Bank of Valletta plc - Interim Directors’ Statement

On 28 October 2019, Bank of Valletta plc issued its Interim Directors’ Statement providing indications on its financial performance during Q3 2019. In this respect, BOV noted that its performance was broadly in line with expectations. On the positive side, net interest income was marginally higher when compared to the corresponding period last year. Nonetheless, the positive impact from volume growth in the loan book and the continuing preference of the bank’s customers for very low yielding deposit products was offset by lower returns on treasury investments and high liquidity levels. Moreover, commission and trading income also registered a slight improvement as the bank’s efforts at seeking alternative revenue sources to mitigate the impact of the de-risking initiatives and competitive pressures are yielding positive results. On the other hand, BOV’s performance reflects the higher costs attributed to the transformation programme which is aimed at lowering the bank’s risk profile and ensure long-term sustainability. Furthermore, the bank also recorded lower reversals of loan impairment provisions.

Total assets as at the end of September 2019 were marginally higher when compared to 30 June 2019 as demand for credit, both retail and business, remained satisfactory. On the liabilities side, deposits from international corporate clients dropped as the bank progressed with its de-risking initiatives, whilst deposits from retail and corporate local customers grew. Nonetheless, the advances-to-deposits ratio of 44.6% remained in line with the June 2019 level. BOV also noted that its capital ratios continued to register improvement while it bank continued with its capital optimisation plan and, as outlined in the publication of the FY2018 results, BOV is actively seeking to raise additional Tier 1 Capital by the end of this year which will further strengthen the bank’s regulatory capital.

Further to the press release issued in June 2019 announcing ING’s decision to terminate its relationship with BOV, the bank noted that its efforts to find alternative USD clearing arrangements have progressed. In this respect, a number of options were evaluated and the work required to establish new alternative correspondent banking arrangements is progressing well. The bank also added that it will become a direct SEPA participant on 19 November 2019.

The appointment of BOV’s new CEO is subject to regulatory approval. Meanwhile, the bank continued on the journey outlined in its ‘2020+ Vision’ by intensifying the procedures required for the replacement of the Core Banking IT system. The business restructuring programme has also been incorporated in the wider reach of the transformation programme. This programme, for which the bank has engaged the assistance of two global consultancy firms, covers a number of specific streams, mostly relating to governance and risk management and is primarily aimed towards the strengthening of the bank’s regulatory capital position, lower the risk profile while ensuring long term viability in line with the Group’s primary strategic priority.