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Just after six and a half weeks from year end, the board of directors of HSBC Bank Malta plc, has approved the accounts and published the preliminary profit statement for the year ended 31 December 2005. Even without having the full details of the accounts, notes and explanations, one can immediately draw certain conclusions.
The Group accounts show:
- The profit before tax for the Group reached Lm36.7mio at 31/12/2005, showing a healthy 11.7% increase over the same period last year. This is a healthy Lm100,500 per day.
- Shareholders enjoy profits after taxation is deducted. This year they have Lm24.1mio being an increase of Lm2.1 over the previous year.
- A key performance indicator is the EPS (Earnings Per Share). This is a healthy 33cents rising from the previous year’s 30.2cents.
- The Tax bill increased from Lm10.8 in 2004 to Lm12.6 in 2005. The effective rate of Tax has also increased marginally by 1% to reach 34.4%.
- The Group enjoyed an increase of 13.2% in net interest income reaching Lm46.9mio.
- HSBC succeeded in controlling its costs wherein it’s operating expenses slightly increased by half a million Maltese Liri to reach Lm32.1mio. However this did not impact negatively as the Groups’ cost to income ratio was down to 46.7% in 2005 as against 52.5% in 2004.
On the basis of these results the board of directors has recommended: A final dividend of 19cents 1mil gross per share; a special dividend of 21cents 1mil gross per share.
These bring the final dividend payout to shareholders on the register on 21/02/2006 at 40 cents 2mils gross. One must recall that when HSBC announced their half yearly results they gave a gross interim dividend of 19cents 1mil and a special dividend of 27cents 4mils. This is a company that practices a policy of passing on cash to its shareholders.
Moreover, the Board is provisioning a recommendation to its shareholders to benefit from a three for one bonus shares and allotted to shareholders still registered so on 18 April 2006 and will be available also for trading on the next day.
It comes as no surprise that the director and CEO of HSBC Malta plc terms 2005 as another successful year coming from strong sales growth across all the business lines. The balance sheet reflects the strength of the results so far with assets totalling Lm1,650,695,000.
The Group also confirmed that these results were coming from its hard working employees who enjoyed a bonus of Lm2.3mio which is Lm1mio more than 2004 and another contribution of Lm150K towards the provision for pensions. The pension fund is now at Lm250,000, even before the Government legislates on this issue. Here HSBC is showing the business community that it is a model employer and their regular contributions to the community also stimulate admiration for this entity.
Analysts and stockbrokers are used to getting good and improved results from HSBC. It is almost becoming a boring exercise waiting for the results. However, this year’s results show stability and its improved performance is preparing it to be ready for future growth. One has no doubt in stating that HSBC is using all that is necessary to be more robust. These are the full year results prepared according to International Financial Reporting Standards, which make it mandatory for a public liability company to publish results after reviewing the fair valuation of all its assets and liabilities. This impacted the Banks P&L positively at Lm8.5mio against Lm3.5mio in 2004, coming from insurance financial instruments designated at fair value. Surely the Bank is keeping a close look on this item to maximise its return. The effect of what is known as International Accounting Standard 39 is something that needs to be seen in all locally listed p.l.c’s
If one had to compare the full year 2005 results published by the Group and compare them with just the first six months of the same financial year, one would come up with the following:
Net Interest Income: Lm46.9m (Full year), Lm21.3m (half year)
Total Operating Income: Lm92.3m (FY), Lm44.2m (HY)
Net Operating Income: Lm68.6m (FY), Lm33.4m (HY)
Profit before Tax: Lm36.7m (FY), Lm18.5m (HY)
Earnings per share: 33c (FY), 16c6 (HY)
Practically the Bank continued with the momentum of results obtained in interim 2005.
Even when it comes to cash, the bank in June had Lm78.7mio, whilst at year end it is Lm136.5mio even after a payment of Lm28.5mio in dividends.
The Banks Key Performance Ratios are:
- Currently the price earnings is 30.8 times. This will revise with the proposed extra shares resulting from the bonus issues and expected effect on the trading share price.
- The Earning per share at 33cents is well earned and below the actual dividend payout (interim and proposed final) even excluding the special dividends (interim and proposed final). A return which the shareholders appreciate even though the EPS is calculated after Tax whilst the value for the Dividend is quoted at Gross (before Tax). The net dividend is high and special dividends are a healthy bonus which will be further complemented by a 3 for 1 Bonus share issue. The shareholders will be glad to note that the Bank has also decreased its provision for Bad Debts and the value of non performing loans is at low level.
Shaun Wallis, the CEO, was upbeat in his presentation calling them excellent and of benefit to the shareholders of whom he hints that the number of local investors owning shares in HSBC is increasing. The bank also indicating that it will sustain in providing a wide choice of products and financial services for its clients.
It would not be a complete analysis if no comment is made on the segmental information given. The Bank’s main lines of business being: Personal Financial Services, Commercial Banking and Corporate Investment Banking and Markets.
The Profit Before Tax from Personal Financial Services for the Group at year end stood at Lm33.7mio. When the interim results were announced this was Lm16mio. For Commercial Banking at year end the profit before tax from this activity reached Lm23.5mio while at half year it stood at Lm11.2mio. From Corporate Investment Banking and Markets, the Profit before Tax is Lm11.4mio as against Lm6.1mio in the interim.
It is evident that all lines of business contributed to the increase in profits both when comparing the full year results to the half-year results and show that in the second half for the year in Personal Financial Services and Commercial Banking there was a contribution of more than double whilst this rhythm was not matched in Profit before Tax from Corporate, Investment Banking and Markets line of business.
These results, which the HSBC Bank Malta p.l.c. has announced, will contribute to the results of HSBC Holdings p.l.c. which will report its results on the London Stock Exchange in the 1st week of March 2006.
The HSBC Bank Malta as stated had an 11.7% increase in Profit before Tax in 2005 as compared to 2004.
In the UK, analysts are forecasting that HSBC Holdings would register a pre-tax profit of around GBP11.6 billion against GBP9.1 billion registered in 2004. This is a 27.5% increase for the worldwide operation.
However, the EPS growth for Malta in Year 2005 to Year 2004 is 9.27% as against the worldwide Group’s EPS growth of 8.71%.
The dividend yield at 3.76% for Malta is below the4page 27 3page 26 the worldwide Group. The figures for the worldwide Group are all based on 2004 results, while those of HSBC Malta on 2005 Preliminary Statement figures.
At this point one has to draw up some observations. With a market capitalisation of around Lm741mio, HSBC Bank Malta is not only the largest cap local quoted organisation, but definitely has an impact on the MSE Index. The dividend is adequately covered at 1.33 times, however, noting that the current trading price to Net Asset Value at 5.5, one concludes that local investors see HSBC as a safe investment and have extended faith in its future earnings and strategies.
This statement remains to be confirmed after the three for one bonus share issue. It is only than that the market would have worked out the effect of this transaction to benefit the shareholders on its books on 18/04/05, and bring in more shares available for trade. One cannot but note the popularity of these shares amongst investors who take it up for the long term capital growth and a generous dividend, as a regular return.
The results of HSBC Malta, confirm that the World’s Local Bank is living up to its slogan.
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