Bank of Valletta (BOV) Group delivered a strong performance during the first quarter of 2024, with profit before tax increasing by 36.8 per cent over the same period in 2023 (€46.5 million) to reach €63.7 million.

The results were released in the bank’s quarterly financial overview, published on Monday (today), with net interest income remaining as the primary driving force for the group at €98.3 million. This is equivalent to an increase of €24.8 million or 33.7 per cent when compared to the first quarter of 2023. This rise reflected an additional expansion in both the customer lending and proprietary investment portfolios over the last 12 months, as well as from improved deposit rates achieved on cash balances.

Net fee and commission income rose by €1.9 million (11 per cent) to €18.7 million when compared to the same period last year, with this primarily being influenced by higher amounts achieved on credit-related business.

Operating income for the first quarter in 2024 surged by 22.9 per cent to €117.4 million, driven by increased returns both from an interest and non-interest income perspective. Operating costs excluding strategy at €46.8 million (1Q 2023: €44.2 million) represents an increase of 5.9 per cent compared to the same period in 2023. BOV stated that this growth in operating expenses was in line with trends observed in previous quarters and is mainly influenced by the group’s “ongoing efforts to enhance talent, improve compensation and benefits, invest continuously in technology, and comply with regulations.”

The group’s Cost to Income ratio continued to shift downwards, standing at 41.8 per cent in the first quarter of 2024 (1Q 2023: 48.2 per cent).

Net Expected Credit Losses (ECL) for the first three months of 2024 amounted to a net charge of €6.6 million, up from the €5 million recorded in the same period in 2023. This was influenced by business expansion on all credit portfolio segments and a slight deterioration in the asset quality ratios of the commercial book. The ratio of non-performing loans to the total credit portfolio remains in line with that at the end of 2023 at 3.1 per cent.

The group’s total assets stood firm at €14.5 billion as at the end of March 2024, with this representing a minimal change from the end of 2023 (December 2023: €14.5 billion). In its review, BOV remarked that its balance sheet optimisation strategy related to the deployment of cash reserves into longer-term interest-bearing assets continued during the quarter with the main shifts being registered from balances with the Central Bank of Malta to the credit and investments portfolios.

Cash and short-term funds amounted to €1.9 billion at the end of the first quarter, down from the €2.4 billion in December 2023. The allocation of funds was directed towards investment, predominantly in treasury securities, where an increase of €261.9 million was registered, followed by a €182.8 million rise in the loan book.

Net loans and advances to customers amounted to €6.4 billion at the end of the first quarter, going up slightly from the €6.2 billion recorded in December 2023.

The proprietary investments portfolio grew by €261.9 million (4.9 per cent) during the first quarter of 2024, leading to a holding amount of €5.6 billion, representing 38.6 per cent of total assets. This is compared to the €5.4 billion (36.9 per cent of total assets) recorded in December 2023.

Additionally, customer deposits experienced a marginal decrease of €47 million during the first three months of the year, representing a 0.4 per cent drop from the previous quarter. The main decrease was registered on non-personal related customers.

The group’s liquidity coverage ratio (LCR) at the end of the first quarter was 345 per cent, down from the 362 per cent outstanding as at December 2023.

BOV revealed that total group equity stood at €1.3 billion, up by €41.2 million when compared to that of December 2023. Common Equity Tier 1 (CET1) and total capital ratios as at the end of March 2024 were 21.5 per cent (December 2023: 22.7 per cent) and 24.6 per cent (December 2023: 25.9 per cent), respectively. This meant that the capital ratios remained strong and above regulatory requirements.

Looking ahead, the BOV made reference to the fact that European Central Bank (ECB) has maintained the rate on its deposit facility fixed at four per cent since September 2023, contributing positively to BOV’s interest income. The bank anticipates that some time in 2023, the ECB may start reducing the current level of monetary policy restriction, yet the timing and pace of the possible rate cuts “remain uncertain,” mainly due to the fluidity in international conditions. BOV stated that in order to prepare itself for a falling interest rate scenario, it has been “proactively restructuring its balance sheet” through the redeployment of treasury funds into longer term assets, as well as a productive expansion in good-quality credit.

BOV remarked that Malta’s current and near-term economic environment has “remained benign,” this supporting the group’s positive expectations in terms of further growth in loans and the preservation of asset quality.

“While the positive influence of high interest rates on liquid assets may be short-lived, the bank is focusing on continued loan portfolio growth, effective cost management, and digitalisation of products and processes to sustain its profitability and make the necessary investments towards the further greening of its operations and its balance sheet,” BOV added.