‘We have made a difference in maintaining economic stability’ – Malta Development Bank CEO

Malta Development Bank (MDB) CEO Paul V. Azzopardi has lauded the bank’s role in helping maintain economic stability during the COVID-19 pandemic, while also protecting social stability through job security.

This came as part of the bank’s Annual Report for 2022, which represents Mr Azzopardi’s first as CEO at MDB, after he was appointed to the role last July, having first joined the bank as Deputy to the CEO in 2020.

His time at the bank has been blighted by the effects of the COVID-19 pandemic, yet he remarks that “fortuitously, but fortunately, the MDB was already a well-functioning institution” when the pandemic struck, driving global economic practically to a “halt”.

MDB was established in 2017 with the aim of contributing towards sustainable economic development that “benefits the Maltese people in line with public policy objectives”.

“Half a decade might be just a blip in history. Yet, a look back at where we came from and what has been achieved so far and under which circumstances, renders us both proud and humble at the same time. The numbers we have managed to produce in such a short period are tangible evidence of the positive impact that the bank succeeded in exerting on Malta’s economic development in recent years,” Mr Azzopardi explained.

He remarked that the pandemic, together with the war in Ukraine, have “starkly demonstrated the need to have promotional banks in place” in order for them to “speedily act counter-cyclically to mitigate the adverse impacts of the prevailing economic cycle”, before adding that Malta was “no exception”.

“The MDB was the instrument which enabled Government to unlock more than half a billion euro in commercial bank liquidity and achieve the benefits of financial leverage. This was an excellent demonstration of the benefits of having a national promotional bank equipped with the institutional and operational capacity to support the economic, with Government support. Suffice to say that during these five years, the MDB reached over 700 businesses which employ some 40,000 persons, and more than 400 students, facilitating €580 million in favourable financing,” he said.

Over the course of its five years of operations, MDB has been guided by its strategic objectives, “namely filling SMEs financing gaps, supporting infrastructural development, being active in closing social gaps, promoting the adequate financing of horizontal sectors, such as digitalisation and green initiatives, acting countercylically and supporting the country’s financial stability”, Mr Azzopardi said. He added that these initiatives form the bank’s profile in the local economy, which even though is a “young profile”, is also a “useful and effective one”.

He remarked that MDB strives to maintaining a “constant flow of discussion” with commercial banks, business representatives, and also government entities and institutions, in order to “better understand the needs of the market and society”.

Mr Azzopardi explained that MDB contributes around 13 per cent of all the banking system’s outstanding loans to Maltese businesses, with the “most visible impact” of this being during the pandemic where the aggregate volume of business loans by Malta’s banking system increased by nine per cent, where in the absence of MDB’s support, it would have decreased by 2.5 per cent.

“We have made a difference in maintaining economic stability while protecting social stability by ensuring that as much as possible jobs were not lost. And we did this sustainably by using the massive guarantee provided by Government to leverage commercial bank liquidity. Due to the pace of the post-pandemic recovery and the way we designed our scheme we have so far had negligible borrower defaults. This means that Maltese businesses managed to leap over the pandemic without imposing a burden on the taxpayer. It is indeed a demonstration of the ‘doing-more-with-less’ principle,” he remarked.

He was also full of praise towards the progress made by the bank towards having a better international statute, having “accomplished a lot” over the past two years when it comes to relations with international institutions. He added that over 2022, MDB has “solidified its relationship” with other EU promotional banks, enabling the “exchange of best practices and the reciprocal transfer of knowledge”.

Locally, the bank also moved its offices from the small Central Bank Annex on Pope Plus V Street in Valletta to a larger building at Market Street, Floriana. Mr Azzopardi stated that this move was necessitated due to “increasing staff numbers”.

He also stated that as the Central Bank of Malta forecasts Malta’s GDP growth to moderate significantly from 6.8 per cent in 2022 to 3.7 per cent in 2023, the MDB shall be “both proactive and adaptable to the current economic challenges”, especially aiming to be “at the fore to proactively promote entrepreneurship, innovation, investment, and sustainable growth”.

“We have invested heavily in business development so that we can continue to offer a wider range of facilities consistent with the economic and social needs of the nation,” Mr Azzopardi continued, making reference to the launch of seven new financing programmes in 2022, which so far have been well received.

Additionally, in the Annual Report, MDB announced a profit before changes in expected credit losses of €1.2 million, a sharp improvement from 2021’s €363,004 loss. When taking away changes in expected credit losses, profit stood at €651,500, an increase of 160.7 per cent from the €1.1 million loss which was recorded in 2021.

This steady improvement in performance largely came as a result in a rise in net interest income, totalling €509,541, 583.6 per cent greater than 2021’s €105,374 net interest expense. This was also driven by €2.6 million in administrative fee income over 2022 (2021: €1.6 million).

Total assets expanded significantly up to €99 million from 2021’s €80.6 million, particularly as a result in rises in financial investments, as well as loans and advances to customers.

In terms of the bank’s overall performance, he noted that MDB “continued consolidating” its internal operations during 2022 after two years of growth and transformation on the back of “accelerating activity” during the pandemic.

Concluding, he proceeded to thank MDB’s staff, Chairman Josef Bonnici, the Board of Directors, its EU partners, local banks, and also the Ministry for Finance and Employment, as well as the Managing Authority for EU Funds. Mr Azzopardi also expressed gratitude to his predecessor Rene Saliba, “who steered the institution from its birth and throughout its infancy” and for guiding it through “the challenging developments” which characterised the initial years of its existence.