BOV sees 35 per cent rise in pre-tax profit

The Bank of Valletta Group has registered a pre-tax profit of Lm26.6 million in the financial year ending September 30, 2005 - an increase of 35 per cent over the previous year.

Addressing reporters yesterday afternoon, BOV chairman Roderick Chalmers said the board of directors had recommended a final gross dividend of 15 cents per share, which taken together with the gross interim dividend of 7.5 cents per share declared and paid earlier in the year, makes for a total gross dividend at 22.5 cents per share over the whole financial year.

The BOV board also recommended a one for one bonus issue of shares, effective on January 18, 2006, which would increase the permanent capital base of the bank. Mr Chalmers said this measure would enhance the affordability and liquidity of the bank's shares.

Mr Chalmers said the increase in profitability was attributable to improved interest margins and growth in profits from other banking and financial services.

"Financial markets, fund management, credit cards and bancassurance all had a good year. We have also seen a much-improved contribution from our share of profits in associates.

"At the same time, net impairment losses have been reduced, and costs have been kept under control, with the increase in overall expenditure being contained at three per cent, notwithstanding the impact of a new collective agreement signed during the year. The group's cost to income ratio remained strong at 44.5 per cent," Mr Chalmers said.

The net impairment charge for the year decreased from Lm13.4 million last year to Lm11.7 million. Furthermore, the profits for the year are also impacted by a one-off charge of Lm3.4 million resulting from a change in policy on the treatment of suspended interest on impaired accounts, the chairman said.

"It is important to appreciate the nature and quality of the impairment charge for the financial year under review which, following a change in the method of computation, includes a collective impairment allowance charge of Lm5.1 million. The specific charge amounts to Lm6.6 million, down from Lm17.2 million for the previous year," explained Mr Chalmers.

The BOV Group also registered sustained balance sheet growth with Group total assets increasing by Lm75 million to reach Lm2.1 billion.

Customer deposits have increased by Lm50 million to reach Lm1.5 billion. Demand for mortgages had remained strong, whereas that for business credit was somewhat muted.

Net advances to customers remained flat at Lm838 million during the year under review. Shareholders' funds increased by Lm13 million and amounted to Lm146 million as at the year end when compared to the Lm133 million of 2004.

The group's net asset value per share increased from Lm2.39 to Lm2.63.

Mr Chalmers said that the beginning of the financial year saw the appointment of Tonio Depasquale as CEO and his appointment as the new chairman of the board of directors.

"In the light of these changes, it was deemed opportune to carry out a high level business and organisational review, and this was done in the first half of the year. The outcome of this review led the board to focus on the importance of a number of priority change initiatives", he said.

Mr Chalmers said that the bank believed that the advent of the euro would bring with it both increased competition on the credit side of the business and a depletion of its foreign exchange earnings.

On the issue of privatisation, Mr. Chalmers said BOV continued to work closely with the government's Privatisation Unit and its advisors.

"At the same time, from the bank's perspective we are proceeding with a 'business as usual' attitude, and the board and management were not allowing the privatisation process to cause the bank to defer, delay or postpone taking those decisions that were believed to be in the best interest of the business and our stakeholders," said Mr Chalmers.