HSBC 'in good shape' despite fall in profits

HSBC Malta yesterday reported a drop in pre-tax profit of €18.6 million over the previous year but its CEO, Alan Richards, said the bank was still "well positioned to weather the financial storm".

Mr Richards said that when seen in the context of the global financial situation and the country's introduction of the euro at the beginning of 2008, HSBC achieved "a set of solid results" with a return on equity of 22.3 per cent.

The bank's profits in 2008 fell to €96.1 million - 16 per cent - from the €114.6 million in 2007.

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 also down 17.2 per cent standing at €0.216, compared to €0.261 for 2007.

"The direct impact of the financial crisis on HSBC Bank Malta has been minimal but the bank is not immune to international developments. 2009 is 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," he said.

Loans and advances to customers reached €3,112.2 million - up €289.9 million, or 10.3 per cent, compared with 2007. Customer deposits totalled €3,407.5 million - up €33.7 million, or one per cent, compared with 2007.

Net interest income of €123.0 million in 2008 was down 2.5 per cent, 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 European Central Bank in the last quarter of 2008.

The bank's board is declaring a final gross dividend of €0.096 per share (€0.062 net of tax). This will be paid on April 20 to shareholders who are on the bank's register as at March 4. This, together with the gross interim ordinary dividend of €0.119 per share, results in a total gross dividend for the year of €0.215.

Mr Richards said 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's total assets reached €5.2 billion, up €401.0 million, or 8.2 per cent, compared to 2007.

"While 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," he said.

When asked, Mr Richards said the bank will not be carrying out a cost-cutting exercise but will be implementing "strict discipline on expenses", while continuing to upgrade its branches and technologies.