Strong results for HSBC, bank announces €15 million dividend payout

HSBC Bank Malta plc profit before tax increased by 21.4% to €42.2 million in the first six months of the year, compared to the same period last year. At a meeting held on 30 July 2010, the Board of Directors of HSBC Malta plc approved the Group and Bank Interim Accounts for the six-month period up to 30 June 2010. “HSBC delivered a strong performance during the first half of 2010.

After a period of negative GDP growth, the Maltese economy has stabilised and is showing encouraging signs of sustainable growth. However, we are not out of the woods as the recent Eurozone sovereign bond crisis has highlighted.

Nonetheless, HSBC Bank Malta is both financially strong and well-positioned to support its customers and future growth in the economy,” said Alan Richards, CEO of HSBC Malta.

Profit before tax for the six months ended 30 June 2010 of €42.2 million represents an increase of 21.4%, or €7.4 million, compared with €34.8 million for the same period last year. “Profitability at the half year relative to history, peers and industry benchmark remains strong with an increased return on equity of 16.9%. Revenue is up 12.7% year-on-year reflecting improved margins and fee income. Costs are marginally down year-on-year reflecting last year’s work on productivity.

Loan impairment charges have also been well controlled and balance sheet growth has been reasonable notwithstanding the softer economic conditions,” said Mr Richards. Operating expenses of €40.8 million for the six months ended 30 June 2010 were in line with those in the first half of 2009. The cost efficiency ratio improved to 48.4% compared to 54.7% for the same period in 2009. This was achieved through strict cost discipline.

In a challenging economic environment, net loan impairment charges of €1.4 million were reported for the six months ended 30 June 2010, compared to a release of €0.9 million in the comparable period in 2009. It is to be highlighted that this is from an extremely low historic base and the charge remains at a modest level of the overall loan book.

Total assets grew by €489 million to €5,606.8 at 30 June 2010 compared to €5,117.8 million at 31 December 2009. The main increases were reported in treasury bills and debt securities investments as part of the bank’s liquidity management. The credit quality of the available-for-sale investments portfolio remained satisfactory with an increase in fair value of €6.8 million during the current period compared to €3.8 million for the six months ended 30 June 2009. This increase in fair value is credited directly to the revaluation reserve, net of tax.

Loans and advances to customers were €3.2 billion at 30 June 2010, a decrease of €22.1 million, or 0.7%, compared with 31 December 2009, as in the current economic environment, borrowers looked to reduce debt levels.

However, where lending opportunities arose, the Bank continued to support its customers’ financial needs while maintaining asset quality. Consumer lending showed resilience and good growth was registered in new mortgages. Demand for corporate lending was soft. Total new lending for the first six months of the year amounted to €306 million. The quality of the lending portfolio showed a marginal deterioration with non-performing loans representing 3.2% of gross loans as at June 2010, compared to 2.9% as at 31 December 2009.

Liquidity and capital ratios remain strong and are well above regulatory requirements. In a period of growing competitive pressures, characterised by a number of local government and corporate bond issues, customer deposits increased by €59.4 million for the first six months to €4.1 billion.

The Bank’s liquidity position remains strong with an advances-to-deposits ratio of 77.3%, compared with 79% at 31 December 2009. Net interest income increased by 26.2% to €60.8 million, compared to €48.2 million in the first half of 2009. Liability margins remain under pressure given the low interest rate environment. Net fees and commission income of €16.9 million for the six months ended 30 June 2010 increased by 11.2%, or €1.7 million, compared to €15.2 million recorded in the first half of 2009.

Strong growth was recorded in lending, card issuance and usage fees and from trust and retail brokerage trading activities. Profits from life insurance business, weakened by recent market conditions, at €3.7 million for the first half of 2010 was 32.5% lower than for the same period in 2009. Tax on profits was €14.8 million. Total tax payments including social security contributions and VAT total €17.8 million.

The Board is declaring an interim gross dividend of 7.9 euro cent per share (5.1 euro cent net of tax). The ordinary dividend payment of €15 million is 55% of current profits attributable to over 10,400 Bank shareholders. This will be paid on 24 August 2010 to shareholders who are on the Bank’s register of shareholders as at 10 August 2010. “We have made good progress during these six months and we continue to emphasise our competitive advantage as an international bank. We remain liquid, well-capitalised and well-positioned to support the local economy and future growth,” said Mr Richards.