HSBC posts €83.1 million in pre-tax profits, up by 16.7% over 2009

HSBC Bank Malta delivered a strong performance in the year ended 31 December 2010 with reported profit before tax of €83.1 million, an increase of 16.7 per cent, or €11.9 million compared to 2009.

The profits were primarily driven by improved levels of revenues reflecting stronger net interest income as margin compression eased. Net interest income improved by 17.0% to €122.8 million compared to €105.0 million in 2009 attributable to balance sheet growth and the unwinding of term deposits.

Net fees and commission income of €34.3 million increased by 5.9 per cent, or €1.9 million, compared to the €32.4 million recorded in 2009.

Strong growth was recorded in card issuance and usage fees and from trust and retail brokerage trading activities.

Insurance performance was robust in a challenging economic environment. Life insurance activities generated a profit before tax of €12.6 million in 2010, up €0.8 million, or 7.2 per cent, compared to €11.7 million in 2009. A gain of €19.7 million in net income from insurance financial instruments designated at fair value was reported compared to €26.7 million recorded in prior year reflecting the volatility in the European financial markets.

“HSBC Bank Malta continues to take a disciplined approach to cost management while continuing to invest in the business and IT systems. As a result, operating expenses increased by €3.8 million, or 4.6 per cent, to €87.6 million in 2010. This was driven mainly by a high level of investment in branch refurbishments, customer segmentation, channel and process migration and system improvements as well as rewarding performance in line with revenue growth,” the bank said in its statement.

In a challenging economic environment and from a low historic base, there was a modest €1.0 million increase in loan impairments to €5.3 million in 2010 from €4.2 million in 2009. This remains at the modest level of 16 basis points of theoverall loan book.

Total assets grew by €546.8 million to €5,664.6 million at 31 December 2010 compared to €5,117.8 million in 2009. This liability driven growth was invested in treasury bills and debt securities as deposit growth exceeded loan demand and as part of the bank’s liquidity management strategy.

Loans and advances to customers grew by €77.4 million in 2010 to €3,303.8 million, from €3,226.5 million in 2009, with growth seen in both the personal and commercial sectors.

Mortgage market share remained stable. Following muted demand for corporate lending in the first nine months of 2010 stronger growth was registered in the last quarter. Gross new lending to customers amounted to €682.0 million which reflects the bank’s continued support to the local economy and was a modest increase on prior year.

The quality of the overall loan book remains good with non-performing loans at the 2010 year end representing 3.0% of gross loans compared to 2.9% in 2009.

Customer deposits grew by €376.2 million in 2010 to €4,462.9 million, testimony to the trust customers continue to place in HSBC during a period characterised by a number of bond issues and growing competitive pressures.

The available-for-sale investments portfolio remains well diversified and conservative. A fair value gain of €1.2 million on this portfolio was credited to revaluation reserves, net of tax.

The bank’s liquidity position remains strong with an improved advances to deposits ratio of 74.0 per cent, compared with 79.0% at 31 December 2009. The capital adequacy ratio at 10.2% is well above regulatory requirements.

Alan Richards, Director and Chief Executive Officer of HSBC Bank Malta p.l.c., commented: “2010 was a difficult year but we are pleased both with the headline results and the progress we have made in transforming the bank for sustainable long-term growth. Our goal remains that of being the leading local and international bank in Malta.

“The local economy is performing relatively well and we anticipate continued growth for the foreseeable future. However, challenges within the global economy remain. Growth across Europe remains mixed, unemployment is still high, we have seen renewed stress in the Eurozone area and the impact of a number of government-led austerity measures are contributing to downside risks. We will continue to monitor the current situation closely as any slowdown in growth in Europe will inevitably impact Malta’s open economy.”

The Board is declaring a final gross dividend of €7c7 per share (5.0 euro cent net of tax). This will be paid on 21 April 2011 to shareholders who are on the bank’s register of shareholders at 8 March 2011. This, together with the gross interim ordinary dividend of €7c9 euro cent per share, results in a total gross dividend for the year of €15c6.