S&P Global Ratings have assigned a BBB+/A-2 long- and short-term credit rating to Bank of Valletta. The outlook is 'stable'.

"Our ratings on BOV reflect our view that the bank will maintain its dominant
domestic market position and sound retail franchise, which enable it to access
an ample, stable customer deposit funding base," the agency said.

"The ratings also factor in our expectation that the bank will continue to reduce its stock of non-performing assets (NPAs) through a combination of write-offs, good-quality new lending, and improving recovery rates, while maintaining its recently enhanced capitalization. These strengths counterbalance BOV's lack of geographic and business diversification compared with its international peers, in our view."

The agency said it expects Malta's economy will expand by about 4% a year on average in 2017-2019, well above the average of other eurozone countries.
Such favourable economic conditions would support banks' growing lending
activity and should help banks to gradually reduce their NPAs and credit
losses.

"However, the rapid increase in property market prices, coupled with
banks' significant exposure to the real estate sector, could pose risks for
banks in the case of a correction in house prices. Malta's banks are still
dealing with legacy NPAs they accumulated after the slowdown in real estate
prices in 2008-2009," S&P said. 

It added that the Maltese banking sector is likely to maintain a sound funding profile, being heavily reliant on customer deposits that more than cover the banks' funding needs.