HSBC Malta reports €57 million pre-tax profit

HSBC Malta reported a before-tax profit of €57.3 million for the 2022 financial year, an increase of 113% compared to the previous year.

When adjusted to exclude the impact of a €1.5 million restructuring, before-tax profit stood at €58.8 million, an increase of 98% compared to the prior year.

“HSBC’s financial performance in 2022 exceeded expectations and was driven by rising interest rates, a significant credit recovery, increase in trading income and rigorous cost management actions,” the bank’s CEO Simon Vaughan Johnson said.

He said the interest rate outlook appears positive, but the outlook for 2023 remains uncertain due to heightened levels of inflationary pressures and continued geopolitical tensions.

Net interest income increased by 11% to €108.2 million compared to prior year as the bank benefitted from rising interest rates. The European Central Bank increased the interest rate on their overnight deposit facility from -0.5% on 26 July 2022 rising to 2% as from 21 December 2022 and therefore the bank’s surplus liquidity position was no longer being placed at negative rates.

Net fee income decreased by €2.1 million compared to 2021 to €22.1 million. This was driven by the removal of the high balance fee in July 2022 in view of the rising interest rate environment. The bank also reported a decrease in the refund received on card scheme fees.

HSBC Malta attributed a number of factors to the net decrease in adjusted costs of €1.1 million. It said the most material contributors were lower long term employee benefit costs in view of the increase in interest rates, savings on our commercial real estate costs and lower regulatory fees.

These cost savings were partially offset by higher amortisation of intangible assets due to investments in digitalisation, higher recharges from Group entities in view of increased outsourced services and higher costs incurred by the insurance subsidiary for the implementation of new accounting requirements.

HSBC Malta’s recommended gross final dividend is 5.61 cent per share, or 3.64 cent per share net of tax.

The bank also reported a profit after tax attributable to shareholders of €37.6 million for the 2022 financial year, resulting in earnings per share of 10.4 cent.

In the same period in 2021, this stood at 4.9 cent.

The adjusted cost efficiency ratio was 67% in 2022, compared to 78% in 2021. Meanwhile the adjusted return on equity stood at 7.8% compared with 4% in 2021.

Net loans and advances to customers decreased marginally by €21.6 million compared to the 2021 financial year, while customer deposits increased by 6% to €5.9 billion.

Overall, net loans and advances amounted to €3.2 billion. Commercial balances decreased by 1.9% while retail balances decreased by 0.2%.

The bank reduced commercial non-performing loans by 22% while retail non-performing loans decreased by 34%, mainly driven by mortgage upgrades on which moratoria were extended during the COVID-19 period.

Indeed, the bank is in a strong liquidity position with a loan-to-deposits ratio of 53%.