Bank of Valletta (BOV) reported significantly less profits for the year 2020 when compared to 2019, with €15.2 million profits before tax recorded as opposed to the €89.2 million recorded in 2019, CEO Rick Hunkin said.
When adjusted for a number of 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.
“It’s been an extremely difficult and turbulent year, so there has been an impact on customers and on the bank as a whole,” Hunkin noted. “Recognising the key role BOV plays in the Maltese economy and in the communities and customers we serve, we have provided significant and widespread support to our clients as they experienced financial strain and liquidity constraints, by providing extensive support by way of loan moratoria and through the Government/ Malta Development Bank supported scheme.”
Financial Performance of the Group
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; €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 bank also noted that reduction in the normalised operating profit was driven by lower net interest income (€146.8 million, €6 million lower than 2019), COVID-19 impacted Commissions and Trading revenues (€78.8 million, €12.1 million lower than 2019) and higher operating costs (€15.9 million higher than in 2019). The cost to income ratio also stood at 66.8%.
Balance Sheet Position
Total assets of the Group increased by 5%, reaching €12.9 billion. Customer deposits also grew by €642 million (6%), topping €11.3 billion.
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. CET 1 ratio increased from 19.5% to 20.9%, and the total capital ratio improved from 23.1% to 24.5% as at end of December 2020.
In line with the regulators’ recommendation, the Board has responsibly decided not to declare distribution of dividends for year 2020.
“As highlighted in last year’s Annual General Meeting (AGM), the Bank’s strategy aims to target the maximisation of shareholder value in the medium term, with a vision to restore the payment of dividends at levels that are adequate, stable and predictable,” a bank’s statement read.
Strategic Plan – BOV 2023
Hunkin also noted that the bank is embarking on changing and adapting to the landscape the world finds itself in, not only in terms of Covid-19, but economically and in terms of digitisation and Green economy.
“We realise the importance and digitisation and greening of the economy, and the company is prepared to take that on,” Hunkin said.
The Chairman and the CEO of BOV thanked all of the bank’s employees for adapting to the current challenging situation and for continuing to provide services to the Bank’s customers.
“The year 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 shown and contributed to economic and social resilience,” Hunkin said.