Bank of Valletta plc - Interim Directors’ Statement

On 5 May 2022, Bank of Valletta plc issued an Interim Directors’ Statement providing information about its performance in Q1 2022 when compared to the same period in 2021. In this respect, BOV explained that revenues increased by 5% reflecting increased lending activity (particularly in the home loan segment) as well as growth in the payments and cards businesses.

On the expenditure side, total operating costs increased by 3% mainly due to higher employee compensation costs driven by an increase in headcount, as well as higher contribution towards the Deposit Guarantee Scheme reflecting the higher level of customer deposits. Moreover, the share of results from the Bank’s insurance associates decreased materially when compared to the same period in 2021 largely driven by a more cautious perspective impacting the outcome of actuarial models.

Meanwhile, BOV’s financial performance was boosted by a net release in Expected Credit Losses (“ECLs”) of €7 million reflecting a more favourable economic backdrop as well as better collateralised positions. In this respect, BOV added that it continues to maintain a prudent approach and cautious outlook and that the reversal in ECLs in Q1 2022 may not necessarily represent the dynamics for the remaining of the year. In fact, the Bank recorded a charge of €4.8 million in Q1 2022 with respect to long outstanding non-performing loans.

Overall, BOV recorded a profit before tax of €22 million compared to €9.3 million in the first three months of 2021. In terms of financial position, customer loans grew by 2% to €5.2 billion whilst customer deposits increased by 1% to €12.3 billion. As a result, the loan-to-deposit ratio improved to 42.3% compared to 41.9% as at the end of 2021 and 42.2% as at 31 March 2021. BOV also noted that during Q2 2022, it intends to continue strengthening its Minimum Requirement for Own Funds and Eligible Liabilities (“MREL”) position in line with ongoing regulatory requirements. The planned issuance of a senior preferred bond on the international market will be specifically undertaken to meet the Bank’s MREL target for the foreseeable future.


In its statement, BOV explained that the improvement in financial performance in Q1 2022 reflects the ongoing but as yet incomplete recovery from the pandemic, further underpinned by encouraging economic activity. Notwithstanding, the Bank anticipates evolving risks emanating from geo-political instability which may potentially impact its business and the local economy.

For the future, BOV will continue investing in its transformation with a view of improving its processes, risk governance and control functions, as well as the experience provided to customers. The ongoing digitalisation strategy is evolving by leveraging new technologies and adopting leaner processes that deliver additional efficiencies, simplification, accuracy, and customer centricity. Furthermore, BOV will continue to modernise its retail network and strengthen internal controls in line with regulatory requirements.

On the current conflict in Ukraine, BOV explained that it is constantly monitoring developments for any potential impact to the Bank’s position and asset quality. Within its loan book, BOV is not significantly exposed to Russia or Russian nationals. Additionally, exposures stemming from Ukraine and its bordering countries are also low and insignificant when compared to the total lending portfolio. Furthermore, the Bank is reviewing closely the possible economic and business effects as both Russia and Ukraine are major exporters of key global inputs in areas such as energy, metals, and crops. Malta’s direct trade links with both countries are small and concentrated in specific products. However, the indirect effects, stemming from the price dynamics of products traded in international markets as well Malta’s other trading partners’ economic dependence on Russia and Ukraine, make this adverse supply shock of direct relevance to businesses and households in Malta. Consequentially, BOV carried out an impact assessment to gauge the indirect impact of the Russian-Ukraine conflict on those sectors that may be impacted due to supply bottlenecks for a number of resources or materials. The Bank simulated three different severity scenarios and is satisfied that even in the most stressful of these scenarios BOV would be able to absorb the adverse impact. Nonetheless, the situation will continue to be monitored given the possibility that the fluid situation could potentially deteriorate.