As a BOV shareholder, in and out over a number of years, I have followed closely the bank’s ups and downs and cannot but agree with the editorial (May 7) headed ‘BOV shareholders owed an explanation’.

BOV shareholders have suffered from the losses incurred by the bank through claims it has been forced to meet in regard to its defunct Property Fund (€3.4 million plus interest and charges) and the Swedish Pension Agency case (€26.5 million).

But these losses are overshadowed by the recently announced amicable settlement of €182.5 million in connection with the Deiulemar Italian shipping group bankruptcy which resulted in a claim by the curators of €363 million against BOV, made through the Italian courts in November 2014.

I start by looking back to the bank’s 2016 report (shortly before the first signs of trouble with a trust set up for Deiulemar became public knowledge) when the then chairperson, John Cassar White, reported a pre-tax profit of €145.9 million, which included a one-time gain of €27.5 million from the acquisition of BOV’s shares in VISA Europe on its takeover by VISA Inc. The bank was then riding high paying good dividends to shareholders annually.

Those were the days when the bank was euphoric about its performance.

Financial consultants such as Alfred Mifsud (who, later, was appointed as one of the bank’s directors in December 2019) stated in an article (‘Flying high as the economy’, November 7, 2017) that the 2016 results “show a performance as stellar as that of the general economy… BOV’s key performance indicators all tell a story of stability and efficiency”.

Only one year later, commenting in the 2017 report (which covered the 15-month period to December 31 as the bank changed its accounting year-end from September to December), the new chair, Taddeo Scerri, sounded a first cautionary note by saying that the bank was reviewing its risk appetite and was continuing with the winding down of its trust business. For the above-mentioned period, BOV reported a pre-tax profit of €174.7 million (€139.76 million annualised). Still a respectable result with a proposed gross dividend payment of €42 million to shareholders.

In the following year, 2018, the bank returned a pre-tax profit of just €71.2 million but this after making a special litigation provision of no less than €75 million mainly to cater for the Deiulemar case as, by then, legal proceedings had been instituted in Naples against BOV. I quote from the chair’s statement and the wider information given in the review of the then CEO, the late Mario Mallia.

“The bank is currently involved in a number of litigation cases, the most material of which arose from its past involvement in trust and custody business. Management remains convinced, on the basis of counsel’s advice, that the bank’s legal position in these cases is strong. Nevertheless, the board has deemed it prudent to set aside the amount of €75 million as a provision against potential losses from litigation and claims. This is a judgment call based on the situation prevailing as at December 2018, and is subject to ongoing review in the light of developments.”

Shortly before the 2019 AGM, BOV had suffered a cyberattack in February when 11 fraudulent payment transactions for the equivalent of €12.9 million were made. This, and the COVID pandemic, resulted in the AGM scheduled for May being postponed to November, by which time it was reported that the bank had recovered about €10 million of the funds taken fraudulently.   

Shareholders’ funds are going to be eroded by a further €102.5m- Anthony Curmi

When referring again in his 2019 statement to the Deiulemar litigation, the chair recalled that this was “a legacy of a trust structure from 2009, that could be decided against the bank in the court of first instance”. For that reason, the board decided to increase the litigation provision covering the two main claims by a further €25 million to €100 million.

In one of the notes to the accounts it was stated that “€100 million is deemed to better reflect any resultant outflows including potential protracted legal costs and a negotiated settlement”.

As a result of this, and after accounting for “additional costs associated with a transformation programme of €23.9 million”, the bank reported a pre-tax profit of €89.2 million; somewhat better than in 2018. A proposed gross dividend of 2.64c was eventually not paid due to a ruling of the European Central Bank that affected all banks in the EU.

Since then, BOV shareholders have remained without any dividend income. In his statement dated March 30, 2021, accompanying the 2020 report, the new chairperson, Gordon Cordina (appointed October 2020) said that “the regulators are not recommending the distribution of dividends, so as to ensure that the bank is well positioned to meet the high standard on capital and support the local economy till the end of the pandemic”.

No wonder, as BOV returned a pre-tax profit of a mere €15.2 million (after a net increase of €65.1 million in net impairment losses), down by €74 million from 2019. This was attributed to the impact on businesses most affected by the pandemic crisis, in sectors such as tourism, accommodation, restaurants etc.

On the Deiulemar litigation, CEO Rick Hunkin stated that “the claim remains outstanding and continues to be significant. The group is adamant, based on robust legal opinions (including one from Italy’s leading independent and specialist authority in these cases) that this claim is wholly without merit”. He further stated that “the board considered that it makes commercial sense for the group to seek to resolve this claim at a level not exceeding the potential cost impact… No additional provision for litigation over that taken in the past two years is considered necessary and we will exhibit strong resolve until the issue is closed”.

Yet, in a statement made by BOV – on May 5,2022 – the bank announced that an amicable agreement has been reached for the claim to be settled at €182.5 million.

The impression given is that this is very good news as the amount is about half of the curators’ original claim of €363 million. However, the fact remains that the specific provision made by BOV for this claim stands at only €80 million and, thus, shareholders’ funds are going to be eroded by a further €102.5 million. Surely not something for one to blow his trumpet!

BOV has announced that its 2022 AGM is to be held virtually, for the third year running, on June 2 but, at the time of writing, shareholders still await the relative formal notice and documentation including the bank’s 2021 annual report and financial statements.

The above-mentioned statement by BOV made a few days ago on the Deiulemar claim settlement included information on the bank’s financial performance in Q1 2022 but this gave no indication of whether a dividend is being proposed at the forthcoming 2022 AGM.