Bank of Valletta plc - Full-Year Results & Dividend Announcement

On 26 October 2007, Bank of Valletta plc published their full-year financial results as at 30 September 2007.

During the financial year under review, the Group’s net interest income rose by 13.2% to Lm55.6 million on the back of strong growth in the Bank’s loan book as well as the favourable rising interest rate environment during the first half of the year. However, total non interest income declined by 17.8% to Lm17.2 million solely as a result of the sharp drop in trading profits due to the impact of the international credit crisis on the Bank’s portfolio.

BOV Chairman Mr Roderick Chalmers however stated that the Group has already begun experiencing a reversal of the write-downs in the value of the portfolio as equilibrium is gradually restored in the international credit markets.
The Group reported an 11% rise in net fee and commission income and strong performances from activities such as bancassurance, trade finance, foreign exchange and stockbroking. Total operating income generated by BOV during the year amounted to Lm72.8 million, a rise of 4%.

The share of profits from associates and jointly-controlled companies involved in insurance activities were also negatively impacted by lower investment returns. The Group’s share of profits from its equity participations in Middlesea Valletta Life Assurance Co. Ltd. and Middlesea Insurance plc of Lm2.5 million represents a drop of 39% from last year’s record level. The Chairman explained that the technical insurance results of both these companies was positive and these strategic investments possess ‘significant upside potential in the medium and long-term’.

Cost management remained effective during the year with non-interest expenses rising by only 2.1% to Lm31.7 million. Mr Chalmers confirmed that the Group’s cost to income ratio of 42.2% places BOV among the most efficient European banks.

For the first time in many years, the Group recognised a net impairment reversal of Lm151,000. This compares favourably with the significant impairment allowances taken in recent years and confirms the improvement in the credit quality of the loan book. In fact, BOV reported that non-performing loans as a percentage of total net loans as at September 2007 amounted to 4.8% from a high of 12% in September 2003. BOV’s pre-tax profit increased by 13.9% during the year to a record Lm43.7 million and after accounting for taxation and minority interests, the profit attributable to shareholders of Lm29.1 million result in earnings per share of 26c3 (2006: 23c3).

During the Board Meeting held on 26 October, the Directors recommended the payment of a final gross dividend of 13.5c per share (22.7% higher than last year’s final dividend) to all shareholders on the register of members as at close of trading on Friday 2 November. This dividend will be put forward for shareholders’ approval during the Annual General Meeting on 19 December. Adding the gross interim dividend of 6c75 per share paid in May, the total gross dividend in respect of the financial year amounts to 20c25 per share, resulting in a dividend payout ratio of 50%. The final dividend is expected to be paid on 20 December.

The Board is also recommending an increase in the nominal and paid up value of the ordinary shares as well as a bonus issue of 1 new share for every 4.92581 shares held. Shareholders as at close of trading on Thursday 10 January 2008 will be entitled to this bonus share issue.

BOV’s balance sheet as at 30 September 2007 shows Group total assets of Lm2.44 billion. Net loans to customers increased by 14% (Lm138.2 million) during the year to Lm1.13 billion with customer deposits rising by 10.4% (Lm173.8 million) to Lm1.85 billion. The advances to deposits ratio rose to 0.61 times with Mr Chalmers claiming that this ratio is still on the low side implying the need to channel more deposits into loans and make the balance sheet work harder. Shareholders’ funds totalled Lm172.2 million as at 30 September 2007 giving a net asset value per share of Lm1.55. The Group’s return on equity (profit after tax divided by average shareholders’ funds) increased to a record 17.6% (2006: 16.9%) with return on assets (profit before tax divided by average assets) of 1.8% (2006: 1.7%).  On a pre-tax basis, the return on equity stood at 26.4%. The BOV Group continues to enjoy a high solvency ratio of 14.1% compared to the minimum regulatory requirement of 8%.

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