Bank of Valletta profits down 35% to €64 million from 2010

Bank of Valletta has registered a 35% downturn in its pre-tax profits, down to €64 million from €98 million last year for the group’s operations.

BOV chairman Roderick Chalmers said the results had been impacted by the charge of €15 million relating to the La Valette Multi Manager Property Fund settlement.

Chalmers said the bank’s problems with the La Valette multi-manager property fund saga had been “a most unhappy and unfortunate experience” for the bank and its customers.

BOV and its subsidiary Valletta Fund Management were fined €347,000 for breaching the investment restrictions of the property fund, believed to have cost the fund some €50 million in value. The bank eventually offered shareholders a compensation offer of 75c per share – three times the value of the devalued shares.

The financial regulator has still to complete two investigations into the fund’s management. “Although a number of regulatory issues remain to be addressed in connection with the Fund, with an acceptance rate of close to 99%, BOV will work to bring early closure to all issues relating to the fund, including its winding up.”

Chalmers said the BOV group’s retail and corporate businesses had performed steadily in a year fraught with uncertainty in the financial markets, resulting in an overall fair value charge in its financial markets book of €24.9 million.

Chalmers said the difficult economic conditions of the past two years, compounded by the Libyan conflict had a knock-on effect on credit quality in certain sectors. “Overall credit quality remains satisfactory, with little change over the past year in the proportion of non-performing accounts to total loans and advances.”

BOV registered a net operating profit from core corporate and retail banking operations of €100.3 million – a €2% increase over 2010 – thanks to an improved net interest income.

Customer deposits reached €5.5 billion as at 30 September 2011, an increase of €339 million over 2010.

BOV will recommend the payment of a final gross dividend of €0.08 per share making for a final net dividend of €0.052 per share which would make for a total gross dividend for the year of €0.1425 per share.

It will also recommend a bonus share issue of one share for every eight shares held which will be allotted to shareholders.

The bonus issue will be funded by a capitalisation of reserves amounting to €30 million. This bonus issue will serve to further increase the rmanent capital base of the Bank (from €240 million to €270 million), and will also serve to enhance the affordability and liquidity of the Bank’s shares.

Chalmers warned that the long-running eurozone sovereign debt crisis would throw “a pall of uncertainty” over the 2012 outlook.

He warned that eurozone countries would have to adopt more stringent fiscal restrain, while banks will buffer up their capital requirements. But he said Greece’s sovereign debt would be rescheduled “under the guise of various euphemisms for what will be a de facto default.”

“None of the above augurs well for economic prospects over the next 12 to 24 months – and Malta, notwithstanding our history of resilient economic performance, cannot expect to be exempt from the downside pressures on our economy emanating from our major markets.”

Chalmers said that a positive tourism record and a growth in services would keep employment strong. He also said more EU funding bolstering infrastructure projects could bring relief to the subdued construction sector, which he said was bing affect by “the turgid planning application and approval process.”

And while government finances required continued discipline and vigilance, Malta’s debt and budget deficit to GDP data “remained respectable by EU-wide standards.”

Bank of Valletta chief executive Tonio Depasquale will retire from the bank after 42 years of service, having been appointed CEO in 2004.

Paying tribute to Depasquale, BOV chairman Roderick Chalmers said he had taken the bank from strength to strength, “weathering the storms of the greatest financial crisis since the 1930s in a manner achieved by very few European financial institutions