"How can you earn profits of 26c2 per share and pay out 39c5 per share in dividends?" That was one of the first e-mails we received when we e-mailed the results of HSBC Bank Malta plc (HSB) for the year ended December 31, 2007, to clients.
The results were published after the close of trading last Monday and showed a 19% increase in pre-tax profits to a record €114.7 million (Lm49.2 million). More importantly, the pre-tax profits rate of growth increased by 48% on the previous year. Earnings per share increased 22.4% from €0.214 (Lm0.092) to €0.262 (Lm0.112).
Net interest income grew by 15.4% to €126.2 million (Lm54.2 million) and was driven by increased customer loans of 7.6% and customer deposits of 17.5%. Non-interest income advanced by 8.7% to €72.5 million (Lm31.1 million), as a result of growth in business activity and volumes which were well spread across the group's core products and service lines. Operating expenses grew by 4.5% to €83.6 million (Lm35.9 million). Of this total, €49.8 million (Lm21.4 million) were taken up in employee compensation and benefits. General and administrative expenses increased by €4 million (Lm1.7 million) to €26.7 million (Lm11.5 million) largely as a result of investment in a large number of mandatory projects including the euro conversion, and adoption of SEPA legislation, as well as the cost of increased business volumes and regulatory fees.
For the year ending December 31, 2007, the bank's cost-to-income ratio improved from 45.5% to 42.1%; customer deposits increased by €602.6 million (Lm258.7 million) to €4,039.5 million (Lm1,734.2 million); loans and advances to customers increased by €199.1 million (Lm85.5 million) to €2,822.3 million (Lm1,211.6 million); and total assets increased by €485.4 million (Lm208.4 million) to €4.9 billion (Lm2.1 billion).
HSB's board is recommending a final gross dividend of €0.148 (Lm0.064) per share (€0.096/ Lm0.041 net of tax), scheduled to be paid on April 29. This will be paid to shareholders on the bank's register by Friday, i.e. those who will have purchased shares by Tuesday.
When added to the gross €0.154 (Lm0.066) interim dividend, and gross interim special dividend of €0.093 (Lm0.04) paid last August, shareholders will have received a full gross dividend of €0.395 (Lm0.17) per share for the full year. At Friday's closing price of €4.60, this translates into a gross dividend yield of 8.6%. For the benefit of the more punctilious, the yield quoted includes the special interim dividend. If the special dividend is excluded, the yield works out at 6.6% - still an extremely attractive income. On the other hand, the Price to Earnings ratio, although down to 17.6, is still much headier than Bank of Valletta plc's (BOV) 11.9.
Contrarily to BOV - and virtually every other major financial institution from America to Zimbabwe - HSB had absolutely nothing to say about the nefarious credit crunch. One takes it that no news is good news. But is it not strange, considering HSB's superb PR machinery - which trumpets even the most mundane of handouts to the local oratory - that they turn into shrinking violets when it comes to such an undisclosed achievement?
Finally, to answer our opening question: HSB's board has gone on record several times stating that one of the company's aims is to maintain a policy of a high dividend payout. Also, they are happy to dip into reserves, so long as prudential and regulatory levels are met, and business growth is sustained.
On the market, which registered the highest equity turnover by value for 2008 at €1,704,306, the MSE index sank to a 2007/8 low of 4,587.411 on Tuesday, to then recover 2.88% to 4,719.626, a miniscule 0.14% up for the week.
HSB traded lower on Monday closing 1.1% down at €4.599 ahead of the release of its annual results at 1 p.m. Bizarrely, it sank 7% to the bottom of its allowable trade range on Tuesday, tumbling from a €4.49 open to €4.278 on a turnover 49,121 shares. It rebounded on Wednesday, closing at €4.499, pushing ahead to €4.63 on Thursday. Friday's final deals pulled the price back to €4.60, for HSB to end the week 1.1% lower. Trading in HSB amounted to a total of 105,370 shares, worth €467,648. By Friday's close there was outstanding demand for 1,000 shares at €4.55 with offers for 1,000 shares starting at €4.649.
BOV finally returned to positive territory after four consecutive weeks of losses - although this was not before sliding to an intra-day low of €5.51 on Monday, and then closing at €5.60. The day's volume was fairly strong with just over 25,000 shares changing hands. It advanced in 10c spurts from Tuesday to Thursday, climbing from €5.70 to €5.90, and then easing back to end Friday at €5.85 - nonetheless ending 3.5% ahead. BOV accounted for 30% of the week's equity turnover by value with 87,984 shares changing hands for a value of €506,696. At the end of the session, best bids totalled 898 shares at €5.85 with offers for 1,570 shares at €5.89.
GO plc got off to a good start, rising to €3.05 at Monday's open and closing the day at €3.06. It continued forward, hitting €3.08 on Wednesday to close the week at this level, 1% up. The week's turnover amounted to 49,185 shares for a value of €151,127. At the end of the session best bids totalled 6,550 shares at €3.076, with offers for 2,380 shares at €3.10.
Malta International Airport plc started out unchanged at €3.18 on Monday, rising to €3.20 on Tuesday. It maintained this level until Friday to end the week 0.6% ahead. The week's volume amounted to 31,389 shares for a value of just over €100,000. At the end of the session, best bids were for 1,615 shares at €3.151 with offers for 360 shares at €3.20.
International Hotel Investments plc (IHI) was down to €1.02 on Wednesday on 1,159 shares, and continued lower to €1 on Thursday on heavy volume of 114,798 shares to end the week 2% down. IHI announced on Friday that it has signed a memorandum of understanding with Libyan Foreign Investment Co. Ltd for a joint-venture agreement to develop a five-star hotel on a 7,000-metre site on the waterfront in central Benghazi, Libya's second largest city. It is planned to develop the site into a 360-room five-star hotel with serviced offices and retail outlets, which will be operated by CHI Ltd, the hotel operating subsidiary of IHI.
Fimbank plc traded steadily at $2 on Monday, Wednesday and Friday, with Friday's deals representing 70% of the week's total volume of 193,480 shares.
Middlesea Insurance plc only traded on Tuesday, shedding 1.3% to €3.65 on 684 shares. On Monday it announced that Domingo Sugranyes Bickel, who was appointed as a director through the shareholding of Corporacion Mapfre S.A., has ceased to be a director with effect from February 11.
Simonds Farsons Cisk plc gained a cent to €2.37 on Tuesday, advancing minimally to €2.375 by Friday to close the week 0.6% ahead. Last Wednesday the company inaugurated a €24.5 million soft drinks packaging and state-of-the-art logistics centre.
Maltapost plc (MTP) was generally stable and traded mainly at 66c5, hitting an intra-day high of 67c on Tuesday. The week's only deal at 66c was Friday's final one, leading MTP to close in negative territory for the first time since listing on January 25.
Grand Harbour Marina plc was stable at €1.73 in the week's only deal for 578 shares on Monday.
Plaza Centres plc leapt ahead to €1.689 on Monday's single deal for 4,150 shares, hitting €1.70 on Tuesday. It did not trade for the rest of the week, sealing a 6.2% gain.
Crimsonwing plc (CW) was slightly weaker, 0.9% lower at 59c on Monday. It only traded again on Tuesday, at the same price.
In an interim directors' statement issued on Wednesday, CW said it has recorded strong sales performance during the second half of the financial year, and is set to achieve the revenue projections as detailed in the prospectus issued at the time of the public offering. Overall profitability may be negatively impacted by the erosion in the £/€ exchange rate. The statement added that last month CW initiated operations in North America through Crimsonwing LLC, a 100% owned subsidiary of Crimsonwing Promentum BV.
In the Government Bond market, turnover by value reached €5.38 million with 50 deals struck in 16 stocks. In the corporate bond market, there were 56 deals for a total turnover value of €1.62 million. Turnover value in the Treasury Bill market totalled €3.03 million.
This report was provided by J.G.P. Bonello, managing director of Financial Planning Services Limited, of Marina Court, G. Cali Street, Ta' Xbiex, which is licensed by the MFSA to provide investment services, including stockbroking (IS/3608). The company is involved in acting as sponsoring stockbroker and corporate stockbroker. The directors or related parties, including the company and their clients, are likely to have an interest in securities mentioned. E-mail: info@bonellofinancial.com or 2134 4243.