Author: Mel Chamber

Bank of Valletta’s first Financial Well-Being Centre officially opened its doors last week, marking a significant milestone in the local financial services sector. The opening was attended by the Bank’s Chairman Dr Gordon Cordina, CEO Kenneth Farrugia, Chief Personal and Wealth Officer Simon Azzopardi and Chief Operations Officer Ernest Agius.

The Financial Well-Being Centre, located in St Anne Street Floriana, offers a comprehensive service to both personal and business customers. Services offered include financial planning and budgeting, lending, investments and retirement planning. The service is offered specifically through appointments with dedicated relationship managers or other specialised employees who are experts in their field, offering one-to-one personal meetings in a private space to ensure full client privacy and confidence. Customers will be served at their convenience by the same persons who assist them at their branch; they can also request other experts for specific services.

In his opening address, Kenneth Farrugia, BOV CEO expressed his satisfaction at the Bank’s progress in taking customer experience to the next level. “We are truly pleased to open the Bank’s Financial Well-Being Centre in Floriana,” he said. “This is both a first for BOV and a first for the Maltese islands, in line with our mission to empower individuals with the knowledge and tools they need to make sound and informed financial decisions. This new Centre represents a crucial step forward in our customer-centric driven strategy as we focus on taking a holistic approach to the Bank’s service experience.”

Simon Azzopardi, Chief Personal and Wealth Officer continued to expand on the Centre’s holistic approach to customer service. “Our Centre is specifically designed to offer a wide spectrum of services that encompass all that our customers may need at every stage of their financial journey. We truly believe in the financial wellbeing of our customers and this personalised, one-on-one approach will ensure that our clients receive expert advice that will truly help them meet their financial objectives.”

Dr Gordon Cordina, BOV Chairman highlighted the strategic importance of the Centre. “The establishing of this Centre underscores the Bank’s commitment to fostering financial resilience in today’s society. We are intrinsically linked to the Maltese economy and in our 50-year history have been present in the lives of the majority of Maltese. The Bank is ensuring that its physical presence in localities around Malta and Gozo is cemented not only by the traditional branch, but also by other more innovative outlets, making the Bank even more relevant today. This Centre reinforces our aspirations to continue to be leaders and innovators in the financial sector and a catalyst for positive change.”

Customers wishing to discuss their financial circumstances with our team at the new BOV Financial Well-Being Centre can apply online for appointments. Alternatively, they may scan the QR Code available outside the Centre itself to access the booking application on bov.com.

HSBC Bank Malta reported record half year profits reflecting revenue growth, investment in people and technology as well as strong credit quality of the loan book. A record profit performance of €78.6m in the first half of the year has enabled us to continue the trend of rewarding our shareholders with the highest interim dividend over the last 10 years. The Directors are recommending a gross interim dividend of 10 cents per share.

Financial performance

• Profit before tax increased by €19.3m to €78.6m, mainly driven by an increase in revenue due to the higher interest rate environment and higher credit recovery which was partially offset by higher costs as the bank continued to invest.
• Revenue increased by €21.5m or 20% driven by rising interest rates and a 34% increase in trading income. Progress was also reported in net fee income and income from the insurance subsidiary.
• A release of €7.0m was reported on expected credit losses (‘ECL’) in view of curing of non-performing loans and releases of overlays held by the bank in relation to inflationary pressures.
• Costs are €6.6m higher than the same period in 2023. This increase was largely driven by the investment in people, technology as well as the new headquarters in Qormi, ‘HSBC Hub’.
• During the first six months, loans to customers and deposits were slightly lower than those reported at 31 December 2023.  
• Profit attributable to shareholders of €50.7m for the six months ended 30 June 2024 resulted in earnings per share of 14.1 cents which compared favourably with 10.7 cents in the same period in 2023.
• An interim gross dividend of 10 cents per share is being recommended.
• Return on equity of 18.3% for the six months ended 30 June 2024 compared favourably with 16.2% for the same period in 2023.
• Cost efficiency ratio (‘CER’) improved to 43.9% from 46.6% in the same period last year as the increase in revenue outweighed the increase in costs.
• The bank maintained a strong liquidity and capital position as at 30 June 2024, with a   Liquidity Coverage Ratio of 552% and Tier 1 Capital of 21.1%.

Financial performance

Profit before tax for the six months ended 30 June 2024 was €78.6m, an increase of €19.3m from the same period in 2023. Higher profits reflect an improvement in all revenue lines as well as a higher recovery of expected credit losses (‘ECL’). These positive variances were partially offset by higher costs as the bank continued to invest.

Net interest income (‘NII’) increased by €17.0m to €106.6m compared with €89.7m in the same period in 2023. The increase in NII was driven by the higher interest environment as the average interest rates in H1 2024 were higher than those prevailing in H1 2023.

Non-funds income (fees and commissions and trading income) increased by €1.3m reflecting a rise in both trading and new fee income. Trading income increased by 34% compared to the same period last year driven by higher foreign exchange income generated from the strong relationship with corporate customers.

Operating expenses increased by €6.6m to €56.1m, compared with €49.5m in the same period in 2023. While there were several contributors to the movement in operating expenses, the most material drivers were increases in staff costs, IT expenses and real estate costs as the bank continues to invest in its people, technology, and new headquarters in Qormi. Releases in litigation provisions reported in H1 2024 were roughly of the same value to a refund from insurance in relation to operational losses reported in 2023.

During the six months, there was a release of ECL of €7.0m, compared to a release of €2.6m reported in the same period last year. Both the retail and corporate business lines contributed to the release. The release in the corporate business line was mainly a result of amounts recovered from non-performing loans and an improvement in the credit quality. On the other hand, the release in the retail business was mainly driven by a release of provisions held for inflationary pressures which did not materialise.

HSBC Life Assurance (Malta) Ltd reported a profit of €4.5m compared to €1.6m reported in the same period last year. The increase in profits is a result of an improvement in the composition and volume of new business together with yield curve and positive movements on the financial securities’ prices.

The effective tax rate was 35% in both periods. This translated into an interim tax expense of €27.9m.

Financial Position and Capital

Net loans and advances to customers amounted to €2,981m, a decrease of €103m or 3% when compared to 31 December 2023. The bank continued to improve asset quality by reducing non-performing loans by 28% while retaining a prudent credit policy to ensure long term sustainability of its service proposition.

The bank’s investment portfolio increased by €394m to €1,710m as the bank invested in longer tenure assets to strategically hedge against future movements in interest rates. The investment portfolio is composed of highly rated securities and continues to be conservatively positioned with the lowest investment grade of A-.

Customer accounts were €6,058m as at 30 June 2024, a decrease of €83m or 1.4% compared to 31 December 2023. The bank had a satisfactory advances-to-deposits ratio of 49%, and its liquidity ratios were well in excess of regulatory requirements.

The bank continued to strengthen its capital ratios and is fully compliant with the regulatory capital requirements. The bank’s common equity tier 1 capital was 21.1% as at 30 June 2024, compared to 20.6% at the end of 2023. The total capital ratio increased to 24.1% compared to 23.5% as at 31 December 2023.

The bank continued its trend in rewarding its shareholders with the highest interim dividend over the last 10 years. The Board has thus recommended an interim gross dividend of 10 cents per share which amounts to a gross dividend of €36.0m. The interim dividend will be paid on 17 September 2024 to shareholders who are on the bank’s register of shareholders on 16 August 2024.

Geoffrey Fichte, the Chief Executive Officer of HSBC Malta, said:

“HSBC is celebrating 25 years in Malta. Our results for the first half of the year reflect the strong relationship with customers built over these years as part of Malta’s economic transformation, as well as the continued success of our turn-around strategy announced early last year. We’re growing revenue across all of our businesses and continue to invest for the long term. HSBC’s robust management of risk and focus on high-quality and long-term customer relationships continues to deliver results.

“This year we signed an ambitious and ground-breaking three-year collective agreement to energise our talent on customer service excellence. We inaugurated our new headquarters, HSBC Hub, in Qormi, a €30m investment in the future of work. We accelerated investments in technology, sustainability and new ATMs to support customers.

“We thank our customers and shareholders for their support and are recommending a gross interim dividend of 10 cents per share which is the highest dividend over the last 10 years. Our capital and liquidity remain strong, and we continue to pursue growth opportunities in Malta.”

In the first half of 2024, the Bank of Valletta Group delivered a strong financial performance, with pre-tax profits of €148.2 million, representing an increase of 40.9% over the same period last year. The increase in profitability resulted from strong growth in interest income, and to a lesser extent, from net fee and commission streams, underpinned by sustained efforts to improve cost effectiveness and efficiency. In tandem, the Bank continued to pursue a balance sheet optimisation strategy, shifting short-term liquidity into long-term assets to ensure longer term profitability.

The Bank registered Net Interest Income (NII) of €193.6 million, representing an increase of 21.1% when compared with the same period last year. Net Fee and Commission Income increased by 6.5%, reaching €36.7 million, with positive results registered in core income areas including credit-related and trade finance business, as well as brokerage and other investment related activities.

Operating costs registered a decrease of €2.3 million, down to €90.7 million, with costs of human capital the primary driver, followed by technology-related expenses. The Bank’s efforts to manage its costs resulted in cost reductions in the majority of cost categories, with the Cost-to-Income ratio reducing sharply from 47.9% in June 2023 to 40.7% in June 2024.

The Group’s strategy to optimise the balance sheet continued to be centred on its core financing business and management of excess liquidity. The Group’s treasury continued to perform well on the strength of increased volumes and improvements in the net interest margin on the investment portfolio, as well as interest being derived on the cash deposits held with the Central Bank. While cash and short-term funds decreased by €1.1 billion compared to end December 2023, investments in the treasury portfolio increased by €723.2 million.

Loans and advances to customers amounted to €6.6 billion at the end of the first half, resulting in a net increase of €374 million, with high growth levels on both business and retail advances. On the liabilities side, customer deposits experienced a marginal increase of €14.9 million, reaching €12.2 billion. This led to a favourable increase in the Group’s gross loan-to-deposits ratio from 51.7% at end 2023 to 54.7% at end of June 2024, in line with the Bank’s long-term direction.

Following these developments, the Bank retained a comfortable Liquidity Coverage Ratio of 357% as at 30 June 2024. With a continued focus on asset quality and related impairments, the non-performing exposure ratio moved below the 3% mark by June 2024. Total Group Equity stood at €1.3 billion, an increase of €68.7 million, while the net asset value per share at the end of June 2024 stood at €2.3 per share (December 2023: €2.2 per share).

Reinforcing our aspirations to be leaders and innovators in the financial sector – Dr Gordon Cordina, Chairman

“I am pleased to report yet another strong financial performance by the BOV Group for the first six months of 2024. This is all the more significant within the context of a weak international economic scenario clouded with uncertainty. BOV’s profitability continued to benefit from the environment of high international interest rates and our decision to maintain interest rates unchanged for most clients while maintaining a very strong capital base.

We registered a solid performance in most of our core areas of business. We have seen growth in customer lending, contained movements in customer deposits and have continued to expand our bond portfolio with the aim to lock in returns over the longer term. The BOV Group’s balance sheet figures are extremely encouraging, with pre-tax return on average equity (ROAE) of 22.8% and the Group’s Common Equity Tier 1 Capital (CET1) ratio in June 2024 at 22.3%.

In the months to come we will strengthen our resolve to continue along this trajectory. We will endeavour to sustain the Bank’s performance, renew our resolve to become ever more customer centric, improve our digital maturity and continue to engage with our stakeholders to highlight the importance of ESG and instigate behavioural change particularly through pricing incentives to boost the attractiveness of ESG for businesses and households alike. The Bank’s financial performance reinforces our aspirations to be leaders and innovators in the financial sector and a catalyst for positive change.”

We continue to strengthen our position as Malta’s Leading Bank – Kenneth Farrugia, CEO

“During the first half of 2024, the BOV Group maintained its strong financial standing, building on the excellent performance registered in 2023 and sustained in the first quarter of 2024.  The positive performance was characterised by strong growth in our operating income, across our interest and non-interest income driven lines of business, while also maintaining a strong focus on our costs. We continued to gain traction in both commercial and retail financing, and I am pleased to note the continued interest in our green financing solutions. On the net fee and commission income side, the Bank has continued to register positive traction across a number of business areas.

Reflecting on this performance, I cannot but reaffirm our unwavering commitment to continue strengthening the quality of our customer service experience across our channels. We continue to invest in our digital service offering and will also shortly be initiating the process to modernise our ATM fleet across Malta and Gozo.

I am pleased to note that our efforts in improving the customer experience is bearing fruit. Our ongoing customer panels are showing improvements in our net promoter scores and our customer service ratings, with customers mentioning good service and overall touchpoint satisfaction as key factors to this improvement. The current ratings are in line with our ambitious targets for the year, and the insights garnered are providing us with further opportunities to keep enhancing our service offer, particularly in digital services and in speed of service, to further align with customer expectations.

The Bank’s performance registered so far is the result of the ambitious strategy that we are taking forward, a strategy aimed at positioning Bank of Valletta as Malta’s leading and go to Bank. Over the coming months we will continue taking on the challenges of a modern and fast-paced financial industry as we continue our journey that is taking this Bank from good to great.”

As part of Bank of Valletta’s 50th Anniversary celebrations, an art exhibition titled “Inwaħħdu xbihat minn kullimkien” was inaugurated at the Museum of Fine Arts in Valletta. The exhibition is a showcase of the Bank’s vast collection of modern and contemporary artworks. The title “Inwaħħdu xbihat minn kullimkien” is taken from Achille Mizzi’s poem “Skorfon” (Il-Kantiku tad-Demm), reflecting the vast collection of artwork on display, and drawing its imprint from the nature of the exhibits and the way the Bank’s art collection evolved over the years.

Bank of Valletta’s collection is, by Maltese standards, a very large one, counting over 900 pieces. It is a collection that has evolved rather randomly, with works that were primarily meant to decorate reception areas, offices, and boardroom walls. They largely date from the 1970s to the early 2000s and most works were purchased directly from the artists.

In its vastness, the Bank of Valletta’s collection provides a snapshot of Maltese art, with works by both prominent and less prominent artists. The works reflect the realities of the Maltese art scene and understandably vary in style and significance. The collection is largely composed of landscape paintings and abstract works of small to medium size. They are mostly executed in traditional media, without breaking much into experimental forms.

Whilst inaugurating the exhibition and also welcoming all those present, Dr Gordon Cordina, BOV’s Chairman, stated that the Bank has always been at the forefront in supporting the community at large and supporting the local art and culture scene. “This is yet another event where the Bank is looking to the past but investing in the future, seeking to leave behind a better world for those who come after us. Curator Prof Keith Sciberras did a sterling job in identifying and highlighting the work of the protagonists in a curated display that mirrors much of the artistic concerns and production of modern and contemporary art in Malta.”

Mr Kenneth Farrugia, the Bank’s Chief Executive Officer, said that during its 50-year history, BOV has also provided continuous support to the local artistic scene since this forms part of BOV’s community investment in arts and culture. “As the leading Bank in Malta, we are constantly committed in nurturing artistic talent, for the benefit of the local community. We are proud to host this event and give the visiting public a unique opportunity to experience local art at its best. These initiatives are supportive of our ESG strategy which resides at the core of the Bank’s strategic initiatives. It is the firm intent of the Bank to continue investing in the local talent in the years ahead of us.”

Mr Farrugia continued by making reference to the Bank’s social initiatives, forming part of the Bank’s CSR programme. “These initiatives are aligning with other efforts we are taking to support our ESG strategy to give back to the local community. This is highly important for us, and we will continue to focus our efforts on unique opportunities that will be of benefit to the community that we service.”

During the selection process for “Inwaħħdu xbihat minn kullimkien”, Prof Sciberras identified and highlighted the work of the protagonists in a curated display that mirrors much of the artistic concerns and production of modern and contemporary art in Malta. In their attempt to embrace international references, the works on display dialogue, albeit sometimes hesitantly, with artistic realities primarily in England, Italy, and France, where several of these Maltese artists trained or studied.

Prof. Sciberras stated that “the concept of the exhibition entitled flows through three main chapters, or rooms, set out in the Camerone of MUŻA – the National Museum of Arts, Valletta. They are respectively dedicated to works on paper (Karta / Paper), landscapes (Art / Earth), and abstract works (Ħsieb / Mind). A smaller, but significant, room is dominated by one single, large figurative work by Anton Calleja. The exhibition also combines art and poetry in a dialogue that mirrors the ‘ut pictura poesis’ tradition, where poetry and painting engage in a dialogue or friendly ‘paragon’. The poet of choice is Achille Mizzi, and extracts from his work, selected by Immanuel Mifsud, accompany the titles of exhibition rooms.”

Prof. Sciberras continues that the fifty-eight works from 32 artists on exhibit display considerable visual coherence, but at the same time underline individual interests and idioms. The concerns here are mainly with aesthetics and rendering and notably do not engage in depth with commentary on political and social controversies and debates of that time. Colour, light, form, and expression unite (iwaħħdu) this exhibition. In many ways, this reflects the general character of Maltese modern art.

BOV invites the general public to visit this unique exhibition which will be on display until Sunday, 8th September, 2024, at MUŻA, the National Museum of Art in Valletta.