The BOV Group announced pre-tax profit for the year ended 31 December 2017 of €174.7 million. This was announced by Bank of Valletta Chairman Deo Scerri during a press conference at BOV Centre in StaVenera, on the first anniversary since his appointment as Chairman of Bank of Vallettap.l.c. Scerri was accompanied by the Chief Executive Officer Mario Mallia and Chief Finance Officer Elvia George.

In line with the recently approved Dividend Policy, the Board of Directors is recommending a gross final dividend of 8 cents per share, resulting in a gross total dividend of 11.6 cents per share, as compared to the adjusted gross total dividend of 11.5 cents per share declared for the last financial year (as adjusted for the bonus issue). The Bank’s recently approved Dividend Policy aims to achieve a balance between the long-term sustainability of the Group, the regulatory requirements and the interest of the shareholders.

The Board is also recommending an optional scrip dividend programme. Shareholders have the option to receive new ordinary shares instead of cash dividends. This provides existing shareholders with the opportunity to increase their shareholding without incurring trading costs.  Whilst explaining this programme, the Chairman said, “The Board took this decision following the oversubscription by our shareholders of the rights issue. We want to give an opportunity to our shareholders to subscribe to more shares at a preferential price without incurring trading costs. This is an optional programme and shareholders will receive their dividend in cash unless they opt for the scrip dividend programme.”

Giving an overview of the Bank’s financial performance for the 15-month period under review, Mr Scerri said that the Core Profit excluding fair value items and associates was of €149.9 million, compared to €118.4 million registered for the previous year. The Chairman referred to the narrower interest margins, high levels of liquidity and negative interest rates on deposits held with the ECB as primary variables exerting downward pressure on the Bank’s bottom line. “On the other hand, the Bank’s strategic drive to diversify its revenue flows has played a key role in offsetting the negative impact of these factors,” explained Mr Scerri referring to the increase of 4.5% in commissions.

Operating costs increased to €151.3 million from €112.8 millionlast year.  Increaseswere mainly attributed to the cost of IT, heavy investment in HR and the strengthening of the Bank’s control functions. In fact, during 2017, the Bank enhanced significantly its compliance, risk management and anti-financial crime capabilities. “These functions are now housed under one roof at the Risk Management Centre in Santa Venera that was inaugurated last October,” explained Mr Scerri. “We are directing substantial human and IT resources towards this area, including enterprise-wide risk training.”

The Bank’s Return on Equity (ROE) ratio is of 16.5%, slightly down from 16.9% registered last year, as adjusted for the one-off gain on the VISA transaction.

During his speech, Deo Scerri explained the significant changes the BOV Group underwent during 2017, following the revision of its Memorandum and Articles of Association as approved by the Bank’s shareholders during its Extraordinary General Meeting held in July 2017. “The composition of the Board of Directors itself has undergone significant changes and now includes five non-executive directors and two executive directors.”

The Bank’s total assets as at end of 2017 amounted to €11.8 billion, resulting primarily from an 8% increase in short-term retail deposits. A 4% increase in home loans yielded a growth of €160 million in the loan book. Thus the Bank’s loan-to-deposit ratio stands at 44.3%, reflecting the Bank’s highly liquid position.

The Core Equity Tier 1 (CET 1) ratio went up from 12.8% in 2016, to 16.1% as at December 2017,providing substantial capital buffers to sustain business growth. Here the Bank’s Chairman referred to the highly successful Rights Issue which had been oversubscribed by nearly €50 million and reiterated the Bank’s satisfaction with the vote of confidence by its shareholders, which saw the Bank’s capital base rising by €150 million.

Looking ahead, Deo Scerri confirmed that, “The Board is committed to remain true to its Vision 2020 strategy, with its two-pronged focus on long-term stability and business sustainability. This vision is sustained by our solid corporate governance framework and evolving Business Model. Concurrently the Bank is working hard at its Transformation Programme which is based on substantial investment in Human Resources and IT.”

In his final note, Scerri thanked his fellow Directors and the members of the Management Board as well as all employees, saying, “The financial services sector is highly competitive and complex, dominated by the expectations and demands of a sophisticated market on the one hand, and tighter regulations and controls on the other. Having said that, I firmly believe that we are well-positioned to make the most of the opportunities available, whilst responding to the challenges ahead. In the coming years, Bank of Valletta will become more accessible, agile and concurrently more resilient.” 

Not much variation in deposit interest rates expected in short to medium term - BOV Chairman

Bank of Valletta Chairman Deo Scerri does not believe there will be much variation in interest rates in the short to medium term future.

The Malta Independent told Chairman that interest rates on deposits are still low, and asked whether people could expect to see an interest rate rise anytime in the near to medium future.

"This depends, a lot, on the position Europe will take on interest rates. I think that in the short to medium term there won't be much variation in interest rates. I know there is grumbling over low interest rates, but the one most to grumble is the bank," he said.

He mentioned the issue of negative interest rates which the bank is having to pay for making deposits with the European Central Bank.

"For every deposit we place with the ECB and other large banks abroad, we pay 0.4% negative interest rate. We are taking deposits to provide a service for the community. We know many people have peace of mind as they have deposits with BOV, and that someone is taking care of it, but these are costing us a lot of money."

"Until the rates abroad don't change it is hard for us to change our rates. The negative interest rate is costing us €12 million a year," he said.

During yesterday's press conference, the Chairman said that negative interest rates on deposits held with the European Central Bank is a primary variables exerting downward pressure on the Bank's bottom line.