The Bank of Valletta Group has announced a profit before tax of €163.5 million for the first nine months of the year, compared to a loss before tax of €48.7 million, in the same period a year ago.

The bank said the favourable performance for the first three quarters of 2023 was attributable mainly to the improvement in the group’s operating revenues totalling €315.9 million, a growth of €113.7 million or 56% compared with the same period in 2022 (9M 2022: €202.3 million).

Net interest income continued to be the dominant catalyst with €253.8 million (9M 2022: €137.3 million), an increase of €116.5 million or 85% compared to the same period in the prior year.

This was primarily driven by strong growth in the bank’s personal and business lending business with the loan portfolio exceeding the €6 billion mark (December 2022: €5.6 billion).

In addition, improved returns from the bank’s treasury portfolio as well as the positive impact of higher rates of interest on the euro have equally contributed to the strong returns.

Net fees and commissions, exchange and other revenues amounted to €62.1 million, down by €2.8 million or 4% (9M 2022: €65.0 million).

Net commissions declined by €0.8 million, or 2% vis-à-vis the same period last year mostly due to the removal of deposit-related fees to corporate customers and a persisting slowdown in investment-related commissions as a result of the continued volatility in the world’s capital markets driven by the geopolitical tensions which is in turn dampening investor sentiment.

Operating costs in the first three quarters of the year amounted to €139 million (9M 2022: €132.3 million) an increase of €6.7 million or 5% compared to the same period in 2022.

Net Expected Credit Losses (‘ECL’) for the period to September 2023 was a net charge of €13.1 million (9M 2022: €10.1 million net charge). 

As at September 30, the ECL coverage for credit-impaired assets stood at 53.6% (December 2022: 53.8%) while the ratio of non-performing to the total credit portfolio stood at 4.0% (December 2022: 3.5%).

An allocation of an additional €6.7 million was made in the first nine months of 2023 (9M 2022: €6.6 million) for the execution of strategic actions.

The share of profit from insurance associates for the first three quarters of 2023 amounted to €6.4 million, aligned with the recently adopted IFRS 17 standard implemented by the associates (9M 2022: €1.5 million restated).

BOV group financial position

The group’s total assets reduced by €118.8 million and stood at €14.4 billion as at end of Q3 2023, lower by 1% compared to the year ended 2022 (December 2022 restated: €14.5 billion). Its liquidity ratio as at 9M 2023, stood at 458.5%, up from 426.3% as at December 2022, significantly above the minimum regulatory requirement.

Effective management of surplus liquidity was upheld in the first nine months of the year with cash and short-term assets decreasing by 35% or €1.2 billion. Net expansion in the loan portfolio was of €401.5 million or 7%.

The treasury portfolio increased by €556.8 million (12%), with the vast majority measured at amortised cost reflecting the bank’s primary business model to hold securities until maturity with a view to collecting interest revenues over the life of the investment. Customer deposits contracted by circa 1% in the last quarter and 4% since December 2022, in line with the bank’s expectations.

The increase in loans experienced both in the corporate and retail lending portfolios led to a favourable increase in the group’s net loans to deposits ratio from 46.0% in December 2022 to 49.5% as at the end of September 2023.

Total group equity increased to €1.2 billion, up by €108.5 million on December 2022 as restated. 

The group’s capital ratios remained strong and above regulatory requirements, with the CET 1 and total capital ratios as at September 2023 of 22.7% (December 2022: 21.8%) and 26.1% (December 2022: 25.4%), respectively.

The 2023 capital ratios are inclusive of 9M 2023 profits and proposed interim dividend for comparative purposes. The Group’s net asset value as at  September 30  amounted to €1.2 billion resulting in €2.1 net asset value per share (December 2022: €1.1 billion restated resulting in €1.9 net asset value per share).