Credit agency modifies BOV's rating

The international credit rating agency Moody's Investors Service has changed the Bank of Valletta's long term foreign currency deposit rating from A3 to Baa1 with a stable outlook, the band said yesterday.

The outlook for the Bank's D+ financial strength rating has been changed from negative to stable. The short-term Prime 2 rating remains unchanged.

Moody's issued the changed ratings following a comprehensive review carried out earlier this year.

In their report, Moody's explained that the change in the long-term bank deposit rating was the result of stricter EU regulations regarding state support which now applied to Malta as an EU member country.

In other words, the ability of the Maltese authorities to provide support to banks in case of need could be constrained by EU regulations regarding state support and competition.

Moody's said similar rating actions have been taken for other banks domiciled in other countries that joined the EU in May.

The agency has also changed the outlook on BOV's financial strength rating from negative to stable "to reflect the bank's improving financial fundamentals, which are underpinned by higher earning power and better asset quality".

Moody's said that "the concerted management efforts to tackle the credit quality problems by strengthening the credit risk management capabilities and enhancing internal controls led to an improvement in asset quality in 2004".

Tonio Depasquale, the BOV's chief executive officer, commented that the change in the long-term deposit rating of the bank was based entirely on considerations extraneous to the bank's performance, namely regulations concerning the government's support capabilities.

"Moody's have also acknowledged the restructuring that has been carried out by BOV in the past few years and the bank's ability to enhance its earnings capacity and profitability," he said.

Mr Depasquale expressed satisfaction at the change in the outlook on the bank's financial strength rating, from negative to stable, adding that the bank's on-going efforts to continually strengthen its fundamentals had been duly acknowledged by the rating agency.