HSBC Bank Malta plc - Interim Directors’ Statement

Friday, May 25th, 2018

On 25 May, HSBC Bank Malta plc published an Interim Directors’ Statement updating the market on its performance during the first three months of 2018.

During the period under review, HSBC Malta reported a decline in pre-tax profits compared to the same period last year in line with management’s expectations. However, profit before tax during the first quarter of 2018 exceeded the plan established as part of the bank’s new strategy approved in February 2018. The drop in profitability compared to 2017 reflects the effect of lower corporate loans and advances (compared to the same period in 2017), the continuing adverse impact of low interest rates as well as the prioritisation of risk management actions during 2017.

The Directors further explained that revenue during the first quarter of 2018 declined due to lower income from the Group’s investment book and lower average balances in the corporate loan book as well as lower sales in the insurance business. Nonetheless, management explained that loans and advances to customers slightly increased compared with the position as at the end of 2017 largely boosted by strong sales of mortgages. Following completion of the strategic repositioning of HSBC’s Commercial Banking business, corporate lending stabilised in the first quarter of 2018 and the business aims to continue to build momentum behind the loan book growth.  Both retail and commercial customer deposits increased during the period under review.

Moreover, costs moderately increased reflecting the annual staff pay increase as well as higher IT and administrative costs. In this respect, the announcement noted that a number of initiatives aimed at cost base streamlining through digitalisation, outsourcing and process optimisation are underway.

Meanwhile, the effective management of corporate non-performing exposures led to loan impairment recoveries during the period under review and lower overall non-performing loan balances which remain well within management expectations.

The Bank continued to maintain a robust liquidity position as well as strong regulatory capital ratios which are higher than the end-point regulatory capital requirements.

Andrew Beane, the Chief Executive Officer of HSBC Malta, said: “In the first quarter of 2018 we commenced the repositioning of HSBC for measured growth which has been enabled by the excellent progress made to strengthen the bank’s risk management and compliance capability over the past two years. Our profitability during the first quarter of the year was higher than that envisaged in our strategic plan and we are now focused on prudently growing our business in a manner consistent with HSBC’s signature risk management standards.”

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