Bank of Valletta reports profits of €146 million

The Bank of Valletta group has reported a profit for the year of €145.9 million, before tax, a result inclusive of €27.5 million in income arising from the takeover of VISA Europe, in which BOV is a principal member, by VISA Inc.

The Group’s operating profit, adjusted for this windfall profit, amounts to €118.4 million, as compared to the profit of €117.9 million reported for the previous financial year.

The Board will be recommending a final gross dividend of €0.0852 per share which, taken together with the gross interim dividend of €0.0391 per share paid in May 2016, results in a total gross dividend of €0.1243 per share for the 2016 financial year.

The Board is also recommending, effective 16 January 2017, a bonus issue of 1 share for every 13 shares held. The bonus issue will be funded by a capitalization of reserves amounting to €30 million. This will increase the permanent capital from €390 million to €420 million.

Profit excluding the gain on the VISA transaction represents a return on equity (ROE) of 16.9%, down from 18.4% for 2015. This decrease is due to equity having grown by 9% to €729.2 million over the year, while the growth in operating profit has been marginal. Return on average assets, adjusted for the windfall gain, stands at 1.1%, compared to 1.3% last year. The cost-to-income ratio, which relates to costs incurred to revenue generated (excluding the VISA gain), amounts to 44.3%, against 41.8% in 2015.

Group total assets stand at €10.7 billion, up by €821 million over September 2015. This growth was financed primarily by incoming customer deposits, which increased by €621 million to reach €9.2 billion; and by the issue of €112 million worth of subordinated debt. These funds were mostly deployed as liquid assets, as gross loans and advances remained stable at their September 2015 level of €4.3 billion. New loan drawdowns amounted to over €700 million, but these were almost completely offset by repayment of existing lending.

The Group’s Core Equity Tier 1 (CET1) ratio, which is the standard regulatory ratio measuring the capital adequacy of banks, rose to a robust 12.8%, up from 11.3% last year.

BOV Chairman John Cassar White pointed out that pressure on profitability is also arising from increasing overheads, and especially HR costs, which have risen by 4% following the conclusion of a new Collective Agreement.

Cassar White said the bankank will be further strengthening its anti-financial crime defences, by setting up a fully resourced Anti-Financial Crime department, and review its Risk Appetite Framework, which is based on a detailed articulation of the Board's risk appetite.