HSBC Malta profits down 20% to €49.9m, shareholders to get €20m extraordinary dividend

HSBC Bank Malta has reported a profit before tax of €49.8m for 2017, a decrease of €12.4m or 19.9% on the previous year.

The bank announced a €20 million extraordinary dividend for shareholders, citing it as a “reward” for the implementation of the bank’s strategic plan.

The reported pre-tax profit includes the gain on disposal of the bank’s membership interest in Visa Europe amounting to €10.8m and a provision of €8m for remediation of the legacy operational failure in the bank’s brokerage business.

The bank said profits were affected by future employee benefits, with its €2m charge in 2016 going up to €7.6m in 2017.

HSBC said 2017 was marked by broadly stable but persistently low interest rates and increasing excess liquidity in the market, while attractive investment opportunities remained limited. In this environment, a record number of debt issuances by corporate entities was registered on the Malta Stock Exchange fuelled by investors’ demand for higher yield.

“In 2017 we largely completed changes to our business model in order to meet the highest global standards for compliance and risk management,” CEO Andrew Beane said.

“While these actions reduced profitability during the year due to lower revenues and higher costs, they have materially strengthened the bank’s risk profile and position it well for the future.”

Beane said the exceptional dividend of €20m reflected HSBC’s capacity to generate more capital than is required by its risk profile.

He said that in 2018, within our changed business model, HSBC will increase investment in customer service and innovation to support growth over the medium term while sustaining the bank’s signature conservative credit discipline that supports strong performance through the full economic cycle.

Profit attributable to shareholders amounted to €30.9m resulting in earnings per share of 8.6 cent compared with 11.2 cent in 2016.

The Board recommended maintaining a current dividend payout ratio of 65% of net profit, and return part of retained earnings to the shareholders and recommended an extraordinary dividend of €20m in addition to the regular dividend paid out of the net profit for the year. The final gross dividend will be 12.4 cent per share (8.1 cent per share net of tax).

Together with the interim dividend paid in September 2017, the total gross dividend for 2017 will be 17.1 cent per share (11.1 cent per share net of tax) or €61.6m (€40.2m net of tax) representing a 54.0% increase on the dividends paid for 2016. The final dividend will be paid on 19 April 2018 to shareholders who are on the bank’s register of shareholders at 13 March 2018.

HIghlights

• Reported profit before tax of €49.8m for the year ended 31 December 2017, a decrease of €12.4m, or 19.9%, compared with prior year.
• Adjusted profit before tax, which excludes the effect of notable items, was €55.6m, 9.5% down on 2016.
• Net dividend for 2017 was €40.2m, up 54.0% compared with prior year. It includes a special dividend of €20m to be distributed from surplus retained earnings.
• Common equity tier 1 ratio increased to 13.9% at 31 December 2017 from 13.2% at 31 December 2016. The total capital ratio was 14.4% at 31 December 2017, compared with 14.2% at 31 December 2016.
• Adjusted cost efficiency ratio was 66.2%, compared with 58.7% in 2016.
• Adjusted return on equity for the year ended 31 December 2017 was 7.2% compared with 8.4% in 2016.
• Earnings per share of 8.6 cent compared with 11.2 cent in 2016.
• The advances to deposits liquidity ratio remained stable at 65.6%.
• Net loans and advances to customers were €3,129m, down 5.8% compared with 2016.
• Customer deposits decreased by 4.7% to €4,766m at 31 December 2017.