In the first half of 2024, the Bank of Valletta Group delivered a strong financial performance, with pre-tax profits of €148.2 million, representing an increase of 40.9% over the same period last year. The increase in profitability resulted from strong growth in interest income, and to a lesser extent, from net fee and commission streams, underpinned by sustained efforts to improve cost effectiveness and efficiency. In tandem, the Bank continued to pursue a balance sheet optimisation strategy, shifting short-term liquidity into long-term assets to ensure longer term profitability.
The Bank registered Net Interest Income (NII) of €193.6 million, representing an increase of 21.1% when compared with the same period last year. Net Fee and Commission Income increased by 6.5%, reaching €36.7 million, with positive results registered in core income areas including credit-related and trade finance business, as well as brokerage and other investment related activities.
Operating costs registered a decrease of €2.3 million, down to €90.7 million, with costs of human capital the primary driver, followed by technology-related expenses. The Bank’s efforts to manage its costs resulted in cost reductions in the majority of cost categories, with the Cost-to-Income ratio reducing sharply from 47.9% in June 2023 to 40.7% in June 2024.
The Group’s strategy to optimise the balance sheet continued to be centred on its core financing business and management of excess liquidity. The Group’s treasury continued to perform well on the strength of increased volumes and improvements in the net interest margin on the investment portfolio, as well as interest being derived on the cash deposits held with the Central Bank. While cash and short-term funds decreased by €1.1 billion compared to end December 2023, investments in the treasury portfolio increased by €723.2 million.
Loans and advances to customers amounted to €6.6 billion at the end of the first half, resulting in a net increase of €374 million, with high growth levels on both business and retail advances. On the liabilities side, customer deposits experienced a marginal increase of €14.9 million, reaching €12.2 billion. This led to a favourable increase in the Group’s gross loan-to-deposits ratio from 51.7% at end 2023 to 54.7% at end of June 2024, in line with the Bank’s long-term direction.
Following these developments, the Bank retained a comfortable Liquidity Coverage Ratio of 357% as at 30 June 2024. With a continued focus on asset quality and related impairments, the non-performing exposure ratio moved below the 3% mark by June 2024. Total Group Equity stood at €1.3 billion, an increase of €68.7 million, while the net asset value per share at the end of June 2024 stood at €2.3 per share (December 2023: €2.2 per share).
BOV chairman Gordon Cordina“I am pleased to report yet another strong financial performance by the BOV Group for the first six months of 2024,” said BOV chairman Gordon Cordina. “This is all the more significant within the context of a weak international economic scenario clouded with uncertainty. BOV’s profitability continued to benefit from the environment of high international interest rates and our decision to maintain interest rates unchanged for most clients while maintaining a very strong capital base.”
Dr Cordina added: “We registered a solid performance in most of our core areas of business. We have seen growth in customer lending, contained movements in customer deposits and have continued to expand our bond portfolio with the aim to lock in returns over the longer term. The BOV Group’s balance sheet figures are extremely encouraging, with pre-tax return on average equity (ROAE) of 22.8% and the Group’s Common Equity Tier 1 Capital (CET1) ratio in June 2024 at 22.3%.
“In the months to come we will strengthen our resolve to continue along this trajectory. We will endeavour to sustain the Bank’s performance, renew our resolve to become ever more customer centric, improve our digital maturity and continue to engage with our stakeholders to highlight the importance of ESG and instigate behavioural change particularly through pricing incentives to boost the attractiveness of ESG for businesses and households alike. The Bank’s financial performance reinforces our aspirations to be leaders and innovators in the financial sector and a catalyst for positive change.”
Kenneth Farrugia, BOV CEO said: “During the first half of 2024, the BOV Group maintained its strong financial standing, building on the excellent performance registered in 2023 and sustained in the first quarter of 2024. The positive performance was characterised by strong growth in our operating income, across our interest and non-interest income driven lines of business, while also maintaining a strong focus on our costs. We continued to gain traction in both commercial and retail financing, and I am pleased to note the continued interest in our green financing solutions. On the net fee and commission income side, the Bank has continued to register positive traction across a number of business areas.
Kenneth Farrugia, BOV CEO“Reflecting on this performance, I cannot but reaffirm our unwavering commitment to continue strengthening the quality of our customer service experience across our channels. We continue to invest in our digital service offering and will also shortly be initiating the process to modernise our ATM fleet across Malta and Gozo.
“I am pleased to note that our efforts in improving the customer experience is bearing fruit. Our ongoing customer panels are showing improvements in our net promoter scores and our customer service ratings, with customers mentioning good service and overall touchpoint satisfaction as key factors to this improvement. The current ratings are in line with our ambitious targets for the year, and the insights garnered are providing us with further opportunities to keep enhancing our service offer, particularly in digital services and in speed of service, to further align with customer expectations.
“The Bank’s performance registered so far is the result of the ambitious strategy that we are taking forward, a strategy aimed at positioning Bank of Valletta as Malta’s leading and go to Bank. Over the coming months we will continue taking on the challenges of a modern and fast-paced financial industry as we continue our journey that is taking this Bank from good to great.”