Bank of Valletta is to open an office in Brussels, Charles Borg, BoV chief executive officer tells The Sunday Times in an interview.

We must identify and invest in the business sectors of the future

“In line with the Bank’s strategic objectives for the current financial year, the Brussels Representative Office will be complementing the operations of the EU Business Development Department, which is tasked to position the bank as the key intermediary for the local business community to avail itself of EU funding opportunities.

“It is difficult for our clients to find these programmes on their own and we believe it is part of our responsibility to help clients expand and make use of EU funds,” he says.

Besides assisting enterprises tap into EU funded programmes and initiatives, the Brussels Representative Office will further strengthen the bank’s linkages with EU institutions and agencies, including the European Investment Fund and the European Investment bank.

Mr Borg says BoV has always helped small and medium sized enterprises, and over 90 per cent of its corporate clients are SMEs.

He highlights the Jeremie programme, a joint initiative launched by the European Commission and the European Investment Bank to improve access to finance for SMEs, which is administered in Malta by BoV, as a huge “success story”.

“The €51 million Jeremie programme has many benefits for SMEs, such as lower interest rates, between one and one-and-a-half per cent, which is significant and reduced collateral, because the EIB will provide the collateral for you, so it’s a win-win situation for SMEs.”

Mr Borg points out that in the first 10 months of operation 40 per cent of the Jeremie funding (which is a three-year programme) has already been allocated and over €19 million has been sanctioned and given out. Many sectors of the economy have benefitted, he says, such as restaurants, innovation and IT companies.

“A cross section of the Maltese economy has gained from this programme, which is exactly what we want to achieve. The sanctioned amount per application is in the €100,000 to €200,000 region, and this is very encouraging.

“The EIB is extremely happy with Bank of Valletta and we have been ranked first in Europe with regard to the implementation of the Jeremie programme. We anticipate that the whole programme will be taken up soon,” he says.

BoV also has plans in the pipeline for Libya, which Mr Borg says has always been an important market for the bank and its clients.

“There are many opportunities in Libya and people need to take advantage of them. It is a question identifying these opportunities and finding the right partners.

“The model we are envisaging is more or less the same as the Brussels model, but the Libyan market is different to the European one.”

Mr Borg says the BoV office in Libya has always been a catalyst for the identification of partners and trying to assist clients wherever possible. He says that after last year’s revolution the bank witnessed an increased interest from both local and international companies wanting to do business in Libya, even if the situation there has not yet settled completely.

He stresses that there are some business areas which are particularly important for Libyans at the moment, such as medicines, and the bank was facilitating and financing the trade of this sector.

“We have clients who want to expand into the retail sector and the construction business and they consider Libya as a land of opportunity. Things have not yet settled, but the bank has an important role to play, such as finding the best possible partners for clients,” he says.

Mr Borg says the bank has been in Libya for 10 years and has considerable experience in that market. He points out that BoV financed a number of business sectors there such as airlines, hospitals, infrastructural projects, hotels, medicines, energy and the retail sector.

“We have very cordial relations with the banks and the Central Bank. When the situation stabilises we will definitely look into the scale and scope of our operations.”

Mr Borg says BoV is always looking at new technology and identifying new ways of doing banking. He says the bank was responding to changing customer preferences by launching BoV Mobile, which allows customers to make payments and banking transactions, anytime, anywhere, through their smartphones.

“More and more transactions are taking place through alternative means. We believe the next step forward after 24 x 7 internet banking is mobile banking. This mobile technology that we are launching is the first of its kind in Malta making person to person payments from a mobile phone a really convenient and simple process.

“It will become easier and much simpler to pay someone else using a BoV Mobile Pay than to exchange cash or write a cheque, and over the coming weeks and months we will be showcasing its intuitive and easy-to-use product with a view to creating a large base of mobile banking users that would effectively be creating a new payments ecosystem for Malta.

“Today everyone has a mobile, and this new transaction process is truly revolutionary, just like 24 x 7 internet banking was.”

Regarding the performance of the Maltese economy, Mr Borg says the bank was getting different messages.

“Certain sectors are doing extremely well such as the IT, gaming, financial services, services – including tourism, and exports.

“Other sectors are encountering difficulties, such as the construction industry, as there is an over-supply of property on the market, particularly in the middle segment of the property market, including first time buyers and foreigners. As a result people in the ‘soft trades’ such as plumbers and electricians are negatively affected.

“The retail sector, which is a large sector, is passing through a difficult moment. When there is a level of economic uncertainty, consumption is reduced, and the retail sector is immediately hit.”

Mr Borg says the slump in construction is worrying for everyone because the economy is so interlinked. But he stresses that BoV had taken a decision years ago to reduce its involvement in the construction sector, and its exposure to construction is much lower than it used to be.

“BoV is very much oriented towards larger projects, for which there is still a market, as opposed to the smaller four- or five-storey apartment blocks. Many of the large projects have already been sold.”

He adds that BoV always tells the rating agencies that the bank takes property as collateral and its exposure to the construction industry is through this collateral “which does not mean our business is more risky”.

The slump in construction is worrying for everyone because the economy is so interlinked

Asked if he was concerned that Malta could slip into recession after economic growth contracted in the fourth quarter of 2011, Mr Borg says: “The Maltese economy operates within a globalised environment. What happens in Greece affects us. Whatever happens to our major trading partners, Germany, Britain and Italy affects us.

“We are worried about collateral damage hitting Malta, because we are hit indirectly. There is also another factor over which we have absolutely no control, namely the rise in the price of oil, which have caused utility tariffs to increase.”

But he adds that if Malta can continue to maintain its employment rate at a relatively high level, then consumption will remain constant.

“The employment level is critical, and we must all work towards keeping this rate stable. We must identify and invest in the business sectors of the future,” he says.

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