Market conditions affect HSBC short-term business in 'difficult' Q1
Liquidity, capital ratios 'strong'
HSBC Bank Malta has described the first quarter of the year as "difficult" with market conditions "appreciably" impacting short-term financial performance as predicted. Liquidity and capital ratios remained strong and ahead of regulatory requirements.
In line with expectations, core income and profitability at HSBC Bank Malta plc were affected by the downturn between January and mid-May as trading conditions for the local financial services industry continue to be "extremely challenging", according to the bank's interim directors' statement released on the Malta Stock Exchange last Friday.
The bank said profitability was "materially impacted" by a combination of reduced revenues, narrower margins from lower interest rates, and constrains on volume in insurance and investment-related business due to the volatility in the equity and bond markets.
Deposits, however, remained "broadly stable" in the first quarter of this year when a series of local government and corporate bond issues were launched and competitive pressures grew.
The bank said it grew lending "carefully to maintain high asset quality and to support its customers' requirements and pointed out that there was no material deterioration in the quality of the lending portfolio.
Chief executive officer Alan Richards said that although the local banking system was "in good shape", the short-term outlook continued to be highly challenging because of significant uncertainty and pressure on short-term profitability.
"It is apparent that mortgage lending and corporate activity in some sectors is slowing, impairments are likely to increase as the credit cycle turns and our businesses with exposure to investment markets will continue to suffer from market volatility," Mr Richards said in the company statement.
"Margin compression will significantly impact the bank's profitability as long as interest rates remain at current levels.
"Through this period of major uncertainty and beyond we will continue to position HSBC Malta for long-term profitable growth. Our capital and balance sheet strength, and a commitment to strict cost control, will continue to underpin our performance.
"So while 2009 is difficult and challenging, I would stress that HSBC is well-positioned to weather the current storm and to support its customers and the local economy as a whole."