HSBC Malta's adjusted profit before tax declined 15.9 per cent in the first half of the year, with the bank blaming the fall on negative interest rates, lower non-interest income and higher regulatory costs.
The bank's overall profit rose by 13.8 per cent to reach €41.3m during that period, but that increase was due to a one-off €10.8m sale of investment in Visa Europe, which was bought by Visa Inc.
When discounting the Visa Europe sale, profits were a more modest €30.5m, compared to the €36.3m achieved in the same period in 2015.
Adjusted performance was in line with management's forecasts, the bank said.
Profit attributable to shareholders reached €26.9m, resulting in earnings of 7.5c per share - up from the 6.6c in the same period of 2015.
A recommended gross interim dividend of 7.1c per share (4.6c per share net of tax) is 40 per cent higher than the 2015 figure. The interim dividend will be paid on September 9 to shareholders who are on the bank’s register as at August 12.
The bank's total assets were up €48m when compared to December 31 and now reach €7,284m, while customer accounts were up €52m in the first six months of the year and reached €5,002m as of June 30.
Net interest income was up 6.4 per cent to reach €63.9m, while net fee income declined by 12 per cent, primarily as a result of HSBC Malta discontinuing its trust and stockbroking activities.
HSBC Life Assurance (Malta) Limited pre-tax profits were down to €2m compared with €6.7m in the first half of 2015. The bank blamed this on adverse market movements in yield curve.
Trading profits reduced by €1m compared to the first half of 2015 reflecting lower trading volumes and thinner foreign exchange margins, the bank said.
The bank’s liquidity position remained broadly unchanged with the conservative advances-to-deposits ratio of 66 per cent.
The bank further strengthened its common equity tier 1 capital (CET1) which increased to 12.5 per cent from 12.3 per cent at December 31. CET1 capital ratio continues to be well above the regulatory requirements. Total capital ratio stood at 13.5 per cent compared to 14.2 per cent at December 31 as a result of regulatory amortisation of the subordinated debt maturing in the next two years.
CEO Andrew Beane said the bank was making "good progress" in implementing a new strategy approved in February.
"Despite pay increases arising from union negotiations and further increases in regulatory related costs, the strong expense discipline we have established enabled us to keep adjusted costs flat to 2015," he said.
He added: “I hope that shareholders will welcome the 40 per cent increase in dividends, which demonstrates the investment case to own HSBC Malta shares. We remain confident in our ability to increase underlying profitability over time without increasing risk appetite."
The UK's Brexit decision had added another layer of uncertainty to banking operations, Mr Beane said.
"The longer term implications, positive or negative, are not yet clear. HSBC remains confident in the Maltese economy and is committed to support our customers.”