BOV drops following rating downgrade

The international credit rating agency Fitch Ratings yesterday afternoon announced that it downgraded Bank of Valletta plc’s Long-Term Issuer Default Rating from ‘A-‘ to ‘BBB+’. The rating agency explained that the downgrade was mainly due to the concentration risk evident in the Bank’s loan portfolio. Fitch noted that loan impairment charges are expected to remain higher than in the past, weighing down the Bank’s operating profit. However the rating agency also remarked that BOV’s ratings continue to reflect its satisfactory profitability, sound liquidity and funding position, adequate capitalisation as well as its position as the largest bank in Malta. Furthermore Fitch expects BOV’s profitability to continue to benefit from a more favourable domestic economic environment during the current financial year ending 30 September 2011. The news of the rating downgraded forced BOV’s share price to close 1.7% lower to a new 4-month low of €2.92 on volumes of over 38,500 shares.

Meanwhile HSBC Bank Malta plc maintained the €2.95 level on the last day for investors to gain entitlement to the final gross dividend of €0.077 per share. Volumes increased to a total of 65,874 shares today. The equity trades ex-dividend as from tomorrow.

The share prices of Malta International Airport plc and GO plc registered marginal recoveries today. The airport operator saw its equity edge 2.1% higher to €1.735 on volumes of 9,680 shares ahead of the Company’s 2010 full-year results publication on 17 March and the publication of the February traffic statistics in the coming days. GO’s share price advanced by 0.6% to €1.77 on volumes of 8,000 shares.

Overall, the MSE Share Index closed in negative territory for the tenth consecutive session with a decline of another 0.3% to a new 2-month low of 3,572.871 points. Malta Government Stock prices also declined as the benchmark Eurozone yield strongly recovered above the 3.20% level. As a result the Rizzo Farrugia MGS Index retreated by 0.3% to 979.589 points. The recently issued MGS’s have been admitted to the Official List of the Malta Stock Exchange this morning with trading expected to commence as from tomorrow. This afternoon the European Central Bank maintained rates at a record low of 1% but the ECB President warned of a possible hike next month due to inflation expectations.

On the corporate bond market, the bonds of Mediterranean Investments Holding plc continued to trade below the 90% level. However it is noteworthy to highlight that the 7.5% MIH 2015 bond recovered strongly from yesterday’s close of 80% to the 89% level. The rest of the active bonds were fairly stable with the Sterling tranche of the 7% MIDI plc 2018 bonds easing 150 basis points to 105% and the 7.15% Melita Capital 2016 bonds moving marginally higher to close at the par level.

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