HSBC Malta reports interim pre-tax profit of €53 million

HSBC Bank Malta plc came in with a “positive set of results” to June 30, reporting a pre-tax profit of €53 million, up six per cent over the first half of last year, and a “strong” return on equity of 17.8 per cent.

Unveiling the interim financial results at the Malta Chamber’s Exchange Buildings yesterday, chief executive Mark Watkinson said the bank’s three main lines of business – retail banking and wealth management, commercial banking, and global banking and markets – contributed positively” to the overall performance.

He underlined the bank’s commitment to Malta, where the franchise is looked upon by group as delivering superior returns. There will be more investment in the Malta operation and the teams, he said.

Replying to a question from a financial professional, Mr Watkinson announced that HSBC will participate in the micro-guarantee scheme administered by Malta Enterprise which was launched on Monday.

A comparison between the balance sheet to June 30 and that as at December 31, 2011, shows total assets rose by €147 million to €5,972 million, and loans and advances to customers increased by €20 million to €3,364 million.

The cost efficiency ratio stood at 45.4 per cent, compared to 43.8 per cent in the first half of last year; the capital adequacy ratio was 11.8 per cent compared to 6.7 per cent at end June 2011. Tier 1 ratio currently stands at 7.8 per cent compared to last June’s 6.7 per cent.

The board has declared an interim gross dividend of 10c per share, payable next month to shareholders on the register as at August 8. The bank has maintained the 55 per cent pay-out ratio.

Net interest income rose by five per cent to €68 million, partly reflecting modest growth in the mortgage portfolio. There was a net gain of €2 million on the disposal of available-for-sale securities compared to a net loss of €4 million in the same period last year.

Operating expenses rose by €3 million to €45 million, which, on a like-for-like basis, reflect the increase in amortisation due to the implementation of a new banking system introduced last year.

Net impairments reduced from €4 million to €0.8 million this year, following a €2 million impairment taken on Greek government bonds held by the life insurance subsidiary in its available-for-sale bond portfolio. The life insurance company has disposed of all its Greek debt exposure and now holds no exposure to southern European government debt.

Non-performing loans remained stable at five per cent of gross loans and asset quality remains good.

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

Mr Watkinson said that despite the difficulties Europe was facing, the bank had a clear strategy focused around simplifying the business, reducing bureaucracy and improving efficiency. In a group-led global change programme, HSBC sought to leverage its best strengths and to foster “deeper and broader” relations with its 100 million customers.

Speaking to The Times after presenting the interim results, Mr Watkinson explained: “We have global businesses in retail banking and wealth management, global banking and markets, commercial banking, and group private banking. We do not have private banking in Malta. Until about a year ago, strategy took place at a country level. We now have global businesses with global strategies. Our job at a country level is to implement that global strategy and tie customers from different parts of the world together. We will take into account what is relevant to the Maltese market.”

He explained how an eight-by-eight matrix sought to trim bureaucracy around the group and ensure layers between management were minimised.

Mr Watkinson was keen to point out that gross new lending to customers amounting at €274 million was positive in the current climate which was seeing softening demand.

HSBC, he added, continued to watch the local property market closely.

Although there has been a slowdown in construction, there has not been a significant fall in underlying asset values.

“We are seeing a much slower market,” he said. “The main thing is the underlying property values have not seen a dramatic drop. Land is in short supply and the intrinsic value does not diminish as fast as it would elsewhere.”

The chief executive described the outlook for the eurozone as “very challenging” and growth was not immediately around the corner. It would be necessary to hang tough for a while, he said.