The Bank of Valletta Group registered a pre-tax profit of €104.1 million for the financial year ended 30th September 2014, down from €115.8 million registered in the previous year. This was announced by John Cassar White, Chairman of Bank of Valletta during a press conference held at BOV Centre, soon after the Board of Directors approved the BOV Group results for the financial year.
The core operating profit of €87.9 million, which is stated before fair value movements and share of profit from associates, is up by 2% over previous year's figures (FY2013: €86 million).
The Board of Directors is proposing a final gross dividend of €0.0925 per share, which taken together with the gross interim dividend of €0.0425 per share paid in May of this year, makes for a total gross dividend of €0.135 per share for FY2014. If approved, the total dividend for the year represents a gross yield of 6.05% by reference to the closing share price of €2.23 per share at 30th September 2014 and a net dividend cover of 2.4 times.
The Board is also recommending a bonus issue of 1 share for every 11 shares held on 16th January 2015 by a capitalisation of reserves amounting to €30 million. This will increase the permanent capital from €330 million to €360 million.
The results were impacted by a contraction of 4% in the interest margin, caused by a persistently low interest rate environment and by high levels of liquidity. This was partly offset by a 7% rise in non-interest income. Fair value gains, at €9 million, were half of those recorded last year.
Operating costs rose by 5% on the back of significantly higher regulatory and supervisory costs.
Advances stood at €4.1 billion, an increase of 5% over last year, while deposits, at €7.1 billion registered an increase of 14%. Common Equity Tier 1 (CET1) ratio rose to 11.7%, as calculated under the CRD IV regulation which came into effect during the year.
Mr Cassar White expressed satisfaction at the level of performance achieved by the Bank during the past financial year characterised by significant regulatory changes and a historically low yield environment. These results were achieved in the context of a turbulent international environment, characterised by a stagnant euro area economy, and by rising geo-political risk in North Africa and Eastern Europe. Despite these unfavourable circumstances, the Maltese economy performed well, with real GDP growth exceeding that of the EU.
The Bank's Chairman also commented on the Comprehensive Assessment carried out by the European Central Bank (ECB), the results of which were only recently published. He explained that BOV was one of the 130 European Banks chosen to be under the direct supervision of the ECB.
Mr Cassar White explained that the Comprehensive Assessment re-affirms that the Bank's capital base exceeds the regulatory capital requirement even in an adverse scenario. The initial CET1 ratio of 11.2% at December 2013 fell to 10.7% as a result of the Asset Quality Review. In the stress test, the CET1 ratio rose to 11.93%, being the lowest ratio over a three year period under the baseline scenario, compared to the threshold of 8% set by the ECB. Under the adverse scenario, the CET1 ratio decreased to 8.92% compared to the required threshold ratio of 5.5%.
The Bank's Chairman stated that, "Focus on a robust governance structure will be one of our major priorities to ensure the Bank's sustainable performance in the future."
The BOV Group CEO Charles Borg explained that, "Within the BOV Group, long term sustainability remains a strategic objective, with its conservative business model and prudent policies continuing to serve it well." He reiterated the Bank's commitment to reaching the various expectations of the different stakeholder groups in a responsible manner.