Creating syntheses between banking
David Lindsay speaks to Bank of Valletta Stockbrokers
Ltds Franco Xuereb about BOVSLs scope of activities, its
success in tapping investment potential, investor outlook and the subsidiarys
In a nutshell, what is the scope of BOVSLs activities?
Basically, the scope of BOVSL is to give easy access to stock exchanges
to the retail market. Through our set up, we can service our clients
through all BOV branches and effect transactions on most stock exchanges
over the world.
However, the retail investor is not our only market. We also have quite
a few clients who are institutional investors. This sector is always
very important in any stockbroking business.
We also provide these two category of clients with advice. On the retail
side we help our clients into deciding what to buy or sell and most
important we guide them into building a portfolio which reflects, amongst
other things, their risk profile.
On the institutional side, we provide corporate finance and advise our
corporate clients on diverse areas.
The last time we spoke, in March 2001, BOVSL was just setting up
its operations. How would you gauge BOVSLs success in tapping
local investment potential to date?
We launched during a very difficult time of the market and unfortunately,
a lot of people have shied away from the markets. Considering this factor,
we are still very happy with the results that have been achieved so
far. In fact in three years of operations, we already have a database
of around 4000 clients.
However, I think that theres still a lot to be done. In my opinion,
theres still a lot of potential out there which remains untapped
and many investment opportunities which the general investing public
is not yet aware of. And thats what were working on, to
unleash that potential and increase this awareness!
Having been set up in early 2001, BOVSL has been through trying times
for the investment community, with the global economic fallout following
9/11, the bursting of the tech bubble and the various accounting scandals
on the international stage. The Maltese economy has also felt the repercussions
of this turmoil to some extent. How do you see the outlook for the Maltese
investor against this backdrop?
Yes, as Ive just mentioned, we launched during very difficult
times. Some had called it a baptism of fire. However, what you mentioned
is the past and although you cant completely discard it, I prefer
looking ahead. I think that the Maltese investor has a lot of opportunities
Our eventual adoption of the Euro will definitely bring about a lot
of changes in the way the Maltese investor thinks and acts at the moment.
A lot of investors do not venture into foreign markets for the simple
reason that they are not ready to take any currency risk and are "stuck"
into a thin local market. This however will change completely and were
already seeing a change in this direction with investors already starting
to diversify their portfolios with some Euro holdings.
Investors can make use of BOVSLs services through its offices
in Floriana or alternately through any BOV branch. How would you compare
consumer interest between the two options?
You cant really compare the two options for the simple reason
that due to licensing reasons, the services offered are different. At
a branch level, we offer execution only services whilst at our offices
we offer our whole range of service. We have managed to find the right
balance between the services offered through branches and through our
offices. We are in constant contact with the reps in our branches and
we keep them up to date with any developments.
Just to give you an example, we have recently started to issue Research
Notes on all listed companies right after the publication of their interim
or final financial statements. Our research department analyses the
performance of the company as well as its prospects and potential threats,
and we then come up with a buy, hold or sell recommendation.
Could you elaborate on BOVSLs Share Link service? Does this
tie in with the BOV Groups wider internationalisation strategy?
ShareLink is basically buying/selling international shares, bonds
and funds. The client buys or sells under a nominee basis. This makes
it much easier for the client to effect the deal rather than holding
the shares with a certificate under his own name. Furthermore, the client
has no hassle of chasing dividends or interest payments because we do
all the administrative work for them including the payment of any withholding
tax. The client can just sit at home and receive a credit in his account.
For a number of years now, the BOV Group has embarked on an internationalisation
strategy. We dont think just local anymore. You cant do
that if you want to survive. Next year, with our accession into the
EU, Malta will become part of a community and as I mentioned earlier,
I believe that the attitudes of the Maltese investors will eventually
change. ShareLink is giving local investors access to EU markets and
Do you see the advent of EU membership changing the landscape of
Maltese financial services and its capital market? If so, how?
Yes definitely. First of all the EU Savings Tax directive will
and has already changed the attitudes of Maltese investors. In this
respect, I think that the extension of the governments Registration
Scheme was a wise move. Hopefully, we shall no longer have money "hidden"
away and I think that this could help us tap the local potential which
we mentioned earlier. Furthermore, the adoption of the Euro will change
the way local investors structure their portfolios. We will still have
investors who would want to invest solely in local companies. That will
always remain. But I think that some changes need to be done in the
local market in order to convince more people to keep their money "local".
One important change, which the regulators need to address, is the way
some local bonds are brought to the market. Issuers create a Special
Purpose Vehicle, a finance company, with the specific aim of issuing
a bond. This in turn then gives a loan to the parent company. Up till
then, so far so good. But during the life of the Bond, both investors
and financial practitioners have no idea how the parent company is performing.
In some cases its difficult to give advice to a client whether
he should buy or sell that particular bond. Foreign bonds are rated
and one can easily assess the bond through its rating history. On the
local scene, I dare to say that sometimes a lot of investors have to
act upon hearsay. We clearly need to address these issues before its
What do you see in the shot and long term for BOVSL? Future products
In the past three years weve managed to take a leading share
of the local market. Well be striving to maintain this leading
role and continue to participate actively in the primary market. On
the other hand, we shall be concentrating on strengthening our ShareLink
service thus facilitating access to foreign markets.
We obviously keep up to date with new legislation and on the look out
for new opportunities but I cant be too specific because the competition
is reading this!