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by Bank of Valletta
ANNOUNCEMENTS OF FINANCIAL RESULTS FROM JANUARY TO SEPTEMBER 2022
Bank of Valletta Group today announced financial results for January to September 2022, reporting a pre-tax loss for the year to date of €55.7 million. Excluding the effect of the Deiulemar claim settlement in May this year, nine-month profit was 47.8 million euros, up 3% on the same period last year.
The Bank saw continued growth in its core banking business, with its core revenue lines showing improved business performance. Revenue for the first nine months of 2022 amounted to €202.3 million. This is an improvement of 16.8%, reflecting higher interest rates in the Eurozone coupled with higher volumes in the distribution sector, notably in housing finance, cards and payments.
Operating expenses grew at a slower pace of 6.7% compared to the same period in 2021. This increase was largely driven by human capital needs in specialty areas, growth in average salaries and the Group’s contribution to the depositor compensation system. The need for non-recurring external specialist support related to environmental, social and governance (ESG) issues also contributed to cost growth. A net impairment charge of €10.1 million at the end of the third quarter of 2022 was taken into account due to the evolution of risks emanating from geopolitical instability taking into account higher inflation and growth in the Lower GDP based on forecasts published by the Central Bank of Malta. The Bank continues to actively assess its expected credit losses as economic conditions evolve.
BOV’s share of Insurance Associates earnings declined significantly from the same period in 2021, largely due to volatility in global financial markets.
In order to meet the regulatory requirements relating to MREL, the Bank obtained approval from the Central Bank of Ireland for a base prospectus for the establishment of a Euro Medium Note program for a maximum amount of 500 millions of euros. The Notes will be offered in the international bond capital markets through Credit Suisse (Europe) SA and UBS Europe SE, acting as joint arrangers and brokers. This issue will also allow the Bank to increase its loan portfolio and broaden the investment horizons of its treasury operations.
“BOV continues to make steady progress” – Dr Gordon Cordina, President of BOV
Announcing the results, BOV Chairman Dr Gordon Cordina said the results continued to show the Bank’s progress, with the increase in revenue demonstrating efforts to continue to guide the Group on the right path. way. These results indicate once again that the Bank’s performance remains solid in all of its core activities.
Dr Cordina referred to local economic developments stating that “In recent quarters, the Maltese economy has returned to positive economic momentum, characterized by strong real GDP growth, which has brought the unemployment rate down to historically low levels. The recovery of tourism, which has been the hardest hit sector during the COVID-19 pandemic, is also going well this year. However, another major global economic shock, a surge in inflation, occurred. This shock has hit the country in recent months, but its impact has been partially cushioned by the government’s decision to keep utility and fuel prices stable, despite sharp increases in foreign energy prices caused by the war in Ukraine. The government has committed additional funds to continue meeting the cost of energy to support households and businesses in Malta. This is a temporary solution and, from a risk management point of view, it would be prudent to anticipate the possibility that recent increases in international energy prices may persist in the long term”.
Dr Cordina also commented on another important development, the decision by the European Central Bank (ECB) to start raising interest rates. “This has benefited the Bank as it no longer pays negative interest when depositing its excess cash. The Group will continue to monitor the situation, together with the actions of other major banks in Malta, with the aim of finding the fair balance among its stakeholders when setting its interest rate structure. The strong liquidity position will help ensure that any future changes are well-managed and gradual.”
“Drive business performance” – Kenneth Farrugia, CEO of BOV
Kenneth Farrugia was recently appointed Chief Executive Officer and Executive Director of the Bank, after receiving regulatory approval. During his first speech at the announcement of the Group’s results as CEO, he commented on the continued growth of the Bank in its core banking activities. “Despite the negative impact of the Deiulemar settlement, the core business remains very robust, as evidenced by continued revenue growth comprising both interest and non-interest income. Bank credit grew by 5.8% over the period, driven by growth in business and consumer credit.In addition, we recorded a 4% increase in deposits, mainly driven by growth in accounts. savings accounts, compared to December 2021. The Bank will intensify its efforts to reduce its operational costs through various initiatives it will take forward.These results bode 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 agenda which is key to sustaining and improving the results achieved so far. “Our transformation program is centered on 4 key quadrants which revolve around improving our customer service experience by adding value to our customers in the process, re-engineering our processes and procedures to achieve a model of lean and digital operational service, the strengthening of our risk management function and controls, and equally important, developing our human capital to meet the demands of our business and our customers.The initiatives in each quadrant will be supported by cross-cutting strategic digital and data initiatives, as part of an overall ESG consideration to ensure the longer-term sustainability of our business”.
Mr. Farrugia went on to say that during the quarter under review, we launched several re-engineering and automation initiatives such as the introduction of the first unattended robotic process automation to improve internal efficiency and filtering source search engine for customers, as well as the introduction of a digital workflow to optimize customer callback requests. In addition, the Bank has also launched an online solution for property finance solutions, a first in Malta. Through this innovative digital channel, our customers can request an estimate of the financing they can request from the Bank and also process a request for real estate financing completely digitally from the comfort of their own home”.
Integrate ESG principles
In their closing remarks, Dr. Cordina and Mr. Farrugia commented on the importance of ESG to Bank of Valletta. In 2022, climate and environmental (C&E) risks received more attention, given that they constitute an important source of risk for the Bank’s balance sheet and also because of the potential impact that this risk could impose on the Maltese economy. The Bank continued its monitoring of environmental risks and commissioned an energy audit and a carbon footprint assessment. In addition, the Bank has joined the Malta ESG Alliance, a platform intended to encourage companies to motivate other companies and supply chains to push for decarbonisation and achieve their ESG objectives. BOV’s approach to ESG sustainability is currently reflected in its recently approved strategy, which incorporates the Bank’s position and sets out a plan for 2022-2024.
Dr. Cordina and Mr. Farrugia thanked shareholders for their continued support, as well as the Bank’s management team and staff for their valuable work, concluding by expressing their gratitude for outgoing CEO Rick Hunkin’s service over the past few years. three years, in particular for the governance and transformation improvements achieved under extraordinarily difficult circumstances, and wishing him every success in his future endeavours.
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