Bank of Valletta is shortly to distribute a range of American Express-branded cards after signing a card issuance agreement last October, bank chief executive officer Tonio Depsasquale told The Times Business.
"We are looking forward to bring to our extensive customer base an exclusive proposition based on the benefits, prestige and exclusivity characteristic of the global card expertise of American Express," Mr Depasquale said.
American Express, the leading global payments, network and travel company, was founded in 1850.
"By adding one of the world's most recognised brands to our portfolio, we will be enhancing the product range that is directed at the premium and prestige end of the market," Mr Depasquale added.
Over the next 12 months, Malta's largest financial institution will be increasing its investment banking operations. The project comes in anticipation of a number of opportunities in the short-term, including a handful of initial public offerings and bond issues as local companies seek to raise capital levels. The bank has a long track record in this area, and has provided management and registrar services to numerous public issues.
Recognising the remarkable growth of Malta's funds industry over the past five years, the bank is also to consolidate and widen the provision of its custody services offering.
BoV already provides global custody services, through JP Morgan as sub-custodian, to a number of investment funds. These include both UCITS III Schemes and an array of hedge funds authorised by the Malta Financial Services Authority. They are managed by Malta-based and international fund managers.
Earlier this month, BoV launched its own €35 million, ten-year bond issue bearing a 5.35 per cent coupon, with an over-allotment option of a further €15 million. Its last bond issue was made 10 years ago; a €46 million syndicated loan will mature in June next year.
Mr Depasquale said the €35 million raised will increase the bank's capital adequacy ratio by around one per cent to 13 per cent - the current regulatory minimum is eight per cent. Primarily, it will seek to improve the capital mix between the bank's relatively high Tier 1 capital levels and its Tier 2 capital.
The bond issue was launched in anticipation of a worldwide thrust towards more highly-capitalised banks. Two reports recently commissioned by the UK's Financial Services Authority and the European Commission have hinted that bank regulation would take this direction.
Mr Depasquale said that although the local banking community boasted healthy capitalisation levels - BoV's Tier 1 capital alone stands at 10.5 per cent - future regulations are likely to raise the bar where capital adequacy and liquidity is concerned.
"It is still very early to know what the new obligations will be but there is a 'current' which maintains that the banking system in general was undercapitalised, and therefore not sufficiently insulated against the fallout from the financial crisis," Mr Depasquale pointed out.
"Another major problem stems from the imprudent liquidity management of certain international banks. These institutions were lending much more than their deposits, and were funding the gap on the money markets. When the credit crunch struck, they were unable to refinance their business, and many had to be bailed out.
"This situation did not really affect the local banking sector, which always maintains high liquidity buffers. Bank of Valletta's advances to deposits ratio is 67 per cent. Very simply, for every €100 we have deposited by customers we are lending €67; €33 is kept in cash or quasi-cash."
Even before the financial turmoil, Basel II, the revised international capital framework, required banks to hold enough capital to cover all their risks. Mr Depasquale emphasised that the bank's capital was under "absolutely no pressure", and that the eventual recovery of international financial markets would result in an increase in the fair value of the bank's investment portfolio, strengthening capital even further.
"Bank of Valletta," he emphasised, "gives top priority to capital management, and ensures that it remains always ahead of the curve."
The wider banking community does not expect interest rates to rise in the short term, but Mr Depasquale said the bank's deposits continued to prosper and lending business maintained growth.
"Deposits are the lifeblood of the banking system. In the wake of the credit crisis, we have seen a considerable inflow of funds from abroad, as depositors felt more comfortable in holding their assets within the Maltese banking system, which has proven itself to be stable and strong."
The bank is monitoring the local economic situation closely, particularly the more influential sectors. Tourism accounts for around 20 per cent of GDP, and a slowdown in this sector would have a considerable negative impact given the associated multiplier effect.
"Luckily, there are other sectors which are partly compensating for the reduction we are seeing in tourism and other industries. We are keenly following those which are showing a clear potential for growth; primarily, financial services, pharmaceuticals, ICT, and online gaming," Mr Depasquale said. "These are the dynamic sectors that will play a determining role in the local economy in the coming years."
Mr Depasquale struck a cautious note when asked about the immediate prospects for the Maltese economy. He emphasised that much hinged on the performance of the world economy.
S&P's recent downgrading of the UK's outlook from stable to negative was not good news and could potentially have an effect on Malta. However, the slight upturn in financial markets indicated an anticipation of better prospects in the medium term. "The global economic recovery will be slow and painful," Mr Despasquale explained. "BoV will continue to play its part by providing credit and assisting local entrepreneurs responsibly. In the meantime, we will continue to position ourselves among those institutions which will emerge strengthened from the recession."