Standard and Poor's (S&P) has just assigned Bank of Valletta a BBB+ rating with a stable outlook. The research note highlights BOV’s dominant market position, sound retail franchise and stable customer deposit funding base.
The research note also noted the Bank’s progress in reducing its stock of NPLs through a combination of write-offs, good quality new lending and improving recovery rates. In fact, the Bank’s NPA (non-performing assets) ratio has decreased from the 9.5% peak in 2014 to about 6.2% as of September 30, 2017, a level that compares favourably with the domestic banking sector average of 8.2% for 2016.
Commenting on the recent €150million increase in share capital, S&P confirmed that this will allow the Bank to comply with increased regulatory capital requirements and counterbalance the impact of IFRS 9 due to come in force in 2018, while at the same time enabling the Bank to reach critical targets in the execution of its strategy, particularly its investments in digitalisation and multichannel projects.
S&P also emphasised the Bank’s retail-oriented funding structure and solid funding base, with customer deposits remaining the Bank’s primary source of financing. In consequence, the Bank’s recourse to wholesale funding is expected to remain limited.
Commenting on S&P’s rating, Mario Mallia, BOV Group CEO, noted that S&P’s assigned rating of BBB+ is one notch higher than that provided by Fitch prior to the rights issue. He also added that the agency’s outlook was positive underpinned by resilient profitability, contained credit losses and a strong solvency position. The CEO concluded by saying, “2017 was an extremely positive and productive year for BOV Group. The hard work put in by all BOV employees has been crowned by increased custom from our customers, and overwhelming response from shareholders to a very successful rights issue and an improved rating from a major rating agency.”