Bank of Valletta plc - Interim Directors’ Statement

On 2 November 2021, Bank of Valletta plc issued an Interim Directors’ Statement explaining that in Q3 2021, it posted a pre-tax profit of €20.6 million. As a result, profits before tax for the nine-month period up to September 2021 amounted to €46.5 million compared to €40.6 million in the same period in 2020.

BOV noted that the improved profitability over 2020 reflects the gradual recovery from the COVID-19 pandemic. Revenues up to September 2021 amounted to €172.1 million (+4% over the comparable period in 2020), mostly due to improved volumes in the retail sector particularly in home lending, cards, and payments. On the other hand, operating costs increased by just 1% as the Bank continued to invest in the ‘BOV 2023 Strategy’, the benefits of which will be reaped in future years. BOV’s financial performance was also boosted by the contribution from its insurance associates which was significantly higher than the same period in 2020 largely driven by the increase in the market value of investments as well as higher written premia.

In terms of credit quality, BOV booked a net impairment reversal of €3 million in Q3 2021 as the charges taken on in relation to long outstanding non-performing loans (“NPL”) were offset by recoveries. In this respect, the Bank explained that as it retains a cautious outlook for the remainder of the year, it will continue to actively assess its expected credit losses as economic prospects evolve. The NPL ratio stood at 4.3% as at the end of September 2021 compared to 4.7% as at end 2020.

Net loans and advances to customers increased by 5% during the first nine months of 2021, mostly due to the strong growth in home loans as well as the increase in demand for business loans. On the other hand, customer deposits increased at a slower pace, by 4%, mostly due to the increase in shorter term deposits.

In conclusion, BOV explained that it remains vigilant in monitoring risks stemming from the long-term economic impact of COVID-19, and other emerging risks in the global economic scenario. The Bank is furthermore reviewing potential risks arising from the placement of Malta in the FATF grey-list. In this respect, BOV is sustaining and reinforcing its efforts on a number of complex and wide-ranging projects to meet regulatory expectations in a period of continued rapid de-risking and investment in compliance activities at the level of the jurisdiction.

Similarly, BOV will continue to maintain its vigilance and engagement with respect to risks emanating from long-dated litigation events – namely the Deiulemar case. Moreover, the Bank is increasing the focus on its ‘ESG’ (Environmental, Social and Governance) agenda in line with evolving regulatory requirements.

Strategy BOV 2023 Update

Meanwhile, BOV also provided an update on the implementation of its ‘BOV 2023 Strategic Transformation’ programme. Key milestones achieved so far include organisational changes and improved customer focus underpinned by extensive training provided to front-office staff, the implementation of streamlined systems in credit management, wealth management as well as on-boarding processes.

The Bank noted the significant reductions in over-the-counter transactions with a sustained customer migration to the use of self-service machines and electronic payments. These changes will enable BOV to be more effective in meeting customer’s banking needs.

As the Bank maintains a wide network of community-based branches, it has also launched a new retail concept which is set to deliver profound improvements in the way customers are served through notable reduction in back-office paperwork and better, more effective but simplified processes. This initiative will also complement the implementation of a number of digitisation projects that BOV has already initiated as the Bank continues with its strong drive in investing in systems, people, and controls.