BOV Chairman Roderick Chalmers addressed shareholders at the 38th Annual General Meeting held at the Hilton Malta in St Julians. Mr Chalmers started by describing the backdrop to the Financial Year as an existentialist crisis within the Eurozone and provided a detailed description of the events that led to the European sovereign debt turmoil. He added that BOV’s exposure to sovereign paper issued by the countries most affected by the crisis was modest and had already been ‘marked to market’ at the end of September 2011.

“Despite the troubled international background, Malta’s domestic economy has demonstrated resilience and exports have continued to grow, as have tourist arrivals. Malta also experienced real GDP growth during the first half of 2011. Domestic consumption has however remained muted, as have the property and construction sectors.

The Bank of Valletta Group reported profits before taxation of €64.4 million for the year ended 30th September 2011, an decrease of 35% over the previous year. The Board of Directors recommended a final dividend of €0.08 per share which, taken together with the interim dividend of €0.0625 per share paid on 26th May 2011, makes for a total gross dividend of €0.1425 per share. This dividend will be 1.9 times covered by the post tax profits for the year.

The Board also recommended a bonus issue of 1 share for every 8 shares held, effective 12th January 2012 (funded by a capitalisation of reserves amounting to €30 million). The bonus issue will serve to further increase the permanent capital base of the Bank from €240 million to €270 million and will also serve to enhance the affordability and liquidity of the Bank’s shares.

During the summer of 2011, the EBA, in collaboration with the ECB, carried out a series of stress tests on 91 European Banks. BOV was selected to represent the Maltese banking sector and, Mr Chalmers confirmed, the tests showed that the Bank enjoys strong capital buffers. This reaffirms the Bank’s position as that of a resilient financial institution and one that is well-capitalised by all international standards. New regulatory measures are being introduced to improve the quality and quantity of capital held by Banks. These measures will require more stringent asset and liability management at the expense of profitability.”

Looking ahead, Mr Chalmers stated that the “outlook for the year 2012 and beyond is one of uncertainty for the Eurozone. A number of factors, including more stringent fiscal restraint across Europe and the re-scheduling of Greek sovereign debt, indicate the strong possibility of a double-dip recession.”

Mr Chalmers concluded by paying tribute to Tonio Depasquale, CEO, who retired at the end of the AGM after 42 years of service to the Bank. He also wished Charles Borg, newly appointed CEO, and Romeo Cutajar, Chief Officer – Financial Markets and Investments, every possible success in their new roles.

Tonio Depasquale, CEO of Bank of Valletta followed by addressing shareholders with a detailed overview of the Bank’s performance during the financial year. The financial year was one characterised by heightened volatility, one that required the Bank to focus on prudent balance-sheet management and maintaining the Bank’s position as the largest financial institution in Malta.

“Growth in the Bank’s retail business meant that the Bank retained its leading position for both deposits and advances. Customer deposits increased by 6.5% to reach a record €5.5 billion at year end.

Meanwhile, despite a subdued demand for credit, the Bank saw an increase in lending of €114 million, with net advances reaching €3.7 billion. Most of this increase stemmed from an increased demand for home loans, particularly by first-time buyers. The loan book also showed a marginal improvement in quality during the period,., with the percentage of non-performing loans reported at 5.1%. An impairment charge of €16 million reflects the cautious approach necessary within the context of the current economic outlook.

Notwithstanding that FY 2011 continued to be characterised by a low interest rate environment, the Bank has registered an increase of €10.6 million or 8.3% in net interest income which amounted to €137.3 million for the year or 69% of total operating income. Commission income from various lines of business – another important contributor to profitability – was exemplified by strong cards business, driven by increased card usage, as customer preferences continued to shift towards more efficient payment instruments.

Other areas of business were more subdued, resulting in net commission and trading income for the year decreasing by 2% to €61.1 million. Of particular note was the decrease registered in trade finance business as a result of the political instability and turmoil in North Africa.

Effective cost management led to an increase in expenses of only 4% year on year. The increase of €3.4 million is attributable to higher HR costs, legal and consultancy fees and the strong investment that the Bank undertook towards information technology platforms.

FY 2011 was characterised by customer centric innovation across all business lines, as BOV responded effectively to changing customer needs, sharpening its customer value proposition and delivering an experience that is aligned to the Bank’s brand promise.

Special deposit products in the ‘FIDDA’ range gave customers the opportunity to invest in products with an attractive interest rate coupled with a capital guarantee feature. In addition, the €40 million issue that represented the first tranche of BOV’s Medium Term Note was fully subscribed within a few hours of launch.

Another innovation brought to the market by BOV was the JEREMIE Financial Package for SMEs, opening access to previously unavailable funding for small businesses. BOV won the bid to manage the programme in Malta and bring a portfolio of €51 million in new loans to SMEs in a bid to further enhance the competitiveness of Malta’s small business industry.

Cards and payments business continued to deliver innovation across the board, offering themed pre-paid cards, with BOV remaining the only bank in Malta to offer these products. BOV is also the only Bank to offer American Express products and grew its service offering to include the American Express Selects programme that gives Maltese businesses unique access to the vast global network that the brand represents.

Improving operational efficiencies was another area of focus during the Financial Year. BOV restructured its bancassurance structures to take full advantage of the new opportunities created by changes at Middlesea group and to bring new products to the market. Process management framework improvements have also enabled the Bank to improve response times via business process optimisation.

During FY 2011, the Bank continued to play an active role within the community, understanding that its role as a corporate citizen extends beyond the provision of financial services. BOV continued to support various projects and initiatives directed at making a positive contribution towards Malta’s society. These included initiatives in the social sector, support of educational activities, the sponsorship provided to the major sports associations and patronage of the arts. The Bank has also continued to provide a contribution to national heritage through support of various high profile restoration projects and has also participated actively in a number of environmental projects.”

Looking forward, the CEO stated that “Bank of Valletta will continue to tap new areas of business opportunity as Malta develops into a financial services centre of repute, and will continue to assist the local business community to access EU funding opportunities. In addition, the Bank will strengthen its position as a payments institution of choice.”

The CEO concluded by thanking the Chairman, the Board of Directors, the shareholders, staff members and customers for their support during his tenure and congratulated his successor, Charles Borg, on his appointment.

Business of the AGM

Following the Chairman’s and the CEO’s address, six resolutions were put to the meeting. These resolutions included approval of the Profit and Loss Account and Balance Sheet for the year ended 30th September 2011, and the Directors’ and Auditors’ Reports thereon. In addition, a gross final dividend of €0.08 per share, which represents a gross payment of €19,200,000 as recommended by the Directors, was approved for payment on 17th December 2011. Approval was also obtained for the amendment of the Memorandum of Association to increase the authorised share capital of the Company (from €300 million) to €350 million, and to capitalise €30 million from retained earnings for the purpose of a bonus issue of 1 share for every 8 shares held.

The appointment of Deloitte Audit Limited (forming part of Deloitte Malta), jointly with Deloitte United LLP (United Kingdom), as Auditors was also approved.

Pursuant to Article 60 of the Articles of Association, the company received six valid nominations for directors. Since there were 6 vacancies no election was held. The Government of Malta and UniCredit are entitled by the Articles of Association to appoint 2 and 1 director respectively. Roderick Chalmers (Chairman), Gordon Cordina and Roberto Cassata have been so appointed until the conclusion of the 2012 AGM. The Board of Directors for the forthcoming year will therefore comprise :-

Joseph Borg

Roberto Cassata

Roderick Chalmers (Chairman)

Gordon Cordina

George Portanier

Manuel Rizzo

Norman Rossignaud

Paul Testaferrata Moroni Viani

George Wells

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