HSBC Bank Malta made a pre-tax profit of €36 million in the first half of this year, €4 million less than in the first half of 2014.

Although net operating income was up three per cent year-on-year, higher costs and impairment charges relating to loans going sour contributed to the decline.

Total costs increased as a result of new regulatory requirements, continued investment in risk and compliance staff – with 20 people being taken on for this role – and additional expenses for outsourced services, mostly relating to foreign exchange rates rather than extra contracts.

The bank made slightly more money from its operations, including net fee and commission income, in spite of low interest rates, but the increased costs drove its return on equity up to 10.5 per cent, very close to the HSBC Group’s target of “over 10 per cent”.

All three main business lines – retail banking and wealth management, commercial banking and global banking and markets ­– were profitable during the six-month period.

Addressing stockbrokers and the media after the board had approved the results, director and chief executive officer Mark Watkinson noted that in low interest rate environments, both retail and corporate customers tended to repay their loans quicker, resulting in a reduction in the net amount of loans and advances of 0.7 per cent.

“Our advances to deposits ratio is 62.7 per cent and we would dearly like to lend more. The group prefers to have levels of around 80-85 per cent,” he said.

Mortgages were up by 30 per cent, and undrawn balances on approved loans were also “very healthy”, he said.

On the other side of the balance sheet, customer deposits increased by €331 million to €5.2 billion, with a shift from longer-dated to shorter-dated deposits.

The board declared an interim gross dividend of 5c per share, which reflects the profits which had to be set aside for regulatory purposes (known as BR09) over a three-year period.

Mr Watkinson said that the provisions were now all set aside, apart from minor adjustments that might need to be made to reflect non-performing loans at year-end. Otherwise, he confirmed that the dividend policy payout remained 55 per cent but that this was subject to ongoing review by the board.

He also confirmed that the collective agreement, which expired in 2013, was still being negotiated and that the bank was “still open to dialogue”.