Banking on it
It looks as if the banking sector is due for quite a shake up. At present the sector is dominated by two heavies, which boast an extensive branch network all over the Maltese islands: HSBC Malta and the Bank of Valletta. These banks still have roots in...
It looks as if the banking sector is due for quite a shake up. At present the sector is dominated by two heavies, which boast an extensive branch network all over the Maltese islands: HSBC Malta and the Bank of Valletta. These banks still have roots in the soil tilled by the old National Bank Group and the local "branch" of Barclays Bank.
The sector contains other, much smaller but very robust banks. Two fairly old local ones are APS Bank, which belongs to the Maltese Curia, and Lombard Bank, which is back to majority foreign ownership. Lombard retained the name it had up to the mid-1970s when it was completely owned by Lombard North Central of the UK and then partly owned by the government. It was subsequently totally privatised.
For a time Lombard seemed to be following a business plan which would see it gradually establish more than a handful of branches. That plan appears to have been shelved. The bank does not have a branch network to speak of. The same can be said of APS Bank, which operates from Floriana and Valletta.
While Lombard Bank is listed on the Malta Stock Exchange, APS Bank did not follow a suggestion floated some years ago that it, too, seek private shareholders.
Other foreign banks have arrived, like Volksbank, Bavac and Fimbank. All have sought to carve out a niche for themselves. They are also exploring cooperation with bigger banks for certain types of loans.
But when it comes to branch banking, the Big Two have it all their own way. They are not even challenged by judiciously located ATMs, though APS and Lombard have glanced in that direction.
All that is about to change and HSBC and BOV are to be challenged on their own turf by a new bank, Banif, originally of Madeira but now extensively active internationally. The Times Business carried a good interview with Banif's CEO last week. It confirmed what I heard from him several months ago, when we were introduced for an informal exchange of views.
The novelty of this bank - in contrast to other foreign-controlled banks that set up here - is that it will have Maltese partners. The interview was rather coy in that regard, mentioning the fact twice without giving any names. In Malta there are no secrets and the Registrar of Partnerships will ensure that, anyway. Perhaps the final form has still to be reached, after some initial turbulence, including dropping of a would-be participant because of the person's political activities.
What is sure is that Malta's Banif will have Joe Sammut as its non-executive chairman. The promoters chose a good pair of hands there, along with a sober and experienced brain. Mr Sammut is not new to banking - he chaired BOV for a while in its early days, when it arose out of the ashes of the National Bank Group. What he does not know about the Maltese economy is not worth knowing. He was in charge of economic planning for many years and in his final stint in the public sector, as a much respected Ombudsman, he did not take his eyes off what was going on.
Banif intends to exploit the new economy initially with retail banking. I should think they aim to have some 10 branches up and running in their first three years of operation. But they will not be the relatively huge branches we have come to know. Banif's branch will be more compact, focusing on the client rather than the architecture.
It obviously remains to be seen to what extent Banif will penetrate the terrain covered by the existing branch network of the Big Two. That network is massively strong because in addition to the usual banking services it provides easy access to bank assurance and a large array of investment products. Banif, its CEO has made clear, will initially focus only on retail banking.
Its deposit and lending rates will tell a lot in regard to its ability to make an impact in an area where the Big Two as well as the Smaller Five already focus as tightly as possible. The promoters have been studying the local scene for quite some time and sound very confident. Which means that they must have something up their sleeve.
The fact they had a very good response to their call for applications could also be significant, given the shortages being experienced by local firms seeking to recruit qualified accountants and even accounts clerks.
The first team is set to be tight, with two Portuguese expatriates leading it. The quality of the staff launching the early drive will be very relevant to its impact. If the take-off is strong and a well-targeted branch network is built up, the Big Two might have to sharpen their competitive edge.
The other development which could lead to a considerably different structure in the banking sector is Lombard Bank's acquisition of majority control of Maltapost. The former postal service has a network of offices reaching many parts of the Maltese islands. Financial expert and former banker Alfred Mifsud has been pointing out its potential to the banking sector for years.
Lombard will have a great challenge to sort out the core activity of Maltapost, which has deteriorated almost progressively in recent years. But their interest as bankers will surely be to exploit the chain of offices. Just by placing an ATM in the better locations, it would offer increased competition to the branch banks. Its new business plan with Maltapost will probably envisage considerably more than that, with retail banking a priority.
The dominance of BOV and HSBC Malta is not about to be eaten away but rather nibbled here and there. Consumers will be banking on increased competition spelling better times for them, especially with bank charges not being as trim as they should be.
(I should add, by the way, that I hold a few BOV and HSBC Malta shares in my portfolio and that I intend to hold on to them.)
The sector contains other, much smaller but very robust banks. Two fairly old local ones are APS Bank, which belongs to the Maltese Curia, and Lombard Bank, which is back to majority foreign ownership. Lombard retained the name it had up to the mid-1970s when it was completely owned by Lombard North Central of the UK and then partly owned by the government. It was subsequently totally privatised.
For a time Lombard seemed to be following a business plan which would see it gradually establish more than a handful of branches. That plan appears to have been shelved. The bank does not have a branch network to speak of. The same can be said of APS Bank, which operates from Floriana and Valletta.
While Lombard Bank is listed on the Malta Stock Exchange, APS Bank did not follow a suggestion floated some years ago that it, too, seek private shareholders.
Other foreign banks have arrived, like Volksbank, Bavac and Fimbank. All have sought to carve out a niche for themselves. They are also exploring cooperation with bigger banks for certain types of loans.
But when it comes to branch banking, the Big Two have it all their own way. They are not even challenged by judiciously located ATMs, though APS and Lombard have glanced in that direction.
All that is about to change and HSBC and BOV are to be challenged on their own turf by a new bank, Banif, originally of Madeira but now extensively active internationally. The Times Business carried a good interview with Banif's CEO last week. It confirmed what I heard from him several months ago, when we were introduced for an informal exchange of views.
The novelty of this bank - in contrast to other foreign-controlled banks that set up here - is that it will have Maltese partners. The interview was rather coy in that regard, mentioning the fact twice without giving any names. In Malta there are no secrets and the Registrar of Partnerships will ensure that, anyway. Perhaps the final form has still to be reached, after some initial turbulence, including dropping of a would-be participant because of the person's political activities.
What is sure is that Malta's Banif will have Joe Sammut as its non-executive chairman. The promoters chose a good pair of hands there, along with a sober and experienced brain. Mr Sammut is not new to banking - he chaired BOV for a while in its early days, when it arose out of the ashes of the National Bank Group. What he does not know about the Maltese economy is not worth knowing. He was in charge of economic planning for many years and in his final stint in the public sector, as a much respected Ombudsman, he did not take his eyes off what was going on.
Banif intends to exploit the new economy initially with retail banking. I should think they aim to have some 10 branches up and running in their first three years of operation. But they will not be the relatively huge branches we have come to know. Banif's branch will be more compact, focusing on the client rather than the architecture.
It obviously remains to be seen to what extent Banif will penetrate the terrain covered by the existing branch network of the Big Two. That network is massively strong because in addition to the usual banking services it provides easy access to bank assurance and a large array of investment products. Banif, its CEO has made clear, will initially focus only on retail banking.
Its deposit and lending rates will tell a lot in regard to its ability to make an impact in an area where the Big Two as well as the Smaller Five already focus as tightly as possible. The promoters have been studying the local scene for quite some time and sound very confident. Which means that they must have something up their sleeve.
The fact they had a very good response to their call for applications could also be significant, given the shortages being experienced by local firms seeking to recruit qualified accountants and even accounts clerks.
The first team is set to be tight, with two Portuguese expatriates leading it. The quality of the staff launching the early drive will be very relevant to its impact. If the take-off is strong and a well-targeted branch network is built up, the Big Two might have to sharpen their competitive edge.
The other development which could lead to a considerably different structure in the banking sector is Lombard Bank's acquisition of majority control of Maltapost. The former postal service has a network of offices reaching many parts of the Maltese islands. Financial expert and former banker Alfred Mifsud has been pointing out its potential to the banking sector for years.
Lombard will have a great challenge to sort out the core activity of Maltapost, which has deteriorated almost progressively in recent years. But their interest as bankers will surely be to exploit the chain of offices. Just by placing an ATM in the better locations, it would offer increased competition to the branch banks. Its new business plan with Maltapost will probably envisage considerably more than that, with retail banking a priority.
The dominance of BOV and HSBC Malta is not about to be eaten away but rather nibbled here and there. Consumers will be banking on increased competition spelling better times for them, especially with bank charges not being as trim as they should be.
(I should add, by the way, that I hold a few BOV and HSBC Malta shares in my portfolio and that I intend to hold on to them.)