Bank of Valletta announces pre-tax profit of €174.7 million

The BOV Group announced pre-tax profit for the year ended 31 December 2017 of €174.7 million.

The directors recommended a gross final dividend of 8c per share, resulting in a gross total dividend of 11.6c per share, as compared to the adjusted gross total dividend of 11.5 cents per share declared for the last financial year.

The board is also recommending an optional scrip dividend programme. Shareholders have the option to receive new ordinary shares instead of cash dividends. “The Board took this decision following the oversubscription by our shareholders of the rights issue,” chairman Deo Scerri said. “We want to give an opportunity to our shareholders to subscribe to more shares at a preferential price without incurring trading costs. This is an optional programme and shareholders will receive their dividend in cash unless they opt for the scrip dividend programme.”

Core profits excluding fair value items and associates was of €149.9 million, compared to €118.4 million in 2016. Scerri referred to the narrower interest margins, high levels of liquidity and negative interest rates on deposits held with the ECB as primary variables exerting downward pressure on the Bank’s bottom line.

“On the other hand, the Bank’s strategic drive to diversify its revenue flows has played a key role in offsetting the negative impact of these factors,” Scerri said, referring to the increase of 4.5% in commissions.

Operating costs increased to €151.3 million from €112.8 million last year. Increases were mainly attributed to the cost of IT, heavy investment in HR and the strengthening of the Bank’s control functions. During 2017 the bank enhanced significantly its compliance, risk management and anti-financial crime capabilities. “These functions are now housed under one roof at the Risk Management Centre in Santa Venera that was inaugurated last October,” Scerri said. “We are directing substantial human and IT resources towards this area, including enterprise-wide risk training.”

The Bank’s Return on Equity (ROE) ratio is of 16.5%, slightly down from 16.9% registered last year, as adjusted for the one-off gain on the VISA transaction.

The Bank’s total assets as at end of 2017 amounted to €11.8 billion, resulting primarily from an 8% increase in short-term retail deposits. A 4% increase in home loans yielded a growth of €160 million in the loan book, putting the bank’s loan-to-deposit ratio at 44.3%, reflecting the bank’s highly liquid position.

The Core Equity Tier 1 (CET 1) ratio went up from 12.8% in 2016, to 16.1% as at December 2017, providing substantial capital buffers to sustain business growth. Scerri referred to the highly successful rights issue which had been oversubscribed by nearly €50 million and reiterated the bank’s satisfaction with the vote of confidence by its shareholders, which saw the bank’s capital base rising by €150 million.