Bank of Valletta plc - Interim Directors’ Statement

Friday, February 6th, 2015

On 6 February, Bank of Valletta plc issued its Interim Directors’ Statement updating the market on its performance since the start of its current financial year on 1 October 2014.

The Directors noted that the financial performance of the BOV Group during the period under review is in line with expectations. The Bank stated that it continued to experience weak demand for business lending which was mitigated by the increasing request for home loans. Meanwhile, customer deposits continued to grow despite the lower rates, resulting in higher levels of liquidity. Part of these incoming funds were invested in short dated, low yielding instruments and this served to keep negative returns on overnight deposits to a minimum. Concurrently, commissions earned on the sale of financial products continued to grow at a satisfactory rate across all key business lines.

On the expenditure side, BOV registered an increase in costs during the period under review primarily due to the higher regulatory costs applicable under the Deposit Compensation Scheme (DCS) arising both from changes in the level of contribution required as well as the higher volume of deposits. The cautious view towards provisioning, particularly the prudent valuation of collateral held, was retained during the period under review. Price changes on the Bank’s investment portfolio also remained moderately positive during the period.

The announcement also noted that on 4 November 2014, Bank of Valletta came under the direct supervision of the European Central Bank in terms of the Single Supervisory Mechanism (SSM). This mechanism, operating through the Joint Supervisory Team, is expected to be challenging with stringent supervision and increased reporting requirements. In this respect, the Directors revealed that work has started on a number of improvements relating to issues highlighted during the Asset Quality Review and the Stress Tests performed during the last financial year.

In conclusion, the Directors noted that during the period under review the Bank undertook a restructuring of its senior management organizational structure. The revised organisation aims to ensure a more focused corporate governance structure as well as efficiency in dealing with the major challenges that the Bank faces in the coming decade.

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