HSBC continuously runs a rigorous six-filter process on its various portfolios and as long as HSBC Malta continues to pass these tests the banking giant will remain committed to the Maltese market, Brian Robertson, HSBC UK and Europe CEO tells The Sunday Times of Malta in an interview.
I am in charge of 75,000 employees in Europe, why would I join the board of HSBC Malta if we were about to leave?
The six filters are: future economic potential; connectivity across the group; return on equity; cost efficiency; loan/deposit ratio; and financial crime risk.
“As long as Malta continues to meet the return equity requirements, the efficiency ratios and increasingly as Malta gets more connected with the rest of the world, I can see no reason why we should exit Malta because it’s a good investment. As long as we have a place to play in the Maltese economy, and as long as we can continue to perform in the Maltese economy, then I can say we’re here,” Mr Robertson says.
Mr Robertson, who was recently appointed on the board of directors of HSBC Bank Malta, says HSBC’s biggest portfolio in Europe is in the UK, “followed by France, then Germany and Turkey, who are neck and neck, and then Malta, which is our fifth largest business in Europe. It performs very well, it’s a well run bank and it pays good dividends.”
He says the Maltese economy and customers are going to have to look externally, outside of the eurozone, for opportunities to grow, “and we can help them do that, as the Maltese Government invests in new infrastructure, and we may help identify people who may wish to invest in Malta”.
Mr Robertson says HSBC was in the process of moving an insurance business from Ireland to Malta.
“Why would we move a €1.1 billion insurance portfolio from Ireland to Malta, if we were about to leave? As long as we get through the six filters, then we have a good future in Malta,” he stresses.
He adds: “We continue to invest in Maltese business, we are refurbishing branches, investing in new ATMs and hiring new graduates this year. These are good signs; we spent €10 million upgrading our computer system; these are sizeable investments. We have carried out 51 transactions, dispositions, since 2011, and we haven’t got to Malta. I am in charge of 75,000 employees in Europe; why would I join the board of HSBC Malta if we were about to leave?”
He says the fact that the Maltese economy has positive GDP “makes it an outlier in the euro context” and its deficit figures, at slightly over three per cent, “puts in a reasonably good position in the European context”.
He adds: “Unemployment remains fairly low but the challenge is to find new productive enterprises in Malta, whether it’s additional tourism or more investment in the maritime sector. Malta has to find ways to make it relevant to the rest of the world.”
He attributes HSBC Bank Malta’s positive 2012 financial results to “the people who work for the bank in Malta and the support we get from the Maltese community”.
‘We have a good, focused team’
“We have a very good, focused team here in Malta; they know their customers, the customers know the bank, and as long as customers entrust us with their business, we can continue to be successful,” he adds.
HSBC Malta Life’s strong performance helped the bank achieve its positive results in 2012 and Mr Robertson describes the life insurance sector as “a key part of our wealth management business and a key part of the bank in Malta”.
“We exited a number of markets where we felt somebody could do a better job than us in the life insurance sector, but we certainly don’t feel this is the case in Malta. We are one of the seven insurance sites in the world, and the insurance business makes up almost half our retail business in Malta. There are opportunities for growth both onshore and offshore,” he points out.
Asked why HSBC had carried out such a restructuring exercise globally, including shedding so many jobs, when it required no government bailout and remained profitable, Mr Robertson said economic conditions around the world remained challenging and the regulatory and other changes which have come in since the financial crisis require banks to adapt and adopt new ways of doing business.
“The expectation around how banks behave has changed dramatically, and we concluded that we possibly expanded too much, we were not as efficient and effective as we could be, so we announced a sort of new, focused strategy. We ran all our businesses through what we called our six-filter process and decided which fitted the portfolio and which didn’t. We reorganised ourselves around four global businesses and focused our potential on where we see long-term growth.”
Mr Robertson says the global economy is starting to recover from the worst periods after 2008.
“America is starting to recover now, Latin America is doing OK, Asia has high single-digit growth rates and the Middle East bounced back from its problems,” he says.
However, he is more cautious about Europe: “Europe remains depressed, the eurozone crisis has been solved by the ECB flooding the market with cheap liquidity, but the structural changes required, the fiscal consolidation and the European Banking Union are all still works in progress. In my view, it’s going to be some time before Europe returns to trend growth”.
He regards the possibility of a UK exit from the EU as “pretty disastrous”, saying industry in Britain has tried to get the argument across that exiting the EU entirely would be a very bad thing for the UK.
“Renegotiating the terms of participation in the EU may be a good thing but to exit entirely would be pretty disastrous for the UK, pretty disastrous for the City of London – the eurozone’s primary offshore financial centre, pretty disastrous for UK companies that export the majority of their stuff to Europe, so it would be pretty much a bad thing,” he says.
Mr Robertson believes two “obvious” areas for future growth in Malta are tourism and trade.
“Tourism needs to be tweeted to include heritage; Malta has spoken about this for decades, but it needs to do something about it. There is a need to go upmarket as Malta can’t take any more tourists. Another economic pillar for Malta is trade and logistics and I discussed this with the Prime Minister recently. As and when North Africa sorts itself out, why would you ship all the way to Antwerp, break cargo and then ship back down. Why not stop in Malta?” he points out.
Did his meeting with Prime Minister Joseph Muscat go well? “It went well, he was reasonably upbeat about the economy and very enthusiastic about Malta’s future,” he says.