The Malta Independent on Sunday
BOV’s increase in share capital will sustain future growth
Helena Grech Bank of Valletta is currently offering 105,000,000 new ordinary shares at a price of €1.43 per new share by way of a rights issue. This will result in an increase in its capital base of approximately €150,000,000.
BOV’s CO Investment Services, Romeo Cutajar, explained that the main objective of the rights issue is to consolidate the long-term financial sustainability of the bank. Being regarded as a local, systemically important, institution by the European Central Bank, BOV is required to hold capital buffers that are higher than those that would be required of less significant banks. As a consequence of the rights issue, the bank will significantly strengthen these regulatory capital buffers, allowing it to exceed them.
The capital increase is also intended to support BOV’s strategic initiatives for the next three years, which will include new business undertakings that will contribute to future earnings growth. In addition, the capital increase will also allow the bank to maintain a prudent dividend payout ratio.
Speaking to The Malta Independent on Sunday, Cutajar highlighted how “BOV is concentrating on expanding income yielding business lines such as asset management, bank assurance and personal lending. He added that digitalisation is also a priority area for the bank. The thinking behind the digitalisation strategy is to keep pace with competitors and compete with FinTech companies that are competing in niche markets such as the card and payment markets.
“Ultimately, we also want to offer a better service to our customers via the digitalisation strategy. In fact, the bank is currently undergoing a transfor- mation to its core banking system. This will cost the bank around €44 million and will be accompanied by a bank-wide change programme that will transform business processes with the aim of providing a higher quality of service and a solid foundation for developing the bank’s future strategy to digitalise its services.
Cutajar said that the idea of raising capital had been floated more than 15 months ago by BOV’s previous chairman, who indicated that, going forward, the bank would have to strengthen its capital buffers. “This was reiterated by our current chairman, as he indicated when he presented the bank’s financial results last year.”
The increase in capital of 105,000,000 shares will result in the bank’s issued share capital increasing from 420,000,000 ordinary shares to 525,000,000 (of a nominal value of €1 per share) constituting an increase of 25 per cent in the issued share capital of the bank. The offer period opened on 8 November and will end on 6 December.
Cutajar quashed the notion that it was the financial crisis that had required BOV to raise its share capital. He stressed that while the financial crisis had resulted in new and considerably more onerous regulations being imposed on banks, the main reason for the rights issue by BOV was, as already explained, indeed a regulatory one. In fact, all banks within the EU – in particular systemically important banks such as BOV – are subjected to such regulations.