HSBC Malta interim profit down 38%, sustains dividend

The profit before tax for the six months ended 30 June 2018 of HSBC Bank Malta p.l.c. amounted to €16.2m, a decrease of €9.8m or 38% compared with the same period last year. The performance during the first six months of 2018 mainly reflected the continuing impact of low interest rates and prioritisation of risk management actions during 2017.

Profit attributable to shareholders amounted to €14.3m resulting in earnings per share of 4.0 cents compared with 4.7 cents in the first half of 2017. The Board proposes to maintain the current dividend pay-out ratio of 65% and recommends an interim gross dividend of 4.0 cents per share (2.6 cents per share net of tax). The interim dividend will be paid on 18 September 2018 to shareholders who are on the bank’s register as at 17 August 2018.

Andrew Beane, Director and Chief Executive Officer of HSBC Malta, said: “Our profitability in the first half of 2018 was lower than the prior year reflecting four main factors: the impact of essential de-risking actions taken during 2017; the ongoing effect of negative interest rates;  loan impairments arising where the sale of assets pledged as security by corporate borrowers in default for many years have been delayed by lengthy judicial processes which make the recovery of liabilities a very protracted exercise; from investment in regulatory and risk programmes such as GDPR and customer due diligence.”

Net interest income decreased to €54.1m or 10% compared with €60.3m in the same period in 2017 predominately due to a further decline in the average yield on the investment book due to continuing amortisation of higher yielding bonds as well as contraction of the Commercial Banking loan book relative to the prior year position.                      

Operating expenses increased to €54.9m or 5% compared with €52.2m in the same period in 2017. This increase reflects continued investment in regulatory programmes, financial crime compliance and business growth. The bank continues to exercise rigorous cost control and to implement initiatives at cost base streamlining through digitalisation, outsourcing and processes optimisation.

On 1 January 2018, the bank adopted IFRS 9 ‘Financial Instruments’. Adoption of this new standard reduced net assets by €8.0m, net of deferred tax of €4.3m. The bank was not required to restate comparative periods. Accordingly, all adjustments resulting from the transition apply by adjusting the opening balance sheet as at 1 January 2018.

HSBC Life Assurance (Malta) Limited reported a profit before tax of €1.8m compared to €4.4m in the same period of 2017. The decline was driven by positive market movements in 2017 which were not repeated in the first half of 2018. In addition, the insurance subsidiary registered a reduction in premium income, as a result of lower new single premium policies written when compared to prior year.