Company News BOV announces results for 2019
A pivotal year towards a safer, stronger bank
Bank of Valletta Group last week announced its results for the year ended 31 December 2019.
Financial highlights:
• Profit before tax of €89.2m, a
post-tax ROE of 6.2%
• Profit before tax, stated before the increased litigation provision of €25m and additional transformation costs of €23.9m, amounts to €138.1m
• Earnings per share of 10.9 cents,
Shareholders’ equity of €1.1bn • Core Equity Tier One ratio in
creased by 120bps to 19.5%
• A net dividend of 1.71 cents per share is recommended
Although 2019 presented many challenges for the bank, BOV reported on a strong set of results. Pre-tax profit for the year, adjusted for the litigation provision and transformation costs is €138.1m, or 6% below the comparative number. This performance has strengthened the bank’s capital position as we build upon a significant de-risking programme, supported by tangible improvements in our risk, governance and control frameworks.
Capital strength is evidenced by an improvement in the CET1 ratio; at the year end this now stands at 19.5%, an increase of 120 basis points over last year. The Board is therefore recommending a net dividend of 1.71 cents per share, subject to regulatory approval.
A strong performance in the local economy has helped net loans and advances to increase by €88m, primarily in the consumer finance portfolio, which includes home loans. In the SME segment, we have also seen growth, supported by the various funding schemes made available to small businesses.
Customer deposits grew by 2.1% to €10.6bn; local retail economic growth has driven up domestic balances while international corporate deposits have reduced by 24%.
To deliver on our strategy of a safer, stronger bank, we have invested heavily in de-risking our portfolio through a new risk appetite, increased controls and tighter policies and remediating any past control failings. This required an investment of €23.9m during 2019, and it is likely that we will need to continue investing during 2020 to provide all stakeholders with increasing confidence that we are moving towards our overall aim.
The new core banking system was successfully rolled out, which was the culmination of a threeyear programme to simplify and enhance the IT architecture. At the same time the bank enhanced its digital product suite by introducing a new version of the BOV Mobile app and BOV Pay.
The Board appointed Rick Hunkin as CEO with effect from January. He brings significant experience across the international, retail and the corporate banking sectors, having worked with major banks in the UK and overseas over the last 40 years.
Commenting on the results, Hunkin said: “2019 was a pivotal year for the BOV Group, with strong results being reported. We successfully delivered the implementation of the new Core Banking System, continued with our de-risking initiatives and strengthened our control functions. At the same time we continued to provide our customers with innovative digital banking services and supported a wide range of businesses across the Maltese economy.
“At the current time, all our minds are on the extraordinary challenges brought about by Covid-19. So far at Bank of Valletta, our staff has continued to serve our customers and we have kept all our branches and operations going with their help and commitment. My thanks, as always, go to our loyal and hardworking teams here at BOV.
“There is no doubt the next few months are very uncertain and undoubtedly everyone in Malta will be affected in some way. The outbreak is expected to have a substantial negative impact on both global and local economies. BOV’s capital buffers, together with measures made available by the regulatory authorities provide significant mitigation against the additional challenges of this unprecedented event. An adverse influence on 2020 performance is highly probable but a clear determination of the overall financial impact cannot be made at this early stage. There are uncertainties on both the duration of the crisis and the extent of the impact on the local economy as well as the scale and effectiveness of mitigating measures provided by local and EU authorities. The bank has already taken steps and intends to launch further initiatives to continue to support the local economy as well as to help safeguard the well-being of its employees and its customers.
Against this uncertain background, our strategic priority remains the long-term sustainability of the bank underpinned by a strengthening capital base. In 2020 we will focus on growing the business in line with the revised Risk Appetite Framework and enhancing the customer experience by simplifying our processes and investing further in our digital channels. We will also continue to strengthen the internal risk culture through the Risk Transformation programme and related de-risking activities.
“Although 2020 will still see some headwinds on cost, the forward-looking strategy of the bank built on customers, efficiency and service will start to position us better for the future.
“Finally, I refer to Deo Scerri’s decision to withdraw from the Board in order to focus more on his personal life and family. Deo has been a leader of our business for over seven years and has made a massive contribution to the bank. On behalf of all the staff, I thank him and wish him well for the future. Details regarding his successor will be announced as soon as these become available.”
Hunkin, on behalf of the whole bank, also paid tribute to the significant contribution of BOV’s exCEO Mario Mallia, whose sad and untimely death in February came as a shock to everyone at Bank of Valletta.