HSBC reports €53 million profit before tax

HSBC has reported a profit before tax of €53 million for the six months which ended June 30, an increase of €3 million, or six per cent over that in the same period last year.

The board declared an interim gross dividend of 10c per share (6.5c net of tax). This will be paid on August 22 to shareholders on the bank’s register at August 8.

The interim accounts were approved by the group’s board of directors this afternoon.

Director and chief executive Mark Watkinson said: “We have delivered another positive set of results that saw pre-tax profit increase by six per cent with a return on equity of 17.8 per cent.

The bank’s capital and liquidity position remained strong and it had a firm grip on risks and costs at a time of continuing pressure on revenue as a result of the challenges in the Eurozone.

 “Despite the difficulties in Europe we have a clear strategy focused around simplifying our business, reducing bureaucracy and improving efficiency. As part of the world’s largest international bank we are well placed to service the needs of our customers and to support the Maltese economy,” he said.

Net interest income increased by five per cent to €68 million compared with €64 million in the first half of last year. The increase reflected growth in mortgage lending and improved positioning of the balance sheet management available-for-sale portfolio.  

Net fee and commission income of €16 million for the six months ended June 30, compared with €17 million in June last year.

Growth in funds under administration and higher levels of custody fees more than off-set lower card fees following the sale of the merchant card acquiring business in December 2011, he said.

Mr Watkinson said that HSBC Life Assurance (Malta) Ltd reported a profit before tax of €7 million, compared with €13 million in the first half of 2011.

The first half of 2011 benefitted from a non-recurring gain of €7 million as a result of the refinement in the methodology used to calculate the present value of in-force long-term insurance business.

New business particularly with respect to life-insurance protection and higher investment income as a result of improved global market conditions partially offset this non-recurring gain.

A net gain of €2 million was reported on the disposal of available-for-sale securities compared to a net loss of €4 million in the comparable period in 2011.

Operating expenses at €45 million increased by €3 million six per cent, impacted by non-recurring staff cost recoveries in the first half of 2011 of €2 million, mainly relating to the release of an early voluntary retirement provision.

At a consolidated level, net impairments reduced from €4 million to €0.8 million. This was principally due to a €2 million impairment taken on Greek government bonds held by the life insurance subsidiary in its available-for-sale bond portfolio.

Following the Greek bonds restructuring programme, the life insurance subsidiary has disposed of all its Greek debt exposure and now holds no exposure to southern European government debt.

Loan impairments declined to €0.8m (five basis points of the overall loans book) against €1.8m in 2011 as the profit or loss benefitted from modest recoveries.  At a bank level, non-performing loans remained stable at five per cent of gross loans and asset quality remains good.

Net loans and advances to customers increased marginally by €20 million to €3,364 million. Mortgage market share remained stable.

The bank saw a slight softening in loan demand due to slowing economic conditions. Gross new lending to customers amounted to €274 million which reflects the bank’s continued support to the local economy.

Customer deposits rose by €257 million to €4,660 million as at June 30 reflecting an increase in corporate and institutional deposits.

The levels of retail deposits were broadly unchanged despite significant competitive pressure for deposits including from local government bond issuance.

The bank’s available-for-sale investments portfolio remains well diversified and conservative.

The bank’s liquidity position remained strong with advances to deposits ratio of 72 per cent, compared with 76 per cent at last December 31.

The bank continued to strengthen its capital ratio to 11.8 per cent. This exceeded the eight per cent minimum regulatory capital requirement. The bank intended to maintain a conservative approach to capital and would continue to build capital where appropriate.