Maltese Lombard’s value increases after MPB purchase

The prospects of Lombard Bank Malta plc have improved following the decision of Marfin Popular Bank to acquire a 43% shareholding for EUR48.3 mln (Lm20.7 mln); equivalent to approx. Lm5.58 per share, according to Rizzo, Farrugia & Co. (Stockbrokers) Ltd., members of the Malta Stock Exchange and licensed to

conduct Investment Services business by the Malta Financial Services Authority.

On 15 October 2007, Lombard Bank Malta plc announced that Marfin Popular Bank Public Company Ltd. of Cyprus had agreed to acquire a stake of circa 43% in Lombard Bank from Banca della Svizzera Italiana SA, Lugano as well as from other foreign  shareholders. This transaction is, however, still subject to regulatory approval.

The announced price of EUR48.3 million values Lombard at EUR112.3 mln or approx. Lm5.58 per share. At this level, Lombard’s historic price to earnings multiple is of 18.9 times with a price to book value of 2.38 times according to Rizzo, Farrugia & Co. (Stockbrokers) Ltd.

The announcement made by Lombard Bank stated that this investment falls within Marfin’s strategy given Malta’s geographic positioning and macroeconomic environment. The Board of Directors of both Lombard Bank and Marfin Popular Bank believe that the acquisition stands to benefit both organisations. Marfin is rated by all three international credit rating agencies. With regards to long-term deposits, Moody’s assigned a rating of A3 while Fitch and S&P both rate it at BBB+. Moreover, the financial strength rating assigned by Moody’s and Fitch is C- and C respectively.

The surprise announcement seems to be very positive news for Lombard Bank Malta given Marfin’s welldefined strategy and its growing presence in South East Europe. Although it is still too early for further news on Marfin’s strategy for Lombard given that the acquisition is still subject to Regulatory approval, Lombard Bank may have finally found a strategic partner which will enable it to offer a wider array of financial services products through the Bank’s branch network.

Moreover, this announcement becomes even more interesting following Lombard Bank.s recent acquisition of a majority stake in Maltapost plc, with its 30 offices across Malta and Gozo which could prove to be very valuable service outlets for the Bank.

Could Marfin be interested in increasing their stake further by acquiring more shares with a view to securing a majority? Should this be the case, it would trigger a Mandatory Bid in terms of the local Listing Rules. Given the recent promising developments at Lombard, Rizzo, Farrugia & Co. (Stockbrokers) are upgrading their recommendation from a HOLD to a BUY at current price levels of Lm5.00 per share.