What the HSBC Malta CEO had to tell The Sunday Times after announcing the bank's outturn for the first six months of the year was even more significant than the outturn itself, and how it was presented. HSBC Malta made a profit during January-June 2009 which was 25.3 per cent less than in the comparable period a year ago - remarkably still seen as "a strong performance considering the economic challenges we all face".

Saying that, CEO Alan Richards described the half year as "a very challenging six months". He could have said that again; and in fact he did. Before doing so he said he thought the results were testimony to HSBC's underlying strength. They were.

As the CEO pointed out: "Overall profitability relative to history, peers and industry benchmark remains strong with a return on equity of 15.6 per cent."

What of the outlook? The second half of the year will be even more challenging for HSBC Malta than the first six months, Mr Richards told the sister paper. "We are living through an exceptional set of economic circumstances and I think we are in for a tough ride over the next six to nine months." He thinks that for Malta a lot will depend on how the tourism industry performs in the third quarter.

I'd say add the fourth quarter to that. So far the tourism industry has suffered a drop in occupancy, bed nights and rates. More of the same is predicted for the rest of summer. Unless there is an early turnaround in the EU economy, which is not expected, performance will also be weak between October and December, and going into 2010.

Moving that way, what sort of forward indicators shall be showing the way? Turn to Mr Richards again. Although the banking system in Malta remains stable, the outlook for the near term is challenging, he said. It is apparent that mortgage lending and corporate activity in some sectors are slowing, impairments are likely to increase as the credit cycle continues to turn and our investment markets businesses will continue to experience volatility.

The statement can easily be interpreted by those of us who are following economic developments more closely than backward-looking statistics suggest. It is not just tourism that is contracting, manufacturing declining, and overall consumption shrinking. The old trusty, albeit dangerous drivers of the local economy - construction and property sales - are backing up against the wall, as reduced advertising demonstrate.

There seems to be a conspiracy of careful silence about them but, as hinted here weeks ago and as now well known all around, a number of big projects have stalled. Five of them belong, if that is the right word given the extent of indebtedness, to a single group. Some people seem to think that disposal of the Jerma Palace site in Marsascala would solve the group's problem.

Were that to come about, it would ease the group's situation relative to their bankers, but simultaneously reveal the remaining extent of their indebtedness to other parts of the private sector, including names one did not expect to become involved in the Big Gulp when the going seemed good.

There are other names, not that small either, who are facing difficulty. Moving into the fields of those who have been more cautious, who - like HSBC Malta - have cut operating costs, who have tried to seek new activities as their older ones are hit by the recession, one finds a situation which still speaks of hardship. Many firms have to slash profit margins to win orders. They and others will be reporting sharply reduced profits before tax to their shareholders. As it will be doing in the case of HSBC Malta and the other local banks, the Treasury will be "sharing" in the decline profits. The tax take will be squeezed like it has not been squeezed for quite a long time.

The whole private sector is under pressure, though surprisingly there are low-cost outlets that are not seeing year-to-year drops, and some even report modest gains. It is under pressure in terms of the demand for its good and services. And it will be under pressure because the banks will be more careful than ever in the lending they make.

The threat of "impairments" referred to by Mr Richards indicates how the banks will be looking at their old and particularly new lending.

"We remain vigilant and continue to take a highly proactive approach to managing our balance sheet to remain liquid, well capitalised and able to support the domestic economy. HSBC's commitment to strong capital and liquidity will stand both the bank and the local economy in good stead," said Mr Richards.

The strength of the banks is beyond question. They will be particularly careful not to imperil that strength. Raising debit interest rates, fees and other charge would have contributed to some extent to contain the drop in profitability of HSBC Malta and the other banks. Squeal though clients might, those actions have not yielded enough additional income to the banks to compensate for the effects of the weakened economy.

The forecast is a tighter situation and more turbulence all over. Containing costs has never been a greater imperative. The name of the game is survival.