Bank of Valletta plc - Interim Directors’ Statement

Monday, January 30th, 2012

On 27 January, Bank of Valletta Malta plc issued Interim Statement updating the market on its performance for the first quarter of their 2011/12 financial year. BOV reported that demand for new loans (both in the personal and corporate sectors) have remained subdued due to the current economic uncertainties while it experienced further growth in customer deposits, predominantly from the corporate sector. BOV explained that there was no growth in personal deposits mainly due to the substantial issuance of government paper in November 2011.

BOV stated that during the period between 1 October 2011 and 31 December 2011, net interest income was satisfactory but commission and trading income was subdued. The uncertain market conditions that prevailed in the latter part of 2011 resulted in a lower demand for investment-related services. The Bank further reported that operating expenses were in line with expectations. BOV noted that the impairment charge for the quarter continued to reflect the difficult environment experienced by certain sectors of the economy. Moreover, the challenging eurozone sovereign debt crisis in particular related to the lack of a clear resolution to the restructuring of the Greek debt resulted in some unrealized fair value mark downs on the Bank’s investment portfolio. BOV indicated that the net profit for the quarter was is in line with that generated during the first quarter of the previous year.

Looking ahead, the Bank stated that (i) considering a mild recession that will affect the eurozone during 2012,  (ii) the likelihood that there will be the need for bank recapitalization measures across Europe and (iii) further austerity measures in some eurozone countries, the prospects for growth during 2012 remain slim. BOV further stated that a solution to the eurozone debt crisis is urgently needed as the current fear of contagion will cause spreads across the bond markets to remain elevated thus negatively impacting capital values on their investment portfolio. BOV concluded by stating that it will continue to support the Maltese economy in a responsible manner whilst at the same time maintain prudent funding, asset quality, liquidity and capital adequacy policies.

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