No dividends for Bank of Valletta shareholders as bank sets aside €75m for litigation

Bank of Valletta’s mid-term profits of €88 million have been slashed after the company hived off money to cover three pending litigation cases

BOV presented its half-yearly results for 2018 today
BOV presented its half-yearly results for 2018 today

Bank of Valletta has put aside €75 million from its profits in “litigation provisions” over three pending cases, including the Deiulemar case in Italy, the bank said.

The other cases are the La Valette Property Fund, over which BOV is appealing a decision by the financial services arbiter, and the Falcon Funds that involves losses suffered by Swedish pensioners.

The announcement was made this afternoon when BOV presented its half-yearly results for 2018.

BOV chairman Deo Scerri said the decision to set aside €75 million to cover these three cases meant the bank would not be giving its shareholders a dividend in 2018.

“Conscious of the fact that we will be departing from a long-standing tradition, the board is proposing not to give a dividend for 2018 and instead reinvest all profits back into the bank to ensure financial sustainability, given the litigation provisions,” Scerri said.

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Bank of Valletta loses Italian court appeal on €363 million precautionary warrant

The bank’s profit for the first six months before the litigation provision was €88 million, which dropped to €13 million as a result of the €75 million charge.

Scerri said that the bank was reconsidering its risk appetite by taking all steps to close its trust business, undertake a strategic review of the custody business and an evaluation of its client base. “The bank will be undergoing a de-risking exercise by cutting down on non-core business that delivers very little profit for the risk involved.”

Bank officials said the bank’s balance sheet remained very strong and the litigation cases did not have an impact on profitability.

“The bank decided to strengthen its capital by setting aside €75 million from its record profits to safeguard its position for the future, which is why we decided against a cash dividend,” Scerri said.

BOV has deposits to the tune of €10 billion, issued loans to the tune of €4.5 billion and shareholder funds approaching €1 billion.
Scerri insisted depositors and investors with the bank had nothing to worry about because the company was very liquid and strong. 

Deiulemar case

Earlier this month a court in Torre Anunziata, an Italian town of 40,000 inhabitants, rejected BOV’s appeal and upheld a precautionary warrant of seizure for the sum of €363 million.

The Deiulemar case involves a failed shipping business in which almost half of the people in Torre Anunziata had invested. BOV was roped in legal proceedings because it had held the trusts of the holding company.

The bitten bond holders are seeking €363 million from BOV in what they claim are lost savings that were invested in the shipping company.

BOV legal representative Louis Degabriele said this afternoon BOV was facing a hostile environment in Torre Anunziata. He said the bank is asking for the case to be heard elsewhere in Italy on the bases that it is unlikely to get a fair hearing in a town where many have a vested interest in the case.

Degabriele said the bank has asked the court in Torre Anunziata to refer its appeal to the Italian constitutional court.

“The bank has strong legal arguments but it would be naïve to believe that this alone is enough to win a case because we are also up against a hostile environment in a town that has had to deal with social, economic and political ramifications from this case,” Degabriele said.

Degabriele refuted the €363 million claim made in Italy, insisting the bank had only received three sets of shareholding in trust worth €2,000 each. “The bank never received €363 million through its trust business,” he said.