Fitch downgrading not to affect BoV’s profitability

In a statement issued yesterday, Bank of Valletta reacted to the downgrading of the Bank’s credit rating by international rating agency Fitch, which had reduced BoV’s long-term outlook from A- stable to A- negative. Fitch had also downgraded BoV’s individual rating from B/C to C. However, the Bank’s short-term outlook had remained unchanged at F2.

In its reaction, BoV associated the downgrading with the fact that international credit rating agencies have been applying more stringent criteria in granting credit ratings.

BoV explained that the revised ratings would not impact in any significant manner on the Bank’s profitability or funding programmes and that the all-important short-term credit rating of F2 has been affirmed, while the long-term rating was left unchanged at A-.

"The change in the outlook from stable to negative was a reflection of a number of factors which had affected the Bank's profitability in 2001, principally a slow-down in the international and domestic economy and the drop in profits generated by the Bank's associated companies," the bank states.

BoV noted that while the bank’s long-term outlook had been changed from stable to negative, the Bank was satisfied that the efforts of the Bank's management to consolidate BoV’s leading role in the Maltese economy have been recognised by Fitch in that the Bank's short and long-term ratings have been re-affirmed at F2 and A- respectively.

BoV adds that its financial results over the first six months of the current financial year show that the profitability level has stabilised, despite a consistent increase in the Bank's provisioning reserves and a more stringent approach to credit quality assessment, offset by increased interest and non-interest income.

"It is heartening that Fitch ratings have also taken note of the Bank's strong position in the Maltese financial system, the very stable retail deposit base and the strong capitalisation," BoV explains.

The Bank said that it will be working over the coming months on improving the asset quality of its balance-sheet while preserving current levels of profitability.