BOV’s ‘solid’ performance in first half of 2023 is a sign of its ‘significant progress’, says CEO

Bank of Valletta plc (BOV) CEO Kenneth Farrugia has earmarked the bank’s “solid” performance during the first six months of 2023 as an indication of its “significant progress” across all fronts, particularly sustainability and digitisation.

This came following the publication of the bank’s Half-Yearly Report for the six months ending at 30th June 2023, where it enjoyed a pre-tax profit of €105.1 million at group level, a significant surge from the €72.1 million pre-tax loss of the same period last year. This was also the case at bank level, where pre-tax profit increased to €106.1 million from the €66.7 million loss it had in 2022. BOV noted that the previous loss also included €102.7 million in net settlement of the Deiulemar litigation.

The increase in profitability mainly came as a result of an improvement in operating profit, driven by an increase in operating revenues that reached €202.5 million (First half of 2022: €131.3 million), together with net interest income, which remains BOV’s leading driver for profit with €159.9 million.

The group’s total assets stood at €14.3 billion by the end of the reporting period, representing a contraction of 1.4 per cent when compared to the €14.5 billion recorded at the end of 2022.

Mr Farrugia explained that the bank “continued to strengthen its position” as a leading financial institution in Malta, as it delivered a “solid” financial performance.

“The bank is also progressing in our commitment to delivering customer-centricity excellence and innovation in an ever-evolving industry landscape,” he continued.

He added that the bank is “investing significantly” in business process re-engineering, technology, and digital infrastructure to provide customers with “seamless and convenient banking services”. “Our digital platforms are undergoing substantial improvements to offer enhanced security, efficiency, and a wide range of digital banking solutions. We understand the importance of convenience in today’s fast-paced world, and we are dedicated to meeting your banking needs efficiently and effectively,” he said.

Mr Farrugia added that BOV has made “significant progress” in its efforts to foster sustainability and responsible banking practices, with the belief that “sustainable development is crucial for the long-term prosperity” of the community and for the “preservation of our environment”. By aligning BOV’s business practices with sustainable principles, the bank aims to create a “positive impact on society while maintaining strong financial performance”.

“Looking ahead, we remain committed to our core values of trust, integrity, and innovation. While we sustain our commitment to keep interest rates on home and personal loans at very competitive levels, over the next six months, through our insurance associate and fund management subsidiary, we will be launching a number of products that will provide our depositors with consistent income streams in the short to medium term,” he shared.

He added that the bank will continue to “adapt to the changing needs” of customers and embrace emerging technologies while exploring new opportunities to “deliver exceptional banking experiences”. “Our ongoing investment in talent development, robust risk management practices, and operational resilience will ensure that BOV remains a stable and reliable partner for your financial needs”, Mr Farrugia continued.

He proceeded to express gratitude to BOV’s customers and suppliers for their “trust and continued support”, together with the bank’s staff, whose efforts to “elevate the bank to another level are truly appreciated and your ever continued engagement to the cause is the foundation of our success”.

“These results would have never been possible without your dedication and commitment,” Mr Farrugia concluded, referring to the bank’s workforce.

Also commenting on the results, Chairman Gordon Cordina noted that the “positive performance” reflects the bank’s activities to “optimise its performance within the opportunities created by the higher interest rate environment”.

“With the goal of curbing euro area inflation, the ECB raised its interest rates by a total of 400 basis points over the past 12 months. Looking ahead, further increases are possible, as euro area inflation is proving rather persistent. A normalisation of interest rates is to be expected in the medium term, as the decade of exceptionally accommodative monetary policy has effectively come to an end,” he explained.

He further confirmed that within this context, BOV is “pursuing opportunities for investment to ensure sustainable returns in the medium to long term” from its treasury activities and loan portfolio.

Dr Cordina stated that the Board of Directors is in the process of compiling its data and analyses to consider the payment of a dividend out of this reporting period’s profit. He reaffirmed that BOV’s dividend decisions are “not based on a simple calculation but need to meet important risk and other regulatory criteria, which focus on the strength and viability of the bank’s future business”.

“As Malta’s largest bank, BOV is conscious that its actions have a material impact on the economy and is a key enabler of the country’s economic prospects. In this respect, the bank aims to minimise shocks in the economy, which is a key service for a very small open economy,” Dr Cordina added.

He also noted that the bank is “moving ahead” with initiatives aimed at reducing the carbon footprint of its operations and is “exploring ways how to embed further green priorities in its pricing structures”.

“The bank’s financial performance during the first half of 2023 is a tangible sign that the outlook for BOV is bright. These satisfactory results augur well for the year and play an important consideration in the Board’s approach to the management of the bank’s capital,” he concluded.