Bank of Valletta plc

Interim / Quarterly Report • Jul 31, 2020

BOV/391

COMPANY ANNOUNCEMENT

The following is a Company Announcement issued by Bank of Valletta p.l.c. pursuant to the Malta Financial Services Authority Listing Rules:

Quote

During a meeting held on 31 July 2020, the Board of Directors of Bank of Valletta p.l.c. approved the attached Group and Bank condensed Interim Financial Statements for the six-month financial period commencing 1 January 2020 to 30 June 2020. These financial statements have been reviewed by KPMG Malta in accordance with ISRE 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. Profit before tax for the six months amounts to €13.8 million (June 2019: €54.3 million).

The Board of Directors, taking cognisance of supervisory guidance, has resolved not to declare an interim dividend.

The Interim Financial Statements and the financial commentary for the period ended 30 June 2020, are available for view and download on the Bank's website under the Investor Relations section and are also attached herewith:

https://www.bov.com/documents/interim-results-fy2020

Annual General Meeting

Further to Company Announcement No. 383 where the Bank informed the market that it will be postponing its Annual General Meeting (AGM), originally scheduled for the 15 May 2020, to a later date, and following the coming into force of Legal Notice 288/2020, the Bank hereby announces that it shall be availing itself of the extension period granted under the said legal notice for the purpose of holding the Company's AGM. The new date set for the AGM shall be the 26 November 2020. More information on the upcoming AGM will be communicated in due course.

Unquote

Dr. Ruth Spiteri Longhurst B.A., LL.D. Company Secretary

31 July 2020

INTERIM REPORT JUNE 2020

Statements of profit or loss for the six months ended 30 June 2020

	The Group		The Bank
	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000
Interest and similar income:
- on loans and advances, balances with
Central Bank of Malta and treasury bills	82,795	84,642	82,795	84,642
- on debt and other fixed income instruments	13,316	20,169	13,316	20,169
Interest expense	(23,173)	(27,223)	(23,113)	(27,223)
Net interest income	72,338	77,588	72,338	77,588
Fee and commission income	35,904	42,256		37,932
Fee and commission expense	(4,337)	(5,940)	31,435 (4,331)	(5,940)
Net fee and commission income	31,567	36,316	27,098	31,992
Dividend income
	160	377	1.180	25,698
Trading profits	3,847	12,858	3,912	12,857
Net gain on investment securities and hedging instruments	716	143	716	143
Operating income	108,628	127,282	105,244	148,278
Employee compensation and benefits	(41,098)	(35,550)	(39,619)	(34,254)
General administrative expenses	(38,538)	(39,571)	(37,909)	(38,931)
Amortisation of intangible assets	(5,733)	(2,650)	(5,733)	(2,650)
Depreciation	(4,125)	(3,517)	(4,005)	(3,487)
Net impairment charge	(7,462)	(936)	(7,462)	(936)
Operating profit	11,672	45,058	10,516	68,020
Share of results of equity-accounted investees, net of tax	2,086	9,244
Profit before tax	13,758	54,302	10,516	68,020
Income tax expense	(3,678)	(16,148)	(3,265)	(17,874)
Profit for the period	10,080	38,154	7,251	50,146
Earnings per share	1.7c	6.5c	1.2c	8.6c

Bank of Valletta p.l.c.

Statements of profit or loss and other comprehensive income for the six months ended 30 June 2020

	The Group		The Bank
	Jun-20	Jun-19	Jun-20	Jun-19
	€000	€000	€000	€000
Profit for the period	10,080	38,154	7,251	50,146
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Debt investments at FVOCI
- change in fair value	(5,953)	2,212	(5,953)	2,212
tax thereon	2,083	(774)	2,083	(774)
- change in fair value transferred to profit or loss	(652)		(652)
tax thereon	228		228
	(4,294)	1,438	(4,294)	1,438
Items that will not be reclassified to profit or loss:
Equity investments at FVOCI
- change in fair value	878	1,574	878	1,574
tax thereon	(307)	(551)	(307)	(551)
	571	1,023	571	1,023
Remeasurement of actuarial losses on defined benefit plans	101	(111)	101	(111)
tax thereon	(35)	39	(35)	39
	66	(72)	66	(72)
Other comprehensive income for the period, net of tax	(3,657)	2,389	(3,657)	2,389
Total comprehensive income for the period	6,423	40,543	3,594	52,535

Statements of financial position as at 30 June 2020

		The Group	The Bank
	Jun-20	Dec-19	Jun-20	Dec-19
	€000	2000	€000	€000
ASSETS
Balances with Central Bank of Malta,
treasury bills and cash	3,904,893	3,669,580	3,904,893	3,669,580
Financial assets at fair value through profit or loss	176,665	205,139	176,504	204,979
Investments	3,309,632	3,071,160	3,309,632	3,071,160
Loans and advances to banks	444,704	501,686	444,704	501,686
Loans and advances to customers at amortised cost	4,535,610	4,445,812	4,535,610	4,445,812
Investments in equity-accounted investees	103,565	101,479	52,870	52,870
Investments in subsidiary companies			6,230	6,230
Intangible assets	60,733	60,463	60,733	60,463
Property and equipment	125,737	126,196	125,129	126,031
Current tax
	21,348	15,185	21,211	14,678
Deferred tax	73,638	76,017	73,638	76,017
Assets held for realisation	9,609	10,123	9,609	10,123
Other assets	5,345	42,627	6,366	42,627
Prepayments	5,346	5,142	3,094	3,031
Total Assets	12,776,825	12,330,609	12,730,223	12,285,287
LIABILITIES
Financial liabilities at fair value through profit or loss	12,222	10,907	12,222	10,907
Amounts owed to banks	69,877	66,047	69,877	66,047
Amounts owed to customers	11,132,300	10,629,719	11,137,207	10,632,260
Deferred tax	5,736	5,736	5,736	5,736
Other liabilities	182,183	189,109	181,215	188,881
Provisions	122,392	118,109	122,392	118,109
Accruals and deferred income	561	484
Derivatives designated for hedge accounting Subordinated liabilities	19,608 163,218	13,963 234,230	19,608 163,218	13,963 234,230
Total Liabilities	11,708,097	11,268,304	11,711,475	11,270,133
EQUITY
Called up share capital	583,849	583,849	583,849	583.849
Share premium account	49,277	49,277	49,277	49,277
Revaluation reserves	51,013	54,898	50,901	54,786
Retained earnings	384,589	374,281	334,721	327,242
Total Equity	1,068,728	1,062,305	1,018,748	1,015,154
Total Liabilities and Equity	12,776,825	12,330,609	12,730,223	12,285,287
MEMORANDUM ITEMS
Contingent liabilities	289,246	341,618	289,246	341,618

Commitments

Banking Rule 09 requires banks in Malta to hold additional reserves for general banking risks against non-performing loans. The appropriation to the "Reserve for General Banking Risks" shall be effected from the profits for the year. As at the reporting date this reserve amounts to €5.227 million.

1,902,250 1,828,756 1,828,756

These copdensed interim financial statements were approved by the Board of Directors and authorised for issue on 31 July 2020 and signed on its behalf by:

( Do

Alfred Lupi Interim Chairman

1,902,250 ------------------------------------------------------------------------------------

1,828,756

Rick Hunkin CEO & Executive Director

Statements of changes in equity for the six months ended 30 June 2020

	Called up Share Capital	Share Premium Account	Revaluation Reserves	Retained Earnings	Total Equity
	€000	€000	€000	€000	€000
The Group
At 1 January 2019	530,772	49,277	50,034	364,050	994,133
Profit for the period				38,154	38,154
Other comprehensive income
Debt investments at FVOCI - change in fair value, net of tax			1,438		1,438
Equity investments at FVOCI - change in fair value, net of tax			1,023		1,023
Remeasurement of actuarial losses on defined benefit plans, net of tax				(72)	(72)
Release of surplus on sale of property, net of tax			(82)	82
Total other comprehensive income			2,379	10	2,389
Total comprehensive income for the period			2,379	38,164	40,543
Transactions with owners, recorded directly in equity:
Bonus issue	53,077			(53,077)
At 30 June 2019	583,849	49,277	52,413	349,137	1,034,676
At 1 January 2020	583,849	49,277	54,898	374,281	1,062,305
Profit for the period				10,080	10,080
Other comprehensive income Debt investments at FVOCI
- change in fair value, net of tax - change in fair value transferred to profit or loss, net of tax			(3,870) (424)		(3,870) (424)
Equity investments at FVOCI
- change in fair value, net of tax			571		571
- change in fair value transferred to retained earnings, net of tax			(162)	162
Remeasurement of actuarial losses on defined benefit plans, net of tax				୧୧	દિશ
Total other comprehensive income			(3,885)	228	(3,657)
Total comprehensive income for the period			(3,885)	10,308	6,423
At 30 June 2020	583,849	49,277	51,013	384,589	1,068,728

Bank of Valletta p.l.c. Statements of changes in equity for the six months ended 30 June 2020

	Called up Share Capital	Share Premium Account	Revaluation Reserves	Retained Earnings	Total Equity
	€000	€000	€000	€000	€000
The Bank
At 1 January 2019	530,772	49,277	49,922	309,278	939,249
Profit for the period		-		50,146	50,146
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax		-	1,438	-	1,438
Equity investments at FVOCI
- change in fair value, net of tax	-	-	1,023	-	1,023
Release of surplus on sale of property, net of tax		-	(82)	82	-
Remeasurement of actuarial losses on defined benefit plans, net of tax				(72)	(72)
Total other comprehensive income			2,379	10	2,389
Total comprehensive income for the period	1	1	2,379	50,156	52,535

Transactions with owners, recorded directly in equity:

Bonus issue	53,077			(53,077)
At 30 June 2019	583,849	49,277	52,301	306,357	991,784
At 1 January 2020	583,849	49,277	54,786	327,242	1,015,154
Profit for the period				7,251	7,251
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax			(3,870)		(3,870)
- change in fair value transferred to profit or loss, net of tax			(424)		(424)
Equity investments at FVOCI
- change in fair value net of tax - change in fair value transferred to retained earnings, net of			571		571
tax	-		(162)	162
Remeasurement of actuarial losses on defined benefit plans, net of tax	-			66	66
Total other comprehensive income	-	-	(3,885)	228	(3,657)
Total comprehensive income for the period			(3,885)	7,479	3,594
At 30 June 2020	583,849	49,277	50,901	334,721	1,018,748

Bank of Valletta p.l.c.

Statements of cash flow for the six months ended 30 June 2020

	The Group		The Bank
	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000
Cash flows from operating activities
Interest and commission receipts Interest, commission and compensation payments Payments to employees and suppliers Operating profit before changes in operating assets and liabilities	132,740 (24,511) (79,636) 28,593	148,880 (24,283) (77,171) 47,426	128,477 (24,588) (77,528) 26,361	144,434 (24,133) (75,235) 45,066
(Increase)/decrease in operating assets: Loans and advances Reserve deposit with Central Bank of Malta Fair value through profit or loss financial assets Fair value through profit or loss equity instruments Treasury bills with original maturity of more than 3 months Other assets	(102,317) (4,524) 23,153 4,232 (173,929) 37,796	(142,575) (2,147) 7,520 911 6,173 (2,158)	(102,317) (4,524) 23,153 4,233 (173,929) 37,795	(142,575) (2,147) 7,520 91 6,173 (2,152)
Increase (Decrease) in operating liabilities: Amounts owed to banks and customers	510,253	237,468	512,619	237,055
Other liabilities	(2,249)	37,908	(3,194)	38,369
Net cash from operating activities before tax	321,008	190,526	320,197	187,400
Tax paid	(5,885)	(8,680)	(5,090)	(11,473)
Net cash from operating activities	315,123	181,846	315,107	175,927
Cash flows from investing activities
Dividends received Interest received from amortised and other fixed income instruments Investment in subsidiaries Proceeds on sale of equity investments Purchase of debt instruments Proceeds from sale or maturity of debt instruments Purchase of property and equipment and intangible assets Proceeds from disposal of property and equipment Net cash (used in) / from investing activities	160 12,444 562 (765,468) 506,930 (8,585) (253,957)	19,806 19,317 (309,513) 351,022 (13,036) 330 67,926	160 12,444 562 (765,468) 506,930 (8,579) (253,951)	25,698 19,317 (10) (309,513) 351,022 (12,999) 330 73,845
Cash flows from financing activities
Repayment of Long Term Borrowings Interest paid on Long Term Borrowings Payment of Lease Liability	(70,000) (3,567) (831)	(40,318) (5,491) (516)	(70,000) (3,567) (822)	(40,318) (5,491) (516)
Net cash used in financing activities	(74,399)	(46,325)	(74,389)	(46,325)
Net change in cash and cash equivalents	(13,233)	203,447	(13,233)	203,447
Effect of exchange rate changes on cash and cash equivalents	1,462	1,371	1,462	1,371
Net change in cash and cash equivalents after effect of exchange rate changes	(14,695)	202,076	(14,695)	202,076
Net change in cash and cash equivalents	(13,233)	203,447	(13,233)	203,447
Cash and cash equivalents at 1 January	3,968,868	3,626,859	3,968,868	3,626,859
Cash and cash equivalents at 30 June	3,955,635	3,830,306	3,955,635	3,830,306

STATEMENT PURSUANT TO THE LISTING RULES ISSUED BY THE LISTING AUTHORITY

I confirm that to the best of my knowledge the condensed interim financial statements as at 30 June 2020 have been prepared, in all material respect, in accordance with International Reporting Standards as adopted by the EU applicable to Interim Financial Reporting (IAS 34).

Rick Hunkin CEO & Executive Director

1. Reporting entity

Bank of Valetta p.l. ('the Bank' is a credit in Mala with its reastered address at 58. Zachay Street, Vallett. The condensed interim financial statements of the six months ended 30 June 2020 include the Bank, subscitiaries and equity-accounted investes (together referred to as the "the Group").

Th audied financial statements of the Group as anded 31 December 2019 are available upon request from the Bank's registered office and are available for viewing on its website at www.bov.com.

2. Basis of preparation

The published figures have been prepared in IAS 34 Interim Financial Reporting, as adobled by the EU. The condensed interim financial statements have been extracted from Bank of Valletta's unaded 30 June 2020, and have been reviewed in terms of ISRE 2410 Review of Interim Financial Internet by the Integendent Auditor of the Entity. The interim results are being published in terms of Chapter 5 of the Listing Rules of the Malta Financial Services Authority.

These condensed interim financial statements with the Bank's audited financial statements for the year ended 31 December 2019. The significant accounting polices used interim consolidated financial statements are consistent with those used in the Group's audied consolidated financial statements for these polices are described in Note 1 of the Bank's audited financial statements for the year ended 31 December 2019. New standards which came into effect as of 1 January 2020 are mentioned in note 2.1 below.

As required by IAS 34 Interin Financial Reporting the comparative statements include the comparative statements of financial position information as of 31 December 2019, and the comparative statements of profit or loss and other comprehensive income, statments of charges in equity and statements of cash flows information for the period ended 30 June 2019.

In preparing these interim financial statements the contents of the Public Statement issued by the European Securities and Markets Authority dated 20 May 2020 [ESMA32-63-972) the objective of which is to promote transparency and consistent of European requirements for information provided in the half-yearly reports under the current circumstances related to the COVID-19 outbreak.

Related party transactions with other components of the period 1 January to 30 June 2020 have not materially affected the performance for the period under review except for dividends from subsidiaries which were recognised in the Bank's profit.

2.1 Adoption of new standards / amendments:

The following amendments to standards were effective from 1 January 2020 but did not have a material effect on the Group's financial stalements.

• (i) Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform;
• (ii) Amendments to IAS 1 and IAS 8: Definition of Material;
• (iii) Amendments to References to the Conceptual Framework in IFRS Standards;
• (iv) Amendments to IFRS 3 Business Combinations

Interest Rate Benchmark Reform

A fundamental reform of major interest rate being undertaken globally to replace or reform IBOR with allernative nearly risk-free to as "BOR reform"). The Group does not have significant offered rates ("BOR) on its financial instruments that will be replaced or reformed as part of this market-wide intitative. In any case, the timing and the methods of transition. The Group does not anticipate that the IBOR reform will have significant operational, risk management and accounting impacts across its business lines.

The Bank has entrusted its Treasury for the mation to alternative rates. Its objective include evaluating the extent to which loans granted and the Group's financial liabilites are based on IBOR contracts need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.

The majority of the Bank's loan portfolio is priced and only very few loans are floaling rate bans. Presently, no falback provisions have been contracted for when IBOR ceases to exist.

The Bank has no floating-rate financial liabilities. All deposit products are linked to fixed rates of interest that do not depend on IBOR.

With respect to derivalive instruments the Bank of isk maragement purposes only. The interest rate derivatives instruments all have receivefloating legs that are IBOR indexed and are entered into hedges. The Bank did not designate any derivalives as hedging instruments in cash flow hedges.

The calculation methodology of Euribor changed during 2019, the Belgian Financial Services and Markets Authority granted authorization with respect to Euribor under the European Union Benchmarket participants to continue to use Euribor after 1 January 2020 for both existing and new contracts. The Bank expects that Euribor will continent rate for the for the foreseeable future and does not articipate changing the hedged risk to a different benchmark. For these reasons the fair value hedges of the Eurilior benchmark interest rate to be directed by interest rate benchmark reform at 30 June 2020.

3. v Segment information

		Personal Banking & Wealth Management		Corporate Banking	Proprietary Investments		Liquidity Management		Total Reportable Segments
	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000	Jun-20 €000	Jun-19 €000
Operating income for the six months	55,866	57,456	53,566	57,603	9,635	21,060	(10,439)	(8,837)	108,628	127,282
Profit before taxation for the six months	8,140	18,635	34,593	40,700	8,566	27,793	(37,541)	(32,826)	13,758	54,302
	Personal Banking & Wealth Management			Corporate Banking	Proprietary Investments		Liquidity Management		Total Reportable Segments
	Jun-20	Dec-19	Jun-20	Dec-19	Jun-20	Dec-19	Jun-20	Dec-19	Jun-20	Dec-19
	€000	€000	€000	€000	€000	€000	€000	€000	€000	€000
Total Assets	2,407,289	2,425,661	2,347,470	2,274,103	3,672,469	3,459,579	4,349,597	4,171,266	12,776,825	12,330,609
Total Liabilities	2,641,411		2,628,735 2,738,710 2,640,842		3,525,151	3,321,384	2,802,825	2,677,343	11,708,097 11,268,304

4. Provisions and Contingent Liabilities

(a) Litigation Provisions

Bank of Valletta is party to legal procedions. Matters operations. Matters arising from a set of similar circumstances can give rise to either a provision or a contingent libility, depending on the recognition of provisions and disclosure of contingent labilites in realint to such maters involves critical accounting estimates and is delemined in accordance with the relevant accounting policies. At each reporting date, the status of each significant loss contingency is reviewed to assess the posure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, a liability for the estimated loss is provided for.

Due to the uncertainles inherent in such maters, on the principal legal cases that have been disdosed in note 3 of the 2019 Financial Statements of the Bank, are based on the best information available. On the basis hat no significant developments happened on the principal legal cases, the provision of €100 million recorded as at 31 December 2019 was retained as at 30 June 2020.

(b) Financial Guarantees and Loan Commitment Provisions

Refer to Note 9 for impact of expected credit losses on loan commitments and financial guarantee contracts during the six months to 30 June 2020.

5. Subordinated Liabilities

The €70 million 4.8% Euro subordinated bonds matured on 15 Mar 2020.

6. Fair value measurement

6.1 Fair value hierarchy

Level 1 in the fair value hierarchy represents quoted) in active markets for identical assets or liabilities.

Level 2 in the fair value hierarchy represents included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 in the fair value hierarchy represents unobservable inputs.

6.2 Fair Value hierarchy of assets and liabilities measured at fair value

The Group

	Level 1 €000	Level 2 €000	Level 3 €000	Total €000
At 30 June 2020
Assets
Treasury Bills		413,562		413,562
Financial assets at fair value through profit or loss
- debt and other fixed income instruments	9,652	14		9,666
- equity and other non-fixed income instruments	568	10,808	14,371	25,747
- loans and advances		140,629		140,629
- derivative financial instruments Investments		623		623
Debt and other fixed income instruments
- FVOCI	52,167	79,645		131,812
Equity and other non-fixed income instruments
- FVOCI	16,094	8,013		24,107
	78,481	653,294	14,371	746,146
Liabilities
Financial liabilities at fair value through profit or loss
- derivative financial instruments		12,222		12,222
Financial liabilities designated for hedge accounting
- derivative financial instruments		19,608		19,608
	-	31,830	-	31,830
	Level 1	Level 2	Level 3	Total
	€000	€000	€000	30000
At 31 December 2019
Assets
Treasury Bills		97,053		97,053
Financial assets at fair value through profit or loss
- debt and other fixed income instruments	33,061			33,061
- equity and other non-fixed income instruments	4,487	10,758	16,136	31,381
- loans and advances
		139,422		139,422
- derivative financial instruments		1,275		1,275
Investments
Debt and other fixed income instruments
- FVOCI	64,472	79,539		144,011
Equity and other non-fixed income instruments
- FVOCI	15,306	8,484		23,790
	117,326	336,531	16,136	469,993
Liabilities
Financial liabilities at fair value through profit or loss		10,907		10,907
Financial liabilities designated for hedge accounting
		13,963		13,963
		24,870		24,870

6. Fair value measurement (continued)

6.3 Fair Value hierarchy of assets and liabilities measured at fair value

The following table provide an analysis of financial instruments that value subsequent to initial recognition:

		Fair value measurement
	Level 1 €000	Level 2 €000	Level 3 €000	Total €000	Carrying Amount €000
At 30 June 2020 Investments
at Amortised cost	2,783,851	417,243		3,201,094	3,153,713
Financial liabilities
Subordinated liabilities	164,145			164,145	163,218
	164,145	-	-	164,145	163,218
	Fair value measurement		Carrying
	Level 1 €000	Level 2 €000	Level 3 €000	Total €000	Amount €000
At 31 December 2019
Investments at Amortised cost	2,426,519	522,029		2,948,548	2,903,359
Financial liabilities
Subordinated liabilities	231,452			231,452	234,230
	231,452	-		231,452	234,230

The following are all other financial intruments that value subsequent to initial recognition and that are not included in the table above:

(i) Loans and advances to customers

Loans and advances to customers are the largest financial asset held by the Group, and are reported net of allowances to reflect the estimated recoverable amounts. The carrying amount of loans and advances to customers is a reasonable approximation of fair value because these are repriced to take into account changes in both benchmark rate and credit spreads. Their fair value measurement is a level 2 input.

(ii) Loans and advances to banks and balances with Central Bank

The majority of these assels reprice or mature in lence their fair value is not deemed to differ materially from their carrying amount at the respective reporting dates.

(iii) Other financial assets

The fair value of other financial assets is not deemed to differ materially from their carrying amount at the respecting dates.

(iv) Amounts owed to banks and customers

These liabilities are carried at amority of these liabilities reprice or mature in less than 1 year. Hence their fair value is not deemed to differ materially from their carrying amount at the respective reporting dates. Their value measurement is a level 2 input.

(v) Other financial liabilities

The fair value of other financial liabilities is not deemed to differ materially from their carrying dates.

The valuation techniques utilised in preparing therm financial statements were consistent with those applied in the preparation of financial statements for the year ended 31 December 2019.

6. Fair value measurement (continued)

6.4 Reconciliation of Level 3 fair values

The following table shows a reconciliation from the closing balances of the Group's financial assets measured at fair value with a Level 3 input.

	Fair value through profit or loss
--	-----------------------------------	--	--

	Equity and other	Total
	non-fixed income
	instruments
2020	€000	€000
Opening balance 1 January 2020	16,135	16,135
Net change in fair value	(855)	(955)
Purchases	29	29
Sales	(838)	(838)
Closing balance 30 June 2020	14.371	14,371

Fair value through profit or loss

	Equity and other non-fixed income	Total
	instruments
2019	€000	€000
Opening balance 1 January 2019	9,974	9.974
Net change in fair value	4,220	4,220
Purchases	36	36
Sales	(127)	(127)
Closing balance 30 June 2019	14,103	14,103

During the six months under review no change in financial assets at fair value through profit or loss (June 2019: Nil) and financial assets classified as FVOCI (June 2019: Nil).

The realised and unrealised gains/losses on fire value through profit or loss with a Level 3 input for the six month period ended 30 June 2020 amounted to (€0.95) million (June 2019: €4.22 million).

7. Investments in equity-accounted investees

A decrease of €7.2m in share of results of equity-accounted investees has been registered over same period last year. This decrease is mainly atributable to a downward movement in the value-in-force business, which has been impacted by market volatility and lower yeld returns as opposed to a strong performance in the six months to Jun 2019.

8. Earnings per share

The earnings per share was calculated on proft attributable to shareholders of the Group €10,080,000 (2019: €38,154,000) and the Bank €7,251,000 (2019: €50,146,000) divided by 583,849,270 shares outstanding as at 30 June 2020.

9. COVID-19 impact on Expected Credit Losses

9.1 Assumptions and judgements

Expected Credit Losses, (ECL) are senstive to judgements and assumptions of formulation of forward-looking seenarios and how such scenarios are incorporated into the calculations. the Group re-assesses the applicability of the key economic variables used by the model, which inputs impact the credit risk and the expected credit losses for each portfolio. These economic variables and their associated impact on probability of defaults vary by financial instrument. Macro-economic factors that are found to be statistically significant for all portfolios are forecased using a Vector Auto Regressive model ("VAR').

As with any economic forecasts, the projections of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may significantly differ to those projected.

As at June 2020, the IFRS 9 model was updated with the Central Bank of Malta, (CBM) severe macro-economic forecasts instead of the model generated forecasts. This change was required to factor information reflecting the economic scenarios as impacted by the CVVD-19 pardenic which triggered the partial lockleconomy. Adopting the forecasts which reflects the national impact brought about by the pardenic is in line with recommendations issued by the European Central Bank (ECB), dated April 2020, IFRS9 in the coronavirus (COVID-19) pandemic'.

The table below presents the difference in foree main macro economic variables between that used by the model and those provided by the CBM, source CBM Quarterly release, June 2020.

	BOV IFRS9 Model		Severe CBM Forecasts		Change
	2020	2021	2020	2021	2020	2021
Macrovariable	0/0	0/0	0/0 -	%	0/0	9/0 1
GDP	3.1	5.2	-8.3	6.8	-11.4	1.6
Inflation	2.4	1.4	0.5	0.6	-1.9	-0.8
Unemployment	3.2	3.1	6.1	5.7	2.9	2.6

Maragement also applied judgement to refect the higher probability of deforming exposures operating in high risk sectors. At the reporting date the assel quality of such exposures remains sound and there is no evidence of significant increase in these exposures (see 9.2 below), However it was deemed apply a higher sectorial probability of default as a management overlay since the circumstances relating to COVID-19 are difficult to predict.

As regards to property prices the Group haken a conservative view in determining the fair value of collateral and hairculs applied to arrive at the estimated recovery amount of property held as collateral.

The net impairment charge includes circa €10 million which is predominantly attributed to COVID-19.

9.2 Significant increase in credit risk in a COVID-19 scenario

In Ine with the European Banking Authority ('EBA') guidan of the prudential framework regarding Default, Forbearance and IFRS9 in light of COVID-19 measures' dated 25th March 2020, the application of moratoria or deferral of payments, aimed at addressing the adverse systemic economic image of the Covid not by itself act as a trigger to conclude that significant increase in credit risk ocurred. However, this does not remove the obligation to assess the credit quality of the exposures benefiting from these measures and identifying any situation of unlikeliness to pay of the borrower.

The moratoria period is considered a suitable measure to give relief to borrowers temporarily unable to COVID-19 disruptions. Expert judgement was applicant increase in credit isk exists by distinguishing between a borrower taking up payment deferrals for temporary liquidity issues restrictions and borrowers taking up payment deferrals hat shall lead to long term financial difficulties over the ife of the exposure, thus recognised as a significant increase in credit risk.

9.2 Significant increase in credit risk in a COVID-19 scenario (continued)

COVID-19 measures were granted to exposures eligible to the parameters of Directive 18 issued by the Central Bank of Malla on 13th April 2020, and other Government guaranteed COVID-19 assistance measures.

The table below presents the Group's credit portfolio grouped by industry risk.

		Jun-20	Dec-19
Industry	Total	Balances on	Total
Risk	Balance	which COVID-19 measures were granted	Balance
	€000	€000	€000
High	940,546	398,307	902,153
Medium	515,985	87,646	479,694
Home loans & other	3,333,439	351,822	3,311,708
Total	4,789,970	837,775	4,693,555

Industry risk is categorised as High, Medium or Other as follows:

• High: Substantial negative downturn and medium-to-long term recovery,

• Medium: Negative downturn and short-to-medium term recovery,

• Other: Minimal impact and consumer finance, including home loans.

9.3 Reconciliation of ECL

The following tables explain the changes in the beginning and the end of the period due to the following factors:

• Transfers between Stage 1 and Stages 2 or 3 due to financial increases (or decreases) of credit risk or becoming credit- impaired in the period, and the consequent "step down") between 12-month and Lifetime ECL. Changes in the staging allocation of balances existing at 1 January 2020 (and associated in "transfers to((from)", whereas subsequent changes in the staging allocation of new assets originated during the year are presented in "hew financial assets originated";

• Additional allowances for new financial ining the period, as well as releases for financial instruments de-recognised in the period;

• Impact on the measurement of ECL to forward looking assumptions - the main macro economic variables, GDP, Inflation and Unemployment for 2020 and 2021 were replaced with those of the CBM, severe scenario;

• Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis;

• Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and

• Financial assets derecognised during the period and write-offs of allowances related to assets that were written off during the period.

9.3 Reconciliation of ECL (continued)

Allowances on On-Balance Sheet Exposures	Stage 1	Stage 2	Stage 3
	12-month ECL	Lifetime ECL	Lifetime ECL	Total
	€000	€000	€000	€000
Total allowances at 1 January 2020	9,145	19,405	79,771	108,321
Transfer to/(from):
Stage 1	(325)	4,349	3,498	7,522
Stage 2	183	(2,432)	4,360	2,111
Stage 3	38	837	(1,898)	(1,023)
New financial assets originated*	633	382	632	1,647
Financial assets that have been derecognised	(243)	(1,032)	(2,273)	(3,548)
Write-offs			(2,401)	(2,401)
Changes to model inputs and assumptions	3,640	1,567	ದ	5,215
Other movements	(366)	(4,977)	1,227	(4,116)
Total allowances at 30 June 2020	12,705	18,099	82,924	113,728
Provisions on Off-Balance Sheet Exposures	Stage 1	Stage 2	Stage 3
	12-month ECL	Lifetime ECL	Lifetime ECL	Total
	COOO	€000	€0000	€000
Total provisions at 1 January 2020	3,536	3,095	9,171	15,802
Transfer to/(from):
Stage 1	(73)	1,084	732	1,743
Stage 2	26	(194)	848	680
Stage 3	2	303	(749)	(444)
New financial assets originated*	783	913	215	1,911
Financial assets that have been derecognised	(277)	(186)	(286)	(749)
Write-offs			(a)	(9)
Changes to model inputs and assumptions	4,469	290		4,759
Other movements	(979)	(1,663)	(298)	(2,940)
Total provisions at 30 June 2020	7 487	3 642	9 624	20 753

The following table discloses changes in the gross carrying amount of the loan portfolio to help further significance to the loss allowance for the same portfolio as discussed above:

Carrying Amount	Stage 1	Stage 2	Stage 3
	12-month ECL	Lifetime ECL	Lifetime ECL	Total
	€000	€000	€000	€000
Total Gross Carrying Amount as at 1 January 2020	4,127,997	347,610	217,948	4,693,555
Transfer to/(from):
Stage 1	(66,522)	54,611	12,286	375
Stage 2	64,805	(87,440)	17,120	(5,515)
Stage 3	1,599	6,630	(3,146)	5,083
New financial assets originated*	107,987	10,044	848	118,879
Financial assets that have been derecognised	(79,017)	(11,550)	(6,736)	(97,303)
Write-offs			(3,050)	(3,050)
Other movements	97,821	(4,059)	(15,816)	77,946
Total Gross Carrying Amount as at 30 June 2020	4,254,670	315,846	219,454	4,789,970
Less Allowances	(12,705)	(18,099)	(82,924)	(113,728)
Net Loans and Advances to customers	4,241,965	297,747	136,530	4,676,242

Carrying amount comprises loans and advances to customers at anortised cost and loans and advances designated as fair value through profit or loss.

* Originated loans during the period include the following:

i) Originated credit impaired assets which relate to new facilities granted to counterparties in default as part of existing commitments,

ii) Assets that have been originated to counterparties and still subject to the Bank's cure/probation criteria.

KPMG 92, Marina Street Pietà, PTA 9044 Malta Telephone (+356) 2563 1000 Fax (+356) 2566 1000 Website www.kpmg.com.mt

Independent Auditors' Report on review of condensed interim financial statements

To the Board of Directors of Bank of Valletta p.l.c.

Introduction

We have reviewed the accompanying condensed interim financial statements of Bank of Valletta p.l.c. ('the Bank') and of the Group of which the Bank is the parent ('the Condensed Interim Financial Statements') which comprise the condensed statements of financial position as at 30 June 2020, and the related condensed statements of profit or loss, profit or loss and other comprehensive income, changes in equity and cash flows for the period then ended and a summary of significant accounting policies and other explanatory notes. Management is responsible for the preparation and presentation of the Condensed Interim Financial Statements in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU. Our responsibility is to express a conclusion on these interim financial statements based on our review.

This report is made solely to the Board of Directors in accordance with the terms of our engagement and is released for publication in compliance with the requirements of Listing Rule 5.75.4 issued by the Listing Authority. Our review has been undertaken so that we might state to the Board of Directors those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Board of Directors for our review work, for this report, or for the conclusions we have expressed.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

KPMG, a Mattese civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International rative ("KPMG International"), a Swiss entity

The firm is registered as a artnership of Certified Public Accountants in terms of the

A list of partners and directors of the firm is available at 92 Marina Street, Pieta, PTA9044

KPMG 92, Marina Street Pietà, PTA 9044 Malta Telephone (+356) 2563 1000 Fax (+356) 2566 1000 Website www.kpmg.com.mt

Independent Auditors' Report on review of condensed interim financial statements

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying Condensed Interim Financial Statements for the period ended 30 June 2020 are not prepared, in all material respects, in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU.

The Principal authorised to sign on behalf of KPMG on the review resulting in this independent auditors' report is Noel Mizzi.

elli

KPMG Registered Auditors

31 July 2020

KPMG, a Maltase civil partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International
Cooperative ('KPMG International''), a

The firm is registered as a
partnership of Certified Public Accountants in terms of the Accountancy Profession Act

A list of partners and directors of
the firm is available at 92. Marina Street, Pieta, PTA9044. Malta.

Overview

The period under review experienced unprecedented events brought about by the COVID-19 pandemic. This has impacted not only the performance of our business but also the way we have operated and adapted to the circumstances. The island's economy, which is heavily dependent on tourism and the wholesale and retail sectors has endured an unexpected blow that caused a far-reaching ripple effect for the subsequent months. The Bank immediately took steps to support its employees, its customers and the community at large in line with the guidance provided by the regulators and the national health authorities.

Financial performance of the Group

Bank of Valletta Group is reporting a profit before tax of €13.8 million for the six months ended 30 June 2020, representing an annualised return on equity (pre-tax) of 2.6%. For the comparative period, the Group registered a pre-tax profit of €54.3 million. Results for the first half of FY2020 inevitably include the negative effect of COVID-19 which has influenced a number of line items. More than half of the drop in profit is predominantly attributed, directly or indirectly, to the impact of the results for the period under review were also influenced by other factors, including increased depreciation from new IT investments, staff costs due to strengthening of risk and compliance resources and reduction in foreign exchange and commission income, in line with expectations, resulting initiatives which have been carried out over the recent months.

The Board of Directors, following supervisory guidance, had postponed the final proposed dividend for FY2019. It has also resolved not to declare an interim dividend for June 2020. Any recommendation for a final cash dividend for FY2020 will be revisited at the end of the financial year in line with developments in the second half of the year.

Operating profit

The half-yearly results are summarised in the following table:

	Jun-20 € million	Jun-19 € million	Change € million	9/6
Net interest income	72.3	77.6	(5.3)	(7)
Net commission and trading profits	37.0	45.8	(8.8)	(19)
Costs	(89.5)	(81.3)	(8.2)	10
Impairment charge	(7.5)	(0.9)	(6.5)	697
Operating profit	12.4	41.2	(28.8)	(70)
Fair value movement	(0.7)	3.9	(4.6)	(118)
Share of profit from associates	2.1	9.2	(7.2)	(77)
Profit before tax	13.8	54.3	(40.5)	-(75)

Operating profit amounts to €12.4 million and is 70% below the €41.2 million for the corresponding period. Revenue is down across all streams, as the unprecedented outbreak of COVID-19 adversely impacted most of the revenue generating areas coupled with the effect of derisking as the Bank exited business lines/customers outside the revised risk appetite. During the period, costs have increased and a higher charge for impairment is also being reported.

Net interest income of €72.3 million lower than that earned for H1 2019 and remains the main revenue driver. The persistently low to negative interest rate environment, coupled with a conservative risk appette limiting investment opportunities in respect of the proprietary portfolio and increased levels of liquidity, which attract negative interest, resulted in a decrease in interest earned on the treasury assets. As the economic outlook deteriorated in the first half of the year due to the COVID-19 pandemic, demand for credit was primarily required to support temporary liquidity needs rather than for investment purposes. Home loans grew at a much slower pace when compared to previous periods. The decrease in interest revenue was partly offset by lower cost of funding as customers preference for call deposits continued and long term borrowing matured in March 2020.

Commission and trading profits amount to €37.0 million, 19% less than the €45.8 million reported for the comparative period. The COVID-19 had an adverse and direct effect on commissions especially those relating to the card business, where substantially lower card usage was recorded; the payments business, as economic activity slowed down significantly; and investment related products as lower demand reflected the subdued economic environment. Lower revenues, in line with expectations, were also recorded in those line items affected by the derisking exercise. The latter was one of the factors leading to a decrease in exchange earnings which was also impacted by lower volumes due to COVID-19.

Total costs for the first half of the year have increased by €8.2 million and amount to €89.5 million. The increase is mainly attributed to higher employee and IT costs. The Bank went live with the new core banking system at the start of 2020. Operating costs for these six months include the amortisation and higher maintenance fees relating to this new system as well as other IT investments. Costs relating to insurance and regulatory contributions have also increased. In 2019 the Bank embarked on a transformation programme covering various initiatives aimed to lower the Bank's risk profile while ensuring long term sustainability, stability and profitability. The transformation and derisking programmes continue to reduce risks and enhance controls resulting in a more resilient institution. This has enabled the Bank to embark on an ambitious strategic journey to grow in the more profitable segments with fewer risks and better controls.

In assessing the impairment charge for the six months under review due consideration was given to the expected impact related to COVID-19, especially in the formulation of forward looking scenarios and expected credit losses relating to exposures in high risk sectors. Expected credit losses are highly sensitive to judgements and assumptions and, as with any economic forecast, subject to a degree of inherent uncertainty which has been augmented in the current circumstances which remain fluid and undefined.

As at June 2020, the Bank's IFRS 9 model was updated with the severe macro-economic factors published by the CBM. Judgement was also applied in assessing the probability of default of perforning exposures operating in high risk sectors. The asset quality of such exposures remains sound and there is no significant increase in the credit risk of these exposures at the Group retained its cautious view towards impairment and the charge for the period includes a higher sectorial PD as a management overlay on the highly impacted sectors. The net impairment charge to June 2020 is stated net of recoveries in respect of debt which had previously been written off.

The results for the period were also influenced by the share of profit from associates which at €2.1 million represent a reduction of 77% attributable primarily to losses from actuarial valuations.

Financial position

The Group remains highly liquid with cash and short term funds increasing by €178.3 million (4.3%) since December 2019. The excess liquidity, which continues to put pressure on the net interest margin, was partly mitigated by increased investment of over €500 million, comprising Treasury bills and Malta Government bonds. The majority of treasury assets are measured at amortised cost category reflecting the Bank's primary business model of 'hold to collect'. The asset quality of the Bank's portfolio remains high with more than 90% in A- or higher.

Net loans and advances increased by €91 million since December 2019, an annualised growth rate of 4%, and stand at €4.7 billion at 30 June 2020. Demand for new mortgages slowed down significantly and growth in this sector was almost half that experienced in other periods. The slowdown is largely attributed to changed behaviour influenced by the various measures implemented by the health authorities to address the pandemic. The Bank supported its customers through this trying period and by the reporting date had provided more than €800 million through the granting of moratoria and the sanctioning of new loans to ease temporary liquidity constraints. Deferred payments were granted to both business and personal customers who met the eligibility criteria of the CBM Directive 18. Government guaranteed facilities under the BOV MDB COVID Assist product aimed to support the economy during these unprecedented times were also sanctioned.

Customer deposits increased by just over €500 million since the start of the financial year and reached €11.1 billion at end June 2020. Customer preferences remain predominantly for demand deposits. The growth is wholly attributable to local customers, both retail and business. During the period further reductions in deposits held by international corporate customers continued in line with the derisking exercise. Long term debt at the reporting date reflects the repayment of the €70 million 4.8% subordinated bonds which matured on 15 March 2020.

Equity as at end June 2020 is marginally higher than December 2019 and stands at €1.1 billion. The Group's capital position remains strong, with a CET 1 ratio as at the end of June 2020 of 19.8%, in line with the Group's risk appetite and comfortably above the minimum regulatory requirements. In light of the COVID-19 pandemic the Bank has followed the ECB guidance and postponed the final dividend for FY 2019 and will make the final payment conditional on a reassessment of the situation, taking into account the possible consequences of COVID-19. The Group is closely monitoring the situation and constantly assessing the impact of the COVID-19 pandemic. The capital plan shows that the capital ratios are expected to remain strong in the coming years both under the business as usual scenario, taking into consideration the COVID-19 impact, and also under severe stressed scenarios.

Bank's response to COVID-19

Employees and Branches

The Bank responded proactively by implementing safeguards for customers and employees by fully adopting the recommendations issued by the Superintendence of Public Heatth in Malta. A multi-disciplinary Incident Management Team (IMT), was tasked with carrying out regular assessments of the situation and implementing necessary preventive and corrective actions as the pandemic evolved and will remain active until normality is restored.

Sanitising of public spaces, offices, air-conditioners and ATMs was immediately stepped up and protective screens were installed in customer-facing areas. An internal campaign was launched to raise and encourage staff to take all possible measures to minimise the possibility of contracting the virus. Personal protective equipment was distributed to staff as necessary for their role, while queueing was disallowed within branches.

The Bank's Business Continuity Plans were put to practice, splitting critical functions into separate geographical locations, restricting face-to-face meetings to those which were strictly necessary, empowering our people to work from behind closed doors and from home and the introduction of rosters where on-site presence was required.

A dedicated BOV Assist Team was launched and a number of banking services were being offered through email, video-conferencing and phone calls. For branch visits, customers were urged to set up an appointment in order to minimise waiting times.

Remote working capabilities were provided to employees, enabling vulnerable staff to work from the safety of their home, parents to care for their children and others to keep safe while keeping connected with their workplace. As our staff gradually returned to their workplaces, the Bank reinforced the preventive measures in place.

Customers

COVID-19 has propelled a dramatic shift in personal customer behaviours and it hit the multiple sectors of the Maltese economy to varying degrees as businesses experienced a shortage in liquidity. As a systemic bank and Malta's largest, this turn of events has placed an extraordinary responsibility on Bank of Valletta to support impacted businesses and the general economy.

Moratoria on loans provided breathing space to customers experiencing liquidity challenges, with temporary increases in overdraft and credit card limits providing short-term financial respite at no extra charges. Various fees were also waived to ease the burden on customers going through difficult times due to the COVID-19 situation.

The Bank deferred a total of €60 million in loan repayments across more than 2,900 customers, 70% of whom being retail customers. BOV was also the first Bank to launch the COVID Assist scheme which was made available at very attractive interest rates and which is accessible to all local businesses facing liquidity shortages. The Bank's attractive offering already ensured that a high number of companies were able to access such assistance, with more than €140 million being committed to nearly 200 customers. In addition the Bank has introduced various measures to ensure that its banking services remain accessible

Technology and BOV Digital Channels

to the wider community.

BOV's current suite of electronic channels were instrumental during the COVID-19 pandemic, handling the spike in digital transactions as an increasing number of customers made use of BOV Mobile, BOV Internet Banking, Cards and ATMs. A significant increase was registered in the value and volume of contactless payments on BOV pay and wearables such as watches. This trend was supported by the Bank by increasing transaction limits. Furthermore, at the peak of the pandemic, more than half the workforce was able to work safely from remote locations, thanks to the swift and timely support of the Bank's IT arm. This implementation was instrumental for the continued operation of the Bank and an uninterrupted delivery of service to our customers.

The continuous modernisation of digital channels ranks highly on the Bank's agenda and over the first two months more than ten ATMs have been replaced by newer models supporting additional services, such as cash and cheques. In our endeavour to reduce environmental impact, we discontinued the printing and mailing of thousands of statements as these are available for customers on internet banking 24x7. Thousands of customers make regular use of BOV electronic channels and the Bank has committed to invest further into the development of its e-channels, moving ahead to enable seamless customer services across different channels.

During the first half of the year, customers and employees got more accustomed to the new core banking system, Flexcube, successfully implemented at the end of 2019. This transformation brought about various changes in processes, technology together with a shift in people's attitudes. This major IT implementation was the cornerstone that paves the way for the implementation of a comprehensive digitalisation strategy.

Support to the Community

At the height of the pandemic the BOV Safe@home initiative on its website and social media. The initiative provideed educational and fun material mainly aimed to entertain their children during the stay-at-home periods. This was later broadened to provide activities to a wider segment of the population who were staying at home. The Bank reached out to its staff members and Social Partners to provide artistic content such as drawings and crafts, educational material especially in the field of history and the environment and fun activities such as fitness workouts and creative baking. These can be found at - https://bov.com/content/bov-safe-at-home.

Bank of Valletta was presented with the Promuturi fl-Arti award during the third edition of 'II-Premju ghall-Arti', the national arts awards that celebrates the achievements of the cultural and creative sectors. The award was received on account of the Bank's significant support to the Maltese community through its Corporate Social Responsibility programme that encompasses a wide range of areas that receive the Bank's support. The award was virtually presented to ex-BOV Chairman Deo Scerri during a livestreaming event.

Looking ahead - BOV Strategy 2023

The CEO, together with the Executive Committee and the Board, have been working for the past months on the Group's strategy for a future-proof bank. The Group now has a definite and comprehensive plan of action, based on in-depth 360 degree analysis and ideal future positioning. The overarching objective of the strategy is to achieve more sustainable returns by minimising risk, growing core business lines and keeping costs under close watch. It is a pleasure to share herewith the main themes underpinning the strategy and some of the decisions that we will start implementing over the coming months.

Accelerating Digitalisation and Process Simplification

We will be investing considerably to build the infrastructure, implement processes and train our people to deliver the best possible service for our customers. We will be upgrading our electronic channels to offer increased convenience and additional services for our customers without the need to go to the branch. Simultaneously, we will be rebalancing the branch network and adapting work practices to ensure that our face-to-face outlets are optimised for a value adding and personalised service. We will also be changing our branch service model to offer an enhanced customer experience, with particular emphasis on high net worth customers and SMEs.

Boosting Interest Income

We will continue to grow our lending portfolio, supporting our personal customers to reach their life goals and improving access to finance to SMEs. We will be consolidating our leading position by offering favourable lending products, tailored around the needs of our customers.

The cost of deposits has been rising steadly over the years and investment opportunities have become extremely limited. We will help our customers to adjust to this new reality by providing guidance on how to manage their assets better and offer them opportunities to diversify their portfolio beyond short-term savings.

Empowering our People

We will be engaging our workforce to embrace the strategy and empowering them with the necessary tools and skills to implement the desired changes. We will be aligning the collective skills of our workforce with those of benchmark European banks, offering ample learning opportunities and clear expectations and directions. We will mobilise employees to focus on delivering a straight-forward and personalised service to our customers, streamlining internal processes and maximising efficiencies.

Strengthening Governance and Risk

Later this year we will approach the tail end of the de-risking programme, a massive undertaking that will put the Bank in a much safer and stronger position. Over the coming years we will continue to strengthen our risk governance structures by engaging further skilled people in the main three lines of defence.

Closing statement

We are convinced that the new strategy is the best way forward for Bank of Valletta and very excited to communicate further initiatives and specific decisions as we implement the strategy over the coming months. The road ahead will be bumpy as uncertainty looms over how long the economic recovery will take, and whether we will be met with further economic shocks in the uncertain circumstances brought about by the COVID-19 pandemic are likely to influence the performance for the coming months. Although some early signs of recovery have been evident during these last two months, it is not yet clear whether this will be sustained. We remain cautious about the future impact of COVID-19 as the outlook, at this stage, is still uncertain. The Bank remains committed to support the local economy through the provision of funds and other measures that may be required to assist their temporary liquidity needs.

By Order of the Board 31 July 2020