Bank of Valletta plc - Quarterly Update

On 31 October 2024, Bank of Valletta plc issued a Quarterly Financial Update providing information about its performance during the nine-month period ended 30 September 2024 when compared to the same period in 2023.

Net interest income surged by 14.5% to €290.5 million (3Q 2023: €253.8 million) through the continued growth in gross interest income (+14% to €329.5 million) primarily driven by an increase in the investment portfolio. In fact, interest income from financial investments almost doubled to €92 million from €48.9 million during the same period last year. Meanwhile, interest expenses (mostly attributable to BOV’s 10% Callable Senior Non-Preferred Notes) increased by 10% to €38.9 million

Meanwhile, net fees and commission income moved 5.4% higher to €56.6 million (3Q2023: €53.7 million). In this respect, BOV highlighted an improvement in card and investment fee income. BOV also registered gains of around €11.8 million from trading income, which is higher than the gains of €7.3 million recognised in the same period last year.

Meanwhile, BOV’s financial performance was boosted by a €9.5 million release of Expected Credit Losses (ECL) (3Q 2023: net charge of €13.1 million) which was influenced mainly by asset grading quality improvements as well as strengthened collateral positions. The Directors highlighted that the coverage ratio for credit impaired assets increased to 44.9% compared to 43.9% as at 31 December 2023 and that the non-performing loan ratio decreased to 2.8% from 3.1% at the end of last year.

Net operating income amounted to €368.8 million, which is 21.8% higher than the comparable figure of €315.9 million recorded in the first nine-months of 2023.

On the expenditure side, operating costs rose by 3.8% to €151.3 million on the back of further investments in human resources, digitisation and regulatory compliance. The Cost-to-Income ratio at the end of September improved to 42.1% compared to  46.1% achieved in the same period in 2023.

Meanwhile, BOV also recognised net profits of €6.25 million from its share of results of associates, compared to the figure of €6.38 million for the first nine months of 2023.

Overall, BOV recorded a pre-tax profit of €223.7 million which is 36.9% higher than the €163.4 million generated in the same period last year. After accounting for a tax charge of €76.4 million, BOV’s net profit for the first nine months of 2024 amounted to €147.3 million, which translates into an annualised return on average equity of 14.2%.

The Statement of Financial Position as at 30 September 2024, when compared to 31 December 2023, shows that total assets remained relatively unchanged at €14.5 billion, principally composed of customer loans of €6.69 billion (+€0.57 billion), treasury investments of €5.90 billion (+€0.54 billion), and cash balances of €1.26 billion (-€1.10 billion).

Meanwhile, total liabilities decreased by 0.9% (or €-0.13 billion) to €13.1 billion particularly as the reduction (-€0.28 billion) in amounts owed to banks outweighed the increase (+€0.12 billion) in customer deposits. As a result, the loan-to-deposit ratio increased to 54.5% from 50.3% as at the end of 2023. Total equity grew by 9.3% (or +€0.11 billion) to €1.39 billion resulting in a net asset value per share of €2.373 (31 December 2023: €2.171).

BOV explained that the Group’s capital ratios remained strong and above regulatory requirements, with a CET 1 ratio as at September 2024 of 22.5% (December 2023: 22.7%) and a total capital ratio of 25.6% (December 2023: 25.9%). The 2024 capital ratios are exclusive of the profits for the third quarter.

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 provide more modern, fast and secure banking services. Furthermore, the Bank launched an automated application for the BOV SME Invest Package and is refurbishing the Bank’s Business centres for its commercial clients. At the personal customer levels, work is also progressing on the simplification of customer onboarding as well as the automation of deceased customer administrative requirements. Moreover, Bank of Valletta is dedicating efforts to enhance its competencies in customer service excellence, leadership development, digital upskilling, innovation, as well as those in the ESG space. Digitalisation continues to be high on the Bank’s agenda, as aims to continue to move towards Cloud enabled platforms and improved data management capabilities.

BOV also made reference to the independent study it commissioned with respect to measures intended to optimise shareholder value. The bank noted that it will deliberate on the outcome of this study by the end of the year.