Bank of Valletta (BOV) closed off 2021 with a pre-tax profit of €80.7 million, a steep increase from the €15.2 million pre-tax profit registered in 2020, when the pandemic hit Malta.

Pre-tax return on equity also increased steadily, from 1.4 per cent in 2020 to 7.3 per cent in 2021. In addition, earnings per share came in at €9.6c, up from €2.4c in 2020.

The underlying operating performance of the bank “demonstrates a resilient income stream with good recovery from the impact of the pandemic in 2020 and growth in some areas, partly offset by higher costs”.

Stronger profitability benefited from a net release of Expected Credit Losses (‘ECLs’), reflecting better economic conditions relative to 2020 and individual client asset improvements.

Total operating income was up 4.9 per cent to €242.9 million (compared to €231.6 million in 2020).

The bank’s revenues mostly recovered from 2020 lows, as net interest income held up overall and net commission income grew strongly, however foreign exchange income was down due to continued lower turnover.

Total costs were €195.6 million, increasing by €25.2 million or 14.8 per cent, inclusive of Strategy costs which were up by €7.3 million year over year.

Employee compensation increased by €2.2 million, “which reflected the need for the Bank to meet regulatory requirements across its functions such as Risk and Compliance, and to reinforce ongoing investments in digital based capabilities.”

Here, BOV’s outgoing CEO Rick Hunkin has come under fire after it came to light that the bank engaged seven foreign consultants at a cost of between €1,500 and €2,00 per day.

The bank incurred a total of €6.1 million in specific items such as the €2.6 million fine imposed by Financial Intelligence and Analysis Unit (‘FIAU’) and €1.4 million disbursements on card fraud.

 Furthermore, costs payable to the Deposit Guarantee Scheme (‘DGS’) increased by €4.8 million during the year as the growth in retail deposits continued.

Excluding the impact of items that are not expected to recur and an increase in contribution to the DGS, underlying operating costs increase was €5.7 million, or 3.7 per cent, mainly driven by IT investments due to the Bank’s constant efforts to modernise and digitise key systems.

BOV Group’s share of the insurance associates’ results was €14.5 million, up by €4 million on prior year, attributable to “strong economic recovery, solid growth in investments business and significant liquidity in the local market”.

Click here to read more about BOV’s financial position.

Update on BOV’s 2023 strategic plan

In 2020, BOV’s Board of Directors approved a strategy taking the bank on a digital transformation journey over the coming years.

BOV has indeed embarked on major refurbishment and transformation works at its branches, “both operationally, with staff re-training and re-skilling, and with new improved branches that saw the launch of the new Sliema brand and with other branches being converted from a more traditional layout to a new service model.”

“We have also focused on migrating transactions towards more efficient electronic means of payment which has resulted in significant volumes of transactions processed electronically and cheques processed down by more than 50 per cent.”

BOV said that while “good progress” has been made in several areas, it has had to balance the pace of desired change with both managing staff through a major transformation and the need to ensure that risk is continually improved to meet current regulatory requirements.

“The Bank invested significantly in its credit management and wealth management back-office processes to deliver stronger controls without impacting customer service.

“Alongside the transformation we have been significantly enhancing our internal data capabilities, to improve customer understanding and enable us to make better and more informed decisions. We currently have a number of data quality enhancements underway, which will support future product development and customer value propositions.”