HSBC Malta CEO expects difficult 2012

2012 is expected to be a more difficult year, outgoing HSBC Malta chief executive Alan Richards said in the bank's interim statement for November 2011, citing difficult market conditions and increasing pressures on revenue and capital.

"Clearly market conditions have been particularly difficult in recent months and whilst the Eurozone crisis still has some way to go, we are satisfied with the bank's positive performance during the period under review.

"The local economy has held up relatively well despite the significant uncertainty across the Eurozone economy with high unemployment, mixed growth and government-led austerity measures contributing to some significant down side risks for 2012. We have a firm grip on both risks and costs at a time when we are likely to see continuing pressure on revenue as the wider Eurozone economy slows."

HSBC Malta has reported financial performance during the period 1 July 2011 to 15 November 2011 remained broadly in line with expectations, with the trading period dominated by volatility in global markets, most specifically around the problems associated with the Eurozone sovereign crisis.

HSBC said it sought to significantly reduce its market risks by de-risking the available-for-sale portfolio, through the disposal of the bank's exposure to peripheral Eurozone debt.

"Revenue is slightly below expectations and profitability in the investment-related subsidiaries, including the life company, has been adversely impacted by the volatile investment markets.

"HSBC Malta continues to provide strong support to its borrowers and security for its depositors. Levels of retail deposits were unchanged during the period despite significant competitive pressure. Market share in lending has been stable during the period under review and pipeline business remains reasonably resilient."

HSBC said costs are slightly higher than the same period last year, primarily due to ongoing investment in the business. Loan impairments, although slightly higher than the same period last year, remain below expectations.

The bank has approved a plan to look to deliver additional sustainable cost savings by the end of 2013, to be launched early in 2012. These include 'optimising the footprint' of their branches and automated delivery channels, the introduction of improved technology and operational infrastructure, and the simplification of the bank's organisation.

The potential disposal of the bank's card acquiring business, which was announced on 28 October, forms part of these initiatives. As a consequence of these initiatives restructuring charges of approximately €10 millon will be incurred, which will impact the 2011 results.

By far the largest component of this charge will be to support early retirement schemes for employees. Consultations with the union and briefings to staff on the details of these initiatives have begun and further details will be announced as they are finalised.

"We continue to emphasise our competitive advantages as an international bank and we remain highly liquid, with a strong asset to deposit ratio, and well capitalized," Richards said.

"We have done well to anticipate the downturn in the Eurozone but will need to increase our focus on cost and risk management as trading conditions become more challenging. We have a clear strategy and have agreed priorities for 2012 and we look forward to next year with confidence."