The chairman of the Bank of Valletta did not stop at explaining the past when he presented the bank's half-yearly outturn up to March on Thursday. Roderick Chalmers also looked into the future, outlining what he saw as the outlook of the global financial crisis, his institution's performance and what might lie ahead in the domestic economy.

In a media release Mr Chalmers spared neither detail nor facts. The simple point was that the BOV's net operating profit (before extraordinary movements) of a little under what it was last year just before the global financial downturn really started galloping, is not bad in the circumstances. The main reason for a €5.8 million drop lay in the fact that the European Central Bank has been slashing its reference rate in an attempt to kick-start the EU economy out of recession. Although the bank, like most others in Malta, did not pass on the last two of the ECB's interest rate cuts, the two that it had passed on cost it around €6 million. That was due to the timing within which cut rates work.

A cut tends to hit interest on loans and advances almost immediately but takes time to work through to term deposits, these being fixed for a period ahead. If there was a devil in the detail given by the BOV chairman it lay in the fact that Malta cannot escape various aspects of the global financial crisis. In particular the crisis affected what are called fair value movements (changes in the price of an institution's assets).

While assets in the form of loans and advances, all financed through local deposits, essentially held their value, prices of foreign assets, like bonds, were hit in a multiple of ways. Their net effect was a charge of €32 million against the bank's operating profit. It could have been much worse were it not for the prudence whereby the Bank of Valletta, like the rest of the local banking system, is managed. So where will it go from here? What is the outlook on the three fronts peered at by the chairman?

The bank, he feels, is well poised to take advantage of any global recovery. While "extreme stress" has eased somewhat, sentiment remained fragile, observed Mr Chalmers. In his view "any lasting recovery will inevitably be something of a gradual process, with set-backs occurring from time to time".

The bank is well poised for the future. It should benefit from recovery in the global financial markets, as well as from assets approaching redemption, when their value should rise towards par.

Meanwhile, the BOV's "core retail and corporate banking businesses are soundly based, and are operating satisfactorily". The board of the Bank of Valletta expected to see a gradual improvement of the net interest margin (and so in operating profits), with interest rates coming close to the bottom of the cycle.

What, then, of the economic outlook, given that the global recession has not as yet impacted fully on Malta. "A cautious expectation," said Mr Chalmers, "must be that the global recession will increasingly influence the local economy - and this may be reflected in a deterioration in asset quality, something which is being watched with extreme vigilance".

Translated, that means some borrowers might find it very challenging to service loans and advances as the global downturn hits them more harshly.

We live in the real world. There are domestic pressures raising the cost of production, like the water and electricity bills. But our foreign markets are being squeezed and will take time to take strength again. At end-March unemployment in the EU reached 20 million. Another 3.5 million more jobs are expected to be lost this year. Unemployment is highest among those aged under 25.

Expect, therefore, EU demand for manufactured goods and for tourism services to face more hard challenges. In trying to attire ourselves to live through these challenges it will be important not to lose sight of where they are coming from, and why. The banking system is not losing sight of anything. But its ability and willingness to stand by producers of goods and services during the remaining tough times will be crucial.

It was heartening, therefore, to hear the BOV chairman reiterate that the bank would support the Maltese economy and the business community in a responsible manner during the current economic downturn by "making sure that credit is available to both the corporate and the personal sectors".