Bank of Valletta plc - Interim Directors’ Statement

Thursday, July 31st, 2014

On 31 July, Bank of Valletta plc issued its Interim Directors’ Statement providing an update on its performance since the end of the first half of its 2013/14 financial year on 31 March 2014.

The Bank reported that the period under review was once again characterised by a decline in the interest margin in part due to the prevailing low interest rate scenario as well as the negative overnight deposit rates with the European Central Bank. BOV explained that demand for business credit was weak although this was partly offset by a robust demand for home loans. Meanwhile, customer deposits continued to grow leading to an increase in liquidity. On the other hand, BOV confirmed that it registered an increase in fees and commission income, fair value movements improved moderately while expenses increased, mainly attributable to higher regulatory costs. BOV also noted that its cautious approach towards provisioning continued during the period under review.

The Directors also explained that as from November 2014, BOV will be under the direct supervision of the ECB, as part of the Single Supervisory Mechanism. In preparation for this transition, BOV is currently undergoing an Asset Quality Review  and commenced a stress testing exercise, which aims to evaluate the asset quality, adequacy of the provisioning criteria applied by the bank, as well as the resilience of the bank’s capital buffers under extreme conditions. The results of these exercises are expected to be announced towards the end of October 2014.

Whilst reiterating the commitment to the local economy, the  Directors concluded by stating that the bank looks towards the future with cautious optimism, as the latest EU economic forecast indicated that Malta’s growth outlook is robust, and that expansion is expected in household consumption and large-scale investment projects. BOV will be investing significantly in extending and upgrading its IT infrastructure and continue to operate its prudent business model, with priority given to high capital and liquidity buffers in the interest of national financial stability.

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