Moody's changes ratings for Bank of Valletta

Bank of Valletta last week announced that international credit rating agency Moody's Investors Service has issued its ratings for the bank following a comprehensive review carried out earlier this year.

The long-term foreign currency deposit rating has been changed from A3 to Baa1 with a stable outlook. The outlook for the bank's D+ financial strength rating has been changed from negative to stable. The short-term Prime 2 rating remains unchanged.

In their report, Moody's explained that the change in the Long Term Bank Deposit Rating is the result of stricter EU regulations on state support, which now apply to Malta as an EU member country.

The ability of the Maltese authorities to provide support to banks in case of need could be constrained by EU regulations on state support and competition. Moody's said similar rating actions have been taken for other banks domiciled in other countries that joined the EU last May.

Moody's have also changed the outlook on BoV's Financial Strength Rating from negative to stable "to reflect the bank's improving financial fundamentals, which are underpinned by higher earning power and better asset quality".

They further commented that "the concerted management efforts to tackle the credit quality problems by strengthening the credit risk management capabilities and enhancing internal controls led to an improvement in asset quality in 2004".

BoV chief executive officer Tonio Depasquale commented that the change in the bank's long-term deposit rating is based entirely on considerations which are extraneous to its performance, namely regulations concerning the government's support capabilities. "Moody's have also acknowledged the restructuring carried out by BoV in the past few years and the bank's ability to enhance its earnings capacity and profitability," Mr Depasquale said. He also expressed satisfaction at the change in the outlook on the bank's Financial Strength Rating, from negative to stable.