Bank of Valletta plc - Interim Results
On 25 April, Bank of Valletta plc published its interim results covering the six months ended 31 March 2014.
Performance Overview
During the period under review the BOV Group reported a 22.7% drop in net profit to €34.4 million. The decline in profitability is partly attributable to the 5% decline in core profits which were impacted by continued downward pressure on interest margins given the prevailing low interest rate scenario as well as a 4% increase in operating expenses to €46.5 million largely reflecting the higher incidence of regulatory costs. The 7% increase in net commission and trading income to €35.4 million and the 16.8% decline in loan impairments to €9.9 million were insufficient to offset this decline.
The financial performance of BOV was also adversely impacted by a lower incidence of fair value movements. During the first half of the year, the Group registered positive FV movements of €4.7 million compared to €13.2 million in the previous comparable period. The movements in financial markets also led to a 37% reduction in the share of profits from BOV’s interest in its insurance associates (namely MSV Life plc and Middlesea Insurance plc) to €5.4 million.
The statement of financial position shows a 7.2% increase in deposits (equivalent to €362 million) to a record €6.58 billion whilst loans to customers only increased by 0.5% (equivalent to €17.5 million) to €3.69 million. As a result, the advances to deposit ratio dropped to 58.7% – the lowest in the last ten years. Shareholders’ funds reached €0.59 billion which translates into a net asset value per share of €1.774. The interim report also notes that the BOV Group remains well capitalised with a Tier 1 ratio of 11.3% and a Capital adequacy ratio of 15.7%.
Dividend
In line with the decline in profits, the Directors recommended an interim gross dividend of €0.0425 (2012: €0.0545) per share to all shareholders as at the close of trading on 5 May. The €3.058 million provision (representing 40% of the reserve to be built during the initial three year period) in relation to the new requirements of Banking Rule 09 was accounted for through excess non-distributable reserves.
Outlook
Looking ahead, the Board noted that it intends to continue to safeguard the quality and quantity of the Bank’s capital and liquidity resources, through a responsible dividend policy, prudent lending and investment practices within its cautious risk appetite framework.