Bank of Valletta shares

As I write BOV shares tumbled overnight by three per cent on the government's announcement that its agreement with Capitalia for the joint disposal of their 40 per cent holding was extended by a further six months. One needs here to be reminded that, over a span of merely 12 months, the MSE price for BOV's shares has fluctuated between Lm5.20 and Lm2.25. This is a phenomenon usually associated with risky business companies, not with such a solid well-managed bank operating in a market that guarantees profits even to the inefficient mediocre.

Obviously, the obnoxious speculators have been busy undermining the confidence of the genuine long-term investors in BOV who, understandably, have now come to regard both the government and Capitalia as an albatrosses hung round management's neck. Why can't we, who bought shares when first offered to the public, look to a future when the bank's statute would strictly forbid any one person or institution, directly or indirectly, from holding more than three per cent of the voting equity? A truly Maltese people's bank run professionally without any allegiance to or interference from the government of the day.

Capitalia appears to be in a hurry to dispose of its 16 million shares. It has its own reasons, totally different from the government's, even though both of them jointly appointed Rothschild two years ago to secure them the highest possible price that would not be substantially lower than current ones on the local stock exchange: Politically unacceptable, if anything. The heavy fall, perhaps another one soon, could make things easier. But need this be so?

Writing as an accountant, I honestly feel that the government's obsession to dispose of its 25 per cent holding is unwise, as is absurd the EU's economists' refusal to reduce the country's national debt by an amount that represents a conservative market valuation of its BOV shareholding. Et similia for other potentials. I cannot visualise the ECBank not accepting this as being fair and sensible in its treatment of Malta's national debt criterion for joining the single currency. Especially since there is not much time left in its final assessment exercise, which must be completed in 10 months' time.

My suggestion is that:

1. The government declares its intention not to sell any of its shares before Capitalia has completed its own in toto.

2. Capitalia will seek advice how, at what frequency and on what terms will it partially offload its millions on the local stock exchange, such that current prices be reasonably maintained, or at least not drastically reduced.

3. Alternatively, Capitalia will itself offer its total holding to the bank for a buyback at an undisclosed price.

4. The government will then voluntarily renounce its right to appoint the bank's chairman as a gesture that, besides its intention to retain the bank's Malteseness, it will guarantee no interference at all in its running. I would even suggest that the government gives up its voting power on its shares, enabling it to retain 25 per cent after it has managed to pass a resolution on the mentioned three per cent maximum holding.

BOV has performed well, competing successfully with a world giant. Furthermore, it is allowed to operate in a near-duopoly, certainly an oligopoly, with a euphoric MFSA which refuses even to investigate whether overcharging or efficiency has been the cause of the banks' exaggerated super profits.

Let the government stay on, but only as a dormant partner.