The Malta Independent 22 May 2019, Wednesday

BOV makes €146.2 million in profit in 2018; no cash dividends for shareholders for 2018

Kevin Schembri Orland Friday, 15 March 2019, 14:54 Last update: about 3 months ago

BOV saw €146.2 million in profit for the year 2018, Chairman Taddeo Scerri told the press today, and in order to be prudent, he said, a €75 million litigation provision has been made.

When removing the litigation provision of around €75 million, BOV made a €71.2 million profit before tax, he added. The Chairman explained that this provision is just an accounting provision, and the bank is still investing that money. Scerri highlighted that 2018 was not an easy year, arguing that this was a strong result. He mentioned that the bank had a number of legal cases and there was an increase in competition from smaller banks, and other operators who entered the market.

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Customer deposits stood at €10.4 billion, and the bank’s equity stood at €994 million. Management took active steps to manage the growth in deposits, the bank’s Chief Financial Officer said. In terms of local deposits, they were looked at differently than those from abroad, she said.

The chairman, building on this, said that BOV is currently undertaking a de-risking exercise, and the bank is also going through a business restructuring process. The de-risking is achieved by exiting business areas that, on a risk adjusted basis, do not deliver an adequate return on the cost of capital, and through the implementation of a revised customer acceptance policy that excludes relationships that have no economic nexus with Malta. He said accounts with people in high-risk jurisdictions with no nexus to Malta are being closed. He also said that the bank is introducing more stringent anti-money laundering procedures.

In terms of bank costs, they rose by 8% to €131 million, it was said, highlighting an increase in human resources focussing on strengthening control functions.

The legal issues the bank has, the Chairman explained, led to the board deciding to focus on conserving capital to strengthen the loss absorbing capacity of the institution.  This led to the difficult decision to suspend cash distribution in terms of dividends for 2018, the Chairman explained.

While no cash dividends will be issued, the board will issue bonus shares in the ration of one for every ten ordinary shares. They will also issue an additional Tier 1 Contingent instrument targeted to institutional investors.

He said that bank has to give weight to views of its supervisory authorities who tend to take a more conservative view on the possible outcome from litigation.

The board intends to resume dividend payments in line with the dividends policy as soon as prudent judgements so permit, with guidance from its supervisors.

During the meeting, the cairman also spoke about the recent hacking attack, where €12.9 million was falsified through a hacking attack.

The chairman called the hacking attack ‘sophisticated’ and said that from the €12.9 million taken, €5.6 million is either back at the bank or on its way back. €4.4 million are currently frozen and there are procedures to return those funds. On the €2.9 million left, he said, the bank is taking all the necessary measures to regain the funds, including future judicial action.

He said that it is expected that there will be other expenses related to this situation, like legal expenses. These expenses cannot be calculated at this time but the bank does not expect them to be major, he said, adding that every amount which will not be recoverable will be reduced from the profits of this year. This event shows the resiliency of the bank, he said.

He said the bank us strengthening the security infrastructure after this attack, and is creating an information Technology oversight committee.  The committee will assist the board of directors to fulfil its governance responsibilities in relation to digital eco-system including cyber security, the core banking transformation programme and innovative technologies like FinTech.

This cyber attack could have happened to everyone, he said. He explained that there was a phishing email which got through the firewall and there was someone who unfortunately opened it and the virus came through that. At present, he said, the bank brought in foreign experts, who are “A class experts” working to ensure that there would not be another attack. He explained that steps were taken to prevent any issues when such other attacks occur.

The time between the money being taken and the bank noticing was short, he said.

Going back to the bank’s business, the chairman said that the bank is committed to protect and enhance the bank’s strength and profitability by managing risks in a prudent and responsible way.

He spoke of profitability being affected by loss of revenues through de-risking, cost of increasing buffers, higher regulatory and compliance costs and investment in IT systems.

The bank investing in human resources and IT hardware to combat money laundering, he said, which will have an effect on the bank’s profit. 2018 showed, however, that BOV has a strong core business, he said.  The Chairman also said that loan accounts which, in the past, struggled to see payments made, were able to pay off debts more consistently thanks to the positive economic situation. 

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