Bank of Valletta reports interim pre-tax profit of €45.2 million

Bank of Valletta yesterday reported pre-tax profits for the six months to March 2011 of €45.2 million, down slightly on the 2010 interim profits of €47.5 million.

Net operating profit at €47 million is up four per cent on the €45.2 million for the same period last year.

The “modest” increase is partly due to a turnaround in the bank’s share of profits from its holdings in MSV Life plc and Middlesea Insurance plc which for the six months under review amounted to €3.8 million, compared to a loss of €3.6 million at March 2010.

Fair value movements showed a negative €5.6 million compared to a gain of €5.9 million in the first half of last year.

The board has declared a gross interim dividend of €0.625 per share, in line with last year’s interim dividend, as restated for the bonus issue of last January. The dividend will be paid on May 26 to shareholders on the register on May 12.

Bank of Valletta chairman Roderick Chalmers said the six-month period had seen a subdued demand for credit and a small reduction in business loans, and increased human resources and IT costs. Home loans had increased by €39 million.

An additional “call” on Libya exposure to the tune of €4 million had been set aside to cover any potential downside risks.

“The bank has limited direct exposure to Libya,” Mr Chalmers explained. “But some secondary exposure does exist, due to the growing number of Maltese businesses trading with that country in recent years, and the number of Maltese nationals employed there. Overall the position is very manageable, and we are working closely with our clients to support them through this period of challenging circumstances.”

Referring directly to the credit perspective, Mr Chalmers pointed out: “The bigger concerns at this stage are more geo-political than business in nature, particularly as an early solution to the upheaval in Libya is becoming more elusive with the passage of time.”

Mr Chalmers signalled BoV had “very limited” exposure to Portugal, Greece and Ireland. The wider concern, he said, was the fear of contagion into the broader euro market should the EU leadership not move in a determined and conclusive manner to secure a long-term solution to the current uncertainty.

BoV’s total assets as at the end of March stood at €6.3 billion (March 2010: €6.39 billion). Total equity amounted to €476.9 million, up from €445.6 million at the same time last year.

Net of impairment allowances, loans and advances stood at €3.5 billion, reflecting the subdued demand for credit over the period.

Mr Chalmers said credit quality was “largely unchanged” with non-performing loans as a percentage of gross advances increasing to 5.3 per cent from last September’s 5.2 per cent. Mr Chalmers insisted the bank continued to manage its balance sheet deliberately and prudently as it prepared for the implementation of the Basel III regulatory regime.

As at the end of March, core Tier I capital stood at 10.8 per cent, up from September’s 10.5 per cent). Total overall capital ratio stands at 15.3 per cent (September 2010: 15 per cent).

Customer deposits at €5.2 billion are up by €172 million (3.4 per cent) since last March. Deposits remained largely unchanged since the year end, mostly due “to the normal levels of volatility experienced in the institutional sector, while domestic retail deposits have continued to show satisfactory growth”.

Meanwhile, Bank of Valletta is currently undergoing its second stress test as part of the Europe-wide exercise to gauge the health of the banking system. Mr Chalmers said the bank was “quietly confident” the outcome of the exercise, this time held under the newly established European Banking Authority, will be satisfactory. The results will be made public in June.

At the presentation of the interim results yesterday, Mr Chalmers said the bank was in regular communication with the Malta Financial Services Authority in connection with the ongoing investigation into certain matters relating to the La Valette Multi-Manager Property Fund.

“Bank of Valletta believes that until such time as the investigation is completed in all respects, and that due process at regulation and at law has taken place, all matters relating thereto are subject to the strict rules of confidentiality that bind dealings between the bank and the authority,” he said. The chairman added it would be inappropriate to make any comment on details relating to the investigation until it had been fully concluded.