On Wednesday (today), Bank of Valletta (BOV) announced its performance for the financial year 31st December 2023, registering a pre-tax profit of €251.6 million.

These results reflect strong income growth and high profitability levels achieved across all main business lines. This has further bolstered the bank’s balance sheet position, with liquidity and capital positions remaining above regulatory requirements.

BOV Group experienced a significant increase in operating income primarily due to the enhancement in net interest income for the year 2023.

Total operating income amounted to €441.0 million (increase of €147.6m over prior year). Net Interest Income remained the primary driver of operating income, totalling €352.0 million (up by €150.1m), with Net Fee and Commission income increasing by €1.4 million. Total costs amounted to €210.9 million (increase of 10 per cent over prior year). The Group’s share of profit from insurance associates amounted to €11.0 million.

Key performance indicators were satisfactory with pre-tax return on equity at a level of 21.1 per cent and cost to income ratio at 47.8 per cent. Earnings per share amounted to €28.8 cents (€5.4 cents restated in the comparative year).

The group’s total assets remained on the same levels of the previous year at €14.5 billion. Gross loans and advances reached €6.3 billion, an increase of nearly nine per cent compared with the €5.8 billion of December 2022.

Group’s gross loans to deposits ratio increased from 46 per cent in December 2022 to 51.7 per cent by end 2023. Capital ratios remained strong and above regulatory requirements, with the CET 1 and total capital ratios as at 31 December 2023 of 22.7 per cent and 25.9 per cent respectively.

Further to the gross interim dividend of €0.0462 per share paid on 6th December 2023 amounting to €27.0 million (net ordinary dividend of €0.0300 per share amounting to €17.5 million), the Board of Directors will, at the forthcoming Annual General Meeting, be recommending a final gross dividend of €0.0700 per share amounting to €40.9 million (net dividend of €0.0455 per share amounting to €26.6 million).

This would make for a total gross dividend for the year of €0.1162 per share, equivalent to a total gross dividend payable of €67.9 million. The payment of the final dividend is still subject to regulatory approval.

‘The highest dividend in the past decade, with the strongest ever capital base’

Speaking during the announcement BOV Chairman Dr Gordon Cordina commented that “2023 has been a very positive year for the BOV Group, which registered healthy profits in a situation of positive interest rates, while no longer shackled by legacy impediments and risks.”

He remarked that the conservation and the generation of capital remain high on the BOV’s agenda. Such approach “ensures that the Bank has enough capital to sustain its future strategic growth ambitions whilst always acting prudently to remain well capitalised in relation to regulatory thresholds.”

Meanwhile, the Board of Directors stated that it is “pleased to announce one of the highest dividend distributions paid in recent years, which duly rewards our loyal shareholders.”

This is being recommended after taking into consideration the Bank’s future capital requirements, supported by a fully articulated dividend policy which seeks to balance out dividends payout with future growth of the Bank’s equity base. It also takes into consideration the sustainability of further dividend payouts in the future.

In 2023, the Board approved BOV’s updated strategy for the 2024-2026 period. Among its chief priorities, the strategy emphasised Environmental, Social and Governance (ESG) considerations.

BOV noted its 50th anniversary being celebrated this year. Dr Cordina said that as the bank reaches this milestone, its ambition is that as an institution “[it] remains vibrant, relevant, competitive, and dynamic. Our polar star is to be a leader and innovator in the financial sector and a catalyst for positive change,” he concluded.

‘2023 was one of the best experienced during its 50-year history’ - CEO Kenneth Farrugia

Also commenting on the results, BOV CEO Kenneth Farrugia stated that “BOVs financial performance over 2023 was “undoubtedly one of the best experienced during its 50-year history.”

He notes that these results were achieved in a backdrop of a high interest rate environment influenced by geopolitical tensions, high inflation, and tightening monetary policies across the euro area.

“The Bank has been re-engineering processes to deliver service enhancements while providing customers with more efficient alternative channels. We are pleased to see this resulting in continued migration from traditional to more modern alternative channels. We have also taken forward a number of foundational changes to strengthen operational execution to support our key strategic thrusts over the next three years,” he commented.

Moreover, he adds that on the business front, the Bank has registered strong growth in both its commercial and consumer finance business. That is why, he remarks, that “it is particularly pleasing to note” the growth in green commercial and personal loans and “equally the strong quality of its loan book” which has been maintained.

He shared that the digitalisation of BOV’s operational model remains a high priority and reminded that various initiatives are currently in progress to ensure that - across its physical, digital and hybrid channels - it delivers the service experience expected by the customers.

Additionally, he recalled that during the year, BOV took on various projects to strengthening its risk and control infrastructure. “In this manner we are ensuring that we constantly meet our regulatory compliance requirements and meet the expected cybersecurity standards to ensure that our business can be sustained and at the same time our customers to feel secure.”

Mr Farrugia notes that the community that BOV operates in remains an important stakeholder of the bank. “Our Corporate Social Responsibility programme has been highly active during the year where we have organised various initiatives across our key CSR pillars to support this important stakeholder.”

He wraps up by thanking all employees across the bank for their contribution as well as that of my Executive team and of the Board of Directors. “Our aim is to deliver value to our shareholders and customers alike where the bank remains firmly secure, compliant and sustainable in the process,” he concluded.