A unique window of opportunity may just be about to open – and the government needs to think carefully about what its strategy will be to exploit it.

Over the past years, banks which required a bailout by the government were forced to relinquish their overseas operations. This is only fair: why should taxpayers support an operation in another member state?

This is why Volksbank had to sell its bank in Malta, why Banif is desperately waiting for its buyout to be concluded, and why Lombard’s Cypriot shareholding is eventually going to be up for grabs.

And now it seems that Unicredit may have to be bailed out – or ‘in’ – which would almost certainly mean that it will have to sell its 14.45 per cent stake in Bank of Valletta.

The Unicredit shares derived from the 40 per cent of the new bank taken up by the Malta Development Corporation when it was formed in 1974. MDC had in turn sold shares to Banca di Sicilia with the remainder going to the Maltese public. In June 2006, Capitalia took over the stake from Banco di Sicilia and, just over a year later, Capitalia merged with Unicredito Italiano by way of incorporation.

However, over the years, Unicredit has done precious little to help BOV, apart from having a representative sit on the board. It has not touched its shareholding – either selling or buying – and has not offered any strategic potential. Other foreign banks came to Malta and still Unicredit remained a sleeping partner, hiving off considerable dividends but giving little in return, a sad oversight at a time when BOV could so sorely have done with leverage to grow its international presence to compete against its bigger and better branded rivals.

Now, a number of Italian banks including Unicredit are floundering, with over €200 billion in non-performing loans – and that is just loans where the debtor is deemed insolvent. Total impaired loans – a wider net including cases where the debtor has temporary problems or has fallen into arrears – are €360 billion, a third of the eurozone’s total.

Bailouts are now no longer possible, with the EU member states having to opt for bail-ins – but given the amount involved, that may be hard to enforce. Italy is proposing solutions (there is even talk of creating a ‘bad bank’ to absorb losses) but how it saves the bank is less relevant to Malta than the fact that Unicredit might be forced to sell its shares.

UniCredit appointed French investment banker Jean-Pierre Mustier as its chief executive in June but he faces an uphill struggle. The bank’s shares have fallen more than 60 per cent this year, weighed down by investor concerns. Mustier – who took over on July 12 – said he would draft a new strategic plan to boost UniCredit’s capital and profits. Reuters has already reported that it was expected to sell local online bank Fineco, Polish unit Pekao and asset manager Pioneer. Selling the BOV shareholding to raise capital – Unicredit’s core capital ratio is 10.5 per cent – might be an option.

The government needs to be prepared: should it buy the shares itself, thereby increasing its own shareholding to a level that might make BOV interesting to a strategic partner? Should it float the shares to the public, diluting the ‘perceived’ government influence that is tarnishing its reputation? And what about the need to prepare for the National Bank compensation?

Unicredit ploughs off a healthy dividend, in return for providing a director on the board, while hanging tightly on to its shares. Surely there are smarter partnerships possible, which would serve BOV better?