BOV records €80.7 million profit before tax in 2021 up from €15.2m in 2020

Bank Of Valletta has reported €80.7 million in profit before tax for the financial year 2021, up from €15.2 million in 2020.


Bank Of Valletta has reported €80.7 million in profit before tax for the financial year 2021, up from €15.2 million in 2020.

This figure translates into a pre-tax return on equity of 7.3% (2020: 1.4%) and earnings per share of €9.6 cents compared with €2.4 cents in 2020.

The underlying operating performance of the bank demonstrates a resilient income stream with good recovery from the impact of the pandemic in 2020 and growth in some areas, partly offset by higher operating costs. The much stronger profitability benefited from a net expected credit losses (ECLs) release reflecting better economic conditions relative to 2020 and individual client asset improvements.

Overall operating income was up 4.9% to €242.9 million (compared to €231.6 million in 2020).

Net interest income of €156.3 million was up €9.5 million versus prior year, and still provides the main revenue source representing circa 65% of operating income, despite the costs from negative interest being charged to BOV on surplus liquidity and lower average yields on debt securities.

Strong growth in total credit provided to customers was offset by declining average returns on treasury investments as higher-yield assets matured to be replaced with new securities at lower rates coupled with negative interest charges on persistently high (and growing) liquidity levels.

Steps were taken to lower the bank’s cost of funding and this supported the net interest margin as interest paid on interest earning deposits continued to decrease.


The bank’s total costs in 2021 were €195.6 million, increasing by €25.2 million or 14.8%, inclusive of strategy costs which were up by €7.3 million year over year.

BOV invested a total of €23.1 million during the year in strategic initiatives, up from €15.8 million in the previous year.

It continued to drive forward with its strategy which involved investments in the digitisation of processes and data quality, and continuous improvements in its risk, compliance and control environments.

These investments will continue during the transformation journey the bank has embarked on. This included enhanced investment processes, a new credit underwriting tool and soon to be delivered digital-based Home Lending and Customer Onboarding processes.

However, a significant element of this investment has also focused on risk and compliance areas, such as a new platform for anti-money laundering and continually enhancing credit management processes.

Operating costs, excluding strategy, were €172.5 million, up €17.9 million or 11.6% on 2020.

Employee compensation increased by 2.7% from 2020 to €81.6 million, which reflected requirements for additional expertise (through training and headcount) in areas such as risk, compliance and digital based skills.

Operating administrative expenses saw a significant increase year on year, to €70.8  million (2020: €55.4 million). These expenses included a total of €6.1 million in specific one-off items such as the €2.6 million fine Imposed by the Financial Intelligence and  Analysis  Unit  (‘FIAU’) and €1.4 million disbursements on card fraud.

Furthermore, costs payable to the Deposit Guarantee Scheme (DGS) increased by €4.8 million during the year as a result of continuing growth in retail deposits.

Higher  IT  investments were the main contributor due to the bank’s constant efforts to modernise and digitise key systems whilst continuing to meet ongoing regulatory requirements and aligning with the latest IT security solutions.

Adjusting for non-recurring items and increase in contribution to the DGS, underlying operating costs increase was €5.7 million, or 3.7%.

Balance sheet

As at December 2021, total assets of the Group continued to grow and exceeded the €14 billion mark (an 11% increase on last year).

Customer deposits were the main source of funding for the Group’s business and investment, and remain at surplus levels.

Year on year growth in deposits was €905 million or 8%. 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.

Growth was registered in both business and retail deposits.

The on-going low interest rate environment offered limited opportunities to the Bank to manage interest rate exposure any more effectively, forcing BOV to place high levels of excess funds at negative rates.

The Group’s treasury investment portfolio increased by €260 million to €3.7 billion and remained composed of highly rated securities.

Due to limited opportunities within the Bank’s risk appetite, the investments were primarily in local government and other sovereign bonds at much lower market rates than those which matured throughout the year.

Notwithstanding the healthy increases across the Group’s investments, the liquidity position remained materially high with cash and short-term funds reaching €4.6 billion by the end of year, an increase of €828 million or 21.8% over the previous year.

Net loans and advances to customers stood at €5.2 billion, €335 million or 6.9% higher than December 2020 with strong growth across business lending and home loans portfolios.

BOV continued to support requests for financial assistance from customers through the payment moratoria and the provision of government-guaranteed funding through the BOV MDB COVID-19 assist scheme.

The demand for financial assistance significantly declined in the second half of 2021 and BOV issued +30% more of business loans to support new investments over 2020.

A solid growth in home loan lending was also registered in 2021. In order to offer a product suite that continued to meet the various customers’ needs, BOV streamlined home loans into four core products meeting various requirements such as primary, secondary, investment and rental purposes.

The interest rates applicable to each product were also revised and the option for the payment of interest only for the initial period of the loan, between one to five years, was introduced.

BOV 2021 results at a glance

Reported profit before tax (‘PBT’) of €80.7 million (2020: €15.2 million).

Pre-tax return on equity of 7.3% (2020: 1.4%) and earnings per share of €9.6 cents compared with €2.4 cents in the same period 2020.

Total operating income was up 4.9% to €242.9 million (compared to €231.6 million in 2020).

Total costs were €195.6 million, increasing by €25.2 million or 14.8%, inclusive of Strategy costs which were up by €7.3 million year over year.

Net release of ECLs amounted to €18.9 million, compared to the 2020 substantial net charge of €65.1 million which was driven by COVID-19 and Legacy Non-Performing Loans (‘NPLs’).

The Group’s share of the insurance associates’ results was €14.5 million, up by €4 million on prior year, attributable to strong economic recovery, solid growth in investments business and significant liquidity in the local market.

Group total assets reached €14.4 billion as at the end of 2021 - an increase of 11.2% over the previous year. Customer deposits grew by €904.6 million (8.0%).

Cash and short-term funds increased by €827.6 million or 21.8% over the prior year with the extraordinary increase arising from the Bank’s participation in the TLTRO III Eurosystem funding during 1Q 2021.

Liquidity ratio stands at 444% reflecting the high deposit growth over the year which outpaced the demand for loans. The Group’s net advances to deposits ratio stood at 44.1%.

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