HSBC Malta reports €96.1m profit

HSBC Malta has reported a pre-tax profit of €96.1 million for the year ended 31 December 2008 – down €18.6 million, or 16.2 per cent, compared with €114.6 million in 2007.

It said profit attributable to shareholders was down 17.3 per cent, or €13.2 million, to €63.1 million, compared with €76.3 million in 2007.

Earnings per share were €0.216, down 17.2 per cent compared to €0.261 for 2007.

Loans and advances to customers reached €3,112.2 million at 31 December 2008 – up €289.9 million, or 10.3 per cent, compared with 31 December 2007.

Core customer deposits totalled €3,407.5 million – up €33.7 million, or 1.0 per cent, compared with 31 December 2007.

Total assets reached €5,296.1 million, up €401.0 million, or 8.2 per cent, compared with 31 December 2007.

The return on equity was 22.3 per cent for the year ended 31 December 2008, compared with 27.6 per cent in 2007.

The bank said while its profit represented a decline of 16.2 percent compared to 2007, it was a solid result achieved after taking into account the introduction of the euro and the volatility of world financial markets. Overall, profitability was still strong with a return on equity of 22.3 per cent.

Net interest income of €123.0 million in 2008 was down 2.5 percent, from €126.2 million in 2007. Increases in loans and advances generated steady growth in interest receivable. This was off-set by the increase in interest payable on retail deposits, and margin pressure from a combination of increased competition and the lowering of base rates by the ECB in the last quarter of 2008.

The bank said strong organic growth in sales of regular premium term life and investment products, and flat costs contributed to the life insurance business generating a profit before tax of €16.4 million in 2008, up 25.0 per cent on 2007.

The loss of €29.4 million in net income from insurance financial instruments designated at fair value was offset by a corresponding increase in other operating income, a reduction in net insurance claims incurred and movement in policyholders’ liabilities.

During the year, gains from property disposals and a revaluation gain on investment property generated €3.5 million in other operating income.

Loans and advances to customers increased by €289.9 million in 2008 to €3,112.2 million, from €2,822.3 million in 2007, with growth across both the personal and commercial sectors. The quality of the overall loan book remained good with non-performing loans at the 2008 year end representing 2.3 percent of gross loans, an improvement from 2.7 per cent at the end of 2007, the bank said.

Short-term liquid money market placements in the form of loans and advances to banks increased by €441.3 million to €1,072.3 million as more new funds and maturing liquidity were placed with HSBC as a result of increasing market risks.

The available-for-sale investments portfolio was marked down by €9.7 million during the year. The bank said it believed that the credit quality of these assets remained strong and that this deficit would reverse over the long-term.

Alan Richards, director and chief executive officer said 2009 was expected to be particularly challenging.

“Profitability will be under pressure as the economy slows, margins contract further in a low interest rate environment and impairments are likely to increase as the credit cycle continues to weaken.

“Whilst some of the challenges we face may be unprecedented, we are in good shape. I am confident that with our track record, the backing of the HSBC Group, our enduring commitment to liquidity, strong capital and a conservative approach to risk management, we are well positioned to build on our strengths and support our customers to drive future growth.

The Board is declaring a final gross dividend of €0.096 per share (€0.062 net of tax). This will be paid on 20 April 2009 to shareholders who are on the bank’s register of shareholders at 4 March 2009. This, together with the gross interim ordinary dividend of €0.119 per share, results in a total gross dividend for the year of €0.2