BOV reports pre-tax profit of €80.7 million but does not pay out dividend

Bank of Valletta returned to healthy profits of €80.7 million (2020: €15.2m) thanks to a good recovery from the impact of the pandemic in 2020 and growth in some areas.

The much stronger profitability benefited from a net release of Expected Credit Losses (‘ECLs’) reflecting better economic conditions and individual client asset improvements.

During 2021, a gross interim dividend was authorised of €0.0264 per share amounting to €15.4 million (net ordinary dividend of €0.0172 per share amounting to €10.0 million) which was paid on 28 January 2022. The Board of Directors does not intend to recommend a final dividend for Financial Year 2021.

Total operating income was up 4.9% to €242.9 million (2020: €231.6m), with net interest income holding up and net commission income growing strongly. Net interest income of €156.3 million increased by €9.5 million versus prior year; Net Commissions at €74.6 million was up by €7.3 million, or 10.9% on 2020.

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

This included employee compensation which increased by €2.2 million, mainly for risk and compliance and investments in digital based capabilities; a €2.6 million FIAU fine, €1.4 million in disbursements on card fraud; and a €4.8 million increase in costs for Deposit Guarantee Scheme.

Net release of ECLs amounted to €18.9 million, compared to the 2020 substantial net charge of €65.1 million which was driven by COVID-19 and Legacy Non-Performing Loans (‘NPLs’).

Group total assets reached €14.4 billion as at the end of 2021 - an increase of 11.2% over the previous year. Customer deposits grew by €904.6 million (8.0%).

The bank’s investment portfolio increased by €260 million year on year and is composed of highly rated securities. Net loans and advances increased by €335 million, or 6.9%, during the year and stood at €5.2 billion as at 31 December 2021.

In 2020 the Board approved a strategy which plans to take BOV on a digital transformation journey with a major transformation programme for branches, staff re-training and re-skilling, and branches converted from the more traditional layout to a new service model.

Significant volumes of transactions are now processed electronically and cheques processed were down by more than 50%.

“The Bank is going through a significant and necessary period of transformation which will leave it better placed for a more sustainable future. This transformation places a significant workload upon our teams,” CEO Rick Hunkin said.

In his concluding statement the Chairman of the BOV Group Dr Gordon Cordina remarked that 2021 was another challenging year.

“In 2022, we expect the Maltese economy to continue on its path to recovery, and consequently business sentiment to pick up, particularly in the tourism related sectors. This recovery period will present an opportunity for all stakeholders to embark on the implementation of their post-pandemic plans, and as such, further strengthening the recovery momentum albeit tempered by the wider economic impacts of the war in Ukraine.”