BOV chairman, Roderick Chalmers, announced that the decision taken by the Board of Directors of Bank of Valletta to distribute an interim dividend of 7.5 cents per share effectively means that nearly 50 per cent of the bank’s half yearly profits are being distributed to shareholders. The remaining share of profits will continue to strengthen the BOV Group’s shareholders’ funds.
Mr Chalmers met licensed stockbrokers and financial intermediaries at a business breakfast held at the Corinthia Palace Hotel in Attard. The meeting, which focused on a detailed analysis of Bank of Valletta’s six monthly results, was also attended by the bank’s top management team.
Answering questions from licensed stockbrokers and financial intermediaries, Mr Chalmers said that despite signs of increasing competition in all areas, the underlying profit trend of the BOV Group is extremely positive and the Board of Directors expects that the improvement in results registered during the first half of this year can be sustained for the second six months.
When asked about the bank’s policy in terms of impairment allowances, Mr Chalmers said, “Today, Bank of Valletta is fully compliant with the banking directives that regulate provisions for impaired lending. Not only, but for the first time, the Board is in a position to take a policy-led proactive approach rather than a regulatory-driven one. In fact, during the past six months we have made considerable effort to upgrade the quality of our loan portfolio. This has also involved a change in policy, allowing us to take a more cautious and prudent approach. Today, we are ahead of the requirements which the banking directives establish. We have taken a more conservative view of the estimated realisable value of collateral on certain accounts. We have also changed our policy on the treatment of suspended interest on impaired accounts. These changes account for a one-off charge of Lm3.5 million we made during the six month under review,” added Mr Chalmers. The chairman also said that BOV is maintaining its market share both in the deposits market as well as in the lending business.
Speaking about the “privatisation” process, Roderick Chalmers said that BOV is operating a “business as usual” policy and is not letting the so called “privatisation” process interfere with the operations of the bank or delay or postpone business decisions.
The chairman was also questioned on the bank’s reaction to Malta’s joining the ERM II as well as the impact which the adoption of the euro will have on the operations of Bank of Valletta. Mr Chalmers said that, as expected, BOV did not experience any significant changes as Malta joined ERM II. “After all,” Mr Chalmers said, “the euro component of the Maltese lira was already at the level of 70 per cent before we joined ERM II. Therefore, the move to have the Maltese lira pegged to the euro, not only did not entail any significant changes but served to reinforce the stability of the exchange rate of the Maltese lira with the eurozone”.
As for the adoption of the euro, Mr Chalmers said this would affect the bank in three ways. It would obviously involve a cost to align its systems to handle the euro currency; it would also affect the exchange earnings which the bank currently makes on euro/Lm transactions; and it would also involve a narrowing of the interest rate margins due to intensification of competition and the alignment of interest rates with those applicable in the eurozone. All these issues have been high on the agenda of BOV’s management for quite some time now and the bank is working on a number of areas which will result in new sources of income.
Mr Chalmers also spoke about the bank’s internationalisation strategy. “We do not have ambitions to open up branches in foreign markets,” said Mr Chalmers. “Our size limits our possibilities, and we have seen the experience of much larger banks than we are which have been negatively affected by expansion into new markets. However, we are supporting our customers who venture into overseas markets, especially in Europe and the Euro-Mediterranean region,” said Mr Chalmers who explained that BOV’s strategy in this regard is to focus on its customer base and to follow its customers in their overseas expansion plans.