Bank of Valletta’s Board of Directors has recommended a special dividend of 5c gross per share over and above a dividend for the year of 11c gross per share.

The proposal follows a reassessment of the BoV Group’s capital structure. Group Chairman Joseph FX Zahra explains, "The bank has traditionally followed a very prudent dividend policy and has built up substantial reserves which are, in the current circumstances, in excess of the Bank’s requirements. A portion of these funds is now being returned to shareholders by way of the ‘special’ dividend. The remaining reserves are more than adequate to sustain the Bank’s operations and capital adequacy requirements".

Mr Zahra also announced that the Board of Directors had approved a bonus issue of one ordinary share for every five held, at no cost to the shareholder.

The bonus issue is being declared out of the Group’s Share Premium Account. "We have taken this decision to reward shareholders for their loyalty and continued support, by capitalising part of the share premium account and releasing value to shareholders in the form of shares, thereby increasing future potential dividend flows to shareholders. The bonus issue reflects the Bank’s wish to strengthen the link between the shareholder and the company," Mr Zahra comments.

Mr Zahra made the announcements while announcing that the Bank of Valletta Group registered an operating profit before tax of Lm14.5 million for the financial year ended 30 September 2002, representing an increase of 0.8 per cent over the profit figure registered last year. This result shows that BoV has managed to sustain profitability levels reflecting a strengthening of the business fundamentals in a market that is becoming ever more competitive and liberalised.

The BoV Group preliminary profit statement for the financial year shows strong balance sheet growth with Group Total Assets increasing by Lm145.6 million (8.3 per cent) to reach Lm1.89 billion (2001: Lm1.74 billion). Customer Deposits have increased by Lm137.8 million (11.1 per cent) to reach Lm1.38 billion (2001: Lm1.25 billion). Concurrently, reflecting BoV’s prudent credit management policy, Net Advances to customers increased by Lm40.6 million (5.6 per cent) to reach Lm763.3 million (2001: Lm722.7 million).

Over the financial year shareholders’ funds increased by Lm10.2 million (9.9 per cent) and amount to Lm113.8 million (2001:Lm103.5 million). Group Net Asset Value per share is Lm2.46 (September 2001: Lm2.24).

Commenting on the Group’s financial results Zahra said, "The financial results we have published today show the strength and resilience of the BoV Group’s operations. We have continued to reinforce ourselves as a major player in the Maltese economy. These results continue to place us as the number one bank in Malta in terms of total assets and customer deposits and position us as the major financier and partner of business".

Mr Zahra went on to say, "We have been maintaining all the way that BoV is a dynamic organisation, capable of responding effectively to market conditions. Over the past year we have taken important decisions which will contribute positively towards the sustained growth of BoV. We have continued to follow a prudent credit management policy, improving asset quality whilst preserving profitability levels.

"We have entrenched a cost-efficiency operation within our organisation structure to ensure that we approach cost management in a professional and clinical manner. Concurrently, BoV has continued to implement its Euro-Mediterranean internationalisation strategy with the opening of a representative office in Libya in January this year".

The Chairman went on to say that the BoV Group was placing greater emphasis on Customer Relationship Management, developing practices aimed to attract, retain and to deepen customer relationships and improve customer service throughout the Group.

Zahra adds that the bank is looking at the future with confidence and would continue to be guided by a commitment to comply with the highest standards in the financial industry.

He said that the BoV team is determined to follow an ambitious growth strategy in line with its principal objective of strengthening shareholder value.

Money Market Report 28 October - 1 November

Malta Government Treasury Bills

In the primary market for Treasury bills, Government invited tenders for 91-day Treasury bills to mature on 31 January 2003. Applications amounted to approximately Lm66.7 million, while the Treasury issued only Lm29 million bills. Since Lm21 million worth of Treasury bills matured on the same day, outstanding bills increased by Lm8 million to Lm194.4 million.

The weighted average rate resulting from this auction was 3.9394 per cent, down marginally (0.0098 of one percentage point) from the previous 91-day. The latest rate corresponds to a price of Lm99.0274 per Lm100 nominal. The yield resulting from this auction is 0.0106 of one percentage point lower than the Central Bank’s absorption floor. This further reflects the liquidity prevailing in the banking system.

On Tuesday the Treasury invited tenders for 91-day Treasury bills to mature on 7 February 2003. In the following week the Treasury will invite tenders for 91-day bills to mature on 14 February 2003.

During the week under review, turnover in the secondary market amounted to Lm1,164,000. The Central Bank effected net purchases of Lm62,000 in its role as market maker. Deals outside the Central Bank totalled Lm1,100,000.

Central Bank monetary

operations

During the week ending 1 November 2002, excess short-term liquidity in the banking system continued to increase. This week’s surplus was mainly due to the maturity of Lm61 million term deposits and the injection of Lm18 million by the Central Bank against the purchase of foreign currency. This was partly mitigated by the net purchase of Treasury bills by the credit institutions amounting to approximately Lm8 million.

As a result, the Central Bank conducted a term deposit auction on Friday, 1 November 2002. During this auction the Bank absorbed Lm73 million while Lm61 million matured on the same day. Accordingly outstanding term deposits increased to an all time high of Lm164 million. The latest auction was carried out at the weighted average rate of 3.95 per cent, being the floor of the interest rate band of 3.95 per cent - 4.05 per cent at which the Central Bank conducts its weekly auctions for 14-day money.

Inter-bank market

During the week reviewed no inter-bank deals were transacted in the local inter-bank market. Once again this reflects the surplus liquidity position of all the credit institutions.

CBM leaves official interest rates unchanged

The Central Bank of Malta last week left both the central intervention rate and the discount rate unchanged at four per cent.

The decision was taken by CBM Governor Michael C. Bonello following the latest meeting of the Monetary Policy Advisory Council. Bonello explained that though domestic money market interest rates had eased in October, the comparable rates on the currencies of the Maltese lira basket had fallen too, so that the short-term premium on the Maltese lira had remained at a level that was appropriate in the circumstances.

The analysis of economic and financial data undertaken by the Council, in fact, revealed a continuation of prevailing trends. The key indicator of the sustainability of the exchange rate peg, the level of the official external reserves, showed continued strength into October. This suggests a consolidation of the balance of payments position observed during the first half of the year. Information available at this time moreover does not point to pressures on the exchange rate.

Reviewing domestic economic conditions, the Council noted that broad money expanded further in September sustained by growth in the net foreign assets of the banking system. The weakness in credit growth persisted. The Central Bank absorbed the resultant excess liquidity from the banks, thus containing downward pressure on interest rates.

Inflation continued to abate in September and is expected to fall further. Domestic economic activity was unlikely to generate price pressures going ahead in the light of increased pessimism about the timing and extent of the forecast recovery in external demand. However, the Council remained concerned about the deficit on the current account of the balance of payments and the fiscal imbalance.

The Monetary Policy Advisory Council meets again on Thursday, 28 November 2002.

CareMalta Finance announces allotment policy

More than Lm4.2 million worth of bonds was received for the recent CareMalta bond issue and the bond issue was consequently closed on the first day of opening for subscription lists.

With a view to ensuring the widest possible distribution of the bonds CareMalta has decided to adopt the following allocation policy:

Applications submitted under the Employee/Resident Offering will be met in full. Applications received from the general public after opening of subscription lists will be allotted according to the following allocation policy:

Applications for bonds with a nominal value up to and including Lm8,000 will be met in full.

Applications for bonds with a nominal value in excess of Lm8,000 and up to Lm150,000 will be met as follows:

- The first Lm8,000 from the amount applied for will be met in full, whilst 30% of the remaining portion will be allotted.

Applications for bonds with a nominal value in excess of Lm150,000 will be met as follows:

- The first Lm8,000 from the amount applied for will be met in full, whilst 25% of the remaining portion will be allotted.

All allotments will be rounded down to the nearest Lm100.

Allotment letters and refunds of unallocated monies (where applicable) will be mailed in due course. Interest on the bonds commenced on Monday.