The Malta Independent
The sudden` resignation `for personal reasons` of Bank of Valletta`s Chairman Mr Zahra this week must be connected to the sledgehammer politics of Minister Austin Gatt who brashly criticised the Bank`s breach of customer confidentiality regarding an issue related to Malta Freeport`s involvement in a port operation in Brindisi.
Let me make it clear that any breach of client`s confidentiality on the part of a bank is a very serious matter and should be investigated with diligence. However firing wild accusations before having concrete proof of such breach of confidentiality is equally serious especially if it comes from a senior member of the cabinet who is in the process of selling through privatisation an influential equity stake in the same bank.
Every letter has a sender and a receiver and quite often the action demanded by such letter involves a number of other parties who must necessarily get privy to the document. Breach of confidentiality cannot be lightly pinned upon the receiver without first conducting diligence investigations.
And a time when the nation is expecting to get the best terms from its equity stake in Bank of Valletta, any such investigations should be conducted quietly and covertly to ensure that the gem put up for privatisation sale remains polished in the eyes of potential bidders rather than being purposely tarnished for political self-interest at the nation`s expense.
On the eve of privatisation, when the acquirer would expect to appoint its own chairman and other directors on the board of Bank of Valletta to obtain a strong operational control of the Bank, it is in our interest to ensure that the Bank projects an image of stability, progress and continuity.` `The sudden departure of the Bank`s chairman, even before the December annual general meeting where such orderly transitional changes would normally take place, cannot but place a shadow on Bank`s privatisation process.
Mr Zahra was steady hands at Bank of Valletta and he would have been a re-assurance for potential investors that they can rely on an informative and professional hand-over process without any interruption of continuity.` Probably this can still be done given the strong executive team that Zahra has built and is leaving behind, but the perception cannot be the same with Mr Zahra as without him.
Let it be realised that Bank of Valletta`s privatisation is not going to be a piece of cake. Let`s not make false comparison with the sale of Mid-Med Bank. In case of Bank of Valletta the market price of the shares on the Exchange richly values the Bank`s underlying value. At a price earnings ratio exceeding 20 Bank of Valletta`s share price is well above international sector averages for the financial services institutions especially those whose profits come from retail banking rather than private banking/wealth management and investment banking.
In short, the current market price of Bank of Valletta prices in substantial future profit growth and does not carry the bargain tag that Mid-Med sale had when the Bank was sold at a price earnings ratio of less than 10 and at a price just above its book value.
Furthermore the interest in Bank of Valletta from large international banks could be diluted by the fact that they find it unattractive to control less than 50% of the equity but be practically responsible for the total operation including the need to fund the Bank 100% if it should ever need such funding.` Quite a contrast with the sale of Mid-Med Bank when HSBC acquired 70% and were given positive indicators that the private shareholders would be forced to sell out to obtain full control.
Given these circumstances, Ministers would do well to uphold the national interest of obtaining the best from BOV`s equity sale, rather than involve BOV in the political quagmire to deflect attention from the core issues being discussed in the national arena.
Ministers should be wary of invoking professional secrecy to avoid conducting financial matters related to public institutions with transparency. The public has a right to know whether its purse has been forced to incur a cost of several million liri by an irresponsible involvement in a foreign investment by a publicly owned organisation. Deflection attempts to debate whether this cost was incurred by acquiring worthless shares or by taking over a liability of a bankrupt investee company, changes nothing from the substance that we go hit for Lm4 million which are difficult to recover even in the best of circumstances.
Attempts to lay blame on a Labour government of 1998 for conception of this involvement in the Brindisi project is quite like blaming Hitler`s parents for Hitler`s atrocities. A brilliant conceptual idea can still be hopelessly executed and the faults of the poor executive cannot be lightly shifted on the concept creators.
Sledgehammer politics is the last thing this country needs in the quest for consensual approach to national problems.
The sudden` resignation `for personal reasons` of Bank of Valletta`s Chairman Mr Zahra this week must be connected to the sledgehammer politics of Minister Austin Gatt who brashly criticised the Bank`s breach of customer confidentiality regarding an issue related to Malta Freeport`s involvement in a port operation in Brindisi. Let me make it clear that any breach of client`s confidentiality on the part of a bank is a very serious matter and should be investigated with diligence. However firing wild accusations before having concrete proof of such breach of confidentiality is equally serious especially if it comes from a senior member of the cabinet who is in the process of selling through privatisation an influential equity stake in the same bank.
Every letter has a sender and a receiver and quite often the action demanded by such letter involves a number of other parties who must necessarily get privy to the document. Breach of confidentiality cannot be lightly pinned upon the receiver without first conducting diligence investigations.
And a time when the nation is expecting to get the best terms from its equity stake in Bank of Valletta, any such investigations should be conducted quietly and covertly to ensure that the gem put up for privatisation sale remains polished in the eyes of potential bidders rather than being purposely tarnished for political self-interest at the nation`s expense.
On the eve of privatisation, when the acquirer would expect to appoint its own chairman and other directors on the board of Bank of Valletta to obtain a strong operational control of the Bank, it is in our interest to ensure that the Bank projects an image of stability, progress and continuity.` `The sudden departure of the Bank`s chairman, even before the December annual general meeting where such orderly transitional changes would normally take place, cannot but place a shadow on Bank`s privatisation process.
Mr Zahra was steady hands at Bank of Valletta and he would have been a re-assurance for potential investors that they can rely on an informative and professional hand-over process without any interruption of continuity.` Probably this can still be done given the strong executive team that Zahra has built and is leaving behind, but the perception cannot be the same with Mr Zahra as without him.
Let it be realised that Bank of Valletta`s privatisation is not going to be a piece of cake. Let`s not make false comparison with the sale of Mid-Med Bank. In case of Bank of Valletta the market price of the shares on the Exchange richly values the Bank`s underlying value. At a price earnings ratio exceeding 20 Bank of Valletta`s share price is well above international sector averages for the financial services institutions especially those whose profits come from retail banking rather than private banking/wealth management and investment banking.
In short, the current market price of Bank of Valletta prices in substantial future profit growth and does not carry the bargain tag that Mid-Med sale had when the Bank was sold at a price earnings ratio of less than 10 and at a price just above its book value.
Furthermore the interest in Bank of Valletta from large international banks could be diluted by the fact that they find it unattractive to control less than 50% of the equity but be practically responsible for the total operation including the need to fund the Bank 100% if it should ever need such funding.` Quite a contrast with the sale of Mid-Med Bank when HSBC acquired 70% and were given positive indicators that the private shareholders would be forced to sell out to obtain full control.
Given these circumstances, Ministers would do well to uphold the national interest of obtaining the best from BOV`s equity sale, rather than involve BOV in the political quagmire to deflect attention from the core issues being discussed in the national arena.
Ministers should be wary of invoking professional secrecy to avoid conducting financial matters related to public institutions with transparency. The public has a right to know whether its purse has been forced to incur a cost of several million liri by an irresponsible involvement in a foreign investment by a publicly owned organisation. Deflection attempts to debate whether this cost was incurred by acquiring worthless shares or by taking over a liability of a bankrupt investee company, changes nothing from the substance that we go hit for Lm4 million which are difficult to recover even in the best of circumstances.
Attempts to lay blame on a Labour government of 1998 for conception of this involvement in the Brindisi project is quite like blaming Hitler`s parents for Hitler`s atrocities. A brilliant conceptual idea can still be hopelessly executed and the faults of the poor executive cannot be lightly shifted on the concept creators.
Sledgehammer politics is the last thing this country needs in the quest for consensual approach to national problems.
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