HSBC Bank Malta said that it has delivered a resilient performance in the six months ended 30 June 2013 reporting a profit before tax of €53m in line with the comparable period in 2012.

This was principally the result of strong balance sheet management, effective cost control and a good performance from the Life business offset by the impact of lower interest margin earned.

Mark Watkinson, Director and Chief Executive Officer of HSBC Malta, announced at the meeting: “We have continued to deliver resilient results for our shareholders against a very challenging European backdrop. Global conditions look to remain difficult for the medium term. However as part of one of the world’s largest banking groups, operating in 80 countries and territories, HSBC Malta is well positioned to assist its customers explore opportunities in some of the world’s faster growing markets.”

All the three main business lines, Retail Banking and Wealth Management, Commercial Banking and Global Banking and Markets, were profitable during the period under review.

Net interest income reduced by 6% to €63m compared with €68m in the first half of 2012. The fall in net interest income reflected the impact of lower yields as the loan portfolio repriced in the low interest environment and lower average lending balances. This was partially offset by a fall in the cost of funds resulting from a move by customers to more readily accessible, shorter-dated deposits. In addition, a lower level of interest income was earned on debt securities as the proceeds of higher yielding maturing bonds were re-invested at lower yields.

Net fee and commission income of €16m for the six months ended 30 June 2013 was in line with first half of 2012.”

HSBC Life Assurance (Malta) Ltd reported a profit before tax of €8m compared with €7m in the first half of 2012 reflecting a release in with profits modelling reserves as a result of improved product performance.

A net gain of €4m was reported on a higher level of disposals of available-for-sale securities compared to a net gain of €2m in the comparable period in 2012.

Operating expenses at €45m were well controlled and broadly in line with the first half of 2012. The increase of €1m, or 9%, in administrative expenses reflected a higher contribution by the bank to the depositor guarantee scheme and a rise in compliance, security and fraud-risk related costs. The continued investment to improve technology capabilities was funded by savings from simplification and re-engineering of processes. Cost efficiency ratio at 45.9% is in line with last year’s ratio of 45.4%.

The bank’s focus continues to be that of building a high quality asset base and, despite the ongoing economic uncertainties, there were no material new loan impairments reported in the period. Loan impairments at €0.8m were in line with the comparable period in 2012. At a bank level, non-performing loans remained stable at 5% of gross loans and asset quality remains generally good.

Net loans and advances to customers at €3,336m were only €18m lower than at 31 December 2012. In spite of a softening in loan demand the bank provided gross new lending to customers of €318m in the period. This reflects the bank’s continued support to the local economy.

Customer deposits declined by €70m to €4,447m reflecting the normal volatility of corporate and institutional deposits. This fall was partially offset by higher levels of retail deposits achieved despite the heightened competition for deposits.

The bank’s available-for-sale investment portfolio remains well diversified and conservatively positioned.

The bank’s liquidity position remains strong with an advances-to-deposits ratio of 75% compared with 74% at 31 December 2012.

The bank continued to strengthen its capital ratio which was 12.9% at 30 June 2013, comfortably exceeding the 8% minimum regulatory capital requirement. The bank intends to maintain a conservative approach to capital and will continue to build its capital where considered appropriate.

Mark Watkinson said, “I would like to thank our staff, directors and shareholders for their commitment, hard work and support during the first half of 2013.

“The Board is declaring an interim gross dividend of 10.0 cent per share (6.5 cent net of tax). This will be paid on 5 September 2013 to shareholders who are on the bank’s register of shareholders at 16 August 2013.”

The key points are:

Profit before tax of €53m for the six months ended 30 June 2013 – in line with the same period in 2012.

Profit attributable to shareholders of €34m for the six months ended 30 June 2013 – in line with the same period in 2012, resulting in earnings per share of 11.8 cent.

Total assets of €5,748m at 30 June 2013, down €139m, or 2%, compared with 31 December 2012.

Customer accounts of €4,447m at 30 June 2013, down €70m, or 2%, compared with 31 December 2012.

Return on equity for the six months ended 30 June 2013 of 16.3%, compared with 17.8% for the first half of 2012.

Cost efficiency ratio for the period ended 30 June 2013 of 45.9%, compared with 45.4% for the same period in 2012.

Capital adequacy ratio of 12.9% at 30 June 2013 compared with 12.4% at 31 December 2012. Core tier 1 ratio of 8.9% at 30 June 2013, compared with 8.3% at 31 December 2012.

Photo – From left, Josephine Magri, Chief Financial Officer, Sonny Portelli, Chairman, and Mark Watkinson, Chief Executive Officer of HSBC Malta.

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