On 27 October 2017, Bank of Valletta plc published its preliminary financial results for the twelve-month period ended 30 September 2017.
During the period under review, BOV registered a 1.3% drop in net interest income to €146.9 million as the 2.7% decline in gross interest income outweighed the 5.9% contraction in interest expense. The Bank explained that its interest margins continued to remain under pressure reflecting the very low interest rate scenario as significant surplus funds are channelled into short-term and low-to-negative yielding instruments.
The Bank also reported a drop in non-interest income as it contracted by 6.7% to €94.9 million from the adjusted figure of €101.8 million generated during FY2015/16 (i.e. excluding the one-time gain of €27.5 million arising from the sale of shares held in Visa Europe). In this respect, BOV noted that the growth registered in net fee and commission income (+4.2% to €68.9 million) and foreign exchange activities (+2% to €20.7 million) were offset by the unfavourable fair value movements and lower net gains made on investment securities. Indeed, BOV suffered a negative fair value movement of €3.39 million during the twelve-month period ended 30 September 2017 against a positive fair value movement of €4.43 million posted in FY2015/16. In addition, the BOV Group generated €6.95 million in realised gains on investment securities and hedging instruments which is however 23.2% lower than the €9.05 million gains registered in the previous twelve-months.
In aggregate, the total operating income of the BOV Group declined by 3.5% to €241.9 million (adjusted figure for FY2015/16: €250.6 million).
On the expenditure side, total operational costs surged by 6.4% to just under €120 million. In this respect, BOV explained that the largest increases were recorded on regulatory and compliance costs, occupancy costs, process reengineering and IT maintenance. As a result, the cost-to-income ratio improved to 46.8% (adjusted ratio for FY2015/16: 49.7%).
During the twelve-month period under review, BOV booked a reversal of impairment charges of €7.51 million against an impairment allowance of €23.1 million during the period ended 30 September 2016. The reversal of impairment charges arose from the recovery of a number of loans which had been carried as doubtful debts on the Group’s balance sheet for a long number of years. In this respect, BOV explained that it has intensified its focus on remediation and recovery – a strategy that yielded immediate positive results and which will continue to be pursued further in the future.
BOV’s performance was also boosted by the much higher contribution from its associate undertakings (namely MSV Life plc and Mapfre Middlesea plc). In fact, the share of results of equity-accounted investees amounted to €14.5 million against €3.73 million registered during FY2015/16 reflecting strong and sustained demand for both protection and investment products.
Overall, the Group’s pre-tax profits stood at €143.9 million which is 21.6% higher than the adjusted pre-tax profits recorded during the previous twelve-month period. After accounting for a tax charge of €46 million, BOV’s net profit amounted to €97.9 million.
The Statement of Financial Position shows that total assets grew by 8.2% year-on-year to €11.6 billion as loans and advances to banks (comprising very short-term placements that are subject to negative interest rates) increased by 43.6% (or €915.6 million) to €3.01 billion (30 September 2016: €2.1 billion). Total liabilities grew by 8.2% to €10.8 billion on the back of the 9.8% increase (or €897.3 million) in customer deposits to €10.1 billion (30 September 2016: €9.18 billion). Accordingly, total equity increased by 8.2% to €789 million, translating into a net asset value per share of €1.879 (30 September 2016: €1.736).