The Bank of Valletta Group today announced pre-tax profits of €143.9 million, an increase of 21.5% over the adjusted profit before tax of €118.4 million reported for the same period last year. Last year the Bank had a one-time windfall profit of €27.5 million arising from the takeover of VISA Group, in which BOV is a principal member, by VISA Inc.
As had been announced earlier, 2017 is an exceptional year for Bank of Valletta, as the current financial year consists of 15 months, following a decision to change the financial year end from 30 September to 31 December. For the sake of clarity and for comparative purposes, the Bank is today reporting its interim results for the 12 month period October 2016 to September 2017.
Chairman Deo Scerri said that the Bank’s results need to be interpreted in a context of a local economy that has been performing very well, even by comparison to EU standards, but within an international scenario of persistently low interest rates, that continues to pose a significant challenge. “The Bank’s strategic decision to diversify its income sources is yielding results,” said Deo Scerri, “In fact, we have witnessed satisfactory performance in both our card business and investments. This was neutralised in part by the narrow interest margins and the high liquidity levels. Meanwhile, the Bank bore the costs of its increased investment in Human Resources and IT, primarily in relation to the implementation of the programme that will see the Bank changing its core banking systems and onerous regulatory requirements.”Mr Scerri also explained that the Bank’s more proactive approach towards legacy bad debts resulted in a net reversal of impairment charges equivalent to €7.5 million.
Meanwhile, the Bank’s share of profit from Mapfre MSV Life increased significantly, going up to €14.5 million (FY 2016: €3.7 million).
A closer look at the Bank’s balance sheet shows that customer deposits continued to increase, reaching a new high of €10.1 billion, in an environment where the preference for short term deposits persists as the Bank implemented stricter on boarding procedures. Concurrently the Group net lending rose slightly and now stands at €4.4 billion, with home loans representing 42% of the Bank’s total loan book.
The Group Core Equity Tier 1 ratio is 13.4%, up from 12.8% in September 2016. Here the Chairman made reference to the Bank’s imminent Rights Issue which will see the BOV Group strengthen its capital base. “This is necessary not only because of the Bank’s position as a systemically important bank in Malta but also to enable us to be in a better position to sustain new lending, undertake new investment and distribute dividends to our shareholders,” stated Deo Scerri.
In his concluding remarks, the BOV Chairman expressed his satisfaction with the Bank’s performance saying that, “Over the past years, the Bank took some tough decisions and is investing heavily in its people and IT systems in order to ensure it remains valid, competitive and sustainable over the long term. Meanwhile, we have reviewed our business model and risk appetite framework with a view to ensuring that they are tenable, relevant and in line with our strategic orientation for the medium to long-term”. Mr Scerri confirmed that the Bank was already receiving very positive feedback from the market, 24 hours from the company announcement outlining the details of the Rights Issue, claiming that this is an important step in the Bank’s journey to remain a relevant and pertinent financial partner to its customers for years to come.”