Bank of Valletta Group has announced a profit before tax of €163.5 million for the period from January to September 2023, a strong positive result supported by Malta’s robust economic performance, generating more demand for credit, higher interest rates, and effective use of excess liquidity.

Presenting the results for the first nine months of the year, BOV CEO Kenneth Farrugia stressed that the bank will stive to continue a transformation that will see it become more driven by data, science and better use of capital resources, all the while optimising customer experience.

He admitted that the international context is “difficult” as the cost of living rises while growth is faltering in the major economies. While this presents “plenty of upside” in terms of investment opportunities, he warned that any downturn in the country’s major trading partners will eventually impact Malta.

The profit registered during this period marks a change to the €48.7 million loss seen at the end of last year’s first nine months. Last year's loss reflects the Deiulemar settlement, in which the bank took a one-time hit to settle the long-standing matter once and for all.

The favourable performance for the first three quarters of 2023 was mainly attributable to improvement in the group’s operating revenues totalling €315.9 million, a growth of €113.7 million or 56 per cent compared with the same period in 2022 (9M 2022: €202.3 million).

Net interest income continued to be the dominant catalyst with €253.8 million (9M 2022: €137.3 million), an increase of €116.5 million or 85 per cent compared to the same period in the prior year. This was primarily driven by strong growth in the bank’s personal and business lending business with the loan portfolio exceeding the € 6 billion mark (December 2022: €5.6 billion). In addition, improved returns from the bank’s treasury portfolio as well as the positive impact of higher rates of interest on the euro have equally contributed to the strong returns.

On the other hand, net fees and commissions, exchange and other revenues amounted to €62.1 million, down by €2.8 million or four per cent (9M 2022: €65.0 million). Net commissions declined by €0.8 million, or two per cent vis-à-vis the same period last year mostly due to the removal of deposit-related fees to corporate customers and a persisting slowdown in investment-related commissions as a result of the continued volatility in the world’s capital markets driven by the geopolitical tensions which is in turn dampening investor sentiment.

As is the case for practically every employer, staff costs rose by €8.8 million over the last year, the biggest contributor to an increase in operating costs to €139 million for the period (9M 2022: €132.3 million).

Net Expected Credit Losses (ECL) for the period to September 2023 was a net charge of €13.1 million (9M 2022: €10.1 million net charge), reflecting the bank’s growing loan book.

The share of profit from insurance associates for the first three quarters of 2023 amounted to €6.4 million (9M 2022: €1.5 million restated).

BOV Group Financial Position

BOV Group’s liquidity ratio as at the end of September 2023 stood at 458.5 per cent, up from 426.3 per cent as at December 2022, significantly above the minimum regulatory requirement. Effective management of surplus liquidity was upheld in the first nine months of the year with cash and short-term assets decreasing by 35 per cent or €1.2 billion. Net expansion in the loan portfolio was of €401.5 million or 7 per cent.

The treasury portfolio increased by €556.8 million (12 per cent), with the vast majority measured at amortised cost reflecting the bank’s primary business model to hold securities until maturity with a view to collecting interest revenues over the life of the investment.

Customer deposits contracted by circa one per cent in the last quarter and four per cent since December 2022, in line with expectations. The increase in loans experienced both in the corporate and retail lending portfolios led to a favourable increase in the group’s net loans to deposits ratio from 46 per cent in December 2022 to 49.5 per cent as at the end of September 2023.

Total group equity increased to €1.2 billion, up by €108.5 million on December 2022 as restated. The group’s capital ratios remained strong and above regulatory requirements, with the CET 1 and total capital ratios as at September 2023 of 22.7 per cent (December 2022: 21.8 per cent) and 26.1 per cent (December 2022: 25.4 per cent), respectively.

The 2023 capital ratios are inclusive of profits for January to September 2023 and the proposed interim dividend for comparative purposes. The group’s net asset value as at 30th September 2023 amounted to €1.2 billion, resulting in €2.1 net asset value per share (December 2022: €1.1 billion restated resulting in €1.9 net asset value per share).