HSBC Bank Malta plc - Interim Results & Dividends

On 22 July the Board of Directors of HSBC Bank Malta plc published the financial results for the six months ended 30 June 2005 and declared an interim dividend of 46c5 per share (including a special interim dividend of 27c4 per share) to those shareholders on the company’s register as at close of trading on Friday 29 July.

During the first six months of the year HSBC Bank Malta plc and its subsidiaries generated net interest income of Lm21.3 million, an increase of 11.9% over the interest income generated in the six months to June 2004. The Group’s net interest margin continued to improve and edged up to 60.9% (2004: 57.9%). Non-interest income increased by 8.7% to Lm12.1 million as a result of an increase in trading profits as well as net fees and commissions receivable. The HSBC Malta Group’s net operating income during the first six months of the year amounted to Lm33.4 million representing a growth of 10.7% over the comparative period last year. Administrative expenses increased by 8.7% to Lm14.4 million and the Directors attribute this mainly as a result of higher performance-based compensation for all staff. The charge for depreciation edged up marginally to Lm1.4 million. Despite this increase in operating expenses, the cost to income ratio has continued to improve and dropped to 47.5% compared to a previous 48.6% in June 2004.

The Group operating profit before impairment releases increased by 14.3% to Lm17.5 million. Whilst in the first six months of 2004 there were net releases in impairment provisions of Lm4.4 million, during the period under review these amounted to Lm0.95 million. In the announcement of results, the Directors note that in the period to June 2005 new specific allowances of Lm0.5 million were raised and bad debt write-offs of Lm2.4 million were effected. However a continuing improvement in the credit quality of the lending book reduced non-performing loans to Lm70.7 million (equivalent to 6.9% of net loans from 9.3% in June 2004). This contributed to the release of Lm3.3 million in specific allowances and Lm0.6 million in collective allowances.

The lower amount of impairment releases resulted in the Group’s profit before tax dropping from Lm19.8 million to Lm18.5 million. After the tax charge of Lm6.4 million, profit after tax for the six months to June 2005 amounted to Lm12.1 million, a drop of 8.1% compared to the comparative period last year. Earnings per share as at June 2005 of 16c6 compare to the 18c in June 2004 – adjusted to reflect the 2 for 1 share split in March 2005.

The Group balance sheet as at the end of June 2005 shows a 5.2% rise (Lm50.4 million) in loans and advances to customers amounting to Lm1,027 million, with customer deposits increasing by Lm35.7 million (2.8%) to a level of Lm1,331 million. Shareholders’ funds amount to Lm139.3 million resulting in a net asset value per share of Lm1.91.

The directors have declared an ordinary gross interim dividend of 19c1 per share coupled with a special interim dividend of 27c4 per share resulting in a total gross interim dividend of 46c5 per share. The net dividend of 30c2 per share net of tax will be payable to all shareholders on the Company’s register as at close of trading on Friday 29 July 2005, and therefore the equity starts trading ex-div as from Monday 1 August. HSBC’s payout ratio excluding the special interim dividend increased to 75% from 35% in June 2004. At the interim stage last year, HSBC paid an ordinary gross interim dividend of 9c7 per share and also paid a special interim dividend of 17c7 per share.

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