Issue link: https://maltatoday.uberflip.com/i/1511181
5 NEWS 9.11.2023 BOV Group has announced that prof- it before tax for the first nine months of 2023 was €163.5 million compared with a loss before tax of €48.7 million, as re- stated, in the comparative period. Group profits have been restated by €7.0 million in share of results from insurance associ- ates, reversing a €5.4 million loss in Sep- tember 2022. is was a result of the implementa- tion of IFRS 17 by the Group's associated companies, which accounting standard introduced a new methodology for the valuation of insurance contracts. e per- formance of the Group in 2022 was im- pacted by the out-of-court settlement of the Deiulemar case. Excluding the impact of the settlement, the Group's results for the comparative period were a profit before tax of €54.8 million restated. e favourable performance for the first three quarters of 2023 was attributable mainly to the improvement in the Group's operating revenues totalling €315.9 mil- lion, a growth of €113.7 million or 56% compared with the same period in 2022 (9M 2022: €202.3 million): • Net Interest Income continued to be the dominant catalyst with €253.8 million (9M 2022: €137.3 million), an increase of €116.5 million or 85% compared to the same period in the prior year, reflecting a further growth in customer lending and proprietary investment portfolios. Furthermore, the upward repricing of interest rates, a larger investment book coupled with positive returns on liquid assets invested short-term continue to substantially benefit the interest income revenues. Higher interest expense was also regis- tered this financial period primar- ily due to the 10% Callable Senior Non-Preferred Notes, issued by the Bank in 4Q 2022 to meet regulatory requirements. • Net Fees and Commissions, Ex- change and other revenues amount- ed to €62.1 million, down by €2.8 million or 4% (9M 2022: €65.0 mil- lion). Net commissions declined by €0.8 million, or 2% vis-à-vis the same period last year mostly due to the removal of deposit-related fees to corporate customers and a persisting slowdown in invest- ment- related commissions. e latter was partially compensated for by growth in advances and capital markets related commissions. • Operating costs in the first three quarters of the year amounted to €139.0 million (9M 2022: €132.3 million) an increase of €6.7 million or 5% compared to the same peri- od in 2022. is net movement is owing to lower regulatory costs and professional fees offset by further investment in human resources and digitisation efforts. Net Expected Credit Losses ('ECL') for the period to September 2023 was a net charge of €13.1 million (9M 2022: €10.1 million net charge). is charge repre- sented business growth and stronger coverage against specific exposures with increased risk offset by releases in ECL on facilities with improved collateral cover- age or reduced outstanding balances. e Bank's policy to build a robust cov- erage against high-risk non-performing exposures persists with a €3.7 million charge as part of the total net ECL charge for the period. Write-off of non-performing debt (net of recoveries) amounted to €1.8 million charge. As per Company Announcement (BOV461), the Bank is currently in ad- vanced negotiations to sell a portion of its portfolio of non-performing loans with a view to strengthening its capital and liquidity buffers, and to ensure that the Bank's resources are focused on servicing loans with a better prospect of recovera- bility. As at 30 September 2023, the ECL cov- erage for credit-impaired assets stood at 53.6% (December 2022: 53.8%) while the ratio of non-performing to the total credit portfolio stood at 4.0% (December 2022: 3.5%). e Bank sustained its momentum in executing strategic actions, with the Bank allocating an additional €6.7 million in the first nine months of 2023 (9M 2022: €6.6 million). e share of profit from insurance asso- ciates for the first three quarters of 2023 amounted to €6.4 million, aligned with the recently adopted IFRS 17 standard implemented by the associates (9M 2022: €1.5 million restated). Group financial position e Group's total assets reduced by €118.8 million and stood at €14.4 billion as at the end of the third quarter of 2023, lower by 1% compared to the year ended 2022 (December 2022 restated: €14.5 bil- lion). e decrease was driven by lower levels in customer deposits while still support- ing growth in the loan book and further investment in treasury securities. e Group's liquidity ratio as at 9M 2023, stood at 458.5%, up from 426.3% as at De- cember 2022, significantly above the min- imum regulatory requirement. Effective management of surplus liquid- ity was upheld in the first nine months of the year with cash and short-term assets decreasing by 35% or €1.2 billion. During the period to September 2023, the Bank assisted both the business and personal clients with their funding re- quirements, leading to a net expansion in the loan portfolio of €401.5 million or 7%. In view of the increased investment opportunities, the treasury portfolio in- creased by €556.8 million or 12%. e vast majority are measured at am- ortised cost reflecting the Bank's primary business model to hold securities until maturity with a view to collecting interest revenues over the life of the investment. Customer deposits contracted circa 1% in the last quarter and 4% since December 2022, in line with the Bank's expectations given the current market conditions with positive interest rates and various invest- ment opportunities including within the local market such as Malta Government Bonds and other private issues. Net loans and advances to customers as at 30 September 2023 amounted to €6.0 billion (December 2022: €5.6 billion). e increase in loans was experienced both in the corporate and retail lending portfoli- os. ese developments led to a favourable increase in the Group's net loans to de- posits ratio from 46.0% in December 2022 to 49.5% as at the end of September 2023. Total Group Equity increased to €1.2 billion, up by €108.5 million on the De- cember 2022 position, as restated. Group equity as at end 2022 has been restated, against the Investment in equity-account- ed investees, to reflect the new value of investment following IFRS 17 implemen- tation. e Group's capital ratios remained strong and above regulatory require- ments, with the CET 1 and total capital ratios as at September 2023 of 22.7% (De- cember 2022: 21.8%) and 26.1% (Decem- ber 2022: 25.4%), respectively. e 2023 capital ratios are inclusive of 9M 2023 profits and proposed interim dividend for comparative purposes. e Group's net asset value as at 30 Sep- tember 2023 amounted to €1.2 billion resulting in €2.1 net asset value per share (December 2022: €1.1 billion restated re- sulting in €1.9 net asset value per share). Strategy 2023 update During the last quarter, the Bank worked diligently to further enhance banking ser- vices, improve customer experiences, and increase operational efficiency. To date, substantial strides were made in these key focus areas. e strategy remains firmly anchored on business process re-engineering, a critical move designed to enhance operational efficiency, reduce costs, and improve the Bank's financial performance. e Bank has been making significant strides in streamlining its processes, eliminating redundancies, and automat- ing routine tasks, allowing its teams to focus on more strategic, value-adding activities. In line with its commitment to uphold the highest standards of corporate gov- ernance, the Bank continues to make sig- nificant investments in ensuring full com- pliance with its regulatory obligations. e Bank has worked closely with regu- latory bodies and established robust sys- tems and processes to meet and exceed its compliance requirements. Recognising the increasing role of tech- nology in shaping the future of banking, the Bank has been making considerable improvements to its digitisation efforts. e Bank is utilising emerging technol- ogies to digitise its operations, enhance its online platforms, and offer innovative digital banking solutions to its customers by leveraging the Voice of the Customer insights. BOV records €163.5 million in profit before tax in Q1 - Q3