Bank of Valletta registers half-yearly pre-tax profit of €120 million

Bank of Valletta has registered a pre-tax profit of €119.8 million in the first six months of the year, the listed company announced on Wednesday.

The pre-tax profit reflected a reduction of 11.3% over the same period last year as a result of one-off charges.

The half-yearly results show earnings of 12.3c per share, a reduction of 1.6c over the same period last year, and a return on average equity of 15.9%.

BOV chair Gordon Cordina said an interim dividend of €33.6 million after tax, equivalent to 42.5% of profit after tax, was being recommended.

Customer deposits approached €14.5 billion, an increase of 5.4% on year-end. In six months, deposits grew by €748 million.

BOV’s loan book stood at €8.6 billion, an increase of 6.8% on year-end. Loan increases were registered across all categories—business loans jumped up by 5.4%, home loans by 8% and personal loans by 4.8%.

Net interest income stood at €207million in the first six months, an increase of 9.7% when compared to the same period last year.

BOV has a capital CET1 Ratio of 19.3%, which is above the regulatory requirement of around 15% for a bank its size.

Explaining the reduction in pre-tax profit, the bank said downward market prices on investments as a result of geopolitical instability in the first quarter and an impairment charge of €5 million were the main contributors. However, the comparative period last year also registered a one-off gain of €6.5 million.

BOV CEO Kenneth Farrugia said the bank had a total operating income of €251.2 million, the highest level it has ever been, and a balance sheet growth of €17.6 billion.

He said home loans remained a core strength of the bank, placing it as a market leader.

Farrugia noted that the bank witnessed increased deposits but wanted to direct clients to diversify their portfolios, particularly into private pensions. “The trajectory is up but more needs to be done to encourage more people to have a private pension plan, which is why more fiscal incentives are required,” Farrugia said.

BOV has a massive footprint in Malta’s economy. Farrugia said the bank had 360,000 clients of every age and from every social strata. It had Bank of New York and Citibank, providing it correspondent banking services for the dollar.

“Trust in the bank has grown and an international bond for €300 million was twice oversubscribed,” Farrugia said.

Additionally, the bank’s physical branch footprint was as large as all other domestic banks put together. “It remains important for BOV to be present in the community,” Farrugia said, adding that specialised home finance hubs were also operating with extended hours.
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BOV chair Gordon Cordina said the bank was looking to the future with “confidence, optimism and caution”.

He said the results were obtained against a background of geopolitical instability and market volatility. “These disruptions are cause for worry in terms of supply chain management, although inflationary pressures are not yet being felt,” he said.

A collective effort

Asked what role a big bank like BOV could play in a country where there is increasing talk on the need to aim for quality rather than quantity, Cordina insisted this required a collective effort.

“We have many sectors where companies are investing in higher value added; they range from manufacturing, to IT services and tourism. We need to help every sector to regenerate and have less impact on land resources and human resources,” Cordina said, adding Malta’s economy had reached a stage where the country could be selective in the type of investments it could attract.

“There is potential to do more but this would require financial institutions to sit down with the authorities and stakeholders to determine what potential investments can be pursued but we also have to keep in mind the aspirations of the people and their Mediterranean lifestyle,” Cordina said.

Farrugia added that financial wellbeing of society also included investment in second pillar pensions apart from green investment.

“The economy cannot be shocked; we need a gradual transition to a more sustainable model,” Farrugia said.