HSBC seeks to build on ‘strong’ 2010 results

Continued growth will be HSBC Bank Malta’s primary challenge this year, though the bank remains mindful of risk in the current economic climate, chief executive officer Alan Richards told The Sunday Times on Friday.

HSBC reported pre-tax profits of €83.1 million for the year ended December 31, up €11.9m on 2009. This “strong” performance was mainly attributed to improved revenue levels reflecting stronger net interest income.

The board has declared a final gross dividend of 7.7c per share, which with the interim dividend of 7.9c per share, amounts to a total gross for the year of 15.6c, slightly down from last year’s 15.7c. The dividend payout ratio has been retained at 55 per cent as announced in the interim results last August, when the ratio had been scaled back from 65 per cent in view of anticipated regulatory changes.

Customer deposits in 2010 grew by €376.2m to €4,462.9m. Loans and advances to customers rose by €77.4m to €3,303.8m with growth registered in both the personal and commercial sectors.

Mortgage market share remain­ed stable. Corporate lending picked up in the last quarter following “muted” demand in the first nine months. Gross new lending to customers amounted to €682m, up slightly from 2009.

Non-performing loans stood at three per cent of gross loans, compared to 2.9 per cent in 2009.

“We are not out of the woods in terms of the economy yet,” Mr Richard reiterated on Friday.

“There are some downside risks. The real focus in 2011 will be customers and balance sheet growth, but not at the extent of ignoring credit risk, market risk, operational risk.

“We continue to invest in our infrastructure, our technology, our people. There is a lot of change management going on.

“I am particularly pleased we delivered good results but we are also investing for the future and that makes it a very good year,” he said.

Operating expenses for 2010 rose by €3.8m to €87.6m, largely due to branch refurbishment, channel and process migration, system improvements, performance rewards, and customer segmentation. On the latter point Mr Richards said the strength of the Premier and Advance propositions were unique selling points for the group.

The bank’s rolling programme to refit branches will continue this year. Mr Richards said the investment was a reflection of HSBC’s ongoing commitment to the economy, changes in customer requirements, and the increased competition in the local market.

HSBC Malta, Mr Richards pointed out, worked to offer a broader service proposition to customers and fair value. While there was a wide variety of rates being paid across the banking sector in the customer deposits market, Mr Richards stressed interest rates were largely a function of risk.

He conceded the market was tough – corporate and government bonds and new entrants competing for market share presented HSBC with a balancing act as it defended its position without resorting to extensive repricing.

With its international advantage and its extensive cross-continental network, HSBC was “a natural filter for any organisation looking to do business in Malta”. The deposit growth was partly a reflection of the island’s growing attractiveness and Malta’s brand improving in the international financial services industry.

Mr Richards said HSBC’s own brand had a large part to play for the Malta operation and the group: both brand and bank had emerged very well from the enormous challenges of the past three years.

With continued investment, its commitment to capital position and liquidity, and its promise to maintain lending, the brand has continued to be enhanced.

Meanwhile, HSBC’s group results will be announced at the end of the month.

International analysts expect the bank to unveil the largest profit for the 2010 financial year among the UK’s best brands, estimated at £13.5 billion, more than double 2009’s £5.16bn.