Following Bank of Valletta’s half yearly results I made some inquiries to the Chairman of the bank Gordon Cordina. The bank is being extremely secretive over details that are quite positive in its regard, but a culture of secrecy and incompetence prevents the bank from giving full and clear answers.
The bank is in a very good position due to this high-interest scenario, but this scenario may very well change again putting back the bank in its old and usual challenge of having too much cash and little investments.
The bank has taken out €1 billion of its cash reserves from its Central Bank and invested €700 million of this cash mostly in US treasuries and another €300 million as credit to its customers. Note that the bank has so much cash available on its hands that it is using this cash for loans to its own customers. BOV has always had the problem of having too much cash, and this problem was a serious challenge in a low interest rate environment.
Chairman Gordon Cordina has not disclosed what the investments made were but sources at the bank tell me that a considerable part of this purchase was short-dated US Treasuries yielding up to 3%. The bank is making a good risk-free profit from this system.
Sources at the bank told me that a share-buyback is definitely going to happen and the study about this is just an excuse to pave the way for the bank to initiate it. This also explains why are investors are very happy to buy BOV right now. The bank has not yet disclosed the amount of shares it will be buying back, but this will definitely help positive price action for the bank’s stock.
Most of the bank loans are still based on property and the bank is basically Malta’s real-estate credit institution. This is the bank’s reaction to the question on where the loans are going
The growth in the credit portfolio amounted to €371 million with €143 million being commercial loans, €211 million being home loans and €17 million being personal loans. The growth in the commercial portfolio was diversified with key sectors of the economy benefiting from such credit including service industries, ICT, manufacturing, accommodation, wholesale and retail and real estate amongst others.
The bank did not confirm that its clients are taking on more debt.
Overall, the bank is in a very good position, but it’s age-old problem remains, that it has too much cash on its hands and it doesn’t know what’s going to do with it.
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