Bank of Valletta said today that the second quarter of this year saw demand for credit primarily driven by strong growth in home loans, boosted by Government measures to assist first-time buyers.

In a regular statement to the stock exchange, it said that despite the low interest rates, customer deposits continued to grow across all segments, mostly in the call and short dated categories.

"The continuing preference for short term deposits is leaving a positive impact on the net interest margin. However, the resulting situation of higher liquidity, poses additional challenges due to the persisting low interest rate environment and negative rates on overnight deposits held with other banks," BOV said.

It said it had registered a satisfactory increase in commission income across key business lines. The card related transactions exceeded last year’s, and higher demand for investment products was experienced during the period under review.

Foreign exchange earnings are also up, reflecting the growth in turnover.

Price gains recognised on the proprietary portfolio were mostly driven by
the performance of local equities and the disposal of investments. The costs incurred during the period under review, while in line with expectations, exceeded those of the comparative period last year. This increase was largely due to the higher regulatory costs applicable as from this year.

BOV said that during the period under review, for reasons of prudence, it set aside provisions on certain accounts taken on in past years, which showed signs of deteriorating quality.

"The provision charge also reflects the bank’s continuing cautious view towards the valuation of collateral."

The bank has started work on the replacement of the core IT system, and the subsequent transformation of business processes and practices. "This is a project that will involve considerable expense, but that will enable the bank to position itself as a truly customer-centric organisation," BOV said.