Bank of Valletta plc (BOV) on Thursday announced a profit before tax of €105.1 million at group level for the first six months of 2023, a sharp rise from the previous year’s €72.1 million loss.

A similar increase was also experienced at bank level, where pre-tax profit surged to €106.1 million from the €66.7 million loss that it had in the same period in 2022. BOV noted that the previous loss included €102.7 million in net settlement of the Deiulemar litigation.

The results, which Directors labelled “positive” and “robust”, were primarily led by an improvement in operating profit, driven by an increase in operating revenues that reached €202.5 million, up by 54.2 per cent from the €131.3 million that was registered in the first half of 2022.

Net interest income remains BOV’s leading driver for profit with €159.9 million, an increase of €72.7 million from the figure recorded in the same period last year. Interest income also continued to benefit from the upward repricing of interest rates, with higher interest revenues also being reflected by the deployment of liquidity to achieved improved returns in the securities markets.

BOV’s net fee and commissions, exchange and other revenues stood at €42.7 million, down by 3.3 per cent from last year’s €44.1 million. The removal of deposit-related fees on corporate customers and a persisting slowdown in investment-related commissions prompted net commissions to decline by €2.8 million.

On the other hand, operating costs were on the rise, going up by six per cent to €93 million. BOV explained that this was primarily due to higher employee compensation, attributable to its focus to “invest in human capital and new talent, as well as overall competitive market developments in compensation levels which includes inflationary pressures”.

Net expected credit losses (ECL) for the period to June 2023 amounted to €4.6 million net charge, down from the €9 million that was registered in the same period last year.

The group’s total assets stood at €14.3 billion by the end of June 2023, meaning a contraction of 1.4 per cent when compared to the €14.5 billion recorded at the end of 2022. The bank’s funding mainly still comes through customer deposits with almost 70 per cent being driven by the retail segment. Balances on customer deposits declined by 2.7 per cent during the 2023, particularly a result of corporate customers preferring more beneficial opportunities available in the market.

Net loans and advances to customers as at the end of the reporting period reached €5.8 billion, indicating a growth rate of 4.4 per cent since December 2022, fuelled mostly by corporate loans, with the retail lending portfolio advancing at a slower rate.

The Board of Directors stated that it is “confident” that together with stakeholders, BOV can “achieve notable accomplishments and overcome challenges as they arise”. It expressed “heartfelt appreciation” to its employees, customers, and shareholders who have been “fundamental elements” in its success. “As we look ahead, let’s embrace and capitalise on prospects that lie before us and aspire towards even greater achievements whilst staying true to our core values,” it added.

Commenting on the results, Chairman Gordon Cordina noted that the “positive performance” reflects the bank’s activities to “optimise its performance within the opportunities created by the higher interest rate environment”.

Gordon Cordina

BOV Chairman Gordon Cordina

“With the goal of curbing euro area inflation, the ECB raised its interest rates by a total of 400 basis points over the past 12 months. Looking ahead, further increases are possible, as euro area inflation is proving rather persistent. A normalisation of interest rates is to be expected in the medium term, as the decade of exceptionally accommodative monetary policy has effectively come to an end,” he explained.

He further confirmed that within this context, BOV is “pursuing opportunities for investment to ensure sustainable returns in the medium to long term” from its treasury activities and loan portfolio.

Dr Cordina stated that the Board of Directors is in the process of compiling its data and analyses to consider the payment of a dividend out of this reporting period’s profit. He reaffirmed that BOV’s dividend decisions are “not based on a simple calculation but need to meet important risk and other regulatory criteria, which focus on the strength and viability of the bank’s future business”.

“As Malta’s largest bank, BOV is conscious that its actions have a material impact on the economy and is a key enabler of the country’s economic prospects. In this respect, the bank aims to minimise shocks in the economy, which is a key service for a very small open economy,” Dr Cordina added.

He also noted that the bank is “moving ahead” with initiatives aimed at reducing the carbon footprint of its operations and is “exploring ways how to embed further green priorities in its pricing structures”.

“The bank’s financial performance during the first half of 2023 is a tangible sign that the outlook for BOV is bright. These satisfactory results augur well for the year and play an important consideration in the Board’s approach to the management of the bank’s capital,” he concluded.

BOV CEO Kenneth Farrugia acknowledged that the bank “continued to strengthen its position” as a leading financial institution in Malta, as it delivered a “solid” financial performance.

“The bank is also progressing in our commitment to delivering customer-centricity excellence and innovation in an ever-evolving industry landscape,” he continued.

Kenneth Farrugia

BOV CEO Kenneth Farrugia

He added that the bank is “investing significantly” in business process re-engineering, technology, and digital infrastructure to provide customers with “seamless and convenient banking services”. “Our digital platforms are undergoing substantial improvements to offer enhanced security, efficiency, and a wide range of digital banking solutions. We understand the importance of convenience in today’s fast-paced world, and we are dedicated to meeting your banking needs efficiently and effectively,” he said.

Mr Farrugia added that BOV has made “significant progress” in its efforts to foster sustainability and responsible banking practices, with the belief that “sustainable development is crucial for the long-term prosperity” of the community and for the “preservation of our environment”. By aligning BOV’s business practices with sustainable principles, the bank aims to create a “positive impact on society while maintaining strong financial performance”.

“Looking ahead, we remain committed to our core values of trust, integrity, and innovation. While we sustain our commitment to keep interest rates on home and personal loans at very competitive levels, over the next six months, through our insurance associate and fund management subsidiary, we will be launching a number of products that will provide our depositors with consistent income streams in the short to medium term,” he shared.

He added that the bank will continue to “adapt to the changing needs” of customers and embrace emerging technologies while exploring new opportunities to “deliver exceptional banking experiences”. “Our ongoing investment in talent development, robust risk management practices, and operational resilience will ensure that BOV remains a stable and reliable partner for your financial needs”, Mr Farrugia continued.

He proceeded to express gratitude to BOV’s customers and suppliers for their “trust and continued support”, together with the bank’s staff, whose efforts to “elevate the bank to another level are truly appreciated and your ever continued engagement to the cause is the foundation of our success”.

“These results would have never been possible without your dedication and commitment,” Mr Farrugia concluded, referring to the bank’s workforce.

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Written By

Fabrizio Tabone

Fabrizio has a passion for the economy and technology, especially when it comes to innovation. Aside from this, he also has a passion for football and movies, and so you will often find him either with a ball to his feet or at the cinema checking out the latest releases.