In high-interest economy, BOV posts €251.6m pre-tax profit

The Bank of Valletta has posted a pre-tax profit of €251.6 million for 2023, owing in large to high Eurozone interest rates and more favourable yields from Treasury investments.

The end-of-year results for BOV indicate the bank is reaping the benefits of the European Central Bank’s interest rate hikes, with profit before tax up €202 million from the previous year.

When adjusted to exclude the effect of the Deiulemar settlement, the bank’s pre-tax profit is up €100 million above the previous year.

The bank is also issuing a gross dividend amounting to €67.9 million, or €0.1162 per share. This is the highest dividend amount issued by BOV in 10 years.

The bank’s net interest income increased by €150 million year-on-year, mainly derived from increased contribution on overnight cash following increased Eurozone interest rates, and more favourable yields and increased investment on longer-term Treasury investments.

Net fee and commission income remained practically the same for the bank compared to the previous year, registering a marginal increase of €1.4 million.

The bank’s costs increased by €18.3 million during 2023, marking a year-on-year increase of 9.5%. The main driver was staff costs and investments in technology.

Net loans and advances to customers reached €6.3 billion towards the end of the year, an increase of nearly 8.9% compared to December 2022.

Meanwhile, customer deposits stood at €12.1 billion at end of year, which is marginally lower that the amount for the previous year.

Cybercrime, interest rates main challenges for 2024

Speaking at a press conference on Wednesday, BOV chairman Gordon Cordina said the primary emerging risks for the bank in the coming year are cybercrime and the uncertainty over interest rates.

In 2019, BOV suffered a significant cyber attack that saw €13 million transferred out of the bank through false international transactions. But Cordina said that the bank has made significant progress in protecting itself from cybercrime like that suffered in 2019.

BOV CEO Kenneth Farrugia also added that the bank is embarking on campaigns to protect customers from phishing attempts and other cybercrime scams. “Apart from [bank infrastructure], cybercrime protection is also about making sure that our customers are feeling safe.”

Meanwhile, Cordina admitted that the bank’s positive results for 2023 are, to some extent, owed to interest rate hikes from the European Central Bank. “This is an area that concerns BOV substantially,” he commented.

While interest rates helped BOV’s end-of-year results, Cordina said the bank is working to ensure that the returns can be accrued over time.

“Maybe we could have been more aggressive in our investments and dividends,” he said of the bank’s financial position, “but we believe that the results are strong enough.”