On 28 July 2022, Bank of Valletta plc published its interim financial statements covering the six-month period ended 30 June 2022.
Net interest income surged by 18.9% to €87.2 million reflecting consistent growth in lending activity (particularly home loans), the positive impact a one-off alignment of effective interest rates for stepped-up type loans, as well as the 11.2% decline in interest expense despite the continued rise in customer deposits.
BOV also recorded strong growth in non-interest income to €44.1 million (H1 2021: €40.4 million), mostly driven by the increases in net fee and commission income (+8.6% to €37.2 million) and trading income (+15.4% to €6.88 million).
On the expenditure side, operating expenses excluding the costs associated with strategic investments increased by 7.6% to €87.7 million (H1 2021: €81.5 million) reflecting investments in HR, technology, operations/processes, ESG, as well as higher contribution to the Deposit Compensation Scheme. On the other hand, BOV incurred lower costs related to strategic investments reflecting the progress the Bank registered in key areas of risk and compliance.
Meanwhile, the Bank’s financial performance was dented by a net impairment charge of €8.97 million (H1 2021: net impairment reversal of €3 million), driven by the prevailing economic uncertainties and high inflation. Moreover, BOV recorded a loss of €3.71 million (H1 2021: positive contribution of €7.63 million) from its share of results of equity-accounted investees, as well as a €102.7 million net litigation settlement charge related to the Deiulemar case.
After accounting for a tax credit of €25.5 million, BOV reported a net loss of €51.1 million compared to the net profit of €19.4 million recorded in the first half of 2021. Excluding the impact of the net litigation settlement charge, the Bank’s profit before tax stood at €26.1 million compared to €25.9 million in H1 2021.
The Statement of Financial Position as at 30 June 2022 shows that total assets increased by just 0.2% to €14.4 billion when compared to the position as at the end of 2021. The growth in customer loans (+€218.1 million) and investments (+€50.4 million) was mostly offset by the lower level of liquid assets (-€249.8 million). Similarly, total liabilities increased by 0.7% to €13.3 billion mostly driven by the increase in customer deposits to €12.4 billion (+€187.8 million). However, the loan-to-deposit ratio improved to 43% compared to 41.9% as at the end of 2021. Overall, the Bank’s equity base contracted to €1.07 billion which, in turn, translates into a net asset value of €1.834 per share. BOV also noted that although the CET 1 and Total Capital ratios eased to 20.3% (31 December 2021: 21.9%) and 24.1% (31 December 2021: 25.5%) respectively, these remained strong. Moreover, the planned issuance of a senior preferred bond in the international market will be specifically undertaken to meet the Bank’s MREL regulatory targets.
The Board of Directors of BOV resolved not to declare an interim dividend in view of the net loss reported in H1 2022 as well as the need to remain aligned with regulatory expectations.
Strategy 2023 Update
In H1 2022, BOV continued to focus on the investments required to finalise regulatory and mandatory projects. As many costs in these areas were front loaded, the Bank can now put even more emphasis on its strategic ambitions of digitalisation and simplification going forward with a view of creating operational efficiencies and deliver a more customer-centric service including a revamped branch network.
In conclusion, the Bank noted that post the settlement of the Deiulemar litigation, it is now in a position to use its capital more efficiently to invest in and grow its business and pay a sustainable dividend in the future.