. As at
31 December 2025 the recognised goodwill amounted to €920,000 (2024: €857,000) and related to the
acquisition of MaltaPost p.l.c. and of its subsidiary, Dormax (see Note 9).
In applying the requirements of IAS 36, ‘Impairment of assets’, in relation to goodwill arising in business
combinations, the Directors carried out an impairment test at the end of the reporting period to obtain
comfort that the recoverable amount of the cash-generating unit to which goodwill has been allocated is at
least equal to its carrying amount.
The recoverable amount of the cash-generating unit is based on fair value less costs to sell.
This calculation takes into account the market capitalisation of MaltaPost p.l.c. based on the quoted price
of its equity on the Malta Stock Exchange at a price per share of €0.51 as at 31 December 2025 (2024:
€0.47). On this basis, the recoverable amount of the cash-generating unit is higher than its carrying amount.
163
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
12. Property, plant and equipment

| Land and | Computer |  |
Group | buildings | equipment | Other | Total
| € 000 | € 000 | € 000 | € 000
At 1 January 2024 |  |  |  |
Cost or valuation | 65,117 | 5,972 | 16,159 | 87,248
Accumulated depreciation | (4,709) | (4,743) | (11,285) | (20,737)
Net book amount | 60,408 | 1,229 | 4,874 | 66,511
Year ended 31 December 2024 |  |  |  |
At 1 January 2024 | 60,408 | 1,229 | 4,874 | 66,511
Revaluation surplus arising during the year: |  |  |  |
Effect on cost or valuation | 3,839 | - | - | 3,839
Effect on accumulated depreciation | 1,219 | - | - | 1,219
Additions | 120 | 582 | 1,362 | 2,064
Disposals | (120) | (237) | (184) | (541)
Adjustments to right-of-use assets | 857 | - | - | 857
Depreciation charge for the year | (1,430) | (533) | (1,077) | (3,040)
Depreciation released on disposals | 120 | 237 | 184 | 541
Other adjustment |  |  |  |
Effect on cost or valuation | - | - | (24) | (24)
Effect on accumulated depreciation | - | - | 24 | 24
At 31 December 2024 | 65,013 | 1,278 | 5,159 | 71,450
At 31 December 2024 |  |  |  |
Cost or valuation | 69,813 | 6,317 | 17,313 | 93,443
Accumulated depreciation | (4,800) | (5,039) | (12,154) | (21,993)
Net book amount | 65,013 | 1,278 | 5,159 | 71,450
Year ended 31 December 2025 |  |  |  |
At 1 January 2025 | 65,013 | 1,278 | 5,159 | 71,450
Additions | 2,590 | 463 | 1,354 | 4,407
Acquisition of subsidiary | 76 | - | 35 | 111
Disposals | (963) | (22) | (161) | (1,146)
Adjustments to right-of-use assets | 7 | - | - | 7
Depreciation charge for the year | (1,134) | (585) | (1,232) | (2,951)
Depreciation released on disposals | 617 | 18 | 122 | 757
At 31 December 2025 | 66,206 | 1,152 | 5,277 | 72,635
At 31 December 2025 |  |  |  |
Cost or valuation | 71,547 | 6,758 | 19,236 | 97,541
Accumulated depreciation | (5,341) | (5,606) | (13,959) | (24,906)
Net book amount | 66,206 | 1,152 | 5,277 | 72,635

164
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
12. Property, plant and equipment (continued)
Bank
Land and
Computer
buildings
equipment
Other
Total
€ 000
€ 000
€ 000
€ 000
At 1 January 2024
Cost or valuation
43,255
3,675
3,405
50,335
Accumulated depreciation
(2,594)
(2,763)
(2,723)
(8,080)
Net book amount
40,661
912
682
42,255
Year ended 31 December 2024
At 1 January 2024
40,661
912
682
42,255
Revaluation surplus arising during the year:
Effect on cost or valuation
2,580
-
-
2,580
Effect on accumulated depreciation
582
-
-
582
Additions
96
250
192
538
Disposals
(120)
(5)
(37)
(162)
Depreciation charge for the year
(595)
(368)
(194)
(1,157)
Depreciation released on disposals
120
5
37
162
At 31 December 2024
43,324
794
680
44,798
At 31 December 2024
Cost or valuation
45,811
3,920
3,560
53,291
Accumulated depreciation
(2,487)
(3,126)
(2,880)
(8,493)
Net book amount
43,324
794
680
44,798
Year ended 31 December 2025
At 1 January 2025
43,324
794
680
44,798
Additions
49
220
116
385
Disposals
(330)
(10)
(49)
(389)
Depreciation charge for the year
(579)
(374)
(200)
(1,153)
Depreciation released on disposals
2
10
17
29
At 31 December 2025
42,466
640
564
43,670
At 31 December 2025
Cost or valuation
45,530
4,130
3,627
53,287
Accumulated depreciation
(3,064)
(3,490)
(3,063)
(9,617)
Net book amount
42,466
640
564
43,670
165
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
12. Property, plant and equipment (continued)
In 2024, the adjustments to the Group’s right-of-use assets referred to in the table above, comprise the
impacts of the reassessment of the lease term in respect of lease extensions attributable to lease
agreements of MaltaPost p.l.c, which resulted in an increase in right-of-use assets of €857,000.
Land and buildings presented in the tables above include improvements to leasehold properties as follows:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
At 1 January | 1,774 | 2,016 | 1,424 | 1,529
Additions | 513 | 8 | - | 8
Acquisition of subsidiary | 76 | - | - |
Disposals | - | (120) | - | (120)
Depreciation charge for the year | (226) | (250) | (113) | (113)
Depreciation released on disposals | - | 120 | - | 120
At 31 December | 2,137 | 1,774 | 1,311 | 1,424

As at 31 December 2025, property, plant and equipment of the Group and the Bank includes right-of-use
assets of €6,455,000 (2024: €4,839,000) and €2,516,000 (2024: €2,813,000) respectively, as disclosed in
note 13.
12.1 Fair valuation of land and buildings
The Bank’s land and buildings were revalued on 31 December 2024, while the subsidiary’s land and buildings
were revalued on 30 September 2024, by an independent firm of property valuers having appropriate
recognised professional qualifications and experience in the location and category of the property being
valued. The Directors had reviewed the carrying amounts of the Group’s properties as at 31 December
2024, on the basis of the valuations carried out by the independent property valuers.
Valuations were made on the basis of open market value taking cognisance of the specific location of the
properties, the size of the sites, the availability of similar properties in the area, and whenever possible,
having regard to recent market transactions for similar properties in the same location. During 2024, the
carrying values of the properties, classified within property, plant and equipment, have been adjusted to
the valuations and the net resultant adjustment comprised an increase of €5,058,000 in the carrying values
for the Group and an increase of €3,162,000 in the carrying value for the Bank, to reflect the property’s
estimated open market value on an individual asset level. This increase was recognised in other
comprehensive income in the property revaluation reserve. The revaluation surplus net of applicable
deferred income taxes is accordingly shown in ‘other reserves’ in shareholders’ equity (note 19).
The Directors assessed the carrying amounts as at 31 December 2025 on the basis of management’s
assessments of estimated changes in significant inputs to valuations and other developments since the last
external valuation, and concluded that no adjustment to these carrying amounts were necessary.
The Group is required to analyse non-financial assets carried at fair value by level of the fair value hierarchy
within which the recurring fair value measurements are categorised in their entirety (Level 1, 2 or 3). The
different levels of the fair value hierarchy have been defined as fair value measurements using:
- Quoted prices (unadjusted) in active markets for identical assets (Level 1);
- Inputs other than quoted prices included within Level 1 that are observable for the asset, either
directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2);
- Inputs for the asset that are not based on observable market data (i.e. unobservable inputs) (Level 3).
The Bank’s land and buildings comprise various offices and operational premises, including the Bank’s head
office. The subsidiary’s land and buildings, within property, plant and equipment, comprises the head office,
mail delivery hubs and retail outlets. All the Group’s recurring property fair value measurements use
significant unobservable inputs and are accordingly categorised within Level 3 of the fair valuation
hierarchy.
166
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
12. Property, plant and equipment (continued)
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as of the beginning of
the reporting period. There were no transfers between different levels of the fair value hierarchy during
the years ended 31 December 2025 and 2024.
A reconciliation from the opening balance to the closing balance of land and buildings for recurring fair
value measurements categorised within Level 3 of the value hierarchy, is reflected in the table above. The
principal movements for the years ended 31 December 2025 and 2024 are extensively described with the
tables referred to above.
For all Group properties, their current use equates to the highest and best use.
12.2 Valuation processes
The valuations of the properties are performed on a periodic basis taking into consideration the valuation
reports prepared by independent and qualified valuers. These reports are based on both:
- information provided by the Bank such as current terms and conditions of lease agreements. This
information is derived from the Bank’s financial systems and is subject to the Bank’s overall control
environment; and
- assumptions and valuation models used by the valuers – the assumptions are typically market related,
such as rental yields, discount rates and sales prices. These are based on professional judgement and
market observation.
The information provided to the valuers, together with the assumptions and the valuation models used by
the valuers, are reviewed by management.
When management considers that the valuation report is appropriate, the valuation report is considered
by the Audit & Risk Committee as part of its monitoring responsibility for effective financial reporting.
At the end of every reporting period, management assess whether any significant changes or developments
have been experienced since the last external valuation. This is supported by an assessment performed by
the independent firm of property valuers. Management reports to the Audit and Risk Committee on the
outcome of this assessment.
12.3 Valuation techniques
The Level 3 fair valuation of the Bank’s property was determined using a multi-criteria approach, namely
the rent capitalisation method and an adjusted sales comparison approach, with every property being
valued utilising the valuation technique considered by the external valuer to be the most appropriate for
the respective property.
The external valuations of the subsidiary’s Level 3 property have been performed using predominantly an
adjusted sales comparison approach.
In view of a limited number of similar or comparable properties and property transactions, comprising sales
or rentals in the local market, the valuations have predominately been performed using unobservable
inputs. The significant inputs to the approaches used are generally those described below:
- Rent capitalisation method: an annual rent rate per square metre related
to transactions in comparable
properties located in proximity to the respective property, with significant adjustments for differences
in the size, age, exact location and condition of the property, together with a growth rate and a market
capitalisation rate utilised for capitalisation of rental income streams.
- Adjusted sales comparison approach: a sales price per square metre related to transactions in
comparable properties located in proximity to the respective property, with significant adjustments for
differences in the size, age, exact location and condition of the property.
167
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
12. Property, plant and equipment (continued)
12.4 Information about fair value measurements using significant unobservable inputs (Level 3) as at 31
December 2025 and 2024 for the Group’s entire property portfolio

|  |  | Significant |  | Range of
Description by class based |  | Valuation | unobservable |  | unobservable inputs
on highest and best use | Fair value | technique | inputs |  | (weighted average)
Current use as Bank’s offices | €21 million | Rent capitalisation | Rental value (€/sqm) |  |
and operational premises |  | method | Growth rate (%) |  | 60 – 367 (226)
|  |  | Capitalisation rate |  | 2 per annum
|  |  | (%) | 6 – 8 | (7)
| €17 million | Adjusted sales | Sales price per | 2,000 – | 15,000
|  | comparison | square metre (€) | (3,179)
|  | approach |  |  |
Current use as subsidiary’s | €19 million | Adjusted sales | Sales price per | 1,500 – | 6,900
office premises, retail |  | comparison | square metre (€) |  | (4,116)
outlets and mail delivery |  | approach |  |  |
hubs |  |  |  |  |

The higher the rental value or the growth rate, the higher the resultant fair value. Conversely, the lower the
capitalisation rate, the higher the resultant fair value.
The higher the sales price per square metre, the higher the resultant fair valuation.
12.5 Historical cost of land and buildings
If the land and buildings were stated on the historical cost basis, the carrying amounts would be as follows:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Cost | 38,510 | 38,331 | 24,380 | 24,526
Accumulated depreciation | (4,095) | (3,743) | (3,378) | (3,086)
Net book amount at 31 December | 34,415 | 34,588 | 21,002 | 21,440

13. Leases
The Group leases various locations for offsite ATMs, offices, branches and motor vehicles as well as low
value items such as IT equipment. Rental contracts are typically made for fixed periods but may have
extension options. Extension and termination options are included in a number of property leases across
the Group. These are used to maximise operational flexibility in terms of managing the assets used in the
Group’s operations. The majority of extension and termination options held are exercisable only by the
Group and not by the respective lessor. Most extension options in property and motor vehicle leases have
been included in the lease liability as the lease term reflects the exercise of such options.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants other than the security interests in the
leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
168
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
13. Leases (continued)
Leases are recognised as a right-of-use asset within ‘Property, plant and equipment’ (note 12) and a
corresponding liability within ‘Other liabilities’ (note 23) at the date at which the leased asset is available
for use by the Group.

|  | Group |  |  | Bank |
| Buildings | Other | Total | Buildings | Other | Total
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
At 1 January 2024 |  |  |  |  |  |
Cost | 6,095 | 435 | 6,530 | 3,909 | 120 | 4,029
Accumulated depreciation | (1,825) | (263) | (2,088) | (996) | (22) | (1,018)
Net book amount | 4,270 | 172 | 4,442 | 2,913 | 98 | 3,011
Year ended 31 December 2024 |  |  |  |  |  |
At 1 January 2024 | 4,270 | 172 | 4,442 | 2,913 | 98 | 3,011
Additions | - | 122 | 122 | - | 122 | 122
Adjustments upon reassessment |  |  |  |  |  |
of lease term in respect of extensions (see Note 12) | 857 | - | 857 | - | - | -
Depreciation charge for the year | (477) | (105) | (582) | (278) | (42) | (320)
At 31 December 2024 | 4,650 | 189 | 4,839 | 2,635 | 178 | 2,813
At 31 December 2024 |  |  |  |  |  |
Cost | 6,952 | 557 | 7,509 | 3,909 | 242 | 4,151
Accumulated depreciation | (2,302) | (368) | (2,670) | (1,274) | (64) | (1,338)
Net book amount | 4,650 | 189 | 4,839 | 2,635 | 178 | 2,813
Year ended 31 December 2025 |  |  |  |  |  |
At 1 January 2025 | 4,650 | 189 | 4,839 | 2,635 | 178 | 2,813
Additions | 1 ,702 | 752 | 2,454 | - | 75 | 75
Derecognition upon termination | (633) | (35) | (668) | - | (35) | (35)
Adjustments upon reassessment |  |  |  |  |  |
of lease term in respect of extensions (see Note 12) | 7 | - | 7 | - | - | -
Depreciation charge for the year | (643) | (153) | (796) | (278) | (63) | (341)
Depreciation released on derecognition upon |  |  |  |  |  |
termination | 615 | 4 | 619 | - | 4 | 4
At 31 December 2025 | 5,698 | 757 | 6,455 | 2,357 | 159 | 2,516
At 31 December 2025 |  |  |  |  |  |
Cost | 8 ,028 | 1,274 | 9,302 | 3,909 | 282 | 4,191
Accumulated depreciation | (2,330) | (517) | (2,847) | (1,552) | (123) | (1,675)
Net book amount | 5,698 | 757 | 6,455 | 2,357 | 159 | 2,516

169
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
13. Leases (continued)
The Group and the Bank’s lease liabilities are presented below:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Lease liabilities (Note 23) |  |  |  |
Current | 672 | 928 | 226 | 678
Non-current | 5,805 | 4,175 | 2,197 | 2,373
| 6,477 | 5,103 | 2,423 | 3,051

The following tables show the movements in lease liabilities during the year:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Lease liabilities |  |  |  |
At beginning of year | 5,103 | 4,545 | 3,051 | 3,070
Additions | 2,360 | 122 | 76 | 122
Acquisition of subsidiary | 94 | - | - | -
Payments | (1,211) | (542) | (741) | (213)
Interest charge | 174 | 121 | 69 | 72
Adjustments upon reassessment of lease |  |  |  |
term in respect of extensions | 7 | 857 | - | -
Derecognition upon termination | (50) | - | (32) | -
At end of year | 6,477 | 5,103 | 2,423 | 3,051

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
The income statement reflects the following |  |  |  |
amounts relating to leases: |  |  |  |
Depreciation charge on right-of-use assets | 796 | 582 | 341 | 320
Interest expense | 174 | 121 | 69 | 72
Expense relating to short-term leases (included |  |  |  |
in administrative expenses) | 517 | 509 | 80 | 95
Expense relating to leases of low-value assets |  |  |  |
that are not shown above as short-term leases |  |  |  |
(included in administrative expenses) | 197 | 211 | 36 | 34

The total cash payments for leases, including short-term and low-value leases, in 2025 was €1,982,000
(2024: €1,387,000) for the Group and €858,000 (2024: €334,000) for the Bank.
There was no expense relating to variable lease payments which were not included in the measurement of
lease liabilities.
170
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
14. Deferred tax assets and liabilities
Deferred taxes are calculated using the principal tax rate of 35% (2024: 35%), with the exception of deferred
taxation on the fair valuation of non-depreciable property, which is computed on the basis applicable to
disposals of immovable property, based on tax effects on the transfer value.
Deferred tax assets and liabilities are attributable to the following:

| Assets | Liabilities | Net | Assets | Liabilities | Net
| 2025 | 2025 | 2025 | 2024 | 2024 | 2024
Group | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Deferred tax asset, after offsetting |  |  |  |  |  |
Differences between depreciation |  |  |  |  |  |
and capital allowances | - | (236) | (236) | - | (252) | (252)
Provisions for liabilities and charges | 893 | - | 893 | 720 | - | 720
Credit loss allowances | 3,062 | - | 3,062 | 3,361 | - | 3,361
Fair value movements on financial |  |  |  |  |  |
investments | 2,769 | - | 2,769 | 4,049 | - | 4,049
Others | - | (33) | (33) | 83 | - | 83
| 6,724 | (269) | 6,455 | 8,213 | (252) | 7,961
Deferred tax liability |  |  |  |  |  |
Revaluation of property | - | (4,798) | (4,798) | - | (4,824) | (4,824)
| - | (4,798) | (4,798) | - | (4,824) | (4,824)

Bank
Deferred tax asset, after offsetting
Differences between depreciation
and capital allowances
-
(154)
(154)
-
(174)
(174)
Provisions for liabilities and
charges
697
-
697
522
-
522
Credit loss allowances
2,968
-
2,968
3,291
-
3,291
Fair value movements on financial
investments
2,770
-
2,770
4,050
-
4,050
Others
-
(33)
(33)
83
-
83
6,435
(187)
6,248
7,946
(174)
7,772
Deferred tax liability
Revaluation of property
-
(3,252)
(3,252)
-
(3,279)
(3,279)
-
(3,252)
(3,252)
-
(3,279)
(3,279)
171
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
14. Deferred tax assets and liabilities (continued)

Movement in deferred tax assets and liabilities relate to: |  |  |  |  |  |  |
|  |  | Recognised |  |  | Recognised |
| At 1 | Recognised | in other | At 31 | Recognised | in other | At 31
| January | in profit | comprehensive | December | in profit | comprehensive | December
| 2024 | or loss | income | 2024 | or loss | income | 2025
Group | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Differences between depreciation and capital allowances | (42) | (210) | - | (252) | 16 | - | (236)
Provisions for liabilities and charges | 288 | 403 | 29 | 720 | 175 | (2) | 893
Credit loss allowances | 4,385 | (1,110) | 86 | 3,361 | (301) | 2 | 3,062
Revaluation of property | (4,099) | - | (725) | (4,824) | - | 26 | (4,798)
Fair value movements on investments | 7,048 | - | (2,999) | 4,049 | 19 | (1,299) | 2,769
Others | 15 | 68 | - | 83 | (116) | - | (33)
| 7,595 | (849) | (3,609) | 3,137 | (207) | (1,273) | 1,657

Bank
Differences between depreciation and capital allowances
(140)
(34)
-
(174)
20
-
(154)
Provisions for liabilities and charges
119
403
-
522
175
-
697
Credit loss allowances
4,353
(1,148)
86
3,291
(325)
2
2,968
Revaluation of property
(2,800)
-
(479)
(3,279)
-
27
(3,252)
Fair value movements on investments
7,049
-
(2,999)
4,050
19
(1,299)
2,770
Others
-
83
-
83
(116)
-
(33)
8,581
(696)
(3,392)
4,493
(227)
(1,270)
2,996
The recognised deferred tax assets and liabilities are expected to be recovered or settled principally after more than twelve months from the end of the reporting period. The
deferred tax liabilities reflected in other comprehensive income relate principally to the revaluation of property, plant and equipment and the fair valuation of investments
measured at FVOCI (note 34).
172
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
15. Inventories

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Postal supplies and materials | 337 | 331 | - | -
Merchandise | 521 | 522 | - | -
Stocks for resale | 235 | 822 | 235 | 822
Other stock items | 56 | 56 | 56 | 56
| 1,149 | 1,731 | 291 | 878

16. Trade and other receivables

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Trade receivables - net of expected |  |  |  |
credit loss allowances | 6,311 | 6,341 | - | -
Others | 10,116 | 6,638 | 7,238 | 3,443
| 16,427 | 12,979 | 7,238 | 3,443

The expected credit loss allowances in respect of trade receivables are analysed as follows:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Loss allowance as at 1 January | 203 | 91 | - | -
Acquisition of subsidiary | 3 | - | - | -
Net charge recognised in profit |  |  |  |
or loss during the year | 57 | 112 | - | -
Loss allowance as at 31 December | 263 | 203 | - | -

17. Accrued income and other assets

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Accrued income | 2,512 | 2,553 | 2,485 | 2,524
Prepayments | 2,116 | 1,551 | 1,009 | 757
Other assets | 1,099 | 1,331 | 1,099 | 1,331
| 5,727 | 5,435 | 4,593 | 4,612

173
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025

18. Share capital |  |  |  |
Bank |  |  |  |
|  | 2025 |  | 2024
| No. of |  | No. of |
| Shares |  | shares |
| 000s | € 000 | 000s | € 000
Authorised |  |  |  |
Ordinary shares of €0.125 each Issued | 300,000 | 37,500 | 300,000 | 37,500
Ordinary shares of €0.125 each | 154,572 | 19,322 | 154,572 | 19,322

19. Reserves
These reserves are non-distributable.
19.1 Share premium
The share premium comprises premium attributable to the scrip issue of ordinary shares. Utilisation of
the share premium account is governed by the requirements of Article 114 within the Companies Act,
Chapter 386 of the Laws of Malta.
19.2 Revaluation and other reserves
The Group and the Bank had the following reserves as at end of the reporting period:

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Property revaluation reserve | 16,893 | 17,016 | 12,728 | 12,851
Investment revaluation reserve | (5,682) | (7,877) | (5,726) | (7,936)
Other reserve | 2,143 | 1,871 | 2,402 | 2,133
| 13,354 | 11,010 | 9,404 | 7,048

The property revaluation reserve relates to the fair valuation of the land and buildings component of
property, plant and equipment, and the balance represents the cumulative net increase in fair value of
such property, net of related deferred tax.
The investment revaluation reserve represents the cumulative net change in fair values of financial assets
measured at FVOCI held by the Group and by the Bank, net of related deferred tax impacts.
The other reserve mainly represents amounts set aside by the Bank from its retained earnings in relation
to the Depositor Compensation Scheme (the ‘Scheme’), reflecting the carrying amount of assets which as
at end of the financial year are pledged in favour of the Scheme to comply with local regulatory
requirements. The other reserve also reflects the impact of actuarial gains and losses with respect to
pension obligations of MaltaPost p.l.c. recognised in other comprehensive income in accordance with the
Group’s accounting policy, net of any related deferred tax impacts.
The movements in these reserves are also analysed in the Statements of Changes in Equity and in note
34.
174
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025

20. Amounts owed to banks |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Term deposits with agreed maturity dates or periods of notice | 23 | 23 | 23 | 23
Repayable on demand | 322 | 415 | 322 | 415
| 345 | 438 | 345 | 438

21. Amounts owed to customers |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Term deposits with agreed maturity dates | 550,973 | 484,266 | 551,373 | 484,666
Repayable on demand | 656,283 | 635,740 | 658,921 | 637,150
| 1,207,256 | 1,120,006 | 1,210,294 | 1,121,816

22. Provisions for liabilities and other charges |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Obligation to Government | 939 | 1,060 | - | -
Contractual and regulatory claims | 1,991 | 1,490 | 1,991 | 1,490
Other expected credit losses on off-balance |  |  |  |
sheet items | 32 | 83 | 32 | 83
| 2,962 | 2,633 | 2,023 | 1,573

These provisions are predominantly non-current in nature.

Group |  | 2025 |  |  |  | 2024 |  |
|  | Contractual |  |  |  | Contractual |  |
|  | and | Expected |  |  | and | Expected |
| Obligation to | regulatory | Credit Loss |  | Obligation to | regulatory | Credit Loss |
| Government | claims | allowance | Total | Government | claims | allowance | Total
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000
At 1 January | 1,060 | 1,490 | 83 | 2,633 | 1,034 | 340 | 29 | 1,403
Actuarial (gains)/losses |  |  |  |  |  |  |  |
recognised in other comprehensive income | (9) | - | - | (9) | 84 | - | - | 84
Charges recognised |  |  |  |  |  |  |  |
in profit or loss | 26 | 501 | - | 527 | 31 | 1,150 | - | 1,181
Crystallised obligations | (138) | - | - | (138) | (89) | - | - | (89)
Change in ECL provision on off-balance sheet items | - | - | (51) | (51) | - | - | 54 | 54
At 31 December | 939 | 1,991 | 32 | 2,962 | 1,060 | 1,490 | 83 | 2,633

175
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
22. Provisions for liabilities and other charges (continued)
The obligation to Government arises in terms of Article 8A of the Pensions Ordinance (Chapter 93 of the
Laws of Malta), covering former Government employees who opted to become full-time employees of
MaltaPost p.l.c., and who continued to be entitled to pension benefits which go beyond the National
Insurance Scheme. The pension benefits scheme is a final salary defined benefit plan and is unfunded.
Obligation to Government recognised in the statement of financial position is derived as follows:

| 2025 | 2024
| € 000 | € 000
Present value of unfunded obligations | 1,948 | 1,931
Crystallised obligations | (1,009) | (871)
| 939 | 1,060

The amounts recognised in other comprehensive income are as follows:

| 2025 | 2024
| € 000 | € 000
Net actuarial (losses)/gains |  |
- attributable to financial assumptions | 9 | (84)
| 9 | (84)

Crystallised obligations relate to amounts which became payable as at the end of the reporting period.
In computing the provision, the Group used a weighted average discount rate of 3.91% (2024: 3.52%).
Assumptions regarding future mortality experience are based on published mortality tables in Malta,
which translate into an average life expectancy of 83 (2024: 83) depending on age and gender of the
beneficiaries. These factors are deemed to be the main assumptions used in the computation of the
liability. The sensitivity of the obligation to changes in these assumptions is considered immaterial for
disclosure purposes.
Bank
2025
2024
Contractual
Contractual
and
Expected
and
Expected
regulatory
Credit Loss
regulatory
Credit Loss
claims
allowance
Total
claims
allowance
Total
€ 000
€ 000
€ 000
€ 000
€ 000
€ 000
At 1 January
1,490
83
1,573
340
29
369
Charge recognised in profit or loss
501
-
501
1,150
-
1,150
Change in ECL provision on off-
balance sheet items
-
(51)
(51)
-
54
54
At 31 December
1,991
32
2,023
1,490
83
1,573
In addition, the Bank is also a defendant in legal actions by other customers as a result of which the
Directors are of the opinion that no liability will arise.
176
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025

23. Other liabilities |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Trade payables | 3,931 | 5,640 | - | -
Bills payable | 4,527 | 5,373 | 4,527 | 5,373
Lease liabilities | 6,477 | 5,103 | 2,423 | 3,051
Other payables | 15,239 | 10,381 | 10,151 | 6,456
| 30,174 | 26,497 | 17,101 | 14,880

24. Accruals and deferred income |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Accrued interest | 9,680 | 7,323 | 9,681 | 7,324
Other | 6,145 | 6,524 | 1,787 | 2,319
| 15,825 | 13,847 | 11,468 | 9,643

25. Commitments and contingent liabilities

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Contingent liabilities |  |  |  |
Guarantee obligations incurred on behalf of third parties | 15,114 | 12,619 | 15,114 | 12,619
Documentary credits | 6,941 | 7,208 | 6,941 | 7,208
| 22,055 | 19,827 | 22,055 | 19,827

Commitments |  |  |  |
Credit facilities and other commitments to lend | 355,682 | 291,647 | 356,793 | 292,754
Capital commitments | 776 | 389 | 59 | 79
| 356,458 | 292,036 | 356,852 | 292,833

Credit facilities and other commitments to lend funds to customers are granted at prevailing market
interest rates at drawdown date.
As at 31 December 2025, expected credit losses arising on contingent liabilities and undrawn
commitments to lend of the Group and the Bank amounted to €33,000 (2024: €83,000).
Capital commitments as at 31 December 2025 and 2024 mainly relate to the acquisition of property, plant
and equipment.
177
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
25. Commitments and contingent liabilities (continued)
Total future minimum lease payments under non-cancellable short-term leases, with a lease term of less
than 12 months, are as follows:

| 2025 | 2024
| € 000 | € 000
Current |  |
Within 1 year | 694 | 654

Specific lease agreements include an option to renew the lease after the original term but the amounts
presented in the table above do not reflect payments subsequent to renewal.

26. Net interest income |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Interest income |  |  |  |
On loans and advances to banks | 1,115 | 1,405 | 1,050 | 1,333
On loans and advances to customers | 32,938 | 28,989 | 32,938 | 28,989
On balances with Central Bank of Malta | 3,162 | 4,992 | 3,162 | 4,992
On Malta Government treasury bills | 39 | 60 | 39 | 60
| 37,254 | 35,446 | 37,189 | 35,374
On debt and other fixed income instruments | 3,549 | 3,568 | 3,489 | 3,496
Net amortisation of premiums and discounts | (769) | (871) | (767) | (869)
| 2,780 | 2,697 | 2,722 | 2,627
Total interest income | 40,034 | 38,143 | 39,911 | 38,001
Interest expense |  |  |  |
On amounts owed to banks | (1) | (2) | (1) | (2)
On amounts owed to customers | (13,731) | (10,760) | (13,735) | (10,763)
On leases | (174) | (121) | (69) | (72)
Total interest expense | (13,906) | (10,883) | (13,805) | (10,837)
Net interest income | 26,128 | 27,260 | 26,106 | 27,164

178
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025

27. Net fee and commission income |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Fee and commission income |  |  |  |
Retail banking customer fees | 4,003 | 3,855 | 4,005 | 3,856
Brokerage | 143 | 72 | 143 | 72
Other | 2,520 | 2,715 | 1,538 | 1,682
Total fee and commission income | 6,666 | 6,642 | 5,686 | 5,610
Fee and commission expense |  |  |  |
Inter-bank transaction fees | (260) | (246) | (260) | (246)
Other | (33) | (23) | (33) | (23)
Total fee and commission expense | (293) | (269) | (293) | (269)
Net fee and commission income | 6,373 | 6,373 | 5,393 | 5,341

Fee and commission income is principally recognised at a point in time.

28. Postal sales and other revenues |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Stamps, parcel post and postal stationery |  |  |  |
including income from foreign inbound mail | 35,909 | 34,038 | - | -
Collectibles and philatelic sales | 1,800 | 733 | 1,520 | 500
Other | 4,940 | 4,412 | - | -
| 42,649 | 39,183 | 1,520 | 500

29. Dividend income |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Subsidiaries | - | - | 2,104 | 1,445
Associates | - | - | 2,700 | -
Equity investments measured at FVOCI | 425 | 465 | 425 | 465
| 425 | 465 | 5,229 | 1,910

179
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025

30. Net trading income |  |  |  |
|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Gains on foreign exchange activities | 612 | 628 | 579 | 665

31. Employee compensation and benefits

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Staff costs |  |  |  |
- wages, salaries and allowances | 26,392 | 24,731 | 8,988 | 9,002
- social security costs | 1,832 | 1,798 | 509 | 511
- others | 75 | - | 75 | -
| 28,299 | 26,529 | 9,572 | 9,513

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
Average number of employees |  |  |  |
Executives and senior managerial | 47 | 47 | 35 | 35
Other managerial, supervisory and clerical | 389 | 373 | 171 | 173
Others | 532 | 523 | 6 | 6
| 968 | 943 | 212 | 214

180
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
32. Net movement in expected credit losses
Movement in expected credit losses during 2025 was as follows:

|  | Group |  |  | Bank |
|  | Reversals |  |  | Reversals |
| Write- | of write- |  | Write- | of write- |
| downs | downs | Total | downs | downs | Total
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Trade receivables |  |  |  |  |  |
Stage 3 | (57) | - | (57) | - | - | -
Total trade receivables | (57) | - | (57) | - | - | -
Loans and advances to banks |  |  |  |  |  |
Stage 1 | - | 6 | 6 | - | 6 | 6
Total loans and advances |  |  |  |  |  |
to banks | - | 6 | 6 | - | 6 | 6
Loans and advances to customers |  |  |  |  |  |
Stage 1 | - | 301 | 301 | - | 301 | 301
Stage 2 | (308) | - | (308) | (308) | - | (308)
Stage 3 | - | 1,150 | 1,150 | - | 1,150 | 1,150
Recoveries | - | 3 | 3 | - | 3 | 3
Total loans and advances |  |  |  |  |  |
to customers | (308) | 1,454 | 1,146 | (308) | 1,454 | 1,146
Debt securities measured |  |  |  |  |  |
at FVOCI |  |  |  |  |  |
Stage 1 | - | 5 | 5 | - | 5 | 5
Total financial investments |  |  |  |  |  |
measured at FVOCI | - | 5 | 5 | - | 5 | 5
Debt securities measured |  |  |  |  |  |
at amortised cost |  |  |  |  |  |
Stage 1 | - | 12 | 12 | - | 12 | 12
Total financial investments |  |  |  |  |  |
measured at amortised cost | - | 12 | 12 | - | 12 | 12
Other financial assets |  |  |  |  |  |
Stage 1 | (201) | - | (201) | (201) | - | (201)
Total other financial assets | (201) | - | (201) | (201) | - | (201)
Off-balance sheet items |  |  |  |  |  |
Stage 1 | - | 70 | 70 | - | 70 | 70
Stage 3 | (21) | - | (21) | (21) | - | (21)
Total off-balance sheet items | (21) | 70 | 49 | (21) | 70 | 49
Net movement in expected |  |  |  |  |  |
credit losses | (587) | 1,547 | 960 | (530) | 1,547 | 1,017

181
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
32. Net movement in expected credit losses (continued)
Movement in expected credit losses during 2024 was as follows:

|  | Group |  |  | Bank |
|  | Reversals |  |  | Reversals |
| Write- | of write- |  | Write- | of write- |
| downs | downs | Total | downs | downs | Total
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Trade receivables |  |  |  |  |  |
Stage 3 | (112) | - | (112) | - | - | -
Total trade receivables | (112) | - | (112) | - | - | -
Loans and advances to banks |  |  |  |  |  |
Stage 1 | (9) | - | (9) | (9) | - | (9)
Total loans and advances |  |  |  |  |  |
to banks | (9) | - | (9) | (9) | - | (9)
Loans and advances to customers |  |  |  |  |  |
Stage 1 | - | 601 | 601 | - | 601 | 601
Stage 2 | - | 1,441 | 1,441 | - | 1,441 | 1,441
Stage 3 | (1,184) | - | (1,184) | (1,184) | - | (1,184)
Write offs | (129) | - | (129) | (129) | - | (129)
Recoveries | - | 63 | 63 | - | 63 | 63
Total loans and advances |  |  |  |  |  |
to customers | (1,313) | 2,105 | 792 | (1,313) | 2,105 | 792
Debt securities measured |  |  |  |  |  |
at FVOCI |  |  |  |  |  |
Stage 1 | - | 247 | 247 | - | 247 | 247
Total financial investments |  |  |  |  |  |
measured at FVOCI | - | 247 | 247 | - | 247 | 247
Debt securities measured |  |  |  |  |  |
at amortised cost |  |  |  |  |  |
Stage 1 | - | 47 | 47 | - | 47 | 47
Total financial investments |  |  |  |  |  |
measured at amortised cost | - | 47 | 47 | - | 47 | 47
Other financial assets |  |  |  |  |  |
Stage 1 | - | 16 | 16 | - | 16 | 16
Total other financial assets | - | 16 | 16 | - | 16 | 16
Off-balance sheet items |  |  |  |  |  |
Stage 1 | (59) | - | (59) | (59) | - | (59)
Stage 2 | - | 5 | 5 | - | 5 | 5
Total off-balance sheet items | (59) | 5 | (54) | (59) | 5 | (54)
Net movement in expected |  |  |  |  |  |
credit losses | (1,493) | 2,420 | 927 | (1,381) | 2,420 | 1,039

182
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
33. Profit before taxation
Profit before taxation is stated after charging and crediting the following:

| Group |  |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
After charging |  |  |  |
Directors' emoluments |  |  |  |
- fees | 161 | 148 | 135 | 102
- other emoluments | 381 | 368 | 381 | 368
After crediting |  |  |  |
Net income from investment services | 555 | 429 | 555 | 429

Other operating costs are analysed as follows:

| Group |  |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Foreign outbound mail | 9,852 | 10,710 | - | -
Utilities, insurance and security | 1,098 | 1,089 | 707 | 717
Depositor and investor compensation schemes | 624 | 593 | 624 | 593
Information systems and telecommunications | 3,528 | 2,977 | 2,639 | 2,126
Repairs and maintenance | 1,302 | 1,275 | 421 | 440
Short-term and low value leases | 714 | 720 | 116 | 129
Expenses associated with card services | 1,057 | 1,542 | 1,057 | 1,542
Licence fees | 513 | 524 | 282 | 229
Legal and professional fees | 741 | 720 | 495 | 590
Other administrative expenses | 5,155 | 4,281 | 3,331 | 2,341
Total other operating costs | 24,584 | 24,431 | 9,672 | 8,707

Other administrative expenses mainly comprise professional expenses, subcontracted services and other
services or expense items which are incurred in the course of the operations of the Group and the Bank.
Fees charged by the parent company auditor for services rendered during the financial years ended 31
December 2025 and 2024 relate to the following:

|  | Other assurance/
| Audit | advisory services
| € 000 | € 000
Bank |  |
2025 | 121 | 14
2024 | 108 | 158
Subsidiary companies |  |
2025 | 96 | 18
2024 | 86 | 18

During the current year, fees amounting to €77,000 (2024: €73,000) have been charged to the Bank by
connected undertakings of the Bank’s auditor, in respect of regulatory advisory services and tax
compliance services.
During the current year, fees amounting to €21,000 (2024: €7,000) have been charged to the subsidiary
companies by connected undertakings of the subsidiaries’ auditor, in respect of regulatory advisory
services, and tax advisory and compliance services.
183
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
34. Income tax expense
Recognised in profit or loss:

| Group |  |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Current taxation |  |  |  |
Current tax expense | 6,977 | 6,408 | 5,383 | 5,181
Deferred taxation |  |  |  |
Deferred tax charge (note 14) | 207 | 849 | 227 | 696
| 7,184 | 7,257 | 5,610 | 5,877

The tax on the profit before income tax differs from the theoretical amount that would arise using the tax
rate applicable as follows:

| Group |  | Bank |
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Profit before tax | 23,767 | 19,415 | 19,061 | 16,101
Tax on profit at 35% | 8,318 | 6,795 | 6,671 | 5,635
Tax effect of: |  |  |  |
Expenses not deductible for tax purposes | 498 | 776 | 288 | 435
Deductions attributable to usage of electric |  |  |  |
vehicles | - | (315) | - | -
Income taxed at different tax rates | (45) | (118) | (11) | (232)
Share of results of associate | (1,157) | 15 | - | -
Income not subject to tax | - | - | (983) | (52)
Other differences | (430) | 104 | (355) | 91
| 7,184 | 7,257 | 5,610 | 5,877

184
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
34. Income tax expense (continued)
The tax impacts, which are entirely attributable to deferred taxation, relating to components of other
comprehensive income and accordingly presented directly in equity are as follows:

|  | 2025 |  |  | 2024 |
|  | Tax |  |  | Tax |
| Before | credit/ | Net of | Before | credit/ |
| tax | (charge) | tax | tax | (charge) | Net of tax
| € 000 | € 000 | € 000 | € 000 | € 000 | € 000
Group |  |  |  |  |  |
Fair valuation of land and buildings | - | - | - | 5,058 | (725) | 4,333
Fair valuation of financial |  |  |  |  |  |
assets measured at FVOCI: |  |  |  |  |  |
• Net changes in fair value | 3,492 | (1,299) | 2,193 | 8,872 | (3,074) | 5,798
• Net movement attributable to change in credit risk | (5) | 2 | (3) | (247) | 86 | (161)
Remeasurements of defined |  |  |  |  |  |
benefit obligations | 9 | (2) | 7 | (84) | 29 | (55)
| 3,496 | (1,299) | 2,197 | 13,599 | (3,684) | 9,915

2025
2024
Tax
Before
credit/
Net of
Tax credit/
tax
(charge)
tax
Before tax
(charge)
Net of tax
€ 000
€ 000
€ 000
€ 000
€ 000
€ 000
Bank
Fair valuation of land and
buildings
-
-
-
3,162
(479)
2,683
Fair valuation of financial
assets measured at FVOCI:
• Net changes in fair value
3,514
(1,299)
2,215
8,784
(3,074)
5,710
• Net movement attributable
to change in credit risk
(5)
2
(3)
(247)
86
(161)
3,509
(1,297)
2,212
11,699
(3,467)
8,232
35. Earnings per share

|  | Group
| 2025 | 2024
Net profit attributable to equity holders of the Bank (€ 000) | 15,382 | 11,293
Weighted average number of ordinary shares in issue | 154,272,263 | 154,572,263
Earnings per share | €0.10 | €0.07

Earnings per share is based on the net profit for the year divided by the weighted average number of
ordinary shares in issue during the year.
The Bank has no instruments or arrangements which give rise to dilutive potential ordinary shares, and
accordingly diluted earnings per share is equivalent to basic earnings per share.
185
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
36. Dividends

| 2025 | 2024
Dividends paid by the Bank (€ 000) | 3,416 | 1,638
€ per share - net | 2.21 | 0.01

The dividends per share in respect of the financial year ended 31 December 2024 reflected in the table
above has been calculated on the basis of the number of ordinary shares in issue of 154,572,263 as at 25
June 2025, being the date of approval of the dividends by the shareholders of the Annual General Meeting.

Subsequent to the end of the reporting period, a gross dividend of 3.42 cent per nominal €0.125 share

(net dividend of 2.22 cent for a total amount of €3,436,000) for the twelve months ended 31 December
2025 is being proposed for approval by the shareholders to be distributed. A resolution to this effect will
be proposed to the Annual General Meeting.
37. Cash and cash equivalents
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of
acquisition, including cash in hand, deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.

|  | Group |  | Bank
| 2025 | 2024 | 2025 | 2024
| € 000 | € 000 | € 000 | € 000
Balances with Central Bank of Malta (note 5) | 123,379 | 138,320 | 123,379 | 138,320
Malta Government treasury bills (note 5) | 25,864 | - | 25,864 | -
Cash in hand (note 5) | 7,642 | 7,608 | 6,937 | 6,489
Loans and advances to banks (note 7) | 60,925 | 43,697 | 55,939 | 40,973
Amounts owed to banks (note 20) | (322) | (415) | (321) | (415)
Cash and cash equivalents | 217,488 | 189,210 | 211,798 | 185,367

38. Related parties
38.1 Identity of related parties
The Bank considers that it has a related party relationship with the National Development and Social Fund,
subsidiary and associated companies, the Bank’s Directors and Chief Officers (collectively deemed to be
key management personnel, with latter category comprising Chief Executive Officer, Deputy Chief
Executive Officers, Chief Financial Officer, Chief Information Officer, Chief Risk Officer, Chief Legal Officer,
Chief Officer – Group Corporate Services) and other related parties, principally entities controlled by key
management personnel.
186
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
38. Related parties (continued)
The Government of Malta Is also considered to be a related party, through its control over the National
Development and Social Fund (‘NDSF’). Nevertheless, in its Company Announcement dated 10 August
2018, the Bank reported that the NDSF had reaffirmed that:
Quote
- it does not intend to increase its holdings in the Bank;
- it shall not act in concert with any other shareholders;
- it will seek to reduce its shareholding in the Bank in an orderly manner, at the right market conditions
and by agreement with the regulatory authorities;
- it has no intention of exerting any influence on the operations of the Bank; and
- this acquisition will not result in a change in control of the Bank.
Unquote
The Group’s exposure to the Government of Malta arises through its investment in Government treasury
bills and debt securities which are disclosed in notes 5 and 6, respectively, and other balances disclosed in
note 22.
Other related party transactions with government owned/controlled entities were carried out on an arm’s
length basis and on normal commercial terms. The transaction amounts in this respect are not considered
material for disclosure purposes, as they do not materially impact the Group’s financial results and
financial position.
38.2 Principal transaction arrangements and agreements of the Bank involving key management personnel and
entities controlled by key management personnel.

| 2025 | 2024
| € 000 | € 000
Income statement |  |
Interest receivable and similar income | 49 | 31
Interest expense | 7 | 5
Other operating costs | 1,544 | 1,427

| 2025 | 2024
| € 000 | € 000
Statement of financial position |  |
Loans and advances to customers | 3,946 | 3,195
Amounts owed to customers | 1,607 | 1,722
Contingent liabilities and commitments | 137 | 213

187
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
38. Related parties (continued)
The following tables show the movements in loans and advances and commitments of the Bank during
the year:

| Loans and |  | Loans and |
| advances | Commitments | advances | Commitments
| 2025 | 2025 | 2024 | 2024
| € 000 | € 000 | € 000 | € 000
At 1 January | 3,195 | (202) | 2,380 | (462)
Additions | 1,052 | (5) | 1,070 | (109)
Reductions/repayments | (301) | 85 | (255) | 368
Other movements | - | - | - | 1
At 31 December | 3,946 | (122) | 3,195 | (202)

The above banking facilities are part of long-term commercial relationships and were made in the ordinary
course of business on substantially the same terms, including rates and security, as for comparable
transactions with persons of a similar standing or, where applicable, with other employees. The
transactions did not involve more than the normal risk of repayment or present other unfavourable
features.
38.3 Compensation to key management personnel
Directors’ remuneration and salaries to chief officers amount to €1,501,000 (2024: €1,383,000) for the
Bank.
38.4 Transactions with other related parties
38.4.1 Subsidiaries
Information relating to principal transactions undertaken by the Bank with its subsidiary companies during
the year:

| 2025 | 2024
| € 000 | € 000
Income statement |  |
Fee and commission income | 2 | 1
Interest expense | 4 | 4
Other operating income | 76 | 73
Other operating costs | 487 | 453
Statement of financial position |  |
Loans and advances to customers | 9 | 8
Trade and other receivables | - | 18
Accrued income and other assets | 15 | 3
Amounts owed to customers | 3,038 | 1,810
Accruals and deferred income | 40 | 96
Contingent liabilities | 329 | 210
Commitments | 1,111 | 1,107

During the year, Redbox Limited received gross dividends from MaltaPost p.l.c. amounting to €2,103,700
(2024: €1,444,500). The Bank injected further capital into its subsidiaries as disclosed in Note 9.
188
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
38. Related parties (continued)
During the year ended 31 December 2025, other operating costs included an amount of €69,000 (2024:
€129,000) relating to financial support given to Lombard Select SICAV p.l.c. in the form of expenses
incurred on its behalf without seeking reimbursement. During 2025, the entity voluntarily surrendered its
license.
As at 31 December 2025, lease liabilities payable to the Bank by MaltaPost p.l.c. amounted to €95,217
(2024: €120,596) in respect of properties which are being leased to MaltaPost p.l.c.
38.4.2 Associates
Information relating to principal transactions undertaken by the Bank with its associates during the year:

| 2025 | 2024
| € 000 | € 000
Income statement |  |
Dividend income | 2,700 | -
Fee and commission income | 121 | 33
Other operating costs | 136 | 60
Statement of financial position |  |
Trade and other receivables | 6,122 | 2,279
Accrued income and other assets | 15 | 13
Investments in associates | 503 | 1,645
Amounts owed to customers | 14 | 12
Accruals and deferred income | - | 5
Other liabilities | 22 | -

As disclosed within Note 11, on 23 October 2025, an associate effected a reduction in its share capital, and
on 30 December 2025, it declared a dividend.
39. Regulatory compensation schemes
Regulatory contributions amounting to €624,000 (2024: €409,000), included with administrative
expenses, reflect the Group’s annual obligations arising from the EU Directives on Deposit Guarantee
Scheme.
39.1 Investor compensation scheme
In accordance with the requirements of the Investor Compensation Scheme Regulations, 2003 issued
under the Investment Services Act, 1994 (Chapter 370 of the Laws of Malta) licence holders are required
to transfer a variable contribution to an Investor Compensation Scheme Reserve and place the equivalent
amount with a bank, pledged in favour of the Scheme. Alternatively licence holders can elect to pay the
amount of variable contribution directly to the Scheme. Lombard Bank Malta p.l.c. has elected to pay the
amount of the variable contribution directly to the Scheme.
189
Lombard Bank Malta p.l.c.
Notes to the Financial Statements for the year ended 31 December 2025
39. Regulatory compensation schemes (continued)
39. 2 Depositor compensation scheme
The Bank fulfils its obligations in respect of the Depositor Compensation Scheme (DCS) by effecting
payments of 70% of the required contributions directly to the Scheme, while the remaining 30% is
maintained in the form of irrevocable payment commitments (IPCs). The IPCs as at the end of the year
amounted to €2,402,000 (2024: €2,133,000). IPCs are irrevocable in nature, consistent with recent EU
jurisprudence confirming that such payment commitments remain binding and enforceable.
At 31 December 2025, the Bank had pledged deposits amounting to €1,582,000 (2024: €1,313,000) with
the Central Bank of Malta in favour of the Depositor Compensation Scheme and placed an amount of
€820,000 (2024: €820,000) directly with the Scheme to comply with local regulatory requirements.
The IPCs represent a present obligation arising from past events, comprising a legally binding obligation
that could require payment under specific circumstances as emphasised by recent case law. The obligation
emanating from the IPCs would result in an outflow of funds only if either (i) a DCS determination event
occurs in terms of the DCS Regulations in respect of a member bank which is unable to repay its deposit
liabilities, which would require DCS funding, or (ii) the Bank surrenders its credit institution licence. The
probability of an outflow of economic resources is dependent on the likelihood of occurrence of the
triggering events described above.
Management has assessed the probability of the Bank surrendering its licence, based on its strong capital
and liquidity position, profitability projections, regulatory compliance and importance within the domestic
banking system. The Bank’s business model and financial standing indicate the intentions to continue
operating indefinitely. The likelihood of a DCS determination event occurring within the Maltese banking
sector was also assessed considering macroeconomic conditions, financial stability indicators and the
historical incidence of such determination events. The outcome of the Bank’s assessment is that an
outflow linked to the Bank surrendering its credit institution licence and to a DCS determination event
would occur sufficiently far in the future such that the estimated provision necessary as at 31 December
2025 is considered insignificant. The Bank will continue to monitor regulatory developments, local banking
sector conditions, and economic indicators, and will reassess its position at each reporting date.
40. Statutory information
Lombard Bank Malta p.l.c. is a public limited liability company domiciled and incorporated in Malta.
190
Five Year Summary
Statements of Financial Position
Group
2025
2024
2023
2022
2021
€ 000
€ 000
€ 000
€ 000
€ 000
Assets
Balances with Central Bank of Malta,
treasury bills and cash
182,564
154,480
147,043
139,234
126,279
Cheques in course of collection
150
266
1,880
1,053
530
Financial investments
213,136
208,110
216,770
220,815
227,135
Loans and advances to banks
62,423
46,189
38,139
27,615
78,279
Loans and advances to customers
929,111
872,682
758,304
711,612
642,893
Investments in associates
4,714
4,250
3,292
2,607
3,006
Intangible assets
2,136
2,186
2,192
2,121
2,145
Property, plant and equipment
72,635
71,450
66,511
66,375
65,346
Assets classified as held for sale
703
703
703
703
661
Current tax assets
291
-
643
575
2,691
Deferred tax assets
6,455
7,961
11,694
10,889
7,034
Inventories
1,149
1,731
1,391
1,271
1,324
Trade and other receivables
16,427
12,979
11,369
13,243
10,787
Accrued income and other assets
5,727
5,435
5,203
5,302
4,536
Total assets
1,497,621
1,388,422
1,265,134
1,203,415
1,172,646
Equity and liabilities
Equity
Share capital
19,322
19,322
19,322
11,341
11,192
18,530
Share premium
56,534
56,534
56,534
18,530
Property revaluation reserve
16,893
17,016
13,109
13,087
13,040
Investment revaluation reserve
(5,682)
(7,877)
(13,349)
(12,733)
5,180
Reserve for General Banking Risks
-
-
-
2,903
2,903
Other reserves
2,143
1,871
1,660
1,382
2,545
Retained earnings
134,506
122,582
113,107
101,700
83,910
Equity attributable to equity holders
of the Bank
223,716
209,448
190,383
136,210
137,300
Non-controlling interests
10,144
9,473
8,409
8,090
8,470
Total equity
233,860
218,921
198,792
144,300
145,770
Liabilities
Amounts owed to banks
345
438
145
535
1,224
Amounts owed to customers
1,207,256
1,120,006
1,019,075
1,008,431
977,143
Provisions for liabilities and other charges
2,962
2,633
1,403
1,688
2,113
Current tax liabilities
2,401
1,256
1,556
-
809
Deferred tax liabilities
4,798
4,824
4,099
4,099
4,099
Other liabilities
30,174
26,497
28,762
33,347
30,649
Accruals and deferred income
15,825
13,847
11,302
11,015
10,839
Total liabilities
1,263,761
1,169,501
1,066,342
1,059,115
1,026,876
Total equity and liabilities
1,497,621
1,388,422
1,265,134
1,203,415
1,172,646
Memorandum items
Contingent liabilities
22,055
19,827
14,315
13,611
13,195
Commitments
356,458
292,036
257,415
202,396
195,848
191
Five Year Summary
Income Statements
Group
2025
2024
2023
2022
2021
€ 000
€ 000
€ 000
€ 000
€ 000
Interest receivable and similar income
40,034
38,143
33,698
29,020
25,725
Interest expense
(13,906)
(10,883)
(7,837)
(6,744)
(6,169)
Net interest income
26,128
27,260
25,861
22,276
19,556
Other operating income
50,664
47,304
44,820
37,605
43,856
Other operating charges
(57,291)
(56,034)
(54,578)
(48,049)
(51,836)
Net movement in expected credit losses
960
927
(1,261)
16,243
1,464
Share of profit/(loss) of investment
accounted for using equity method
3,306
(42)
(315)
(399)
(402)
Profit before taxation
23,767 19,415 14,527
27,676
12,638
Income tax expense
(7,184)
(7,257)
(4,909)
(10,050)
(4,759)
Profit for the year
16,583
12,158
9,618
17,626
7,879
Attributable to:
15,382
11,293
9,064
17,530
Equity holders of the Bank
7,481
Non-controlling interests
1,201
865
554
96
398
Profit for the year
16,583
12,158
9,618
17,626
7,879
192
Five Year Summary
Statements of Cash Flows
Group
2025
2024
2023
2022
2021
€ 000
€ 000
€ 000
€ 000
€ 000
Net cash flows generated from/(used
in) operating activities
36,488
1,501
18,179
(36,281)
31,632
Cash flows from investing activities
Dividends received
425
465
203
141
81
Interest received from debt securities
3,637
3,791
4,675
3,485
3,012
Purchase of financial investments
(13,596)
(12,631)
(8,359)
(27,518)
(75,270)
Proceeds from maturity/disposal
of financial investments
9,942
30,156
9,903
5,220
6,760
Purchase of property, plant
and equipment and intangible assets
(2,260)
(2,289)
(2,657)
(3,709)
(7,601)
Proceeds from disposal of property,
plant and equipment
49
2
-
-
-
Purchase of investment in associate
-
-
-
-
(1,500)
Investments in associate
(1,000)
(1,000)
(1,000)
-
-
Net cash inflow arising from acquisition
of subsidiary
(256)
-
-
-
833
Net cash flows generated from/(used
in) investing activities
(3,059)
18,494
2,765
(22,381)
(73,685)
Cash flows from financing activities
Proceeds from rights issue of ordinary
shares
-
-
45,733
-
-
Dividends paid to equity holders
of the Bank
(3,416)
(1,638)
-
(873)
(862)
Dividends paid to non-controlling
interests
(523)
(300)
(299)
(429)
(429)
Principal element of lease payments
(1,212)
(552)
(491)
(478)
(523)
Net cash flows (used in)/generated
from financing activities
(5,151)
(2,490)
44,943
(1,780)
(1,814)
193

#

# Independent auditor’s report

## To the Shareholders of Lombard Bank Malta p.l.c.

## Report on the audit of the financial statements

### Our opinion

In our opinion:

· The Group financial statements and the Parent Company (“the Bank”) financial statements (the “financial statements”) of Lombard Bank Malta p.l.c. give a true and fair view of the Group and the Parent Company’s financial position as at 31 December 2025, and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the EU; and

· The financial statements have been prepared in accordance with the requirements of the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386).

Our opinion is consistent with our additional report to the Audit Committee.

What we have audited

Lombard Bank Malta p.l.c.’s financial statements comprise:

· the Consolidated and Parent Company statements of financial position as at 31 December 2025;

· the Consolidated and Parent Company income statements and statements of comprehensive income for the year then ended;

· the Consolidated and Parent Company statements of changes in equity for the year then ended;

· the Consolidated and Parent Company statements of cash flows for the year then ended; and

· the notes to the financial statements, comprising material accounting policy information and other explanatory information.

### Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group and the Parent Company in accordance with the ethical requirements of the Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Cap. 281) that are relevant to audits of financial statements of an EU Public Interest Entity in Malta and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) as applicable to audits of financial statements of public interest entities. We have also fulfilled our other ethical responsibilities in accordance with these Codes.

To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Bank and its subsidiaries are in accordance with the applicable law and regulations in Malta and that we have not provided non-audit services that are prohibited under Article 18A of the Accountancy Profession Act (Cap. 281).

The non-audit services that we have provided to the Bank and its subsidiaries, in the period from 1 January 2025 to 31 December 2025, are disclosed in note 33 to the financial statements.

### Our audit approach

Overview

| Overall group materiality: €1,033,000, which represents 5% of profit before tax adjusted for non-recurring items.
The audit procedures carried out covered all the components within the Group namely Lombard Bank Malta p.l.c. (the Parent Company) and its subsidiary Redbox Limited. The Group also includes MaltaPost p.l.c. which is a subsidiary of Redbox Limited (which is fully owned by Lombard Bank Malta p.l.c.) and Tanseana Limited, Ciabro Limited, PostaInsure Agency Limited and Dormax Press Company Limited by virtue of MaltaPost p.l.c.’s controlling shareholding in these four entities. The group auditor performed a full scope audit on the financial statements of the Bank and performed oversight procedures on the work performed by the component auditor on the significant component, namely MaltaPost p.l.c. The Bank and its subsidiaries are based in Malta.
Credit loss allowances in respect of loans and advances to customers of the Bank

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality | €1,033,000
How we determined it | 5% of profit before tax adjusted for non-recurring items
Rationale for the materiality benchmark applied | We chose profit before tax adjusted for non-recurring items as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark. We chose 5% which is within the range of quantitative materiality thresholds that we consider acceptable.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €103,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter | How our audit addressed the key audit matter
Credit loss allowances in respect of loans and advances to customers of the Bank Credit loss allowances in respect of loans and advances to customers represent management’s best estimate of Expected Credit Losses (‘ECLs’) within the loan portfolios at the end of the reporting period. The development of the models designed to estimate ECLs on loans measured at amortised cost in accordance with the requirements of IFRS 9 requires a considerable level of judgement since the determination of ECLs is subject to a high degree of estimation uncertainty. In this respect, it is considered a key area of focus. The level of estimation uncertainty surrounding the measurement of ECLs in respect of the Bank’s lending portfolios remained elevated during the financial year ended 31 December 2025 in view of the ongoing geopolitical developments impacting key macroeconomic factors. This affected a number of components forming part of the ECL calculation, including the determination of staging, the modelling of expected default levels and loss severities, and the determination of forward-looking scenarios giving rise to heightened subjectivity requiring a higher level of expert judgement. Credit loss allowances relating to loans and advances in the Bank’s Personal and Corporate and commercial portfolios are determined at an instrument level. In general, the Bank calculates ECLs by multiplying three main components: probability of default (PD), loss given default (LGD) and exposure at default (EAD): i. Probability of default (“PD”): the likelihood of a borrower defaulting on its financial obligation either over the next 12 months or over the remaining lifetime of the obligation. ii. Loss given default (“LGD”): the expected losses taking into account, among other attributes, the mitigating effect of collateral value (if any) at the time it is expected to be realised and the time value of money. The LGD modelling methodology utilises historical experience, which might result in limitations in its reliability to appropriately estimate ECLs especially during periods characterised by economic conditions such as those currently experienced. iii. Exposure at default (“EAD”): the expected exposure in the event of a default (including any expected drawdowns of committed facilities). When applicable, the Bank also applies overlays based on expert judgement where management’s view is that the calculated ECLs based on these key inputs do not fully capture the risks within the Bank’s loan portfolios. For non-defaulted (Stage 1 and 2) loans and a number of defaulted (Stage 3) loans which are not individually significant, the Bank uses internally developed statistical models. For non-defaulted (Stages 1 and 2) exposures, PDs are estimated using historical model development data based on the Bank’s own experience as available at the reporting date. For exposures secured by immovable properties, LGDs are driven by the adjusted loan-to-value ratio of the individual facilities and takes into account other assumptions, including market value haircut (which includes costs to sell), time to sell and the impact of discounting the collateral from the date of realisation back to the date of default. The maximum period considered when measuring ECLs is the maximum contractual period over which the Bank is exposed to credit risk. For individually significant defaulted (Stage 3) exposures, discounted cash flow models are utilised in order to estimate ECLs. Internal credit risk management practices are used to determine when a default has occurred, considering quantitative and qualitative factors where appropriate. Judgement is required to determine when a default has occurred and then to estimate the expected future cash flows related to the loan, which are dependent on parameters or assumptions such as the valuation of collateral (including forced sale discounts and assumed realisation period) or forecasted operating cash flows. The Bank is required to assess multiple scenarios in this respect, which scenarios will have probabilities attached. Macroeconomic conditions impact the level of uncertainty around judgements made in determining the timing of defaults and in respect of staging. In this respect, economic conditions might be reasonably expected to impact the affordability of repayments attributable to exposures within the personal portfolio. Moreover macroeconomic factors could create additional pressures on the business of the Bank’s borrowers in the corporate and commercial portfolio. Under IFRS 9, the Bank is required to formulate and incorporate multiple forward-looking economic conditions, reflecting management’s view of potential future economic variables and environments, into the ECL estimates. A number of macroeconomic scenarios based on the selected macroeconomic variables are considered to capture non-linearity across credit portfolios. The complexity attributable to this factor requires management to develop multiple macroeconomic scenarios involving the use of significant judgements. The prevailing macroeconomic uncertainty has significantly impacted macroeconomic factors increasing the uncertainty around judgements made in determining the severity and likelihood of macroeconomic forecasts across the different economic scenarios used in ECL models. Overly sensitive ECL modelled outcomes can be observed when current conditions fall outside the range of historical experience. Data used in the impairment calculation is sourced from a number of systems, including systems that are not necessarily used for the preparation of accounting records. The ECL models are based on a general-purpose application which requires extensive manual handling of data. This increases risk around the accuracy and completeness of data used to determine assumptions and to operate the ECL models. In some cases, data is unavailable and reasonable alternatives have been applied to allow calculations to be performed. Since the estimation of ECLs is subjective in nature and inherently judgmental, the Bank’s application of the IFRS 9 impairment requirements is deemed to be an area of focus, especially in the context of the macroeconomic conditions currently experienced, which have increased the level of estimation uncertainty in respect of the calculation of credit loss allowances. We focused on credit loss allowances due to the subjective nature of specific data inputs into the calculation of ECLs and the subjective judgements involved in both timing of recognition of impairment and the estimation of the size of any such impairment. Accordingly, summarising the key areas relevant to the Bank’s measurement of ECLs would include: • Allocation of assets to stage 1, 2, or 3 using criteria in accordance with IFRS 9; • Accounting interpretations and modelling assumptions used to build the models that calculate the ECL; • Completeness and accuracy of data used to calculate the ECL; • Inputs and assumptions used to estimate the impact of multiple macroeconomic scenarios; and • Measurement of individually assessed provisions including the assessment of multiple scenarios. Relevant references in the Annual Report and Financial Statements: • Summary of material accounting policies: note 1.4 • Credit risk management: note 2.3; • Accounting estimates and judgements: note 3.2; • Note on Loans and advances to customers: note 8; and • Note on Net movement in expected credit losses: note 32. | During our audit of the financial statements for the year ended 31 December 2025, we continued to focus on the key drivers of the estimation of ECL. Apart from assessing the continuing appropriateness of management assumptions, updates to key parameters and model enhancements were evaluated and tested. Discussions with the Audit & Risk Committee and management were held on: observations in respect of the methodology applied by the Bank to estimate ECLs in accordance with the requirements emanating from IFRS 9, including the appropriateness of the models and staging criteria used by the Bank as part of the ECL calculation; the controls and governance framework implemented by management in respect of the estimation of ECLs in accordance with IFRS 9; and · individually significant loan impairments. With respect to the ECL models utilised by the Bank, the continued appropriateness of the modelling policies and methodologies used was independently assessed by reference to the requirements of IFRS 9. ECL calculation for non-defaulted loan exposures and a number of defaulted loans which are not individually significant We understood and critically assessed the models used for ECL estimation for the Bank’s loan portfolio. Since modelling assumptions and parameters are based on historic data, we assessed whether historic experience was representative of current circumstances and of the recent losses incurred within the portfolios. The appropriateness of management’s judgements was also independently considered in respect of calculation methodologies, calibration of PDs and LGDs, segmentation and selection of macroeconomic variables. Model calculations were also tested independently. Substantive procedures were performed as follows: · Performed an overall assessment of the ECL provision levels by stage to determine if they were reasonable considering the Bank’s portfolio, risk profile, credit risk management practices and the macroeconomic environment. · Tested a sample of loans to independently review the borrower’s financial performance and ability to meet loan repayments and assess the appropriateness of the credit rating assigned by management, taking into consideration the impact of the current macroeconomic conditions on the repayment capabilities of the sampled borrowers. · Challenged the criteria used to allocate an asset to stage 1, 2 or 3 in accordance with IFRS 9 and tested a sample of assets in stage 1, 2 and 3 to verify that they were allocated to the appropriate stage. · Tested the completeness and accuracy of the critical data extracted from the underlying systems, that is utilised within the models for the purposes of the year end ECL calculation. · Risk based testing of models, including a review of the continuing appropriateness of model assumptions. We tested the assumptions, inputs and formulas used in ECL models on a sample basis. This included assessing the appropriateness of model design and formulas used, and recalculating PDs, LGDs and EADs on a sample basis, through the involvement of subject matter experts. · We assessed the reasonableness of modelled PDs through a comparison of historically predicted and observed default rates and the reasonableness of modelled LGDs taking cognisance of the potential impacts of the current macroeconomic environment. · We also assessed the reasonableness of market value haircuts and time to sell assumptions used as inputs in the light of the current economic climate. · Tested the multiple macroeconomic scenarios and variables to assess their reasonableness. We assessed the appropriateness of changes effected during the year to factor the impact of the current macroeconomic environment. We assessed whether the severity of the forecasted macroeconomic variables was appropriate in view of the elevated level of uncertainty related to the current economic conditions. We challenged the correlation between economic factors and ECL allowances and the impact of these macroeconomic factors on the ECL. Our testing of models and model assumptions did not highlight material differences. Based on the evidence obtained, we found the model assumptions and data used within the models to be reasonable. ECL calculation for defaulted individually significant loan exposures For defaulted exposures within the loan portfolio, the appropriateness of the methodology and policy used to calculate ECLs was independently assessed. We understood and evaluated the processes for identifying default events within loan portfolios, as well as the impairment assessment process. Substantive procedures were performed in respect of identification of defaults as follows: · Assessed critically the criteria used by management for identifying borrowers whose financial performance is expected to be particularly susceptible to the potential impact of the economic pressures being experienced and for determining whether a UTP/default event had occurred by testing a sample of loans with characteristics that might imply a default event had occurred (for example a customer experiencing financial difficulty or material sector disruption) to challenge whether default events had actually occurred and to assess whether default events had been identified by management in a timely manner. · Selected a sample of performing loans which had not been identified by management as potentially defaulted, to form our own judgement as to whether that was appropriate and to further challenge whether all relevant events had been identified by management. Substantive procedures were performed on defaulted exposures in respect of the estimation of the amounts of the respective ECL provisions, as follows: · Reviewed the credit files of a selected sample of loans to understand the latest developments at the level of the borrower and the basis of measuring the ECL provisions and considered whether key judgements were appropriate taking cognisance of the current macroeconomic environment. · Challenged the severity of scenarios being applied for these exposures, together with their respective probability weights by forming an independent view of the recoverability of the selected loan exposures under different scenarios, assigning probabilities independently and comparing the outcomes to that of the Bank. · Tested key inputs to and reperformed the impairment calculation used to derive expected cash flows under different scenarios. · Assessed the appropriateness of a sample of property valuations securing impaired loans through the use of experts. In the case of some impairment provisions, we formed a different view from that of management, but in our view the differences were within a reasonable range of outcomes.

How we tailored our group audit scope

The Group is composed of seven components. These include Lombard Bank Malta p.l.c. (the Parent Company), and its subsidiary, Redbox Limited. The Group also includes MaltaPost p.l.c. which is a subsidiary of Redbox Limited (which is fully owned by Lombard Bank Malta p.l.c.) and Tanseana Limited, Ciabro Limited, PostaInsure Agency Limited and Dormax Press Company Limited, by virtue of MaltaPost p.l.c.’s controlling shareholding in these four entities.

The group auditor performed a full scope audit on the financial statements of the Bank and it’s subsidiary, Redbox Limited, and performed oversight procedures on the work performed by the component auditor on the significant component, namely MaltaPost p.l.c.

We tailored the scope of our audit in order to perform sufficient work on all components to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates, and local statutory requirements.

The Group auditor performed all of this work by applying the Group overall materiality, together with additional procedures performed on the consolidation. This gave us sufficient appropriate audit evidence for our opinion on the Group financial statements as a whole.

### Other information

The directors are responsible for the other information. The other information comprises all of the information in the Annual Report and Financial Statements 2025 (but does not include the financial statements and our auditor’s report thereon).

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon except as explicitly stated within the Report on other legal and regulatory requirements.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

### Responsibilities of the directors and those charged with governance for the financial statements

The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with IFRSs as adopted by the EU and the requirements of the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Bank or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

### Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Bank’s internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

· Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s or the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Bank to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

## Report on other legal and regulatory requirements

### Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6

We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the Annual Financial Report of Lombard Bank Malta p.l.c. for the year ended 31 December 2025, entirely prepared in a single electronic reporting format.

Responsibilities of the directors

The directors are responsible for the preparation of the Annual Financial Report, including the consolidated financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in accordance with the requirements of the ESEF RTS.

Our responsibilities

Our responsibility is to obtain reasonable assurance about whether the Annual Financial Report, including the consolidated financial statements and the relevant electronic tagging therein, complies in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the requirements of ESEF Directive 6.

Our procedures included:

· Obtaining an understanding of the entity's financial reporting process, including the preparation of the Annual Financial Report, in accordance with the requirements of the ESEF RTS.

· Obtaining the Annual Financial Report and performing validations to determine whether the Annual Financial Report has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.

· Examining the information in the Annual Financial Report to determine whether all the required taggings therein have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF RTS.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Annual Financial Report for the year ended 31 December 2025 has been prepared, in all material respects, in accordance with the requirements of the ESEF RTS.

### Other reporting requirements

The Annual Report and Financial Statements 2025 contains other areas required by legislation or regulation on which we are required to report. The directors are responsible for these other areas.

The table below sets out these areas presented within the Annual Financial Report, our related responsibilities and reporting, in addition to our responsibilities and reporting reflected in the Other information section of our report. Except as outlined in the table, we have not provided an audit opinion or any form of assurance.

Area of the Annual Report and Financial Statements 2025 and the related Directors’ responsibilities | Our responsibilities | Our reporting
Directors’ report The Maltese Companies Act (Cap. 386) requires the directors to prepare a Directors’ report, which includes the contents required by Article 177 of the Act and the Sixth Schedule to the Act. | We are required to consider whether the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. We are also required to express an opinion as to whether the Directors’ report has been prepared in accordance with the applicable legal requirements. In addition, we are required to state whether, in the light of the knowledge and understanding of the Company and its environment obtained in the course of our audit, we have identified any material misstatements in the Directors’ report, and if so to give an indication of the nature of any such misstatements. With respect to the information required by paragraphs 8 and 11 of the Sixth Schedule to the Act, our responsibility is limited to ensuring that such information has been provided. | In our opinion: · the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and · the Directors’ report has been prepared in accordance with the Maltese Companies Act (Cap. 386). We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Statement of Compliance with the Principles of Good Corporate Governance The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare and include in the Annual Financial Report a Statement of Compliance with the Code of Principles of Good Corporate Governance within Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum contents are determined by reference to Capital Markets Rule 5.97. The Statement provides explanations as to how the Company has complied with the provisions of the Code, presenting the extent to which the Company has adopted the Code and the effective measures that the Board has taken to ensure compliance throughout the accounting period with those Principles. | We are required to report on the Statement of Compliance by expressing an opinion as to whether, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified any material misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such misstatements. We are also required to assess whether the Statement of Compliance includes all the other information required to be presented as per Capital Markets Rule 5.97. We are not required to, and we do not, consider whether the Board’s statements on internal control included in the Statement of Compliance cover all risks and controls, or form an opinion on the effectiveness of the Company’s corporate governance procedures or its risk and control procedures. | In our opinion, the Statement of Compliance has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority. We have nothing to report to you in respect of the other responsibilities, as explicitly stated within the Other information section.
Remuneration report The Capital Markets Rules issued by the Malta Financial Services Authority require the directors to prepare a Remuneration report, including the contents listed in Appendix 12.1 to Chapter 12 of the Capital Markets Rules. | We are required to consider whether the information that should be provided within the Remuneration report, as required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules, has been included. | In our opinion, the Remuneration report has been properly prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority.
| Other matters prescribed by the Maltese Banking Act (Cap. 371) In terms of the requirements of the Maltese Banking Act (Cap. 371), we are also required to report whether: · we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; · proper books of account have been kept by the bank, so far as appears from our examination of those books; · the bank’s financial statements are in agreement with the books of account; · in our opinion, and to the best of our knowledge and according to the explanations given to us, the financial statements give the information required by any law which may from time to time be in force in the manner so required. | In our opinion: · we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; · proper books of account have been kept by the bank, so far as appears from our examination of those books; · the bank’s financial statements are in agreement with the books of account; and · to the best of our knowledge and according to the explanations given to us, the financial statements give the information required by any law in force in the manner so required.
| Other matters on which we are required to report by exception We also have responsibilities under the Maltese Companies Act (Cap. 386) to report to you if, in our opinion adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us. We also have responsibilities under the Capital Markets Rules to review the statement made by the directors that the business is a going concern together with supporting assumptions or qualifications as necessary. | We have nothing to report to you in respect of these responsibilities.

### Other matter - use of this report

Our report, including the opinions, has been prepared for and only for the Parent Company’s shareholders as a body in accordance with Article 179 of the Maltese Companies Act (Cap. 386) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior written consent.

### Appointment

We were first appointed as auditors of the Company on 10 April 2010. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 16 years.

Fabio Axisa

Principal

For and on behalf of

PricewaterhouseCoopers
78, Mill Street
Zone 5, Central Business District
Qormi

Malta

24 April 2026