The Bank of Valletta Group made a profit before tax of €74 million in the six months ended on 31 March 2017, an increase of 8% over the €68.5 million reported for the same period last year.
The board of directors has declared a gross interim dividend of 4.5 cents per share, an increase of 24% over the 3.64 cents declared last year, as adjusted for the bonus share issue made in January 2017.
BOV Chairman Deo Scerri explained that the Group's performance should be evaluated within a context of a high-performing local economy, but also a difficult international scenario marked by persisting low interest rates. The current interest rate environment is posing a challenge to all European banks, and BOV's interest margin for the period, which amounted to €72.7 million, showed a decrease of 3% over March 2016.
He said the decline in margin income was, however, mostly offset by an increase in net fee income, which rose by 6% to reach €33.8 million. The bank has embarked on a strategy to supplement its core margin income with non-interest revenue streams, and the interim results show that the strategy is starting to bear fruit.
The group also recorded a reversal of impairment charges of €5.3 million, the result of the bank’s debt recovery efforts that resulted in a number of settlements of non-performing loans. There was also a general improvement in the credit quality of the loan book.
Mr Scerri explained that the group's financial position as at end March 2017 reflected current local conditions, where buoyant economic activity and high investor and consumer confidence resulting in high levels of liquidity in the economy.
In turn, this was reflected in high levels of deposits with the banking sector.
During the period under review, BOV customer deposits rose by €487 million to reach €9.7 billion, accounting for 86% of the group's balance sheet.
Net lending rose by €102 million, and stands at €4.1 billion. The excess of new deposits over new lending was deployed into liquid and investment assets. Group liquid and investment assets now stand at €6.9 billion, or 61% of the balance sheet.
Total assets stand at €11.3 billion, an increase of €583 million over September 2016, while equity amounts to €753 million, an increase of €24 million. Group Core Equity Tier 1 ratio is 13.1%, up from 12.8% in September 2016.
The chairman also referred to the upcoming share issue programme which BOV will commence later this year. He explained that the Group is today adequately capitalised, and is able to distribute dividends to its shareholders."up to today, BOV has relied exclusively on the
"Uup to today, BOV has relied exclusively on the plough back of profits to increase its capital. In view, however, of increasingly onerous supervisory capital requirements, as well as of the planned significant investment in the core IT system, the group is anticipating a situation when the retention of profit will not suffice. The bank is therefore planning to strengthen its capital by issuing €150 million in new share capital over an approximate one year period."