BOV registers €13.8 million profit for the first six months of 2020

Group profits impacted by the economic downturn caused by the COVID-19

For the first six months of 2020, the Bank of Valletta Group is reporting a profit before tax of €13.8 million (2019 – €54.3 million) representing an annualised return on equity (pre-tax) of 2.6%.

The reduction in profit is a result of the COVID-19 pandemic which has impacted all the bank’s business lines, as well as with the de-risking initiatives which intensified over the past months.

Net interest income, which remains the main revenue driver for the group, amounted to €72.3 million, €5.3 million less than the income registered for the same period in 2019.

“The persistently low to negative interest rate environment, coupled with a conservative risk appetite, limited investment opportunities and increased levels of liquidity which attract negative interest, resulted in lower earnings on the bank’s investment portfolio,” BOV said.

Demand for credit was primarily related to liquidity shortages brought about by the COVID-19 pandemic. During the period, the demand for home loans was subdued when compared to previous years and this is mostly attributed to changed consumer behaviour influenced by the pandemic situation.

Commission and trading profits was €37.0 million, 19% lower than the first six months of 2019.

The de-risking programme and its execution is proceeding at an accelerated pace and while the bank is registering lower revenues as some customers and business lines that fall outside the bank’s risk appetite are exited, it is still improving the bank’s risk position and long-term sustainability.
Total costs for the first half of the year increased by €8.2 million to €89.5 million. The increase is attributed to IT costs related to the new core banking system which went live at the start of the year.

The group remains highly liquid, with cash and short-term funds increasing by €178.3 million (4.3%) during the six months. Customer deposits increased by over €500 million since the start of the financial year and reached €11.1 billion at the end of June 2020. Net loans and advances increased by €91 million since December 2019, an annualised growth rate of 4%, and stand at €4.7 billion at 30 June 2020. 

Commenting on the results, BOV CEO Rick Hunkin said: “In line with the rest of the world, these are trying times for Malta and for Bank of Valletta and we are rising to the occasion by supporting businesses, customers and the wider community. As COVID-19 affected all the local economic sectors, the impact on the BOV Group was inevitable. However, we will come out of this together and as Malta’s leading bank we are committed to continue giving our full support to help the Maltese economy recover and thrive once again.”

The Board of Directors and the Executive Team have been fully engaged in establishing a new strategic approach for the BOV Group which will result in a more efficient, more digitally focused and more customer-oriented bank.

“The implementation of the BOV strategy has been set in motion and we are very excited to be driving a programme of initiatives that will be unveiled in due course, as we transform Bank of Valletta into a more efficient, more digital and more customer oriented bank,” Hunkin said.