Bank of Valletta Group has reported a profit before tax of €13.8 million for the first six months of 2020 (compared to €54.3 million in 2019), representing an annual pre-tax return on equity of 2.6 per cent.
The bank noted that the reduction in profit is a result of the COVID-19 pandemic which has impacted all its business lines, as well as with de-risking initiatives which intensified over the past months.
The results for the period under review also include impacts from a number of other areas, including increased depreciation on new IT investments, staff costs as the bank invested more in risk and compliance resources, and expected reduction in foreign exchange and commission income resulting from the de-risking initiatives which have been carried out over the last 12 months. Total costs for the first half of the year increased by €8.2 million to €89.5 million.
Net interest income, which remains the main revenue driver for the group, amounted to €72.3 million, €5.3 million less than the income registered for the same period in 2019.
The persistently low to negative interest rate environment, coupled with a conservative risk appetite, limited investment opportunities and increased levels of liquidity which attract negative interest, resulted in lower earnings on the Bank’s investment portfolio.
Demand for credit was primarily related to liquidity shortages brought about by the COVID-19 pandemic. During the period, the demand for home loans was subdued when compared to previous years and this is mostly attributed to changed consumer behaviour influenced by the pandemic situation.
Commission and trading profits closed at €37.0 million, 19 per cent lower than the first six months of 2019.
The economic slowdown caused by COVID-19 had an adverse effect on commissions earned, especially those relating to the card and payment business and investment related products. Income from foreign exchange transactions was also negatively impacted.
In its statement, BOV said it remains highly liquid, with cash and short-term funds increasing by €178.3 million (4.3 per cent) during the first six months of 2020. Customer deposits increased by over €500 million since the start of the financial year and reached €11.1 billion at the end of June 2020.
Net loans and advances increased by €91 million since December 2019, an annualised growth rate of 4 per cent, and stand at €4.7 billion at 30 June 2020.