Updated at 5pm

Bank of Valletta shares plummeted 9 per cent on Tuesday, from €1.70 to €1.54, after it announced that it would be setting aside €75 million for possible litigation costs.

This is the lowest share price for at least five years. At Tuesday's quoted market cap of €817 million, this means that almost €74 million has been wiped off its value.

Sources within the bank said that the drop was to be expected but expressed confidence that it would recover much of its value in due course.

Source: Malta Stock ExchangeSource: Malta Stock Exchange

The bank will also not be declaring an interim dividend or a final dividend, its chairman Deo Scerri said. 

The last time there was no interim dividend was in 2004, with the bank declaring final dividends every year as far back as 1991. In 2017, BOV paid out €61 million worth in gross dividends.

Mr Scerri was speaking as the bank recorded a pre-tax profit of €13.5 million, after recognising a provision against litigation losses of €75 million.

BOV is currently fighting three separate cases in court - one with aggrieved Deiulemar shareholders, which has forced the bank to deposit a €363m precautionary warrant, another against the financial arbiter concerning the La Valette Property Fund and a third regarding the Falcon Funds. 

The bank announced its half-yearly results for the six months which ended June 30. Profit before litigation provisions amounted to €88.5 million, 30% more than the €67.8 million recorded for the same period last year. It was the highest ever half-yearly profit reported by the group.

Total income for the group, comprising interest margin, fees and trading income, amounted to €127.9 million, compared to €115.5 million last year, an increase of 11%. Costs were kept under control, rising by 2% to reach €63.9 million. The group also benefited from an improvement in the credit quality of its loan book, which led to a reversal of impairment provisions of €20.2 million.

The results were impacted by a provision of €75 million against potential losses arising on significant litigation cases which arose in previous years in which BOV is involved. The board of directors kept these cases under continuous review to assess the bank's position from time to time in the light of developments as they occur.

Should developments so warrant, the board would take the necessary measures in accordance with the changed circumstances, including making appropriate provisions. Such provisions are made without prejudice, and did not, in any way, constitute any admission of fault or liability on the part of the bank, it said.

Lending to customers remained the largest asset on the group's balance sheet, and showed a satisfactory growth, mostly in the home loans segment. The management of customer deposits was another key focus for the bank, which was deemed necessary in a period of prolonged low interest rates. While retail deposits continued to increase in a sustained manner, corporate deposits decreased. Total deposits with the bank to-date amounted to €10 billion.

Mr Scerri said the board was, as always, focused on ensuring the long-term stability and sustainability of the group through the build-up of strong capital buffers and by keeping the business model under constant review.

In this context, the board resolved not to declare an interim dividend, and would not be recommending the payment of a final cash dividend.

"By re-investing profit rather than paying it out in cash, the capital position of the bank would continue to be strengthened, as befitted a bank which was considered by international regulation as a systemically important institution for Malta," the chairman said.

The board was, concurrently, implementing a business restructuring programme at BOV with the aim of reducing the bank's risk profile. This was a medium-term programme which would see the bank re-dimensioning or closing down certain non-core businesses and relationships which lie at the periphery of the board's risk appetite, or where the risk being assumed was not adequately remunerated by income generated.

Mr Scerri stated that "these twin strategies of capital conservation and de-risking the business model are the tools which will ensure the long-term future of BOV as a safe, sustainable and profitable institution."

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