Bank of Valletta plc - 2006 Full-Year Results

Following a Board of Directors’ meeting held on 27 October, Bank of Valletta plc published their financial results for the year ended 30 September 2006. The Directors proposed a final gross dividend of 11c per share (7c15 net) to all shareholders as at close of trading next Friday 3 November. This represents a 47% rise on last year’s dividend payment.

During the twelve months ended 30 September 2006, net interest income generated by the BOV Group increased by 10.2% to Lm49.1 million resulting in a net interest margin of 49.1%. Meanwhile, non-interest income dropped by 5% to Lm20.9 million. Whilst net fee and commission income grew by 17.5% to Lm13.3 million, the trading and other income figure of Lm7.5 million represents a 25% drop from last year. The Directors are attributing this lower figure to adverse movements in bond prices arising from increases in interest rates. However, earnings from foreign exchange activities remained stable despite intense competitive pressures. In respect of the rise in fee and commission income, the Bank reported increased activity from fund management, advances, life assurance and stockbroking. Meanwhile, expenses were contained with only a marginal 1.3% rise to Lm31 million. This resulted in a further improvement in the cost to income ratio to 42% (2005: 44.5%). The Directors explained that the increases in employees’ remuneration and performance-related bonuses were offset by lower retirement costs. Meanwhile, the Bank increased its charge for depreciation following the opening of the new BOV Centre.

Net impairment allowances amounted to Lm4.6 million, down from Lm11.7 million the previous year. This reflects the strengthening of the debt collection function and an improvement in the credit quality of the loan book with non-performing loans as a percentage of net loans decreasing to 7.6% (2005: 10%).

Share of profits from associates and jointly-controlled companies involved in insurance activities, namely Middlesea Insurance plc and Middlesea Valletta Life Assurance Co. Ltd., surged by 65.2% to Lm4.1 million.

This helped the BOV Group register a pre-tax profit of Lm38.4 million, 44.3% higher than in 2005. After accounting for taxation and minority interests, the profit attributable to shareholders amounted to Lm25.8 million resulting in earnings per share of 23c3 (2005: 16c1 adjusted for the bonus share issue in January 2006).

The Board of Directors recommended a final gross dividend of 11c per share for approval by shareholders at the next Annual General Meeting on 20 December 2006. Following the interim dividend of 5c5 per share paid in May 2006, the total dividends in respect of the 2006 financial year amount to 16c5 per share, 47% above the dividend payment in the comparative period. The dividend cover of 2.2 times represents a payout ratio of 46%.

All shareholders on the company’s register as at close of trading next Friday 3 November will be entitled to attend the AGM and receive this final dividend, which is expected be paid on 21 December 2006. The shares begin trading ex-div as from Monday 6 November 2006.

The balance sheet as at 30 September 2006 shows Group total assets of Lm2.3 billion, 10% higher than the total assets at the end of September 2005. Net advances to customers surged by Lm149.5 million (18%) to Lm987 million with customer deposits increasing by Lm164.7 million (10.9%) this year to Lm1.7 billion. The advances to deposits ratio edged up to 0.59 times (59%). Shareholders funds during the year rose by 8.3% to Lm158.5 million resulting in a net asset value per share of Lm1.43. The Group’s return on equity increased to 16.9% (2005: 12.8%) with return on assets also rising to 1.7% (2005: 1.3%).