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According to Market Intelligence, April 2023

S&P downgrades Malta-based Bank of Valletta

S&P Global Ratings on July 31 downgraded Bank of Valletta PLC's long- and short-term issuer credit ratings to BBB-/A-3 from BBB/A-2, and changed the outlook on the long-term ratings to stable from negative.

The agency also downgraded the Maltese bank's long-term resolution counterparty rating to BBB from BBB+ and affirmed its A-2 short-term resolution counterparty rating.

The downgrades reflect the agency's doubts about the robustness of Bank of Valletta's operational risk management in light of the result of regulatory investigations into the firm and a cyberattack in February. The agency also cited uncertainty about the capacity of the Maltese firm's management to adequately manage the complexities of its business model, which is considered to be relatively higher than those of the bank's similarly-sized peers.

S&P Global Ratings also expects the bank's capitalization to slightly drop to about 12.5% over the next two years from 12.8% at 2018-end. In addition, the agency said it considers a precautionary warrant in 2018 to seize funds worth €363 million held at the bank as substantial in relation to its total equity of €994 million as of 2018-end.

The stable outlook, meanwhile, balances the risks of further extraordinary litigation charges and the expected progress in the bank's risk control oversight and management as it carries out its de-risking measures over the next 12 months to 18 months, the agency noted.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.