HSBC Bank Malta plc - Interim Directors’ Statement

On 14 November 2014, HSBC Malta Bank plc issued its interim directors’ statement for the period covering 1 July to 14 November.

Following the 25.4% drop in pre-tax profit during the first six months of 2014, downward pressure on profitability continued during the period under review.  Net interest income remained under pressure during the period under review, given the prevailing low interest rate environment across the eruozone, adverse market movements which impact the insurance business and lower one-off income times relating to recoveries, bond sales and insurance.

The Group experienced an increase in its regulatory and compliance costs, which pushed profits even lower. Nonetheless, excluding these particular costs, other operating expenses were marginally below the 2013 figures as the Group continues to re-engineer its processes to achieve greater efficiencies.

The level of impairments on the Bank’s lending operations was higher than that in the same period of 2013. This was mainly due to lower valuations of the properties acting as security to customer loans as well as a lower incidence of recoveries. The Board also commented that the level of loans and advances in the period under review was largely unchanged as the level of new loans contracted was offset by early repayments of existing loans. Meanwhile, customer deposits increased during the period.

Commenting on the Asset Quality Review and the stress tests conducted by the European Central Bank (ECB) in collaboration with the European Banking Authority (EBA), the Directors expressed their satisfaction that no capital shortfalls were identified in HSBC as the local banking Group remains well capitalised and liquid.

The CEO, Mark Watkinson, remarked that despite the challenging operating environment in the Eurozone due to the low interest rates and modest economic growth, the ECB’s assessment is an indicator that the business of HSBC is well positioned to support the local market in Malta as it continues to grow.