HSBC Bank Malta p.l.c. first half 2009 results - highlights

31 July 2009

The following is the text of an advertisement which is to be published in the press in Malta on 1 August 2009 by HSBC Bank Malta p.l.c., a 70.03 per cent indirectly held subsidiary of HSBC Holdings plc.

Review of Performance

• Profit before tax of €34.8 million for the six months ended 30 June 2009, down €11.8 million, or 25.3 per cent, compared with €46.6 million for the same period in 2008.
• Profit attributable to shareholders down 25.2 per cent, or €7.6 million, to €22.5 million, compared with €30.1 million over the comparable period in 2008.
• Earnings per share for the six months ended 30 June 2009 at 7.7 euro cent, compared to 10.3 euro cent for the same period in 2008.
• Loans and advances to customers of €3,180.6 million at 30 June 2009, up €68.3 million, or 2.2 per cent, compared with 31 December 2008.
• Customer deposits of €4,009.3 million at 30 June 2009, down €7.3 million, or 0.2 per cent, compared with 31 December 2008.
• Total assets of €5,013.1 million at 30 June 2009, down €283.0 million, or 5.3 per cent, compared with 31 December 2008.
• Return on equity of 15.6 per cent for the six months ended 30 June 2009, compared to 22.0 per cent in the first half of 2008. 

Commentary

HSBC Bank Malta and its subsidiaries delivered a profit before tax for the six months ended 30 June 2009 of €34.8 million. Although a decline of 25.3 per cent compared to the same period in 2008, this is a resilient performance in light of current market conditions, which is in line with our expectations. Profitability was impacted by the combination of reduced revenues as the economy slows; significant margin compression in the lower interest rate environment; and downward pressure on profitability of insurance and investment-related business which is impacted by the volatility in equity and bond markets.

The European Central Bank intervention rate has fallen by 325 basis points, from 4.25 per cent since October 2008 to 1.0 per cent in June 2009, significantly impacting the bank's net margins. Net interest income declined by 20.8 per cent to €48.2 million, compared to €60.8 million in the previous period reflecting significant deposit spread compression in the current low interest rate environment.

Net fees and commission income of €15.2 million for the six months ended 30 June 2009 was broadly in line with the first half of 2008. Growth in lending, card issuance and usage fees and retail brokerage trading activities were offset by declines in fees from remittances and subdued sentiment for retail investments. Life insurance business, weakened by current market conditions, generated a profit before tax of €5.5 million, down 13.6 per cent on the same period of the previous year.

Operating expenses of €41.0 million for the six months ended 30 June 2009 were €1.1 million, or 2.5 per cent, lower compared to €42.0 million in the previous period, with a cost efficiency ratio of 54.7 per cent compared to 47.2 per cent for the same period in 2008. Tight control on costs has been maintained and, as a result, costs should continue to trend downwards during the second half of this year.

The credit quality of the available-for-sale investments portfolio remains satisfactory with a modest fair value gain of €3.8 million recorded during the period compared to a mark down of €7.7 million for the six months ended 30 June 2008.  This fair value movement was credited directly to the revaluation reserve, net of tax.

During the first six months of 2009 the bank grew its lending carefully, maintaining asset quality while supporting our customers' financial needs in the difficult economic environment. The quality of the lending portfolio showed little sign of deterioration whilst liquidity and capital ratios remained strong and are well above regulatory requirements.

Levels of deposits of €4.0 billion were maintained in a period characterised by a number of bond issues and growing competitive pressures. The bank has maintained a strong liquidity position with an advances to deposits ratio of 79.3 per cent.

Alan Richards, Director and Chief Executive Officer of HSBC Bank Malta p.l.c., said: "The first half of 2009 has been difficult and, as predicted, the bank's short-term financial performance has been affected. However HSBC Bank Malta remains in very good shape and we are actively working to support the local economy.

"We remain vigilant and continue to take a highly proactive approach to managing our balance sheet to remain liquid, well capitalised and positioned to support future growth. HSBC's commitment to strong capital and liquidity will stand the bank in good stead.

"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 in the future as the credit cycle continues to turn and our investment markets activity will continue to experience volatility.

"Through this period of uncertainty and beyond we will continue to position HSBC Bank Malta for long-term growth. Our capital and balance sheet strength, and a commitment to strict cost control, will continue to underpin our performance. So whilst 2009 is difficult and challenging, I would stress that we are well positioned to support our customers.

"A word of thanks in particular goes to our staff whose commitment and dedication in challenging markets support these results."

The Board is declaring an interim gross dividend of 7.7 euro cent per share (5.0 euro cent net of tax). This will be paid on 27 August 2009 to shareholders who are on the bank's register of shareholders as at 12 August 2009.

Read the full release (11 page pdf 194k)