Bank of Valletta announces half-yearly results

Bank of Valletta announces half-yearly results - Interim dividend up by 24%

The Bank of Valletta Group has announced a profit before tax of €74.0 million for the six months ended on 31 March 2017, an increase of 8% over the €68.5 million reported for the same period last year. This represents a return on equity before tax of 20%. 

Bank of Valletta announces half-yearly results

The Board of Directors has declared a gross interim dividend of 4.5 cents per share, an increase of 24% over the 3.64 cents declared last year, as adjusted for the bonus share issue made in January 2017.

When presenting the results to the media, BOV Chairman Deo Scerri explained that the Group's performance should be evaluated within a context of a high-performing local economy, but also a difficult international scenario marked by persisting low interest rates.  The current interest rate environment is posing a challenge to banking in Malta as well as other European countries, and BOV's interest margin for the period, which amounted to €72.7 million, showed a decrease of 3% over March 2016.

The decline in margin income was, however, mostly offset by an increase in net fee income, which rose by 6% to reach €33.8 million.  The Bank has embarked on a strategy to supplement its core margin income with non-interest revenue streams, and the interim results show that the strategy is starting to bear fruit.

The Group also recorded a reversal of impairment charges of €5.3 million, the result of the Bank’s persistent debt recovery efforts that resulted in a number of settlements of non-performing loans. There was also a general improvement in the credit quality of the loan book.

Mr Scerri explained that the Group's financial position as at end March 2017 reflected current local conditions, where buoyant economic activity and high investor and consumer confidence are resulting in high levels of liquidity in the economy.  In turn, this is reflected in high levels of deposits with the banking sector.  During the period under review, BOV customer deposits rose by €487 million to reach €9.7 billion, accounting for 86% of the Group's balance sheet.

Concurrently, Group net lending rose by €102 million, and stands at €4.1 billion.  The excess of new deposits over new lending was deployed into liquid and investment assets.  Group liquid and investment assets now stand at €6.9 billion, or 61% of the balance sheet.

Total assets stand at €11.3 billion, an increase of €583 million over September 2016, while equity amounts to €753 million, an increase of €24 million.  Group Core Equity Tier 1 ratio is 13.1%, up from 12.8% in September 2016.

The Chairman made reference to the "Change the Bank" programme which BOV is currently undertaking.  He explained that this is a three-year programme that will strengthen the Group's fundamentals, and ensure a robust business model that will ensure the feasibility and profitability of BOV into the 2020s and beyond.   "Its ultimate objective is the sustainability and stability of the Group in the long term.  The programme will be implemented in a challenging financial and regulatory environment, marked by increasingly onerous prudential requirements and spiralling compliance costs.  The Group understands that it must continue to meet shareholders' legitimate expectations of a fair return on their investment.  It is therefore critical for BOV to not simply de-risk its business model, but to make up for income lost through de-risking by exploring and securing new and diversified sources of revenue," stated Mr Scerri.

The Chairman also referred to the upcoming share issue programme which BOV will commence later this year.  Mr Scerri explained that the Group is today adequately capitalised, and is able to distribute dividends to its shareholders.  He commented that "up to today, BOV has relied exclusively on the plough back of profits to increase its capital.  In view, however, of increasingly onerous supervisory capital requirements, as well as of the planned significant investment in the core IT system, the Group is anticipating a situation when the retention of profit will not suffice. The Bank is therefore planning to strengthen its capital by issuing €150 million in new share capital over an approximate one year period."

The Chairman ended by affirming that the Group looks forward to a successful equity issue, which will maintain its market leadership in a growth scenario.  "The Board of Directors and the Management Board commit themselves to sustaining profitability while protecting asset quality within the parameters of the Board's risk appetite, so that shareholders can continue to enjoy a fair return on equity and a satisfactory level of dividends over the coming years."