BOV reports write-backs from financial turmoil markdowns

Bank of Valletta has reported progress in the financial period commencing April 1, including a write-back of a proportion of the markdowns incurred on the financial markets and Investments book during the previous six months.

In an interim statement issued to the Malta Stock Exchange, the bank said that following the extreme conditions that prevailed during the first half of the current financial year, a sense of calm and cautious optimism had very gradually emerged in the international financial markets since the middle of March, as the markets started to believe that the bold action of the policy makers had indeed served to avert a potentially catastrophic meltdown in the global financial system. Both equity and debt markets improved, and the more positive tone and sentiment had been sustained to date.

"As a result of these improved capital market conditions, the third quarter (of the financial year) has seen a write-back of a proportion of the markdowns incurred on the Financial Markets and Investments book during the first six months," the bank said.

Interest margins remained under pressure, but were gradually improving as deposits re-priced and measures taken for the widening of certain select lending margins wereimplemented. Competition for deposits remained keen, and this has been reflected in average rates continuing at levels well above the ECB intervention rate.

"In general, banking fees and commissions have shown a marginal improvement, whilst costs have been controlled at FY 2008 levels. Notwithstanding the number of Bond issues that took place during the period, a sustained and encouraging growth in deposits has been experienced. Loans and Advances have likewise continued to grow at a satisfactory rate in both the Home Loan and Business sectors," Bank of Valletta said.

"Overall, the profitability of the bank for the third quarter was significantly higher than that reported for the half year, principally as a result of the financial markets portfolio write-backs.

"Looking forward, it is very much hoped that the growing confidence in the credit markets will be sustained. Conditions in the Maltese economy remain uncertain, and it is to be expected that some deterioration in credit quality will be experienced, particularly should the current economic downturn continue beyond the end of 2009. In this regard, the international economic environment remains challenging," the ban said.

It added that it had maintained high levels of liquidity, and the successful €50 million bond issue completed in June has added a further 1.5% to its already very strong capital ratios.