One has to hold a doctorate in Theology (or is it Divinity?) to deliver as disastrous an interim report as Bank of Valletta plc's (BoV) so adroitly that no "Oh my God!" reactions are elicited, or divine interventions intoned. BoV chairman Roderick Chalmers, who is also a chartered accountant, did exactly that last Tuesday.
BoV's €25 million (Lm10.7 million) pre-tax profits were 56% down from the €56.6 million (Lm24.3 million) registered over the same period to March 31, 2007. In fairness, in a company announcement issued on January 25 the bank had stated that "the profits for the first half of the current financial year will be below that achieved during the first six months of financial year 2007." This was repeated on April 2 when BoV published the bank's credit ratings as issued by Moody's.
I don't mean to be churlish, but since we now know exactly how much 'below', that announcement certainly qualifies as the understatement of the year. It is like the maître d' at a Michelin-starred restaurant hinting at a lower level menu, and then proceeding to present chicken and chips instead of Chateaubriand.
Let's get this straight: BoV does not operate in a vacuum, and in the light of the massive earthquakes in the global financial markets, it is very much to the credit of BoV's Financial Markets and Investments Division that the bank has come out of this unprecedented turbulence and vicious correction with a pre-tax profit of €25 million. The biggest impact on these results - €26 million - has been fair value markdowns in the bank's top-grade bond portfolio.
On the bright side, the bank has a very high quality rating bond portfolio, a significant 80% of which has a total portfolio duration of up to a maxi-mum of five years. Considering that these holdings include paper issued by HSBC, UBS, General Electric and Citi-group one cannot see such global blue hips not climbing back to par by maturity. This column's role is to report fact and comment thereon, but regulatory restrictions only allow us to deliver advice privately. So for the bank's 17,000-odd shareholders, a tête-à-tête with their stockbroker is the best way forward.
Earnings per share (EPS) decreased by 56% from €0.285 to €0.126. A gross interim dividend of €0.135 per share (€0.0878 net per share) will be paid to shareholders on May 28 who are on the register on May 9, i.e. those who acquire shares by May 6. The impact of euro adoption last January resulted in a cost of €3.4 million - €2.6 million being a decrease in foreign exchange earnings on Lm/€ transactions; €0.8 million in costs directly related to the euro adoption changeover; and a slowdown in revenue during the December 2007 and January 2008 transition period. Non-performing loans continued to improve to 4.31% compared to 5.9% in March 2007. Associates and jointly controlled companies - mainly Middlesea Insurance plc (MSI) contributed a reduction of €1.7 million.
In a holiday shortened four-day week, equity turnover by value slowed to a trickle at €296,797. This marks the second slowest week in equity trading for 2008, minimally above the one-day trading week on January 4, when turnover reached €294,210.42. The MSE index once again hit a fresh 2008 low on Wednesday at 4,487,551, dragged down by two of the large caps, HSBC Bank Malta plc (HSB) and GO plc (GO) which continued to drift south, ending the week 0.24% and 0.17% respectively. The Index closed on Friday at 4,493.97, 0.2% down for the week.
BOV opened the week a fraction lower at €5.189, but closed at the previous Friday's low of €5.19. Investors bided their time prior to the release of the company's half-yearly results on Tuesday as witnessed by the solitary deal for 270 shares at the same price. The loss in profits had minimal effect on Wednesday's trading as the price dropped just 0.2% to €5.179, which is nonetheless a new 2008 low. On Friday, BoV wiped out the loss closing unchanged for the week at €5.19. BoV registered the highest turnover by value at €89,990 as 17,340 shares changed hands. At the end of the week, total bids for 2,967 shares were at €5.18, whereas offers of 2,967 shares started at €5.20.
HSB started the week on a modest decline, ending the day 1c lower at €4.19, marking a new 2008 low. It maintained this price on Tuesday and Wednesday in very thin trade. HSB did not trade on Friday, thus ending the week 0.24% down. Turnover for the five days totalled just 12,768 shares for a value of €53,521. At the end of trading, the best bid was for 500 shares at €4.17, while the best offer for 3,640 shares stood at €4.19.
GO first traded on Tuesday, opening the day 2.9c lower at €2.971 and continued lower closing the day at a 2008 low of €2.95. The day's volume was comparatively strong, at 17,400 shares. It was stable on Wednesday and at Friday's open. It gained 4c5 on a 70-share deal to close the week at €2.995, down a minimal 0.17%. Turnover totalled 21,733 shares for a value of €64,305. At the end of trading, best bids totalled 600 shares at €2.913, with a supply of 4,930 shares at €2.995.
Malta International Airport plc (MIA) was steady at €3.38 on Monday but dropped 1.5% to €3.33 on Wednesday on a single deal for 700 shares. It shed a further 3c on Friday's sole deal for 810 shares to close the week 2.37% lower at €3.30. Total weekly volume was low at 3,225 shares for a value of €10,801. At the end of trading, best bids totalled 1,500 shares at €3.098, with a supply of 4,390 shares at €3.30. MIA announced on Monday that all ordinary resolutions, including the appointment of directors, were approved at the AGM.
International Hotel Investments plc was stable at €1.06 throughout the week. Turnover was very slow with just 6,200 shares for a value of €6,572.
Lombard Bank plc gained 20c to €13.20 on a 115 share trade on Monday but was back at €13 on Wednesday and Friday, ending the week flat at this price. With effect from tomorrow, the share price will be adjusted for the four-for-one share split.
Simonds Farsons Cisk plc was stable at €2.60, with the week's 9,000 shares changing hands at this price. On Friday after close of trading, the company published its financial statements for the year ended January 31, 2008. Pre-tax profit increased by 77% from €2.257 million to €4 million. The EPS increased by 42%, from €0.084 to €0.119. The board will recommend the distribution, out of tax exempt profits, a net final dividend of €0.05316 per share to shareholders on the register on May 30, i.e. those who buy shares by May 27.
These shares only dealt on one day:
Fimbank plc (FIM) lost a cent to $1.91 on Monday on 7,850 shares. FIM announced on the same day that the AGM approved the appointment of John D. Freeman Jr as non-executive director. FIM also announced on Wednesday that following the approval by the AGM of the one-for-five bonus issue and the payment of the scrip dividend, the allotments were completed and the new shares listed on the MSE. The total issued and fully paid share capital of FIM as at April 30, 2008, amounts to 133,193,908 ordinary shares. The shareholders holding 5% or more are Massaleh Investments K.S.C.C. 44.81%, Astrolabe General Trading Contracting Co 5.88%, International Finance Corporation 5.79%, and Mohammed I H Marafie 5.01%.
MSI was active on Tuesday, starting out at €3.401 and rising 0.9% to €3.43.
Crimsonwing plc shed 2.5% to €0.551 in one deal for 2,500 shares on Wednesday.
On the same day, Plaza Centres plc (PZC) shed 0.29% to €1.72 on a 500-share deal. PZC announced on Monday that at the AGM all the ordinary resolutions were approved. Following the resignation of Michael Soler as director Charles J. Farrugia was elected as non-executive director.
Three equities only traded on Friday: 6PM plc saw 8,000 shares changing hands at 75p - the week's worst performer, with the price dropping 3.85%.
Grand Harbour Marina plc claimed the week's best performer spot, gaining 2.22% as 4,300 shares traded and the price reached a new all-time high of €2.30.
Maltapost plc closed flat at €0.75 as 10,777 shares were exchanged.
Datatrak plc (DTK) and Medserv plc (MDS) did not trade this week. DTK announced on Monday that the board meeting has been postponed to May 14, following the delay in the completion of the transactions required to put into effect the restructuring process which was approved by the EGM on April 4. MDS announced on Wednesday that the AGM on April 30 approved all the resolutions presented to shareholders.
In the Government Bond market, turnover by value reached €772,354 with 33 deals struck in 15 stocks. In the corporate bond market, there were 29 deals for a total turnover value of €569,318. Turnover value in the Treasury Bill market totalled €4.65 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.