Consequence of HSBC's ROE success

A question on comparative ratios was put to HSBC chief executive officer Alan Richards at last Wednesday's annual general meeting. His answer revealed an outstanding success story. He replied with alacrity that as regards return on equity, HSBC Malta was 22 per cent above the level of the international performance of the international bank.

A return on equity (ROE) of 22 per cent belongs rather to the realm of investment banking than to commercial banking. I have been militating for HSBC since its inception in this country. It must also be kept in mind that its ROE was achieved by activating only 78 per cent of the local bank's deposit base. This was instead of the usual 90 per cent as is HSBC international practice.

It is indeed remarkable as it points to a minimal bad debt situation. It gladdened one's heart to see to that HSBC Malta was now increasing its lending, helping to counteract Malta's 10 per cent fall in foreign trade and tourism, which is in harmony with declining world recession economic ratios.

World trade is collapsing because of the seemingly irresistible tsunami rise of protectionism. The G20 meeting of last Thursday was a farce. G20 countries delegated responsibility for protectionism to the International Monetary Fund.

Back in Malta, the consequence of HSBC's marvellous ROE success is that the expectation which this country has long harboured because of the attraction of this bank to its shores is now bound to explode in a popular demand.

This breakthrough does not depend only on HSBC Malta. It also depends on the Malta Environment and Planning Authority. Mepa, which has a deciding influence on the economic transformation of this country, was not present at this most important HSBC event. HSBC is the biggest power in real estate development in Malta, and a consequence of its success is that more office property of an international standard is bound to be demanded on the local market. Malta needs this property.

An international money man will not be waiting, months and years for Mepa to decide merrily on the structural details of a staircase. Malta needs to bank legal international money. Our manufacturing base is already suffering heavily, and will be suffering increasingly from the world recession, which is showing all the signs of turning into an ugly depression.

The G20 London meeting of last Thursday was as much a failure as that meeting which Roosevelt refused to attend a London in the early 1930s. It said the US is no longer the world economic leader. This is nonsense. The US still has about 40 per cent of the world's Gross National Product, and China is its only rival in terms of political clout. The G20 spoke against protectionism while the US is pouring trillions into that nefarious policy. The gathering promised hypocritically to put down tax havens while its biggest economies are leaning most abusively on offshore tax havens at home, as The Economist revealed authoritatively in detail in late March.

Offshore banking will decline heavily in the US and the UK, but not because of pressure from the G20. For a long time, big banks in the Organisation for Economic Co-operation and Development countries are not going to be trusted because of their recent outrageous financial behaviour. They will recover but not immediately.

In the meantime, international money is banging at the door of Malta's financial centre, for the very good reason that our banks have been among the safest banks in the world.

Malta's men and women of wealth must realise, that as a consequence of HSBC's outstanding performance in adverse world economic conditions, great business opportunities lie in front of them.

Money international has been flowing into Malta massively during these last 10 years.

An office space building boom is in the offing, which, if not disrupted by bureaucratic nonsense, will help Malta weather the battering of the present depression, which is not even half way through. Banks, and not only HSBC, are liquid enough to steer Malta into the type of business property development which is propelling Cyprus into the forefront of world financial centres. We have in this country very little of the business ability of the Greeks. We see at Manoel Island, the greatest yacht in the world, that of Roman Abramovich, moored to a quay presided over by the ghastly ruin of Europe's most infamous pest house.

The Maltese had better realise the fresh developments on the international financial scene. The dollar, and possibly the euro, is going to be inflated, so there is a new dawn for gold as a significant auxiliary to a globalised currency.

So while Malta's banks are so flushed with hard-earned cash, let us all prepare to welcome new dedicated business real estate developments like Cyprus. If our extra euros become bricks and mortar immediately, or almost so, so much the better.

HSBC must be thanked for building up bank massive financial credentials, and opportunities for our business class which is bound to welcome it enthusiastically.

Mr Azzopardi Vella, economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S and P.

johnazzopardivella@hotmail.com