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BNF BANK P.L.C.
Company Registration No. C 41030 l Annual Report and
Financial Statements 31 December 2025
BNF Bank p.l.c. is also referred throughout the document as
‘BNF Bank’, ‘BNF’, or ‘the Bank’.
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Table of
Content s
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General Information 6
Chairman’s Statement 7 - 8
Chief Executive Officer’s Review 9 - 11
Board of Directors 13 - 18
Executive Committee 19 - 21
Directors’ Report 23 - 28
Statement of Compliance with the
Principles of Good Corporate Governance 30 - 51
Report of the Compensation and Nomination Committee 52 - 54
Statement of Financial Position 56
Income Statement 57
Statement of Comprehensive Income 58
Statement of Changes in Equity 59
Statement of Cash Flows 60
Notes to the Financial Statements 62 – 168
Independent Auditor’s Report 169 - 180
Five Year Summary 182 - 185
Supplementary Financial Information 187
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General
Information
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General Information
Directors
The Directors who served throughout the year were as follows:
Dr Michael Frendo
Non-Executive Chairman
Sheikh Jassim Feisal Q. F. Al-Thani
Non-Executive Board Member (Deputy Chairman)
Mr David R. Power
Chief Executive Officer & Managing Director
Sheikh Mohammed Feisal Q. F. Al-Thani
Non-Executive Board Member
Sheikh Turki Feisal Q. F. Al-Thani
Non-Executive Board Member
Mr Tarik Mahmut
Non-Executive Board Member
Mr Mohammed Abdelqader Darwish Al-Ramahi
Non-Executive Board Member
Mr Mario P Galea
Non-Executive Board Member
Mr Paul Mark Johnson
Non-Executive Board Member
Mr Charles Borg
Non-Executive Board Member
Mr Hassan Elsayed Hassan Abdalla
Non-Executive Board Member
Ms Juanita Bencini
Non-Executive Board Member
Company secretary
Dr Jeanette Carabott
* Resigned with effect from 15 April 2025
Interim Company Secretary
Dr Jean Noel Cutajar
Registered office
Level 2, 203 Rue D’Argens
Gzira, GZR 1368, Malta
Auditors
KPMG
92, Marina Street,
Pietà, PTA9044, Malta
BNF Bank Annual Report 2025
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Chairman’s Statement
A Commitment to Stability and Security
Introduction
2025 was a year of significant delivery for the Bank,
marked by continued focus on long-term stability
alongside major change across key parts of our
operating model. While the scale of transformation
brought challenges, we remained disciplined and
compact in execution, prudent in risk management, and
clear in our responsibility to protect the trust placed in us
by customers, regulators and other stakeholders.
Importantly, we continued to invest in the capabilities
required to strengthen service reliability and support
sustainable growth.
Strategic Priorities
Our strategic priorities in 2025 were clear: to stabilise the
new banking operational platform, address the customer
issues that arose during the transition, and safeguard the
Bank’s financial strength. With the customer at the heart
of what we do, we invested heavily in people, technology,
time and service capacity to support stabilisation and
improve outcomes for customers. We increased technical
and operational resources across the Bank and our key
partners, strengthened incident management and
escalation arrangements, and enhanced monitoring. We
also expanded customer communications and support
capacity to help customers navigate issues and to ensure
that concerns were identified, prioritised and addressed
as quickly as possible.
Technological Transformation
In 2025, we continued to invest in technology and
infrastructure to strengthen the Bank’s operating
platform. During the year we carried out a necessary
major programme of digital and operational change,
including the rollout of a new core banking platform,
enhancements to customer channels, a change of card
provider, upgrades to ATM software, and the
implementation of several supporting systems. This work
is designed to provide a more scalable foundation for the
Bank and its future growth in Malta and in the United
Kingdom and to help us meet evolving customer
expectations and regulatory requirements.
Implementing a new core banking system is one of the
most complex changes a bank can undertake, and the
transition brought periods of service instability and delays
in customer service. We recognise and regret the
inconvenience this caused for customers and appreciate
the additional pressure it placed on our employees. In
response, we prioritised stabilisation, mobilising quickly
and working closely with internal teams and external
partners to support customers and to address issues as
they emerged. These actions — together with the lessons
learned — are guiding our ongoing stabilisation and
optimisation of processes so that the new platform
delivers the reliability, security, and scalability for which it
was adopted.
Responsibility to the Community
Clearly our role extends beyond financial intermediation.
In 2025, we continued to integrate Environmental, Social
and Governance (ESG) considerations into decision-
making and to advance our Corporate Social
Responsibility (CSR) commitments. This includes investing
in our people, supporting local communities, and
progressing initiatives that reduce environmental impact
and promote financial inclusion. We believe that
sustained value is created when financial performance is
matched by responsible conduct and a clear contribution
to society.
Financial Performance
While profitability was impacted in 2025, reflecting
elevated investment in a major system change, the Bank
remained profitable and financially sound. Our diversified
balance sheet and prudent approach to risk supported
resilience through a period of operational challenges. We
remained focused on preserving strong foundations for
the future — balancing short-term solutions with ongoing
BNF Bank Annual Report 2025
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investment in solid service reliability, technology and our
core customer proposition, within a framework of
constant regulatory readiness, while retaining robust
capital and liquidity positions. This strength provides
resilience through periods of change, reinforces
confidence in the safety and soundness of the Bank, and
enables continued investment in customer experience,
technology, and regulatory readiness.
Looking Ahead
As we move forward, our foremost priority is to exploit and
monetise the potential of the new core banking system
and its corresponding customer experience.
We are determined to translate the challenges and
experience of the past year into lasting improvements
and a stronger foundation for a better bank which
delivers improved services and outcomes for its
customers, employees, and shareholders.
MICHAEL FRENDO
Chairman
BNF Bank Annual Report 2025
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Chief Executive Officer &
Managing Director’s Review
2025 was a year of major investment for the Bank. Following the go -
live of our new core banking platform, digital channels and new
card scheme, we addressed key stabilisation priorities while
continuing to enhance our service capabilities. The actions take n in
2025 have strengthened our direction and position us well for the
period ahead.
Introduction
The financial year ended 2025 was a pivotal and
challenging one for BNF Bank. Building on our strategic
commitment to modernise the Bank, we progressed with
a major technology transformation that is essential for
our future competitiveness and service quality. As with
any complex change programme, the period following
go-live required intense stabilisation efforts. Importantly,
throughout this period we maintained a sound financial
position and remained focused on acting ethically and
responsibly, in the interests of our stakeholders.
Market Environment
In 2025, the operating environment for banks in Europe
and Malta was shaped by a combination of moderating
inflation, evolving expectations around interest rates and
ongoing geopolitical uncertainty. Within this scenario,
resilience, strong risk discipline and reliable customer
service, supported by robust systems and controls,
remained central to sustainable banking performance.
Across Europe, economic momentum remained uneven in
2025. While some sectors proved resilient, households
and businesses continued to adjust to a higher interest-
rate environment than in the preceding years, and
uncertainty around energy markets and geopolitical
developments weighed on confidence at times. For the
banking sector, the focus remained on maintaining strong
balance sheets, supporting customers through changing
conditions, and investing in operational resilience and
digital capability to meet rising expectations for speed,
simplicity and security.
In Malta, economic activity remained comparatively
steady in 2025, supported by a services-led economy
and continued business investment. At the same time,
tight labour market conditions, evolving cost pressures
and the interest-rate environment continued to influence
consumer behaviour and credit demand. In this context,
BNF Bank’s priority has been to combine prudent risk
management with dependable service delivery—
strengthening the foundations of our operating platform
so that we can support customers efficiently and
sustainably, across both digital channels and our branch
network.
Financial Performance
Our financial results for the year ended 2025 were
significantly influenced by an exceptionally demanding
year of operational stabilisation following the go-live of
our new core banking system, digital channels and card
scheme. Profitability was impacted as we prioritised
customer support, remediation and delivery assurance,
alongside continued investment in the Bank’s future
operating platform. These actions were necessary to
safeguard service continuity and to protect long-term
value. Although the year saw a temporary dip in
profitability, we responded quickly and responsibly,
continued to invest for the long term, and strengthened
the foundations that will enable us to serve customers
better, operate with greater resilience, and return to
growth with confidence.
With service performance and platform stability now
substantially restored, and with capital and liquidity
BNF Bank Annual Report 2025
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remaining strong, the Bank is well positioned to move
beyond the 2025 profitability dip and translate our
investments into more sustainable performance.
Despite the pressures experienced during the year, our
balance sheet fundamentals remained robust. We
maintained strong capital and liquidity positions,
continued to apply prudent risk management, and
focused on protecting asset quality. We also absorbed
additional costs associated with stabilisation activities,
customer support measures and continued investment in
our transformation programme.
Capital and Funding
Capital and liquidity remain strong, providing the
flexibility required to navigate volatility and to continue
investing in strategic priorities. Our funding base remains
well diversified, with a continued focus on stability and an
appropriate maturity profile. These strengths give the
Bank the capacity to support customers, meet regulatory
expectations and pursue growth opportunities as we
move beyond previous operational challenges
experienced. Our CET1 ratio and Capital Adequacy Ratio
stood at 13.8% (2024: 13.2%) and 18.5% (2024: 17.4%)
respectively.
Digital Transformation
A key pillar of our strategy is sustained investment in
technology and infrastructure. In 2025, we continued to
invest heavily in our digital transformation to build a
stronger, more secure and scalable IT platform—one that
can serve customers more reliably, enable better digital
journeys and strengthen operational controls. This multi-
year programme is foundational to the Bank’s long -term
competitiveness and resilience.
Following go-live, the Bank experienced stabilisation
issues that temporarily affected certain customer
services. Addressing these issues became a clear priority
for the Board and Executive Management. We mobilised
specialist teams, worked closely with key technology
partners, strengthened governance and controls, and
implemented interim measures to support customers,
including increased call-centre capacity and additional
on-the-ground assistance in branches.
Building on the stabilisation work completed during the
year, we are confident that BNF Bank is better equipped
for the future. The technology foundations we have put in
place will enable better customer experiences, and
improved efficiencies, and will support the Bank’s
sustainable growth over the years ahead.
Sustainable Growth & Community
Sustainable growth remains a cornerstone of our
strategy. Even in a year where operational priorities were
heavily focused on stabilisation, we remained committed
to responsible banking, sound governance and long-
term value creation. Our focus on ESG principles
continues to guide how we manage risk, invest in
resilience and contribute positively to the communities we
serve.
Our commitment to the community is reflected in
practical actions and long-term investment. In addition
to advancing our technology programme throughout
2025, we commenced the refurbishment of our Naxxar
Branch, with the newly enhanced and more welcoming
environment opening to customers in 2026. We believe
that combining better digital services with strong branch
support is essential to meet customers’ needs across
different moments and preferences.
Customers
We remain determined in our commitment to customers.
During 2025, customers experienced service disruption as
we worked through stabilisation following go-live. We did
not take this lightly. Our priority has been to restore
consistent service levels, communicate transparently and
provide practical support through our teams in branches
and our contact centre. With the Bank’s continued
investment in digital transformation and improvements to
our branch environment, we are building a stronger
overall customer experience across both digital and
physical channels.
Employees
Our employees are our greatest asset, and 2025
demonstrated this more clearly than ever. I extend my
sincere thanks to colleagues across the Bank who worked
tirelessly to support customers, resolve issues and
maintain high standards of control and professionalism
BNF Bank Annual Report 2025
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throughout a demanding stabilisation period.
Alongside this, we remain committed to developing our
people, strengthening specialist skills and fostering a
culture of collaboration and accountability—capabilities
that are critical as we continue to modernise the Bank.
Shareholders
Delivering value to our shareholders remains a core
priority. While 2025 results reflect the impact of a
challenging year, we view the actions taken as necessary
to protect and enhance long-term value. We remain
committed to transparent engagement with our
shareholders as we progress into the next phase of the
Bank’s journey.
Conclusion
In conclusion, 2025 was a challenging, yet very important
year in building the Bank we need for the future. With
strong capital and liquidity, continued progress on
system stability, and significant investment in a stronger
digital platform, BNF Bank is well positioned to recover
from the 2025 dip in profitability and to deliver
sustainable value for all stakeholders.
DAVID POWER
Chief Executive Officer & Managing
Director
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Core Values
We are a team of inspired people who believe that
opportunities start with a conversation.
The values that guide our daily behaviour are at the basis of
everything we do: Ambition, Responsibility and Empathy.
We embrace change and face challenges head on,
while continually looking for solutions. Ambition to us
represents a strong desire to do and achieve.
We take personal responsibility for growth and
development, keeping in mind the community in
which we operate. We want to share our knowledge
and experience with our customers, who know they
can count and depend on us.
We are empathic because we have the ability
to understand and share the feelings of others.
We understand our customers’ needs to deliver
a high-quality service.
BNF Bank Annual Report 2025
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Board of Directors
Sheikh Jassim Feisal Q.F. Al - Thani has been
appointed to the Board of Directors of BNF
Bank p.l.c. since 15 February 2023 and he is
also a member of the Nominations and
Compensation Committee of the Bank.
Shiekh Al - Thani is the current Chief
Executive Offi cer of Al Faisal International
for Investment Q.P.S.C., in Doha, Qatar.
In 2014, Sheikh Jassim Feisal Q.F. Al - Thani
was appointed member of the Al Faisal
Holding Board of Directors and has led
efforts in enhancing policies and
governance structures within the company.
Sheikh Jassim Feisal Q. F. Al - Thani is a
Board Member of Qatar Islamic Bank (QIB).
Sheikh Jassim Feisal Q.F. Al - Thani holds
a bachelor’s degree in business
administration from Stratford University
in Virginia, the United States of America,
as well as a High School Diploma from
the American School of Doha, obtained
in 2014.
Sheikh Jassim Feisal Q. F. Al-Thani
Non-Executive Deputy Chairman
Dr Michael Frendo
Non-Executive Chairman
Dr Michael Frendo has been serving as
Chairman of the Bank since May 2013. Dr
Frendo is Speaker Emeritus of the House of
Representatives, Parliament of Malta
(2010-2013) and a former Minister for
Foreign Affairs (2004-2008). He also held
various other ministerial portfolios
including Information and Communication
Technologies, Transport and Civil Aviation,
Culture, Broadcasting and Consumer
Protection. Dr Frendo, is a lawyer with
extensive practice experience in European
Union law, Telecommunications and ICT
law, Corporate law and Contract law. He
has held managerial positions in the
private sector in both Malta and the United
Kingdom.
In the UK, between 1979-1982, Michael
Frendo was part of the launching team
of Eurolex (Thomson International), a
pioneer European and UK legislation
and case-law online, full-text
searchable, database and was the
author of its User Handbook.
Dr Frendo is a signatory of the EU Treaty
of Lisbon and was earlier a member of
the European Convention on the Future
of Europe. He has published widely in a
number of books and articles on
Constitutional; Legal; European, and
International Affairs issues.
BNF Bank Annual Report 2025
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David Power
Chief Executive Officer & Managing Director
Sheikh Mohammed Feisal Q.F. Al-Thani has
been appointed to the Board of Directors
of BNF Bank p.l.c. since 4 October 2016 and
has been Vice Chairman of the Board of Al
Faisal Holding since 2010 and the Vice
Chairman and Managing Director of
Aamal Company Q.P.S.C.
Sheikh Mohammed Feisal Q.F. Al-Thani
holds a bachelor’s degree in business
administration from Carnegie Mellon
University and he is the Honorary
President of the Italian Chamber of
Commerce in Qatar, member of the
Board of Trustees of the Arab Academy
for Banking and Financial Sciences
(Egypt), a Board Member of Gulf Qatari
Classic Cars Association, a member of
the Qatari Businessmen Association
and the Qatari Hotels Association.
Sheikh Mohammed Feisal Q. F.
Al-Thani
Non-Executive Director
BNF Bank Annual Report 2025
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Sheikh Turki Fesial Q.F. Al-Thani has been
appointed to the Board of Directors of BNF
Bank p.l.c. since 9 February 2018. Sheikh Al-
Thani is a member of the Board of Al Faisal
Holding since 2014 and Managing Director
of Al Jazi Real Estate since 2021. He is also
the Honorary President of the Belgian
Chamber of Commerce Qatar and serves
as a Non-Executive Director at BNF Bank in
Malta.
Sheikh Turki Feisal Q. F. Al-Thani
Non-Executive Director
Sheikh Turki holds a bachelor’s degree in
foreign service with major in Culture and
Politics from George Town University,
Qatar.
Mr Tarik Mahmut has been appointed to
the Board of Directors of BNF Bank p.l.c.
since 15 February 2023 and he is also a
member of the Credit Approval Committee
of the Bank. Mr Mahmut is currently the
Managing Director and Chief Executive
Officer of Al Rayy an Tourism Investment
Company (known as ARTIC) and has been
occupying this role since 2017 where he
successfully led the international
expansion of Al Faisal Holding Group
through ARTIC into the European, USA and
MENA hospitality sectors and has
successful ly built a diversified portfolio of
over 35 hotels and over 2000 residences,
establishing key partnerships with
international blue - chip companies and
hotel operators such as Four Seasons,
Marriott International, Hilton, Hyatt and
IHG.
Mr Mahmut enjoys vast experience in
managing companies and has occupied
various posts including the position of
Group Chief Financial Officer at Al Faisal
Holding Company in Qatar from 2001 to
2010. Mr Mahmut also held the position
of Board Member and Managing
Director of Aamal Company Q.P.S.C
from 2007 up until 2016, a leading
diversified business group, where he led
its public listing on the Qatar Stock
Exchange in 2007. In 2013, Mr Mahmut
became th e Chairperson of Seldar Misr
Group of Companies.
Recognized for his leadership, Mr.
Mahmut has been featured multiple
times on Forbes Middle East’s “Top
CEOs” and “Top Travel & Tourism
Leaders” lists, including in 2024.
Mr Mahmut is a certified public
accountant and holds a bachelor’s
degree in science and accounting from
the University of Cairo as well as a
Master’s High Diploma in Banking and
Finance from the Arab Academy based
in Egypt.
Tarik Mahmut
Non-Executive Director
BNF Bank Annual Report 2025
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Mr Mario P. Galea has been appointed to
the Board of Directors of BNF Bank p.l.c.
since 19 October 2016. Mr Galea currently
chairs the Bank’s Audit Committee and is
also a member of the Bank’s Risk and
Compliance Committee.
Mr Galea, is a certified public accountant
holding a warrant to practice both as an
accountant and as an auditor. Currently
practising as a business advisor providing
governance oversight and advisory
services to businesses and corporations.
Serves as an independent non-executive
director on the boards and audit
committees of various listed companies in
the financial and commercial sectors
including banks, insurance and investment
companies. Mentor and advisor to family
businesses. Founder, managing partner
and chairman of accountancy and audit
firm Ernst & Young in Malta until retirement
in 2012. Specialised in auditing and
assurance which he has practiced for 35
years in Malta and abroad. Auditing
experience spans over several sectors
including banks, insurance and investment
companies.
Lectured in auditing, assurance and
professional and business ethics and
led several training courses. Speaker at
various business and professional
conferences in Malta and abroad.
Speaker and producer of various
webinars related to auditing, corporate
governance and ethics. Assisted
businesses in several areas particularly
relating to governance, accounting and
systems of control. Served as President
of the Malta Institute of Accountants
and for many years formed part of the
Accountancy Board which is the
accountancy profession regulator in
Malta. Served on various professional
committees in Malta and abroad such
as the council of the Federation des
Experts Comptables (FEE) in Brussels
(now Accountancy Europe). Member of
the Ethics committee of the Malta
Institute of Accountants in Malta.
Mario P. Galea
Non-Executive Director
Mr Moh amme d Abdelqader Darwish Al -
Ramahi has been appointed to the Board
of Directors of BNF Bank p.l.c. since 15
February 2023 and he is also a member of
the Audit Committee of the Bank and also
an Alternate Member of the Credit
Approval Committee of the Bank.
Mr Al- Ramahi is currently the Group Chief
Financial Officer of Al Faisal Holding, a
position which he holds since 2018.
Mr Al- Ramahi has been working in finance
for over 30 years and has served as Group
Finance Manager for the Al Faisal
Holding Company from 2003 until 2007.
Mr Al- Ramahi was also the Chief
Financial Officer of Aamal Company
from 2007 until 2018 and Advisor to the
Chief Executive Officer until 2022.
Mr Al- Ramahi holds a bachelor’s degree
in business administration with a major
in Accounting from the University of
Jordan.
Mohammed Abdelqader Darwish
Al-Ramahi
Non-Executive Director
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Mr Charles Borg has been appointed to
the Board of Directors of BNF Bank p.l.c.
since 17 April 2017. Mr Borg currently chairs
the Bank’s Credit Approval Committee
and is also a member of the Bank’s Risk
and Compliance Committee.
Mr Borg also holds a number of other non-
executive directorship positions in other
financial and credit institutions in Malta.
Mr Borg enjoyed a 34-year career at Bank
of Valletta p.l.c. until December 2015.
During this time, he occupied various senior
management positions, including that of
Chief Executive Officer from 2012 to 2015.
Prior to that, Mr Borg also served as Chief
Officer, Financial Markets and Investments
at BOV, with responsibility for all retail and
wholesale funding of the BOV Group, as
well as the management of BOV’s treasury
portfolio. Mr Borg also served as a
Director of Valletta Fund Management
Ltd. Mr Borg was also General Manager
of Valletta Fund Services Limited and
BOV Investments Limited. In addition, Mr
Borg served as a director on other listed
companies on the Malta Stock
Exchange, including PG plc and Mapfre
Middlesea Insurance p.l.c. Mr Borg also
chaired the Audit Board of the
European Investment Fund, a subsidiary
of the European Investment Bank. Mr
Borg served as a Director on the World’s
Savings Bank in Brussels and was also
the President of the Institute of Financial
Services and the President of the Malta
Bankers Association.
Mr Borg, is a Fellow of the Chartered
Institute of Bankers (UK) and holds a
Banking and Finance Honours Degree
and a Masters Degree in Financial
Services from the University of Malta.
Charles Borg
Non-Executive Director
Mr Paul Johnson has been appointed to
the Board of Directors of BNF Bank p.l.c.
since 1 September 2019 and he currently
chairs the Nominations and Compensation
Committee of the Bank and is also a
member of the Bank’s Audit Committee.
Until recently, Mr Johnson was the Chief
Operating and Information Officer at PIB
Group, a position he held since October
2018 up until March 2026.
Mr Johnson has a wealth of experience in
Banking and other Financial Services
industries where he has occupied various
senior management roles and served on a
number of boards. Mr Johnson joined the
Royal Navy in 1984, he subsequently
gained experience in a wide variety of
activities including technology,
operations and change across a
number of Banking, Financial Services
including IBM Consultancy.
His recent Senior and Executive
positions have included, Chief
Information Officer and Chief
Operations Officer at GMAC, Lloyds
Bank and Aldermore Bank. Mr Johnson
was also involved in the design and
setup of a FinTech Blockchain-based
bank. In addition to serving on BNF’s
Board, he has the position of an
Independent Non-Executive Director on
the Board of a regulated Bank in the UK.
Paul Johnson
Non-Executive Director
BNF Bank Annual Report 2025
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Ms Juanita Bencini was appointed to the
Board of Directors of BNF Bank p.l.c. on 9
February 2018 and she is currently the
Chairperson of the Bank’s Risk and
Compliance Committee.
Ms Bencini is an ex-KPMG partner where
for 17 years she headed Risk Consulting
Advisory within the Malta practice and for
seven years was also Head of Risk
Consulting within the KPMG international
region of which the Malta practice forms
part. Today Ms Bencini acts as a
professional non- executive director on
boards of regulated entities, including
insurance companies, funds and listed
entities. Her area of expertise includes
risk management, financial services
regulation, corporate governance and
AML. Ms Bencini has also served as
President of the Institute of Financial
Services Practitioners and was a
Council Member. She lectures at the
University of Malta on banking and Anti-
Money Laundering topics.
Juanita Bencini
Non-Executive Director
Mr Hassan Elsayed Hassan Abdalla has
been appointed to the Board of Directors of
BNF Bank p.l.c. since 16 June 2022.
Mr Abdalla is currently the Governor of the
Central Bank of Egypt (CBE), a position
which he holds since 2022. Mr Elsayed
Abdalla also serves as Non-Executive
Chairman of Union de Banques Arabes et
Françaises (UBAF). Prior to his joining the
CBE, Abdalla founded and led Panther
Associates, a boutique investment advisory
and private equity firm and chaired both
United Media Services (UMS) and Misr
Spinning and Weaving (Al-Mahala Al-
Kubra) and the Middle East, Far East and
Africa regional committee of the
International Capital Market Association
(ICMA) (Zurich).
During his over thirty years of experience, Mr
Abdalla served as Vice Chairman and
Managing Director at Arab African
International Bank, from 2002 until 2018,
and held board seats in several
reputable and international
organizations including but not limited
to the Central Bank of Egypt, the
Egyptian Stock Exchange, the Egyptian
National Competitive Council (ENCC),
the Arab Business Council of World
Economic Forum, the Institute of
International Finance (IIF), the IIF
Emerging Markets Advisory Council
(Washington DC), and the London
Stock Exchange’s London Africa
Advisory Group.
Furthermore, Mr. Abdalla is a part-time
faculty member at the American
University in Cairo (AUC), where he
received a distinguished alumni award
and obtained both his bachelor’s and
master’s degrees.
Hassan Elsayed Hassan Abdalla
Non– Executive Director
BNF Bank Annual Report 2025
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Executive Committee
Mr Power is a seasoned banking
professional with extensive international
experience across multiple financial
sectors and jurisdictions. He began his
career at Standard Bank of South Africa
Ltd, where he spent 17 years in senior
leadership roles, including Senior Regional
Branch Manager, Head of Priority Banking,
and Head of the Offshore Banking
Group based in the Channel Islands. He
later served as Divisional Director for
Private Banking at Nedbank, South Africa,
before transitioning to the Middle East as
Deputy General Manager at Gulf Bank,
Kuwait.
Mr Power has since held several C-Suite
positions globally, including Group Chief
Retail and Private Banking Officer at the
National Bank of Oman, Head of Retail
Banking at Commercial Bank International
in Dubai, Group Chief Retail and Private
Banking Officer at Kuwait Finance House in
Kuwait and Chief Executive Officer of
Kuwait Finance House in Malaysia.
With a career spanning South Africa, the
Middle East, Southeast Asia, the UK, and
Europe, Mr Power has led key functions
across Retail, Commercial, Small
Business, Private Banking, Wealth
Management, and Offshore Banking.
His expertise in strategic leadership,
digital transformations, and banking
conversions from Conventional to
Islamic finance has been instrumental in
driving growth, innovation, and
operational excellence in complex and
evolving financial landscapes.
Mr Power is a graduate of the University
of Cape Town, South Africa, and holds
several postgraduate qualifications,
including Chartered Professional in
Islamic Finance (CPIF) from the
Chartered Institute of Islamic Finance
Professionals (CIIF) in Malaysia,
Executive Management Programme
(EDP) from Templeton College in Oxford,
UK, Management Development
Programme (MDP) from Ashridge in UK,
Programme in Management (PIM) from
Henley Business School in UK and
Orchestrating Winning Performance
(OWP) from International Institute for
Management Development (IMD) in
Switzerland.
David Power
Chief Executive Officer & Managing Director
In the role of Chief Banking Officer at BNF
Bank p.l.c., Mr Carvil is responsible for
overseeing the Bank’s banking activities,
corporate banking strategy, and client
relationship management.
Mr Carvil is an accomplished banking
executive with over 25 years of experience
in corporate finance, capital markets and
strategic advisory. Prior to joining BNF
Bank, he held senior leadership roles
including Head of Corporate at QNB and
ICBC in London, and Head of Advisory and
Corporate Solutions at SMBC, where he led
complex fundraising and structured
finance initiatives. Previously, he served as
Co-Head of Loan Syndications at Lloyds
Banking Group.
Mr Carvil’s expertise spans debt
syndication, capital raising and
structured finance solutions for
corporates and financial institutions,
and he has built long-standing
relationships across the international
banking sector.
*Stewart Carvil replaced George Debono, who
resigned from his role as Chief Commercial Officer
on 19 September 2025.
Stewart Carvil
Chief Banking Officer*
BNF Bank Annual Report 2025
20
In her role as Chief Financial Officer at BNF
Bank p.l.c., Ms Miceli is responsible for the
Bank’s financial governance, regulatory
finance, capital and liquidity planning,
financial projections, and balance sheet
management.
Ms Miceli brings over 15 years of experience
gained through a progressive career within
BNF Bank, having risen through the ranks to
assume senior financial leadership roles.
She combines deep institutional
knowledge with strong expertise in
regulatory reporting, capital planning,
scenario analysis and stress testing.
Ms Miceli leads the development of the
Bank’s forward -looking financial
framework, supporting Board and
Executive Committee decision-making
with insights on profitability, capital
adequacy, risk sensitivity, and financial
resilience.
Ms Miceli holds a Bachelor of Commerce
in Management and Banking and a
Bachelor of Commerce (Honours) in
Banking and Finance from the University
of Malta, graduating with first-class
classifications.
*Nadia Miceli replaced Mark Micallef, who
resigned from his role as Chief Financial Officer on
23 September 2025.
Nadia Miceli
Chief Financial Officer*
Mr Glen Smith is an experienced financial
services professional with over 30 years'
experience in financial services and
banking, specialising in Risk and
Regulation. He has occupied various senior
management roles across international
financial markets in both retail and
commercial banking.
Prior to his appointment with the Bank,
Mr Smith held the role of Senior Risk
Manager with HSBC Continental
Europe, based in the Paris Head Office.
This included the management and
oversight of wholesale credit risk
activities, reporting, regulatory risk and
controls, covering France, Germany,
Malta and other territories.
Glen Smith
Chief Risk Officer
BNF Bank Annual Report 2025
21
Dr Jean Noel Cutajar is a legal
professional, specialising in banking,
finance, and corporate law. Dr Cutajar
earned his Doctorate of Laws from the
University of Malta in 2010 and further
enhanced his knowledge with a Master of
Laws, specialising in banking and finance,
from the University of London in 2017.
Additionally, he holds a degree in
company directorship from the UK Institute
of Directors, London, in 2021.
Throughout his career, Dr Cutajar has
advised various reputable companies
and institutions, including HSBC Bank
p.l.c. and the Central Bank of Malta,
amongst others.
Dr Cutajar currently occupies the role of
interim company secretary, replacing Dr
Jeanette Carabott, who resigned from
her role as company secretary on 15
April 2025.
Dr Jean Noel Cutajar
Chief Legal & Compliance Officer
As Chief Technology and Operations
Officer, Mr Cutajar is responsible for the
implementation of the Bank's IT strategy,
digital transformation and the Bank’s
Operations.
Prior to joining BNF Bank, Mr Cutajar was
Head of Information Technology at
Ferratum Bank, responsible for the IT
function and overseeing the Bank's IT
strategy, IT governance, business
continuity and outsourcing agreements.
Mr Cutajar was a member of Ferratum
Bank's Executive Committee and the
Group IT Management Committee and
also chaired the Bank's IT Governance,
Risk & Compliance (GRC) Committee.
Mr Cutajar is an IT professional with over
23 years of experience in the Maltese
financial services industry holding
various senior technical and
management roles throughout his
career. Mr Cutajar holds a Masters
Degree in Business Administration
eBusiness from the University of Malta.
Daniel Cutajar
Chief Technology & Operations Officer
BNF Bank Annual Report 2025
22
Director s’
Report
BNF Bank Annual Report 2025
23
Directors’ Report
The Directors present their annual report together with the audited
financial statements of the Bank for the year ended 31 December
2025.
The Directors who served during the year are listed in the General Information section.
Principal activities
BNF Bank p.l.c. was incorporated as Banif Bank (Malta) p.l.c. and licenced to operate as a credit institution in terms of the
Banking Act, Cap. 371 of the Laws of Malta on 27 March 2007. On 4 October 2016, following the non-objection of the European
Central Bank by virtue of a decision dated 12 August 2016 made pursuant to Articles 4(1)(c) and 15(3) of Council Regulation EU
no. 1024/2013, Article 87 of Regulation (EU) no. 468/2014 of the European Central Bank (EC/2014/17) and Article 13(1) and Article
13A of the Banking Act (Cap. 371 of the laws of Malta), a controlling stake was purchased by Al Faisal International for
Investment Malta Limited, a subsidiary of Al Faisal International for Investment Company Q.P.S.C. headquartered in Qatar.
The Bank’s name wa s subsequently changed to BNF Bank p.l.c. On 3 July 2018 Al Faisal International for Investment Malta
Limited changed its name to JUD Investment Group Limited. At 31 December 2025, JUD Investment Group Limited owned
92.44% of the ordinary shares of BNF Bank.
The Bank provides a comprehensive range of retail and commercial banking services through a network of thirteen branches
and a corporate and business centre in Malta, and a branch in London.
The Bank’s long -term strategic objective continues to be that of conservative, robust, and profitable growth.
As always, BNF remains committed to offering its customers the best possible standard of service, and peace of mind that
their finances are in good hands. Good governance remains a top priority for BNF Bank; the Statement of Compliance with
the Principles of Good Corporate Governance in this Annual Report details the Bank’s governance structures.
A review of the Bank’s financial performance for 202 5 is set out overleaf.
BNF Bank Annual Report 2025
24
Profitability
During the year under review, the Bank remained profitable notwithstanding a period of significant investment in its
technology transformation programme. Profit before tax for 2025 amounted to €2.9 million, compared to €13.3 million in 2024,
while net operating income stood at €34.0 million (2024: €37.3 million).
The reduction in profitability was primarily driven by a decline in net interest income of 1.8%, reflecting the prevailing downward
interest rate environment, together with higher operating expenses associated with ongoing investment in technology and
infrastructure.
Notwithstanding these impacts, the Bank is well positioned to restore profitability and realise the benefits of its recent
strategic investments. The enhancements implemented are expected to improve operational efficiency and provide a strong
platform for sustainable growth in the periods ahead.
Operating expenses amounted to € 31.4 million in 2025 (2024: €25.7 million), the increase pertaining primarily to investment in
technology implementation and infrastructure. The cost-to-income ratio stood at 92.3% (2024: 68.8%).
Credit impairment gains of € 0.3 million in 2025 (2024: gains of € 1.7 million) which principally arise due to the release of the
remaining management overlay on the corporate portfolio, reflected the Bank’s improving asset quality and was testament
to a cautious provisioning stance in recent years. For detail on 2025 and 2024 IFRS 9 staging and expected credit losses,
refer to the financial risk management disclosures in Note 3 to the Financial Statements.
Financial position
Total assets remained stable at €1,368.8 million as at 31 December 2025 (2024: €1,375.7 million).
The largest and main income-producing asset portfolio on 31 December 2025 remained loans and advances to customers,
which made-up 75% of total assets. Loans and advances to customers comprised of net corporate lending amounting to
€263.5 million (2024: €262.7 million), net retail lending amounting to €641. 1 million (2024: €641.4 million), and net international
lending amounting to €1 21.8 million (2024: € 106.2 million). During 2025 the percentage of total loans and advances to
customers which were credit-impaired was of 2.44% (2024: 2.39%), and the total credit-impaired exposure amounted to €2 5.4
million (2024: €2 4.5 million). Exposure to credit-impaired loans and advances to customers was mitigated with collateral
amounting to €18. 0 million (2024: €18.4 million), and loss allowances of €1 2.1 million (2024: €11.8 million).
BNF Bank Annual Report 2025
25
As disclosed in further detail in Note 3 to the Financial Statements on financial risk management, loans and advances to
customers on 31 December 2025 and 31 December 2024 were classified as follows under IFRS 9 staging criteria:
Stage 1
Stage 2
Stage 3
12-month ECL
Lifetime ECL
Lifetime ECL
Total
€000
€000
€000
€000
2025
Gross carrying amount
984,862
29,283
25,391
1,039,536
Loss allowance
(889)
(259)
(12,089)
(13,237)
Carrying amount
983,973
29,024
13,302
1,026,299
Coverage ratio
0.1%
0.9%
47.6%
1.3%
2024
Gross carrying amount
978,826
20,625
24,482
1,023,933
Loss allowance
(1,434)
(358)
(11,763)
(13,555)
Carrying amount
977,392
20,267
12,719
1,010,378
Coverage ratio
0.1%
1.7%
48.0%
1.3%
During 2025, the Bank continued to monitor credit risk in the context of evolving macroeconomic conditions. As economic
indicators stabilised and pandemic related risks subsided, the level of estimation uncertainty underpinning these overlays
reduced. As a result, the remaining management overlay on the corporate portfolio was fully released as at 31 December
2025. For further detail refer to Note 3 and Note 4.
BNF Bank’s liquidity position remained robust throughout 202 5, and the Bank continued to operate diversified sources of
funding. The Liquidity Coverage Ratio as of 31 December 2025 was 181.7% (2024: 213.3%), and the Net Stable Funding Ratio
was 138.1% (2024: 141.4%). The Bank’s main source of funding remained retail and commercial deposits from the Maltese
market, although the Bank also continued to strengthen its partnership with online deposit platforms to raise Euro and Pounds
Sterling funding from German and UK retail depositors, respectively.
BNF Bank Annual Report 2025
26
The Bank’s Capital Adequacy Ratio as at 31 December 202 5 was 18.5% (2024: 17.4%) and the Common Equity Tier 1 Ratio was
13.8% (2024: 13.2%), both above overall capital requirements and supervisory pillar two guidance.
Financial Risk Management
Note 3 to the Financial Statements, Financial Risk Management, illustrates the process of how the Bank identifies and
manages its risks and uncertainties. The risks described in Note 3 are credit risk, market risk, liquidity risk, operational risk, and
capital risk management. The same note includes extensive detail of the processes undertaken by the Bank to manage these
risks.
Environmental, Social, and Governance initiatives
The Bank recognises the responsibility that it has towards society at large, and to protect and hand over a more sustainable
and greener environment for the enjoyment of future generations.
The Bank has an ESG Committee which focuses on meeting our Environmental, Social and Governance goals. The Bank has
a comprehensive ESG Strategy and Framework, outlining various action plans aligned with five strategic pillars. This ensures
that Environmental, Social and Governance elements are given equal importance, connected and indivisible. The five pillars
are:
• Energy Efficient Bank.
• Sustainable and Responsible Business.
• Employee Wellbeing.
• Community Presence.
• Strong Governance.
To drive the implementation of the ESG Strategy, the ESG Committee established five Pillar Working Groups corresponding
to each pillar. The working groups are comprised of ESG Champions from different departments within the Bank, ensuring a
holistic and dedicated approach to ensure the strategy's success.
We remain committed to continue advancing our ESG initiatives and further integrating sustainability into our business
operations. We recognize that addressing global challenges such as climate change and social inequality, whilst retaining
effective governance requires ongoing dedication and collaboration. Therefore, we will continue to innovate, set ambitious
BNF Bank Annual Report 2025
27
targets, and work closely with our stakeholders to drive positive change. We believe we can help build a more sustainable
future for generations to come.
Future outlook
Looking ahead, and in line with the Business Plan 2026-2028, the Bank will continue to focus on delivering its strategic
priorities, adapting to evolving market conditions and customer expectations, and strengthening its operating model. The
Bank will maintain a prudent approach to risk management and the management of capital and liquidity, while pursuing
sustainable performance and long-term value creation for its stakeholders.
Events occurring after the reporting period
Subsequent to the end of the reporting period, a dividend of €0.013 per nominal share of €0.7552, for a total amount of
€1,309,946, is being proposed by the Board of Directors to be distributed to the shareholders for the twelve months ended 31
December 2025. A resolution to this effect will be proposed at the Annual General Meeting, subject to regulatory approval.
There were no other events occurring after the end of the reporting period which warrant reporting in this Annual Report.
Refer to Note 39 to the financial statements.
Disclosure in terms of the Sixth Schedule to the Companies Act, Cap. 386 of the Laws of Malta.
During the year ended 31 December 2025, no shares in the Bank were:
• Purchased by it or acquired by it by forfeiture or surrender or otherwise.
• Acquired by another person in circumstances where the acquisition was by the Bank’s nominee, or by another with
the Bank’s financial assistance, the Bank itself having a beneficial interest.
• Made subject to pledge or other privileges, to a hypothec or to any other charge in favour of the Bank.
Preparation of financial statements and Directors’ responsibilities
The directors are required by the Maltese Banking Act, 1994 and the Maltese Companies Act, 1995 to prepare financial
statements that give a true and fair view of the state of affairs of the Bank as at the end of each reporting period and of the
profit or loss for that period.
In preparing the financial statements, the directors are responsible for:
• Ensuring that the financial statements have been drawn up in accordance with International Financial Reporting
Standards as adopted by the EU;
• Selecting and applying appropriate accounting policies;
• Making accounting estimates that are reasonable in the circumstances; and
• Ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to
presume that the Bank will continue in business as a going concern.
The directors are also responsible for designing, implementing and maintaining internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error, and that comply with the Maltese Banking Act, 1994 and the Companies Act, 1995. They are also responsible for
BNF Bank Annual Report 2025
28
safeguarding the assets of the Bank and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The financial statements of BNF Bank plc for the year ended 31 December 2025 are included in the Annual Report 2025, which
is made available on the Bank’s website. The directors are responsible for the maintenance and integrity of the Annual Report
on the website in view of their responsibility for the controls over, and the security of, the website. Access to information
published on the Bank’s website is available in other countries and jurisdictions, where legislation governing the preparatio n
and dissemination of financial statements may differ from requirements or practice in Malta.
Going concern pursuant to Capital Markets Rule 5.62
The financial statements are prepared on a going concern basis. The directors regard that pursuant to Capital Markets Rule
5.62, this is appropriate, after due consideration of the Bank’s profitability, liquidity, the statement of financial positio n, capital
adequacy and solvency. Specifically, the directors have prepared financial and capital plans which show that the Bank is
able to continue operating as a going concern for the foreseeable future.
Information pursuant to Capital Markets Rule 5.64
The Bank does not have any listed securities carrying voting rights.
Statement of the Directors pursuant to Capital Markets Rule 5.68
The Directors confirm that, to the best of their knowledge:
• The financial statements give a true and fair view of the financial position of the Bank as at 31 December 2025, and
of its financial performance and its cash flows for the year then ended in accordance with International Financial
Reporting Standards as adopted by the EU; and
• The Annual Report includes a fair review of the development and performance of the business and the position of
the Bank, together with a description of the principal risks and uncertainties faced.
Statement of Responsibility by the Directors pursuant to Capital Markets Rule 5.68
We, the undersigned, declare that, to the best of our knowledge:
• The financial statements prepared in accordance with the applicable accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the Bank; and
• This report includes a fair review of the performance of the business and the position of the Bank, together with a
description of the principal risks and uncertainties.
Signed on behalf of the Bank’s Board of Directors on 29 April 2026 by David Power (Chief Executive Officer and Managing
Director) and Michael Frendo (Chairman) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in
conjunction with the Annual Report and Accounts 2025.
DAVID POWER MICHAEL FRENDO
Chief Executive Officer & Managing Director Chairman
BNF Bank Annual Report 2025
29
Statement of
Compliance
with the
Principles of
Good Corporate
Governance
BNF Bank Annual Report 2025
30
Statement of Compliance
with the Principles of Good
Corporate Governance
Pursuant to Capital Markets Rule 5.97 as issued by the Malta Financial Services Authority, BNF Bank p.l.c. hereby includes a
Statement of Compliance reporting on the extent to which the Bank has adopted the Code of Principles of Good Corporate
Governance appended as Appendix 5.1 to the said Capital Markets Rules (the ‘Principles’) and the effective measures that
the Bank has taken to ensure compliance with these Principles during the financial year under review.
SECTION 1 -- COMPLIANCE WITH THE CODE
PRINCIPLE 1 - THE BOARD
The affairs of the Bank are directed by the Board of Directors (the ‘Board’).
The Bank’s Board includes a mix of distinguished individuals in diverse business sectors. All directors hold or have previous ly
held key management positions in various local and international organisations.
The Board delegates responsibility for the Bank’s day -to-day management to the Executive Committee (‘Management’),
and certain other responsibilities to the Audit Committee, the Risk and Compliance Committee, the Compensation and
Nomination Committee and the Credit Approval Committee. Further detail on committees is available under Principle 4
below.
PRINCIPLE 2 - CHAIRMAN AND CHIEF EXECUTIVE
The roles of the Chief Executive Officer and the Chairman of the Board are separate and distinct and are held by different
individuals.
The Chairman leads and sets the agenda of each Board meeting and is responsible to ensure that the Board engages in
effective discussion and takes informed decisions. The Chairman is also responsible to ensure effective communication within
the Board, and with Management and the shareholders.
The Chairman meets the independence criteria set out in the Code.
The CEO leads the Executive Committee and is responsible to drive performance in line with the strategy set by the Board.
PRINCIPLE 3 - COMPOSITION OF THE BOARD
The Board is made up of eleven Non-Executive Directors (NED) and one Executive Director (ED). The Board is composed of
an Independent Non-Executive Chairman, a Non-Independent Non-Executive Deputy Chairman, four Non-Independent
Non-Executive Directors, five Independent Non-Executive Directors (INED) and one Executive Director (ED).
BNF Bank Annual Report 2025
31
The shareholders are empowered to appoint or remove directors to the Board in accordance with the Bank’s Articles of
Association. The appointment of new directors is carried out by using a transparent approach, after taking into consideration
diversity of knowledge, judgment and experience. Each Director’s appointment undergoes a due diligence process by the
Malta Financial Services Authority to establish whether they are fit and proper pursuant to the Banking Act.
The Directors who served on the Board during the period under review were the following:
Dr Michael Frendo -- Chairman INED
Sheikh Jassim Feisal Q. F. Al-Thani -- Deputy Chairman NED
Sheikh Mohammed Feisal Q. F. Al-Thani NED
Sheikh Turki Feisal Q. F Al-Thani NED
Mr Tarik Mahmut NED
Mr Mohammed Abdelqader Darwish Al-Ramahi NED
Mr Mario P. Galea INED
Mr Paul Mark Johnson INED
Mr Charles Borg INED
Mr Hassan Elsayed Hassan Abdalla INED
Ms Juanita Bencini INED
Mr David Power ED
The remuneration paid to the Directors is as established by the Bank's shareholders and discussed at the Compensation and
Nomination Committee.
PRINCIPLE 4 – RESPONSIBILITIES OF THE BOARD
The Board is responsible for ensuring that the roles of corporate responsibility, namely accountability, strategy formulation
and policy development are implemented throughout the Bank. The Board also sets the Bank’s values and standards, and
understands that high ethical standards are required in its decision-making process. Decisions and strategies formulated by
the Board seek to encompass the interests of all stakeholders including the Bank’s customers, shareholders and employees.
The Board regularly reviews the Bank’s performance against approved budgets, and sets targets. The Board also considers
credit decisions falling within its credit sanctioning limits, which includes all credit where any director has a direct or indirect
interest. Each director informs the Board of the nature of any direct or indirect interest, and does not participate in the
respective discussion or voting.
Board Committees
The Board of Directors has delegated certain responsibilities to the following committees:-
The Audit Committee
The Audit Committee is responsible for monitoring the financial reporting process in order to ensure the integrity of the Bank’s
financial statements. Furthermore, the Audit Committee reviews and reports on estimates and judgments in the Bank’s
financial information, and on any significant financial reporting issues.
The Audit Committee advises the Board on whether the annual report and accounts of the Bank are fair, balanced and
understandable, and provide the information necessary for shareholders to assess the Bank’s performance, business model
BNF Bank Annual Report 2025
32
and strategy. The Audit Committee, through its review and assessment of the work of the internal auditor, provides
information, direction and recommendations to the Board about the operation of controls implemented by management as
well as their completeness and effectiveness.
The Audit Committee also reviews and monitors Management’s actions and timeliness in addressing control weaknesses,
non-compliance with laws, regulations and policies, and any matters identified by internal and external auditors. The Audit
Committee follows closely correspondence with regulators and management actions.
The Internal Audit function reports specifically and exclusively to the Audit Committee. The Audit Committee frames the policy
on internal audit, and subsequently monitors and reviews the effectiveness, independence and objectivity of the Bank’s
Internal Audit function.
Furthermore, the Audit Committee oversees the Bank’s relationship with the external auditors and assesses the effectiveness
of the external audit process. It makes recommendations to the Board of Directors regarding the appointment of the Bank’s
external auditors, their remuneration and terms of engagement.
The Audit Committee also oversees the function of the Bank’s Whistleblowing Reporting Officer and the effectiveness of the
Bank’s whistleblowing procedures.
In terms of Capital Markets Rules 5.117, 5.118 and 5.119, the Audit Committee is made up of three non-executive Directors
appointed by the Board, the majority of which are independent. The Committee as a whole has competence relevant to the
sector/s which the Bank operates in, and all members of the Committee have significant recent and relevant experience in
financial reporting, auditing and/or accounting. The members of the Audit Committee have a wealth of experience in banking
and other financial services industries, by occupying various senior management roles and have served on a number of
boards.
The Audit Committee met 8 times during the period under review and is composed of the following members:
MEMBERS
ATTENDED
Mr Mario P. Galea - Chairperson
8 out of 8
Mr Paul M. Johnson
7 out of 8
Mr Mohammed Abdelqader Darwish Al-Ramahi
8 out of 8
The Chief Financial Officer, the Whistleblowing Reporting Officer and representatives of the Bank’s External Auditors attend
the Audit Committee meetings by invitation. The Head of Internal Audit Function also attends the meetings of the Audit
Committee.
Various one-to-one meetings are also held regularly between the Chairperson of the Audit Committee and members of
Management.
The Risk and Compliance Committee
The Risk and Compliance Committee monitors and reviews risk exposure, and Management’s risk processes and strategies.
Any risk identified falls within one of the following categories:
BNF Bank Annual Report 2025
33
• Financial risk
• Market risk
• Credit risk
• Operational risk (including relating to the prevention of money laundering and funding of terrorism)
• Reputational risk
The Risk and Compliance Committee recommends the risk appetite framework in line with the Bank’s strategy, and regularly
reviews the Bank’s risk profile taking into account the current and prospective macroeconomic, macro -prudential and
financial environment. Risk strategies are discussed on both an aggregate basis, as well as by type of risk. The Risk and
Compliance Committee follows closely correspondence with regulators and management actions.
The Risk and Compliance Committee reviews and considers reports from the Risk Management and Compliance functions
to ensure good standing of the Bank’s risk profile, risk culture, risk appetite and limits, and risk mitigation plans.
The Risk and Compliance Committee reviews and advises the Board on the liquidity adequacy assessment and internal
capital adequacy assessment process (ILAAP and ICAAP) and endorses statements in relation to risks in the annual report.
Furthermore, the Risk and Compliance Committee actively participates in the annual review of the Bank’s Business Risk
Assessment and in the review of policies relating to the prevention of money laundering and funding of terrorism. The Risk
and Compliance Committee is also responsible for overseeing and monitoring the Bank’s compliance risk and ensuring
adherence to regulatory requirements, including adequate legislative implementation, reporting, governance and controls.
The Risk and Compliance Committee advises and where necessary, updates and approves, any recommendations of the
Audit Committee to the Board, relating to any financial or operational risk policy statements required by law or regulation.
The Risk and Compliance Committee has met 7 times during the period under review and is currently made up of three non-
executive directors whose combined skills are sufficient to address all the above risk categories:
MEMBERS
ATTENDED
Ms Juanita Bencini - Chairperson
7 out of 7
Mr Mario Galea
7 out of 7
Mr Charles Borg
7 out of 7
The Chief Legal and Compliance Officer, the Chief Risk Officer, the Head of Risk and the Head of Regulatory Compliance
attend meetings of the Risk and Compliance Committee by invitation.
Various one-to-one meetings are also held regularly between the Chairperson of the Risk and Compliance Committee and
members of Management, the Head of Risk, the Head of Regulatory Compliance/the Compliance Officer and the Bank’s
MLRO. It is the Board’s di rection to have common members of the Risk and Compliance Committee and on the Audit
Committee so as to enable sharing of ideas and information.
BNF Bank Annual Report 2025
34
The Compensation and Nomination Committee
Information on the functions of this Committee is considered under Principle 8.
The Credit Approval Committee
The Credit Approval Committee is responsible for assessing credit facilities and taking credit decisions within certain
monetary and risk bands.
The Credit Approval Committee has met 5 times during the period under review and was made up of three directors
appointed by the Board with experience in credit.
MEMBERS
ATTENDED
Mr Charles Borg - Chairperson
5 out of 5
Mr Tarik Mahmut
3 out of 5
Mr Mohammed Abdelqader Darwish Al-Ramahi
4 out of 5
The Chief Executive Officer, the Chief Banking Officer, the Chief Risk Officer and senior representatives of the Bank’s
Commercial Function attend the Committee meetings by invitation.
Management Committees
The Executive Committee
The Executive Committee is composed of six members; the Chief Executive Officer, the Chief Risk Officer, the Chief Financial
Officer, the Chief Banking Officer, the Chief Legal and Compliance Officer and the Chief Technology and Operations Officer.
Formulation of risk strategies and risk profiles, including policies conducive to the achievement of organisational goals, are
the responsibility of the Executive Committee, however implementation is delegated to the Departmental Heads through a
formally documented organisational structure with clear and transparent demarcation of functional responsibilities. The
Executive Committee is also responsible for assessing credit facilities and taking credit decisions as prescribed in the Bank’s
credit policy.
Various senior members of the Bank’s management attend the meetings of the Executive Committee by invitation.
The Executive Committee has established the following management committees within the Bank:
The Assets and Liabilities Committee
The Assets and Liabilities Committee (ALCO) meets on a monthly basis to analyse financial information and to assess the
impact that the various types of risks arising from changes in interest rates, exchange rates and the market, have on the
profitability of the Bank and the various other components of the financial statements. This Committee also monitors the
commercial activity of the Bank, reviews risks to liquidity and capital, and plays a vital role in the management and mitigation
of the same risks.
BNF Bank Annual Report 2025
35
The ALCO is made up of the Members of the Executive Committee, the Head of the Treasury Function, the Head of the
Business Development Function, the Head of the Retail Function, the Head of the Corporate Function, the Head of the
Financial Management Function and the Head of the Risk Function. Other Bank officials may be invited to attend meetings
depending on the agenda to be discussed or when determined by the Committee.
The Investments Committee
The Investments Committee (IC) meets with the aim to discuss the investment strategy and specific investments for the Bank’s
proprietary portfolio. The objective of the Committee is to achieve returns for the Bank in line with the Bank’s liquidity, c apital
adequacy, risk and profitability goals.
The Investments Committee meets at least once every two months. It includes Members of the Executive Committee and the
Head of the Treasury Function.
The Credit Committees
These Committees are responsible for assessing credit facilities and taking credit decisions within certain monetary and risk
bands. The Committees are coordinated at three different levels, each assigned a sanctioning limit under which they operate.
If a divergence in the respective committee level exists, the lending decision would need to be taken one authorisation level
upwards.
The Committees meet as frequently as necessary and comprise of officials from the Commercial Function and the Credit
Analysis Function. Each Committee is chaired by the Credit Analysis Function member.
The Products Oversight Committee
The Products Oversight Committee’s main purpose is that of discussing and implementing projects in relation to new
products, new services, channels and/or changes to existing products.
The Committee is made up of senior members from a number of functions, mainly Product Strategy, Corporate Banking, Retail
Banking, Risk, Regulatory Compliance, Credit Operations, Credit Analysis, Financial Regulatory, Financial Management,
Banking Operations, Legal, Business Analysis, Treasury and Information Technology. The Product Strategy function is
responsible for the chairing and steering of this Committee.
The Environmental, Social and Governance Committee
The Environmental, Social and Governance (ESG) Committee’s main purpose is to define the Bank’s practices relating to ESG
matters. The committee is made of the Chief Risk Officer (Chairperson), Chief Banking Officer (Deputy Chairperson), Chief
Technology and Operations Officer, Chief Financial Officer, Head of Risk Department, Head of Credit Analysis Department,
Head of Products, Head of Business Development Department, Head of Retail Department, Head of Human Resources, Head
of Marketing Property, Administration and Safety Department, Head of Regulatory Compliance Department, Head of
Marketing and Communications, and Senior Risk Manager from the ESG Office within the Risk Function as Secretary.
BNF Bank Annual Report 2025
36
The Budget and Planning Committee
The Budget and Planning Committee (BPC) is established to provide oversight, guidance, and recommendations on the
Bank’s operating and capital expenditures. The Committee’s mandate extends to prioritising investment in essential projects,
maximising returns on investment, and facilitating informed decision-making, while also ensuring efficient use of resources. In
addition, the BPC is responsible for maintaining alignment with the Bank’s strategic projections, encompassing all aspects
such as loan book growth, funding, and capital requirements. The BPC is composed of the members of the Executive
Committee, Head of Corporate Banking Department, Head of Retail Banking Department and Head of Treasury Department.
Succession Policy (Code provision 4.2.7)
Code provision 4.2.7 recommends “the development of a succession policy for the future composition of the Board of
Directors and particularly the executive component thereof, for which the Chairman should hold key responsibility”.
The Bank has a Succession Policy that applies to the Bank’s Board of Directors and members of the Bank’s senior
management. The Policy sets out the approach to ensure the continual coverage of duties which are critical to the ongoing
operations of the Bank and sets out the approach adopted by the Board in planning for Board Member and Senior
Management resignations and departures.
PRINCIPLE 5 – BOARD MEETINGS
The Board meets as often as necessary, at least quarterly, in order to discharge its duties effectively. The Chairman sets and
circulates the agenda to all directors. The Chairman, in collaboration with the Company Secretary, also ensures that all
supporting material is circulated to all directors well in advance of Board meetings, to give time to consider the information
therein. The Chairman also ensures that directors participate actively in all Board meetings. During 2025, the Board of
Directors met 9 times.
PRINCIPLE 6 – INFORMATION AND PROFESSIONAL DEVELOPMENT
The Board of Directors in accordance with Code Provision 6 appoints the Chief Executive Officer and participates in the
selection of the members of senior management. Board members have access to the advice and services of the Company
Secretary who is responsible to ensure that the Board procedures and all applicable rules and regulations are followed.
Furthermore, the Company Secretary ensures that the minutes faithfully record attendance, matters discussed, and decisions
taken. Minutes of Board meetings are circulated to all directors and are approved at the subsequent meeting.
The Board and the Executive Committee ensure that the Bank properly recruits, retains, motivates and promotes senior
management and staff, and that staff progress within their career streams.
The Board adheres to the Induction and Training Policy which regulates training and professional development undertaken
by the Directors of the Bank.
In addition, the Board ensures that the Directors have access to independent professional advice at the Bank’s expense,
when requested.
BNF Bank Annual Report 2025
37
PRINCIPLE 7 – EVALUATION OF THE BOARD’S PERFORMANCE
The Board of Directors in its current composition undertook a self-assessment in line with the Joint ESMA and EBA Guidelines
on the assessment of suitability of members of the management body and key function holders (EBA/GL/2021/06) and with
the Capital Market Rules, in late 2024. The process was overseen by the Bank’s Compensation and Nominations Committee.
The suitability evaluation reflected the following:
• The Board of Directors is strong, diverse and well-balanced, having the necessary skills, knowledge and varying
levels of professional experience to carry out its mandate;
• The members of the Board Committees have the necessary competence and expertise to perform their delegated
roles and report back fully and clearly to the Board of Directors; and
• The self-assessment identified minor gaps for some Directors which will be addressed through training and
targeted committee adjustments.
Following the required analysis by the Bank’s Compensation and Nominations Committee, the Board discussed the findings
in detail in 2025. This evaluation encompassed the key criteria outlined in the Guidelines, including individual and collective
assessments of good repute, honesty and integrity, independence of mind, as well as adequate knowledge, skills, experience,
and time commitment to ensure sound governance, effective oversight, and prudent management of the Bank.
These discussions were reflected in targeted changes to two Board committee compositions which also served to address
the minor gaps identified, duly approved by the relevant regulators during the year, thus confirming the ongoing suitability
of the Board of Directors in 2025.
PRINCIPLE 8 - COMPENSATION AND NOMINATION COMMITTEE
The Compensation and Nomination Committee is responsible for reviewing the remuneration policy of the Bank and for
making any recommendations as the Committee deems appropriate in light of the general strategic interests of the Bank
and regulations. The Compensation and Nomination Committee:
• Sets the over-arching principles and parameters of the Remuneration Policy;
• Considers and approves remuneration arrangements of senior executives and highly paid persons;
• Monitors and reviews remuneration paid to the Chairman and other members of the Board of Directors, and makes
recommendations to shareholders in General Meetings;
• Approves annual pay increases and bonuses as recommended by Management;
• Oversees any remuneration matters; and
• Exercises the functions of a Board Nomination Committee aligned to the applicable provisions of the MFSA’s
Capital Market Rules.
During the period under review, the Compensation and Nomination Committee met 3 times and was made up of the following
members:
BNF Bank Annual Report 2025
38
MEMBERS
ATTENDED
Mr Paul Mark Johnson – Chairperson
3 out of 3
Sheikh Jassim Feisal Q.F. Al-Thani
3 out of 3
The Committee was increased to four members in 2026. Further information on the Bank’s Remuneration Policy can be found
in the Report of the Compensation and Nomination Committee.
PRINCIPLE 9 & 10 - RELATIONS WITH SHAREHOLDERS, THE MARKET AND INSTITUTIONAL
SHAREHOLDERS
The Bank provides the market with regular, timely, accurate and detailed information in accordance with the requirements
of the Capital Markets Rules by way of company announcements.
The Bank provides regular and timely information to its shareholders to enable informed decision-taking, and communicates
results and strategy in the Bank’s Annual Report.
The Board ensures that the interests of the Bank’s shareholders are protected at all times. In addition, the Chairman ensures
that the views of all shareholders are communicated to the Board.
The Bank has a Group-Wide Dealing Policy to give guidance to the Bank’s directors and employees on procedures to be
followed when dealing in the Bank’s securities and on the treatment of inside information in line with the provisions of the
Prevention of Financial Markets Act and any related subsidiary legislation and regulations.
During the 2025 Annual General Meeting all shareholders attended as members, whereby the shareholders have the
opportunity to raise and discuss matters that are pertinent to the general conduct of the Bank. As well as exercise their right
to vote on key matters, in line with the powers granted to them under the Memorandum and Articles of Association.
PRINCIPLE 11 - CONFLICTS OF INTEREST
The Board of Directors is governed by a Conflict of Interest Policy which is approved and implemented by the Board. The
Directors are aware of their responsibility to act in the best interest of the Bank and adhere to their obligation regarding
conflicts of interest. Any director experiencing actual or potential conflict of interest is to make a declaration to the Board of
Directors. In such instances, the relative director neither participates in the discussion nor votes on the matter in question.
The minutes of the Board duly reflect the manner in which such situations are handled.
PRINCIPLE 12 - CORPORATE SOCIAL RESPONSIBILITY
BNF’s brand values are shared by the Members of the Board and Executive Management, and are instilled within the Bank’s
culture. BNF’s brand values include:
• Ethical business practices: BNF is in the business of corporate and retail banking, and therefore has a role which is
ingrained within society. BNF endeavours to operate ethically in all that it does;
• Investing in its people: The Bank invests in training and career development and believes in providing equal
opportunities and desirable working conditions;
• Communication: BNF fosters a culture of open communication and inclusion;
BNF Bank Annual Report 2025
39
• Maintaining a role in the development and progress of the local community: The Bank undertakes initiatives to
contribute towards sections of society that are lacking in education, opportunity and inclusion. This value is
observed through the Bank’s product offerings and through the Bank’s CSR Policy, which apportions a fund toward
supporting various CSR projects; and
• Minimising carbon footprint: The Bank regularly reviews its purchasing policies and physical infrastructures to
determine opportunities to minimise any environmental impact.
SECTION 2 -- NON-COMPLIANCE WITH THE CODE
To the Bank’s knowledge, there are no principles that give rise to non -compliance with the Code.
SECTION 3 -- INTERNAL CONTROL
The Board of Directors is ultimately responsible for internal control within the Bank. The Board of Directors delegates to the
Executive Committee the authority to operate the Bank within limits established in the Executive Committee’s Terms of
Reference.
On a regular basis, the Bank issues policies and procedures to control and/or mitigate material risks. Policies are subject to
a periodic review by the Board of Directors, and are enhanced in accordance with changes to the Bank’s risk profile. Policies
are subsequently circulated and adhered to by staff at all times, and are implemented through procedures designed by
Management. All policies and procedures are available to all staff on the Bank’s intranet. Any deviance from parameters set
in policies or procedures is subject to sanctioning by the appropriate approval body.
The Bank adopts the three lines of defence model to risk management and internal control.
SECTION 4 -- CORPORATE PHILANTHROPY AND
COMMUNITY RELATIONS
ROOTED IN SERVICE AND COMMUNITY
In 2025, BNF Bank continued to uphold its commitment to Corporate Social Responsibility (CSR), placing community
engagement at the heart of its efforts and ensuring every initiative reflects the Bank’s core values. Guided by our ESG
strategy, we strengthened our approach to sustainability and social impact, empowering both the Bank and its employees
to contribute meaningfully to the communities we serve.
Our CSR framework is built around five key pillars—education, health, environment, philanthropy, and culture & heritage—
which shape the activities we support and the partnerships we foster. By integrating these pillars into our broader strategy,
we not only drive community development but also cultivate a workplace culture rooted in purpose, responsibility, and shared
values.
BNF Bank Annual Report 2025
40
CHAMPIONING MEANINGFUL CAUSES
Through the #YourCause initiative, BNF Bank reaffirmed its commitment to social responsibility by empowering employees to
champion causes close to their hearts. This programme reflects the Bank’s belief that meaningful change begins with
individual action, and it provides staff with the opportunity to make a tangible difference in the community.
All Ages Netball Club Smiling with Jerome
In 2025, our team supported a diverse range of NGOs and charitable efforts across multiple sectors. Environmental causes
benefited from contributions to Nature Trust and Friends of the Earth, while philanthropic organisations such as Inspire, Life
Network Malta, Kopin, the Assistance to Children in Care Association, and YMCA Malta received vital support. Health-related
initiatives included Smiling with Jerome, Puttinu Cares, and the Action for Breast Cancer Foundation, alongside sporting
engagement through the All Ages Netball Club and animal welfare efforts with SPCA Gozo.
Hospice Foundation Richmond Foundation
Further contributions were made through payroll donations to the Malta Community Chest Fund Foundation, Richmond
Foundation, Inspire, and Hospice, as well as the provision of laptops to Richmond Foundation and The Optimist. Staff also
organised a Food Bank collection, a bake sale, and two blood donation drives, demonstrating the Bank’s holistic approach
to giving back. These collective efforts highlight BNF Bank’s dedicatio n to fostering a culture of care and community impact.
BNF Bank Annual Report 2025
41
Action for Breast Cancer Foundation Friends of the Earth
CORPORATE RESPONSIBILITY IN ACTION
Corporate philanthropy is a cornerstone of social responsibility, driving positive change within communities while creating
shared value for organisations. At BNF Bank, these principles guide our actions, ensuring that our efforts deliver real impact
and reflect our commitment to making a difference.
This year, the Bank made a significant donation to the Malta Community Chest Fund Foundation during the annual L-Istrina
marathon. Our partnership with the Malta Trust Foundation also continued, marked by a donation during their annual
telethon.
We further sustained our backing of the Emergency Fire and Rescue Unit, the Alive Foundation, and Lifecycle, organisations
that channel their efforts into vital causes—from assisting Civil Protection to funding cancer research and supporting renal
patients through challenging cycling events. Additional support was also provided to the Emergency Fire and Rescue Unit
during Freshers’ Week, reinforcing our commitment to safety and community engagement.
ALIVE Foundation Emergency Fire & Rescue Unit Cycling Tour 2025
In addition to these initiatives, the Bank extended its support through donations to ALS Malta and the Kenosis Foundation,
both of which play an important role in improving lives and fostering social well-being.
In addition, BNF Bank continued its sponsorship of the Malta Football Association, supporting the U14, U15, and U17 male
National Leagues, as well as the U16 female league. This collaboration reflects our core values and our dedication to initiatives
that promote sport and youth development across Malta. As part of this partnership, we also organised a Player Escort
initiative, giving children of BNF staff members the unique opportunity to participate in a national game as player escorts—
an experience that celebrates family involvement and inspires the next generation of athletes.
BNF Bank Annual Report 2025
42
MFA BNF National League Awards 2025 Player Escort Initiative
CONNECTING THROUGH CULTURE
Supporting culture and heritage is essential to preserving the identity and values of our islands. It fosters a sense of unity
while contributing to social, economic, and personal well-being. At BNF Bank, we recognise the importance of these pillars
and remain committed to initiatives that celebrate and safeguard Malta’s rich cultural legacy.
This year, we continued our support for the opera scene in Gozo through collaborations with both the Aurora and Astra
theatres, whose dedication ensures an enriching opera season and a vibrant calendar of events throughout the year. On the
music front, we partnered with Festivals Malta during the Three Palaces Festival, proudly supporting a series of classical
concerts held at St John’s Co -Cathedral and Verdala Palace, featuring talented Maltese musicians.
Additionally, we extended our collaboration to the Malta Spring Festival, an event that showcases innovative works and
serves as a platform for emerging artists through the Malta Spring Festival Academy, reinforcing our commitment to nurturing
creativity and new talent.
In the realm of heritage, we maintained our corporate sponsorship of Din L-Art Ħelwa, a distinguished organisation devoted
to the restoration and preservation of historical sites that form an integral part of Malta’s cultural identity.
COMMITTED TO SUSTAINABILITY
Environmental initiatives are fundamental to promoting sustainable development, safeguarding ecosystems, and ensuring
the long-term well-being of our islands. In 2025, our efforts focused on two key themes: preserving biodiversity and raising
awareness through education.
We continued our collaboration with ACT Malta, an NGO dedicated to protecting native fauna through tree and shrub
propagation and planting projects. A group of BNF staff actively participated in a tree-planting initiative in Attard, reinforcing
our hands-on approach to environmental stewardship.
BNF Bank Annual Report 2025
43
ACT Malta Tree Planting
Under our Energy Efficient Bank ESG pillar, we continued our partnership with Ten Trees, providing the NGO with used coffee
grounds from our Head Office and Branches to be repurposed as natural fertiliser—an innovative way to reduce waste and
support green practices. The Energy Efficient Bank ESG pillar also spearheaded an internal campaign and competition to
encourage employees to adopt sustainable commuting habits by walking or cycling to work, promoting healthier lifestyles
and reducing carbon emissions.
As part of the Bank’s commitment to sustainability and energy efficiency, several initiatives have been implemented to reduce
environmental impact and optimise resource use. UV films have been installed on windows to minimise heat penetration,
improving indoor climate control and reducing reliance on air conditioning. Additionally, traditional lighting has been replaced
with LED solutions across offices, significantly cutting energy usage and enhancing overall efficiency. These measures reflect
the Bank’s p roactive approach to creating a greener, more sustainable future.
Also, several of the Bank’s vehicles have been upgraded to mild hybrid vehicles, lowering fuel consumption and emissions
while maintaining operational efficiency. This now means the Bank’s vehicles now range between fully electric, hybrid and
mild hybrid.
STRENGTHENING OUR COMMUNITY CONNECTIONS
BNF Bank’s presence within the community continued in 2025, with active participation in numerous events across Malta and
Gozo. These initiatives provided our Retail teams with valuable opportunities to engage directly with customers and potential
clients, strengthening relationships and giving a personal, approachable face to the Bank.
Rabat Branch
–
Financial Understanding Naxxar & San Gwann Branch - Paul Vella Critien
Exhibition
BNF Bank Annual Report 2025
44
Educational outreach remained a priority, with our Rabat Branch delivering a talk on Financial Understanding and Scam
Awareness in collaboration with Dingli Local Council. This session was tailored for the elderly community, helping them
navigate their financial journey with confidence and security.
Our involvement extended to a variety of community events, including the support of local artist Paul Vella Critien during his
latest exhibition (Naxxar and San Gwann Branches), Festa Familja in Mosta and Safi (Mosta & Siggiewi Branches respectively),
the Malta Classic (Rabat Branch), Zejt iz-Zejtun (Paola Branch), Red Nose Day, the Sunday Running Club for Students, and
the annual fundraiser by the Malta Paediatric Association (all Campus Hub Branch).
Paola Branch
–
Zejt iz-Zejtun Siggiewi Branch - Festa Familja
KNOWLEDGE FOR GROWTH AND EMPOWERMENT
Supporting communities through education is one of the most effective ways to promote social equity and empower
individuals to shape brighter futures. In 2025, our initiatives placed a strong emphasis on literacy and financial literacy,
reflecting our belief that knowledge is the foundation for opportunity.
We continued our collaboration with Malta Libraries, distributing books across several village libraries, and extended this
effort to schools by providing titles from the popular
Karamellu
series and Ruth Frendo’s
Id-Dinja tal-Orsini
, fostering a love
for reading among young learners.
Mosta Branch
–
Reading at Mosta Primary Siggiewi Branch
–
Reading at Siggiewi Primary
This year, we renewed our partnership with the Association for Students of Commercial Studies (ASCS), providing the Bank
with a valuable platform to connect with students pursuing studies in banking, accounting, insurance, and marketing. Through
BNF Bank Annual Report 2025
45
our support, ASCS can organise events and initiatives that enhance both the academic and professional development of its
members.
We also continued our collaboration with the Department of Business Management and Enterprise within the Faculty of
Economics, Management and Accountancy. This agreement is designed to strengthen research opportunities for students
while fostering synergies between the Bank and the academic community.
Freshers Week Campus Hub, MCAST Paola & Sixth Form Gozo
Our engagement extended beyond partnerships to direct interaction with students during Freshers’ Week at Campus Hub,
MCAST, and the Gozo Sixth Form. We also participated in the Gozo Careers Presentation at Sixth Form, the KSU Expo, where
our HR team connected with students, and the Open Day at Higher Secondary, giving us further opportunities to guide
students on their financial journeys and career prospects.
BNF Bank Annual Report 2025
46
BUILDING LASTING RELATIONSHIPS IN BUSINESS
BNF Bank has built a strong reputation as a reliable partner in the corporate banking sector. Understanding the unique needs
of businesses, the bank provides tailored financial solutions designed to foster growth, streamline operations, and mitigate
risks.
Malta Finance Week
Chief Legal and Compliance Officer Jean Noel Cutjar participated in Compliance Day of Malta Finance Week, where he
joined a panel titled ‘A Leaders View on Opportunities and Impacts for European Banks’. The session focused on the key
regulatory activities for banks and payment institutions in Europe in 2025.
Excellence in Construction Awards
The Bank also supported these newly launched Awards, aims to give a platform to Malta’s construction leaders making a
positive change and setting new standards for the industry.
Chief Commercial Officer George Debono during Chief Legal and Compliance Officer Jean Noel Cutajar
Construction Awards during Malta Finance Week
Malta Institute of Accountants
BNF’s Corporate Team once again participated in the Malta Institute of Accountants Biennial Conference, offering their
knowledge and support to attendees during this conference which brings together individuals and companies from across
the financial services industry.
Malta Bankers Association
This year, our Corporate Team also participated in the Malta Bankers Association event ‘The Fraud Landscape: Malta and
Beyond’. This event organised together with EY focused on Financial Crime Compliance, and discussed fraud across various
angles, from the regulatory body perspective to that of local banks.
Malta Stock Exchange
The Bank also participated in the MSE’s Governance, Risk, Compliance and ESG Summit 2025. Our Chief Risk Officer, Glen
Smith participated in the panel discussion on ESG – Social Impact and Community Engagement, discussing the role of ESG
BNF Bank Annual Report 2025
47
strategies in fostering sustainable business practices and community engagement, and the future of responsible corporate
citizenship.
Meanwhile, our BNF Head of Information Security and IT Governance Nathan Gatt took part in the panel discussion on Cyber
Security Risks in the Digital Age, where he joined industry experts to explore evolving cyber threats and strategies to
safeguard organisations in an increasingly digital world.
Head of Information Security and IT Governance, Luis Teles, Head of Operations, Payments & RegTech Event
Nathan Gatt, MSE Event
NextGen Payments & RegTech Forum Malta 2025
Our Head of Operations, Luis Teles, joined the panel discussion titled "Cryptocurrency and Payments: Navigating the Evolving
Landscape". This session delved into digital currencies and the payments ecosystem, offering valuable insights into emerging
trends, challenges, and opportunities in this dynamic space.
Finance Malta
BNF Chief Risk Officer Glen Smith participated in a panel on “Challenges in Opening Corporate Bank Accounts in Malta”
organised by FinanceMalta at the Malta Business Registry. It was a valuable opportunity to share insights and collaborate
with industry leaders to address key challenges and enhance the banking experience for businesses.
Chief Risk Officer Glen Smith, Finance Malta & MBR Event Chief Legal and Compliance Officer Jean Noel Cutajar,
Institute of Financial Services Event
BNF Bank Annual Report 2025
48
BNF was also well represented by its Executive Committee and London Branch during Finance Malta’s annual networking
event in London, Malta - Stronger Together: Malta’s Commitment to UK Financial Partnerships, held this year at Mansion
House.
Institute of Financial Services
Chief Legal and Compliance Officer Jean Noel Cutajar participated in a seminar ‘Governance: Navigating Risk, Regulation
and Reputation’ in a panel discussion on Risk Management: Balancing Compliance, Culture, and Control.
Malta Chamber of Commerce, Enterprise & Industry
Chief Commercial Officer, George Debono participated in the Info Session: Mediation Means Business – Fast, Private,
Effective, organised by the Malta Chamber. The event focused on how mediation can transform conflict into opportunity,
creating workable solutions that strengthen – rather than strain – professional relationships.
Chief Commercial Officer George Debono, Malta Chamber Elena Valtorta & Conor Palmer, BNF London Branch
Event at Finance Malta London Event
Our Head of Corporate, Jordy McKay also participated as a mentor in the Young Chamber Network Speed Networking Event,
sharing expert insights and guidance to help the new generation navigate their business journey.
Malta Business Network
This year, BNF supported the MBN in its launch of its International Entrepreneurship Prize, in collaboration with King’s Coll ege
and the University of Malta. This Prize aimed to nurture the best ideas from across the participating universities that have the
potential to grow into viable businesses. Participating teams had access to leading business mentors, whilst working within
international teams.
BNF Bank Annual Report 2025
49
KPMG-Property Malta Conference
BNF continues to support the research produced by KPMG on the property landscape in Malta, culminating in a national
conference.
SHAPING A CULTURE OF SUPPORT AND OPPORTUNITY
In 2025, the Bank continued its commitment to fostering an environment where employees feel valued, supported, and
empowered to grow. Through enhanced reward and recognition initiatives, expanded training opportunities, and open
communication channels, we have strengthened our focus on professional development and employee engagement.
Wellbeing remained at the heart of our efforts, with initiatives designed to promote collaboration, morale, and a positive
workplace culture. Looking ahead, we aim to build on these foundations by introducing more frequent recognition, structured
career pathways, and actionable improvements based on employee feedback.
Reward and Recognition
• In 2025, the Bank revamped its Employee Awards Programme by introducing additional categories to further
acknowledge and celebrate employee achievements.
• The Bank also provided additional performance bonuses for all employees, accompanied by a more transparent
and structured approach to performance recognition.
• Introduce more frequent recognition opportunities to continuously celebrate and reinforce positive contributions
across the Bank.
Training
• Delivered extensive training initiatives: the first half of the year focused on the core banking system transition, while
Q4 emphasised professional development, including courses related to AI and other growth areas.
• Going forward the Bank aims to expand training initiatives with a greater emphasis on professional development
and structured career pathways.
Communication
• The Bank Implemented the Employee Voice Survey and identified key action points tied to training, reward and
recognition and professional development from the results, which will be addressed next year.
• The Bank’s HR Team conducted one -to-one meetings with all Bank employees, with action points documented
and followed up in collaboration with the respective Chiefs.
Wellbeing
• Rolled out several wellbeing initiatives to support a positive and engaging work environment.
• Organised a Bank-wide team-building event, which was highly successful in strengthening collaboration and
morale across departments.
RECOGNISING EXCELLENCE AND COMMITMENT
Celebrating the achievements of individuals and teams is essential to building a positive, motivated workplace culture.
Recognition is more than a gesture—it is an investment in people and organisational success. By acknowledging contributions
in meaningful ways, businesses inspire sustained excellence, engagement, and loyalty.
In 2025, the Bank enhanced its Employee Awards Programme to better reflect the diverse efforts and accomplishments of its
workforce. The former Internal Excellence Award was restructured into two distinct categories: Best Supporting Function and
BNF Bank Annual Report 2025
50
Best Control Function. New awards were introduced, including Rising Star and Problem Solver of the Year, alongside existing
honours such as Employee of the Year, Best Performing Branch, Best Performing Corporate Banking Team, Vanguard Award,
and Community Care Award.
Best Supporting Function
–
Credit Operations Unit Best Control Function
–
Risk Control & Oversight Department
Vanguard Award
–
Marketing and Communications Unit Problem Solver of the Year
–
Samir Arab
Equally important is recognising long-serving employees whose dedication and expertise have shaped the organisation over
time. Honouring their commitment reinforces a sense of continuity and stability, strengthening the bond between employees
and the Bank.
Rising Star
–
Sephora Schembri Best Performing Branch
–
Mosta
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51
Best Performing Corporate Banking Team
–
Business Community Care Award
–
Karine Laferla
Banking Team A
Employee of the Year
–
Rowena Azzopardi
BUILDING STRONGER COMMUNITIES THROUGH SUSTAINABLE ACTION
Looking ahead, we remain committed to deepening our engagement with the communities we serve while placing
sustainability at the heart of our efforts. By continuing to support education, environmental responsibility, and foster
partnerships that create shared value, we aim to build a foundation for long-term positive impact. Through our core values
and the dedication of our people, we will continue to make meaningful contributions that not only address today’s needs but
also help shape a more resilient and sustainable future.
BNF Bank Annual Report 2025
52
Report of the Compensation and
Nomination Committee
Remuneration Policy
BNF Bank p.l.c. has a Remuneration Policy in place, which is approved by the Board of Directors and is subject to annual
review. The Bank’s Remuneration Policy is drawn up in line with The Supervisory Review Process of Credit Institutions
Authorised under the Banking Act, Banking Rule 12.
The Policy is intended to create guidelines for the Bank when offering remuneration and benefits to all the employees of the
Bank and at the same time to ensure transparency in remuneration matters. It primarily aims at helping the Bank attract,
retain and motivate high calibre employees within the context of the market in which it operates, keeping in mind the interest
of the Bank, the shareholders and all other stakeholders. The Bank also carries a set of rules and procedures for the appraisal
of performance, which are updated from time to time in line with operational requirements/realities.
BNF Bank p.l.c. remunerates employees through a system of:
• Fixed Pay for full-time and part-time salaried employees, within a published pay structure and dependant on
employee’s skills, experience and level of responsibility;
• Fees are payable to non-executive directors in line with the time and effort committed to the institution and
industry practice;
• Benefits in kind are offered to the employees in the form of reduced fees, preferential interest rates and other
benefits in line with industry practice; and
• Annual Bonuses as further detailed below.
The Bank’s performance related reward system does not guarantee the levels of variable performance pay -outs to
employees. On a yearly basis, the Bank’s Board of Directors approve a fund for bonuses and salary increases, which reflects
the efforts and the results achieved by the Bank on its short and longer-term goals. This is then distributed among employees
in accordance with the Performance Appraisal Policy and Procedures and the Bank’s Remuneration Policy.
The strategy of the Bank is to offer low levels of variable compensation in comparison to the employee’s fixed pay. This is
intended to ensure that risks taken are within acceptable parameters and that employees follow the Bank’s values and
vision. Individual targets are set out in a way that encourage employees to achieve individual and group targets whilst
improving personal skills and competencies.
In view of the low proportion of performance related reward to fixed pay, it has hitherto not been the practice to apply
deferred payment of such reward. Malus and clawback have not, to date, therefore been considered applicable.
BNF Bank Annual Report 2025
53
Non-Executive Directors
Non-executive directors are not full-time employees of the Bank and do not receive a regular salary, allowances, pension
rights or other benefits. The compensation for Non-Executive Directors is based solely on a fee for their services together with
reimbursement of any expenses made in the course of the Bank’s business.
The Bank paid Non-Executive Directors compensation for the year 2025 was as follows:
Chairman
Other Members
Compensation
€60,950
€513,500
Executive Committee
The Bank’s Executive Committee is made up of six Chief Officers., who are considered full-time employees of the Bank and
receive a regular salary.
Material Risk Takers (MRT) Remuneration
Fixed and variable remuneration paid to MRTs is detailed in the table below and is aggregated by distinction between senior
and non-senior management. The identification of MRTs is based on the framework for prudential supervision established by
Directive 2013/36/EU.
Remuneration payable to Senior Management and MRTs for the year was:
Senior Management
MRTs
Number of Employees
17
16
Fixed
€1,565,735
€1,259,312
Variable
€405,450
€165,906
All variable remuneration was paid in cash and no shares, share linked instruments or similar instruments were used.
The members of the Bank’s Executive Committee, and Heads of Department enjoy cash and non -cash benefits which in a
number of cases includes the service of a company vehicle. All Bank employees benefit from life cover, health insurance and
personal accident cover.
Specific information on Senior Executives, as defined in the Capital Market Rules, has not been provided beyond the above,
as such information is considered commercially sensitive and falls within the scope of the exemption under clause 8.A.6 of the
said Rules.
None of the members of senior management or MRTs received remuneration in excess of €1 million.
BNF Bank Annual Report 2025
54
GOING CONCERN
The Directors have assessed the Bank’s ability to continue as a going concern. In making this assessment, the Directors
considered a wide range of information relating to both present and future conditions, including, the consideration of
stressed scenarios, such as those reflecting geopolitical tensions, inflation, interest rate movements, as well as other potential
impacts arising from idiosyncratic risks. These matters could impact the Bank’s profitability, capital and liquidity. Furthermore,
the Directors considered the intention to continue in operation for the foreseeable future.
Based on the above, and having taken into consideration the Bank’s performance and its future strategic goals, the Directors
consider it appropriate to prepare the financial statements on a going concern basis having concluded that there are no
material uncertainties related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a
going concern over the period of assessment.
Signed on behalf of the Bank’s Board of Directors on 29 April 2026 by David Power (Chief Executive Officer and Managing
Director) and Michael Frendo (Chairman) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in
conjunction with the Annual Report and Accounts 2025.
DAVID POWER MICHAEL FRENDO
Chief Executive Officer & Managing Director Chairman
BNF Bank Annual Report 2025
55
Primary
Financial
Statements
BNF Bank Annual Report 2025
56
Statement of Financial Position
As at 31 December 2025
The accounting policies and explanatory notes on pages 62 to 168 form an integral part of the financial statements. The
financial statements on pages 56 to 168 were approved by the Board of Directors and authorised for issue on 29 April
2026 and signed on its behalf by David Power (Chief Executive Officer and Managing Director) and Michael Frendo
(Chairman) as per the Directors’ Declaration on the ESEF Annual Fi nancial Report submitted in conjunction with the
Annual Report 2025.
DAVID POWER MICHAEL FRENDO
Chief Executive Officer & Managing Director Chairman
Notes
2025
2024
€000
€000
ASSETS
Balances with Central Bank of Malta and cash
6
118,457
106,332
Cheques in course of collection
1,866
1,863
Financial investments
7
150,117
189,873
Loans and advances to banks
8
27,689
29,157
Loans and advances to customers
9
1,026,299
1,010,378
Derivative financial assets
10
120
-
Prepayments and accrued income
11
13,684
13,409
Property and equipment
12
5,899
5,778
Intangible assets
13
5,646
3,155
Right-of-use assets
14
1,504
1,545
Other assets
15
7,323
8,640
Deferred tax assets
16
6,539
5,572
Current tax assets
3,617
-
TOTAL ASSETS
1,368,760
1,375,702
EQUITY
Share capital
17
74,544
74,544
Perpetual capital notes
18
10,000
10,000
Revaluation reserve
19
(776)
494
Retained earnings
19
24,826
25,466
TOTAL EQUITY
108,594
110,504
LIABILITIES
Debt securities in issue
20
19,915
19,864
Amounts owed to banks and other institutions
21
18
405
Amounts owed to customers
22
1,210,024
1,214,401
Derivative financial liabilities
10
432
1,267
Current tax liabilities
-
4
Other liabilities
23
19,473
17,787
Accruals
24
10,304
11,470
TOTAL LIABILITIES
1,260,166
1,265,198
TOTAL EQUITY AND LIABILITIES
1,368,760
1,375,702
Memorandum Items
Contingent liabilities
25
17,333
13,817
Commitments
25
211,774
197,052
BNF Bank Annual Report 2025
57
Income Statement
For the year ended 31 December 2025
Notes
2025
2024
€000
€000
Interest receivable calculated using the effective interest
method
- on loans and advances, balances with Central Bank
of Malta and other instruments
26
44,469
45,808
- on debt and other fixed income instruments
26
5,900
5,769
Interest payable and similar expense
27
(19,523)
(20,173)
Net interest income
30,846
31,404
Fees and commission income
28
4,245
4,364
Fees and commission expense
28
(623)
(551)
Net fees and commission income
3,622
3,813
Net trading (loss)/income
29
(2,248)
87
Net (loss)/gain from financial instruments at FVTPL
(313)
632
Gains on disposal of debt instruments
2,101
1,387
Net operating income
34,008
37,323
Employee compensation and benefits
30
(13,901)
(12,953)
Other administrative expenses
31
(15,400)
(11,661)
Depreciation of property and equipment and
right-of-use assets
12,14
(974)
(870)
Amortisation of intangible assets
13
(1,112)
(211)
Movements in expected credit losses
33
313
1,664
Profit before tax
2,934
13,292
Income tax expense
32
(314)
(4,373)
Profit for the year
2,620
8,919
Earnings per share (Basic and Diluted) (€ cents)
34
2c7
9c0
The accounting policies and explanatory notes on pages 62 to 168 form an integral part of the financial statements.
BNF Bank Annual Report 2025
58
Statement of Comprehensive Income
For the year ended 31 December 2025
Note
2025
2024
€000
€000
Profit for the year
2,620
8,919
Other comprehensive income
Items that are or may be subsequently reclassified to profit or
loss
Financial investments measured at FVOCI:
- Net gains from change in fair value, before tax
7
(660)
2,893
- Net gains reclassified to profit or loss
on disposal, before tax
7
(1,293)
(1,387)
- Net movements in credit losses released to profit or loss,
before tax
(1)
25
Income taxes relating to these items
684
(536)
Other comprehensive income for the year, net of tax
(1,270)
995
Total comprehensive income for the year
1,350
9,914
The accounting policies and explanatory notes on pages 62 to 168 form an integral part of the financial statements.
BNF Bank Annual Report 2025
59
Statement of Changes in Equity
For the year ended 31 December 2025
Notes
Share
capital
Perpetual
capital
notes
Revaluation
reserve
Retained
earnings
Total
€000
€000
€000
€000
€000
At 1 January 2024
74,544
10,000
(501)
22,143
106,186
Comprehensive income
Profit for the year
-
-
-
8,919
8,919
Other comprehensive income
Fair valuation of debt instruments
measured at FVOCI:
- net movement in fair value
arising during the year
7
-
-
1,880
-
1,880
- reclassifications - net amounts
classified to profit or loss
7
-
-
(901)
-
(901)
- changes in allowance for
expected credit losses
7
-
-
16
-
16
Total other comprehensive
income for the year
-
-
995
-
995
Total comprehensive income
-
-
995
8,919
9,914
Transactions with owners
Distributions to owners:
Return on perpetual capital notes
18
-
-
-
(1,107)
(1,107)
Dividends on ordinary shares
37
-
-
-
(4,489)
(4,489)
Total transactions with owners
-
-
-
(5,596)
(5,596)
At 31 December 2024
74,544
10,000
494
25,466
110,504
At 1 January 2025
74,544
10,000
494
25,466
110,504
Comprehensive income
Profit for the year
-
-
-
2,620
2,620
Other comprehensive income
Fair valuation of debt instruments
measured at FVOCI:
- net movement in fair value
arising during the year
-
-
(429)
-
(429)
- reclassifications - net amounts
classified to profit or loss
-
-
(840)
-
(840)
- changes in allowance for
expected credit losses
-
-
(1)
-
(1)
Total other comprehensive
income for the year
-
-
(1,270)
-
(1,270)
Total comprehensive income
-
-
(1,270)
2,620
1,350
Transactions with owners
Distributions to owners:
Return on perpetual capital notes
-
-
-
(1,030)
(1,030)
Dividends on ordinary shares
-
-
-
(2,230)
(2,230)
Total transactions with owners
-
-
-
(3,260)
(3,260)
At 31 December 2025
74,544
10,000
(776)
24,826
108,594
The accounting policies and explanatory notes on pages 62 to 168 form an integral part of the financial statements.
BNF Bank Annual Report 2025
60
Statement of Cash Flows
For the year ended 31 December 2025
Notes
2025
2024
€000
€000
Cash flows from operating activities
Interest, fees and commission received
48,347
50,224
Interest, fees and commission paid
(20,916)
(18,556)
Net cash inflows from trading activities
3,240
650
Payments to employees and suppliers
(30,065)
(30,964)
Cash flows from operating profit before
changes in operating assets and liabilities
606
1,354
Movement in operating assets:
Reserve Deposit with Central Bank of Malta
(753)
(1,601)
Loans and advances to customers
(15,602)
(58,382)
Other assets and cheques in course of collection
1,181
(267)
Movement in operating liabilities:
Amounts owed to customers
(4,449)
130,563
Other liabilities
(281)
1,809
Net cash flows (used in)/generated from operating activities
before tax
(19,298)
73,476
Income tax paid
(4,230)
(4,745)
Net cash flows (used in)/generated from operating activities
(23,528)
68,731
Cash flows from investing activities
Interest received on financial assets
6,487
4,496
Purchase of property, equipment and intangible assets
12,13
(4,354)
(3,147)
Purchase of financial investments
7
(67,719)
(125,193)
Proceeds from disposal and redemption of financial investments
102,689
74,949
Net cash flows generated from/(used in) investing activities
37,103
(48,895)
Cash flows from financing activities
Cash flows from financing activities
Return on perpetual capital notes
(1,030)
(1,107)
Dividends paid
-
(4,489)
Principal payments of lease liabilities
(546)
(457)
Net cash flows used in financing activities
(1,576)
(6,053)
Net increase in cash and cash equivalents
11,999
13,785
Cash and cash equivalents at beginning of year
124,642
110,857
Effect on exchange rate fluctuations on cash and cash
equivalents held
(1,716)
-
Cash and cash equivalents at end of year
35
134,925
124,642
The accounting policies and explanatory notes on pages 62 to 168 form an integral part of the financial statements.
BNF Bank Annual Report 2025
61
Notes to the
Financial Statements
BNF Bank Annual Report 2025
62
Notes to the
Financial Statements
For the year ended 31 December 202 5
1. STATUTORY INFORMATION
BNF Bank p.l.c. is a public limited liability company domiciled and incorporated in Malta. The Bank was incorporated on 27
March 2007 and started operating as a fully-fledged retail bank during January 2008. The Bank has issued debt instruments
which are listed on the Malta Stock Exchange.
The Bank is a standalone credit institution and as from December 2015 the Bank complies with the disclosure requirements laid
down in Part Eight of the Capital Requirements Regulation (‘CRR’). The Pillar 3 disclosures are aimed at providing the Bank’s
stakeholders further insight to the Bank’s capital structure and adequacy.
The disclosures have been prepared by the Bank in accordance with the Pillar III quantitative and qualitative disclosure
requirements as governed by Banking Rule BR/07: Publication of Annual Report and Audited Financial Statements of Credit
Institutions authorised under the Banking Act, 1994, issued by the Malta Financial Services Authority (‘MFSA’).
The Bank publishes full Pillar 3 Disclosures Report as a separate document on the Bank’s website.
2. SUMMARY OF MATERIAL ACCOUNTING POLICIES
2.1 Basis of Preparation
The Bank’s financial statements are prepared in accordance with the requirements of International Financial Reporting
Standards (IFRSs) as adopted by the EU and with the requirements of the Banking Act, 1994 (Chapter 371 of the Laws of Malta)
and the Companies Act, 1995 (Chapter 386 of the Laws of Malta). These financial statements are prepared under the historical
cost convention, except for the following which are measured at fair value: financial investments (those measured at fair value
through profit or loss (FVTPL) and at fair value through comprehensive income (FVOCI)) and derivatives.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain accounting
estimates. It also requires the Directors to exercise their judgment in the process of applying the Bank’s accounting polici es
(see Note 4.1 -- Critical accounting estimates, and judgments in applying the Bank’s accounting policies).
2.2 Standards, interpretations and amendments to published standards effective in 2025
In 2025, the Bank adopted amendments and interpretations to existing standards that are mandatory for the Bank’s
accounting period beginning on 1 January 2025. The adoption of these revisions to the requirements of IFRSs as adopted by
the EU did not result in changes to the Bank’s accounting policies impacting the Bank’s financial performance and position.
BNF Bank Annual Report 2025
63
2.3 Standards, interpretations and amendments to published standards that are not yet effective
A number of new accounting standards and amendments to accounting standards are effective for annual period beginning
on or after 1 January 2026 and earlier application is permitted. The Bank has not early adopted any new or amended
accounting standards in preparing these financial statements.
Classification and measurement of financial instruments (Amendments to IFRS 9 and IFRS 7) (endorsed on 27 May 2025)
In May 2024, the IASB issued Amendments to the Classification and Measurement of Financial Instruments, which amended
IFRS 9 and IFRS 7.
The requirements will be effective for annual reporting periods beginning on or after 1 January 2026, with early application
permitted, and are related to
• recognition and derecognition, including accounting for the settlement of financial liabilities using an electronic
payment system; and
• assessing contractual cash flow characteristics of financial assets, including those with sustainability linked features.
Such amendments are not expected to have a significant impact on the Bank.
IFRS 18 Presentation and Disclosure in Financial Statements (endorsed on 13 February 2026)
IFRS 18, which replaces IAS 1 “Presentation of Financial Statements”, will be effective for annual reporting periods beginnin g
on or after 1 January 2027. The standard introduces a revised framework for the presentation of financial performance, aimed
at improving comparability and enhancing the transparency of financial information for users of financial statements. While
IFRS 18 does not affect the recognition or measurement of balances, it is expected to have a significant impact on
presentation and disclosure, particularly within the statement of profit or loss, including the introduction of management-
defined performance measures.
The Bank will adopt IFRS 18 from its mandatory effective date and will not apply the standard early. As retrospective
application is required, comparative information for the year ending 31 December 2026 will be restated accordingly.
Management is currently assessing the implications of the new standard, with particular focus on the reclassification of
income and expenses, the introduction of new required subtotals, the alignment of internal performance measures with
disclosure requirements, and the system and process changes necessary to support implementation. The most significant
impact is expected to relate to the presentation and disaggregation of performance information in the statement of profit or
loss.
Other accounting standards
The following amendment to accounting standards is not expected to have a significant impact on the Bank’s financial
statements:
• Annual Improvements to IFRS Accounting Standards (IFRS 1, IFRS 7, IFRS 9, IFRS 10 and IFRS 7) (endorsed on 9 July
2025).
2.4 Segment reporting
For management purposes, the Bank is organised into business units based on its products and services and has four reportable
segments, as follows:
BNF Bank Annual Report 2025
64
• Retail banking - Principally handling customers’ deposits, providing consumer loans, overdrafts and funds transfer
facilities.
• Corporate banking - Principally handling local loans and other credit facilities and deposit and current accounts for
corporate and institutional customers.
• International -- Principally consisting of exposures originated by the Bank’s branch in London which finance prime
property in the UK. The UK branch is licenced to raise deposits which form part of the funding mix.
• Other - Principally treasury and other central functions.
No operating segments have been aggregated to form the above reportable operating segments.
Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors which
together with board committees is the Bank’s chief decision -maker. Day-to-day decisions also take place at the level of the
Bank’s Executive Committee and its sub committees, and by persons classified as material risk takers.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profit or loss. Income taxes
are managed on a group basis and are not allocated to operating segments.
An operating segment’s operating results are reviewed regularly by the Board of Directors to make decisions about resources
to be allocated to the segment and to assess its performance executing the function of the chief operating decision-maker.
Interest income is reported net as management primarily relies on net interest revenue as a performance measure, not the
gross income or expense.
No reconciliation of differences is required since there are no differences between the measurements of the reportable
segments’ profits or losses, assets and liabilities and the entity’s profit or loss, assets and liabilities.
The Bank does not carry-out transactions between reportable segments.
2.5 Foreign currency translation
2.5.1 Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the
entity operates (the ‘functional currency’). The financial statements are presented in euro (€), which is the Bank’s function al and
presentation currency.
2.5.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of
the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the Income Statement.
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65
2.6 Financial assets
2.6.1 Initial recognition and measurement
The Bank recognises a financial asset in its Statement of Financial Position when it becomes a party to the contractual
provisions of the instrument. Regular way purchases and sales of financial assets are recognised on the trade date, which is
the date on which the Bank commits to purchase or sell the asset. Accordingly, the Bank uses trade date accounting for regular
way contracts when recording financial asset transactions.
At initial recognition, the Bank measures a financial asset at its fair value plus or minus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of
the financial asset, such as fees and commissions. Transaction costs of financial assets carried at fair value through profit or
loss are expensed in profit or loss. At initial recognition, an Expected Credit Loss allowance (‘ECL’) is recognised for financial
assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting
loss being recognised in profit or loss when an asset is newly originated.
When the fair value of financial assets differs from the transaction price on initial recognition, the Bank recognises the difference
as follows:
• When the fair value is evidenced by a quoted price in an active market for an identical asset (i.e. a Level 1 input) or
based on a valuation technique that uses only observable markets inputs, the difference is recognised immediately
as a gain or loss in the Income Statement.
• In all other cases, the difference between the fair value and the transaction price is deferred. The deferred day-one
gain or loss is recognised in profit or loss only to the extent that it arises from the emergence of observable market
inputs that market participants would consider in setting the price of the instrument, or upon derecognition of the
financial asset.
2.6.2 Classification and subsequent measurement
The Bank classifies its financial assets in the following measurement categories:
• Fair value through profit or loss (‘FVTPL’);
• Fair value through other comprehensive income (‘FVOCI’); or
• Amortised cost.
The classification requirements for debt and equity investments are described below.
2.6.2.1 Debt Instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as
loans, government and corporate bonds.
Classification and subsequent measurement of debt instruments depend on:
• The Bank's business model for managing the asset; and
BNF Bank Annual Report 2025
66
• The cash flow characteristics of the asset.
Based on these factors, the Bank classifies its debt instruments into one of the following two measurement categories:
•
Amortised cost:
Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest ('SPPI'), and that are not designated at FVTPL, are measured at amortised cost.
The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured
as described in Note 3.2.3. Interest income from these financial assets is included in 'Interest receivable and similar
income' using the effective interest rate method.
•
Fair value through other comprehensive income (FVOCI):
Financial assets that are held for collection of contractual
cash flows and for selling the assets, where the assets' cash flows represent solely payments of principal and interest,
and that are not designated at FVTPL, are measured at fair value through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in
profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss within ‘Gains on disposal of debt instruments at FVOCI’. Interest income from
these financial assets is included in 'Interest receivable and similar income' using the effective interest rate method.
The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the
principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between
that initial amount and the maturity amount and, for financial assets, adjusted for any credit loss allowance.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e., its amortised cost before any
credit loss allowance) or to the amortised cost of a financial liability.
The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and
points paid or received that are integral to the effective interest rate, such as origination fees.
When the Bank revises the estimates of future cash flows, the carrying amount of the respective financial asset or financial
liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised
in profit or loss.
The Bank reclassifies debt instruments when and only when its business model for managing those assets changes. The
reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be
very infrequent and none occurred during the period.
a) Business model
Key management personnel determine the Bank’s business model by considering the way financial instruments are managed
in order to generate cash flows, that is, whether the Bank's objective is solely to collect the contractual cash flows from the
assets or to collect both the contractual cash flows and cash flows arising from the sale of assets.
If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as
part of 'other' business model and measured at FVTPL. Such assessment is performed at a ‘portfolio level' as it best reflec ts the
way the business is managed and information is provided to management. The information that will be considered in such
assessment includes:
BNF Bank Annual Report 2025
67
• The objectives for the portfolio including whether management’s strategy focuses on earning contractual interest
revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration
of the liabilities that are funding those assets or realising cash flows through the sale of assets;
• The method for the evaluation of the performance of the portfolio and how such performance is reported to the
Bank’s management;
• The risks that affect the performance of the business model (and the financial assets held within that business model)
and how those risks are managed; and
• The frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future
sales activity. However, information about sales activity is not considered in isolation, but as part of an overall
assessment of how the Bank’s stated objective for managing the financial assets is achieved and how cash flows
are realised.
Financial assets that are held for trading and those that are managed and whose performance is evaluated on a fair value
basis will be measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect
contractual cash flows and to sell financial assets. Securities held for trading are held principally for the purpose of selling in
the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of
a recent actual pattern of short-term profit-taking.
The Bank may also irrevocably designate financial assets at fair value through profit or loss if doing so significantly reduces or
eliminates a mismatch created by assets and liabilities being measured on different bases.
b) Cash flows that represent solely payments of principal and interest (SPPI)
In respect of assets where the intention of the business model is to hold the financial assets to collect the contractual cash
flows or to hold to collect and to sell, the Bank assesses whether the financial instruments’ cash flows represent solely pay ments
of principal and interest (the ‘SPPI test’). In making this assessment, the Bank considers whether the contractual cash flows are
consistent with a basic lending agreement. ‘Principal’ is the fair value of the financial asset at initial recognition. It i s not the
amount that is due under the contractual terms of an instrument. ‘Interest’ is the compensation for time value of money and
credit risk of a basic lending-type return. A basic lending-type return could also include consideration for other basic lending
risks (for example, liquidity risk) and consideration for costs associated with holding the financial asset for a particular period
of time (for example, servicing or administrative costs) and/or a profit margin that is consistent with a basic lending
arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending
arrangement, the related financial asset is classified and measured at FVTPL.
Unlike the business model assessment, the SPPI assessment is performed for each individual product or portfolio of products.
The following considerations are made when assessing consistency with SPPI:
• Contingent events that would change the amount and timing of cash flows such as contractual term resetting
interest to a higher amount in the event of a missed payment;
• Leverage features, being contractual cash flow characteristics that increase the variability of the contractual cash
flows with the result that they do not have economic characteristics of interest;
• Contractual terms that allow the issuer to prepay (or the holder to put a debt instrument back to the issuer) before
maturity and the prepayment amount substantially represents unpaid amounts of principal and interest, which may
include reasonable compensation for early termination of the contract;
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68
• Contractual terms that allow the issuer or holder to extend the contractual term and the terms of the extension option
result in contractual cash flows during the extension period that are solely payments of principal and interest, which
may include reasonable compensation for the extension of the contract; and
• Features that modify consideration for the time value of money (for example, periodic reset of interest rates).
2.6.2.2 Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do
not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity
instruments include basic ordinary shares.
The Bank subsequently measures all equity investments at FVTPL, except where the Bank’s management has elected, at initial
recognition, to irrevocably designate an equity investment at FVOCI. The Bank’s policy is to designate equity investments at
FVOCI when those investments are held for purposes other than to generate investment returns. This election is made on an
investment-by-investment basis. When this election is used, fair value gains and losses are recognised in OCI and are not
subsequently reclassified to profit or loss, including on disposal.
Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends,
when representing a return on such investments, continue to be recognised in profit or loss as other income when the Bank's
right to receive payments is established.
Gains and losses on equity investments at FVTPL are included in the Income Statement.
2.6.3 Impairment of financial assets
The Bank assesses on a forward-looking basis the expected credit losses associated with its debt instruments measured at
amortised cost and FVOCI and on the exposure arising from loan commitments and financial guarantee contracts. The Bank
recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
• The time value of money; and
• Reasonable and supportable information that is available without undue cost or effort at the reporting date about
past events, current conditions and forecasts of future economic conditions.
Note 3.2.3 provides more detail of how the ECL allowance is measured. ECL allowances are presented in the Statement of
Financial Position as follows:
•
Financial assets
measured at amortised cost:
As a deduction from the gross carrying amount of the assets;
•
Loan commitments and financial guarantee contracts:
Generally, as a provision;
•
Financial instrument with both a drawn and undrawn component, whereby the Bank cannot identify the ECL on the
loan commitment component separately from those on the drawn component:
The Bank presents a combined loss
allowance for both components, as a deduction from the gross carrying amount of the drawn component; and
•
Debt instruments measured at FVOCI:
No loss allowance is recognised in the Statement of Financial Position against
the carrying amount of the asset since the carrying amount of these assets is their fair value. Impairment gains or
BNF Bank Annual Report 2025
69
losses are recognised in profit or loss, with a corresponding amount recognised in other comprehensive income, and
accumulated in equity.
2.6.4 Modification of loans and advances to customers
The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer
retention and other factors not related to a current or potential credit deterioration of the customer.
The Bank renegotiates loans and advances to customers in financial difficulties (referred to as ‘forbearance activities’) to
maximise collection opportunities and minimise the risk of default. Under the Bank’s forbearance policy, loan forbearance is
granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence
that the debtor made all reasonable efforts to pay under the original contractual terms, and the debtor is expected to be able
to meet the revised terms. The revised terms usually include extending the maturity, revision of interest rate and changing the
timing of interest payments. Both retail and corporate loans are subject to the forbearance policy.
When modification happens, the Bank assesses whether or not the new terms are substantially different to the original terms.
The Bank does this by considering, among others, the following factors:
• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts
the borrower is expected to be able to pay;
• Whether any substantial new terms are introduced;
• Significant extension of the loan term when the borrower is not in financial difficulty;
• Significant change in the interest rate; and
• Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated
with the loan.
If the terms are substantially different, the Bank derecognises the original financial asset and recognises a 'new' asset at fair
value, and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered to be
the date of initial recognition for expected credit losses calculation purposes. The Bank assesses whether the newly recognised
financial asset is credit-impaired at initial recognition. However, the Bank also assesses whether the new financial asset
recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was
driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also
recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank
recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification
gain or loss in profit or loss.
The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or
credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The impact of
modifications of financial assets on the expected credit loss calculation is discussed in Note 3.2.8.
2.6.5 Derecognition of financial assets (other than on a modification)
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets
have expired, or when they have been transferred and either (i) the Bank transfers substantially all the risks and rewards of
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ownership, or (ii) the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not
retained control.
Where the Bank neither transfers nor retains substantially all the risks and rewards of ownership and retains control, the Bank
continues to recognise the asset to the extent of its continuing involvement.
2.7 Derivative financial instruments recorded at fair value through profit or loss
Derivative financial instruments, such as cross-currency swaps and forward foreign exchange contracts are initially recognised
at fair value on the date on which a derivative contract is entered into, and are subsequently remeasured at their fair value.
Fair values are obtained utilising valuation techniques for over-the-counter derivatives, including discounted cash flow models.
All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Fair values
for currency forwards and swaps are determined using forward exchange market rates at the end of the reporting period.
Discounting techniques are applied to reflect the fact that the respective exchange or settlement will occur at a future date
and to incorporate the time value of money in the fair valuation of these instruments.
The Bank does not apply hedge accounting. Accordingly, changes in the fair value of derivative financial instruments are
recognised immediately in profit or loss.
2.8 Cash and cash equivalents
Cash and cash equivalents are carried in the Statement of Financial Position at amortised cost less loss allowances. Cash and
cash equivalents comprise balances with original maturity of less than three months, including cash in hand, deposits held at
call with banks and other short-term highly liquid investments with original maturities of three months or less that are subject
to an insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-term
commitments.
2.9 Property and equipment
All property and equipment used by the Bank is initially recorded at historical cost, including transaction costs, for qualifying
assets, borrowing costs. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged
to profit or loss during the financial period in which they are incurred.
Property and equipment is stated at historical cost less accumulated depreciation.
Land is not depreciated as it is deemed to have an indefinite life. Depreciation on other assets is calculated using the straight-
line method to allocate their cost to their residual values over their estimated useful lives, as follows:
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Years
Freehold buildings
20-50
Leasehold buildings
10
Computer equipment
4
Other equipment
3-10
The asset’s residual value, useful life and depreciation method are reviewed, and adjusted if appropriate, at each financial
period end. Changes in the expected useful life are accounted for by changing the depreciation period or method, as
appropriate, and treated as changes in accounting estimates.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater th an
its estimated recoverable amount (see Note 2.12).
Property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in profit or loss in the period the asset is derecognised.
2.10 Intangible assets
Intangible assets consist of computer software and other intangibles. Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation
and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment on an annual basis
and whenever there is an indication that the intangible asset may be impaired (Note 2.12). The amortisation period and the
amortisation method for an intangible asset with a finite useful life is reviewed at each financial period end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset
are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting
estimates.
The amortisation expense on intangible assets with finite lives is recognised in the Income Statement in the expense category
consistent with the function of the intangible asset. Amortisation is calculated using the straight-line method to write down the
cost of intangible assets to their residual values over their estimated useful lives. Computer software is amortised over 4 - 10
years.
The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If
not, the change in useful life from indefinite to finite is made on a prospective basis. Other intangibles are assessed as having
an indefinite useful life.
Subscription fees incurred with respect to Software-as-a-Service (SaaS) arrangements that do not meet the definition of an
intangible asset are recognised as an expense throughout the contract term. Implementation and connected staff costs are
capitalised on the basis of whether they constitute an intangible asset.
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Costs incurred to acquire and bring to use specific software that meet the recognition criteria of IAS 38 are considered
intangible assets and are recognised as ‘intangible assets not yet available for use’ until their implementation process is
finalised and the intangible assets are made available for use, at which point, they are amortised over their useful economic
life.
Costs that do not meet the recognition criteria of IAS 38 to be recognised as intangible assets are expensed in the year they
are incurred. Implementation costs that are not considered to be distinct from the SaaS arrangement and are incurred before
the SaaS is put in use, are recognised as a prepayment and expensed over the term of the SaaS arrangement.
2.11 Property acquired through judicial action
In certain circumstances, property is acquired by the Bank in settlement of outstanding loans following judicial action.
Upon acquisition, such property is recognised at fair value less costs to sell, with any difference between the carrying amount
of the loan and the fair value of the property recognised in profit or loss. Subsequently, property acquired through judicial
action is measured at the lower of its carrying amount and fair value less costs to sell.
2.12 Impairment of non-financial assets
Assets that have an indefinite useful life, for example certain intangible assets, are not subject to amortisation and are tested
annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows (cash-generating units). The impairment test can also be performed on
a single asset when the fair value less costs of disposal or the value in use can be determined reliably. Non-financial assets
that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.13 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that
it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting period.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit
or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the
end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
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authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a
net basis.
2.14 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown
in equity as a deduction, net of tax, from the proceeds.
2.15 Perpetual capital notes
Perpetual capital notes qualify as Additional Tier 1 capital instruments, are undated and subordinated obligations. These
instruments contain no contractual obligation for the Bank to deliver cash or another financial asset. These instruments are
redeemable at par at the discretion of the Bank and are classified as equity. Distributions on perpetual capital notes are fully
discretionary and non-cumulative and may be cancelled by the Bank at its sole discretion without constituting an event of
default. Perpetual capital notes are accounted for within equity in the Statement of Financial Position. Any interest coupon
payments are accounted for under transactions with owners within ‘Statements of Changes in Equity’.
2.16 Financial liabilities
2.16.1 Initial recognition and measurement
The Bank recognises a financial liability on its Statement of Financial Position when it becomes a party to the contractual
provisions of the instrument. Financial liabilities not at fair value through profit or loss are recognised initially at fair value, being
the fair value of consideration received, net of transaction costs that are directly attributable to the acquisition or the issue of
the financial liability.
2.16.2 Classification and subsequent measurement
Financial liabilities are classified as subsequently measured at amortised cost, except for:
• Financial liabilities at fair value through profit or loss: this classification is applied to derivatives (which are mandatorily
measured at FVTPL) and other financial liabilities designated as such at initial recognition. Gains or losses on financial
liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the
amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that
liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to
market risk) and partially in profit or loss (the remaining amount of change in the fair value of the liability). This is unless
such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses
attributable to changes in the credit risk of the liability are also presented in profit or loss;
• Financial guarantee contracts and loan commitments (see Note 2.26).
Financial liabilities measured at amortised cost comprise principally amounts owed to banks and other institutions, amounts
owed to customers, debt securities in issue together with other liabilities.
2.16.3 Derecognition
The Bank derecognises a financial liability from its Statement of Financial Position when the obligation specified in the contract
or arrangement is discharged, is cancelled or expires.
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The exchange between the Bank and its original lenders of debt instruments with substantially different terms, as well as
substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present
value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original
effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original
financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in
the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into
consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or
fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted
for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the
remaining term of the modified liability.
2.17 Repurchase and reverse repurchase agreements
Securities sold under agreements to repurchase at a specified future date are not derecognised from the Statement of
Financial Position as the Bank retains substantially all of the risks and rewards of ownership. The corresponding cash received
is recognised in the Statement of Financial Position as an asset with a corresponding obligation to return it (i.e. the repurchase
agreement), including accrued interest, as a liability, reflecting the transaction’s economic substance as a loan to the Bank.
The difference between the sale and repurchase prices is treated as interest expense and is accrued over the life of the
agreement using the effective interest rate.
When the counterparty has the right to sell or repledge the securities, the Bank reclassifies the presentation of those securities
in its Statement of Financial Position to financial assets recognised as FVTPL pledged as collateral or to financial investments
recognised as FVOCI pledged as collateral, as appropriate.
Conversely, securities purchased under agreements to resell at a specified future date are not recognised in the Statement of
Financial Position. The consideration paid, including accrued interest, is recorded in the Statement of Financial Position,
reflecting the transaction’s economic substance as a loan by the Bank. The difference between the purchase and resale prices
is recorded in net interest income and is accrued over the life of the agreement using the effective interest rate.
If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to return the securities
is recorded as a short sale within financial liabilities held for trading and measured at fair value with any gains or losses included
in net trading income.
2.18 Trade and other payables
Trade payables comprise obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest method where
applicable.
2.19 Provisions for legal and other claims
Provisions for legal and other claims are recognised when the Bank has a present legal or constructive obligation as a result of
past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognised for future operating losses.
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Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-
tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognised as interest expense.
2.20 Provisions for pension obligations
The Bank contributes towards the government pension defined contribution plan in accordance with local and UK legislation
as applicable and to which it has no commitment beyond the payment of fixed contributions. These obligations are recognised
as an expense in the Income Statement as they accrue. The Bank does not contribute towards any other retirement benefit
plans.
2.21 Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest income’ and ‘interest
expense’ in profit or loss using the effective interest method. The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the
relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any
expected credit loss allowance) or to the amortised cost of a financial liability.
The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and
points paid or received that are integral to the effective interest rate, such as origination fees.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for
financial assets that are not purchased or originated credit-impaired but have subsequently become credit-impaired (or
'stage 3'), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the
expected credit loss provision).
2.22 Fees and commissions
Fees and commissions income and expenses that are an integral part of the effective interest rate on a financial asset or
liability are included in the calculation of the effective interest rate and treated as part of effective interest. Other material fees
and commissions are recognised on an accrual basis when the service has been provided.
Fees and commissions income, comprising account servicing fees, investment management fees, placement fees, fee income
from financial guarantees and other similar fees, are recognised as the related services are performed. Loan commitment fees
for loans that are likely to be drawn down are deferred (together with related direct costs) and recognised as an adjustment
to the effective interest rate on the loan. When a loan commitment is not expected to result in the drawdown of a loan, the
related loan commitment fees are recognised on a straight-line basis over the commitment period.
Other fee and commissions expense, relating mainly to transaction and service fees, are expensed as the services are received.
2.23 Dividend income
Dividends are recognised in profit or loss in ‘other income’ when the entity’s right to receive payment is established.
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2.24 Net trading income
The line item includes income from foreign exchange activities and net income from derivatives (such as cross-currency swaps
and forward exchange contracts).
2.25 Leases
A right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term, unless the lease transfers ownership of the underlying asset to the Bank by the end of the lease term
or the cost of the right-of-use asset reflects that the Bank will exercise a purchase option. In that case the right-of-use asset
will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, adjusted for certain
remeasurements of the lease liability.
A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Bank’s incrementa l
borrowing rate. Generally, the Bank uses its incremental borrowing rate as the discount rate.
The Bank leases a number of properties and motor vehicles as well as low value items such as photocopiers and note counting
machines. Rental contracts are typically made for fixed periods but may have extension options. The lease term reflects the
exercise of such options when it is reasonably certain that such extension options will be exercised. Payments associated with
short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less.
2.26 Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Such financial guarantees are given to banks, financial institutions and other bodies on behalf of customers.
In the ordinary course of business, the Bank issues financial guarantees, consisting of letters of credit, guarantees and
acceptances.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
• The amount of the loss allowance (calculated as described in Note 3.2.3); and
• The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.
'Loan commitments' are the Bank’s commitments to provide credit under pre -specified terms and conditions and are measured
as the amount of the loss allowance (calculated as described in Note 3.2.3).
For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for
contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit
losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn
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commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit
losses exceed the gross carrying amount of the loan, the expected credit losses in excess of the gross carrying amount are
recognised as a provision.
2.27 Dividend distribution
Dividend distribution to the Bank’s shareholders is recognised as a liability in the Bank’s financial statements in the perio d in
which the dividends are approved by the Bank’s shareholders.
2.28 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the effective interest method.
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3. FINANCIAL RISK MANAGEMENT
3.1 Introduction
The Board of Directors holds ultimate responsibility for the Bank’s risk management framework. To assist in this, the Board h as
set up board committees tasked with monitoring risk in their respective areas. The committees provide regular reports to the
Board of Directors regarding their activities. Additionally, the Bank has management committees that monitor and manage
the various risk areas.
Risk management policies, procedures, frameworks and processes have been developed to identify and evaluate the risks the
Bank faces, establish appropriate limits and controls, and track risks along with compliance to these limits. These risk
management policies and systems undergo regular reviews to ensure they reflect changes in market conditions, regulatory
requirements and the Bank’s product and services. The Bank also offers relevant risk related training tailored to the specifi c
needs of its staff members.
The Bank’s business model exposes it to financial risks and non-financial risks. The key elements of the Bank's business model
include: the corporate lending portfolio, which consists of loans to Maltese corporations; the retail lending portfolio, primarily
consisting of residential mortgages to Maltese customers; and the international lending portfolio, which includes loans to UK
corporations.
The Bank is exposed to risks, categorised as follows:
•
Credit risk:
The risk of losses arising from untimely or non-repayment of existing or contingent credit obligations,
generally resulting from deterioration in the financial condition of a borrower. The Bank is exposed to credit risk on
customers, clients or market counterparties, through interbank, commercial and consumer loans and advances, loan
commitments arising from such lending activities, and credit enhancement provided, such as financial guarantees,
documentary credits, endorsements and acceptances. The Bank is also exposed to credit risk on investments in debt
securities and derivatives as well as settlement balances with market counterparties.
Credit risk could impair the quality and hence the value of the Bank’s lending assets. Country risk and settlement risk
are included in this category. Country risk refers to the risk of losses arising from economic or political changes that
affect the country of origination of an asset. Settlement risk refers to the risk of losses through failure of a counterparty
to settle outstanding dues on the settlement date.
•
Market risk:
The risk of losses arising from fluctuations in fair value or future cash flows of financial instruments, due to
changes in market variables such as prices, interest rates and currencies, the correlations between them, and their
levels of volatility.
•
Liquidity risk:
The risk of losses due to:
i. The Bank’s funding costs increasing disproportionately;
ii. Lack of funding preventing the Bank from establishing new business; and
iii. Lack of funding which will ultimately prevent the Bank from meeting its obligations.
Liquidity risk arises from:
i. Market (product) liquidity risk: The risk of losses arising from the inability to easily offset or eliminate a
position without significantly affecting the market price because of inadequate market depth or market
disruption; and
ii. Funding liquidity risk: The risk of losses arising from a timing mismatch between investing, placements and
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fundraising activities resulting in obligations missing the settlement date or satisfied at higher than normal
rates.
•
Operational risk:
The risk of direct or indirect losses arising from inadequate or failed internal processes, system failure,
human error, fraud or from external events (including legal risk). When controls fail to perform or underperform,
operational risks can cause damage to reputation, have legal or regulatory implications, and/or lead to financial
loss.
•
Environmental, Social and Governance (ESG) risks:
The risks of any negative financial impact on the Bank stemming
from the current or prospective impacts of ESG factors on its counterparties or invested assets and their interaction
with traditional risk categories such as credit, market and liquidity risk. ESG factors refer to environmental, social and
governance factors that may have a positive or negative impact on the financial performance or solvency of the
Bank.
The Bank has in place a Risk Management Framework which establishes the principles and standards for effective financial risk
management and control. This establishes the Bank’s Risk Appetite, Governance, Policies and Procedures as well as monitoring
and reporting practices. The Risk Management Framework is an integral part of the Bank’s organisational and governance
structure, the details of which are set out in the Statement of Compliance with the Principles of Good Corporate Governance.
Three lines of defence
The Bank’s Risk Management Framework is modelled on the Three Lines of Defence Principle:
• The first line of defence
The first line of defence comprises of the internal entities which own and manage the risks. The control duties in the first line
underline the dual responsibility which is to generate business for the organisation while remaining cognisant of the associated
risks and controls. The first line is composed primarily of all commercial, customer-facing and operational or internal support
departments.
• The second line of defence
The second line of defence comprises of all functions, including risk and compliance control functions, providing oversight and
support to the first line of defence. The key duties of the second line are to monitor and report risk-related practices and
information, and to oversee all types of compliance and financial controlling issues. The second line of defence defines
preventive and detective control requirements and ensures that such requirements are embedded in the policies and
procedures of the first line.
• The third line of defence
The third line of defence comprises the Internal Audit Function, which provides independent assurance to Management and
the Board of Directors on a broad range of objectives, including efficiency and effectiveness of operations, safeguarding of
assets, reliability and integrity of reporting processes and compliance with laws and regulations. The Internal Audit Function
has a direct reporting line to the Audit Committee.
Risk Culture
The Board of Directors is responsible for the Bank’s risk culture, and for outlining its long -term objectives. Furthermore, the Board
has the responsibility for ensuring that the Executive Committee implements a strategy which enables the Bank to meet its
objectives while respecting its risk appetite.
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To this end, the Board of Directors continuously challenges the Bank’s management and their performance and has delegated
the responsibility of the oversight of risk management to the Risk Committee. Through the Risk Committee, the Board of
Directors regularly and comprehensively engages in analysis of the Bank’s risk position. The primary tools used by the Risk
Committee to address their responsibility are the Risk Appetite and the Risk Management Process.
Risk Appetite
The Board has approved a Risk Appetite Statement which sets out the Bank’s tolerance to risk exposure with respect to all ris ks
identified. The Risk Appetite Statement is reviewed and approved by the Board on an annual basis, or more frequently, if
required, to remain consistent with the Bank’s strategy, business and any regulatory requirements.
This statement is translated into a system of risk limits for all risks which the Bank considers as material, to ensure that the Risk
Appetite is fully embedded throughout the Bank. The established limits are grouped and have different triggers and thresholds
including escalation requirements, for further action.
The Bank allocates resources to monitor ongoing compliance with approved limits and has a fixed reporting cycle to ensure
that Management and the Board of Directors are informed of all material matters in this respect.
Risk Management Process
The Bank’s risk management process forms an integral part of its Risk Management Framework, and is outlined as follows:
• Identification and assessment of material risks and controls
The Bank carries out an analysis of its business model and strategy on a regular basis. As part of that analysis, the Bank
endeavours to identify its key vulnerabilities, being the areas that drive its risks and potential scenarios of stress.
The Bank maintains a risk taxonomy which is updated on a regular basis, identifying risk categories and sub-categories of risk
exposure.
• Risk measurement and mitigation
The Bank aims to mitigate risk with controls where possible, by ensuring that adequate processes, procedures, and systems of
internal control are in place at all times. Systems of internal control also support accurate financial reporting, which in turn aids
effective decision making.
Identified risks are evaluated both on a holistic and micro level, across different levels and different business lines. Following
risk identification, the inherent level of risk is assessed by considering the risk drivers, probability of occurrence and potential
impact. The availability and effectiveness of mitigating controls is also assessed in order to derive the level of residual risk.
Subsequent to the identification of the residual risk, the Bank initiates a process whereby further risk mitigation action plans
are implemented to further treat such residual risk.
In cases where residual risk remains beyond the Board’s risk appetite or where the residual risk is not considered acceptable ,
further risk treatment is considered. Additionally, such risks are often targeted as part of the Bank’s stress testing framew ork
and may be considered as part of the Pillar 2 add-on.
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• Monitoring and reporting
The Risk function is involved in aggregating and reporting risks, ongoing reporting and overseeing the risk mitigation activity
being recommended.
The Bank’s risk profile is not static but changes according to internal and external risk drivers and factors. The regular mo nitoring
and reporting of risks in line with the framework of various committees within the Bank, ensures that limits are being observed
and analysed by different structures within the Bank and where needed, the risk profile is adjusted accordingly to better reflect
the Bank’s business model.
Qualitative and quantitative aspects of the Bank’s risk position are regularly reported to and discussed by top management.
This includes the Board of Directors and its sub-committees i.e. the Audit Committee and Risk and Compliance Committee, the
Executive Committee, as well as management committees, such as the Asset and Liabilities Committee (’ ALCO’).
Regulatory risk reporting also takes place regularly through the ICAAP and ILAAP reports and the Recovery Plan.
3.2 Credit risk
Credit risk is the single largest financial risk for the Bank. In this regard, as an integral component of the second line of defence,
management has established a framework that delineates distinct responsibilities pertaining to various facets of credit risk.
This framework embodies two discrete and segregated functions:
•
Credit Analysis Department:
Responsible for credit risk management activities by way of analysis of credit requests,
implementation of credit policies, and participation in credit committees where credit decisions are taken by
consensus; and
•
Risk Control and Oversight Department:
Responsible for credit, concentration, and correlation risk control and
oversight activities. This Department does not actively participate in credit decisions, and is responsible for the
maintenance of credit policies, risk models, metrics, tools, monitoring and reporting on adherence or otherwise to the
Bank's Risk Appetite Framework on credit and other risks.
The above-mentioned functions report to the Chief Risk Officer (CRO) who forms part of the Bank's Executive Committee. In
terms of organisational structure, the CRO has a duty to report inter alia to the Risk and Compliance Committee and is
frequently invited to report to the Audit Committee on credit and other financial risks.
Credit decisions are taken within credit committees where, at each discretionary level, the risk function is represented through
the Credit Analysis Department.
The Bank‘s Credit Committees’ structure is composed of various levels ranging from Level 1 to Level 2, Executive Credit
Committee (ECC) / Executive Committee (EC), the Credit Approval Committee (CAC) / the Board of Directors (BoD). The BoD
acts as the highest approval body within the Bank whilst the CAC is a board committee. The role of the CAC is to approve
credit applications within an established range, and to make recommendations to the Board in respect of credit applications
that fall within the approval range of the BoD.
The CAC may escalate to the Board any credit application where it considers that action is needed, with recommendations as
to the steps to be taken. Furthermore, the BoD also delegated oversight functions related to credit risk to several board
committees, such as the Audit Committee and the Risk and Compliance Committee.
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3.2.1 Credit risk management
Lending decisions should achieve a reasonable balance between the risks and returns of extending credit to a customer. The
Bank has a credit authorisation structure, made up of various credit committee levels; ranging from the lowest level, which
includes authorisation by a Branch/Senior Manager and an Analyst/Manager from the Credit Analysis Department to the
highest level, being the Board of Directors. Each credit committee level is assigned a sanctioning limit, under which it can
operate within specific guidelines. Within its discretionary limit, a credit committee can approve new credit, increase, reduce
or otherwise amend the terms and conditions of existing facilities, or simply renew existing facilities without altering the terms
and conditions at original sanction. A credit committee has the onus to ensure that the facility carries acceptable credit risk
and meets credit rating requirements. Lending is not primarily based on the existence of collateral but on the customer’s
perceived ability to repay the exposure from the primary repayment source.
At the same time, the existence of security acts as a fall-back option available in case of need. Where applicable the Bank
ensures that security held is perfected. The majority of facilities are secured either by cash, financial assets, property and/or
guarantees.
Facilities are generally reviewed periodically. In a facility review, the Bank analyses factors such as the customer profile, credit
quality, non-financial considerations, adherence to internal policies and procedures, and profitability.
The Bank manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual
counterparties and for industry concentrations, and by monitoring exposures in relation to such limits.
The Bank rigorously applies a credit quality review process to provide early identification of possible changes in the
creditworthiness of counterparties, including regular revisions to collateral.
In addition, exposures which are technically performing but exhibit early signs of deterioration (e.g. days past due and/or other
early warning signals), are separately analysed on a monthly basis by the Risk Department in liaison with the business units.
This often results in prompt revision of individual risk rating, revised expected loss quantification, and instigation of corrective
action.
Credit quality is also reviewed in aggregate by portfolio, to provide early identification of possible changes in the
creditworthiness of relevant portfolio segments.
The Bank has in place policies and procedures which formalise the above internal control mechanisms.
The Bank continued to adapt its credit risk management processes for the purposes of identifying deterioration in credit risk
within its portfolios and estimating expected credit loss allowances using the best possible judgement.
Credit risk and the economy
During the financial year ended 31 December 2025, global macro-economic conditions showed signs of gradual stabilisation
after a prolonged period of volatility. Inflation continued to moderate as supply chain pressures eased and the effects of earlier
monetary tightening filtered through, prompting major central banks to maintain a more accommodative policy stance.
Malta’s economy remained resilient, supported by strong labour market conditions, sustained domestic demand, and ongoing
investment activity. Economic growth continued to outperform the euro area average, while unemployment remained at
historically low levels and is expected to decline further to 2.8%.
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The Bank also continued to monitor developments in the UK debt market as part of its credit risk assessment framework. This
includes regular analysis of UK specific macroeconomic indicators, such as interest rates, inflation, unemployment, and GDP
growth, to evaluate their potential impact on borrower repayment capacity. In addition, the Bank utilises credit risk tools to
monitor Probability of Default (PD) metrics and conducts internal credit reviews to assess borrower creditworthiness on an
ongoing basis.
3.2.2 Credit risk measurement
Measurement of credit risk considers that an exposure varies with changes in market conditions, expected cash flows and the
passage of time. The Bank’s internal models measure expected credit losses by portfolio using probability of default (PD),
exposure at default (EAD) and loss given default (LGD) parameters. Refer to Note 3.2.3.3 for more details.
• Loans and advances to customers
The Bank uses internal credit risk gradings (see Note 3.2.7) to reflect its assessment of the probability of default of individual
counterparties or facilities. Internal credit risk gradings are based on payment behaviour, loan specific information and expert
judgement of the Bank’s credit committees.
Information considered by the Bank when determining the internal credit risk grades includes the payment behaviour of the
borrower and other information about borrowers which impact their creditworthiness, including level of income and/or financial
performance.
The internal credit risk gradings are calibrated such that they reflect the increased risk of default at each higher risk grade.
Corporate
For corporate business, which includes both the local and international segments, the rating is determined at the borrower
level. A Bank official will incorporate any updated or new information/credit assessments into the Bank’s credit system on an
ongoing basis. In addition, a Bank’s official will also update information about the cr editworthiness of the borrower from sources
such as financial statements.
The creditworthiness of the borrower is considered in every periodic review. This will determine the updated internal credit risk
grading.
Retail
After the date of initial recognition, for retail business, the payment behaviour of the borrower is monitored on an ongoing basis.
Any other known information about the borrower which impacts their creditworthiness, such as unemployment and previous
delinquency history, is also captured.
• Other financial assets
Other financial assets include balances with the Central Bank of Malta, investments and loans and advances to banks. The
Bank considers external risk grades to reflect its assessment of the probability of default of individual counterparties. These
published grades are continuously monitored and updated. The PD associated with each grade are determined based on
realised default rates over the recent periods.
In determining the probability of default of individual counterparties, the Bank distinguishes between exposures considered as
investment-grade and non-investment grade.
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3.2.3 Expected credit loss measurement
IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial recognition as summarised
below:
• A financial instrument that is not credit-impaired upon initial recognition is classified in 'Stage 1'.
• If a significant increase in credit risk ('SICR') since initial recognition is identified, the financial instrument is moved to
'Stage 2' but is not yet deemed to be credit-impaired. Refer to Note 3.2.3.1 for a description of how the Bank
determines when a significant increase in credit risk has occurred.
• If the financial instrument becomes credit-impaired, the financial instrument is moved to 'Stage 3'. Refer to Note
3.2.3.2 for the Bank’s definition of credit -impaired.
• Financial instruments in ‘Stage 1’ have their ECL measured at an amount equal to the portion of lifetime expected
credit losses that result from default events possible within the next 12 months. Instruments in ‘Stage 2’ or ‘Stage 3’
have their ECL measured based on expected credit losses on a lifetime basis. Refer to Note 3.2.3.3 for a description
of inputs, assumptions and estimation techniques used in measuring the ECL.
• A pervasive concept in measuring ECL in accordance with IFRS 9 is that forward looking information is considered.
Note 3.2.3.4 includes an explanation of how the Bank has incorporated forward looking information into ECL models.
Further explanation is also provided of how the Bank determines appropriate groupings of loans and advances to customers
for ECL measurement (see Note 3.2.3.5).
The expected credit loss requirements apply to financial assets measured at amortised cost and FVOCI, and loan commitments
and financial guarantee contracts. At initial recognition, an impairment allowance (or provision in the case of commitments and
guarantees) is required for ECL resulting from default events that are possible within the next 12 months (‘‘12-month ECL’’). In the
event of a significant increase in credit risk, an allowance (or provision) is required for ECL resulting from all possible default
events over the expected life of the financial instrument (‘‘lifetime ECL’’).
The Bank recognises loss allowances at an amount equal to 12-month ECL for debt investment securities that are determined
to have low credit risk at the reporting date. The Bank considers a debt security to have low credit risk when it is considered
‘inves tment-grade’, defined by recognised external rating agencies.
The following diagram summarises the impairment requirements under IFRS 9:
Change in credit quality since initial recognition
‘Stage 1’
‘Stage 2’
‘Stage 3’
(Initial recognition)
(Significant increase in credit risk since
initial recognition)
(Credit impaired)
12-month expected credit losses
Lifetime expected credit losses
Lifetime expected credit losses
3.2.3.1 Significant increase in credit risk (SICR)
To determine whether the credit risk on a financial instrument has increased significantly since initial recognition, the Bank
considers reasonable and supportable information that is relevant and available without undue cost or effort, including both
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quantitative and qualitative information. Such analysis is based on the Bank’s historical experience, credit assessment and
forward-looking information.
The Bank primarily identifies whether a SICR has occurred for an exposure within the loans and advances to customers, through
the Bank’s internal risk gradings. The Bank allocates each exposure to an internal rating grade based on a variety of data th at
is determined to be predictive of the risk of default and applying experienced credit judgement. These factors vary depending
on the nature of the exposure and the type of borrower. Exposures are subject to ongoing monitoring, which may result in an
exposure being moved to a different internal rating grade (refer to Note 3.2.7). Exposures which exhibit a SICR are subject to
extended ongoing monitoring. The Bank identifies SICR and classifies non-defaulted exposures as ‘Stage 2’ when these fulfil
at least one of the following conditions:
• The exposure is considered forborne and allocated a forbearance flag under the Bank’s definition of forbearance
(set out in section 3.2.7);
• The credit quality of any other exposure to the same customer is not considered ‘regular’ (except where otherwise
stated in the Bank’s Credit Policy e.g. cash covered facilities); and
• The borrower’s internal rating grade is not considered ‘high -grade’, as defined in Note 3.2.7.
The Bank has utilised segmentation techniques for the purposes of identifying indicators of SICR within both retail and
corporate portfolios, local and international exposures.
In relation to retail portfolios, SICR is generally determined on the basis of delinquency related indicators since less information
is available at asset level to enable the timely identification of a SICR. Due to the heightened risks, the Bank continued to
rigorously apply its credit assessment and oversight processes, which include monitoring of arrears.
In the context of the corporate portfolio for both local and international segments, the Bank continues to rigorously assess and
monitor its borrowers through credit assessments. Judgement is exercised in evaluating all relevant information on indicators
of impairment, particularly where factors indicate deterioration in the financial condition and outlook of borrowers, affecting
their ability to pay and potential breach of any covenants. During 2025, the Bank continued to intensify its efforts to obtain
updated recent financial information on the underlying business of the borrowers with a view to continue carrying out further
enhanced assessments.
Monitoring typically involves use of the following data:
Corporate Exposures*
Retail Exposures
All Exposures*
• Information obtained during periodic
review of customer files -- e.g.
audited financial statements,
management accounts, budgets
and projections. Examples of areas
of particular focus are: gross profit
margins, financial leverage ratios,
debt service coverage, compliance
with contractual conditions, quality
of management and senior
management changes.
• Internally collected data on
customer behaviour -- e.g.
utilisation of credit card facilities.
• Affordability metrics.
• Payment record -- this includes
overdue status as well as a range
of variables about payment ratios.
• Utilisation of the granted limit.
• Requests for and granting of
forbearance.
• Existing and forecast changes in
business, financial and economic
conditions.
• Data from credit reference agencies,
press articles and data available
• Monitoring of any days in arrears
and payment patterns.
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Corporate Exposures*
Retail Exposures
All Exposures*
through credit risk assessment
platforms.
• Data and reports available on loan
syndication platforms.
• Covenant certification analysis.
Monitoring of covenants in place,
through requested reports, data
available and monitoring
(particularly for international
syndicated facilities).
• Actual and expected significant
changes in the political, regulatory
and technological environment of
the borrower or in its business
activities.
• Management / shareholders /
internal conflict which threatens the
business viability.
• Demise of key person.
• Privilege creditors default including
failed repayment arrangements,
erosion of collateral held and/or
result in non-sustainable repayment
positions.
• Negative news which could affect
the business’s viability.
• Loss of a big customer &/or market
share.
• Legal / regulatory issues (including
ESG considerations).
• Court cases instituted against
client/business which could
jeopardise repayment.
*Corporate exposures cover both the local and international segments.
The assessment of SICR incorporates forward-looking information (see Note 3.2.3.4) and is performed at the counterparty level
and on a periodic basis. The criteria used to identify SICR are monitored and reviewed periodically for appropriateness by the
independent Credit Analysis Department.
As a backstop, and as required by IFRS 9, the Bank presumes that SICR has occurred when a loan to a customer is more than
30 days past due. The Bank determines days past due by counting the number of days since the earliest elapsed due date in
respect of which full payment has not been received.
In the case of other financial assets (including loans and advances to banks and investments in debt securities), the Bank
applies the low credit risk simplification to all its exposures considered ‘investment -grade’, thus they are not subject to the
SICR assessment. Moving from ‘investment -grade’ to ‘non -investment grade’ does not automatically mean that there has
been a SICR.
During 2025 management continued to closely monitor the portfolio in the context of ongoing macroeconomic developments.
In this respect, following the subsiding of inflationary pressures, the lowering of market interest rates, as well as management’s
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experience with limited credit rating downgrades and default events being observed, the remaining management overlay on
the corporate portfolio was no longer deemed to be required and was fully released as at 31 December 2025.
Further details on the macroeconomic forecasts used in the ECL calculations are provided in Note 3.2.3.4.
3.2.3.2 Definition of default and credit-impaired assets
The Bank’s assessment to determine the extent of increase in credit risk of a financial instrument since initial recognition is
performed by considering the change in the risk of default occurring over the remaining life of the financial instrument.
The Bank applies the definition of default in a consistent manner with internal credit risk management practice for the relevant
instruments and the definition considers qualitative and quantitative factors where appropriate.
The Bank determines that a financial instrument is credit-impaired or in default (and accordingly stage 3 for IFRS 9 purposes)
by considering relevant objective evidence, primarily whether:
• The debtor is deemed unlikely to meet financial commitments with the Bank;
• The exposure is more than 90 days past due;
• An exposure in the form of a commitment that, was drawn down or otherwise used, would likely not be paid back in
full without realisation of collateral;
• An exposure where additional forbearance measures are granted, or where whilst the exposure is under probation
following the granting of forbearance measures, becomes more than 30 days past due; and
• An exposure in the form of a financial guarantee that is likely to be called by the guaranteed party, including where
the underlying guaranteed exposure meets the criteria to be considered to be non-performing.
As set out in this section, the Bank’s definitions of credit -impaired and default are fully aligned.
In assessing whether a borrower is in default/credit-impaired, the Bank considers indicators that are:
• Qualitative -- such as non-adherence to terms and conditions of sanction and/or other breaches of covenant;
• Quantitative -- such as overdue status and non-payment of another obligation of the same obligor to the Bank; and
• Based on data developed internally and obtained from external sources.
The default definition is applied consistently when modelling the PD, EAD and LGD parameters throughout the Bank's expected
credit loss calculations.
Except for forborne exposures, an instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets
any of the default criteria for a consecutive period of at least three months. This period has been determined based on an
analysis which considers the likelihood of a financial instrument returning to default status after cure using different possible
cure definitions. In the case of forborne exposures, as stated in Note 3.2.8, the cure period comprises 12 consecutive monthly
repayments made in a timely manner with a minimal grace period of one day (i.e. one or more repayments may be made no
more than one day late).
The Bank considers other financial assets to be in default when a payment due including a coupon payment is not effected.
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3.2.3.3 Measuring ECL – Explanation of inputs, assumptions and estimation techniques
Expected credit losses are measured on either a 12-month or on a lifetime basis depending on whether a significant increase
in credit risk has occurred since initial recognition or whether an asset is considered to be credit impaired. Further details are
set out in Note 3.2.3.4.
ECL are the discounted product of the PD, EAD and LGD. ECL are determined by projecting the PD, LGD and EAD for each
future month and for at individual exposure level or on a collective basis, as appropriate. These three components are multiplied
and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier month). This effectively
calculates ECL for each future month, which are then discounted back to the reporting date. The discount rate used in the ECL
calculation is the original effective interest rate.
The 12-month ECL is calculated by multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated on a similar basis for
the residual life of the exposure.
The PD, EAD and LGD parameters are derived from internally developed statistical models and other historical data, adjusted
to reflect forward-looking information as described below.
The PD represents the likelihood of a borrower defaulting on its financial obligation (as per ‘Definition of default and cred it-
impaired assets’ above), either over the next 12 months, or over the remaining lifetime of the obligation. Accordingly, the 1 2-
month and lifetime PD represent the probability of default occurring over the next 12 months and the remaining maturity of the
instrument, respectively.
PD estimates are estimates at a certain date, which, for loans and advances to customers are calculated based on statistical
rating models and assessed using rating tools tailored to the various categories of counterparties and exposures. These
statistical models are based on compiled data comprising both quantitative and qualitative factors using internal and external
sources.
With respect to the retail portfolio (as defined in Note 3.2.3.5), the PD calculation is based on fitting theoretical distribution to
historical default rates in particular periods after origination (‘months on book’) for each homogeneous portfolio, to pro duce
term structure of point-in-time PD.
In the case of the local corporate portfolio (as defined in Note 3.2.3.5), the PD calculation is based on a transition matrix
approach which determines the probability of a borrower’s transition from one internal rating class to another (or staying within
the same class) by tracking the historical movement of loans between stages over a defined period of time. The PD is calculated
on the basis of a 12-month horizon, with quarterly frequencies. The main assumptions underlying this approach is that the PD
does not depend on ‘months on book’ and that the future PD depends on current characteristics of the exposure or borrower.
Due to the lack of internal history of defaults on the international lending portfolio (as defined in Note 3.2.3.5), the Bank applies
PDs which are sourced from renowned external service providers which assess the credit risk of small and medium-sized
enterprises (‘SMEs’), and determine PDs by reference to financial and non -financial aspects namely the entity size, country,
industry sector, corporate governance and the macroeconomic environment in which the entity operates. Furthermore, these
PDs are Point in Time PDs and only take into account the situation of the company at the moment of assessment.
Market data is used for the PD of loans and advances to banks and investment securities. If a counterparty or exposure
migrates between internal rating grades or external credit ratings, such will lead to a change in PD.
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The Lifetime PD is developed as follows:
•
Retail portfolio:
Obtaining an average PD profile for homogenous groups by fitting a parametric distribution to the
Bank’s historical default rates. Homogenous grouping is based on similar months on book, days past due and internal
ratings. The average PD profile is adjusted to consider forward-looking information through macroeconomic
modelling to arrive to the final unconditional PD..
•
Corporate portfolio:
Obtaining a transition matrix which shows the probability of a borrower’s transition from one
internal rating class to another (or staying in the same class) within a given horizon, raised to a particular power. The
conditional PD is adjusted to consider forward-looking information through macroeconomic modelling to arrive to
the final unconditional PD.
•
International portfolio:
Case by case PDs are obtained by reference to financial and non-financial aspects namely
the entity size, country, industry sector, corporate governance and the macroeconomic environment in which the
entity operates. Lifetime PDs are derived by applying the 10-year multipliers to the entity’s point -in-time PD, while
also taking into consideration the entity’s bond equivalent rating to arrive to the final unconditional PD.
EAD represents the expected exposure in the event of a default (including any expected drawdowns of committed facilities).
The Bank derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed
under the contract including amortisation. The EAD of a financial asset is the gross carrying amount at default.
The 12-month and lifetime EAD are determined based on the expected payment profile, which varies by product type:
• For amortising products and bullet repayment loans, this is based on the contractual repayments owed by the
borrower over a 12 month or lifetime basis; and
• For revolving products, the exposure at default is predicted by taking the drawn balance and adding a ‘‘credit
conversion factor’’ which allows for the expected drawdown of the remaining limit by the time of default. These
assumptions vary by product type and current limit utilisation band, based on the analysis of the Bank’s default data.
Loss Given Default (‘LGD’) represents the Bank’s expectation of the extent of loss on a defaulted exposure. Hence, the LGD
represents expected credit losses on the EAD assuming an event of default. LGD takes into account among other attributes,
the mitigating effect of collateral value at the time it is expected to be realised and the time value of money. The 12 month and
lifetime LGD are determined based on the factors which impact the recoveries post default.
For secured products, LGD is primarily based on collateral type and projected collateral values, historical discounts to
market/book values due to forced sales, time to repossession and recovery costs observed. The LGD for exposures secured by
real estate is derived from the adjusted loan-to value ratio of the individual facilities, and takes into account the expected
recovery by applying haircuts for the cost to sell the property. Also taken into account are the sales ratio and sales ratio
volatility, and the effect of discounting (using the effective interest rate) over a projected time to sell period. The sales ratio
resembles a market value haircut while the sales ratio volatility captures the standard deviation of the sales ratio.
For unsecured products, LGD is typically set at product level due to the limited differentiation in recoveries achieved across
different borrowers.
ECL are measured from the initial recognition of a financial asset. The maximum period considered when measuring ECL
(whether 12-month or lifetime ECL) is the maximum contractual period over which the Bank is exposed to credit risk. With respect
to non-revolving credit facilities, the contractual life of the facility is considered. In the case of revolving credit facilities,
provided that such facilities do not have a fixed term or repayment structure, the Bank considers the lifetime of such exposures
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to be 6 months, in cases where the next substantive credit review is within the next 6 months. Otherwise, for the purpose of
measuring ECL, the Bank considers a lifetime of 12 months. For the credit cards portfolio, the Bank considers a lifetime of 36
months. These behavioural lifetimes reflect the period over which the Bank is exposed to credit risk, taking into account
contractual features, historical customer behaviour and the frequency of substantive credit reviews.
Forward-looking economic information is considered in determining the 12-month and lifetime PD and LGD. Refer to Note 3.2.3.4
for an explanation of forward-looking information and its inclusion in ECL calculations.
The assumptions underlying the ECL calculations are monitored and reviewed on a regular basis. For individually significant
credit impaired loans, management determines the size of the allowance required based on a range of factors such as the
realisable value of security, the viability of the customer’s business model and the capacity to generate cash flow to service
debt obligations, under different scenarios. Judgement is applied in estimating the expected future cash flows from each
borrower and the time to recover these cash flows under the different scenarios as well as to attach probabilities to those
scenarios. The assumptions around forecasted recoveries from the sale of collateralised properties, including around valuation
haircuts and time to recovery, are key drivers in the estimation of credit loss allowances in respect of individually assessed
loans.
Judgement is applied in estimating the expected future cash flows from each borrower and the time to recover these cash
flows under the different scenarios as well as to attach probabilities to those scenarios. The assumptions around forecasted
recoveries from the sale of collateralised properties, including around valuation haircuts and time to recovery, are key drivers
in the estimation of credit loss allowances in respect of individually assessed loans.
A level of expert judgement is required to predict with reasonable accuracy the recoverability of exposures through cashflows
from the sale of collateral. The estimated ECL remains subject to a moderately high degree of uncertainty around the time to
repossess properties held as collateral and to resell such properties in the open market.
3.2.3.4 Forward-looking information incorporated in the ECL model
Methodology
The calculation of ECL incorporates forward-looking information. The Bank performs a historical analysis to identify the key
economic variables affecting credit risk and expected credit losses for each portfolio. These economic variables and their
associated impact on the PD, EAD and LGD may vary by portfolio.
In this respect, the Bank has identified key drivers of credit risk and credit losses for each portfolio of financial instruments and
using an analysis of historical data, has analysed relationships between macro-economic variables, credit risk and credit
losses. These key drivers include:
•
Corporate exposure:
The Average Gross Salary Growth, Unemployment Rate and the Real Estate Price Index, were
incorporated due to the significant influence these indicators exert on local investment activity and the overall
performance of corporate entities.
•
Retail exposure:
The Real GDP Growth, Unemployment Rate, Real Estate Price Index and Average Gross Salary
Growth, given the significant impact they have on local investment and labour market. The performance of these
economic indicators affects repayment feasibility of secured and unsecured retail borrowers.
•
International Portfolio:
The UK GDP Growth, UK Inflation Rate, UK Unemployment Rate and BOE Bank Rate are
being considered, given that together these four macro-economic indicators contribute best to the model.
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The impact of these economic variables on the PD is determined by performing statistical regression analysis to understand
the historical impact that changes in these variables had on the Bank’s default rates.
Three possible scenarios are considered to capture non-linearity across credit portfolios. The ‘Baseline’ scenario represents the
most-likely outcome. It is based on authoritative sources forecasting these economic variables referred to above and providing
the best estimate view of the economy over the next three years. Apart from the ‘baseline’ scenario, the Bank considers an
‘upside’ and a ‘downside’ macro -economic scenario; which respectively represent a more optimistic and a more pessimistic
outcome. Such scenarios reflect the current top and emergent risks and opportunities. The Bank considers economically
plausible upside and downside scenarios, and the downside scenario is not necessarily as severe as scenarios used in stress
testing.
Each scenario is weighted by a probability of occurrence, determined by a combination of macroeconomic research and expert
credit judgment, taking into account the range of possible outcomes each chosen scenario represents. The Bank measures
ECL as either a probability weighted 12-month ECL (Stage 1), or a probability weighted lifetime ECL (Stages 2 and 3). Probability-
weighted ECL are determined by running each scenario through the relevant ECL model and multiplying it by the appropriate
scenario weighting (as opposed to weighting the inputs).
For the international portfolio as highlighted in section 3.2.3.3, due to the lack of internal history of defaults specific to the
portfolio, the Bank applies PDs which are sourced from a renowned external service provider which assesses the credit risk of
small and medium-sized enterprises (‘SMEs’), and determine s PDs by reference to financial and non-financial aspects namely
the entity size, country, industry sector, corporate governance and the macroeconomic environment in which the entity
operates. In line with the IFRS9 Methodology, upside and downside scenarios are also calculated for each customer. Baseline
financial data is stressed by the annually revised financial data multipliers which are developed based on the current and
forecasted macro-economic scenarios.
Market data is used for the PD of loans and advances to banks and investment securities. If a counterparty or exposure
migrates between internal rating grades or external credit ratings, such will lead to a change in PD.
The economic context and economic scenarios considered
During the financial year ended 31 December 2025, global economic growth remained moderate as overall demand remained
subdued amid heightened uncertainty, driven by geopolitical tensions and increased trade fragmentation. Ongoing conflicts
in Eastern Europe and the Middle East, together with threats of trade wars and concerns about supply chain disruptions further
impacted overall investment sentiment.
Economic growth in the euro area exceeded expectations and remains supported by a resilient labour market, improved
financial conditions and decreasing inflation. Indeed, in 2025, euro area inflation rates neared the 2% medium-term target, with
projections indicating further decreases in 2026. Nevertheless, economic forecasts remain characterised by high uncertainty
as the economic outlook could be impacted by lingering geopolitical events, which increase the likelihood of cyberattacks,
ongoing trade tensions as well as higher tariffs introduced by the US.
While global economic prospects for 2026 remain subdued, the Maltese economy is expected to grow at a stable rate in the
next three years, driven by private consumption and investment. Inflation in Malta remained close to the 2% ECB target, with
forecasts for the next three years estimating the rate to ease further driven primarily by lower services inflation. Public finances
are also projected to continue to improve as public debt remains below 50% of GDP. As a small open economy, a significant
worsening of global economic or geopolitical conditions could affect Malta through higher energy and import prices or a
slowdown in exports and tourism activity.
BNF Bank Annual Report 2025
92
The UK economy grew at a slow pace during 2025. Lower underlying productivity growth continues to prevail in the forecasts
pointing to sub‑1% to 1% growth, reflecting a period of subdued economic momentum. While the inflation rate in the UK dropped
in 2024, it rose in 2025, prompting the BoE to implement four rate cuts totalling one percentage point in the course of 2025.
Further cuts could continue to alleviate cost pressures and debt repayment burdens on the UK corporate market. Effective risk
management remains paramount in proactively identifying any underlying signs of vulnerabilities.
Despite the above-mentioned challenges and economic uncertainties, the Bank’s portfolio did not show any meaningful signs
of credit quality deterioration. The Bank’s credit portfolio remained sound, with asset quality indicators broadly stable
throughout the year. The non‑performing exposure (NPE) ratio remained low supported by conservative underwriting practices,
strong collateralisation levels, and the continued resilience of the domestic economy.
Nonetheless, the Bank maintains a cautious stance, applying affordability stress tests and applying sector specific risk
assessments, with heightened scrutiny of exposures to more cyclical industries.
As with any macro-economic forecast, the projections and likelihoods of occurrence are subject to a degree of uncertainty
and actual outcomes could vary from those projected. The Bank considers these forecasts to represent its best estimate of
the possible outcomes after analysing different simulations to establish that the chosen scenarios are appropriately
representative of the range of possible scenarios.
An element of expert judgement has also been applied particularly in terms of the calibration of scenario weightings.
The most significant period-end assumptions used for the ECL estimate as at 31 December 2025 are set out below. The
‘baseline’, ‘upside’ and ‘downside’ scenarios were used for all portfolios:
• The ‘baseline’ scenario captures business -as-usual macroeconomic expectations, whereby the current rhythm of
economic activity is maintained;
• The ‘downside’ scenario is based on a subdued level of economic activity hypothesized to correspond to an
economic recession;
• The ‘upside’ scenario is based on the assumption that it would be possible to marginally improve further over the
already benign economic conditions.
As at 31 December 2025
2026
2027
2028**
Average gross salary rate (YoY)*
‘Baseline’
4.50%
4.34%
4.23%
Range of forecasts for alternative scenarios
[2.3 – 4.8]%
[1.4 – 4.7]%
[1.1 – 4.7]%
Real GDP rate (YoY)*
‘Baseline’
4.63%
4.08%
4.11%
Range of forecasts for alternative scenarios
[2.9 – 5.4]%
[1.9 – 5.1]%
[1.7 – 5.2]%
Unemployment rate (YoY)*
‘Baseline’
3.45%
3.61%
3.67%
Range of forecasts for alternative scenarios
[3.4 – 3.6]%
[3.5 – 3.8]%
[3.6 – 3.9]%
Real Estate Price Growth rate (REPI) (YoY)*
‘Baseline’
5.74%
5.74%
5.74%
Range of forecasts for alternative scenarios
[5.1 – 5.9]%
[5.0 – 6.0]%
[4.9 – 6.0]%
*YoY = year on year
** 2028 Q3 data forecast
BNF Bank Annual Report 2025
93
As at 31 December 2024
2025
2026
2027**
Average gross salary rate (YoY)*
‘Baseline’
1.93%
3.20%
3.48%
Range of forecasts for alternative scenarios
[-0.1 – 2.3]%
[0.4 – 3.7]%
[0.3 – 4.0]%
Gross Fixed Capital Formation (GFCF) (YoY)*
‘Baseline’
-5.90%
-3.06%
-1.45%
Range of forecasts for alternative scenarios
[-9.3 – -2.0]%
[-7.7 – 2.1]%
[-6.8 – 4.5]%
Real GDP rate (YoY)*
‘Baseline’
4.98%
4.88%
4.80%
Range of forecasts for alternative scenarios
[2.6 – 6.2]%
[1.7 – 6.5]%
[1.1 – 6.6]%
Unemployment rate (YoY)*
‘Baseline’
3.43%
3.62%
3.71%
Range of forecasts for alternative scenarios
[3.3 – 3.6]%
[3.4 – 3.8]%
[3.5 – 3.9]%
Real Estate Price Growth rate (REPI) (YoY)*
‘Baseline’
5.66%
5.65%
5.65%
Range of forecasts for alternative scenarios
[5.1 – 6.0]%
[5.0 – 6.1]%
[4.9 – 6.1]%
*YoY = year on year
** 2027 Q3 data forecast
The weightings assigned to each economic scenario were 50% (2024: 50%) for the ‘baseline’ scenario, 25% (202 4: 25%) for the
‘downside’ scenario and 25% (202 4: 25%) for the ‘upside’ scenario. The number of scenarios used is based on the analysis of
each major product type to ensure that non-linearities are captured.
The number of scenarios and their attributes including the macroeconomic variables are reassessed at each reporting date.
The economic scenarios were simulated over a full economic cycle. There were no significant changes in the estimation
techniques during the year.
Economic scenarios sensitivity analyses of ECL estimates
The outcome of the Bank’s credit loss allowances estimation process is sensitive to judgements and estimations made
throughout the incorporation of forward-looking macro-economic conditions. Management has assessed the sensitivity of the
Bank’s expected credit losses by assigning a 100% weighting to the baseline, downside and upside scenario respectively. The
Bank’s credit loss allowances would decrease by € 0.6 million (2024: €0.6 million) if the provisions had to be calculated solely on
the baseline scenario; ECLs would increase by € 1.9 million (2024: €2.2 million) if these had to be estimated using only the
downside scenario and would reduce by € 1.8 million (2024: €1. 7 million) if the upside scenario only were to be taken into
consideration. This analysis illustrates the sensitivity of the Bank’s expected credit loss allowances to changes in
macroeconomic assumptions. Considering any of these scenarios, the Bank would remain in a profitable position. In the
directors’ view t his demonstrates the Bank’s resilience in overcoming negative shocks and the ability to absorb such changes,
if necessary.
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any
regulatory, legislative or political changes, have also been considered, but are not deemed to have a material impact and
therefore no adjustment has been made to the ECL for such factors. This matter is reviewed and monitored for appropriateness
on an ongoing basis.
3.2.3.5 Categorisation of loans and advances to customers for ECL measurement
As part of the ECL model, the Bank classifies its exposures to loans and advances to customers into groups with similar
characteristics that include instrument type. In this respect, the Bank considers the following categories when measuring ECL:
BNF Bank Annual Report 2025
94
• Retail portfolio, which includes loans and advances to individual customers such as mortgages, credit cards and
other consumer credit.
• Corporate portfolio, which includes local loans and advances to local business entities.
• International portfolio, which includes international loans, presently corporate exposure originated by the Bank’s
branch in the United Kingdom which finances prime properties.
3.2.4 Maximum exposure to credit risk
An ‘exposure’ is defined as the amount at risk arising from the Bank’s assets and off -balance sheet items. The Bank’s maximum
credit risk with respect to assets and off-balance sheet items can be classified into the following categories:
• Financial assets recognised on-balance sheet comprising principally balances with Central Bank of Malta, debt
instruments measured at FVOCI and amortised costs, and loans and advances to banks and customers. The
maximum exposure to credit risk of these financial assets is equal to their gross carrying amounts. Refer to section
3.2.11 for information on the impact of collateral held for loans and advances to customers.
• Documentary credits and guarantee obligations incurred on behalf of third parties. The latter carry the same credit
risk as loans, whilst documentary credits are collateralised by the underlying shipments of goods to which they relate,
and therefore carry less risk than a loan to a customer. The maximum exposure to credit risk is the full amount that
the Bank would have to pay if the guarantees are called upon or if documentary credits are exercised.
• Lending commitments and other credit related commitments that are irrevocable over the life of the respective
facilities and are off-balance sheet items. The maximum exposure to credit risk is the full amount of the committed
facilities. However, the likely amount of loss is less than the total unused lending commitments as most commitments
to extend credit are contingent upon customers maintaining specific credit standards. These exposures are
monitored similarly to on-balance sheet loans and advances.
BNF Bank Annual Report 2025
95
The Bank’s credit risk exposure relating to on-balance sheet assets and off-balance sheet instruments, reflecting the maximum
exposure to credit risk before collateral held or other credit enhancements, include the following:
2025
2024
Gross
ECL
Gross
ECL
exposure
allowance
exposure
allowance
€000
€000
€000
€000
Credit risk exposure relating to on-balance sheet
assets
Subject to IFRS 9 impairment allowance
Financial assets measured at amortised cost
Balances with Central Bank of Malta
108,657
(2)
97,282
(11)
Cheques in course of collection
1,866
-
1,863
-
Financial investments
13,032
-
34,983
(52)
Loans and advances to banks
27,694
(5)
29,162
(5)
Loans and advances to customers
- Corporate
272,798
(9,305)
273,209
(10,498)
- Retail
644,601
(3,550)
644,142
(2,699)
- International
122,137
(382)
106,582
(358)
Accrued income
5,076
-
5,363
-
Financial investments measured at FVOCI
136,703
(177)
154,244
(178)
Not subject to IFRS 9 impairment allowance
Financial investments measured at FVTPL
382
-
698
-
Derivative financial instruments
120
-
-
-
Credit risk exposure
1,333,066
(13,421)
1,347,528
(13,801)
Credit risk exposure relating to off-balance sheet
instruments
Contingent liabilities
17,333
(33)
13,817
(116)
Undrawn commitments to lend
211,589
(112)
196,928
(165)
Credit risk exposure
228,922
(145)
210,745
(281)
Accrued income substantially arises from loans and advances to customers. Expected credit losses in respect of accrued
income, which are not deemed material, have been allocated to loans and advances to customers.
BNF Bank Annual Report 2025
96
3.2.5 Credit concentration risk
Concentration risk results from limited diversification. This risk is managed by regular measurement and monitoring of industry
sector, counterparties and geographical region concentration levels.
Credit concentration risk by industry sector
The Bank’s financial investments (gross of credit loss allowance) were composed of local and foreign government debt
securities, and other debt instruments as shown in the following table:
The industry sector analysis of the Bank’s loans and advances to customers (gross of credit loss allowances) is set out in the
following table:
Credit concentration risk for counterparties
As at 31 December 2025, no loans and advances to customers were deemed to be prohibited large exposures in accordance
with the requirements of Part Four: Large Exposures, of the CRR. A limited number of customers amount to over 10% of the
Bank’s regulatory own funds, which customers are monitored more frequently and rigorously.
Within its daily operations, the Bank transacts with counterparty banks and other financial institutions. To mitigate the risk of
losses in respect of such transactions, the Bank places short-term funds solely with pre-approved counterparties subject to
pre-established limits, which limits are determined after having considered the respective institution’s external credit rating.
Open positions for such transactions are checked against limits on a daily basis and are available in real time.
Credit concentration risk by geographical region
The Bank monitors credit concentration risk by geographical region. The majority of the Bank’s exposures were in Malta at the
end of the year under review, the country in which the Bank is incorporated. The Bank originated a number of exposures in the
United Kingdom (as defined in Note 3.2.3.5), which as at 31 December 2025 had a carrying amount of €122.1 4 million (2024:
2025
2024
€000
€000
Governments
78,360
58,681
Corporate
Financial services
68,396
127,857
Other sectors
3,361
3,387
150,117
189,925
2025
2024
€000
€000
Manufacturing
3,261
4,699
Accommodation
19,288
43,971
Financial services
27,046
29,441
Households and individuals
660,954
661,041
Construction
88,276
120,839
Wholesale and retail
43,768
43,369
Real estate activities
106,248
91,094
Other sectors
90,695
29,479
Gross loans and advances to customers
1,039,536
1,023,933
BNF Bank Annual Report 2025
97
€106.6 million). Moreover, the Bank also held balances with correspondent banks in foreign jurisdictions and investments in
debt securities issued by foreign entities. The following tables represent financial instruments and loans and advances to
banks split by geographical region.
2025
2024
€000
€000
Financial investments at FVOCI and FVTPL
Malta
67,375
46,917
Austria
1,008
1,997
Belgium
-
3,971
Canada
5,443
3,042
Czech Republic
1,044
4,187
Finland
3,635
2,633
France
12,590
21,948
Germany
2,061
13,417
Iceland
5,585
5,719
Japan
-
3,051
Lithuania
3,013
2,046
Luxembourg
7,452
2,557
Netherlands
4,015
14,657
Norway
2,936
-
Poland
1,806
2,003
Portugal
-
5,034
Slovenia
-
3,098
Spain
6,368
9,403
Switzerland
1,032
1,046
United Kingdom
3,260
3,306
United States
8,462
4,910
137,085
154,942
2025
2024
€000
€000
Financial investments measured at amortised cost
Malta
-
10,054
Canada
4,973
4,942
France
-
5,000
Netherlands
5,064
5,099
Norway
-
4,949
Spain
2,995
3,988
United States
-
951
13,032
34,983
2025
2024
€000
€000
Loans and advances to banks
United Kingdom
10,739
16,840
Qatar
16,955
10,500
United States
-
1,822
Gross loans and advances to banks
27,694
29,162
BNF Bank Annual Report 2025
98
3.2.6 Information on credit quality of balances with banks and debt securities
During 2025, the Bank mainly held debt securities and similar instruments issued by investment grade sovereign and non-
sovereign counterparties. The issuers are approved and regularly reviewed, focusing on market developments. The debt
securities held by the Bank are listed on the Malta Stock Exchange, a regulated market in Malta, or on other recognised
exchanges.
Loans and advances to banks included money market placements and balances held with counterparty banks. The credit risk
associated with these balances is considered low, given that funds are placed with reputable institutions holding investment
grade credit ratings.
At the end of the reporting period, none of these financial assets mentioned were past due or impaired.
The following tables set out information on the credit quality of financial assets measured at amortised cost and financial
investments measured at FVOCI. The credit quality of the financial assets is determined by credit ratings applicable to issuers
or counterparties. Explanation of the terms 12-month ECL, lifetime ECL and credit impaired are included in Note 3.2.3.
The credit rating of Malta was classified as investment grade by external rating agencies as at 31 December 2025 and 2024.
Balances held with the Central Bank of Malta are considered to have a low credit risk, as they are placed with a central bank
counterparty.
2025
IFRS 9
12 -month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Balances with Central Bank of Malta
measured at amortised cost
Gross carrying amount
108,657
-
-
108,657
Loss allowance
0-0.02
(2)
-
-
(2)
Carrying amount
108,655
-
-
108,655
2024
IFRS 9
12 -month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Balances with Central Bank of Malta
measured at amortised cost
Gross carrying amount
97,282
-
-
97,282
Loss allowance
0-0.15
(11)
-
-
(11)
Carrying amount
97,271
-
-
97,271
BNF Bank Annual Report 2025
99
2025
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Financial investments measured at
FVOCI
Aaa to Aa3
0-0.17
20,912
-
-
20,912
A1 to A3
0-0.79
92,585
-
-
92,585
Baa1 to Baa3
0-0.02
9,997
-
-
9,997
Ba1 to Ba3
0-0.01
3,841
-
-
3,841
Unrated
0-1.39
9,368
-
-
9,368
Carrying amount – fair value
136,703
-
-
136,703
Loss allowance
(177)
-
-
(177)
2024
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Financial investments measured at
FVOCI
Aaa to Aa3
0-0.16
26,415
-
-
26,415
A1 to A3
0-0.91
78,876
-
-
78,876
Baa1 to Baa3
0-0.05
40,476
-
-
40,476
Ba1 to Ba3
0-0.29
4,030
-
-
4,030
Unrated
0.08-1.74
4,447
-
-
4,447
Carrying amount – fair value
154,244
-
-
154,244
Loss allowance
(178)
-
-
(178)
Unrated financial investments disclosed in the table above represent bonds listed on the Malta Stock Exchange which are
unrated by international credit rating agencies.
BNF Bank Annual Report 2025
100
2025
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Financial investments measured at
amortised cost
Aaa to Aa3
0-0.01
7,969
-
-
7,969
Baa1 to Baa3
-
5,063
-
-
5,063
Gross carrying amount
13,032
-
-
13,032
Loss allowance
-
-
-
-
Carrying amount
13,032
-
-
13,032
2024
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Financial investments measured at
amortised cost
Aaa to Aa3
0-0.06
19,830
-
-
19,830
Baa1 to Baa3
0-0.01
15,153
-
-
15,153
Gross carrying amount
34,983
-
-
34,983
Loss allowance
(52)
-
-
(52)
Carrying amount
34,931
-
-
34,931
BNF Bank Annual Report 2025
101
2025
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Loans and advances to banks
measured at amortised cost
A1 to A3
0.02-0.08
18,532
-
-
18,532
Baa1 to Baa3
-
9,162
-
-
9,162
Gross carrying amount
27,694
-
-
27,694
Loss allowance
(5)
-
-
(5)
Carrying amount
27,689
-
-
27,689
2024
IFRS 9
12-month
PD ranges
Stage 1
12-month
ECL
Stage 2
Lifetime
ECL
Stage 3
Lifetime
ECL
Total
€000
€000
€000
€000
Loans and advances to banks
measured at amortised cost
Aaa to Aa3
0-0.12
12,322
-
-
12,322
A1 to A3
0-0.02
16,840
-
-
16,840
Gross carrying amount
29,162
-
-
29,162
Loss allowance
(5)
-
-
(5)
Carrying amount
29,157
-
-
29,157
The Bank did not hold any purchased credit-impaired assets throughout current and comparative financial years.
After the end of the reporting period there were no significant changes in credit ratings reflected in the tables above which
would have a material impact on the credit quality of the financial assets.
BNF Bank Annual Report 2025
102
3.2.7 Information on credit quality of loans and advances to customers
The credit quality of loans and advances to customers is managed by the Bank using internal credit ratings. The Bank applies
an internal rating system (‘IRS’) which encapsulates the risk profile associated with every customer lending relationship.
The IRS comprises 13 credit rating levels which constitute a continuum of progressively increasing risk profiles ranging from A1
(best rating, least risky) to E (loss, worst case representing full risk materialisation).
The Bank’s IRS is broken down as follows:
Performing
• High Grade (Internal rating of A1 to A3)
A customer having an internal risk rating between A1 through A3 generally would not have any interest and/or capital payments
overdue by more than 30 days or a recent history of default. High grade exposures typically do not exhibit indicators of future
losses.
• Standard (Internal rating of A4 and B)
An exposure with more than 30 days past-due is not graded higher than B under the Bank’s IRS.
An exposure is assessed as per section 3.2.8 and potentially classified as A4 if days past-due are not more than 30 but it
exhibits one or more of the following indicators: a tight debt-service ratio, a deterioration in financial standing, operations or
collateral in an industry under distress, overdraft facilities experiencing hardcore elements, or a high loan-to-value ratio. Other
quantitative or qualitative factors may be considered in such assessments as may be deemed necessary by the Bank’s credit
committees.
• Substandard (Internal rating of C)
Customers having an internal risk rating of C, thus classified within the ‘Substandard’ category, generally have interest and /or
capital payments overdue by more than 60 days but not overdue by more than 90 days. Further or prolonged deterioration in
the indicators set out in the above section on exposures rated as ‘Standard’ could result in a C rating.
Non-performing
• Doubtful (Internal rating of D1 to D6 and E)
All credit-impaired or defaulted exposures (see definition in Note 3.2.3.2) fall within this category of the IRS. Exposures past due
by more than 90 days automatically fall within this category. Customers granted additional forbearance measures on already
forborne exposures will also fall within this category.
The Bank’s credit impaired loans and advances mainly relate to a number of independent customers which are not meeting
repayment obligations or deemed by the Bank as unlikely to pay their obligations to the Bank without recourse by the Bank to
realising the collateral.
BNF Bank Annual Report 2025
103
The following tables set out information about the credit quality of loans and advances to customers measured at amortised
cost. Explanation of the terms 12-month ECL, lifetime ECL and credit-impaired are included in Note 3.2.3.
2025
IFRS 9
Stage 1
Stage 2
Stage 3
12-month
12-month ECL
Lifetime ECL
Lifetime ECL
Total
PD ranges
€000
€000
€000
€000
Loans and advances to
customers
measured at amortised cost
Corporate
High grade
0.07 – 0.81
241,720
11
-
241,730
Standard
0.02 – 14.12
-
14,885
-
14,885
Substandard
9.23 – 32.13
-
1,168
-
1,168
Doubtful
100.00
-
-
15,014
15,014
Gross carrying amount
241,720
16,064
15,014
272,798
Loss allowance
(253)
(71)
(8,981)
(9,305)
Carrying amount
241,467
15,993
6,033
263,493
Retail
High grade
0.03 – 5.59
621,005
36
-
621,041
Standard
0.54 – 17.55
-
10,396
-
10,396
Substandard
1.19 – 17.55
-
2,787
-
2,787
Doubtful
100.00
-
-
10,377
10,377
Gross carrying amount
621,005
13,219
10,377
644,601
Loss allowance
(254)
(188)
(3,108)
(3,550)
Carrying amount
620,751
13,031
7,269
641,051
International
High grade
0.35 – 1.95
122,137
-
-
122,137
Gross carrying amount
122,137
-
-
122,137
Loss allowance
(382)
-
-
(382)
Carrying amount
121,755
-
-
121,755
Total
High grade
0.03 – 5.59
984,862
47
-
984,909
Standard
0.02 – 17.55
-
25,281
-
25,281
Substandard
1.19 – 32.13
-
3,955
-
3,955
Doubtful
100.00
-
-
25,391
25,391
Gross carrying amount
984,862
29,283
25,391
1,039,536
Loss allowance
(889)
(259)
(12,089)
(13,237)
Carrying amount
983,973
29,024
13,302
1,026,299
BNF Bank Annual Report 2025
104
2024
IFRS 9
Stage 1
Stage 2
Stage 3
12-month
12-month ECL
Lifetime ECL
Lifetime ECL
Total
PD ranges
€000
€000
€000
€000
Loans and advances to
customers
measured at amortised cost
Corporate
High grade
0.01 – 2.27
246,285
29
-
246,314
Standard
0.65 – 35.53
-
11,158
-
11,158
Substandard
100.00
-
676
-
676
Doubtful
100.00
-
-
15,061
15,061
Gross carrying amount
246,285
11,863
15,061
273,209
Loss allowance
(861)
(254)
(9,383)
(10,498)
Carrying amount
245,424
11,609
5,678
262,711
Retail
High grade
0.01 – 5.91
625,959
13
-
625,972
Standard
0.16 – 14.21
-
7,200
-
7,200
Substandard
3.84 – 14.21
-
1,549
-
1,549
Doubtful
100.00
-
-
9,421
9,421
Gross carrying amount
625,959
8,762
9,421
644,142
Loss allowance
(215)
(104)
(2,380)
(2,699)
Carrying amount
625,744
8,658
7,041
641,443
International
High grade
1.07 – 3.56
106,582
-
-
106,582
Gross carrying amount
106,582
-
-
106,582
Loss allowance
(358)
-
-
(358)
Carrying amount
106,224
-
-
106,224
Total
High grade
0.01 – 5.91
978,826
42
-
978,868
Standard
0.16 – 35.53
-
18,358
-
18,358
Substandard
3.84 – 100.00
-
2,225
-
2,225
Doubtful
100.00
-
-
24,482
24,482
Gross carrying amount
978,826
20,625
24,482
1,023,933
Loss allowance
(1,434)
(358)
(11,763)
(13,555)
Carrying amount
977,392
20,267
12,719
1,010,378
BNF Bank Annual Report 2025
105
The following table sets out information about the credit quality of loans and advances to customers, guarantees,
documentary credits and undrawn commitments to lend on an aggregate basis:
2025
Stage 1
Stage 2
Stage 3
12-month ECL
Lifetime ECL
Lifetime ECL
Total
€000
€000
€000
€000
High grade
1,206,309
46
-
1,206,355
Standard
-
32,165
-
32,165
Substandard
-
4,329
-
4,329
Doubtful
-
-
25,607
25,607
Gross amount
1,206,309
36,540
25,607
1,268,456
Loss allowance
(956)
(289)
(12,136)
(13,381)
1,205,353
36,251
13,471
1,255,075
2024
Stage 1
Stage 2
Stage 3
12-month ECL
Lifetime ECL
Lifetime ECL
Total
€000
€000
€000
€000
High grade
1,187,351
45
-
1,187,396
Standard
-
20,049
-
20,049
Substandard
-
2,421
-
2,421
Doubtful
-
-
24,812
24,812
Gross amount
1,187,351
22,515
24,812
1,234,678
Loss allowance
(1,601)
(400)
(11,835)
(13,836)
1,185,750
22,115
12,977
1,220,842
As at 31 December 2025 and 2024, there were no purchased credit-impaired assets.
The following table analyses the credit impaired loans and advances, gross of credit loss allowances, by industry sector:
2025
2024
€000
€000
Manufacturing
606
606
Households and individuals
11,178
10,315
Construction
227
320
Wholesale and retail
8,162
7,788
Other
5,218
5,453
25,391
24,482
BNF Bank Annual Report 2025
106
The following table provides a detailed analysis of the credit quality of the Bank’s lending portfolio at 31 December 202 5:
Non-forborne
Forborne
Exposures
Exposures
Total
2025
2025
2025
€000
€000
€000
Performing - Stage 1
Loans which are not past due
967,705
-
967,705
Loans which are past due by not more than 30 days
17,157
-
17,157
984,862
-
984,862
Underperforming - Stage 2
Loans which are not past due
High grade
-
45
45
Standard
19,945
127
20,072
Substandard
3,061
334
3,395
23,006
506
23,512
Loans which are past due by not more than 90 days
Past due by not more than 30 days
4,370
35
4,405
Past due by not more than 60 days but more than 30 days
863
-
863
Past due by not more than 90 days but more than 60 days
503
-
503
5,736
35
5,771
28,742
541
29,283
Non-performing - Stage 3
Past due loans by more than 90 days and credit impaired
loans
19,151
6,240
25,391
Gross loans and advances to customers
1,032,755
6,781
1,039,536
Expected credit losses
12-month ECL
(889)
-
(889)
Lifetime ECL
(10,640)
(1,708)
(12,348)
Net loans and advances to customers
1,021,226
5,073
1,026,299
Interest income recognised during the financial year ended 31 December 2025 in respect of forborne exposures amounted to
€98,000 (2024: €163,000).
BNF Bank Annual Report 2025
107
The following table provides a detailed analysis of the credit quality of the Bank’s lending portfolio at 31 December 202 4:
Non-forborne
Forborne
Exposures
Exposures
Total
2024
2024
2024
€000
€000
€000
Performing - Stage 1
Loans which are not past due
962,979
-
962,979
Loans which are past due by not more than 30 days
15,847
-
15,847
978,826
-
978,826
Underperforming - Stage 2
Loans which are not past due
High grade
-
42
42
Standard
16,004
130
16,134
Substandard
1,248
353
1,601
17,252
525
17,777
Loans which are past due by not more than 90 days
Past due by not more than 30 days
2,388
43
2,431
Past due by not more than 60 days but more than 30 days
102
-
102
Past due by not more than 90 days but more than 60 days
310
5
315
2,800
48
2,848
20,052
573
20,625
Non-performing - Stage 3
Past due loans by more than 90 days and credit impaired
loans
17,768
6,714
24,482
Gross loans and advances to customers
1,016,646
7,287
1,023,933
Expected credit losses
12-month ECL
(1,434)
-
(1,434)
Lifetime ECL
(9,770)
(2,351)
(12,121)
Net loans and advances to customers
1,005,442
4,936
1,010,378
3.2.8 Modification of financial assets
The contractual terms of a loan may be revised for a number of reasons, including changes in market conditions, customer
retention and other factors that are not related to the credit quality of a customer. Forbearance measures comprise
concessions made on the contractual terms of a loan in response to a customer’s f inancial difficulties. The Bank categorises
loans on which concessions have been granted under conditions of financial difficulties as ‘forborne loans’ when their
contractual payment terms have been revised, because of significant concerns about the customer’s ability to meet
contractual payments when due.
When considering whether there is significant concern regarding a customer’s ability to meet contractual loan repayments
when due, the Bank assesses the customer’s delinquency status, account behaviour, repayment history, current financial
situation and continued ability to repay.
If the customer is not meeting contractual repayments or it is evident that they will be unable to do so without the
renegotiation, there will be a significant concern regarding the ability to meet contractual payments. Indicators of significant
concerns regarding a borrower’s ability to pay include:
BNF Bank Annual Report 2025
108
• The customer is currently in default on any of its debt;
• The customer has declared or is in the process of declaring bankruptcy or entering into a similar process;
• There is significant doubt as to whether the customer will continue to be a going concern;
• The customer has breached the covenants of a credit facility; and
• The Bank forecasts that the customer’s entity -specific cash flows will be insufficient to service the debt (both
interest and principal) in accordance with the contractual terms of the existing agreement through maturity.
A range of forbearance measures are employed by the Bank in order to improve the management of customer relationships,
maximise collection opportunities and, if possible, avoid default or call-in of facilities. They include extended payment terms,
a reduction in principal repayments, the deferral of call-in of facilities and other forms of loan modifications. The Bank’s
policies and procedures in this area allow the Bank to provide a customer with terms and conditions that are more favourable
than those provided initially. Loan forbearance is only granted in situations where the customer has shown a willingness to
repay the loan and is expected to be able to meet the revised obligations. The Bank’s credit risk management policies set
out restrictions on the number and frequency of forbearance measures and the minimum period an account must have been
opened before any forbearance measure can be considered.
For the purposes of determining whether changes to a customer’s agreement should be treated as forbearance the following
types of modification could be regarded as concessionary in cases where the customer is in financial difficulty:
• Reduction of the stated interest rate for the remaining original life of the debt;
• Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt
with similar risk;
• Reduction of the face amount or maturity amount of the debt; and
• Reduction of accrued interest.
Term extension is the most common type of modification granted by the Bank.
In assessing whether forbearance is a sustainable strategy, the customer’s entire exposures are reviewed and the customer’s
ability to meet the terms in relation to the revised obligations and other unchanged credit facilities is considered. In all cases,
forbearance is only granted when the customer is expected to be able to meet the revised terms. When considering
acceptable modified terms the Bank considers the ability of the customer to be able to service the revised interest payments
as a necessity. When principal payment modifications are utilised, the Bank requires the customer to be able to comply with
the revised terms as a necessary pre-condition for the restructuring to proceed.
Forbearance is a qualitative indicator of a significant increase in credit risk and may be considered evidence of credit
impairment.
The risk of default of modified assets after forbearance is assessed at the reporting date and compared with the risk under
the original terms at initial recognition, when the modification is not substantial and so does not result in derecognition of the
original asset (Note 2.6.5).
The Bank monitors the subsequent performance of modified assets and may determine that the credit risk has significantly
improved after restructuring:
• Modified assets are moved from Stage 3 (Lifetime ECL) to Stage 1 (12-month ECL) only if they have performed in
accordance with the new terms for 36 consecutive months or more.
BNF Bank Annual Report 2025
109
• Modified assets are moved from Stage 2 (Lifetime ECL) to Stage 1 (12-month ECL) only if they have performed in
accordance with the new terms for 24 consecutive months or more.
There are no modified assets classified as Stage 1 as at 31 December 2025.
The Bank continues to monitor if there is a subsequent significant increase in credit risk in relation to modified assets that
moved from Stage 3 (Lifetime ECL) or Stage 2 (Lifetime ECL) to Stage 1 (12-month ECL).
The movement in the carrying amount of forborne loans and advances, before impairment allowances, is analysed below.
Forborne exposures
2025
2024
€000
€000
At 1 January
7,287
7,623
Loans to which forbearance measures have been extended during the year
39
430
Repayments
(98)
(107)
Retired from forborne
(447)
(659)
At 31 December
6,781
7,287
As at 31 December 2025 and 2024, the net modification gain or loss from financial assets with lifetime ECL whose cash flows
were modified during the period as part of the Bank's restructuring activities was insignificant.
Forborne loans, gross of credit loss allowances, are analysed by industry sector as follows:
2025
2024
€000
€000
Manufacturing
606
606
Financial services
1,770
1,770
Households and individuals
785
1,088
Wholesale and retail
2,953
3,115
Other sectors
667
708
6,781
7,287
As at 31 December 2025 and 2024 forborne loans comprise exposures to customers based in Malta.
3.2.9 Loss allowances
Reconciliation of 12-month and lifetime ECL provision
The loss allowance recognised is impacted by a variety of factors, as described below:
• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or
decreases) of credit risk or becoming credit impaired in the period, and the consequent "step up" (or "step down")
between 12-month and Lifetime ECL;
• Additional allowances for new financial instruments recognised during the period, as well as releases for financial
instruments derecognised in the period;
• Impact on the measurement of ECL due to changes in PD, LGD or EAD in the period, arising from regular refreshing of
inputs to models;
• Impacts on the measurement of ECL due to changes made to models and assumptions;
BNF Bank Annual Report 2025
110
• Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis; and
• Foreign exchange retranslations for assets denominated in foreign currencies and other movements.
The following tables explain the changes in the loss allowance between the beginning and the end of the annual period. In
respect of loans and advances to customers, the recovery in ECL throughout the year was mainly due to improvements in the
staging of the loan book, including but not limited to repayments of previously granted moratoria with no indicators of arrears,
SICR or UTP, and the release of the remaining management overlay that the Bank had retained since 2021, as explained in
Note 3.2.3.1.
2025
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Balances with Central Bank of Malta measured at
amortised cost
At 1 January 2025
97,282
(11)
97,282
(11)
New financial assets originated or purchased
93,752
-
93,752
-
Net movement in EAD and changes in risk parameters
(PD/LGD)
(947)
9
(947)
9
Financial assets derecognised during the year
(81,430)
-
(81,430)
-
At 31 December 2025
108,657
(2)
108,657
(2)
Total net income statement credit for the year
9
2024
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Balances with Central Bank of Malta measured at
amortised cost
At 1 January 2024
104,119
(5)
104,119
(5)
New financial assets originated or purchased
81,430
-
81,430
-
Net movement in EAD and changes in risk parameters
(PD/LGD)
9,082
(6)
9,082
(6)
Financial assets derecognised during the year
(97,349)
-
(97,349)
-
At 31 December 2024
97,282
(11)
97,282
(11)
Total net income statement charge for the year
(6)
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
BNF Bank Annual Report 2025
111
2025
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Financial investments measured at FVOCI
At 1 January 2025
154,244
(178)
154,244
(178)
New financial assets originated or purchased
66,691
(54)
66,691
(54)
Net movement in EAD and changes in risk parameters
(PD/LGD)
(993)
(12)
(993)
(12)
Financial assets derecognised during the year
(83,239)
67
(83,239)
67
At 31 December 2025
136,703
(177)
136,703
(177)
Total net income statement credit for the year
1
2024
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Financial investments measured at FVOCI
At 1 January 2024
100,855
(152)
100,855
(152)
New financial assets originated or purchased
123,285
(76)
123,285
(76)
Net movement in EAD and changes in risk parameters
(PD/LGD)
3,009
25
3,009
25
Financial assets derecognised during the year
(72,905)
(25)
(72,905)
(25)
At 31 December 2024
154,244
(178)
154,244
(178)
Total net income statement charge for the year
(26)
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
BNF Bank Annual Report 2025
112
2025
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Financial investments measured at amortised cost
At 1 January 2025
34,983
(52)
34,983
(52)
New financial assets originated or purchased
-
-
-
-
Net movement in EAD and changes in risk parameters
(PD/LGD)
-
1
-
1
Financial assets derecognised during the year
(21,951)
51
(21,951)
51
At 31 December 2025
13,032
-
13,032
-
Total net income statement credit for the year
52
2024
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Financial investments measured at amortised cost
At 1 January 2024
33,931
(56)
33,931
(56)
New financial assets originated or purchased
1,908
(1)
1,908
(1)
Net movement in EAD and changes in risk parameters
(PD/LGD)
126
5
126
5
Financial assets derecognised during the year
(982)
-
(982)
-
At 31 December 2024
34,983
(52)
34,983
(52)
Total net income statement credit for the year
4
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
BNF Bank Annual Report 2025
113
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2025
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Loans and advances to banks measured at amortised cost
At 1 January 2025
29,162
(5)
29,162
(5)
New financial assets originated or purchased
26,116
(5)
26,116
(5)
Net movement in EAD and changes in risk parameters
(PD/LGD)
(7,423)
2
(7,423)
2
Financial assets derecognised during the year
(20,161)
3
(20,161)
3
At 31 December 2025
27,694
(5)
27,694
(5)
Total net income statement charge for the year
-
2024
Stage 1
Total
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
amount
losses
amount
losses
€000
€000
€000
€000
Loans and advances to banks measured at amortised cost
At 1 January 2024
10,925
(3)
10,925
(3)
New financial assets originated or purchased
20,161
(4)
20,161
(4)
Net movement in EAD and changes in risk parameters
(PD/LGD)
7,303
1
7,303
1
Financial assets derecognised during the year
(9,227)
1
(9,227)
1
At 31 December 2024
29,162
(5)
29,162
(5)
Total net income statement charge for the year
(2)
BNF Bank Annual Report 2025
114
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2025
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Corporate portfolio
At 1 January 2025
246,285
(861)
11,863
(254)
15,061
(9,383)
273,209
(10,498)
New and further lending
57,526
(102)
200
(12)
701
(535)
58,427
(649)
Repayments
(55,041)
691
(3,445)
157
(352)
946
(58,838)
1,794
Transfers of financial instruments
Stage 1 to Stage 2
(9,885)
20
9,885
(20)
-
-
-
-
Stage 2 to Stage 1
2,432
(42)
(2,432)
42
-
-
-
-
Stage 2 to Stage 3
-
-
(7)
4
7
(4)
-
-
Stage 3 to Stage 1
403
(1)
-
-
(403)
1
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
42
-
12
-
(6)
-
48
At 31 December 2025
241,720
(253)
16,064
(71)
15,014
(8,981)
272,798
(9,305)
Total net income statement credit for the year
1,193
BNF Bank Annual Report 2025
115
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2025
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Retail portfolio
At 1 January 2025
625,959
(215)
8,762
(104)
9,421
(2,380)
644,142
(2,699)
New and further lending
61,908
(105)
127
(34)
450
(656)
62,485
(795)
Repayments
(59,697)
62
(784)
24
(1,545)
233
(62,026)
319
Transfers of financial instruments
Stage 1 to Stage 2
(6,496)
4
6,496
(4)
-
-
-
-
Stage 1 to Stage 3
(1,154)
1
-
-
1,154
(1)
-
-
Stage 2 to Stage 1
108
(2)
(108)
2
-
-
-
-
Stage 2 to Stage 3
-
-
(1,574)
19
1,574
(19)
-
-
Stage 3 to Stage 1
377
(22)
-
-
(377)
22
-
-
Stage 3 to Stage 2
-
-
300
(31)
(300)
31
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
23
-
(60)
-
(338)
-
(375)
At 31 December 2025
621,005
(254)
13,219
(188)
10,377
(3,108)
644,601
(3,550)
Total net income statement charge for the year
(851)
BNF Bank Annual Report 2025
116
2025
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
International portfolio
At 1 January 2025
106,582
(358)
-
-
-
-
106,582
(358)
New and further lending
36,025
(291)
-
-
-
-
36,025
(291)
Repayments
(20,470)
267
-
-
-
-
(20,470)
267
At 31 December 2025
122,137
(382)
-
-
-
-
122,137
(382)
Total net income statement charge for the year
(24)
BNF Bank Annual Report 2025
117
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2025
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Total
At 1 January 2025
978,826
(1,434)
20,625
(358)
24,482
(11,763)
1,023,933
(13,555)
New and further lending
155,459
(498)
327
(46)
1,151
(1,191)
156,937
(1,735)
Repayments and disposals
(135,208)
1,020
(4,229)
181
(1,897)
1,179
(141,334)
2,380
Transfers of financial instruments
Stage 1 to Stage 2
(16,381)
24
16,381
(24)
-
-
-
-
Stage 1 to Stage 3
(1,154)
1
-
-
1,154
(1)
-
-
Stage 2 to Stage 1
2,540
(44)
(2,540)
44
-
-
-
-
Stage 2 to Stage 3
-
-
(1,581)
23
1,581
(23)
-
-
Stage 3 to Stage 1
780
(23)
-
-
(780)
23
-
-
Stage 3 to Stage 2
-
-
300
(31)
(300)
31
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
65
-
(48)
-
(344)
-
(327)
At 31 December 2025
984,862
(889)
29,283
(259)
25,391
(12,089)
1,039,536
(13,237)
Total net income statement credit for the year
318
BNF Bank Annual Report 2025
118
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2025
Stage 1
Stage 2
Stage 3
Total
Expected
Expected
Expected
Expected
Gross
credit
Gross
credit
Gross
credit
Gross
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Total loans and advances to customers measured at amortised
cost,
guarantees, documentary credits and undrawn
commitments to lend
At 1 January 2025
1,187,351
(1,601)
22,514
(400)
24,813
(11,836)
1,234,678
(13,837)
New and further lending
280,285
(520)
3,939
(56)
1,079
(1,183)
285,303
(1,759)
Repayments and disposals
(244,466)
1,138
(5,097)
208
(1,962)
1,202
(251,525)
2,548
Transfers of financial instruments
Stage 1 to Stage 2
(19,287)
27
19,287
(27)
-
-
-
-
Stage 1 to Stage 3
(1,168)
1
-
-
1,168
(1)
-
-
Stage 2 to Stage 1
2,789
(44)
(2,789)
44
-
-
-
-
Stage 2 to Stage 3
-
-
(1,618)
24
1,618
(24)
-
-
Stage 3 to Stage 1
805
(26)
-
-
(805)
26
-
-
Stage 3 to Stage 2
-
-
304
(32)
(304)
32
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
69
-
(50)
-
(352)
-
(333)
At 31 December 2025
1,206,309
(956)
36,540
(289)
25,607
(12,136)
1,268,456
(13,381)
Total net income statement credit for the year
456
BNF Bank Annual Report 2025
119
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2024
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Corporate portfolio
At 1 January 2024
255,915
(1,239)
9,176
(214)
15,768
(9,034)
280,859
(10,487)
New and further lending
69,247
(215)
514
(62)
592
(795)
70,353
(1,072)
Repayments
(73,110)
587
(3,500)
55
(1,393)
461
(78,003)
1,103
Transfers of financial instruments
Stage 1 to Stage 2
(5,779)
6
5,779
(6)
-
-
-
-
Stage 1 to Stage 3
(4)
-
-
-
4
-
-
-
Stage 2 to Stage 1
16
(1)
(16)
1
-
-
-
-
Stage 2 to Stage 3
-
-
(90)
14
90
(14)
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
1
-
(42)
-
(1)
-
(42)
At 31 December 2024
246,285
(861)
11,863
(254)
15,061
(9,383)
273,209
(10,498)
Total net income statement charge for the year
(11)
BNF Bank Annual Report 2025
120
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2024
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Retail portfolio
At 1 January 2024
613,156
(1,391)
8,209
(335)
9,785
(2,695)
631,150
(4,421)
New and further lending
73,555
(110)
79
(28)
56
(80)
73,690
(218)
Repayments
(58,293)
17
(849)
2
(1,556)
528
(60,698)
547
Transfers of financial instruments
Stage 1 to Stage 2
(1,725)
4
1,725
(4)
-
-
-
-
Stage 1 to Stage 3
(981)
2
-
-
981
(2)
-
-
Stage 2 to Stage 1
246
(12)
(246)
12
-
-
-
-
Stage 2 to Stage 3
-
-
(164)
2
164
(2)
-
-
Stage 3 to Stage 1
1
(1)
-
-
(1)
1
-
-
Stage 3 to Stage 2
-
-
8
(8)
(8)
8
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
1,275
-
255
-
(138)
-
1,392
At 31 December 2024
625,959
(215)
8,762
(104)
9,421
(2,380)
644,142
(2,699)
Total net income statement credit for the year
1,722
BNF Bank Annual Report 2025
121
2024
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
International portfolio
At 1 January 2024
53,542
(385)
-
-
-
-
53,542
(385)
New and further lending
64,256
(234)
-
-
-
-
64,256
(234)
Repayments
(11,216)
261
-
-
-
-
(11,216)
261
At 31 December 2024
106,582
(358)
-
-
-
-
106,582
(358)
Total net income statement charge for the year
27
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
BNF Bank Annual Report 2025
122
2024
Stage 1
Stage 2
Stage 3
Total
Gross
Expected
Gross
Expected
Gross
Expected
Gross
Expected
carrying
credit
carrying
credit
carrying
credit
carrying
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Loans and advances to customers measured at amortised cost
Total
At 1 January 2024
922,613
(3,015)
17,385
(549)
25,553
(11,729)
965,551
(15,293)
New and further lending
207,058
(558)
593
(90)
648
(875)
208,299
(1,523)
Repayments and disposals
(142,619)
865
(4,349)
57
(2,949)
989
(149,917)
1,911
Transfers of financial instruments
Stage 1 to Stage 2
(7,504)
10
7,504
(10)
-
-
-
-
Stage 1 to Stage 3
(985)
2
-
-
985
(2)
-
-
Stage 2 to Stage 1
262
(13)
(262)
13
-
-
-
-
Stage 2 to Stage 3
-
-
(254)
16
254
(16)
-
-
Stage 3 to Stage 1
1
(1)
-
-
(1)
1
-
-
Stage 3 to Stage 2
-
-
8
(8)
(8)
8
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
1,276
-
213
-
(139)
-
1,350
At 31 December 2024
978,826
(1,434)
20,625
(358)
24,482
(11,763)
1,023,933
(13,555)
Total net income statement credit for the year
1,738
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
BNF Bank Annual Report 2025
123
Remeasurement of loss allowance arising from foreign-exchange movements was not considered significant.
2024
Stage 1
Stage 2
Stage 3
Total
Expected
Expected
Expected
Expected
Gross
credit
Gross
credit
Gross
credit
Gross
credit
amount
losses
amount
losses
amount
losses
amount
losses
€000
€000
€000
€000
€000
€000
€000
€000
Total loans and advances to customers measured at amortised
cost,
guarantees, documentary credits and undrawn
commitments to lend
At 1 January 2024
1,155,600
(3,246)
20,686
(633)
25,908
(11,847)
1,202,194
(15,726)
New and further lending
295,208
(573)
479
(91)
659
(882)
296,346
(1,546)
Repayments and disposals
(255,028)
946
(5,789)
101
(3,044)
1,042
(263,861)
2,089
Transfers of financial instruments
Stage 1 to Stage 2
(7,804)
9
7,804
(9)
-
-
-
-
Stage 1 to Stage 3
(998)
2
-
-
998
(2)
-
-
Stage 2 to Stage 1
369
(17)
(369)
17
-
-
-
-
Stage 2 to Stage 3
-
-
(304)
15
304
(15)
-
-
Stage 3 to Stage 1
4
(2)
-
-
(4)
2
-
-
Stage 3 to Stage 2
-
-
8
(8)
(8)
8
-
-
Net remeasurement of ECL arising from stage transfers
and changes in risk parameters
-
1,280
-
208
-
(142)
-
1,346
At 31 December 2024
1,187,351
(1,601)
22,515
(400)
24,813
(11,836)
1,234,679
(13,837)
Total net income statement credit for the year
1,889
BNF Bank Annual Report 2025
124
Off‑balance sheet exposures increased between 2024 and 2025, driven primarily by growth in the local corporate portfolio.
Corporate off‑balance sheet exposures in Malta increased by €21.1 million, from €126.0 million in 2024 to €147.1 million in 2025.
The international portfolio increased by €5.5 million, from €4.0 million in 2024 to €9.5 million in 2025. The increase in the
corporate and international portfolio was partially offset by a reduction in local retail off‑balance sheet exposures, which
declined by €8.5 million from €88.8 million to €72.3 million. During 2025, new off ‑balance sheet exposures amounting to €145.3
million were granted, while €127.1 million of the balances reported in 2024 were drawn down.
Despite the increase in the value of undrawn exposures, provisions relating to off‑balance sheet exposures decreased by
€0.1 million, from €0.3 million in 2024 to €0.1 million in 2025. This decrease was mainly attributable to the corporate portfolio,
where provisions fell by €0.1 million, while retail off‑balance sheet provisions declined by €0.02 million.
Transfers of off‑balance‑sheet exposures between impairment stages during the year mainly comprised movements from
Stage 1 to Stage 2, amounting to €2.9 million in 2025 (2024: €0.3 million). Transfers of off‑balance‑sheet exposures between
other impairment stages were not material.
3.2.10 Write-off policy
The Bank writes off loans and advances to customers when it determines that these are uncollectible, usually has exhausted
all practical recovery efforts and has concluded there is no reasonable expectation of recovery. This is generally the case
when the Bank determines that the borrower does not have assets or sources of income that could generate sufficient cash
flows to repay the amounts subject to the write-offs.
The Bank may write-off financial assets that are still subject to enforcement activity. The outstanding contractual amounts
of such assets written-off during the year ended 31 December 2025 amounted to € 72,000 (2024: € 163,000). The Bank still
seeks to recover amounts it is legally owed in full, but which have been partially written off due to no reasonable expectation
of full recovery.
3.2.11 Collateral
The Bank employs a range of policies and practices to mitigate credit risk. The amount and type of collateral required
depends on an assessment of the credit risk of the counterparty. The Bank’s Board establishes a policy regarding the
acceptability of types of collateral and valuation parameters.
Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are at times
unsecured.
The main types of collateral obtained are as follows:
• For corporate lending: charges over real estate properties, cash or securities;
• For international lending: charges over real estate properties and cash;
• For retail lending (including home loans and consumer credit): mortgages over residential properties, cash or
securities; and
• For exposures arising from reverse repurchase transactions: a pledge on liquid sovereign debt securities.
Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. These
financial assets are generally unsecured.
BNF Bank Annual Report 2025
125
Management assesses the market value of collateral as part of the loan origination process. This assessment is reviewed
periodically through ongoing credit file reviews. The Bank requests additional collateral in accordance with the underlying
agreement when necessary.
The Bank's policies regarding obtaining collateral have not changed during the reporting period and there has been no
significant change in the overall quality of the collateral held by the Bank since the prior period.
A portion of the Bank's loans and advances to customers, secured by cash, have no loss allowance being recognised in
accordance with the Bank's expected credit loss model. The carrying amount of such financial assets as at 31 December
2025 was €25,163,000 (2024: €29,290,000).
The extendible value of the collateral is the lower of the fair value of a pledged asset for lending purposes and the gross
carrying amount of the secured loans.
The Bank closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that
the Bank will take possession of collateral to mitigate potential credit losses. Financial assets that are credit-impaired and
in respect of which related collateral is held in order to mitigate potential losses are shown below:
As at 31 December 2024
Extendible
Gross
value of
carrying
ECL
Carrying
collateral
amount
allowance
amount
held
€000
€000
€000
€000
Retail
Credit card
s
6
2
4
4
Fixed term loans
902
58
844
885
Mortgages
7,493
1,300
6,193
7,493
Corporate
Small and medium-sized enterprises (SMEs)
12,844
7,166
5,678
10,021
21,245
8,526
12,719
18,404
As at 31 December 2025
Extendible
Gross
value of
carrying
ECL
Carrying
collateral
amount
allowance
amount
held
€000
€000
€000
€000
Retail
Credit cards
9
4
5
4
Fixed term loans
665
54
611
628
Mortgages
8,271
1,618
6,653
7,950
Corporate
Small and medium-sized enterprises (SMEs)
12,607
6,574
6,033
11,139
21,552
8,250
13,302
19,721
BNF Bank Annual Report 2025
126
Financial assets that are credit-impaired and in respect of which no collateral is held are shown below:
As at 31 December 2025
Gross
carrying
ECL
Carrying
amount
allowance
amount
€000
€000
€000
Retail
Overdrafts
390
390
-
Credit cards
438
438
-
Fixed term loans
497
497
-
Mortgages
54
54
-
Corporate
Small and medium-sized enterprises (SMEs)
2,460
2,460
-
3,839
3,839
-
As at 31 December 2024
Gross
carrying
ECL
Carrying
amount
allowance
amount
€000
€000
€000
Retail
Overdrafts
313
313
-
Credit cards
192
192
-
Fixed term loans
438
438
-
Mortgages
77
77
-
Corporate
Small and medium-sized enterprises (SMEs)
2,217
2,217
-
3,237
3,237
-
There were no credit-impaired loans and advances within the international portfolio in 2024 and 2025.
The following tables show the distribution of LTV ratios for the Bank’s credit -impaired loans and advances to customers
secured by immovable property:
Gross carrying amount of credit-impaired loans and advances to customers as at 31 December
2025
Corporate
Retail
Retail
Retail
exposures
mortgages
credit cards
consumer credit
€000
€000
€000
€000
Lower than 25%
367
278
-
217
25 to 50%
3,481
1,837
-
186
51 to 75%
966
3,191
-
175
76 to 100%
603
2,089
-
-
Higher than 100%
7,185
854
1
48
Total
12,602
8,249
1
626
BNF Bank Annual Report 2025
127
Gross carrying amount of credit-impaired loans and advances to customers as at 31 December 2024
Corporate
Retail
Retail
Retail
exposures
mortgages
credit cards
consumer credit
€000
€000
€000
€000
Lower than 25%
329
255
-
240
25 to 50%
3,472
1,326
-
248
51 to 75%
1,243
2,656
1
330
76 to 100%
100
3,147
-
30
Higher than 100%
7,677
88
-
24
Total
12,821
7,472
1
872
It is the Bank's policy to dispose of properties acquired through judicial action in an orderly fashion. The proceeds are used
to reduce or repay the outstanding claim. Generally, the Bank does not occupy properties acquired through judicial action
for business use.
The following is an analysis of the extendible value of the collateral and other credit enhancements held by the Bank against
exposures of loans and advances to customers.
Non-forborne
Forborne
exposures
Exposures
2025
2025
€000
€000
Performing – Stage 1
Loans which are not past due
Total maximum exposure
967,705
-
Extendible value of collateral
Secured by cash and quasi cash
(25,487)
-
Residential immovable property
(697,701)
-
Commercial immovable property
(206,506)
-
Other collateral
(11,821)
-
Total extendible value of collateral
(941,515)
-
Residual exposure
26,190
-
Loss allowance
(863)
-
Past due by not more than 30 days
Total maximum exposure
17,157
-
Extendible value of collateral
Secured by cash and quasi cash
(13)
-
Residential immovable property
(14,431)
-
Commercial immovable property
(2,412)
-
Other collateral
-
-
Total extendible value of collateral
(16,856)
-
Residual exposure
301
-
Loss allowance
(26)
-
BNF Bank Annual Report 2025
128
Non-forborne
Forborne
exposures
Exposures
2025
2025
€000
€000
Underperforming – Stage 2
Loans which are not past due
Total maximum exposure
23,006
506
Extendible value of collateral
Secured by cash and quasi cash
(607)
(2)
Residential immovable property
(17,877)
(391)
Commercial immovable property
(3,463)
-
Other collateral
(20)
-
Total extendible value of collateral
(21,967)
(393)
Residual exposure
1,039
113
Loss allowance
(194)
(23)
Past due by not more than 90 days
Total maximum exposure
5,736
35
Extendible value of collateral:
Secured by cash and quasi cash
(32)
-
Residential immovable property
(4,534)
(29)
Commercial immovable property
(1,073)
-
Other collateral
-
-
Total extendible value of collateral
(5,639)
(29)
Residual exposure
97
6
Loss allowance
(41)
-
Non-performing – Stage 3
Total maximum exposure
19,151
6,240
Extendible value of collateral:
Secured by cash and quasi cash
(9)
-
Residential immovable property
(12,384)
(1,819)
Commercial immovable property
(1,751)
(3,854)
Total extendible value of collateral
(14,144)
(5,673)
Residual exposure
5,007
567
Loss allowance
(10,404)
(1,685)
BNF Bank Annual Report 2025
129
Non-forborne
Forborne
exposures
Exposures
2024
2024
€000
€000
Performing – Stage 1
Loans which are not past due
Total maximum exposure
962,979
-
Extendible value of collateral
Secured by cash and quasi cash
(33,328)
-
Residential immovable property
(699,102)
-
Commercial immovable property
(194,159)
-
Other collateral
(12,746)
-
Total extendible value of collateral
(939,335)
-
Residual exposure
23,644
-
Loss allowance
(1,384)
-
Past due by not more than 30 days
Total maximum exposure
15,847
-
Extendible value of collateral
Secured by cash and quasi cash
(45)
-
Residential immovable property
(7,683)
-
Commercial immovable property
(7,370)
-
Other collateral
(3)
-
Total extendible value of collateral
(15,101)
-
Residual exposure
746
-
Loss allowance
(50)
-
BNF Bank Annual Report 2025
130
Non-forborne
Forborne
exposures
Exposures
2024
2024
€000
€000
Underperforming – Stage 2
Loans which are not past due
Total maximum exposure
17,252
525
Extendible value of collateral
Secured by cash and quasi cash
(590)
(16)
Residential immovable property
(11,110)
(346)
Commercial immovable property
(4,207)
(39)
Other collateral
(57)
-
Total extendible value of collateral
(15,964)
(401)
Residual exposure
1,288
124
Loss allowance
(266)
(61)
Past due by not more than 90 days
Total maximum exposure
2,800
48
Extendible value of collateral:
Secured by cash and quasi cash
(30)
-
Residential immovable property
(931)
(41)
Commercial immovable property
(1,609)
-
Other collateral
-
-
Total extendible value of collateral
(2,570)
(41)
Residual exposure
230
7
Loss allowance
(27)
(4)
Non-performing – Stage 3
Total maximum exposure
17,768
6,714
Extendible value of collateral:
Secured by cash and quasi cash
(63)
-
Residential immovable property
(10,904)
(1,915)
Commercial immovable property
(1,585)
(3,937)
Total extendible value of collateral
(12,552)
(5,852)
Residual exposure
5,216
862
Loss allowance
(9,477)
(2,286)
3.3 Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market
variables such as prices and interest rates, the correlations between them and their levels of volatility.
BNF Bank Annual Report 2025
131
Market risk for the Bank comprises of two types of risks, namely:
• Interest rate risk, which results from fluctuations in the future cash flows of financial assets and liabilities and fair
value of financial instruments due to interest rate repricing gaps, changes in the yield curves and volatilities in the
market interest rates; and
• Foreign exchange risk, which results from exposure to changes in prices, spot or forward, and volatility of currency
rates.
3.3.1 Management of market risk
The primary objective of market risk management is to ensure that the risk-reward relationship entrenched in managing the
Bank’s resources is optimised in a manner that it does not expose the Bank to losses over and above its risk appetite. To
achieve this objective, the Bank establishes limits and controls positions rigorously. The Bank carries out regular assessments
of how the outcome of business activities in terms of multiple risk metrics impacts financial results.
The Bank´s market risk appetite is defined by the Board of Directors and implemented by the Treasury Department, which
coordinates the setup of risk limits and controls the Bank´s market exposures in the financial markets. The Risk function
oversees adherence to limits and carries out oversight activity. Exposures and limits are reviewed on a regular basis by senior
management in the Executive Committee and in the ‘ALCO’ (Asset and Liabilities Committee).
3.3.2 Interest rate risk
Interest rate risk arises in the Bank’s operations due to interest rate fluctuations resulting from interest -earning assets and
interest-bearing liabilities, which mature or are repriced at different times or in different amounts. Floating rate assets and
liabilities are also exposed to basis risk, which is the difference in repricing characteristics of the various floating rate indices.
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of
changes in market interest rates. As outlined previously, the Bank’s operations are subject to the risk of interes t rate
fluctuations to the extent that interest-earning assets and interest-bearing liabilities mature or reprice within different time
periods or on different terms. The Bank adopts a policy to predominantly match the currency and maturity of transactions
through treasury operations, as much as is practicable, to minimise the risk of adverse fluctuations in interest rates affecting
financial assets and financial liabilities. The Bank accepts deposits from customers at both fixed and floating rates and for
varying terms. This poses a risk to the Bank, which risk is managed by monitoring on a continuous basis the level of mismatch
of interest rate repricing taking cognisance of the terms of the Bank’s principal assets, loans and advances to customers,
that are re-priceable at the Bank’s discretion. The Bank, through its Treasury function, also invests in highly liquid quality
assets, namely listed government and corporate debt securities, for the purposes of mitigating exposures to fluctuations in
interest rates.
The level of interest rate risk is monitored using a number of risk measures, such as prescribed regulatory metrics, the risk
appetites as set by the Board of Directors and other risk measures that are considered appropriate. Interest rate risk is
measured from two perspectives -- the earnings based approach and the economic value of equity (EVE) and exposure is
monitored by the Risk and Treasury Functions and reported to ALCO, Executive Committee and Risk and Compliance
Committee on a quarterly basis. The tables and figures below show the Bank’s total interest rate sensitivity in the banking
book. Moreover, the Bank is in a position to manage the interest rate terms of its financial assets and simultaneously to effect
changes to the interest rate terms of liabilities reflecting the Bank’s strategy together with market developments. In this
manner, the Bank manages the interest repricing gaps highlighted within the tables below. The Bank’s ALCO is primarily
responsible for oversight over the Bank’s interest rate risk management process and monitors actively the interest rate risk
measures utilised by the Bank. Credit facilities and commitments to lend funds to customers are granted at prevailing market
interest rates at drawdown date.
BNF Bank Annual Report 2025
132
The following tables summarise the Bank’s exposures to interest rate risks. These analyse the Bank’s financial instruments, w hich were interest-bearing, at their carrying amounts,
categorised by the earlier of contractual repricing or maturity dates.
Effective
Between
Between
Non-
Carrying
interest
Less than
3 months
1 year
More than
interest
amount
rate
3 months
and 1 year
and 5 years
5 years
bearing
As at 31 December 2025
€000
%
€000
€ 000
€000
€000
€000
Financial assets
Balances with Central Bank of Malta and cash
118,457
2.12%
108,655
-
-
-
9,802
Financial investments
150,117
3.36%
3,398
16,356
23,824
106,157
382
Loans and advances to banks
27,689
3.26%
27,689
-
-
-
-
Loans and advances to customers
1,026,299
3.88%
1,024,698
1,601
-
-
-
Total financial assets
1,322,562
1,164,440
17,957
23,824
106,157
10,184
Financial liabilities
Amounts owed to banks and other institutions
18
-
18
-
-
-
-
Amounts owed to customers
1,210,024
1.15%
905,168
242,066
62,694
96
-
Debt securities in issue
19,915
4.50%
-
-
-
19,915
-
Total financial liabilities
1,229,957
905,186
242,066
62,694
20,011
-
Interest repricing gap
259,254
(224,109)
(38,870)
86,146
Cumulative gap
259,254
35,145
(3,725)
82,421
BNF Bank Annual Report 2025
133
Effective
Between
Between
Non-
Carrying
interest
Less than
3 months
1 year
More than
interest
amount
rate
3 months
and 1 year
and 5 years
5 years
bearing
As at 31 December 2024
€000
%
€000
€ 000
€000
€000
€000
Financial assets
Balances with Central Bank of Malta and cash
106,332
2.51%
97,271
-
-
-
9,061
Financial investments
189,873
3.48%
14,768
29,358
66,844
78,903
-
Loans and advances to banks
29,157
2.96%
29,157
-
-
-
-
Loans and advances to customers
1,010,378
4.24%
1,007,711
2,667
-
-
-
Total financial assets
1,335,740
1,148,907
32,025
66,844
78,903
9,061
Financial liabilities
Amounts owed to banks and other institutions
405
-
177
-
-
-
228
Amounts owed to customers
1,214,401
1.77%
714,283
338,691
161,427
-
-
Debt securities in issue
19,864
4.50%
-
-
-
19,864
-
Total financial liabilities
1,234,670
714,460
338,691
161,427
19,864
228
Interest repricing gap
434,447
(306,667)
(94,583)
59,039
8,833
Cumulative gap
434,447
127,781
33,198
92,237
BNF Bank Annual Report 2025
134
Interest rate profile
The table below analyses interest-earning assets and interest-bearing liabilities between those that have a fixed rate and
a variable rate.
2025
2024
Fixed
Variable
Fixed
Variable
€000
€000
€000
€000
Interest-earning assets
Balances with Central Bank of Malta
93,751
14,905
81,429
15,842
Financial investments
122,169
27,565
121,746
68,127
Loans and advances to banks
26,111
1,578
20,157
9,000
Loans and advances to customers
13,613
1,012,686
12,924
997,454
255,644
1,056,734
236,256
1,090,423
Interest-bearing liabilities
Amounts owed to banks and other institutions
-
18
-
177
Amounts owed to customers
506,017
704,007
639,952
574,449
Debt securities in issue
19,915
-
19,864
-
525,932
704,025
659,816
574,626
Fair value sensitivity for fixed rate instruments
Financial instruments issued at fixed rates potentially expose the Bank to fair value interest rate risk. Loans and advances to
customers and to banks and amounts owed to customers and to banks are measured at amortised cost and are not
expected to be disposed of and are therefore not subject to fair value interest rate risk.
The Bank’s instruments exposing the Bank to fair value interest rate risk consist of quoted debt securities measured at FVOCI ,
as described in Note 7, since these are fair valued with fair value changes recognised in other comprehensive income. At the
end of the reporting period, if market prices on fixed rate financial investments measured at fair value had increased by 5%,
with all other variables held constant, the fair value of these investments would increase by €5,913,000 (2024: € 5,098,000).
Likewise, if market prices on fixed rate financial investments measured at fair value had decreased by 5%, with all other
variables held constant, the fair value of these investments would decrease by € 5,913,000 (2024: €5,098,000).
Cash flow sensitivity for variable rate instruments
The Bank is exposed to cash flow interest rate risk principally in respect of the financial assets and liabilities which are subject
to floating interest rates, including financial investments measured at amortised cost.
At the end of the reporting period, if interest rates had increased by 200/250 basis points
1
(assuming a parallel shift of
200/250 basis points in yields) with all other variables held constant, in particular foreign currency rates, the result for the
year would increase by €1,123,209 (2024: €3,182,721). Likewise, if interest rates had decreased by 200/250 basis points
(assuming a parallel shift of 200/250 basis points in yields) with all other variables held constant, in particular foreign currency
rates, the post-tax result for the year would decrease by €983,559 (2024: €3,247,628).
1
A 200 bps shift is assumed for EUR and other minor currencies, while a 250 bps shift is assumed for GBP.
BNF Bank Annual Report 2025
135
In respect of the cash flow sensitivity for variable rate instruments, a selected number of interest bearing assets were
simulated not to reprice immediately.
3.3.3 Currency risk
Currency risk is the risk of the exposure of the Bank’s financial position and cash flow to adverse movements in foreign
exchange rates.
The Bank manages currency risk by ensuring that foreign currency liabilities are utilised to fund assets denominated in the
same foreign currency thereby matching asset and liability positions as much as is practicable. This mechanism is reflected
in the figures reported in the tables below.
The Bank has in place limits on the level of exposure by currency and in total, which are monitored daily, and hedging
strategies are used to ensure that positions are maintained within established limits. The Bank does not apply hedge
accounting with respect to its derivative contracts such as foreign currency swap agreements.
The table below summarises the Bank’s exposures to foreign currency risk. Included in the tables are the Bank’s financial
instruments at carrying amounts, categorised by currency.
Total
EUR
GBP
USD
Other
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Balances with Central Bank of Malta and cash
118,457
107,782
9,777
898
-
Financial investments
150,117
142,337
-
7,780
-
Loans and advances to banks
27,689
7,997
10,739
8,953
-
Loans and advances to customers
1,026,299
904,363
121,842
94
-
Other assets
20,400
18,334
1,560
506
-
Total financial assets
1,342,962
1,180,813
143,918
18,231
-
Financial liabilities
Amounts owed to banks and other institutions
18
3
-
14
1
Amounts owed to customers
1,210,024
1,161,215
44,406
4,403
-
Other liabilities
29,777
29,004
476
297
-
Debt securities in issue
19,915
19,915
-
-
-
Total financial liabilities
1,259,734
1,210,137
44,882
4,714
1
Net currency position
99,036
13,517
(1)
Notional value of derivatives
(96,279)
(16,991)
-
Residual exposure
2,757
(3,474)
(1)
For presentation purposes, the other assets comprise of ‘Other assets’ and ‘Prepayments and Accrued Income" line items
presented within the Statement of Financial Position. Other liabilities comprise of ‘Current tax liabilities’, ‘Other liabilities’ and
‘Accruals and deferred income’.
BNF Bank Annual Report 2025
136
Total
EUR
GBP
USD
Other
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Balances with Central Bank of Malta and cash
106,332
106,203
67
62
-
Financial investments
189,873
169,797
4,822
15,254
-
Loans and advances to banks
29,157
10,496
16,839
1,822
-
Loans and advances to customers
1,010,378
904,044
106,223
111
-
Other assets
21,450
20,028
1,328
94
-
Total financial assets
1,357,190
1,210,568
129,279
17,343
-
Financial liabilities
Amounts owed to banks and other institutions
405
401
-
3
1
Amounts owed to customers
1,214,401
1,129,709
81,513
3,179
-
Other liabilities
29,261
28,115
931
215
-
Debt securities in issue
19,864
19,864
-
-
-
Total financial liabilities
1,263,931
1,178,089
82,444
3,397
1
Net currency position
46,835
13,946
(1)
Notional value of derivatives
(45,367)
(13,466)
-
Residual exposure
1,468
480
(1)
In view of the levels of net currency positions reflected in the tables above, a sensitivity analysis for foreign exchange risk
disclosing how profit or loss and equity would have been affected by changes in foreign exchange rates that were
reasonably possible at the end of the reporting periods would not reflect significant impacts (after hedging transactions).
In fact, under the scenario that the euro appreciates by 20% against all currencies, the effect would be a gain of €144,000
(2024: gain of € 389,000) in the carrying amount of financial instruments with the favourable impact recognised in profit or
loss. Should the euro depreciate against all currencies by 20%, the effect would be a loss of € 144,000 (2024: loss of € 389,000)
in the carrying amount of financial instruments and the adverse impact would be recognised in profit or loss.
3.4 Liquidity Risk
Liquidity risk is defined as the risk of losses due to:
• The Bank’s funding costs increasing disproportionately;
• Lack of funding preventing the Bank from establishing new business; and
• Lack of funding which will ultimately prevent the Bank from meeting its obligations.
Liquidity risk may result from the Bank’s inability to meet its obligations when they fall due as a result of customer deposi ts
being withdrawn, cash requirements from contractual commitments, or other cash outflows, as well as the inability to sell a
financial asset quickly at close to its fair value. The Bank is exposed to daily calls on its available cash resources from
overnight deposits, current and call deposits, maturing term deposits, loan drawdowns and guarantees.
Such risk is inherent in all banking operations, which is generally affected by a range of institution-specific and market-wide
events including, but not limited to, credit events, systemic shocks and natural disasters.
BNF Bank Annual Report 2025
137
The objective of the Bank’s liquidity and funding management is to ensure that all foreseeable funding commitments and
deposit withdrawals can be met when due. It is the Bank’s objective to maintain a diversified and stable funding base with
the objective of enabling the Bank to respond quickly and smoothly to unforeseen liquidity requirements.
The Bank manages this risk by ensuring that its assets and liabilities are matched in terms of maturities as much as is
practicable. However, the Bank manages its net interest spread by advancing credit to customers with longer terms to
maturity than the liabilities funding such loans. To mitigate exposures arising in this respect, the Bank holds significant liquid
assets in the form of listed debt securities, money market placements and other short-term instruments for managing liquidity
risk to support payment obligations and contingent funding in a stressed market environment.
As at 31 December 2025, the Bank’s advances -to-deposit ratio stood at 84.82% (2024: 83.20%).
•
Liquidity Coverage Ratio
The LCR metric is designed to promote the short-term resilience of a bank’s liquidity profile, and became a minimum
regulatory standard from 1 October 2015, under European Commission (‘EC’) Delegated Regulation 2015/61. It aims to ensure
that a bank has sufficient unencumbered high-quality liquid assets (‘HQLA’) to meet its liquidity needs in a 30 -calendar-day
liquidity stress scenario. HQLA consist of cash or assets that can be converted into cash at little or no loss of value in markets.
During the years ended 31 December 2025 and 2024 the LCR ratio was within both the regulatory minimum and the risk
appetite set by the Bank.
•
Net Stable Funding Ratio
The NSFR requires institutions to maintain sufficient available stable funding relative to required stable funding and reflects
a bank’s long -term funding profile. It is designed to complement the LCR.
The NSFR methodology is calculated in line with the amendments of the Capital Requirements Regulation (EU) No 575/2013
(CRR II) with effect from 28 June 2021.
During the years ended 31 December 2025 and 2024 the NSFR was within both the regulatory minimum and the risk appetite
set by the Bank.
The Bank’s ALCO focuses on the Bank’s management process with respect to market and funding liquidity risks and
adherence to limits. Key Liquidity Risk indicators are also included in the Bank’s Risk Appetite.
• Management of day-to-day funding, by monitoring future cash flows to ensure that requirements can be met. This
includes replenishment of funds as they mature or are borrowed by customers. The starting point for projections is
an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial
assets;
• Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any
unforeseen interruption to cash flow;
• Monitoring the liquidity ratios of the Bank against internal and regulatory requirements; and
• Managing the concentration and profile of debt maturities.
The Bank also monitors the level and type of undrawn lending commitments and the impact of contingent liabilities such as
guarantees as part of the liquidity management process previously referred to.
BNF Bank Annual Report 2025
138
The following table discloses financial assets and liabilities at the end of the reporting period by remaining period to maturity:
Liquidity available to settle these liabilities and support outstanding commitments includes balances with the Central Bank of Malta, cash, marketable securities and undrawn credit
facilities with other counterparties. Although the maturity analysis below shows a mismatch in the earlier time band, this is mitigated by the high liquidity of the investment portfolio and
the stable behavioural profile of the deposit base. The position is monitored on an ongoing basis using the liquidity metrics and regulatory ratios.
Management does not expect the timing of recovery or settlement to differ from that reflected in the maturity analysis disclosed above.
At 31 December 2025
Between
Over 1 but
No
Within 3
3 months
less than
Over 5
maturity
Total
months
and 1 year
5 years
years
date
€000
€000
€000
€000
€000
€000
Financial assets
Balances with Central Bank of
Malta and cash
118,457
107,247
-
-
-
11,210
Financial investments
150,117
3,398
11,293
24,670
110,374
382
Loans and advances to banks
27,689
27,689
-
-
-
-
Loans and advances to customers
1,026,299
53,464
29,039
151,108
792,688
-
Other assets
6,718
-
-
-
-
6,718
Total financial assets
1,329,280
191,798
40,332
175,778
903,062
18,310
Financial liabilities
Amounts owed to banks and
other institutions
18
18
-
-
-
-
Amounts owed to customers
1,210,024
905,168
242,066
62,694
96
-
Other liabilities
29,777
16,016
407
670
318
12,366
Debt securities in issue
19,915
-
-
-
19,915
-
Total financial liabilities
1,259,734
921,202
242,473
63,364
20,329
12,366
Maturity gap
(729,404)
(202,141)
112,414
882,733
Cumulative gap
(729,404)
(931,545)
(819,131
63,602
BNF Bank Annual Report 2025
139
Amounts owed to customers of € 703,485,000 (2024: €574,449,000) as at 31 December 2025 are repayable on demand and included in the ‘‘within 3 months’’ bucket in the tables. However,
the Bank’s experience is that a significant portion of such deposits remains stable. Additionally, a significant part of othe r deposits maturing within 3 months from the end of the reporting
period is typically renewed.
An amount of € 3.371,000 comprising financial investments measured at FVOCI have been pledged in favour of the Depositor Compensation Scheme as at 31 December 2025 (31
December 2024: €3,293,000).
At 31 December 2024
Between
Over 1 but
No
Within 3
3 months
less than
Over 5
maturity
Total
months
and 1 year
5 years
years
date
€000
€000
€000
€000
€000
€000
Financial assets
Balances with Central Bank of
Malta and cash
106,332
95,875
-
-
-
10,457
Financial investments
189,873
9,733
27,358
61,956
90,128
698
Loans and advances to banks
29,157
29,157
-
-
-
-
Loans and advances to customers
1,010,378
26,335
26,851
184,515
772,677
-
Other assets
21,450
13,409
-
-
-
8,041
Total financial assets
1,357,190
174,509
54,209
246,471
862,805
19,196
Financial liabilities
Amounts owed to banks and
other institutions
405
405
-
-
-
-
Amounts owed to customers
1,214,401
716,466
337,548
160,387
-
-
Other liabilities
29,261
15,445
353
854
360
12,249
Debt securities in issue
19,864
-
-
-
19,864
-
Total financial liabilities
1,263,931
732,316
337,901
161,241
20,224
12,249
Maturity gap
(557,807)
(283,692)
85,230
842,582
Cumulative gap
(557,807)
(841,499)
(756,269)
86,313
BNF Bank Annual Report 2025
140
The tables below analyse the Bank’s principal non -derivative and derivative financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting
period to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows.
Between
Over 1 but
Within 3
3 months
less than 5
Over 5
Total
months
and 1 year
years
years
€000
€000
€000
€000
€000
At 31 December 2025
Financial liabilities
Amounts owed to banks and other institutions
18
18
-
-
-
Amounts owed to customers
1,222,989
909,766
247,606
65,509
108
Lease liabilities
1,539
144
407
670
318
Total financial liabilities
1,224,546
909,928
248,013
66,179
426
At 31 December 2024
Financial liabilities
Amounts owed to banks and other institutions
405
405
-
-
-
Amounts owed to customers
1,234,790
718,494
346,751
169,545
-
Lease liabilities
1,660
93
353
854
360
Total financial liabilities
1,236,855
718,992
347,104
170,399
360
BNF Bank Annual Report 2025
141
Between
Over 1 but
Within 3
3 months
less than 5
Over 5
Total
months
and 1 year
years
years
€000
€000
€000
€000
€000
At 31 December 2025
Derivative liabilities
Outflow
(86,527)
(17,707)
(68,820)
-
-
Inflow
85,978
17,657
68,321
-
-
Total derivative liabilities
(549)
(50)
(499)
-
-
At 31 December 2024
Derivative liabilities
Outflow
(58,834)
(6,034)
(49,145)
(3,655)
-
Inflow
58,311
6,011
48,703
3,597
-
Total derivative liabilities
(523)
(23)
(442)
(58)
-
Through the ILAAP, the robustness of the Bank’s liquidity and funding was assessed using various tools and metrics, including a risk assessment and a stress testing exercise. The ILAAP
report concluded that the Bank’s liquidity and funding profile is sound , and liquidity controls are sufficiently robust. The ILAAP report was duly submitted to the Regulator.
BNF Bank Annual Report 2025
142
3.5 Operational risk
The Bank adopts the Capital Requirements Regulation definition of operational risk, which is the risk of direct or indirect losses
resulting from inadequate or failed internal processes, people and systems or from external events, and includes Legal risk.
Operational Risk is inherent in all the Bank’s products, services and activities, including outsourced activities and
encompasses a broad range of sub-risk categories. These include Internal Fraud, External Fraud, Legal, Regulatory
Compliance, Cyber Security, Money Laundering, Sanctions, Conduct, ICT, Reputational, Business Process, Third-party, Staff
Dependency, Business Continuity, Change Management, Data Privacy and Confidentiality and Transformation.
The Bank proactively manages and mitigates these risks through its robust control framework, continuous monitoring and by
responding to emerging risks. Operational risk management is an integral part of the Bank’s overall risk management
framework and is a shared responsibility across all employees, rather than being solely confined to the Risk function. To this
end, operational risk managers have been appointed across all areas of the Bank, ensuring coverage and effective
identification of operational risk events at the point of occurrence.
The operational risk management framework entails a set of interrelated tools and processes designed to ensure effective
identification, assessment and mitigation of the Bank’s operational risks. This framework enables the Bank to adopt a risk -
based approach in line with its operational risk tolerance level while supporting its strategic objectives. The risk tolerance
level is defined in the Bank’s Risk Appetite Framework, through the Risk Appetite Statement and established indicators. Risk
indicators and respective thresholds are characterised by a generally risk-averse approach intended to achieve a
reasonable risk/return equilibrium position.
In addition to recording operational risk events, the Bank maintains a risk register, which is updated bi-annually following a
thorough assessment conducted across all functions to record the identified risks the Bank is exposed to. The key risks across
the institution are analysed and the prevailing risk level is assessed, as well as the efficacy and performance of control
measures in place. Thus, making it possible to differentiate between inherent and residual risk levels.
In recent years, the Bank has continued to strengthen its risk management through the adoption of innovative tools and
methodologies to enhance the identification and reporting of risks. This commitment is evidenced by the integration of
systems that facilitate the recording and management of operational risk events, as well as the enhancement of the risk
assessment management process.
The Risk function is responsible for the coordination of all operational risk activities within the Bank as well as their control and
oversight. Every effort is made to ensure that operational risks are curtailed, minimised and/or mitigated to inhibit, or at least
to significantly reduce, the incidence of operational risks materialising into operational losses.
The Bank’s operational risk management applies proactive measures to ensure business continuity, and the accuracy of
information used internally and reported externally, availability of competent and well-informed staff, and adherence to
established rules and procedures including security arrangements to protect the physical and ICT infrastructure of the Bank.
These efforts are reinforced by fostering a strong risk culture through the ‘tone from the top’, and well-defined objectives
that observe the Bank’s risk appetite. This culture is embedded through policies, procedures, effective communication, and
ongoing staff training to enhance awareness and accountability.
The Bank endeavours to mitigate operational risk by defining, documenting and updating the relevant business processes.
Furthermore, the Bank mitigates operational risk by following strict rules for the assignment of duties and responsibilities
among and within the functions and by having in place a system of internal control and supervision.
BNF Bank Annual Report 2025
143
3.6 Capital risk management
It is the Bank’s policy to actively manage its capital base to cover inherent risks in the business and at the same time to
support the development of the business, to maximise shareholders’ value and to meet all the regulatory requirements.
Capital management policy is monitored by the Executive Committee and the ALCO.
Accordingly, the purpose of the Bank’s capital management is essentially to ensure an efficient use of capital, taking
cognisance of the Bank’s risk appetite and profile as well as its objectives for business development. The Bank is a licensed
credit institution and must therefore comply with the capital requirements under the relevant laws and regulations. During
the years ended 31 December 2025 and 2024, the Bank complied with the imposed regulatory capital requirements.
The Bank also implemented the revised requirements introduced by Capital Requirements Regulation 3 (CRR3), effective from
1 January 2025, including updates to the approaches for credit and operational risk. The adoption of CRR3 did not have a
material impact on the Bank’s regulatory capital position . In line with the CRR framework, the Bank’s regulatory capital is
classified into Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 capital, as disclosed below.
2025
2024
€000
€000
Common Equity Tier 1 capital
Ordinary share capital
74,544
74,544
Retained earnings
24,826
25,461
Other reserves
(776)
494
Deductions:
Intangible assets
(5,646)
(3,155)
Other regulatory adjustments
(3,614)
(3,242)
Total Common Equity Tier 1 capital
89,334
94,102
Additional Tier 1 capital
Instruments classified as equity under IFRS Accounting Standards
10,000
10,000
Total Tier 1 Capital
99,334
104,102
Tier 2 capital
Qualifying subordinated liabilities
20,000
20,000
Total Tier 2 capital
20,000
20,000
Total regulatory capital
119,334
124,102
Further detail on capital risk management and capital adequacy requirements is set out in the ‘Pillar 3 Disclosures Report’
published as a separate document on the Bank’s website.
3.7 Fair values of financial assets and liabilities
The Bank is required to disclose fair value measurements by level of the following fair value measurement hierarchy for
financial instruments that are measured in the Statement of Financial Position at fair value:
• Quoted prices (unadjusted) in active markets for identical assets (Level 1).
• Inputs other than quoted prices included within Level 1 that are observable for the asset either directly i.e. as prices,
or indirectly i.e. derived from prices (Level 2).
• Inputs for the asset that are not based on observable market data i.e. unobservable inputs (Level 3).
BNF Bank Annual Report 2025
144
The IFRS 13 hierarchy of valuation techniques is based on whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the
Bank’s marke t assumptions.
The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which
the change has occurred.
The following tables reflect an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
At 31 December 2025
Financial assets
Derivative financial instruments
-
120
-
120
Financial investments
Government debt instruments
20,354
58,006
-
78,360
Corporate debt and equity instruments
48,974
9,369
382
58,725
Total financial assets
69,328
67,495
382
137,205
Financial liabilities
Derivative financial instruments
-
432
-
432
Total financial liabilities
-
432
-
432
During the year, management determined that classifying local debt securities within Level 2 of the fair value hierarchy would
provide a more appropriate reflection of market conditions, particularly given the limited observable market activity (i.e no
active market). As a result, securities with a carrying amount of € 67,375,000 were transferred from Level 1 to Level 2. No other
movements between hierarchy levels were noted during the year.
Financial instruments in Level 1
The fair value of instruments traded in active markets is based on quoted market prices at the end of the reporting period. A
market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions
At 31 December 2024
Financial assets
Financial investments
Government debt instruments
57,730
-
-
57,730
Corporate debt instruments
96,514
-
698
97,212
Total financial assets
154,244
-
698
154,942
Financial liabilities
Derivative financial instruments
-
1,267
-
1,267
Total financial liabilities
-
1,267
-
1,267
BNF Bank Annual Report 2025
145
on an arm’s length basis. The quoted market price used for financial instruments held by the Bank is the current bid price at
31 December of the respective year.
Financial instruments in Level 2
Level 2 includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all
significant inputs are directly or indirectly observable from market data.
Fair values for the Bank’s derivative contracts, which are classified as level 2, are generally determined utilising valuatio n
techniques, involving primarily the use of discounted cash flow techniques. The fair values referred to are determined by
reference to market prices or rates (forward foreign exchange rates) quoted at the end of the reporting period. The valuation
techniques used are supported by observable market prices or rates since their variables include only data from observable
markets.
Financial instruments in Level 3
This category includes all instruments for which the valuation technique includes inputs not based on observable data and
the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are
valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are
required to reflect differences between the instruments.
Instruments included in Level 3 are immaterial in the context of the Bank’s Statement of Financial Position.
Financial instruments not measured at fair value
Loans and advances to banks and customers and amounts owed to banks, other institutions and customers are measured
at amortised cost in the Statement of Financial Position. The Board considers the carrying amounts of loans and advances
to banks and customers to be a reasonable estimate of their fair value principally in view of the relatively short periods to
repricing or maturity from the end of the reporting periods. The fair values of fixed interest deposits and amounts owed to
banks and other institutions are not deemed to be significantly different from their carrying amounts, based on the
discounted cash flows at current market interest rates, particularly due to the relatively short periods to maturity.
Financial investments measured at amortised cost had a fair value of € 13,131,000 (level 1) as at 31 December 2025 (2024:
€36,197,000 ), compared to the carrying amount of € 13,032,000 (2024: €34,931,000). Debt securities issued measured at
amortised cost had a fair value of € 19,400,000 (level 2) as at 31 December 2025 (2024: €20,000,000) , compared to the
carrying amount of € 19,915,000 (2024: €19,864,000). As at 31 December 2025, financial investments and debt securities in issue
were listed on an active market and the fair value was based on the market price at the reporting date.
4. ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the
application of the Bank’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
BNF Bank Annual Report 2025
146
4.1 Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts
recognised in the financial statement relates primarily to determining criteria for significant increase in credit risk, choosing
appropriate models and assumptions for the measurement of ECL, and establishing the number and relative weightings of
forward-looking scenarios and associated ECL.
4.2 Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in
a material adjustment to the carrying amount of assets and liabilities within the next financial year relates to the
measurement of expected credit loss on loans and advances to customers.
Assumptions and estimation uncertainties in the measurement of expected credit loss on loans and advances to customers
are:
• Determining criteria for significant increase in credit risk
The identification of financial assets that have experienced a significant increase in credit risk or credit impairment is subject
to estimation uncertainty, particularly in an environment of elevated economic uncertainty. This arises mainly from limitations
in the availability, granularity and timeliness of customer specific credit information, which may affect the timing and
identification of changes in credit risk across portfolios.
To address these inherent data limitations, segmentation techniques are applied across the corporate, retail and
international portfolios to identify indicators of changes in credit risk. For retail portfolios, ECL estimates rely primarily on
delinquency based indicators as proxies for default emergence, reflecting the limited availability of forward looking
information at individual exposure level. Consequently, ECL estimates are sensitive to assumptions regarding the behavioural
relationship between arrears status, loan to value ratios and default risk. The Bank’s established credit monitoring processes,
including the ongoing review of arrears and collateral values, are applied to mitigate this uncertainty.
For corporate exposures, SICR and unlikeliness to pay (‘‘UTP’’) assessments are based on the evaluation of available
quantitative and qualitative information, including indicators of impairment and observable deterioration in borrowers’
financial performance or outlook. ECL estimates for these exposures remain sensitive to changes in borrower specific
conditions and macroeconomic developments that may occur after the reporting date (see Note 3.2.3).
• Forward looking economic scenarios and scenario weightings
The measurement of ECL is sensitive to the number, severity and relative weightings of forward looking economic scenarios.
Estimation uncertainty arises from the inherent unpredictability of macroeconomic conditions and their impact on key
variables used to derive forward looking PD and LGD estimates.
Expert judgement was also applied by management when determining the relevance of selected macroeconomic scenarios
and their respective probability weights. For the UK portfolio different stress factors reflecting the current economic
conditions, expected outlook and anticipated risks are applied to the pessimistic and optimistic scenarios.
Management considered the sensitivity of the ECL outcome to the macro-economic forecasts by recalculating the ECL under
the different scenarios, applying a 100% weighting to each scenario. The effect of economic uncertainty on the ECL outcome
is disclosed in the sensitivity analysis presented in Note 3.2.3.4 within the section entitled ‘Economic scenarios sensitivity
analysis of ECL estimates’. The ECL calculated for the upside and downside scenarios should not be taken to represent the
BNF Bank Annual Report 2025
147
upper and lower limits of possible ECL outcomes as there is a high degree of estimation uncertainty in the numbers
representing tail risk scenarios when assigned a 100% weighting (see Note 3.2.4.)
• Estimation of future cash flows for credit impaired loans
For individually significant credit impaired loans, the measurement of ECL is sensitive to assumptions regarding the timing
and amount of expected future cash flows. These estimates depend on factors such as the realisable value of security, the
viability of the customer’s business model and the capacity to generate cash flow to service debt obligations under different
recovery scenarios.
Key assumptions include forecast recoveries from the sale of collateralised properties, valuation haircuts and time to
recovery. The heightened level of uncertainty in the local property market, driven by current macroeconomic conditions,
increases the sensitivity of ECL estimates to these assumptions.
Further details on inputs, assumptions and estimation techniques used in measuring ECL is further detailed in Note 3.2.3.
Management overlay and changes in estimation uncertainty
As explained in Note 3.2.3.1, in prior financial years the Bank applied management overlays to its retail and corporate
portfolios to reflect heightened estimation uncertainty arising from delayed identification of SICR events during periods of
significant economic volatility, including the COVID 19 pandemic, subsequent inflationary pressures, Malta’s temporary
inclusion on the Financial Action Task Force (‘‘FATF’’) grey list and the elevated interest rate environment.
During 2025, the Bank continued to monitor credit risk in the context of evolving macroeconomic conditions. As economic
indicators stabilised and pandemic related risks subsided, the level of estimation uncertainty underpinning these overlays
reduced. As a result, the remaining management overlay on the corporate portfolio was fully released as at 31 December
2025. No further adjustments were considered necessary, as emerging risks are assessed and reflected through ongoing
borrower level credit risk monitoring.
5. SEGMENTAL REPORTING
The following tables present income, profit and certain asset and liability information regarding the Bank’s business segment s
for the years ended 31 December 2025 and 2024:
2025
Retail
banking
Corporate
banking
International
Other
Total
€000
€000
€000
€000
€000
Net interest income
13,831
10,070
3,045
3,900
30,846
Net fees and commission income
1,374
1,892
356
-
3,622
Net trading income (including net gains from financial
instruments at FVTPL and gains on disposal of debt
instruments at FVOCI)
-
-
-
(460)
(460)
Net operating income
15,205
11,962
3,401
3,440
34,008
Employee compensation and benefits
(7,606)
(4,659)
(573)
(1,063)
(13,901)
Other administrative expenses
(7,113)
(4,958)
(506)
(2,823)
(15,400)
Depreciation of property and equipment,
BNF Bank Annual Report 2025
148
depreciation of right-of-use assets and
amortisation of intangible assets
(1,254)
(645)
-
(187)
(2,086)
Credit impairment losses
(883)
1,157
(24)
63
313
Profit before tax
2,934
Income tax expense
(314)
Profit for the year
2,620
Assets
Segment assets
636,094
246,919
121,793
341,399
1,346,205
Unallocated assets
22,555
Total assets
1,368,760
Liabilities
Segment liabilities
963,926
230,285
2,281
17,235
1,213,727
Unallocated liabilities
46,439
Total liabilities
1,260,166
Additions to non-current assets
131
36
-
4,443
4,610
Revenue generated in the Bank’s country of domicile (Malta) is reported within the Retail Banking, Corporate Banking and
Other segments, while revenue generated in the United Kingdom is reported within the International segment. All non-current
assets are located in Malta.
BNF Bank Annual Report 2025
149
2024
Retail
banking
Corporate
banking
International
Other
Total
€000
€000
€000
€000
€000
Net interest income
11,355
12,471
2,057
5,521
31,404
Net fees and commission income
1,341
2,277
195
-
3,813
Net trading income (including net gains from financial
instruments at FVTPL and gains on disposal of debt
instruments at FVOCI)
-
-
-
2,106
2,106
Net operating income
12,696
14,748
2,252
7,627
37,323
Employee compensation and benefits
(5,897)
(4,654)
(500)
(1,902)
(12,953)
Other administrative expenses
(4,541)
(4,072)
(341)
(2,707)
(11,661)
Depreciation of property and equipment,
depreciation of right-of-use assets and
amortisation of intangible assets
(675)
(269)
-
(137)
(1,081)
Credit impairment losses
1,499
249
27
(111)
1,664
Profit before tax
13,292
Income tax expense
(4,373)
Profit for the year
8,919
Assets
Segment assets
638,505
255,411
106,256
347,943
1,348,115
Unallocated assets
27,587
Total assets
1,375,702
Liabilities
Segment liabilities
885,480
219,174
39,524
73,129
1,217,307
Unallocated liabilities
47,891
Total liabilities
1,265,198
Additions to non-current assets
492
-
-
3,025
3,517
BNF Bank Annual Report 2025
150
6. BALANCES WITH CENTRAL BANK OF MALTA AND CASH
The average balance of the reserve deposit required at year end in terms of Article 32 of the Central Bank of Malta Act, Cap.
204 of the Laws of Malta held with the Central Bank of Malta was € 11,210,000 (2024: €10,457,000).
7. FINANCIAL INVESTMENTS
Financial investments include the following:
2025
2024
€000
€000
Financial investments measured at FVTPL
Equity instruments measured at FVTPL
382
698
At 31 December
382
698
Debt instruments measured at FVOCI
Government debt securities
Local and listed on the Malta Stock Exchange
58,006
41,128
Foreign and listed on other exchanges
20,354
16,602
Other debt securities
Local and listed on the Malta Stock Exchange
9,369
5,789
Foreign and listed on other exchanges
48,974
90,725
At 31 December
136,703
154,244
Debt instruments measured at amortised cost
Local and listed on the Malta Stock Exchange
-
10,082
Foreign and listed on other exchanges
13,032
24,901
Less expected credit loss allowances
-
(52)
At 31 December
13,032
34,931
2025
2024
€000
€000
Balances with Central Bank of Malta
108,657
97,282
Cash
9,802
9,061
Gross carrying amount
118,459
106,343
Less credit impairment losses
(2)
(11)
Net carrying amount
118,457
106,332
BNF Bank Annual Report 2025
151
The movement in the carrying amount of financial investments is summarised as follows:
2025
2024
€000
€000
Equity instruments measured at FVTPL
At 1 January
698
485
Changes in fair value
(316)
632
Disposals
-
(419)
At 31 December
382
698
Debt instruments measured at FVOCI
At 1 January
154,244
100,855
Additions
67,719
123,285
Disposals
(83,540)
(73,397)
Foreign exchange
(921)
492
Amortisation of discount/(premium)
(139)
116
Changes in fair value
(660)
2,893
At 31 December
136,703
154,244
Debt instruments measured at amortised cost
At 1 January
34,931
33,875
Additions
-
1,908
Maturities
(11,887)
(982)
Disposals
(10,110)
-
Amortisation of discount
45
126
Movement in credit loss allowances
53
4
At 31 December
13,032
34,931
As at 31 December 2025, the impairment allowance on debt instruments measured at FVOCI was € 177,000 (2024: €178,000).
Debt securities pledged in favour of the Depositor Compensation Scheme as at 31 December 2025 amounted to € 3,371,000
(2024: €3,293,000).
Investments with a nominal value of €21.4 million have been pledged against the provision of credit lines by the Central Bank
of Malta. Investments were valued at €21.0 million as at 31 December 2025.
During the financial year ended 31 December 2025, debt instruments measured at FVOCI with a total carrying amount of
€83,540,000 (2024: € 73,397,000) were disposed of, resulting in a gain on disposal of €1,293,000 (2024: €1,387,000). During the
financial year ended 31 December 2025, debt instrument measured at amortised cost with a total carrying amount of
€10,110,000 (2024: nil) were disposed of, for liquidity purposes, resulting in a gain of € 796,000. Gains on disposals were
recorded and recognised in profit or loss under ‘Gains on disposal of debt instruments’.
BNF Bank Annual Report 2025
152
8. LOANS AND ADVANCES TO BANKS
2025
2024
€000
€000
Repayable on call and at short notice
1,578
9,001
Term placements
26,116
20,161
27,694
29,162
Less expected credit loss allowances
(5)
(5)
Net loans and advances to banks
27,689
29,157
9. LOANS AND ADVANCES TO CUSTOMERS
2025
2024
€000
€000
Repayable on call and at short notice
46,827
42,084
Term loans and advances
992,709
981,849
Gross loans and advances to customers
1,039,536
1,023,933
Less expected credit loss allowances
(13,237)
(13,555)
Net loans and advances to customers
1,026,299
1,010,378
Impairment allowances
Stage 1
889
1,434
Stage 2
259
358
Stage 3
12,089
11,763
13,237
13,555
10. DERIVATIVE FINANCIAL INSTRUMENTS
During the current and prior years, the Bank entered into foreign exchange swap transactions, exchanging a specific amount
in one currency with a specific amount in another currency and agreed to re-exchange at a specified exchange rate and
date in the future.
The table below shows the fair values of derivative financial assets and liabilities.
2025
2024
Notional
Fair value
Notional
Fair value
€000
€000
€000
€000
Derivative assets
Foreign exchange swaps
26,743
120
-
-
Derivative liabilities
Foreign exchange swaps
86,526
432
58,833
1,267
BNF Bank Annual Report 2025
153
11. PREPAYMENTS AND ACCRUED INCOME
2025
2024
€000
€000
Prepayments
8,608
8,046
Accrued income
5,076
5,363
13,684
13,409
12. PROPERTY AND EQUIPMENT
Land and
buildings
Computer
equipment
Other
equipment
Total
€000
€000
€000
€000
Year ended 31 December 2024
At 1 January 2024
4,920
273
247
5,440
Acquisitions
106
543
136
785
Depreciation charge for the year
(193)
(141)
(113)
(447)
At 31 December 2024
4,833
675
270
5,778
At 31 December 2024
Cost
8,386
3,330
2,490
14,206
Accumulated depreciation
(3,553)
(2,655)
(2,220)
(8,428)
Net book amount
4,833
675
270
5,778
Year ended 31 December 2025
At 1 January 2025
4,833
675
270
5,778
Acquisitions
306
180
133
619
Depreciation charge for the year
(205)
(193)
(100)
(498)
At 31 December 2025
4,934
662
303
5,899
At 31 December 2025
Cost
8,692
3,510
2,623
14,825
Accumulated depreciation
(3,758)
(2,848)
(2,320)
(8,926)
Net book amount
4,934
662
303
5,899
Property and equipment include assets amounting to € 422,000 (2024: €192,000) which were still not put to use at year end.
BNF Bank Annual Report 2025
154
13. INTANGIBLE ASSETS
Purchased
Computer
Other
software
intangibles
Total
€000
€000
€000
Year ended 31 December 2024
At 1 January 2024
858
146
1,004
Acquisitions
2,362
-
2,362
Amortisation for the year
(211)
-
(211)
At 31 December 2024
3,009
146
3,155
At 31 December 2024
Cost
7,477
146
7,623
Accumulated amortisation
(4,468)
-
(4,468)
Net book amount
3,009
146
3,155
Year ended 31 December 2025
At 1 January 2025
3,009
146
3,155
Acquisitions
3,761
-
3,761
Disposals
(13)
(146)
(159)
Amortisation for the year
(1,111)
-
(1,111)
At 31 December 2025
5,646
-
5,646
At 31 December 2025
Cost
11,225
-
11,225
Accumulated amortisation
(5,579)
-
(5,579)
Net book amount
5,646
-
5,646
At 31 December 2025, no amount had been contracted but not provided for in the financial statements (Note 25) (2024:
€124,000) . There were no intangible assets which were still not put to use at year end (2024: €2,398,000) .
14. RIGHT-OF-USE ASSETS
The Bank leases its Head Office, four branches and motor vehicles as well as low value items such as photocopiers and note
counting machines. Rental contracts are typically made for fixed periods but may have extension options. The lease term
reflects the exercise of such options.
Photocopiers and note counting machines, in view of the underlying low value lease arrangement are not deemed to be in
scope of IFRS 16.
BNF Bank Annual Report 2025
155
Motor
Premises
Vehicles
Total
€000
€000
€000
Right-of-use assets
Opening balance
1,147
193
1,340
Additions
514
114
628
Lease contracts discontinued during the year
(344)
(79)
(423)
Depreciation for the year
At 31 December 2024
1,317
228
1,545
Right-of-use assets
Opening balance
1,317
228
1,545
Additions
-
435
435
Depreciation for the year
-
(26)
(26)
(356)
(94)
(450)
At 31 December 2025
961
543
1,504
The income statement reflects the following amounts relating to leases:
2025
2024
€000
€000
Depreciation charge of right-of-use assets
475
423
Interest expense on lease liabilities (Note 27)
34
27
Expenses relating to short-term leases
355
520
Expenses relating to leases of low-value assets
63
35
The total cash payments for leases, including short-term and low-value leases, in 2025 was €965,000 (2024: €1,055,000). The
contractual undiscounted cash flows attributable to lease liabilities as at 31 December 2025 and 2024 are analysed in Note
3.4.
15. OTHER ASSETS
2025
2024
€000
€000
Security deposit held as collateral
5,492
5,384
Other
1,831
3,256
7,323
8,640
2025
2024
€000
€000
Lease liabilities (Other liabilities)
Current
551
448
Non-current
988
1,212
1,539
1,660
BNF Bank Annual Report 2025
156
16. DEFERRED TAX
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
Assets
Liabilities
Net
2025
2025
2025
2024
2024
2024
€000
€000
€000
€000
€000
€000
Differences between depreciation
and capital allowances
-
(474)
(474)
-
(242)
(242)
Impairment allowances
5,820
-
5,820
6,009
-
6,009
Fair value movements on
securities and other investments
501
(107)
394
(181)
(14)
(195)
Tax losses carried forward
799
-
799
-
-
-
7,120
(581)
6,539
5,828
(256)
5,572
Movement in temporary differences during the year 2025 related to:
Movement in temporary differences during the year 2024 related to:
The recognised deferred tax assets and liabilities are expected to be recovered or settled principally after more than twelve
months from the end of the reporting period. The deferred tax assets/liabilities reflected in other comprehensive income
relate to the fair valuation of financial investments measured at FVOCI.
Recognised
At 1
Recognised
in other
At 31
January
in profit
comprehensive
December
2025
or loss
income
2025
€000
€000
€000
€000
Differences between depreciation
and capital allowances
(242)
(232)
-
(474)
Impairment allowances
6,009
(189)
-
5,820
Fair value movements on
securities and other investments
(195)
(95)
684
394
Tax losses carried forward
-
799
-
799
5,572
283
684
6,539
Recognised
At 1
Recognised
in other
At 31
January
in profit
comprehensive
December
2024
or loss
income
2024
€000
€000
€000
€000
Differences between depreciation
and capital allowances
(181)
(61)
-
(242)
Impairment allowances
6,625
(607)
(9)
6,009
Fair value movements on
securities and other investments
332
-
(527)
(195)
6,776
(668)
(536)
5,572
BNF Bank Annual Report 2025
157
17. SHARE CAPITAL
2025
2024
No. of shares
€
No. of shares
€
Authorised
Ordinary shares of €0.7552 each
132,415,254
100,000,000
132,415,254
100,000,000
Issued and fully paid up
Ordinary shares of €0.7552 each
98,707,626
74,544,000
98,707,626
74,544,000
The issued ordinary shares rank
pari passu
for all purposes and, in the event that a poll is demanded, each share entitles the
holder thereof to one vote, to dividends as declared from time to time, and residual assets on liquidation.
18. PERPETUAL CAPITAL NOTES
In October 2016, the Bank issued floating rate perpetual capital notes amounting to an aggregate amount of €5,000,000 at
a rate of 6 month Euribor plus 10% paid semi-annually to JUD Investment Group Limited.
In December 2018 and March 2019, the Bank issued two additional fixed rate perpetual capital notes amounting to an
aggregate amount of €5,000,000 to JUD Investment Group Limited (€4,882,000) and PG Holdings Limited (€118,000). These
notes are subject to an interest rate of 8% paid semi-annually.
All interest payments on perpetual capital notes are cancellable at the discretion of the Bank.
The notes constitute unsecured, undated and subordinated obligations of the Bank; these instruments were redeemable at
par at the discretion of the issuer on 31 December 2021 and are also redeemable at six-month intervals thereafter. These
capital instruments qualify as Additional Tier 1 instruments in accordance with the requirements of Article 52 of the Regulations
(EU) No 575/2013 and are categorised as equity within the Bank’s Statement of Financi al Position under the requirements of
IFRSs as adopted by the EU.
19. RESERVES
Retained earnings
Retained earnings represent earnings not paid out as dividends. Interim profits form part of regulatory Own Funds only once
they are verified by an independent external auditor. The Bank may only make distributions out of eligible profits.
Revaluation reserve
The revaluation reserve is used to record movements in the fair value of debt securities measured at FVOCI, net of deferred
taxation thereon. The revaluation reserve is not available for distribution.
BNF Bank Annual Report 2025
158
20. DEBT SECURITIES IN ISSUE
2025
2024
€000
€000
Face value of bonds
200,000 4.5% Unsecured Euro Bonds 2032
20,000
20,000
Gross amount of bond issue costs
(250)
(250)
Amortisation up to end of year (refer to table below)
165
114
Unamortised bond issue costs
(85)
(136)
Amortised cost and closing carrying amount of bonds
19,915
19,864
Accumulated amortisation of bonds issue costs:
At beginning of year
114
65
Amortisation charge for the year
51
49
At end of year
165
114
On 28 June 2022, the Bank announced the issue of €20,000,000 4.5% subordinated unsecured bonds maturing on 29 July
2032 with an early redemption option held by the Bank on 29 July 2027 and annually thereafter. The bonds were issued on
the Malta Stock Exchange with a fixed interest rate of 4.5% and which are redeemable at their nominal value.
The subordinated unsecured bonds will, in the event of winding up of the Bank, be subordinated to the claims of depositors
and all other creditors. As at 31 December 2025, the contractual amount due at maturity is of €20,000,000 (202 4:
€20,000,000).
21. AMOUNTS OWED TO BANKS AND OTHER INSTITUTIONS
2025
2024
€000
€000
Repayable on demand
18
405
22. AMOUNTS OWED TO CUSTOMERS
2025
2024
€000
€000
Term deposits
506,017
639,952
Repayable on demand
704,007
574,449
1,210,024
1,214,401
Included in ‘Amounts owed to customers’ are deposits of € 35,743,000 (2024: € 18,994,000) held as collateral for loan
commitments, irrevocable commitments under guarantees and import letters of credit.
BNF Bank Annual Report 2025
159
23. OTHER LIABILITIES
2025
2024
€000
€000
Bills payable
4,645
5,550
Accounts payable and sundry creditors
5,567
3,879
Lease liabilities (Note 14)
1,539
1,660
Obligations under guarantees and other documentary credits
7,577
6,417
Expected credit losses arising on off-balance sheet items
145
281
19,473
17,787
The movement in ‘Obligations under guarantees and other documentary credits’ is as follows:
2025
2024
€000
€000
At 1 January
6,417
7,828
Arising during the year
3,269
3,094
Utilised
(2,070)
(4,489)
Unused amounts reversed
(39)
(16)
At 31 December
7,577
6,417
Depositor Compensation Scheme
The Bank meets its obligations to the Depositor Compensation Scheme (DCS) by settling 70% of the required contribution in
cash, with the remaining 30% maintained as irrevocable payment commitments (“IPCs”). As at 31 December 2025, IPCs
amounted to €3,318,0 00 (2024: €3,078,000). The IPCs are irrevocable, legally binding and enforceable, as confirmed by recent
EU jurisprudence. An outflow under the IPCs would arise only if the Bank had to surrender its credit institution licence or upon
the occurrence of a DCS determination event within the Maltese banking sector. Management assessed the likelihood of
such events, having regard to the Bank’s financial position, regulatory compliance, business model and prevailing
macroeconomic conditions. Based on this assessment, any resulting outflow is expected to occur sufficiently far in the future
such that a provision recognised as at 31 December 2025 is negligible. The Bank will continue to monitor regulatory
developments, local banking sector conditions, and economic indicators, and will reassess its position at each reporting date.
24. ACCRUALS
2025
2024
€000
€000
Accrued interest
6,687
7,506
Accrued operating expenditure
2,988
3,293
Accrued capital expenditure
127
137
Other accrued income
502
534
10,304
11,470
Accrued operating expenditure mainly relates to amounts in relation to the provision of day-to-day services and specific
non-recurring expenditure.
BNF Bank Annual Report 2025
160
25. CONTINGENT LIABILITIES AND COMMITMENTS
As part of its business activities, the Bank enters into various irrevocable commitments and contingent liabilities. Letters of
credit and guarantees (including standby letters of credit) commit the Bank to make payments on behalf of customers in the
event of a specific act, generally related to the import or export of goods.
Commitments to extend credit represent contractual commitments to make loans and revolving credits. Commitments
generally have fixed expiry dates, or other termination clauses. Since commitments may expire without being drawn upon,
the total contract amounts do not necessarily represent future cash requirements. The potential credit loss is less than the
total unused commitments since most commitments to extend credit are contingent upon customers meeting specific
conditions. The Bank monitors the term to maturity of credit commitments because longer-term commitments generally have
a greater degree of credit risk than shorter-term commitments.
Even though these obligations are not recognised on the Statement of Financial Position, they do contain credit risk and are
therefore part of the overall risk of the Bank.
The total outstanding commitments and contingent liabilities are as follows:
2025
2024
€000
€000
Contingent liabilities
Guarantees
16,699
13,267
Documentary credits
634
550
17,333
13,817
Commitments
Undrawn commitments to lend
211,589
196,928
Capital commitments
185
124
Total commitments
211,774
197,052
Capital commitments as at 31 December 2025 relate mainly to fixed assets, while those as at 31 December 2024 relate mainly
to intangible assets.
As at 31 December 2025, expected credit losses arising on contingent liabilities and undrawn commitments to lend amounted
to € 145,000 (2024: €281,000).
Legal claims
Litigation is a common occurrence in the banking industry due to the nature of the business. The Bank has an established
protocol for dealing with such legal claims. Once professional advice has been obtained and the amount of damages
reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its
financial position. As at the end of the reporting period, there were no significant unresolved legal claims.
BNF Bank Annual Report 2025
161
26. INTEREST RECEIVABLE AND SIMILAR INCOME
2025
2024
€000
€000
On loans and advances to banks
520
756
On loans and advances to customers
42,478
41,428
On balances with Central Bank of Malta
1,471
3,624
44,469
45,808
On debt and other fixed income instruments:
Financial investments measured at FVOCI
5,265
3,898
Financial investments measured at amortised cost
729
1,629
Net amortisation of discounts and premiums
(94)
242
5,900
5,769
Total interest receivable and similar income
50,369
51,577
27. INTEREST PAYABLE AND SIMILAR EXPENSE
2025
2024
€000
€000
On amounts owed to banks and other institutions
(102)
(98)
On amounts owed to customers
18,640
19,295
On debt securities in issue
900
900
Amortisation of debt issuance costs
51
49
On lease liabilities
34
27
19,523
20,173
28. NET FEES AND COMMISSION INCOME
2025
2024
€000
€000
Fees and commission income
Credit related fees and commissions
2,005
1,695
Other fees
2,240
2,669
4,245
4,364
Fees and commission expense
Credit related fees and commissions
(225)
(55)
Other fees
(398)
(496)
(623)
(551)
Net fees and commission income
3,622
3,813
BNF Bank Annual Report 2025
162
29. NET TRADING (LOSS)/INCOME
2025
2024
€000
€000
Foreign exchange activities
Net (charge)/income on foreign exchange activities
(2,248)
87
30. EMPLOYEE COMPENSATION AND BENEFITS
2025
2024
€000
€000
Directors’ and executive officers’ remuneration
2,054
2,117
Wages and salaries
Managerial, supervisory and clerical
11,782
10,716
Others
65
120
Total employee compensation and benefits
13,901
12,953
Total employee compensation and benefits include social security contributions of € 741,000 (2024: € 727,000), out of which
€14,000 relate to social security contributions pertaining to key management personnel (2024: € 16,000).
Total fees paid to Non-Executive Directors amounted to €574,450 during 2025 (2024: €705,000).
The average number of persons employed by the Bank during the years 2025 and 2024 was as follows:
2025
2024
Managerial, supervisory and clerical
296
291
Others
2
5
298
296
The average number of persons employed by the Bank in its London Branch for 2025 was 4 (2024: 4).
31. OTHER ADMINISTRATIVE EXPENSES
2025
2024
€000
€000
Auditors’ remuneration – annual statutory audit, excluding VAT
108
113
Information systems and communications
8,132
5,389
Business development
775
694
Corporate services
1,494
1,568
Regulatory expenses
911
1,578
Other
3,980
2,319
15,400
11,661
BNF Bank Annual Report 2025
163
Other remuneration payable to the current auditor for services rendered during the financial year ended 31 December 2025
amounted to € 9,000 in relation to other assurance and non-audit services. In addition, fees amounting to € 6,000 were
charged to the Bank by connected undertakings of the Bank’s current auditor in respect of regulatory advisory services, tax
advisory and compliance services.
In total, from incorporation up to 31 December 2025, the Bank has contributed € 7,743,000 (2024: € 7,181,000) in variable
contributions to the Depositor Compensation Scheme. This represents 0.7% (2024: 0.7%) of the eligible deposits at 31
December 2025. The cash contribution paid during 2025 amounted to € 561,000 (2024: € 1,259,000) and is included within
Regulatory expenses.
32. INCOME TAX EXPENSE
The components of income tax for the years ended 31 December 2025 and 2024 are:
2025
2024
€000
€000
Income Statement
Current tax
Current tax charge
669
3,705
Change in current tax provision relating to prior year
(72)
-
597
3,705
Deferred tax
Deferred tax movement
(283)
668
(283)
668
Income tax expense
314
4,373
The tax on profit and the result of accounting profit multiplied by the applicable tax rate in Malta of 35% are reconciled as
follows:
2025
2024
€000
€000
Profit before tax
2,934
13,292
Tax at the applicable rate of 35%
1,027
4,652
Tax effect of:
Losses/Income not subject to tax
78
252
Deductibility of return on perpetual capital notes
(360)
(387)
Income subject to different rates of tax
(230)
(144)
Deferred tax previously not recognised
(129)
-
Change in current tax provision relating to prior year
(72)
-
314
4,373
BNF Bank Annual Report 2025
164
33. MOVEMENT IN CREDIT IMPAIRMENT LOSSES
Movement in credit impairment losses during 2025 were as follows:
Write-
downs
Reversals
of write-
downs
Total
€000
€000
€000
Balances with Central Bank of Malta
Stage 1
1
(10)
(9)
Financial investments measured at FVOCI
Stage 1
79
(80)
(1)
Financial investments measured at amortised cost
Stage 1
-
(49)
(49)
Loans and advances to banks
Stage 1
5
(5)
0
Loans and advances to customers
Stage 1, including off-balance sheet items
521
(1,166)
(645)
Stage 2, including off-balance sheet items
164
(273)
(109)
Stage 3, including off-balance sheet items
1,556
(1,256)
300
Bad debts written-off
72
-
72
Total loans and advances to customers
2,313
(2,695)
(382)
Other provisions
128
-
128
Credit impairment losses
2,526
(2,839)
(313)
Movement in credit impairment losses during 2024 were as follows:
Write-
downs
Reversals of
write-
downs
Total
€000
€000
€000
Balances with Central Bank of Malta
Stage 1
6
-
6
Financial investments measured at FVOCI
Stage 1
87
(61)
26
Financial investments measured at amortised cost
Stage 1
2
(6)
(4)
Loans and advances to banks
Stage 1
4
(2)
2
Loans and advances to customers
Stage 1, including off-balance sheet items
517
(2,162)
(1,645)
Stage 2, including off-balance sheet items
151
(384)
(233)
Stage 3, including off-balance sheet items
1,041
(1,052)
(11)
Bad debts written-off
163
-
163
Total loans and advances to customers
1,872
(3,598)
(1,726)
Other provisions
32
-
32
Credit impairment losses
2,003
(3,667)
(1,664)
BNF Bank Annual Report 2025
165
34. EARNINGS PER SHARE (BASIC AND DILUTED)
Earnings per share is calculated by dividing net profit attributable to the shareholders of the Bank as shown in the Income
Statement divided by the weighted average number of ordinary shares outstanding during the year. The Bank has no
instruments or arrangements which give rise to dilutive potential ordinary shares and accordingly diluted earnings per share
is equivalent to basic earnings per share.
2025
2024
Net profit attributable to shareholders (€000)
2,620
8,919
Number of ordinary shares in issue
98,707,626
98,707,626
Earnings per share (€ cents)
2c7
9c0
35. CASH AND CASH EQUIVALENTS
Analysis of balances of cash and cash equivalents as shown in the Statement of Cash Flows:
2025
2024
€000
€000
Statement of Cash Flows
Cash (Note 6)
9,802
9,061
Balances with Central Bank of Malta (excluding Reserve Deposit - Note 6)
97,447
86,824
Loans and advances to banks (Note 8)
27,694
29,162
Amounts owed to banks and other institutions (Note 21)
(18)
(405)
Cash and cash equivalents
134,925
124,642
Statement of Financial Position
Balances with Central Bank of Malta and cash
118,457
106,332
Loans and advances to banks
27,689
29,157
Amounts owed to banks and other institutions
(18)
(405)
146,128
135,084
Balances with contractual maturity of more than three months
(11,210)
(10,457)
Add expected credit losses
7
15
Cash and cash equivalents
134,925
124,642
36. RELATED PARTIES
36.1 Identification of related parties
The majority shareholding of the Bank is held by JUD Investment Group Limited, a subsidiary of Al Faisal International for
Investment Company Q.P.S.C. headquartered in Qatar.
All entities which are ultimately controlled by Al Faisal International for Investment Company Q.P.S.C., together with the other
minority shareholders and entities controlled by them, are considered to be related parties. Key management personnel of
the Bank, being the Bank’s Directors and executive officers, and close family members of key management personnel are
also considered to be related parties. The executive officers, which form part of the Bank’s Executive Committee, are referre d
to within the Statement of Compliance with the Principles of Good Corporate Governance.
BNF Bank Annual Report 2025
166
The Bank’s related party transactions mainly comprise transactions with shareholders and other entities controlled by the
same shareholders. These transactions principally include loans, deposits and issuance of capital notes.
Related party transactions do not impact the Bank’s financial results and financial position taking cognisance of the normal
commercial terms and conditions of such transactions.
36.2 Balances and transactions with shareholders
•
Major shareholder
During the year under review, the Bank entered into the following transactions and had the following outstanding balances
with entities ultimately controlled by Al Faisal International for Investment Company Q.P.S.C, as well as with individuals
forming part of the same group.
2025
2024
€000
€000
Income Statement
Interest and similar expense
1,573
1,917
Statement of Financial Position
Other assets
199
199
Amounts owed to parent (within ‘Amounts owed to customers’)
36,929
45,528
Deposits are on normal commercial terms and are either repayable on demand or, where held as term deposits, have a
contractual maturity not exceeding one year from inception.
Interest payable on perpetual capital notes to the parent during 2025 amounted to € 1,019,000 (2024: €1,107,000). Refer to
Note 18 for the balances of perpetual capital notes held by the parent as at year end.
•
Other minority shareholders
The following transactions were conducted by the Bank with its minority shareholders who were represented on the Bank’s
Board of Directors:
No related party transactions were entered into with minority shareholders during the year ended 2025, as minority
shareholders did not have representation on the Board during the period.
2025
2024
€000
€000
Income Statement
Interest and similar income
-
185
Interest and similar expense
-
18
Other administrative expenses
-
27
Statement of Financial Position
Loans and advances to customers
-
3,308
Prepayments and accrued income
-
-
Amounts owed to customers
-
1,077
Accruals
-
-
Other liabilities
-
-
BNF Bank Annual Report 2025
167
36.3 Transaction arrangements and agreements involving key management personnel
The following banking transactions were carried out with the Bank’s Directors and executive officers, being the Bank’s key
management personnel:
2025
2024
€000
€000
Income Statement
Interest and similar income
3
9
Interest and similar expense
7
4
Statement of Financial Position
Loans and advances to customers
672
1,134
Amounts owed to customers
520
1,273
The above‑mentioned outstanding balances arose in the ordinary course of business and were conducted on substantially
the same terms and conditions as those applicable to comparable transactions with persons of a similar standing or, where
applicable, other employees. Loans outstanding as at the end of the reporting period are secured.
36.4 Compensation to key management personnel
Directors’ remuneration and salaries to executive officers, are separately disclosed in Note 30.
37. DIVIDENDS
During 2025, a dividend of €0.0 23 (2024: €0.0 45) per nominal share of €0.7552 (2024: €0.7552 ), for a total amount of € 2,229,769
(2024: 4,489,300), was declared by the Bank, subject to regulatory approval, for the twelve months ended 31 December 2024
(2024: twelve months ended 31 December 2023).
Subsequent to the end of the reporting period, a dividend of €0.0 13 per nominal share of €0.7552, for a total amount of
€1,309,946, is being proposed by the Board of Directors to be distributed to the shareholders for the twelve months ended 31
December 2025. A resolution to this effect will be proposed at the Annual General Meeting, subject to regulatory approval.
38. STATUTORY INFORMATION
BNF Bank p.l.c. is a public limited liability company domiciled and resident in Malta.
The immediate parent company of BNF Bank p.l.c. is JUD Investment Group Limited, a company registered in Malta, with its
registered address at 35, St Barbara Bastions, Valletta, Malta.
The ultimate parent company of BNF Bank p.l.c. is Al Faisal International for Investment Company, Q.P.S.C., a Qatari Private
Shareholding Company registered under the laws of Qatar with commercial registration number 43094, and with its
registered office situated at 17th Floor, Marriot Marquis Centre, Doha, Qatar.
The ultimate controlling party of Al Faisal International for Investment Company, Q.P.S.C. is H.E. Sheikh Feisal Qassim F. Th.
Al-Thani.
BNF Bank Annual Report 2025
168
39. EVENTS OCCURRING AFTER THE REPORTING PERIOD
There were no significant events subsequent to the financial reporting date that require disclosure to these financial
statements other than the proposed dividends as per Note 37.
Management has also considered the prevailing geopolitical environment, including the ongoing conflict involving the United
States and developments in the Middle East, and has concluded that these matters have not had any impact on the Bank’s
operations, financial position or performance by the date of issue of these financial statements, nor do they give rise to any
matters requiring disclosure as at the date of publication.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report
To the Shareholders of BNF Bank p.l.c.
1 Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of BNF Bank p.l.c. (the “Company” or the “Bank”), which
comprise the statement of financial position as at 31 December 2025, the income statement, statements
of comprehensive income, changes in equity and cash flows for the year then ended, and notes,
comprising material accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
(a) give a true and fair view of the financial position of the Company as at 31 December 2025, and of
their financial performance and their cash flows for the year then ended in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the EU; and
(b) have been properly prepared in accordance with the provisions of the Companies Act, 1995
(Chapter 386, Laws of Malta) (the “Act”) and the Banking Act, 1994 (Chapter 371, Laws of Malta)
(the “Banking Act”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our
responsibilities under those standards are further described in the Auditors’ responsibilities for the audit
of the financial statements section of our report. We are independent of the Company in accordance
with the International Ethics Standards Board for Accountants’ International Code of Ethics for
Professional Accountants (including International Independence Standards) (“IESBA Code”), as
applicable to audits of the financial statements of public interest entities, together with the ethical
requirements that are relevant to our audit of the financial statements in accordance with the
Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the
Accountancy Profession Act (Chapter 281, Laws of Malta) (“APA”), and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Measurement of impairment allowances on loans and advances to customers, including off-
balance sheet elements of those exposures and related disclosures.
Accounting policy 2.6.3 and 2.26 and Notes 3.1, 3.2, 4, 9, 23, 25 and 33, to the financial statements for
further disclosures
Expected credit loss allowance on 'Loans and advances to customers' (€1.03 billion) amounted to €13.24
million. Expected credit loss provision on 'Contingent liabilities’ and ‘Undrawn commitments to lend’
(€228.92 million) amounted to €0.15 million.
The calculation of the expected credit loss ('ECL') involves significant judgement and estimation
uncertainty. Of all the Company’s financial instruments, the most significant impact in terms of
complexities around the measurement of the ECL and of the materiality of the resultant allowances was
in relation to the loans and advances to customers' portfolio (and the related off-balance sheet elements
namely guarantees and undrawn commitments to lend), and specifically on those within the stage 3
portfolio. In that regard, our key areas of audit risk in the Company's calculation of the ECL were the
following:
• Model estimations - Inherently judgmental modelling is used to estimate ECL which involves
determining Probabilities of Default ("PD"), Loss Given Default ("LGD") and Exposures at Default
("EAD").
• Economic Scenarios - Management judgement is applied in determining the selection of (i) forward
looking macroeconomic scenarios, (ii) the associated scenario probabilities and (iii) the material
economic variables which drive the scenarios and the related weightings.
• Identification of a significant increase in credit risk ('SICR') is also a key area of judgement within the
Company's ECL calculation as the application of the SICR criteria determines whether a twelve
month or lifetime provision is recorded.
• Individually assessed stage 3 exposures may be materially misstated if individual impairments are
not appropriately identified and estimated. The calculation of expected credit losses on stage 3
exposures includes a range of estimates of future cash flows and valuation of collateral, which are
inherently uncertain and judgmental.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Key audit matters (continued)
Whilst the PD models are the key drivers of the Company's expected credit loss, alternative recovery
scenarios and probability-weightings for each scenario and future cash flows within the LGD models
have the most significant impact on the magnitude of the resultant allowances, particularly for stage 3
exposures, and are therefore the most significant judgmental element of the Company's ECL modelling.
The disclosures regarding the application of IFRS 9 are important in the context of explaining the key
judgements made, as referred to in this key audit matter, and inputs used to generate the IFRS 9 ECL
results.
Our response
As part of our procedures:
• We tested the design and implementation as well as the operating effectiveness of relevant manual
and automated controls (that is, Information Technology based). More specifically, the following
controls were tested:
— the review and approval of loan credit ratings;
— the review control over the completeness and accuracy of loan exposures' inputs, data and
assumptions keyed into the ECL model;
— the review control over ECL movements; and
— the key controls over past due days calculations.
• We involved our own financial risk modelling specialists to assist us in evaluating the appropriateness
of the Company's IFRS 9 impairment methodologies (including the SICR criteria used) as disclosed
in Note 3.2. For the local exposures, we inspected the model code for the calculation of key
components of the ECL model to assess its consistency with the Company's approved methodology.
On a sample basis, we assessed the reasonableness of the model predictions by comparing them
against independent official predictions. We made enquiries about the Company as to the reasons
for any significant variations identified and assessed the reasonableness of the explanations
provided, against the specialists' expectations on the direction and extent of variations identified. For
the UK exposures, where PDs are generated by an external vendor, we have assessed the vendor’s
underlying methodology and related documentation and have also considered an external data point
for benchmarking purposes.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Key audit matters (continued)
• We involved our own economics specialist to assist us in assessing:
— the appropriateness of the key macroeconomic variables (as set out in note 3.2.3.4 to the financial
statements) as well as the accuracy of macroeconomic data feeding the ECL model;
— the appropriateness of the macroeconomic models used to project forward looking information;
— the appropriateness of the methodology for determining the macroeconomic scenarios used and
the reasonableness of the probability weightings applied to them;
— the appropriateness of the stage determination criteria based on the ECL methodology; and
— the reasonableness of real estate valuations applied by the bank.
• ln evaluating the Company's credit grading process, we have performed credit reviews on a sample
of corporate customers, including also a sample of stage 3 loans and advances to customers. In
performing those credit reviews, we:
— considered relevant internal information available used in the Company's assessment and any
relevant external data in relation to those customers;
— evaluated whether those customers were graded in line with the Company's credit policy; and
— determined whether a SICR was appropriately identified.
In addition, for the selected stage 3 corporate customers, we independently reperformed the impairment
calculation to assess the reasonableness of the Bank's recorded ECL.
• On a sample of loans and advances to customers, we:
— performed testing over key data elements (relating to EAD, PD and LGD models) impacting the
ECL calculation to assess the accuracy of information used by the Company to the underlying
source; and
— reperformed model calculations for arithmetical accuracy for all stages.
• We assessed whether the disclosures in relation to IFRS 9 adequately explain the key judgements
made and significant inputs used in the recognition of expected credit losses as at the end of the
financial reporting period.
Key observation
We have no key observations to report, specific to this matter.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Other information
The directors are responsible for the other information which comprises the:
— General Information,
— Chairman’s Statement,
— Chief Executive Officer’s Review,
— Board of Directors,
— Executive Committee,
— Directors’ Report,
— Statement of Compliance with the Principles of Good Corporate Governance,
— Report of the Compensation and Nomination Committee,
— Five Year Summary, and
— Supplementary Financial Information.
but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and, other than in the case
of the Directors’ Report, and the Statement of Compliance with the Principles of Good Corporate
Governance (the “corporate governance statement of compliance”), on which we report separately
below in our ‘Report on Other Legal and Regulatory Requirements’, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information,
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that (a) give a true and fair view
in accordance with IFRS as adopted by the EU, and (b) are properly prepared in accordance with the
provisions of the Act and the Banking Act. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
The directors are also responsible for overseeing the financial reporting process.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. ‘Reasonable assurance’ is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Consider the extent of compliance with those laws and regulations that directly affect the financial
statements, as part of our procedures on the related financial statement items. For the remaining
laws and regulations, we make enquiries of directors and other management, and inspect
correspondence with the regulatory authority, as well as legal correspondence. As with fraud, there
remains a higher risk of non-detection of other irregularities (whether or not these relate to an area
of law directly related to the financial statements), as these may likewise involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Auditors’ responsibilities for the audit of the financial statements (continued)
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are therefore
the key audit matters. We describe these matters in our auditors’ report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such communication.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
2 Report on Other Legal and Regulatory Requirements
Opinion on the Directors’ Report
The directors are responsible for preparing a directors’ report in accordance with the provisions of article
177 of the Act and Rule 5.64 of the Capital Markets Rules issued by the Malta Financial Services
Authority (the “Capital Market Rules”), and is to include a statement that the Company is a going concern
with supporting assumptions or qualifications as necessary, as required by Rule 5.62 of the Capital
Markets Rules .
We are required to consider whether the information given in the directors’ report for the accounting
period for which the financial statements are prepared is consistent with those financial statements; and,
if we are of the opinion that it is not, we shall state that fact in our report. We have nothing to report in
this regard.
Pursuant to article 179(3) of the Act, we are also required to:
• express an opinion on whether the directors’ report has been prepared in accordance with the
applicable legal requirements; and
• state whether, in the light of the knowledge and understanding of the entity and its environment
obtained in the course of our audit of the financial statements, we have identified material
misstatements in the directors’ report, giving an indication of the nature of any such misstatements.
Pursuant to Rule 5.62 of the Capital Markets Rules, we are required to review the directors’ statement
in relation to going concern.
In such regards:
• in our opinion, the directors’ report has been prepared in accordance with the applicable legal
requirements;
• we have not identified material misstatements in the directors’ report; and
• we have nothing to report in relation to the statement on going concern.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Report on the Corporate Governance Statement of Compliance
Pursuant to Rule 5.94 of the Capital Market Rules, the directors are required to prepare and include in
the Company’s Annual Report the corporate governance statement of compliance (included in the
Annual Report in the statement of compliance with the principles of good corporate governance)
explaining the extent to which they have adopted the Code of Principles of Good Corporate Governance
set out in Appendix 5.1 to Chapter 5 of the Capital Markets Rules, and the effective measures that they
have taken to ensure compliance with those principles. The corporate governance statement of
compliance is to contain at least the information set out in Rule 5.97 of the Capital Markets Rules.
Our responsibility is laid down by Rule 5.98 of the Capital Markets Rules, which requires us to include
a report to shareholders on the corporate governance statement of compliance in the Company’s Annual
Report by expressing an opinion as to whether, in light of the knowledge and understanding of the
Company and its environment obtained in the course of the audit, we have identified any material
misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 (dealing with
the Company’s internal control and risk management systems in relation to the financial reporting
process) and 5.97.5 (where a takeover bid applies). Where material misstatements are identified in
relation to those requirements, we shall, in addition to our conclusion, provide an indication of the nature
of such misstatements. We are also required to assess whether the corporate governance statement of
compliance includes the other information required by Capital Markets Rule 5.97, insofar as it is
applicable to the Company.
We are not required to, and we do not, consider whether the directors’ statements on internal control
and risk management systems cover all the risks and controls in relation to the financial reporting
process or form an opinion on the effectiveness of the Company’s corporate governance procedures or
its risk and control procedures, nor on the ability of the Company to continue in operational existence.
In our opinion, in light of our knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identified material misstatements with respect to the
information requirements referred to in Capital Markets Rules 5.97.4 and 5.97.5, and the corporate
governance statement of compliance includes the other information required by Capital Markets Rule
5.97.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Matters on which we are required to report by the Act, specific to public-interest entities
Pursuant to article 179B(1) of the Act, we report as under matters not already reported upon in our
‘Report on the Audit of the Financial Statements’:
• we were first appointed as auditors by the shareholders on 26 June 2025. The period of total
uninterrupted engagement is one year;
• our opinion on our audit of the financial statements is consistent with the additional report to the audit
committee required to be issued by the Audit Regulation (as referred to in the Act); and
• we have not provided any of the prohibited services as set out in the Accountancy Profession Act
1979 (Chapter 281, Laws of Malta) (the “APA”)
Matters on which we are required to report by the Banking Act and exception by the Act
Pursuant to article 31(3)(a), (b) and (c) of the Banking Act, in our opinion:
• we have obtained all the information and explanations which, to the best of our knowledge and
belief, were necessary for the purpose of our audit;
• proper books of account have been kept by the Company so far as appears from our examination
thereof; and
• the Company's financial statements are in agreement with the books of account.
Furthermore, we have nothing to report in respect of the above matters, where the Act requires us to
report to you, in relation to the Company by exception pursuant to articles 179(10) and 179(11).
Pursuant to article 31(3)(d) of the Banking Act, in our opinion and to the best of our knowledge and belief
and, on the basis of the explanations given to us, the Company’s financial statements give the
information required by law in force in the manner so required.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Report on compliance of the Annual Report with the requirements of the Commission
Delegated Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “European
Single Electronic Format Regulatory Technical Standard” or “ESEF Regulation”), by reference
to Capital Markets Rule 5.55.6 issued by the Malta Financial Services Authority
We have undertaken a reasonable assurance engagement in accordance with the requirements of
Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act, 1979
(Chapter 281, Laws of Malta), the Accountancy Profession (European Single Electronic Format)
Assurance Directive, on the Annual Report for the year ended 31 December 2025, prepared in a
single electronic reporting format.
Responsibilities of the directors for compliance with the requirements of the ESEF Regulation
As required by Capital Markets Rule 5.56A, the directors are responsible for the preparation of the
Annual Report in XHTML format, in accordance with the requirements of the ESEF Regulation.
In addition, the directors are responsible for such internal control as they determine is necessary to
enable the preparation of the Annual Report that is in compliance with the requirements of the ESEF
Regulation.
Auditors’ responsibilities to report on compliance with the requirements of the ESEF Regulation
Our responsibility is to obtain reasonable assurance about whether the Annual Report in XHTML format,
comply in all material respects with the ESEF Regulation based on the evidence we have obtained. As
part of our work, we obtain an understanding of the Bank’s controls relevant to the preparation of the
Annual Report in compliance with the said requirements, but not for the purpose of expressing an
opinion on the effectiveness of the controls in place.
In discharging that responsibility, we:
• obtain an understanding of the internal control system and processes relevant to the application
of the electronic reporting format of the financial statements, including the preparation of the
XHTML format; and
• verify whether the XHTML format was properly applied.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of BNF Bank p.l.c.
Conclusion
In our opinion, the Annual Report for the year ended 31 December 2025 has been prepared, in all
material respects, in accordance with the requirements of the ESEF Regulation, by reference to
Capital Markets Rule 5.55.6.
The Principal authorised to sign on behalf of KPMG on the audit resulting in this independent auditors’
report is Claude Ellul.
KPMG 29 April 2026
Registered Auditors
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All
rights reserved.
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, Pietà, PTA9044,
Malta.
Five Year
Summary
BNF Bank Annual Report 2025
182
Five Year Summary
Statements of Financial Position
As at 31 December
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
ASSETS
Balances with Central Bank of Malta
and cash
118,457
106,332
108,972
124,264
102,410
Cheques in course of collection
1,866
1,863
3,063
6,515
1,327
Financial investments
150,117
189,873
135,215
91,420
72,135
Loans and advances to banks
27,689
29,157
10,922
10,730
11,713
Loans and advances to customers
1,026,299
1,010,378
950,258
903,688
793,093
Derivative financial assets
120
-
100
464
6
Prepayments and accrued income
13,684
13,409
6,119
4,803
3,187
Property and equipment
5,899
5,778
5,440
5,582
5,640
Intangible assets
5,646
3,155
1,004
868
864
Right-of-use assets
1,504
1,545
1,340
1,493
1,830
Other assets
7,323
8,640
7,198
5,269
5,736
Deferred tax assets
6,539
5,572
6,776
7,883
6,757
Current tax assets
3,617
-
-
-
-
TOTAL ASSETS
1,368,760
1,375,702
1,236,407
1,162,979
1,004,698
EQUITY
Share capital
74,544
74,544
74,544
74,544
74,544
Perpetual capital notes
10,000
10,000
10,000
10,000
10,000
Revaluation reserve
(776)
494
(501)
(2,543)
38
Reserve for general banking risks
-
-
-
992
992
Retained earnings
24,826
25,466
22,143
17,296
12,137
TOTAL EQUITY
108,594
110,504
106,186
100,289
97,711
LIABILITIES
Debt securities in issue
19,915
19,864
19,815
19,775
-
Amounts owed to banks and other
institutions
18
405
190
10,168
29,436
Amounts owed to customers
1,210,024
1,214,401
1,083,675
1,006,416
859,152
Derivative financial liabilities
432
1,267
44
29
256
Current tax liabilities
-
4
1,043
1,927
652
Other liabilities
19,473
17,787
15,912
18,960
12,663
Accruals and deferred income
10,304
11,470
9,542
5,415
4,828
TOTAL LIABILITIES
1,260,166
1,265,198
1,130,221
1,062,690
906,987
TOTAL EQUITY AND LIABILITIES
1,368,760
1,375,702
1,236,407
1,162,979
1,004,698
Memorandum items
Contingent liabilities
17,333
13,817
14,322
9,732
9,506
Commitments
211,774
197,052
222,333
255,468
253,534
BNF Bank Annual Report 2025
183
Income Statement
For the years ended 31 December
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Interest receivable calculated using the effective interest
method
- on loans and advances, balances with Central Bank
of Malta and other instruments
44,469
45,808
42,588
29,790
26,312
- on debt and other fixed income instruments
5,900
5,769
3,058
757
286
Interest payable and similar expense
(19,523)
(20,173)
(13,168)
(4,770)
(3,900)
Net interest income
30,846
31,404
32,478
25,777
22,698
Fees and commission income
4,245
4,364
4,083
4,372
4,004
Fees and commission expense
(623)
(551)
(890)
(1,084)
(1,365)
Net fees and commission income
3,622
3,813
3,193
3,288
2,639
Net trading (loss)/income
(2,248)
87
428
206
326
Net (loss)/gains from financial instruments at FVTPL
(313)
632
94
853
1,075
Gains on disposal of debt instruments
2,101
1,387
7
2
399
Other income
-
-
-
-
104
Net operating income
34,008
37,323
36,200
30,126
27,241
Employee compensation and benefits
(13,901)
(12,953)
(11,665)
(10,061)
(9,030)
Other administrative expenses
(15,400)
(11,661)
(10,742)
(7,282)
(6,835)
Depreciation of property and equipment
and right-of-use assets
(974)
(870)
(874)
(910)
(925)
Amortisation of intangible assets
(1,112)
(211)
(273)
(321)
(333)
Movements in expected credit losses
313
1,664
386
656
(1,067)
Profit before tax
2,934
13,292
13,032
12,208
9,051
Income tax expense
(314)
(4,373)
(4,053)
(4,135)
(2,750)
Profit for the year
2,620
8,919
8,979
8,073
6,301
Earnings per share (Basic and Diluted)
2c7
9c0
9c1
8c2
6c4
BNF Bank Annual Report 2025
184
Statements of cash flows
For the years ended 31 December
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Cash flows from operating activities
Interest, fees and commission received
48,347
50,224
45,913
33,842
30,560
Interest, fees and commission paid
(20,916)
(18,556)
(9,899)
(5,031)
(5,361)
Net cash inflows from trading activities
3,240
650
925
508
678
Payments to employees and suppliers
(30,065)
(30,964)
(22,058)
(18,596)
(16,817)
Cash flows from operating profit before
changes in operating assets and liabilities
606
1,354
14,881
10,723
9,060
Movement in operating assets:
Reserve Deposit with Central Bank of Malta
(753)
(1,601)
(1,228)
(834)
(1,050)
Loans and advances to customers
(15,602)
(58,382)
(46,068)
(111,007)
(106,225)
Other assets and cheques in course of collection
1,181
(267)
1,478
(4,771)
161
Movement in operating liabilities:
Amounts owed to customers
(4,449)
130,563
77,131
147,262
82,166
Other liabilities
(281)
1,809
(3,105)
6,680
1,492
Net cash flows (used in)/generated from
operating activities before tax
(19,298)
73,476
43,089
48,053
(14,396)
Income tax paid
(4,230)
(4,745)
(4,930)
(2,595)
(2,799)
Net cash flows (used in)/generated from
operating activities
(23,528)
68,731
38,159
45,458
(17,195)
Cash flows from investing activities
Interest received on financial assets
6,487
4,496
2,323
780
340
Purchase of property, equipment, and intangible assets
(4,354)
(3,147)
(740)
(782)
(957)
Purchase of financial investments
(67,719)
(125,193)
(58,419)
(47,361)
(25,685)
Proceeds from disposal and redemption of
financial investments
102,689
74,949
17,604
24,518
32,727
Net cash flows generated from/(used in) investing
activities
37,103
(48,895)
(39,232)
(22,844)
6,425
Cash flows from financing activities
Return on perpetual capital notes
(1,030)
(1,107)
(1,087)
(914)
(914)
Dividends paid
-
(4,489)
(4,037)
(2,000)
-
Proceeds from issue of debt securities
-
-
-
19,750
-
Principle repayments of lease liabilities
(546)
(457)
(165)
(368)
(409)
Net cash flows (used in)/generated from financing
activities
(1,576)
(6,053)
(5,289)
16,468
(1,323)
Net increase/(decrease) in cash and cash equivalents
11,999
13,785
(6,362)
39,082
(12,093)
Cash and cash equivalents at beginning of year
124,642
110,857
117,219
78,137
90,230
Effect on exchange rate fluctuations on cash and cash
equivalents held
(1,716)
-
-
-
-
Cash and cash equivalents at end of year
134,925
124,642
110,857
117,219
78,137
BNF Bank Annual Report 2025
185
Accounting Ratios
2025
2024
2023
2022
2021
%
%
%
%
%
Net interest income and other operating
income to total assets
2.48
2.71
2.93
2.59
2.71
Operating expenses to total assets
2.29
1.87
1.91
1.60
1.70
Cost to income ratio
92.29
68.84
65.07
61.65
62.86
Profit/loss before tax to total assets
0.21
0.97
1.05
1.05
0.90
Profit/loss before tax to equity
2.70
12.03
12.27
12.17
9.26
Profit/loss after tax to equity
2.41
8.07
8.46
8.05
6.45
Shares in issue (millions)
98.71
98.71
98.71
98.71
98.71
Net assets per share (€ cents)
110.02
111.95
107.57
102
99
Profit/loss per share (€ cents)
2.65
9.04
9.10
8.18
6.38
BNF Bank Annual Report 2025
186
Supplementary
Financial
Information
BNF Bank Annual Report 2025
187
Supplementary Financial
Information
Shareholding Information
As at 31 December 2025, the issued share capital stood at €74,544,000 (202 4: €74,544,000), made up of 98,707,626 (2024:
98,707,626) fully paid up ordinary shares of €0.7552 (202 4: €0.7552) each.
The ordinary shares are held as follows:
No. of shares
JUD Investment Group Limited (C 74331)
91,235,202
PG Holdings Limited (C 8569)
2,222,424
Virtu Investments Limited (C 42860)
1,750,000
Mizzi Organisation Limited (C 813)
1,750,000
SAK Limited (C 3240)
1,750,000
98,707,626
The percentage holdings stand as follows:
%
JUD Investment Group Limited (C 74331)
92.44
PG Holdings Limited (C 8569)
2.25
Virtu Investments Limited (C 42860)
1.77
Mizzi Organisation Limited (C 813)
1.77
SAK Limited (C 3240)
1.77
100.00
Each of the shareholders are entitled to appoint one director in line with the Bank’s Articles of Association. Each ordinary
share entitles the shareholder to one voting right.
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