HSBC Bank Malta plc - Full-Year Results and Dividend Announcement

Thursday, February 16th, 2006

On 16 February, the Board of Directors of HSBC Bank Malta plc issued the preliminary profits statement for the year ended 31 December 2005.

During the twelve months ended 31 December 2005, HSBC Bank Malta plc and its subsidiaries generated net interest income of Lm46.87 million, an increase of 13.2% over the period under review. Gross interest income increased by 7.8% to Lm74.2 million as a result of an increase in lending mainly related to mortgages. Meanwhile, interest expense dipped to Lm27.3 million helping the net interest margin to rise further to 62.3% from 60.2% last year.
The Group’s non-interest income levels also improved significantly during the period under review and amounted to Lm21.8 million, a 16% increase from the Lm18.7 million generated in 2004. This rise was mainly as a result of the 26% rise in net fee and commission income following increased sales of investments product and further usage of credit cards. Moreover profits form trading activities, mainly relating to foreign exchange activities increased by 9.8% to Lm7.2 million.

Operating expenses increased marginally in 2005 to Lm31.4 million from Lm30.8 million in 2004. As a result, the cost to income ratio continued to improve and dropped from 52.5% in 2004 to 46.7%.

HSBC’s net operating income before impairment releases increased by 28.1% in 2005 to Lm36.6 million. Net impairment reversals during the year totalled just Lm142,000 compared to just over Lm4 million in the previous year.

Despite this significant drop in impairment releases, the Group’s pre-tax profits still increased by 11.7% in 2005 to a value of Lm36.7 million. After deducting tax of Lm12.6 million, the profits for the year totalled Lm24 million, resulting in earnings per share of 33c (2004: 30c2c).

The Group balance sheet shows total assets rising by 3.3% to Lm1.65 billion mainly due to an increase in loans and advances to customers of 4.1% (Lm39.8 million) to just over Lm1 billion. Customers’ deposits increased by 6.1% (Lm78.6 million) to a total of Lm1.37 billion with shareholders’ funds decreasing marginally by 2% to Lm131 million. This translates into a net asset value per share of 181c.

HSBC’s return on equity (profit after tax divided by average shareholders’ funds) works out at 18.1% (2004: 16.6%) with return on assets at 2.26% (2004: 2.09%).

The Board is recommending a final gross ordinary dividend of 19c1 per share together with a special dividend of 21c1 per share for a total gross final dividend of 40c2 per share (26c1 net of tax). Coupled with the ordinary interim dividend of 19c1 paid in August 2005 together with a special dividend of 27c4, total dividend in respect of the 2005 financial year amount to 86c7 including the special dividends (38c2 when one excludes these special dividends). The final ordinary and special dividends amounting to 40c2 gross will be paid to all those shareholders appearing on the Company’s share register as at close of trading next Tuesday 21 February 2006. The equity begins trading ex-div as from 22 February 2006.

The Board of Directors is also recommending a ‘3 for 1’ bonus share issue. The bonus shares will be allotted to shareholders on the register of members as at close of trading on 18 April 2006. These bonus shares will be available for trading at the opening of business on 19 April 2006. The bonus issue will capitalise 218,880,0000 fully paid ordinary shares of a nominal value of Lm0.125 per share against the debit of an equivalent amount of Lm23,118,000 to the Bank’s retained earnings account and Lm4,242,000 to the debit of the Bank’s devaluation gain account. As such, as from 19 April 2006, the Bank’s issued share capital will increase to 291,840,000 shares of a nominal value of Lm0.125 each.

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