[WATCH] ‘We can no longer promise super profits’, says Bank of Valletta CEO

Prudence is Bank of Valletta’s watchword as bank announces de-risking process to close down accounts of businesses with no Malta ties

Bank of Valletta CEO Mario Mallia with BOV chairperson Taddeo Scerri (centre)
Bank of Valletta CEO Mario Mallia with BOV chairperson Taddeo Scerri (centre)
[WATCH] ‘We can no longer promise super profits’, says Bank of Valletta CEO

Bank of Valletta can no longer promise super profits as it embarks on a more prudent business model, the bank’s CEO Mario Mallia said.

Presenting the financial results for the first six months of 2019, Mallia said the bank was pulling out of businesses wholly based abroad.

“Businesses that have no ties with Malta have had their accounts closed in a de-risking process. This means a loss of income but this was replaced with new income in 2019. We are getting out of businesses that we qualify as risks that we are not ready to tolerate,” Mallia said, insisting that all major correspondent banks were de-risking.

He said the bank was facing increased expenses as it was enlarging its anti-money laundering section, claiming that skills in this area were hard to come by.

“We are resourcing for 2020 and beyond. However, the anti-money laundering skills do not match the current demand, so the prices for these skills are constantly increasing as well,” Mallia said.

Profits in the first half of 2019 were of €54.3 million before tax. In 2018, this profit during the same period was at €13.5 due to litigation expenses that amounted to €75 million.

Quoting the Standard & Poor’s downgrading of BOV, its second downgrading of BOV in two years, Mallia argued that the rating of BBB-/A-3 meant that though the bank had been downgraded it was also stamped with a stable outlook.

“This means that the credit agency is not seeing any risks that might contribute to even further downgrading. This wasn’t an unexpected downgrade either. S&P had previously given a negative basic anchor rating to general banks and had placed us on a negative watch,” Mallia said, adding that though the February cyberattack had contributed to this downgrade, the bank had not lost any data in the process.

Still, this was a cause for enhancement as he said that BOV was in the process of changing its main IT core system, a 20-year-old structure, and transforming it into IT infrastructure which was used internationally.

With regards to the three major litigation cases, for the €363 million Deiulemar case BOV have said that at the Tribunal of Torre Annunziata it does not have a guarantee of a fair hearing, so the bank filed a case with the European Court of Human Rights, its next hearing being the 10 September; with the Falcon Funds case, BOV filed several judicial letters holding 158 individuals responsible for any damages; and the Property Fund case had its next hearing on the 12 November as the court heard all submissions.

Mallia also announced that BOV had reopened US dollar accounts with Raiffeisen Bank in Austria, adding that this was not a solution but simply the first step going forward.

BOV chairman Deo Scerri said the bank was currently implementing a two-year programme to deal with its two most pressing challenges.

“We are currently changing all our IT systems and attempting to introduce them to our staff in the shortest time possible. Our other challenge is a transformation programme the bank is willingly going through where we are attempting to strengthen the bank’s governance, increasing our staff and control functions,” Scerri said.

He said that the bank was also conducting a Know Your Customer (KYC) exercise where management was meeting with all clients, corporate or otherwise, to make sure that they are not involved in financial crime.