BOV Group chairman Roderick Chalmers addressed shareholders at the recent AGM, explaining that financial year 2008 was characterised by widespread economic turmoil on an unprecedented scale, almost certainly the worst of a generation.

Although regarded as being respectable in the circumstances, the reported profits for the year of €40.6 million did not meet the record profits registered during the previous financial year and, as is prudent, the board recommended a reduced dividend distribution. The chairman reminded shareholders that the board had long articulated a policy whereby dividend distributions would be related to profits – and that this prudent approach had enabled the bank to strengthen its reserves by €100 million over recent years.

Speaking on behalf of the Board of Directors, Mr Chalmers stated that the recommended final gross dividend to shareholders would be €0.0675 per share which, taken together with the gross interim dividend of €0.1350 per share paid on 28 May of this year, made a total gross dividend of €0.2025 per share for FY 2008. This dividend would be covered 1.5 times by the profits for the year.

The board also recommended that, with effect from 15 January, there would be an increase in the nominal and paid up value of the Ordinary shares in issue from €0.75 to €1.00 per share (the increase to be funded by a capitalisation of reserves), amounting to €33.33 million, and a bonus issue to shareholders of one share for every five shares held. These two moves will further strengthen the balance sheet through the increase of the permanent paid up capital of the bank to €160 million, and will also enhance the affordability and liquidity of the bank’s shares.

Mr Chalmers concluded by saying that the current global recession would make for very challenging conditions in the year ahead. However, he reiterated that the bank is wholly committed to supporting Malta’s economy and its business community, and will continue to be assiduous in its care and attention to its corporate and retail customers who, with their loyalty and trust, have made BOV Malta’s leading bank.

He confirmed that BOV is well placed to face the challenges that the year will bring, and that the bank will continue to provide credit to the economy in a responsible manner and retain its cost-conscious attitude.

Bank of Valletta CEO Tonio Depasquale gave shareholders an overview of the bank’s performance during the financial year. He said that not only had the year been one that presented huge challenges but also one that brought with it significant achievements.

This financial year had seen the largest ever deposit base for the bank and also a record size and health of the loan book. These are two notable figures, confirming the position of BOV as the largest bank in Malta, despite fiercer and more diverse competition.

The CEO went on to mention the adoption of the euro and BOV’s pivotal role in the transition. The currency adoption had caused the bank to incur additional one-time costs but BOV had performed admirably, ensuring that the transition was smooth and painless for all its customers. Responsible for the largest proportion of changeover transactions, BOV more than lived up to its name as the “Euro Bank”.

Financial year 2008 was the third and final year of implementation of the Brand Promise, BOV’s drive towards ensuring that at every point of contact with the client, the experience is one that is mutually beneficial and supportive, one where value is generated immediately and sustained in the long-term.

One aspect of implementation was the customer segmentation strategy, a process that was awarded the IFS Financial Innovation Award as the year’s most innovative strategy of its kind. Not only is the award held in the highest esteem worldwide, but competition came from the biggest names in the industry.

During the year, BOV was named Bank of the Year in Malta 2008 by FT’s publication The Banker and also Best Bank in Malta by the American publication Global Finance.

Mr Depasquale gave a detailed account of the measures taken by the bank to ensure a robust financial infrastructure, one that withstood the impact of the international financial crisis.

Strong solvency with an 11.5 per cent capital ratio and a prudent loan to deposit ratio of below 70 per cent had helped keep the bank in good shape throughout the storm. A conservative liquidity policy approach also ensured that at no point was the bank forced to dispose of assets at unfavourable prices.

The CEO also noted that the €41 million of fair value markdowns are unrealised in nature, and that it was expected that much of the markdown would be clawed back over time on those holdings that the bank chose to hold through to redemption.

Speaking about the financial performance, the CEO stated that the bank’s assets had increased by €544 million, while the deposit base had grown by €322 million, bringing Customer Deposits up to a record €4.6 billion. This was coupled by a record growth of €418 million to a total loan book of €3 billion. The quality of the loan book had also improved, reducing the proportion of non-performing loans to just 4 per cent.

FY2008 was also a record year for the cards business in many ways. Apart from an increase in issued cards and card use, the year saw the adoption of EMV chip & pin, the latest and most secure technology on the market. Rollout of this technology has already started and will be complete by 2010.

More cutting-edge technology was introduced by BOV in the form of a new breed of ATM dubbed “super-ATMs”. These are capable of envelope-less, real-time deposits – a breakthrough that brings unparalleled levels of service, speed and convenience to BOV customers.

The bank is also keeping careful a control of costs within the context of increased salary costs due to a new Collective Agreement that came into force this year.

Concluding his overview of the financial results, the CEO said: “I am proud to announce that the credit rating agency Fitch analysed our financial performance and confirmed our credit ratings while reaffirming our stable outlook. This is a transparent and independent assessment of our prudence and ability to manage our capital and liquidity.”

Mr Depasquale then presented the bank’s efforts towards giving back a portion of its profits to the community within which it operates under the seven pillars of its community programme. He emphasised the bank’s drive in favour of innovative projects and initiatives that contribute towards social and economic development. Among others, the CEO mentioned the completed restoration of the Emvin Cremona paintings at the Sanctuary of Ta’ Pinu in Gozo, a considerable investment that restores the priceless collection to its original glory. “We consider our role within the community as one that extends beyond financial services. The bank values the community as one of its most important stakeholders and is committed to offer its continuous support.”

The CEO concluded by providing an overview of the plans for the next financial year. “We must keep in mind that the new year will continue to be a challenging one – one in which we can expect more conservative growth. Our operations will take the new realities into consideration while leveraging our competitive advantage, underpinned by our commitment to offering excellent customer service. We are approaching the year with a cautious attitude while we continue to seek new business opportunities.

“One important innovation planned for next year is the introduction of American Express cards, a prestigious global franchise that has chosen BOV to handle its brand in Malta. This year we will also be focussing on the image of our brand, making sure that it is aligned with all the foundations established by our brand promise.”

Following the addresses by the chairman and CEO, a total of seven resolutions were put to the meeting. Among others, the shareholders approved the bank’s Profit and Loss Account and Balance Sheet for the year ended 30 September and the Directors’ and Auditors’ Report thereon.

A gross final dividend of €0.0675 per share, which represents a gross payment of €9,000,000 as recommended by the directors, was approved for payment on 18 December.

The meeting approved that all future dividends would be paid directly to shareholders’ bank accounts by electronic transfer. A bonus issue of one for five shares, to be effected on 15 January, was also approved by the shareholders, as was the capitalisation of €33,333,333 from retained earnings for the purpose of increasing the paid up value from €0.75 to €1.00 per issued share.

The meeting reappointed Deloitte & Touche Malta, jointly with Deloitte & Touche United Kingdom, as auditors and authorised the Board of Directors to fix their remuneration.

Following a call for applications for directors pursuant to Article 60 of the bank’s Articles of Association, seven valid nominations were received for the six vacancies on the Board of Directors.

An election was held, following which the Board of Directors of Bank of Valletta is now composed as follows:

• Roderick Chalmers (chairman)

• Joseph Borg

• Joseph Brincat

• George Portanier

• Norman Rossignaud

• Paul Testaferrata Moroni Viani

• George Wells

The Government of Malta and Unicredito are entitled by the Articles of Association to appoint two and one director respectively. The Government re-appointed Roderick Chalmers as Chairman and appointed Dr Gordon Cordina as director. UniCredito appointed Roberto Cassata as director.

The shareholders also approved a resolution authorising the board to co-opt an additional director in circumstances where this was required to meet the conditions of an amendment to the Listing Rules whereby the Audit Committee must include an independent director who is “competent in accounting and/or auditing”.

Resolution 9 passed at the December 2007 AGM authorised the Board of Directors to buy back up to 10 per cent of the company’s shares within specified price ranges. The BOV board reiterated that it would be a sensible precaution for the board to have the power to buy back up to 10 per cent of the company’s shares – hence the resolution passed at the 2007 AGM.

The board believes that it is appropriate that the power to buy back shares be refreshed and extended to December 2010. Any acquisition after June 2009 must be within the stipulated price range of €1.67 to €4.00 per share, duly adjusted to take account of any subsequent bonus issue.