HSBC cautious of exposure to higher risk sectors as it posts €21 million profit

HSBC has reported a profit before tax of €20.9 million for the first six months of 2019 but the results come with a cautionary note.

With profits, up by 30% over the same period last year, HSBC CEO Andrew Beane said the bank remained cautious of increasing its exposure to higher risk sectors such as real estate.

“While Malta’s economic performance and outlook remain positive, we are positioning the bank for the long-term economic cycle and remain cautious in growing exposure to higher risk sectors such as corporate real estate,” Beane said today as the bank announced its financial results.

There has been growing pressure from the authorities and economic operators for banks to be more flexible in dealing with new sectors such as gaming and aviation. The traditional retail banks have shown increasing reluctance to service these growing sectors, causing problems to business operators and their employees.

Prime Minister Joseph Muscat had also highlighted the problem when addressing guests at an event marking the rebranding of the Malta Financial Services Authority, earlier this year.

He repeated the concern in June at a Finance Malta conference.

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Beane added the bank welcomed the actions being taken by the Maltese authorities to reform corporate insolvency practices and augured this be completed at pace.

“The bank’s capacity to better use its capital to support lending into the economy and, if appropriate, higher dividends will significantly increase once these reforms are concluded,” Beane said.

Profits went up by €4.8 million in the first half, with the board recommending a gross interim dividend of 1.7 cents per share.

Loans up, customer deposits down

HSBC reported that net loans to customers stood at €3.2 billion, up by €73 million when compared to December 2018.

Customer deposits stood at €4.9 billion, a decrease of €38 million when compared to the end of last year.

The tier 1 capital ratio stood at 16.2%, well above the regulatory requirements and an increase from the 14.6% at the end of 2018.

The bank will pay €7.3 million in taxes for the first half.

HSBC registered profits in all three main business lines - retail banking and wealth management, commercial banking, and global markets.

Beane said the results were good and showed that the bank emerged from the implementation of a risk management strategy “with increasing momentum”.

“Strategically we are now focused on delivery of world-class customer service to support growth. Progress in retail banking is ahead of expectations with significant market share gains achieved in new customer acquisition and home loans without increasing risk appetite. Retail banking will also benefit from a number of digital innovations the bank will launch in the second half of the year,” Beane added.