The financial valuation and performance of a small local bank : Lombard Bank Malta plc

Abstract

This thesis is set out with the aim of finding out the intrinsic value of Lombard Bank shares using a methodical approach. In theory, the value of equity is the total amount of cash that the investor is expected to earn over its life time in terms of dividend and capital gain, discounted to its present value. This paper compares the Bank's intrinsic value as at March 2005 with the average market price of March 2005 of the Bank's shares and draws conclusions on the market's perceived value. The valuation estimates and assumptions used were as realistic and conservative as possible, to ensure that the results would be more reliable for the purposes of this thesis. The assessment of the Bank's performance was affected through fundamental analysis by reference to the Bank's published financial statements. Due consideration was also given to a macroeconomic analysis of the industry as well as a thorough evaluation of the quality of the firm's management in the context of the firm's standing and market share. The principal objective of this analysis was to determine the likely future performance of Lombard Bank and consequently the valuation of its shares.