On 30 July 2010 Bank of Valletta plc issued its interim Directors’ Statement explaining that during the third quarter of the Bank’s financial year (April – July 2010), the retail and corporate businesses of the Bank continued to perform well. BOV confirmed that net interest margin improved further whilst the contribution to profits from commission and trading activities remained strong and ahead of expectations.
The BOV Group also assured investors that operating expenses remained on track whilst overall credit quality remained satisfactory. However, while the first half of the Bank’s financial year to 31 March 2010 saw an improvement in the international markets, the third quarter saw a reversal of sentiment and a return to risk aversion due to heightened concerns relating to the debt burden of certain Eurozone countries. This return to risk aversion has caused a widening of spreads in parts of the credit markets which has in turn resulted in the reversal of the modest fair value gains reported at the half-year period. BOV explained that as at the end of the third quarter, the cumulative fair value movements for the year to date are showing a modest negative position – much of which related to Interest Rate Swaps which is expected to eventually be reversed. Meanwhile, a small gain has been recorded during Q3 on the Bank’s Available for Sale portfolio.
The BOV Group stated that the results for the full-year ending 30 September 2010 will be influenced by the behavior of the credit markets in the last quarter. The Group is expecting that profits from the core retail and corporate operations will be satisfactory and ahead of those achieved in full-year 2009. At the same time, BOV has continued to manage its balance sheet in a prudent manner, maintaining strong liquidity and capital ratios. In fact, the results of the recent stress tests carried out by the European Central Bank were very satisfactory confirming that BOV’s capital ratios are comfortably in excess of the required levels.