Bank of Valletta plc's (BOV) anxiously awaited results for the year ending September 30 were released after the close of trading on Friday. These show pre-tax profits of €40.6 million - a devastating decline of 60% from last year's €101.73 million. The bank attributed this drop mainly to the effects of the credit turmoil, especially its escalation in the second half of September - two weeks before the bank's financial year end. The largest single item which impacted the performance was the unrealised fair value markdowns totalling €41 million - €14 million of which arose in the ghastly last two weeks. On its own, the declaration of bankruptcy of Lehman Brothers on September 14 resulted in a direct charge of €12.7 million. Earnings per share decreased by an equivalent 61.5% - from 50c9 to 19c6.
BoV noted that policies and precautionary measures adopted have helped mitigate the impact of these events: a) a solid capital base of €100 million, with a group capital adequacy ratio of 11.5%; b) a conservative loan-to-deposit ratio below 70%, so that resort to inter-bank financing to fund lending operations is uncalled for; c) a strong liquidity position with ratios of over 50% - well above the prudent statutory requirement of 30%; and d) a conservative investment portfolio spread over a large number of highly rated sovereign supranational and institutional names with a relatively short weighted average maturity of less than three and a half years.
The adoption of the euro in January had a twofold impact on performance: exchange income was €10 million (43%) below that of the previous year, while the additional one-off costs amounted to €1 million. Overall costs increased by 5%, largely due to a new collective agreement.
Customer deposits increased by €322 million (7.5%) to €4.6 billion, whereas loans and advances to customers (net of impairment allowances) increased by €418 million to €3 billion. The impairment charge for the year of €3.1 million is modest in relation to the total book, but is €3.4 million higher than last year since higher recoveries from impaired accounts were concluded last year.
A final gross dividend of 6c75 per share - 4c39 net of tax, will be paid on December 18 to shareholders who are on the bank's register as at November 10, i.e. trades undertaken up to and including next Wednesday. When added to the gross interim dividend of 13c5 paid in May, this totals a gross 20c25 for the full year, compared to the 39c21 gross dividend paid in 2007.
Additionally, the board is also recommending, effective next January 15, an increase in the nominal and paid-up value of the ordinary shares from €0.75 to €1. This increase will be funded by a capitalisation of reserves amounting to €33.3 million. Furthermore, a bonus issue of one share for every five shares held will be recommended. This will also be funded by a capitalisation of reserves amounting to €26.67 million. These moves will also serve to enhance the affordability and liquidity of the bank's shares.
The board further resolved to recommend additional resolutions: a) renewal of share buy-back authorisation; b) amendments to the Memorandum and Articles of Association in respect of co-option (where appropriate) of a non-executive independent director competent in accounting and/or auditing to ensure compliance with the Listing Rules; electronic payment of dividends; the location of the unlisted shares and debenture registers and the minute book of general meetings.
On the market, the MSE index closed at a fresh 2008 low of 3,361.767, down 1.4% for the week. BOV added 9c on Monday, climbing to €3.49 albeit on very thin trade. Barring a mid-session dip to €3.44 on Wednesday, it was mainly stable around the €3.49 level till Thursday's close. In anticipation of the annual results, Friday saw jittery trading at falling prices spanning €3.45 to €3.35, climbing back to €3.40 in the final deal to close the week unchanged. BoV accounted for the bulk of the week's equity turnover with 43,548 shares traded for a value of €150,254 - 41.5% of the week's total. At the end of the session, the best bid was for 5,500 shares at €3.35 with supply 222 shares at €3.40.
HSBC Bank Malta plc maintained the €2.90 mark on Monday but yo-yoed between €2.85 and €2.90 for the rest of the week, ending Friday unchanged at €2.90. Volume was still weak with 31,219 shares traded for a value of €90,092. At the end of trading, the best bid was for 5,000 shares at €2.85 while supply for the same number of shares was present at €2.90.
International Hotel Investments plc opened the week lower at €0.955, ending the day at €0.95 on 31,243 shares. The only other trade was a 1,000-share deal at 94c on Thursday, for a 2.9% drop on the week.
GO plc's (GO) turnover was restricted to just 4,135 shares negotiated on Wednesday, as the price sank to €1.901 - a 2008 and near 10-year low. At the end of Friday's trading, the best bid was for 1,000 shares at €1.90 with supply of 160 shares starting at €1.95.
Go announced that with effect from last Tuesday a new structure came into effect: chief executive officer David Kay; chief operations officer Norbert Prihoda; chief finance officer Edmond Brincat; chief technology officer Joseph Bugeja; chief information officer Ramana Palepu; and chief human resources officer Michelle Bonnici.
Malta International Airport plc gave up 1.9% to fall to €2.698 on a 1,000-share deal on Monday, tumbling a heavy 5.5% to a 2008 low of €2.55 on Wednesday's four trades for 5,900 shares. MIA was the week's worst casualty, shedding a steep 7.3%. At the end of Friday's session, bids for 1,000 shares were at €2.329 with a supply of 13,200 shares at €2.55.
Fimbank plc (FIM) only traded once on Monday as it shed 2c or 1.25% to $1.58 on a 1,750-share deal. FIM announced on Monday that Armin Eckermann has been appointed Fim Group head banking and deputy to the president.
Lombard Bank plc (LOM) was only active on Friday when 15,400 shares changed hands, down by a whisker to €2.947. An interim directors' statement issued last Thursday expressed satisfaction with the performance of the bank and its subsidiaries, and noted that LOM continues on the path of profitable growth, and remains well positioned to achieve the projections set for the financial year ending December 31.
Middlesea Insurance plc lost 5c to fall to yet another 2008 low of €2.70, with the week's six deals for 853 shares all executed at this price.
Grand Harbour Marina plc too gave up 5c to fall to €2.10 on the week's only two trades totalling 5,000 shares on Monday. Another one-day trader, RS2 Software plc, saw 2.6% shaved off its price in the week's single 2,000-share trade on Thursday at a new 2008 low of €0.75.
Santumas Shareholdings plc was the only positive performer, gaining 10c or 3.3% to €3.10 on one deal for 1,123 shares on Monday.
Plaza Centres plc (PZC) did not trade this week. According to an interim directors' statement issued on Wednesday, no material events or transactions took place for the six-month period ending June 30. PZC also announced that it is planning to refurbish the retail areas of the commercial centre in the first quarter of 2009. The financial position, as reported in the interim results, has remained satisfactory and is in line with the company's projections and expectations. A separate announcement referred to the resignation of Brian Mizzi from his post as a member of the audit committee, and his replacement by C.J. Farrugia.
In the Government Bond market, turnover by value amounted to €1.44 million with 34 deals struck in 15 stocks. In the corporate bond market, there were 36 deals for a total turnover value of €294,580 million. Turnover value in the Treasury Bill market totalled €8.1 million.
This report was provided by J.G.P. Bonello, managing director of Financial Planning Services Limited, of Marina Court, G. Cali Street, Ta' Xbiex, which is licensed by the MFSA to provide investment services, including stockbroking (IS/3608). The company is involved in acting as sponsoring stockbroker and corporate stockbroker. The directors or related parties, including the company and their clients, are likely to have an interest in securities mentioned. E-mail: info@bonellofinancial.com or 2134 4243.