Bank of Valletta chairman, ‘We cannot meet unreasonable demands’ on Lehman perpetuals

The chairman of Bank of Valletta, Frederick Mifsud Bonnici, has defended his bank from claims that it was not upholding all client complaints demanding compensation for a loss in earnings in subordinated bonds by Lehman Brothers, RBS and other institutions.

Mifsud Bonnici made explicit reference to a press conference by Paul Bonello, of Finco Treasury Management, hinting that Bonello was probably aware of BOV's impending presentation of its annual financials today. He also pointed out that he did not break up any negotiations with anyone on the matter.

In a clear reference to criticism levelled at him by Bonello, Mifsud Bonnici said: "Since somebody said I lacked personality I have the whole board of directors sat with me today."

Mifsud Bonnci was appointed this year by the government upon the resignation of Roderick Chalmers, said in a sardonic observation.

In another snide remark he said that "unfortunately" Chalmers and former CEO Tonio Depasquale where not present to dictate proceedings, following claims that the bank's refusal to settle the disagreement with investors were influenced by BOV's former management. 

The chairman defended BOV's handling of the complaints related to the sale of Lehman's perpetuals and other securities, saying the bank could not be expected to compensate people who had "gambled" and bought certain bonds.

"If one of the investors makes an unreasonable compensation claim, the bank cannot be expected to meet unreasonable demands.

"If somebody gambled and bought bonds in Lehmans, the bank cannot compensate for such gambling. These perpetuals were being sold all over Europe as bonds. The bank cannot be accused of misselling."

He added that the bank was acing in its own best interest and said that the bank is ready to listen and speak to everyone as long as the demands are reasonable.

"The bank has absolutely no interest in seeking lengthy and complex legal battles. We want to get over with this chapter as quickly as possible," the BOV Chairman said. However he added that the less the bank speaks about this matter the better, as the bank would be putting itself into a straightjacket.

There are 138 complaints pertaining to the sale of Lehman perpetuals and other securities, 39 of which have been settled, 12 compensation offers pending, 39 not upheld by the bank, and 48 still undergoing investigation by the bank.

The Bank of Valletta Group recorded a satisfactory profit before taxation of €110.7 million for the financial year ended 30 September 2012. This represents a 72% increase over the corresponding figure of €64.4 million pre-tax profit reported in the previous financial period.

Core Operating Profit of €100.3 million for the financial year was very much in line with that of the previous year (FY 2011: €100.2 million), confirming that the retail and corporate businesses of the BOV Group continued to perform steadily notwithstanding the uncertainty in the international financial markets.

Key performance indicators also showed a steady improvement with a 40.7% cost-income ratio, down from 54.7% in 2011; and an advances-to-deposits ratio of 66.7%, down from 68.0% last year.

On 28 June 2012, the bank announced that notwithstanding that irrevocable settlement agreements had been reached with 99% of investors in the La Valette Multi Manager Property Fund, it stood ready to fully cooperate with a file review aimed at identifying any investors who may have been ineligible to invest in the Fund, and to pay to such ineligible investors an additional ex gratia compensation of €0.25 per share.

The board recommended a final gross dividend of €0.13 per share which, taken together with the gross interim dividend of €0.06 per share paid on 24 May 2012, makes for a total gross dividend of €0.19 per share for FY2012.

The total dividend for the year of €0.19 would represent a gross yield of 8.4% by reference to the closing share price of €2.265 per share at 30 September 2012. Similar to last year, the board is also recommending a bonus issue of 1 share for every 9 shares held as on 17 January 2013 by capitalisation of reserves amounting to €30 million increasing the permanent capital to €300 million from €270 million.

Mifsud Bonnici said credit must go to the former chairman and management team as he only took over in July. In looking ahead at the bank's future, Mifsud Bonnici expressed optimism and also called on the government to introduce the private pension reform as soon as possible,

He also said the government must restructure its own entities and make them commercially viable, however Mifsud Bonnici refused to elaborate or explain which entities he was referring to.

BOV is one of the creditors to Enemalta which has debts of over €550 million.