BOV re­ports prof­its of €146 mil­lion

Malta Independent - - NEWS -

At a press con­fer­ence held yes­ter­day, Bank of Val­letta Chair­man John Cas­sar White an­nounced the Group’s fi­nan­cial re­sults for the fi­nan­cial year which ended on 30 Septem­ber 2016.

The Group re­ported a profit for the year of €145.9 mil­lion, be­fore de­duct­ing in­come tax. This re­sult is in­clu­sive of a gain of €27.5 mil­lion, 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 FY2016.

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 cap­i­tal­i­sa­tion 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 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 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 ex­pressed sat­is­fac­tion at the re­sults which, he said, were achieved dur­ing a year marked by healthy eco­nomic ac­tiv­ity, but which was also char­ac­terised by a con­tin­u­ing low in­ter­est en­vi­ron­ment which was ex­ert­ing pres­sure on mar­gins. 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.

Mr Cas­sar White em­pha­sised the need for BOV to re­view its busi­ness model in order to en­sure the long term sus­tain­abil­ity of the Bank, and its con­tin­u­ing rel­e­vance to the Mal­tese econ­omy.

“The model is evolv­ing from one based on growth to one based on qual­ity, with a lower risk pro­file and, cor­re­spond­ingly, po­ten­tially lower re­turns,” ex­plained the Chair­man. The bank has to re­con­sider busi­ness lines with a high level of in­her­ent risk, while other core busi­ness lines are reach­ing a state of ma­tu­rity and their po­ten­tial for fur­ther growth is lim­ited. “Di­ver­si­fi­ca­tion of rev­enue streams and de-risk­ing will be high on the bank’s agenda over the com­ing years,” af­firmed Mr Cas­sar White.

The Chair­man ex­plained the bank’s strat­egy which, he said, gives pri­or­ity to the long-term sta­bil­ity and sus­tain­abil­ity of the busi­ness. The strat­egy may be de­scribed as one of con­sol­i­da­tion, and in­cludes the strength­en­ing of the bank’s lev­els of cap­i­tal; the Core Bank­ing Trans­for­ma­tion pro­gramme, which is cen­tered around the re­place­ment of the Core IT sys­tem; the re­view of the busi­ness model; and the strength­en­ing of the cor­po­rate gov­er­nance frame­work.

The bank 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.

Mr Cas­sar White con­cluded by thank­ing all stake­hold­ers for their com­mit­ment to the bank’s suc­cess, and the bank’s cus­tomers for choos­ing BOV as their pre­ferred provider of fi­nan­cial ser­vices.

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