The second half of the year will be even more challenging for HSBC Malta than the first six months, CEO Alan Richards told The Sunday Times.
Mr Richards was speaking after HSBC announced a profit before tax for the six months ended June 30 of €34.8 million, which represents a decline of €11.8 million, or 25.3 per cent compared to €46.6 million for the same period last year.
Mr Richards said: "Looking ahead is difficult. I think forecasting in current markets is not a science. 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.
"I think for Malta a lot will depend on how the tourism industry performs in the third quarter and we'll have to see. I think the main thing is that we are well capitalised and liquid, we remain open for business and we are doing all we can to support our customers and the local economy as a whole."
Asked whether the markets were stabilising or whether they remain versatile, Mr Richards said it was difficult to "crystal ball gaze" at the moment.
He added: "I think this is an economic crisis that we have not seen the likes of since the 1930s. I think a lot of the policies being implemented by governments are unconventional, whether we are talking about the toxic assets repurchase programme, nationalising banks, very aggressive interest rate cuts or economic stimulus packages by governments.
"A lot has happened in a very short time and I think there is evidence that the equity markets in the short term have certainly stabilised and picked up a bit. There is a lot of debate about whether this is a V shaped or U shaped or a W shaped recession but I think the house view is that this still has a long way to run."
Mr Richards said the interim results announced by HSBC were 'entirely' in line with the bank's expectations when one considers low interest rates, slowing economies and volatile equity markets.
He referred to the results as "pretty resilient".
"It has been a very challenging six months but I think the results are testimony to HSBC's underlying strength," he said.
"Overall profitability relative to history, peers and industry benchmark remains strong with a return on equity of 15.6 per cent."
The bank announced operating expenses of €41million which are 2.5 per cent lower compared to the same period in 2008. The cost efficiency ratio increased to 54.7 per cent from 47 per cent for the same period in 2008, primarily as a result of a 15.9 per cent decrease in operating income to €74.9 million.
Loans and advances to customers stood at €3,180.6 million at June 30, up €68.3 million, or 2.2 per cent, compared with December 31, 2008.
"In gross terms, the bank sanctioned €337.9 million in new lending for the first six months of this year. Loans to customers have grown by over seven per cent in the last 12 months. This is a strong performance considering the economic challenges we all face and reflects our active commitment to supporting the local economy," Mr Richards said when announcing the results.
Customer deposits of €4,009.3 million at June 30 were down marginally by €7.3 million, or 0.2 per cent, compared with December 31, 2008.
Net interest income of €48.2 million represents a decline of 20.8 per cent compared to €60.8 million during the prior year period, reflecting a significant contraction in interest margin following ECB base rate cuts.
Fees and commission income of €15.2 million was slightly down on first half of 2008, as a result of the slowing economy.
Tax on profits was €12.3 million. Total tax payments including social security contributions and VAT totals €14.9 million.
The board declared an interim gross dividend of 7.7 euro cents per share (5.0 euro cents net of tax). The ordinary dividend payment of €14.6 million is 65 per cent of current profits attributable to over 10,100 bank shareholders.
This will be paid on August 27 to shareholders who are on the bank's register of shareholders as at August 12.
"Although the banking system in Malta remains stable, the outlook for the near term is challenging. 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.
"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.