Issue link: https://maltatoday.uberflip.com/i/1357219
4 maltatoday | WEDNESDAY • 31 MARCH 2021 NEWS PAUL COCKS BANK of Valletta has reported profit be- fore tax of €15.2 million, down from €89.2 million in 2019. When adjusted for a number of specif- ic items PBT would increase to €100.7 million (2019 - €138.1 million), a reduc- tion of €37.4 million or 27% when com- pared to prior year. The most significant specific items were: €38.1 million related to increases in credit provisions with charges pre- dominantly attributed to COVID-19; €39.8 million in impairment charges for long outstanding non-performing loans driven by changes in regulatory policy in light of current economic en- vironment; €15.8 million investment in the Bank's transformation programme, offset by an €8.1 million net litigations provision release following the settle- ment of the Swedish Pensions Agency (SPA) case. The reduction in the normalised op- erating profit was driven by lower net interest income, COVID-19 impacted commissions and Ttading revenues and higher operating costs. Net interest income of €146.8 million was €6 million lower than 2019, but still the main revenue driver. Growth in deposits coupled with per- sistent negative interest rates continued to impact the bank's net interest mar- gin. Securities, previously generating positive returns, have been maturing and are now being re-invested at lower or negative rates. BOV's commission and trading rev- enues of €78.8 million, down by €12.1 million year on year, were most severe- ly impacted by the COVID-19 restric- tions. Decreases in revenues were pre- dominantly in the card business, where substantially lower card usage was re- corded, and in the payments business, as economic activity slowed significant- ly, especially during the initial lock- down period. A slower trend was similarly noted in the foreign exchange business due to reduced foreign trade and travel, and to a smaller degree through the reduction in our appetite for higher risk business," Hunkin said. The bank's operating costs increased by €15.9 million or 11.5% to €154.6 mil- lion. This was mostly due to increased em- ployee compensation, attributable to retirement benefits of €5.2 million paid under the Voluntary Early Retirement Scheme, as well as continuous invest- ment in new skills and resources. "In addition, the investment in our new IT core banking system imple- mented at the start of this year has led to increased amortisation cost of €4 million," Hunkin said. Total assets of the Group reached €12.9 billion as at December 2020, an increase of 5% over 2019. Customer deposits grew by a further 6%, or €642 million, during the last year. Customers continued to prefer short term deposit products and channelled their savings into the banking system due to the lack of more beneficial opportunities in the market. Despite continued momentum in the loan book, the liquidity position remained very strong with cash and short-term funds increasing by €106.6 million or 2.6% over the year. "The Group liquidity ratio stands at 463% reflecting the extraordinary de- posit growth that has outpaced loan demand," Hunkin said. "This excess liquidity, which continues to put pres- sure on the net interest margin, was partly mitigated by increased invest- ment, of almost €400 million, in Treas- ury bills and Malta Government bonds." Deiulemar Although having successfully ad- dressed two of the historic litigation claims long outstanding against the Group, the Deiulemar claim remains outstanding and continues to be signifi- cant. The Group is adamant, based upon legal advice it has received – including one from Italy's leading independent and specialist authority in these areas – that this claim is wholly without merit. BOV has been making concerted ef- forts on all fronts to ensure a fair and independent hearing which it believes would reject this claim. "The issue is being complicated by the fact the case is being heard in the Tribu- nal of Torre Annunziata, amidst signifi- cant local pressures that serve to deflect proper legal proceedings," Hunkin said. "The bank continues to explore every legal and other proper available avenue at its disposal to bring about a change in the judicial process and deliver a fair outcome. Until the bank is successful it needs to demonstrate that, however un- likely, it has sufficient capital resources to withstand any possible adverse out- come." US corresponding services Bank of Valletta will be offering corre- sponding services in US dollars through Western Union as of tomorrow, CEO Rick Hunkin announced this afternoon. Following a press conference on the bank's financial results for 2020, Hunkin told MaltaToday that the bank had secured an agreement with Western Union to offer corresponding services in US dollars to the bank's customers, while discussions with Raiffeisen Inter- national Bank were still underway. Raiffeisen had originally announced it would stop offering corresponding ser- vices to BOV by the end of December 2020. "Since then, we managed to move that deadline first to the end of March this year and, recently, we postponed the end of services to the end of May," Hunkin said. "In the meantime, talks with Raiffeisen continue." He said that with the new agreement with Western Union coming into force tomorrow, he did not envisage BOV hav- ing any problems providing correspond- ing services in US dollars to its clients. BOV reports pre-tax profits of €15.2m in COVID-impacted year Bank of Valletta has reported profit before tax of €15.2 million, down from €89.2 million in 2019