Bank Of Valletta: Good Profit Growth But Spreads Up With Events

Bank of Valletta (BOVMV: BBB-) 1Q24 abridged results are out today. Very small bank with no consensus available but it has one EUR350m bond (BOVMV 10% ’27) in our index. PBT is up over a third which is clearly positive but spreads appear well up with events, in our view.

• Key credit metrics: CET1 ratio is 21.5% (Dec-23: 22.7%), non-performers are stable at 3.1% but there appears no disclosure of loan loss charges in this period.
• Revenues are reported up near-30%, largely in NII as this very liquid bank (loan-deposit ratio is just 53%) has redeployed surplus liquidity from central bank balances into higher-yielding Treasury assets. The bank does claim 85% of these are sovereign, with nothing outside investment grade at all. Much as this is what Silicon Valley Bank did, the question becomes the extent of deposit concentration and flight risk. For a major incumbent retail business, this should be a small risk.
• The spread on its one index constituent bond has tightened meaningfully more than the average both YTD and over the last month (62bp -1M). There is no outlook statement.