Bank of Valletta’s long-term credit rating had been downgraded by financial service provider Standard and Poor’s.
The rating, previously at BBB with a negative outlook was stepped down to BBB- with a stable outlook. The bank's short-term rating was also revised form A-2 to A-3.
The agency cited perceived weaknesses in the bank’s internal control framework and potential impact form its ongoing litigation cases in its decision to downgrade the rating.
Bank of Valletta has had a tough year. In February, it was forced to suspend all its operations after hackers broke into its systems and moved €13 million into foreign accounts.
All of the bank’s functions – branches, ATMs, mobile banking and even email services – were suspended and its website taken offline for a day.
Last month, Times of Malta reported that the financial regulator had written to the bank to express "serious concern" about managerial shortcomings in its operations.
Bank downplays downgrade
The bank’s chairman Deo Scerri has said that the group is in “full transformation mode” and on the path of a two-year program to reform itself with the assistance of two international consultancy firms.
Mr Scerri said the S&P rating action hadn’t been unexpected in view of the fact that the rating outlook had been set as negative the previous year. He said that the factors underlying the decision were already being addressed through the transformation program.
The bank also announced that it had posted a pre-tax €54 million profit for the first half of the year, representing a pre-tax annualised return on equity of 10.7 per cent. In the comparative period of the previous year, BOV had registered a pre-tax profit of €13.5 million, which included a litigation loss provision of €75 million.
The group’s operating income amounted to €127 million. Recurrent costs amounted to €81 million, an increase of 27% over the comparative period.
The bank said that the increase in costs arose mainly on fees and expenses related to BOV’s ongoing transformation program and on the substantial recruitment of resources in the Group’s control functions. The impairment charge for the period is just under €1 million, compared to reversals of €20 million booked for the corresponding period.
It also reported a growth in customer deposits, which grew by €223 million over December 2018, to reach €10.6 billion. The bank said that shareholders’ funds and comprising capital reserves have topped the €1 billion mark for the first time in it’s history.
Mr Scerri also commented on the board’s decision not to distribute and interim dividend, saying that the board had “retained its prudent stance with the aims of further strengthening the bank’s capital buffers”.
“This is in line with our strategy of foregoing short-term benefits in the interest of long-term stability.”
Mr Scerri said that the situation would be reassessed at the end of the year in consultation with supervisory authorities”.