Wrong sell-off

Should the government dispose of the State's 25.2 per cent shareholding in the Bank of Valletta plc? Most definitely, yes. Should it proceed with its plans to do so in conjunction with the Banco di Sicila, which hangs on to another 14.55 per cent of the BoV? Most definitely, no.

The Minister of Public Investments, even if he does not have direct experience of the sector, no doubt has professional advice from experienced hands. My own conclusion rests on a broader base than this column. I headed the banking sector for eight years and had negotiated the involvement of the Banco di Sicilia in the Bank of Valletta phoenix, which rose from the warm ashes of the National Bank Group.

To suggest that there was any hidden purpose in the deal to involve the Sicilian bank, is nonsense. To say that the objectives of the lopsided partnership were not reached, is correct. There was little, if any, flow of direct investment to Malta as a result of any demonstrable strenuous efforts by the Sicilian bank.

In the same way, if over a much shorter span, there has been no distinctively positive fall out from the sale of 70 per cent of the former Mid-Med Bank to the HSBC Group. That is the core point of today's column. Why is the government twinning with the Banco di Sicilia to seek a strategic partner?

If the Banco di Sicilia wants to remain in the BoV as a sleeping partner, contributing little to the Group that is commensurate with the dividends they take out of it, that is its privilege. Our constitution protects ownership rights. To bring that bank into a tactical equation that helps the owners to sell their BoV shareholding, is good for them. But not demonstrably so for Malta.

I premise that on my belief that the Bank of Valletta does not need a strategic partner. Meaning - by my reasoning - that the government is mistaken to go about disposing of the State's share in BoV on the strategic-partner basis.

The government can make a public offering of its shares, based on a suitable minimum acceptance price. Maltese small and not-so-small existing and potential investors should not be presumed not to be very interested. The Bank of Valletta has been a success story. There is quite a lot to criticise among its disparate chapters. There is much more to appreciate and praise.

Professionalism has taken deep root, reaching into nourishing terrain hitherto worked more intensively by the old Barclays-Mid Med competition, succeeded and hardened by the HSBC. The bank, under successive committed chairmen - from Joe Agius to incumbent Joe FX Zahra - and the attendant boards of directors, has progressively revolutionised its culture and capabilities.

Its loans and advances portfolio required sharper focus in the context of good practices and cautious Central Bank requirements. Do believe it if you do not as yet: so did - does? - that of HSBC (Malta) after the handling it received from sticky foreign hands.

BoV has also progressed into bank assurance and fund management. It paralleled thereby, in regard to private assets management, the aggressive Mid-Med Bank. It gave no quarter when HSBC took over and began siphoning dividends and other profits out of Malta. That, of course, was within the rights of HSBC. But not quite the projected and perceived expectation when 70 per cent of Mid-Med Bank was sold off.

Against that backcloth, why should the BoV need a strategic foreign partner? Granted, yet again - the government should get out of the sector. And, of course, it could do with the one-off Lm60 million or so it should receive from the sell-off. But, I hold, that receipt can be achieved through a public offer to sell the State's shares.

Foreign investors, financial institutions, would be free to participate. Domestic investors would have an equal opportunity. That - in my opinion - should be the way ahead.

There is no need or justification to give the Banco the Sicilia a helping hand. There is every justification to offer a good opportunity to Maltese investors. The small ones - like the two-thirds of the BoV's 15,000 or so equity shareholders who own up to 1,000 shares, and some considerably bigger ones - are very likely to be interested.

To go the way of the Mid-Med Bank, though in a more astute transparent manner, would be to persist in the path of the first error. That, surely, was diabolical enough.