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Continued growth in Core Banking Business
03 Nov 2022

FINANCIAL RESULTS FOR JANUARY TO SEPTEMBER 2022 ANNOUNCED

Bank of Valletta Group today announced the financial results for January to September 2022, reporting a loss before tax for the year to date amounting to €55.7 million. Excluding the effect of the settlement of the Deiulemar claim in May this year, the nine-month profit amounted to €47.8 million, up by 3% compared to the same period last year.

The Bank reported continued growth in its core banking activities, with its main income lines showing improved commercial performance. Revenue for the first nine months of 2022 stood at €202.3m. This constituted an improvement of 16.8%, reflecting the increase in Eurozone interest rates coupled with a rise in volumes in the retail sector, particularly in home financing, cards, and payments.

Operating costs rose at a slower rate, by 6.7%, compared to the same period in 2021. This increase was in good part due to human capital requirements in specialised areas, growth in average salaries, and the Group’s contribution to the Depositor Compensation Scheme. The need for a non-recurring external specialist support relating to Environmental, Social and Governance (ESG) also contributed to the growth in costs. A net impairment charge of €10.1 million as at the end of the third quarter of 2022 was taken on account of evolving risks emanating from geo-political instability factoring in higher inflation and lower GDP growth based on published Central Bank of Malta forecasts. The Bank continues to actively assess its expected credit losses as economic circumstances evolve.

BOV’s share of results from insurance associates declined significantly compared to the same period in 2021, largely driven by the volatility of global financial markets.

In order to meet regulatory requirements pertaining to MREL, the Bank has obtained approval from the Central Bank of Ireland for a base prospectus towards the establishment of a Euro Medium Note Programme of a maximum amount of €500 million. The notes will be offered in the international debt capital markets through the intermediation of Credit Suisse (Europe) S.A. and UBS Europe SE, acting as joint arrangers and dealers. This issue will also allow the Bank to increase its lending book and expand investment horizons of its treasury operations.

“BOV continues to progress at a steady pace” - Dr Gordon Cordina, BOV Chairman

On announcing the results, BOV Chairman Dr Gordon Cordina stated that these results continue to show the Bank’s progress, with increased revenue a testament to the effort being made to continue steering the Group along the right path. These results once again indicate that the Bank’s performance remains strong across its core activities.

Dr Cordina reflected on local economic developments stating that, “In recent quarters, the Maltese economy regained a positive economic momentum, characterised by strong real GDP growth, which brought the unemployment rate to historically low levels. The recovery in tourism, which was the most impacted sector during the COVID-19 pandemic, is also proceeding well this year. However, another major global economic shock, a surge in inflation, has occurred. This shock hit the country in recent months, but its impact has been partially cushioned through the government’s decision to keep utility and fuel prices stable, despite the strong increases in foreign energy prices caused by the war in Ukraine. The government has committed further funds to continue shouldering the cost of energy to support households and businesses in Malta. This is a temporary solution and from a risk management perspective it would be prudent to anticipate the eventuality that the recent increases in international energy prices may persist in the long term”.

Dr Cordina also commented on another significant development, the decision by the European Central Bank (ECB) to start increasing interest rates. “This has benefited the Bank as it is no longer paying negative interest when depositing its surplus liquidity. The Group will continue to monitor the situation, as well as the actions of the other major banks in Malta, with the aim of striking the right balance among its stakeholders when setting its interest rate structure. The strong liquidity situation will help to ensure that any future changes would be well-managed and gradual”.

“Encouraging commercial performance” – Kenneth Farrugia, BOV CEO

Kenneth Farrugia was recently appointed as the Bank’s Chief Executive Officer and Executive Director, following receipt of regulatory approval. During his first intervention at the announcement of the Group results as CEO, he commented on the Bank’s continued growth in its core banking activities. “Despite the negative impact of the Deiulemar settlement, the core business remains very robust as evidenced by the sustained growth in revenues comprising of both interest and noninterest income. The Bank’s credit financing business has increased by 5.8% over the period, driven by growth in both business and consumer finance areas. Moreover, we have registered an increase of 4% in Deposits, predominantly driven by growth in current and savings accounts, when compared with December 2021. The Bank will intensify its focus on reducing its operational costs through various initiatives that the Bank will be taking going forward. These results augur well for the path towards a brighter future for the Bank.” 

Speaking about the Bank’s strategy, Mr Farrugia commented on the Bank’s transformation program that is key in sustaining and improving the results achieved so far. “Our transformation program is centered around 4 key quadrants which revolve around improving our customer service experience adding value to our customers in the process, reengineering our processes and procedures to achieve a lean and digital operational service model, strengthening our risk management function and controls, and equally important, develop our human capital to meet the exigencies of our business and our customers. The initiatives in each quadrant, will be supported by strategic Digital and Data transversal initiatives, within an overarching ESG consideration to ensure longer term sustainability of our business”.

Mr Farrugia went on to say that during the quarter under review, we have launched several reengineering and automation initiatives such as the introduction of the first unattended Robotic Process Automation to improve internal efficiency and open-source search screening for customers, as well as the introduction of a digital workflow to optimise customer call-back requests. Moreover, the Bank has also launched an online solution for home financing solutions which is a first in Malta. Through this innovative digital channel, our customers can seek an estimate of the financing they can apply for from the Bank and also process a home financing application completely in a digital manner from the comfort of their home”.

Embedding ESG Principles

In their concluding remarks, both Dr Cordina and Mr Farrugia commented on the importance of ESG for Bank of Valletta. During 2022, Climate and Environmental (C&E) risks received greater focus, given they constitute a significant source of risk to the Bank’s balance sheet and also due to the potential impact this risk could impose on the Maltese economy. The Bank continued its environmental risk monitoring and commissioned an energy audit and carbon footprint assessment. Furthermore, the Bank joined the Malta ESG Alliance, a platform earmarked to encourage companies to motivate other businesses and supply chains to push for de-carbonisation and reaching their ESG goals. BOV’s approach to ESG sustainability is currently reflected in its recently approved strategy, which embeds the Bank’s position and sets a blueprint for 2022-2024.

Dr Cordina and Mr Farrugia thanked shareholders for their continued support, as well as the Executive Team and the Bank’s staff for their valuable work, concluding by expressing their gratitude for the outgoing CEO Rick Hunkin’s service over the past three years, especially for the governance and transformation improvements achieved in extraordinarily difficult circumstances, and wishing him every success in his future endeavours.

 

 

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).