The Bank of Valletta Group has announced a profit before taxation of €47.5 million in the six months ended 31 March 2010, a jump from €6.3 million in the first six months of the previous financial year.
The group said that the Net Interest Margin for the period, of €61.9 million, increased by €3.5 million from €58.4 million to March 2009.
"The European Central Bank (ECB) has not implemented any changes to the historically low reference rate of 1% since May 2009, and net interest margin earnings will remain compressed for so long as rates are maintained at this low level. Given the fragility of the economic recovery, it is unlikely that the ECB will make any changes to its key reference rate until towards the end of 2010 or early 2011 at the earliest," the group said.
Net Commission and Trading Income showed strong growth of €5.9 million for the period - up by nearly 24% from the equivalent period to March 2009. This improvement came from a wide cross-section of activities, with investment related activities (Capital Markets, Funds and Wealth Management, Bancassurance and Stockbroking) producing particularly strong results as investors regained their poise and appetite for the equity and bond markets after the shocks of 2008 and 2009.
Foreign trade and exchange business was also robust, and the cards business continued to demonstrate improved results, the group said.
Operating expenses for the six months totalled €40.3 million, an increase of just 3% over the previous year, with most of the increase arising from personnel and IT related expenses.
As anticipated, the difficult economic conditions of the past 18 months had a knock-on effect on credit quality, the group said.
"The specific impact to date has been modest and manageable, and the higher impairment charge for the period has come from an increase in the non-specific collective allowance, as management has adopted a prudent and cautious outlook to certain sectors at a time when the overall economic situation remains characterised by some uncertainties" the group said.
Overall credit quality remained satisfactory, with the proportion of non-performing accounts to total loans and advances showing only a marginal increase.
The six month period to 31 March 2010 saw a further reversal of approximately €6 million of the unrealised fair value movements booked in previous periods. This compared with a markdown of €32 million for the six month period to March 2009 - a date which represented something close to the low point of the financial crisis. A further sum of €6.2 million before taxwas credited directly to reserves, representing gains on the available for sale portfolio.
€7.2m LOSS FROM HOLDING IN MIDDLESEA INSURANCE
When reporting on Jointly Controlled and Associated Companies, which represent the BOV insurance sector interests in Middlesea Valletta Life Assurance Company Limited (MSV), in which BOV has a direct equity interest of 50%, and in Middlesea Insurance plc (MSI), where holding increased to 31.08%, the group said its share of loss was of €3.6 million made up as follows:- MSV share of profit €3.6m; MSI share of loss €7.2m. Net loss for the period €3.6million
"The above charge represents BOV's share of profits and losses on its MSV and MSI shareholdings based on the audited accounts of these companies through to 31 December 2009, and therefore includes the impact on MSI's results of the write off of its entire investment in Progress Assicurazioni SpA, following the decision that was taken to wind up the operations of that company," the group said.
The BOV group Total Assets as at the end of March 2010 stood at €6.39 billion (September 2009 - €6.21 billion; March 2009 - €6.10 billion) while total Equity amounted to €445.6 million (September 2009 - €434.6 million; March 2009 - €393.1 million). Loans and Advances, net of impairment allowances, stood at €3.5 billion, an increase of €240 million or 7.4% since 30 September 2009.
DIVIDEND
The Board has resolved to declare an Interim Dividend of €0.075 per share (gross). This compares with last year's interim dividend (as restated for the bonus issue effected in January 2010) of €0.028 per share. This dividend will be paid on 28 May 2010 to shareholders on the Bank's Register of Members at the close of business on 12 May.
In its outlook, the Board said it expects that the general economic environment will continue to improve - but that this recovery will be slow and somewhat erratic, with the possibility of set-backs along the way.