Bank of Valletta is to name a successor to chief executive Tonio Depasquale before December 16’s annual general meeting, chairman Roderick Chalmers told The Times Business.
Tonio has prepared the bank for his eventual departure. We are privileged to have the ability to make an internal choice
A sub-committee of the board has been appointed to oversee the succession process, which Mr Chalmers described as “very open and consultative”. The candidate will be appointed from Bank of Valletta’s senior management team.
Mr Depasquale is to retire following the annual general meeting, after 42 years’ service to the bank. He was appointed chief executive in 2004 and has twice acceded to the board’s request to extend his term.
“We are greatly indebted to Tonio for the leadership that he has shown. He has navigated the bank through some turbulent waters,” Mr Chalmers said. “The euro changeover was a significant challenge for the bank which he led with great skill. Under his stewardship, Bank of Valletta has gone from strength to strength, even through the crises of 2008, 2009 and 2011. Tonio’s great achievement and lasting legacy to the bank is that he has pulled together a group of able and skilled senior executives who work effectively as a cohesive leadership team.”
“Tonio has prepared the bank for his eventual departure and we are privileged to have the ability to make an internal choice rather than having to recruit externally. We have the skills-set which gives the bank the benefit of deep local knowledge and continuity.
“Our competitive advantage will never be size or resource. The only way we can match our major competitor is through our quality of service, our profound local knowledge and the often generations of relationships that we have built with our customers.”
Bank of Valletta Group on Friday announced pre-tax profits for the year ended September 30 of €64.4 million, 35 per cent down on 2010’s €98.9 million.
While the core retail and corporate businesses grew by two per cent to reach the €100 million mark, the group’s overall results for the year were impacted by a €24.9 million fair value charge to the financial markets book and a €15 million charge relating to the settlement to investors in the under-performing La Valette Multi Manager Property Fund.
Mr Chalmers said the bank was performing satisfactorily in a challenging environment, where interest rates remained low and customers were exercising increased caution. Bank of Valletta had continued to support business customers whose operations in Libya had been affected by the recent uprising.
Mr Chalmers was confident that the long-term banking relationships with these clients would be strengthened as a result of this support, and that Malta was well-placed to play a part in Libya’s rebuilding.
Deposits grew to a record €5.5 billion, up €339 million on 2010, from both the retail and corporate sides. The increase was partly due to businesses softening demand for credit, delaying decision-making on investment and accumulating cash in the process. Mr Chalmers said these deposit levels were significant and evidence of the high regard in which Bank of Valletta was held, given that there was “no shortage of competition” from attractive offers from other banks and the issuance of considerable government paper.
Mr Chalmers believes that Bank of Valletta is “closer to the end than to the beginning” of the La Valette Multi Manager Property Fund episode, although a number of regulatory issues still needed to be resolved. The bank regarded the 99 per cent acceptance rate of the bank’s settlement offer as manifestation of the investors’ support for the unprecedented step that the bank had taken in a bona fide effort to bring the matter to a conclusion. Bank of Valletta has taken a full charge of the settlement costs and expects to recover some, he added.
The chairman once again acknowledged that where mistakes and errors had been made, Bank of Valletta would learn from them. The bank is reviewing policies, procedures and processes so that they are benchmarked against best-in-class in other developed jurisdictions. “This way,” Mr Chalmers said, “we will learn not just from our errors but also from the collective wisdom of the experience of many other institutions and regulators arising from the 2008-2009 financial crisis.”
Mr Chalmers admitted his greatest priority at this stage was eliminating any perception of bad faith within the bank in connection with redemptions in the fund.
“One thing that is still outstanding – and which I am very keen to put behind us once and for all – is any notion that members of the board, senior management, family and friends were involved in some kind of cabal to take advantage of privileged information relating to the fund and its suspension,” Mr Chalmers emphasised. “That has always been the most serious allegation to me because it is not a question of an error or mistake, it is a question of bad faith. And I do not accept that that happened.
“It is very important that the redemptions investigation is concluded. We have carried out our own internal reviews. The MFSA has been working on its own reviews for a year and it will make its findings public. I am entirely confident that the bank will be found to be without fault in this regard. It is important that that the redemptions issue is put behind us, so that any question of reputational damage arising from bad faith in this matter is dealt with emphatically and conclusively.”
Mr Chalmers said the bank’s customary prudence had served it in good stead in the eurozone crisis. Euro market spreads have widened and the bank’s financial markets book had taken “a bit of a beating” at the end of the financial year.
Bank of Valletta was fortunate, he stressed, that exposure to GIIPS (Greece, Ireland, Italy, Portugal and Spain) sovereigns was just one per cent of the book with a net value of €22 million at the end of the year, as the financial markets team have been proactive in avoiding the more vulnerable European sovereigns. The bank’s 2011 results had taken a charge of €6 million on the exposure.
The chairman said the volatility in the euro markets would linger, and that a lasting solution to the crisis would take some time. With the haircut on Greek debt extended to 50 per cent from 21 per cent, the acceleration of the Basel III regulatory regime, and the expansion of the European Stability Fund mechanism, Europe’s politicians needed more time to deal with their internal fiscal affairs, particularly in countries like Spain and Italy.
“Everybody recognises that the eurozone is too important to walk away from and give up on,” Mr Chalmers said. “The real challenge in the eurozone is that there is one currency, one central bank and monetary policy, but 17 governments in different stages of the electoral process, all held in different levels of regard. Any fiscal alignment process will take time.”
Malta, he added, sat in a micro-economic climate where fiscal discipline had been exercised. The country’s debt-to-GDP and deficit-to-GDP were within European norms, but it was imperative that Malta continued on its current path of fiscal prudence and vigilance.
Bank of Valletta is recommending the payment of a final dividend of €0.08 per share.
If approved by the annual general meeting next month, shareholders will receive a total dividend per share of €0.1425. The full-year dividend is 27 per cent lower than that of 2010.
Additionally, a one-for-eight bonus share issue will be funded by a capitalisation of reserves amounting to €30 million.
Mr Chalmers recalled how Bank of Valletta had exercised self-imposed dividend restraint for many years, even before it became “fashionable” for regulators to require banks to do so. The bank and its shareholders had to be mindful of the fact that Bank of Valletta was a small bank by international standards, and did not have an international group’s treasury to turn to if and when it needed to top up its capital. Over the years, it had been necessary for Bank of Valletta to gradually build its own capital base.
“Our shareholder equity has grown substantially and enabled us to withstand the shocks of 2008, 2009, and 2011,” Mr Chalmers explained. “The regulators now require nine per cent Tier I capital and Bank of Valletta’s stands at 10.5 per cent. It does not need to turn to shareholders at this time as other banks did overseas, diluting shareholder capital and asking them to forgo dividends completely. We must continue to get the balance between paying a fair dividend to shareholders and providing for the long-term needs of the business right.”