Bank of Valletta plc - Interim Results
On 27 July 2023, Bank of Valletta plc published its interim financial statements covering the six-month period ended 30 June 2023.
Net interest income surged by 83.3% to €159.9 million from the €87.2 million recorded in the comparable period last year as the higher levels of gross interest income outweighed the increase in interest expenses emanating from the MREL bond issued at the end of 2022. The growth in interest income reflected the higher deposit rates on balances held with the European Central Bank, the continued growth in lending activity as well as a portion of the loan book benefitting from higher variable rates.
Meanwhile, BOV recorded a 3% decline in non-interest income to €42.7 million (H1 2022: €44.1 million), resulting from lower net fee and commission income (-7.4% to €34.5 million). As a result, total operating income amounted to €202.5 million compared to €131.3 million in the same period last year.
On the expenditure side, administrative expenses increased by 5% to €87.0 million (H1 2022: €82.9 million) whilst depreciation charges were 3% higher to €10.1 million.
BOV’s financial performance was dented by a net impairment charge of €4.6 million driven by the prevailing economic uncertainties and high inflation, which however, was lower than the charge of €9 million recorded in the same period last year.
As a result, BOV registered an operating profit of €100.9 million, compared to a loss of €72.9 million in the first six months of 2022, which included the €102.7 million litigation settlement charge in relation to the Deiulemar court case.
Moreover, BOV recorded a gain of €4.27 million from its share of results of associates, compared to a restated figure of €0.86 million in H1 2022.
BOV reported a profit before tax of €105.1 million for the first six months of 2023. After accounting for a tax charge of €36.2 million, BOV’s net profit for the period amounted to €69.0 million compared to the net loss of €46.6 million recorded in the first half of 2022.
The Statement of Financial Position as at 30 June 2023, compared to a restated position as at 31 December 2022 shows that total assets decreased by 1.4% (or €207.7 million) to €14.3 billion. BOV registered growth in customer loans (+€243.4 million) and investments (+€155.6 million) but held lower levels of balances with the Central Bank, treasury bills and cash (-€540.1 million). Total liabilities decreased by 2.1% to €13.1 billion mostly driven by the decrease in customer deposits to €12.2 billion (-€344.8 million). Consequently, the loan-to-deposit ratio improved to 47.6% compared to 44.3% as at the end of 2022. BOV’s equity base expanded by 6.3% (or €70.2 million) to €1.18 billion which translates to a net asset value per share of €2.026. BOV’s CET 1 and Total Capital ratios increased to 23.2% (31 December 2022: 21.8%) and 26.7% (31 December 2022: 25.4%) respectively.
Dividend
In a press release issued after the publication of the financial statements, BOV remarked that: “the Board is now in the process of compiling forward-looking data and analyses in order to consider the payment of a dividend out of the profits realised in the first half of 2023. As explained at the Bank’s latest AGM, dividend decisions at BOV are not based on a simple calculation but need to meet important risk and other regulatory criteria, which focus on the strength and viability of the Bank’s future business. This is essential to safeguard the best interests of our shareholders and wider stakeholders.”
Strategy Update and Outlook
In the first six months of 2023, BOV continued to focus on driving operational efficiency, ensuring regulatory compliance as well as fulfilling ESG moral obligations. Furthermore, the bank worked on improving the digitalisation of its services to provide a more customer-driven service.
In the medium term, BOV is expecting a normalisation of interest rates and is therefore seeking to pursue opportunities to ensure sustainable returns in the medium to long term from its treasury activities and loan portfolio.