HSBC Bank Malta reported a profit before tax of €90 million for the financial year ended December 31, 2013, down five per cent on the previous year.
CEO Mark Watkinson described the performance as something he could “genuinely describe as resilient”, saying they were some of the best numbers, even when compared with the bank’s peers.
He attributed the drop to the combination of the continuing difficult market conditions in Europe, the low interest rate environment, costs associated with regulatory changes at home and abroad and a subdued local economy.
The bank also announced a final dividend of 5.2 cents per share. The total for the year should have been 17.1 cents, in accordance with the bank’s unchanged dividend policy of 55 per cent payout of profits.
However, new MFSA rules meant the bank had to set aside €4 million as reserves for banking risk, something it will have to repeat for the next two years, affecting dividends during that period. As a result, the payout will be 15.2 cents per share.
However, the bank also announced a one-for-nine bonus share issue, one of its first in many years, which will increase its capital by €10 million.
It will be a tough year. I do not see interest rates ticking up before 2015 – and even then, any increases will be modest
The bank’s results reflected lower levels of net interest income and a lower contribution from the life insurance company (€13 million from €18 million), which had in 2012 benefited from favourable equity markets – something that was not repeated in 2013.
Net interest income fell by six per cent, reflecting a tightening in interest margins on lower average lending balance and a decline in interest earned on investment. Net loans and advances were down €53 million but gross new loans were up €90 million (18 per cent).
“The demand for new commercial loans from customers remained subdued as commercial customers have used surplus cash to repay borrowings and delay investments in times of uncertainty. However, there are early indications of an increase in activity in the beginning of 2014,” he said, adding that mortgages continued to show record growth.
Net impairments, at €3 million, were lower compared with the €5 million in 2012. Chief financial officer Josephine Magri explained this was the result of €3 million being recovered from specific cases, and a €700,000 drop in the collective impairment charge.
Mr Watkinson said the future for Malta’s economy lay in international activity, as this was the only way to break through the somewhat tepid growth rates forecast locally.
He said 68 per cent of the bank’s €50 million international fund was already committed, showing the interest in looking beyond Malta’s horizons.
Looking ahead, Mr Watkinson wished he could say the “clouds had parted”.
“However, there are complex new rules which make day-to-day business of the bank much more complicated. It will be a tough year ahead. And I do not see interest rates ticking up before 2015 – and even then, any increases will be modest,” he said.
Performance highlights:
Cost efficiency ratio: 49.9% (2012: 49%)
Return on equity: 13.9% (2012: 15.4%)
Earnings per share: 21.1%
Advances to deposits ratio: 73% (2012: 74%)
Total capital ratio: 12.9% (2012: 12.4%)
Tier 1 capital ratio: 9.4% (2012: 8.3%)