HSBC Bank Malta plc - Interim Results

On 3 August, HSBC Bank Malta plc published its interim results covering the six months ended 30 June 2015.

Performance Overview

During the six months under review, the Bank registered a 3% increase in net interest income to just over €60 million as the 4.4% drop in gross interest income to €72.8 million (reflecting diminishing lending margins and declining income on the investment portfolio) was offset by a higher 28.4% reduction in interest expense to €12.7 million as depositors continued to shift funds towards shorter-dated deposits rather than long-term.

Meanwhile, non-interest income grew by 2.4% to €29.8 million mainly reflecting the asset management fees generated by the insurance subsidiary in connection with the new portfolio of investment contracts transferred at the end of 2014. This offset the decline in the custody and stock broking fees (following the winding-up of the respective businesses in early 2014), the lower credit fees given that fewer credit facilities were sanctioned during the period under review as well as the lower level of net gains on disposal of available-for-sale securities.

Overall, the Group’s net operating income amounted to €89.8 million representing a 2.8% increase over the comparable figure for the six months ended 30 June 2014.

Non-interest expenses also increased by 7.8% to €49.9 million largely reflecting increases in compliance investment, regulatory fees and costs attributable to regulatory obligations (including new Single Supervisory Mechanism fees and the new contributions to the Single Resolutions Fund) as well as higher costs related to outsourced services as a result of currency fluctuations and the expenses incurred in connection with the newly transferred insurance portfolio.

As a result, operating profit declined by 2.8% to €39.9 million compared to €41.1 million in the previous comparable six months.

HSBC also incurred €3.6 million in loan impairments during the period under review compared to €1.4 million during the first six months of 2014. The half-year report notes that this figure comprises €15.9 million (HY2014: €3.2 million) impairments and €12.4 million (HY2014: €1.8 million) in reversals of previous impairments.

This led to a pre-tax profit of €36.3 million for the period under review representing an 8.3% decline from the comparable figure of €39.6 million during the six months ending 30 June 2014.

After accounting for a tax charge of €12.4 million, the Group’s profit for the period under review dropped by 6.8% to €23.9 million which translates into an earnings per share of €0.0664 (HY 2014: €0.0712).

The Statement of Financial Position as at 30 June 2015 shows a 6.7% increase in total assets to €7.68 billion compared to the figures as at 31 December 2014 largely reflecting the 3.3% increase in financial instruments to €2.66 billion as well as a 50% increase in loans and advances to banks to €1.3 billion which offset the 0.8% decline in loans and advances to customers to €3.2 billion. Similarly, total liabilities increased by 6.9% to €7.22 billion largely reflecting the 6.8% increase in customer deposits (both retail and corporate) to just below €5.2 billion. Overall, the Group’s equity base increased by 3.6% to €0.46 billion which translates into a net asset value per share of €1.2804 (Dec 2014: €1.24).

Dividend

The gross interim dividend was raised by 25.9% to €0.051 per share (net: €0.0332) resulting in a higher payout ratio of 39.6% compared to 37% in the first six months of 2014. The dividend will be paid on 10 September 2015, to all shareholders as at the close of trading on Wednesday 12 August.

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HSBC Bank Malta plc – Half-Year Results for the six months ended 30 June 2015.