In a company announcement on the Malta Stock Exchange (MSE), Bank of Valletta (BOV) warned that conditions in the Maltese economy “remain uncertain”.
In view of this, the company was expecting “some deterioration in credit quality”, particularly should the current economic downturn continue beyond the end of 2009.
“The international economic environment remains challenging,” BOV said in the company announcement.
Following the “extreme” conditions that prevailed during the first half of the current financial year, “a sense of calm and cautious optimism has very gradually emerged in the international financial markets since the middle of March.”
The bank said this was the result of financial markets starting to believe “that the bold action of the policy makers has indeed served to avert a potentially catastrophic meltdown in the global financial system”.
“Both equity and debt markets also improved,” the bank said, “and the more positive tone and sentiment have been sustained to date”.
As a result of these improved capital market conditions, “the third quarter has seen a write-back of a proportion of the markdowns incurred on the Financial Markets and Investments book during the first six months”, BOV announced.
However, interest margins remained “under pressure”, but were “gradually improving” as deposits re-priced and measures taken for the “widening of certain select lending margins” were implemented.
Competition for deposits remained “keen”, and this had been reflected in “average rates continuing at levels well above the ECB intervention rate”, the bank said.
BOV said that in general, banking fees and commissions showed “a marginal improvement”, while costs have controlled at FY 2008 levels.
“Notwithstanding the number of bond issues that took place during the period, a sustained and encouraging growth in deposits has been experienced.”
Loans and Advances had “likewise continued to grow at a satisfactory rate in both the Home Loan and Business sectors”, it added.
“Overall, the profitability of the bank for the third quarter was significantly higher than that reported for the half year, principally as a result of the financial markets portfolio write-backs.”
BOV now hopes “that the growing confidence in the credit markets will be sustained”.
Liquidity for the period to date was “maintained at a high level”, and the successful €50 million bond issue completed in June had added “a further 1.5 per cent to our already very strong capital ratios”.
As promised, BOV “has continued to make credit available throughout the period, and to support our many customers and the Maltese economy as a whole.”
Finally, BOV reported that during the financial period commencing on 1 April 2009 up to 27 July 2009, “no material events and/or transactions have taken place that would have an impact on the financial position of the bank or the group, such that they would require specific mention, disclosure or announcement pursuant to the applicable listing rule”.