Bank of Valletta Group has reported a pre-tax loss of €55.7 million for the first nine months of the year, caused by the settlement of the Deiulemar court case in May.
Excluding that settlement, the bank said it made a nine-month profit of €47.8 million, up by 3% compared to the same period last year.
BOV had reached a €182.5 million out-of-court settlement over the long-drawn-out Deiulemar bankruptcy case in Italy. Shareholders of the collapsed shipping giant were found guilty of fraud and seven members of the company's founders were jailed by an Italian court in 2014. But BOV had taken over a trust that held €363 million in the company's assets in 2009.
In a statement on Thursday, the bank said revenue for the first nine months of 2022 stood at €202.3m. This constituted an improvement of 16.8%, reflecting the increase in Eurozone interest rates coupled with a rise in volumes in the retail sector, particularly in home lending, cards, and payments. Commission income also grew, particularly in card business.
The bank's operating costs rose at a slower rate, by 6.7 per cent, compared to the same period in 2021.
"This increase was in good part due to human capital requirements in specialised areas, growth in average salaries, and the group’s contribution to the Depositor Compensation Scheme. The need for non-recurring external specialist support relating to Environmental, Social and Governance (ESG) also contributed to the growth in costs," the statement said.
A net impairment charge of €10.1 million at the end of the third quarter of 2022 was taken on account of "evolving risks emanating from geo-political instability factoring in higher inflation and lower GDP growth based on published Central Bank of Malta forecasts".
"The Bank continues to actively assess its expected credit losses as economic circumstances evolve. BOV’s share of results from insurance associates declined significantly compared to the same period in2021, largely driven by the volatility of global financial markets.
"Net loans and advances to customers increased by 5.8 per cent during the first nine months of 2022. Growth was reported in both business and home loans, with the latter being the main driver. Customer deposits up by 4.0 per cent over December 2021, predominantly driven by current and savings accounts."
On the decision by the European Central Bank (ECB) to start raising interest rates, the bank said it will continue to monitor the situation, as well as "the actions of the other major banks in Malta, with the aim of striking the right balance among its stakeholders when setting its interest rate structure".
The bank also said the increase by ECB has benefited the bank as it is no longer paying negative interest when depositing its surplus liquidity.
Highly uncertain global economic situation
In comments during a press conference after the results were announced, BOV chairperson Gordon Cordina said the result came amid a “highly uncertain global economic situation”.
“We have witnessed unprecedented changes in interest rates happening at a quick pace. Markets have reacted negatively, within a context of high inflation for all the wrong reasons…because of supply shocks because of geopolitical crisis.
"This is putting us in a situation where we are not certain about where the economy is heading and whether we will be facing recessionary conditions, globally. We need to put in risk management more than ever.”
The bank, the chairperson said, will continue to support its clients, both those borrowing and depositing. He added, however, that BOV must also give “due count to these risks” so that results, which have been positive and encouraging, can continue to be sustained while meeting risks which are impending in the next few months.
On his part, CEO Kenneth Farrugia said the results are “very encouraging” and reflect all the initiatives taken by the bank.
Asked about delays in customer care services, Farrugia said the bank plans to unveil new “digital channels” by the first quarter of 2023 which will improve the customer experience.