Creating syntheses between banking and stockbroking

David Lindsay speaks to Bank of Valletta Stockbrokers Ltd’s Franco Xuereb about BOVSL’s scope of activities, its success in tapping investment potential, investor outlook and the subsidiary’s future prospects

In a nutshell, what is the scope of BOVSL’s activities?
Basically, the scope of BOVSL is to give easy access to stock exchanges to the retail market. Through our set up, we can service our clients through all BOV branches and effect transactions on most stock exchanges over the world.
However, the retail investor is not our only market. We also have quite a few clients who are institutional investors. This sector is always very important in any stockbroking business.
We also provide these two category of clients with advice. On the retail side we help our clients into deciding what to buy or sell and most important we guide them into building a portfolio which reflects, amongst other things, their risk profile.
On the institutional side, we provide corporate finance and advise our corporate clients on diverse areas.
The last time we spoke, in March 2001, BOVSL was just setting up its operations. How would you gauge BOVSL’s success in tapping local investment potential to date?
We launched during a very difficult time of the market and unfortunately, a lot of people have shied away from the markets. Considering this factor, we are still very happy with the results that have been achieved so far. In fact in three years of operations, we already have a database of around 4000 clients.
However, I think that there’s still a lot to be done. In my opinion, there’s still a lot of potential out there which remains untapped and many investment opportunities which the general investing public is not yet aware of. And that’s what we’re working on, to unleash that potential and increase this awareness!
Having been set up in early 2001, BOVSL has been through trying times for the investment community, with the global economic fallout following 9/11, the bursting of the tech bubble and the various accounting scandals on the international stage. The Maltese economy has also felt the repercussions of this turmoil to some extent. How do you see the outlook for the Maltese investor against this backdrop?
Yes, as I’ve just mentioned, we launched during very difficult times. Some had called it a baptism of fire. However, what you mentioned is the past and although you can’t completely discard it, I prefer looking ahead. I think that the Maltese investor has a lot of opportunities ahead.
Our eventual adoption of the Euro will definitely bring about a lot of changes in the way the Maltese investor thinks and acts at the moment. A lot of investors do not venture into foreign markets for the simple reason that they are not ready to take any currency risk and are "stuck" into a thin local market. This however will change completely and we’re already seeing a change in this direction with investors already starting to diversify their portfolios with some Euro holdings.
Investors can make use of BOVSL’s services through its offices in Floriana or alternately through any BOV branch. How would you compare consumer interest between the two options?
You can’t really compare the two options for the simple reason that due to licensing reasons, the services offered are different. At a branch level, we offer execution only services whilst at our offices we offer our whole range of service. We have managed to find the right balance between the services offered through branches and through our offices. We are in constant contact with the reps in our branches and we keep them up to date with any developments.
Just to give you an example, we have recently started to issue Research Notes on all listed companies right after the publication of their interim or final financial statements. Our research department analyses the performance of the company as well as its prospects and potential threats, and we then come up with a buy, hold or sell recommendation.
Could you elaborate on BOVSL’s Share Link service? Does this tie in with the BOV Group’s wider internationalisation strategy?
ShareLink is basically buying/selling international shares, bonds and funds. The client buys or sells under a nominee basis. This makes it much easier for the client to effect the deal rather than holding the shares with a certificate under his own name. Furthermore, the client has no hassle of chasing dividends or interest payments because we do all the administrative work for them including the payment of any withholding tax. The client can just sit at home and receive a credit in his account.
For a number of years now, the BOV Group has embarked on an internationalisation strategy. We don’t think just local anymore. You can’t do that if you want to survive. Next year, with our accession into the EU, Malta will become part of a community and as I mentioned earlier, I believe that the attitudes of the Maltese investors will eventually change. ShareLink is giving local investors access to EU markets and beyond.
Do you see the advent of EU membership changing the landscape of Maltese financial services and its capital market? If so, how?
Yes definitely. First of all the EU Savings Tax directive will and has already changed the attitudes of Maltese investors. In this respect, I think that the extension of the government’s Registration Scheme was a wise move. Hopefully, we shall no longer have money "hidden" away and I think that this could help us tap the local potential which we mentioned earlier. Furthermore, the adoption of the Euro will change the way local investors structure their portfolios. We will still have investors who would want to invest solely in local companies. That will always remain. But I think that some changes need to be done in the local market in order to convince more people to keep their money "local".
One important change, which the regulators need to address, is the way some local bonds are brought to the market. Issuers create a Special Purpose Vehicle, a finance company, with the specific aim of issuing a bond. This in turn then gives a loan to the parent company. Up till then, so far so good. But during the life of the Bond, both investors and financial practitioners have no idea how the parent company is performing. In some cases it’s difficult to give advice to a client whether he should buy or sell that particular bond. Foreign bonds are rated and one can easily assess the bond through its rating history. On the local scene, I dare to say that sometimes a lot of investors have to act upon hearsay. We clearly need to address these issues before it’s too late.
What do you see in the shot and long term for BOVSL? Future products or services?
In the past three years we’ve managed to take a leading share of the local market. We’ll be striving to maintain this leading role and continue to participate actively in the primary market. On the other hand, we shall be concentrating on strengthening our ShareLink service thus facilitating access to foreign markets.
We obviously keep up to date with new legislation and on the look out for new opportunities but I can’t be too specific because the competition is reading this!