On 26 July, Bank of Valletta plc published its Interim Statement describing the Group’s performance from the start of the 3rd quarter of their financial year on 1 April 2011. Between April and June 2011, the Bank continued to experience a slowdown in demand for credit both in the personal and corporate sectors. On the other hand, customer deposits continued to grow satisfactorily. BOV reported that net interest income is ahead of the previous year’s level while commission and trading income has been adversely affected by the on-going situation in Libya and the uncertainty in financial markets which resulted in a muted demand for investment products.
The prevailing European sovereign debt crisis caused further turbulence across financial markets resulting in the widening of spreads. In turn, BOV incurred further ‘unrealised fair value mark downs’ during the quarter. Moreover, the impairment charge on the Bank’s loan book continues to reflect the difficult environment that has been experienced by certain sectors of the economy.
Overall, the cumulative operating profits for the nine months ended 30 June 2011 are reportedly slightly behind those for the equivalent period in the previous financial year. However, this exclude the one-off charge of €14.5 million (before third party recoveries) in respect of the buy-back offer relating to the La Valette Multi-Manager Property Fund.
Looking ahead, the Directors of BOV explained that the on-going Libya crisis and the eurozone’s sovereign debt crisis will continue to impact investor and consumer confidence coupled with sluggish economic growth at best. The Directors also explained that although the recent accord reached by European leaders on a second bailout for Greece may somewhat improve sentiment, it remains to be seen whether this agreement will provide a lasting solution to Europe’s sovereign debt crisis. If not, further volatility will cause bond spreads to remain elevated or even widen further resulting in additional fair value markdowns.
In conclusion, the Directors noted that BOV has deliberately maintained prudent funding, asset quality, liquidity and capital adequacy policies as confirmed by the recently published stress test results carried out by the European Banking Authority in collaboration with the European Central Bank.