Cost effectiveness, strategic diversification lead to BoV profits surge

- Group continues to focus on internationalisation

Citing an effective cost management strategy, Bank of Valletta last week announced pre-tax profits of Lm6.4 million for the fiscal period wrapped up at the end of March.
Commenting on the Group’s performance BOV Group Chairman Joseph FX Zahra, states, "The Group’s strong fundamentals are reflected in the fact that operating income continued to rise at a faster rate than costs. This highlights the validity of the Group’s cost management strategy, especially considering that a number of significant investment projects continued to be implemented.
"These include the launch of internet banking, the setting up of a call centre, the consolidation of the centralisation project as well as the construction of the new processing centre, which is currently underway."
Zahra explained how the Group’s continued strategy of diversifying its sources of income yielded positive results despite the continuing downward pressure on interest rates, net interest income increased by 2.8 per cent. Concurrently, commission income rose by 11.1 per cent. Non-interest income accounts for 32.9 per cent of operating income, up from 32.4 per cent for the same period last year.
Zahra emphasised how the results show that the Group continued to deliver in terms of its main strategic directions. In fact, the results show that both interest and non-interest income have continued to increase. Concurrently, the Group has continued to improve its performance in terms of cost efficiency.
Over the period, Group total assets increased by Lm33.2 million or 3.5 per cent p.a. to reach Lm1.92 billion. Shareholders’ funds amount to Lm114.6 million, an increase of Lm0.8 million or an annualised growth of 0.7 per cent. Advances, net of impairment allowances, rose by Lm3.7 million, or one per cent p.a. to reach Lm767 million. Customer deposits remained stable at Lm1.38 billion. Deposits denominated in local currency showed a steady increase, and the Group maintained its share of this core market. The profitability of the group continued to be sustained at a good level during these six months despite a slight decrease when compared to the corresponding profit figure of Lm 6.9 million registered last year.
The Group continued to strengthen its core sources of income, while at the same time managing to contain growth in overheads. The satisfactory performance was achieved despite the prevailing subdued economic conditions both locally and internationally. Operating income increased by 2.2 per cent, from Lm23.9 million in March 2002 to Lm24.4 million. Operating expenses, at Lm14.1 million, rose by only 1.9 per cent. Impairment allowances amounted to Lm4.7 million, reflecting the Group’s prudent approach in line with its credit management policy. Profits from associates amounted to Lm0.8 million in March 2003, compared to Lm0.7 million for the same period last year.
BoV’s results are a reflection of a number of factors. As expected, the greater use of voluntary retirement schemes, as part of the restructuring exercise, affected reported results.
In addition, the reduction in general impairment allowances registered last year was not repeated. Moreover, the international economic and political scenarios resulted in a reduction of the fair value of derivatives employed for hedging purposes.