The following is the text of an announcement issued locally in Malta on 4 March 2013 by HSBC Bank Malta p.l.c., a 70.03% indirectly held subsidiary of HSBC Holdings plc.
Review of Performance
- Profit before tax of €95m for the year ended 31 December 2012 – an increase of €7m, or 8%, compared with €88m in 2011.
- Profit attributable to shareholders of €62m for the year ended 31 December 2012 – up €4m, or 7%, compared with €58m in 2011, resulting in earnings per share of 21.1 cent, up 7%.
- Total assets of €5,886m at 31 December 2012, up €61m, or 1%, compared with 31 December 2011.
- Customer accounts were €4,517m at 31 December 2012, an increase of €114m, or 3%, compared with 31 December 2011.
- Return on equity for the year ended 31 December 2012 was 15.4%, compared with 15.7% in 2011.
- Cost efficiency ratio for the year ended 31 December 2012 improved to 48.7%, compared with 50.4% in 2011.
- Capital adequacy ratio of 12.4% at 31 December 2012, compared with 11.6% at 31 December 2011. Core tier 1 ratio of 8.3% at 31 December 2012 compared with 7.4% as at 31 December 2011.
HSBC Bank Malta p.l.c. delivered a positive performance for the year ended 31 December 2012. Reported profit before tax of €95m increased by 8% or €7m over prior year. The main factors driving the improvement in profit before tax were a strong performance from the life insurance company reflecting a recovery in investment returns and available-for-sale gains as a result of the repositioning of the bond portfolio. These more than offset the impact of the non-recurring gains made in 2011 on the sale of the card acquiring business and the refinement in the methodology used to calculate the present value of in-force long-term insurance policies.
All the three main business lines, Retail Banking and Wealth Management, Commercial Banking and Global Banking and Markets, were profitable in 2012.
Net interest income increased by 3% to €133m compared with €129m in 2011. The increase reflected growth in mortgage lending from new business and improved balance sheet management returns. Net fee and commission income fell to €30m in 2012 compared with €34m in 2011. Growth in fee income for payments and cash management was more than offset by lower card fees following the sale of the merchant card acquiring business in December 2011.
During 2012 there was a greater focus on strengthening the connectivity between Global Banking and Markets and Commercial Banking and as a result FX revenues grew by €1m or 11% year on year.
HSBC Life Insurance (Malta) Ltd reported a profit before tax of €18m compared with €11m in 2011 reflecting a recovery in investment returns. Underlying new business performance generation, particularly with respect to life-insurance protection, was encouraging.
Net other operating income of €3m compared with €24m in 2011. The gain on the sale of the card acquiring business in 2011 and one-off gain from a refinement in the methodology used to calculate the present value of in-force long-term insurance business were not repeated in 2012.
A net gain of €4m was reported on the disposal of available-for-sale securities compared to a net loss of €2m in 2011.
Operating expenses of €96m were €2m or 2% lower than the previous year. The fall in expenses was despite a €2m rise in amortisation costs, relating to the implementation of an IT system in 2011 and the costs associated with an early voluntary retirement programme incurred during the year. The bank has continued to simplify and de-layer the organisation and the positive benefits of this global HSBC initiative are becoming evident. The cost efficiency ratio improved from 50.4% to 48.7% in 2012.
Net impairments reduced from €8m to €6m in 2012. This was principally due to the non-recurrence of a €4m impairment taken on Greek government bonds held by the life insurance subsidiary in its available-for-sale bond portfolio in 2011. During 2012, following the Greek bonds restructuring programme all Greek debt exposure was sold and no Southern European country government debt is now held in this portfolio.
In a challenging economic environment loan impairments increased by €1m to €5m (14 basis points of the overall loan book). At a bank level, non-performing loans remained stable at 5% of gross loans and asset quality remains generally good.
Net loans and advances to customers increased by €10m to €3,354m. The bank's share of the mortgage market was stable. Despite a softening in loan demand in the challenging economic conditions gross new lending to customers amounted to €507m. This reflects the bank's continued support to the local economy.
Customer deposits rose by €114m during the year and stood at €4,517m at the year end reflecting an increase in both corporate and institutional deposits. The levels of retail deposits were marginally higher despite heightened competition for deposits.
The bank's available-for-sale investments portfolio remains well diversified and conservative. The bank's liquidity position remains strong with an advances-to-deposits ratio of 74%, compared to 76% at 31 December 2011.
The bank strengthened its capital ratio to 12.4% which comfortably exceeds the 8.0% minimum regulatory requirement. The bank will maintain its conservative approach to capital, building capital where appropriate.
Mark Watkinson, Director and Chief Executive Officer of HSBC Bank Malta, said: "We have delivered another positive set of results that saw pre-tax profit increase by 8% with a return on equity of 15.4%. This performance was achieved in spite of the continued travails of the eurozone, a low interest rate environment, heightened competition and softer demand.
"The bank's capital and liquidity position remains strong.
"Despite all the current global and regional challenges, we have a clear strategy in place of assisting our customers and Malta to access broader global markets with faster growth, simplifying our business, improving the customer experience and driving greater organisational efficiency.
"Looking ahead, 2013 is likely to be another difficult year and while the Maltese economy has proved to be very resilient in times of crisis, we need to remain vigilant.
"I would like to take this opportunity to thank our staff, directors and shareholders for their commitment, hard work and support in 2012."
The Board is declaring a final gross dividend of 7.9 cent per share (5.1 cent net of tax). This will be paid on 27 April 2013 to shareholders who are on the bank's register of shareholders at 19 March 2013.
Basis of preparation
The preliminary statement of annual results is published pursuant to Listing Rule 5.54 of the MFSA Listing Authority and Article 4 (2) (b) of the Prevention of Financial Markets Abuse (Disclosure and Notification) Regulations, 2005. Figures have been extracted from HSBC Bank Malta p.l.c.'s Annual Report and Accounts which have been audited by KPMG.
These financial statements have been prepared and presented in accordance with International Financial Reporting Standards as adopted by the EU.
HSBC Bank Malta p.l.c. is a member of the HSBC Group, whose ultimate parent company is HSBC Holdings plc the parent company of the HSBC Group headquartered in London. The Group serves customers worldwide from around 6,600 offices in 81 countries and territories in Europe, the Asia-Pacific region, North and Latin America, and the Middle East and North Africa. With assets of US$2,693bn at 31 December 2012, the HSBC Group is one of the world's largest banking and financial services organisations.
Read the full text of the media release.