HSBC Bank Malta and its subsidiaries last week announced a profit before tax on ordinary activities of Lm41.4 million for the year ended December 31, 2006, an increase of Lm4.7 million, or 12.8 per cent compared with 2005.
The pre-tax return on average shareholders' funds (ROE) increased from 27.6 per cent in 2005 to 32.1 per cent.
The board also approved a final ordinary dividend of 5.3 cents gross per share and additionally a special dividend of 5.3 cents gross per share. This follows the interim gross dividend per share of 5.3 cents paid in August 2006. Together this is a total gross dividend of 15.9 cents per share and a total of Lm46.4 million in gross dividends for the financial year 2006. At the current share price of Lm2.14 as at close of business on February 15 this results in a gross yield of 7.4 per cent.
Net interest income grew by 5.4 per cent over the previous year and contributed Lm47 million to total operating income. Interest returns on assets grew by Lm8.9 million due to lending volumes increasing by 10 per cent.
The bank said the key drivers of growth in the lending portfolios were in the personal and nonpublic sector customer segments and a reduction in lower yielding public sector debt. Improved revenue flows were partly offset by growing customer deposit volumes and a higher interest rate environment which pushed up interest payable to customers.
Non-interest income levels grew by 18.8 per cent, contributing Lm28.6 million to total operating income. Key drivers here were an increase in transactional activity on credit card payments and debit card EPOS machine usage which grew substantially, as well as increases in funds under management, stockbroking sales and the life assurance business which also grew significantly.
In neither case did the income increase due to higher charges to customers, the bank insisted. "In fact the reverse is true with discounts and fee free periods being offered to customers in a number of campaigns across the year," the bank said.
Against a background of stronger product sales and revenue streams, operating expenses were Lm34.3 million, an increase of Lm2.3 million over prior year figures. Total employee compensation grew by 5.5 per cent driven largely by performance related pay benefits due to the higher sales and profits of the bank. While general expenses increased by Lm1 million, within this, there were significant upgrades to the infrastructure and branch network, which strategically improved automation and operational efficiencies. This has enabled the bank to absorb larger volumes of business without increasing headcount significantly and positioned it well for future growth.
As a result, the group's cost to income ratio improved to 45.5 per cent from 46.7 per cent in 2005.
Total assets increased by Lm231 million to Lm1,887 million. Within these, loans and advances to customers increased by Lm110 million supported by growth in both the personal and commercial sectors. New loan product lines were introduced to Malta with a wider choice of mortgage products as well as new financial and advisory packages for the SME market and new invoice receiveable financing to help corporate cash flow. Advances to deposits ratio increased to 76.3 per cent from a prior year end level of 74.3 per cent.
HSBC said credit quality remained sound. Net impairment reversals contributed only Lm0.2 million to profitability further evidencing the strong underlying performance Amounts owed to customers increased by Lm108 million to Lm1,475 million as customer liquidity and banking volumes grew at a sustained rate through the year. Higher interest rates and the investment in automated bank channels strengthened the growth in deposit volumes.
The pre-tax return on average shareholders' funds (ROE) increased from 27.6 per cent in 2005 to 32.1 per cent.
The board also approved a final ordinary dividend of 5.3 cents gross per share and additionally a special dividend of 5.3 cents gross per share. This follows the interim gross dividend per share of 5.3 cents paid in August 2006. Together this is a total gross dividend of 15.9 cents per share and a total of Lm46.4 million in gross dividends for the financial year 2006. At the current share price of Lm2.14 as at close of business on February 15 this results in a gross yield of 7.4 per cent.
Net interest income grew by 5.4 per cent over the previous year and contributed Lm47 million to total operating income. Interest returns on assets grew by Lm8.9 million due to lending volumes increasing by 10 per cent.
The bank said the key drivers of growth in the lending portfolios were in the personal and nonpublic sector customer segments and a reduction in lower yielding public sector debt. Improved revenue flows were partly offset by growing customer deposit volumes and a higher interest rate environment which pushed up interest payable to customers.
Non-interest income levels grew by 18.8 per cent, contributing Lm28.6 million to total operating income. Key drivers here were an increase in transactional activity on credit card payments and debit card EPOS machine usage which grew substantially, as well as increases in funds under management, stockbroking sales and the life assurance business which also grew significantly.
In neither case did the income increase due to higher charges to customers, the bank insisted. "In fact the reverse is true with discounts and fee free periods being offered to customers in a number of campaigns across the year," the bank said.
Against a background of stronger product sales and revenue streams, operating expenses were Lm34.3 million, an increase of Lm2.3 million over prior year figures. Total employee compensation grew by 5.5 per cent driven largely by performance related pay benefits due to the higher sales and profits of the bank. While general expenses increased by Lm1 million, within this, there were significant upgrades to the infrastructure and branch network, which strategically improved automation and operational efficiencies. This has enabled the bank to absorb larger volumes of business without increasing headcount significantly and positioned it well for future growth.
As a result, the group's cost to income ratio improved to 45.5 per cent from 46.7 per cent in 2005.
Total assets increased by Lm231 million to Lm1,887 million. Within these, loans and advances to customers increased by Lm110 million supported by growth in both the personal and commercial sectors. New loan product lines were introduced to Malta with a wider choice of mortgage products as well as new financial and advisory packages for the SME market and new invoice receiveable financing to help corporate cash flow. Advances to deposits ratio increased to 76.3 per cent from a prior year end level of 74.3 per cent.
HSBC said credit quality remained sound. Net impairment reversals contributed only Lm0.2 million to profitability further evidencing the strong underlying performance Amounts owed to customers increased by Lm108 million to Lm1,475 million as customer liquidity and banking volumes grew at a sustained rate through the year. Higher interest rates and the investment in automated bank channels strengthened the growth in deposit volumes.