HSBC Bank Malta p.l.c. 2008 results -

HSBC Bank Malta p.l.c. 2008 results
The following is the text of an advertisement which is to be published in the press in Malta on 21 February 2009 by HSBC Bank Malta p.l.c., a 70.03 per cent indirectly held subsidiary of HSBC Holdings plc.

Review of Performance

Profit before tax of €96.1 million for the year ended 31 December 2008 – down €18.6 million, or 16.2 per cent, compared with €114.6 million in 2007.
Profit attributable to shareholders down 17.3 per cent, or €13.2 million, to €63.1 million, compared with €76.3 million in 2007.
Earnings per share of €0.216, down 17.2 per cent compared to €0.261 for 2007.
Loans and advances to customers of €3,112.2 million at 31 December 2008 – up €289.9 million, or 10.3 per cent, compared with 31 December 2007.
Core customer deposits of €3,407.5 million at 31 December 2008 – up €33.7 million, or 1.0 per cent, compared with 31 December 2007.
Total assets of €5,296.1 million, up €401.0 million, or 8.2 per cent, compared with 31 December 2007.
Return on equity of 22.3 per cent for the year ended 31 December 2008, compared with 27.6 per cent in 2007.
Capital adequacy ratio, on a Basel II basis, of 11.0 per cent compared with 10.3 per cent in 2007.
Commentary

HSBC Bank Malta and its subsidiaries delivered a profit before tax in 2008 of €96.1 million. While this represents a decline of 16.2 per cent compared to 2007, it was a solid result achieved after taking into account the introduction of the euro and the volatility of world financial markets. Overall, profitability was still strong with a return on equity of 22.3 per cent.

Net interest income of €123.0 million in 2008 was down 2.5 per cent, from €126.2 million in 2007. Increases in loans and advances generated steady growth in interest receivable. This was off-set by the increase in interest payable on retail deposits, and margin pressure from a combination of increased competition and the lowering of base rates by the ECB in the last quarter of 2008.

Net fees and commission income of €31.8 million in 2008, compared to €31.0 million in 2007, was achieved despite reduced levels of business activity during the first quarter of 2008 following Malta’s adoption of the euro on 1 January 2008 and the general elections. Adopting the euro also affected foreign exchange dealing income which, at €7.9 million, was significantly lower than the €16.7 million earned in the previous year.

Strong organic growth in sales of regular premium term life and investment products, and flat costs contributed to the life insurance business generating a profit before tax of €16.4 million in 2008, up 25.0 per cent on 2007.

The loss of €29.4 million in net income from insurance financial instruments designated at fair value was offset by a corresponding increase in other operating income, a reduction in net insurance claims incurred and movement in policyholders’ liabilities.

During the year, gains from property disposals and a revaluation gain on investment property generated €3.5 million in other operating income.

Operating expenses of €90.4 million in 2008 were €6.7 million, or 8.1 per cent, higher compared to the previous year, with a cost efficiency ratio of 48.0 per cent compared to 42.1 per cent in 2007. Employee compensation and benefits increased by €5.6 million in 2008 primarily due to an exceptional charge to support a voluntary early retirement scheme. General and administrative expense growth of €1.0 million was driven primarily by non-recurring costs related to the euro conversion and information technology investment, as well as utility and communications expenditure. Stripping out the costs incurred by the euro conversion and voluntary retirement scheme, operating expenses remained flat year-on-year.

The net impairment charge of €1.9 million was six basis points of loans and advances to customers. The year-on-year increase was mainly due to the non-recurrence of the high levels of recoveries experienced during 2007.

Loans and advances to customers increased by €289.9 million in 2008 to €3,112.2 million, from €2,822.3 million in 2007, with growth across both the personal and commercial sectors. The quality of the overall loan book remains good with non-performing loans at the 2008 year end representing 2.3 per cent of gross loans, an improvement from 2.7 per cent at the end of 2007.

Short-term liquid money market placements in the form of loans and advances to banks increased by €441.3 million to €1,072.3 million as more new funds and maturing liquidity were placed with HSBC as a result of increasing market risks.

In these challenging times, the available-for-sale investments portfolio was marked down by €9.7 million during the year. HSBC Malta believes that the credit quality of these assets remains strong and that this deficit will reverse over the long-term. The mark-down was charged to revaluation reserves, net of tax.

The capital adequacy ratio, on a Basel II basis, remained strong at 11.0 per cent. In September 2008, the bank issued a €30.0 million, 5.9 per cent, subordinated bond to further strengthen its funding base and to support future business growth.

Alan Richards, director and chief executive officer of HSBC Bank Malta, said: “It will be a particularly challenging year in 2009 as many parts of the world head into a recession which will leave its mark on Malta. Profitability will be under pressure as the economy slows, margins contract further in a low interest rate environment and impairments are likely to increase as the credit cycle continues to weaken.

“Whilst some of the challenges we face may be unprecedented, we are in good shape. I am confident that with our track record, the backing of the HSBC Group, our enduring commitment to liquidity, strong capital and a conservative approach to risk management, we are well positioned to build on our strengths and support our customers to drive future growth.

“The financial result for 2008 is a testimony to the hard work and professionalism of our staff during these trying times.”

The Board is declaring a final gross dividend of €0.096 per share (€0.062 net of tax). This will be paid on 20 April 2009 to shareholders who are on the bank’s register of shareholders at 4 March 2009. This, together with the gross interim ordinary dividend of €0.119 per share, results in a total gross dividend for the year of €0.215.

Read the full media release (9 page pdf 55k).

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