Proceeds to fund long-term projects

Bank of Valletta last week announced the sale at par to the public in Malta and abroad of US$25m 10-year bonds, with each bond having a nominal value of US$500.

The interest rate on the bonds will be at eight per cent per annum and will become due and payable annually in arrears on 2 October, with the first interest payment due and payable on 2 October 2001.

Due to a high demand, however, BOV yesterday said the bond issue will close today. Joseph F. X. Zahra, chairman of the Bank of Valletta Group said during the launch of the Bond Issue 2010 held at the Malta Hilton: "The purpose of the issue is that the proceeds of the Bonds will be used by the bank in the general business of the BOV Group, and most particularly in the financing of long-term development projects in Malta that are due to commence around the end of this year.

Moreover, if during the offer period, the bank will receive applications for bonds in excess of US$25m, the bonds in issue will be increased to accommodate the demand but only to a maximum of US$50m."

He added that "besides being the first Bond Issue in Malta to be denominated in a foreign currency, the Bank of Valletta US Dollar Bond 2010 is also innovative because it has been rated by two major international credit rating agencies, Moodys and Fitch.

"This is in fact the first time a local bond has been rated, and the bank believes that this is the way forward for our local capital markets and the rating of local issues is an appropriate way to encourage an efficient secondary market. The BOV US$ Bond has been rated A3 by Moodys and A- by Fitch, ratings identical to the ratings assigned to the bank itself."

The bank has also filed an application with the Malta Stock Exchange to have these bonds admitted and listed on the exchange. Within four working days of the closing of the application lists, the bank will announce the basis of acceptance of the applications received and the allocation policy to be adopted.

"This bond issue is another important addition to the range of investment opportunities available to Maltese investors, and provides an exciting way in which the investing public can participate in the future development of our islands," Mr Zahra said. Referring to the strong results of the BOV Group for the nine-month period to 30 June, he said "the BOV Group's total assets were at Lm1.55bn, and customer deposits were just over Lm1.1bn, while advances to customers were just over Lm650m."

In the nine months from 1 October 1999 to 30 June 2000, the group's average assets increased from Lm1.3bn in September last year to Lm1.47bn while registering a pre-tax profit of Lm14.5m, a clear indicator of the continuing success of the BOV Group, particularly with these results having been achieved in a period of strong competition from different sectors of the financial community.

"The bank's drive to diversify the sources of revenue and to reduce the reliance on interest income is also leaving positive results, and non-interest income as a percentage of total income for the nine months to June 2000 was 35.5 per cent against the 31 per cent in the previous year. Also, the bank's efforts to contain overhead costs and to streamline its operation are meeting with success and the percentage of these cost to total assets fell from 1.6 per cent last year to 1.5 per cent in the nine months to June 2000," he added.

Speaking about the Group's future projects, Mr Zahra said "as part of an overall group structure review the bank has decided to reintegrate within the bank the operations of two of the group subsidiaries, namely Card

Services Limited and Valletta Investment Bank Limited. "Additionally, within the next few weeks a restructuring of the BOV Group's Organisation Structure will be announced, and a new lean management structure focused on functional responsibilities will be effective as from 1 October 2000," he said. The reason behind this exercise is specifically to ensure that the BOV Group, in line with current concepts of management, becomes more effective in its response to the increasing demands of its customers while at the same time maintaining an efficient operation that will continue adding value to its shareholders. The abundant and wide ranging skills at all levels of our organisation will be fully exploited to maximise customer satisfaction. After all, we strongly believe that our customers deserve the best we can provide both in terms of content of product as well as quality," added Mr Zahra.

Mr Zahra also explained that these measures will ensure the continuing success of a customer-centric BOV Group and will be complemented by other initiatives reaching implementation stage such as the strategy of relationship banking and the implementation of the new IT platform.