HSBC Malta said today that its results between January 1 and May 19 were below the level achieved last year.

In a scheduled statement to the stock exchange, the bank said it was operating  against a backdrop of very challenging market conditions.

The main factors impacting performance were margin compression, slow loan growth and a reduced contribution from the life insurance business, that in the comparative period in 2013 benefited from a significant one-off gain.

The bank said it had seen a rise in operating expenses as a result of compliance investments and increased regulatory fees. However underlying expenses have been well controlled and significant work continues around streamlining the business for greater efficiencies.

Loan impairments were up on 2013, as the prior year benefited from a number of recoveries, but lower than forecast.

Mark Watkinson, director and chief executive Officer of HSBC Malta, said: “The European market remains very difficult and the low interest rate environment presents its own set of issues for an organisation such as ours. Nevertheless, we continue to build our business and invest in our franchise. The growth in the pipeline of commercial and retail new business is encouraging. Notwithstanding this 2014 is likely to be a challenging year for both our business and the industry in general."

LOMBARD: COMPLIANCE COSTS MAY DAMPEN GROWTH

In a separate statement, Lombard Bank said the cost of complying with additional regulation may dampen the pace of growth in the short term.

"More stringent interpretations of ‘forbearance’ and ‘delayed repayments’ by borrowing customers may well put pressure on profits" the bank said in its interim directors' statement.

The bank said it is expecting to maintain the same levels of its loans and advances portfolio and Amounts Owed to Customers as at the previous year.

It said it was well-positioned to reach the targets set for the first half of this year.