BOV: Creating value for Malta’s economy and shareholders

Bank of Valletta (BOV) almost tripled its share value in the last four years while paying out a record €130m in dividends earlier this year.

BOV Chairperson Dr Gordon Cordina said that while shares in the Bank cost around 75c in 2022, by this year the price per share had rocketed to around €2.10.

"That is quite a substantial growth, and it also reflects the performance and confidence which the market has attributed to the bank – and we're still trading below our net asset value," he said.

The Chairperson noted that if shares were valued according to the balance sheet valuations of the bank, that figure would rise to around €2.50.

Cordina was speaking to Times of Malta in an interview about the Bank's recent performance alongside CEO Kenneth Farrugia, who noted that a recent share buyback scheme had "accelerated" trading in BOV shares.

"If you look at the 40-month value that we've extended to shareholders over this period, it exceeds €1.1 billion, both by way of dividends but also by share price appreciation over that time – that's one of the core focus areas of the bank,” said Farrugia.

"We've really anchored ourselves in ensuring that we're delivering value to shareholders."

Cordina noted that the bank had not utilised all its profits for dividend payments to ensure a balance between meeting shareholder expectations and retaining capital as a buffer to help the bank grow, particularly in its credit offerings.

The Bank's loan book was growing by at least 16 per cent each year, he said, with indications the "strong demand" will continue over the next years.

"This requires not us not only to have deposits, which are also continuing to grow at a rate of €1 billion plus per year, but also to have capital... to ensure that any losses, expected or unexpected, are properly provisioned for.”

Following several years of the bank allocating dividends up to 50% of profits, while continuing to ringfence funds for future growth, "we felt the need and fairness to approve a special dividend", he said.

Cordina added that the bank's actual profits of €260 million had exceeded its maximum guidance for the year.

The special dividend of €130.5 million was announced at the BOV annual general meeting last month.

'Responsibility'

With BOV now the largest bank in Malta, how does it see its role within the country?

"One word: responsibility," said Farrugia.

Noting that no other systemic bank – one whose failure would cause a major economic crisis – in Europe matched BOV's market share of around 50%, the CEO emphasised that BOV therefore had a responsibility to supporting economic growth in Malta.

"If you look at where we are with commercial lending, where we are with deposits, we're hitting those numbers... I see the bank really as a catalyst for continued economic growth," he said.

Farrugia noted that BOV supported businesses from micro and SMEs through to large corporations, meaning it was "not just limited to GDP growth", but also in employment.

The Bank's balance sheet of around €17 billion, stacked up against Malta’s GDP of around €24 billion “says a lot”, he said, describing the relationship between the country and its largest bank as “symbiotic”.

He added the bank had undertaken a number of initiatives to promote 'financial wellness' among the public.

Cordina called BOV the "first and last-resort bank of Malta", while noting its "leading market position" in deposits, home loans and corporate financing.

He said that while the bank would continue its established service for its "traditional clientele", it was also gearing up to increase the scope of its digital offerings to appeal to the younger generation.

Cybercrime and resilience

Increased digital services bring risks, however; Farrugia called cybercrime an "existential threat" facing banking institutions around the world, especially in an era of artificial intelligence and widespread social media use.

He stressed that the "first line of defence is the customer," however, warning that the bank could not simply stop all new transactions for every customer.

Nonetheless, the Bank's outreach was "paying off", he said, while noting there appeared to be more awareness among banking customers of techniques employed by fraudsters.

Cordina agreed, stressing that while the bank continued to invest in infrastructure to protect its critical assets, "this is a war we cannot fight on our own... there is a big part which our customers, employees and systems need to play," he said.

Farrugia emphasised that the bank's focus was "resilience", which Cordina noted also extended to climate resilience. He said the bank could be a "key player" in helping to secure such resilience by favouring clients with better climate credentials.

"We will very soon see that the projects with the right climate credentials will also have the best economic and financial performance," said Cordina.

Farrugia added that BOV had undertaken several initiatives to reduce its carbon footprint, including reducing and centralising printing operations and incentivising its employees to use electric and hybrid vehicles.

He noted that the bank offers green financing options to its customers geared towards renewable energy product financing, as well as offering favourable borrowing rates for companies with better green credentials.