The Bank of Valletta Group reported a profit before tax of €15.2 million for the financial year which ended 31 December 2020.
In line with the regulators’ recommendation, the Board said that it “has responsibly decided” not to declare distribution of dividends for year 2020.
The Group’s results were announced by BOV Chairman Dr Gordon Cordina and Chief Executive Officer Rick Hunkin through an online press conference held in line with current COVID-19 restrictions.
When adjusted for a number of specific items, profit before tax would increase to €100.7 million (2019 – €138.1 million), a reduction of €37.4 million or 27% when compared to prior year. The most significant specific items were €38.1 million related to increases in credit provisions with charges predominantly attributed to COVID-19, €39.8 million in impairment charges for long outstanding non-performing loans driven by changes in regulatory policy in light of the current economic environment and a €15.8 million investment in the Bank’s transformation programme, offset by an €8.1 million net litigations provision release following the settlement of the Swedish Pensions Agency (SPA) case.
The reduction in the normalised operating profit was driven by lower net interest income, COVID-19 impacted Commissions and Trading revenues and higher operating costs.
Net interest income of €146.8 million, €6 million lower than 2019, remains the main revenue driver. Growth in deposits coupled with persistent negative interest rates continue to impact the Bank’s net interest margin. Securities, previously generating positive returns, have been maturing and are now being re-invested at lower or negative rates.
The Bank said that Group total assets of the Group reached €12.9 billion as at December 2020 – an increase of 5% over the previous year. Customer deposits grew by €642 million (6%).Cash and short-term funds increased by €106.5 million or 2.6% over the year. The Group liquidity ratio stands at 463% reflecting the extraordinary deposit growth that has outpaced loan demand. The financial investments portfolio decreased by 5.2% or €171 million year on year. The decrease relates to the maturing debt securities which were partly replaced at lower yields.
Net loans and advances increased by €296 million, or 6.6%, during the year and stand at €4.7 billion as at 31 December 2020.
The Bank also announced that it had embarked on a forward-looking strategy for the BOV Group to ensure a best possible plan of action for its long-term sustainability. It noted how the retail banking business model is changing rapidly as the record low interest rates continue to exert pressure on the net interest margin – the largest share of income.
“Technological innovation across most business lines and steep regulatory demands for systemic banks such as Bank of Valletta, are changing the traditional banking landscape. BOV is not only accepting these changes but is using them as catalyst for a major shift from the use of cash and cheques to the use of electronic banking channels.”
The Chairman and the CEO thanked all Bank employees wholeheartedly for adapting to the current challenging situation and walking the extra mile to provide, COVID-19 permitting, continuous services to the Bank’s customers. Special appreciation went to all BOV front liners, our heroes who have manned our face-to-face channels providing personalised services to customers who required their assistance.
In a statement, the Bank said that “2020 will go down in history as one of the most turbulent years of our times but it has also been a remarkable year for those sectors that have shone and contributed to economic and social resilience. Adapting to change is far from easy but it is the only way forward.”
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