Malta’s full-year earnings season continued last week with a number of announcements. Undoubtedly, the most important one was from Bank of Valletta plc given its dominance in the banking sector and also since it is the largest capitalised company on the Malta Stock Exchange with a market cap exceeding €1.3 billion.
BOV implemented a marked changed in its communications and investor relations strategy over the past few years with the publication of quarterly financial statements and detailed analyst briefings. While the headline figures in the annual financial statements published last week may not have been a surprise to those who closely follow the quarterly announcements, a number of important observations emerge from the 2025 annual report.
Profitability above guidance
The BOV group’s pre-tax profit in 2025 reached €260.4 million, exceeding the upper limit of profitability guidance which was originally established between €200m and €250m at the beginning of the year and subsequently upgraded to a range of €215m to €250m at the half-year stage.
While the 2025 profit represents a decline of 13.9% from the record pre-tax profit of €302.4m in 2024, the performance must be analysed in the context of the interest rate declines by the European Central Bank (ECB) from the peak of 4% until June 2024, the accelerated investment programme in technology and human capital pushing operating costs higher, as well as the marginal net impairment charge of a mere €0.04m in 2025, compared to the net reversal of €23.8m recorded in the previous year which was a substantial boost to profitability last year.
Balance sheet repositioning
The key item that helped BOV report such a strong profitability in 2025 despite the three factors highlighted above, was that net interest income rose to €387.4m. The net interest income is the difference between what the bank earns on its loans, investments and central bank balances, and what it pays on deposits and other funding.
Although the net interest income of €387.4m was only a marginal increase from the €386m recorded in 2024, this is 10% higher than the €352m generated in 2023 despite the significant downturn in the deposit facility by the ECB since then. This is a direct result of the balance sheet repositioning strategy that BOV’s management team has been very successfully executing since 2022.
The core of the strategy was the migration of assets away from short-term, variable-rate instruments (principally overnight deposits with the Central Bank of Malta) and into longer duration, fixed-rate assets comprising sovereign and investment-grade bonds held in the bank’s proprietary treasury portfolio (which has grown to €6.9bn at an effective interest rate of 2.3%), and customer loans with fixed or partially fixed interest rate structures. The increased duration of the treasury portfolio to lock in higher yields has clearly cushioned the impact of ECB rate cuts in 2025.
The pace of balance sheet expansion was another key highlight in 2025. Total assets rose by €1.4bn to above €16.5bn, clearly showing the scale of BOV’s systemic role within the Maltese banking system.
The expansion of the balance sheet was driven by two principal forces. Customer deposits increased by €937m during 2025, bringing the total deposit base to above €13.7bn. The deposit base had already climbed to €12.8bn at end-2024 from €12.1bn a year earlier. In parallel, long-term liabilities rose by €277m, following the successful issuance of Tier 2 subordinated bonds during the year under the Euro Medium Term Note programme which improved the group’s capital ratios and diversified its funding profile.
On the asset side, the 16% increase in the loan book to €8 billion is an important achievement in 2025 with BOV’s chairperson stating that the strong growth in the loan book also reflects specific circumstances currently taking place across the banking sector.
The repositioning away from low-yielding central bank reserves and towards loans and investments has been the defining strategic decision of the past three years. The loan-to-deposit ratio increased to 58% in 2025 from 44% in 2022. Liquidity held with the Central Bank of Malta declined to €920m in 2025 from €4.6bn in 2021, with the treasury portfolio rising to €6.9bn from €3.5bn in 2022.
BOV’s dominance in the banking sector is evident from the 49% share of customer deposits, a share of 42.8% of home loans, 51% of corporate loans and 55% in personal loans.
Stability in dividend
The overall dividend for the 2025 financial year is unchanged from the distribution in respect of the 2024 financial year (adjusted for the bonus shares) as the payout ratio increased from 42.6% to 49.4% which is precisely in line with the current dividend payout policy set at a maximum of 50% of profit after tax.
BOV’s board of directors is recommending a final net ordinary dividend of €0.0659 per share and a special net dividend of €0.0105 per share (reflecting the portion of 2025 profitability that exceeded the profit before tax guidance of €250 million). Both dividends, amounting to €0.0764 per share or €49 million in total, will be paid on June 12, 2026, to all shareholders as at close of trading on May 7.
Coupled with the net interim dividend of €0.0556 per share paid in September 2025, the total net dividend attributable for the 2025 financial year amounts to €0.132 per share.
The stability of the total net distribution of €85 million for the 2025 financial year must be seen in the context of the transformation in recent years from a bank that was unfortunately constrained in its distributions by legacy issues and regulatory uncertainty to one that is now proactively returning capital through multiple avenues. This represents one of the most significant governance improvements across the local equity market in recent years.
There was an evident re-rating of the share price of BOV over the past three years with the shares jumping higher as the price to book multiple rose from 0.45 times in Q1 2023 (55% discount to book value) to a current level of 0.90 times book value (10% discount).
Despite the strong upward movement in the share price over the past three years, BOV shares still trade on a single-digit price to earnings multiple (6.9x) and a 10% discount to its December 2025 book value of €2.33 per share.
BOV has a very well-capitalised balance sheet (CET1 ratio of above 20%), a clear dividend distribution policy and has reported a marked improvement in the non-performing loan ratio to 1.7%.
Given its dominant market position in Malta and indications that it will manage to maintain a double-digit return on equity, there is further scope for the share price to reduce the valuation gap with other eurozone banks which mostly trade above their book value.
Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.
© 2026 Rizzo, Farrugia & Co. (Stockbrokers) Ltd. All rights reserved.
