The Bank of Valletta Group has reported a pre-tax profit of €68.5 million for the first half of the year.

This compares to a profit of €58.8 million in the same period last year. But despite the positive results, the bank warned that low interest rates were hurting it.

"Negative rates imposed by the European Central Bank and other prime banks, as well as negative yields on certain sovereign debt, mean that the bank is being penalised for its high levels of liquidity," said BOV chairman John Cassar White.

Pre-tax return on average equity is of 19.9 per cent per annum (2015: 18.4 per cent), while pre-tax return on average assets amounts to 1.4 per cent per annum (2015: 1.3 per cent).

The group generated operating income of €134.5 million, up by 12.5 per cent over the corresponding period last year. Operating costs amounted to €58.4 million, a growth of seven per cent. The cost-to-income ratio is of 43.3 per cent, compared to 41.8 per cent last September.

Growth in income was driven by investment services, including stockbroking, bancassurance and wealth management services, as well as credit card transactions. Growth in costs is mainly attributable to higher HR costs following the signing of the Collective Agreement in December 2015.

Net impairment allowances, at €8.1 million, are lower by 41.8 per cent compared to the corresponding period last year, due mainly to a more positive view being taken of certain economic sectors, which led to a lower charge for collective impairment.

The board of directors approved a gross interim dividend of 3c91 per share (2015: 3c6 as restated for bonus issue), which works out at 2c54 per share net of tax (2015: 2c34). This dividend represents a pay-out ratio of 22 per cent of profit after tax, compared to a ratio of 23 per cent in 2015.

Mr Cassar White sounded a note of caution.

“Regulatory requirements and increasing investment in IT are pushing costs upwards. At the same time, banking regulation is increasing capital requirements, especially for banks like BOV, which are deemed to be significant to their host countries.

“The bank is giving priority to strengthening its capital buffers and lowering its risk profile,” he said.

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