Bank of Valletta plc - Interim Directors’ Statement

On 2 November 2023, Bank of Valletta plc issued an Interim Directors’ Statement providing information about its performance during the nine-month period ended 30 September 2023 when compared to the same period in 2022.

Net interest income surged by 85% (or €116.5 million) to €253.8 million as the growth in the lending book and investment portfolio, coupled with the upward repricing of interest rates offset the higher interest expense incurred following the 10% Callable Senior Non-Preferred Notes issued at the end of 2022.

Meanwhile, non-interest income fell by 4.3% to €62.1 million reflecting lower levels of net fee and commission income and net trading income. In this respect, BOV highlighted a slowdown in investment-related commissions.

On the expenditure side, operating costs increased by 4.9% to €145.7 million as the further investments in human resources and digitisation offset the lower levels of regulatory costs and professional fees.

BOV’s financial performance was also impacted by a net impairment charge of €13.1 million compared to a net charge of €10.1 million in the same period last year, principally due to the growth in the loan book and stronger coverage against specific exposures. BOV explained that as at 30 September 2023, the expected credit losses coverage for credit-impaired assets stood at 53.6% (December 2022: 53.8%) while the ratio of non-performing to the total credit portfolio stood at 4.0% (December 2022: 3.5%).

Meanwhile, BOV also recognised net profits of €6.38 million from its share of results of associates, compared to a restated figure of €1.54 million for the first nine months of 2022.

Overall, BOV recorded a pre-tax profit of €163.5 million compared to a pre-tax loss of €48.7 million in the same period last year, which however had included a net litigation charge of €103.5 million related to the settlement of the Deiulemar claim in May 2022. Excluding the impact of the settlement, BOV’s comparable pre-tax profit of last year would amount to €54.8 million.

BOV’s net profit for the first nine months of 2023 amounted to €108.8 million, which translates into an annualised return on average equity of 12.4%.

In terms of financial position, during the first nine months of 2023, total assets eased by 0.8% to €14.4 billion. BOV increased its investments by €590 million to €5.16 billion and loans to customers by €401 million to €5.96 billion but reduced cash and short-term assets by €1.18 billion to €2.21 billion. In terms of liabilities, customer deposits dropped by €508 million to €12.0 billion while amounts owed to banks increased by €222 million to €299 million. As a result, the loan-to-deposit ratio climbed to 49.5% compared to 46.0% as at the end of 2022. Total equity increased by 9.8% (or €109 million) to €1.22 billion, which translates into a net asset value per share of €2.091.

BOV explained that the Group’s capital ratios remained strong and above regulatory requirements, with the CET 1 ratio as at September 2023 of 22.7% (December 2022: 21.8%) and a total capital ratio of 26.1% (December 2022: 25.4%). The 2023 capital ratios are inclusive of the profits for the first nine months of 2023 and proposed net interim dividend of €0.03 per share, payable on Wednesday 6 December to shareholders as at close of trading on Friday 17 November, subject to regulatory approval.

In their commentary, the Directors of BOV noted that during the first nine months of the year, the Maltese economy remained resilient to economic challenges and continues to support BOV’s asset quality. Meanwhile, in terms of strategy, the Bank worked diligently to further enhance banking services, improve customer experiences, increase operational efficiency, and targeted its efforts towards conducting sustainable and diligent banking.