‘A reaffirmation that we are on the right trajectory’ – BOV leadership reacts to S&P rating upgrade

On Friday (today), BOV shared that Standard and Poor (S&P) Global Ratings had raised its long- and short-term issuer credit ratings on Bank of Valletta to BBB/A-2 from BBB-/A-3. S&P Global Ratings also raised the long-term resolution counterparty rating (RCR) to BBB+ from BBB and affirmed an A-2 short-term RCR.

BOV Chairman Gordon Cordina and CEO Kenneth Farrugia expressed their “extreme satisfaction” to the latest announcement of the bank’s upgraded rating.

Dr Cordina stated that “this upgrade by S&P Global Ratings is yet another testament to the sustained progress that the Bank has been making. A significant part of our efforts has been directed towards restoring sustained profitability and making the BOV Group secure, for the benefit of our stakeholders, shareholders, and the wider community. This upgrade is recognition of this effort, and a reaffirmation that we are on the right trajectory, giving us the confidence to continue along this transformation journey.”

Mr Farrugia echoed Dr Cordina’s comments, crediting this positive announcement to the bank’s clear strategic direction, its transformation program, commitment to excellence and leadership across its operations.

In addition, the drive to ensuring that the bank maintains a strong capital base has been critical in this positive rating. “This upgrade reflects BOV’s strong financial position and validates our strategic vision and ongoing efforts to strengthen the bank’s capital, which will in turn support the growth of our business in the years ahead of us. The very recent successful closure of the €100 million five per cent unsecured subordinated bonds (2029-2034), which was fully subscribed within two days of its launch to the market, reflects the public’s overwhelming trust in the bank,” he said.

The stable outlook reflects S&P’s view that BOV will maintain an additional loss-absorbing capacity (ALAC) ratio well above four per cent of S&P Global Ratings risk-weighted assets (RWAs) metrics over the next two years, while preserving the bank’s dominant market position in Malta and its strong capitalisation.

BOV had previously had its rating upgraded in September 2023, when S&P noted the bank’s strong capitalisation and resilient asset quality metrics, as well as the diminishing reputational risks in Malta’s banking sector. At the time, it added that it would consider increasing BOV’s rating once the bank registers an additional loss-absorbing capacity buffer that exceeds the four per cent risk-adjusted capital ratio threshold. 

The upgrades follow consecutive downgrades in BOV’s rating in 2018 and 2019, where S&P cited reputational and operational risks for the Maltese banking sector in general, as well as potential litigation charges related to the Deiulemar case for BOV in particular. BOV controversially settled the Deiulemar case for €182 million in mid-2022.

In December’s update published by S&P, it expects the bank’s dominant market position and strong capitalisation to likely continue supporting business stability in Malta over the next few years.

BOV, it stated, remains the largest bank in Malta with a very strong market share of around 50 per cent in both commercial loans and customer deposits at end-September 2024. It is also expected that the bank will continue benefiting from supportive economic conditions, marked by solid economic growth.