HSBC Bank Malta plc - 2006 Interim Results

On 27 July 2006, the Board of Directors of HSBC Bank Malta plc issued for publication the financial results for the six months ended 30 June 2006. The Board of Directors have declared an ordinary gross interim dividend of 5c3 per share to those shareholders who are on the company’s register as at close of trading on 1 August 2006 for settlement on 4 August 2006. The equity trades ex-dividend as from Wednesday 2 August.

During the first six months of the year HSBC Bank Malta plc and its subsidiaries increased their net interest income by 7% over the previous comparative period to Lm22.8 million. The Group’s net interest margin continued to improve and edged up to 61.2% (June 2005: 60.9%). The Group’s efforts to continue strengthening non-interest revenue streams have been successful and the Group recorded strong growth in net fee and commission income, net gains on disposal of non-trading financial instruments and other operating income. Net earned insurance premium and income from insurance financial instruments less claims incurred increased by 15.4% to Lm1.5 million. As a result the Group’s non-interest income surged by 24.8% to Lm15.1 million.

Net operating income during the first six months of the year amounted to Lm37.8 million representing a growth of 13.5% over the comparative period last year. Administrative expenses increased by 9.3% to Lm15.8 million primarily due to higher performance based compensation for all staff. The charge for depreciation edged 9.34% over June 2005 (Lm1.42 million) to Lm1.47 million. Non-interest expenditure amounted to Lm17.2 million (June 2005: Lm15.8 million), representing a rise of 8.8% over the previous comparative period. Despite this increase in operating expenditure, the cost to income ratio continued to improve and dropped to 45.5% (June 2005: 47.5%).

Therefore during the six months to 30 June 2006, the Group operating profit before impairment allowances amounted to Lm20.6 million, representing a 17.7% rise over the same period last year. In the first six months of 2005 there were net impairment releases of Lm0.95 million, but during the period under review the net release was a marginal Lm54,000. After accounting for impairment allowances, pre-tax profits amounted to Lm20.6 million, 11.3% above the profitability in the comparative period last year. After deducting tax of Lm7.1 million, profits attributable to shareholders totalled Lm13.4 million, resulting in earnings per share of 4c6 (June 2005: 4c1). The earnings per share figure of June 2005 has been adjusted to reflect the 3 for 1 bonus share issue in April 2006.

The Group’s balance sheet shows total assets rising by 3% during the past six months to Lm1.7 billion, mainly due to an increase in loans and advances to customers of 5.8% (Lm59 million) to reach Lm1.08 billion as at 30 June 2006. Meanwhile, customers’ deposits increased by Lm40 million (2.9%) to Lm1.4 billion. The Directors reported that risk provisions were at low levels supported by an unchanged conservative policy in the assessment of credit risk and effective risk management. In fact, impaired loans continued to drop and totalled Lm58.8 million as at the end of June resulting in a non-performing loan ratio of 5.5%. Shareholders’ funds dropped by 6.5% since the start of the year to Lm123 million, translating into a net asset value per share of Lm0.42. The Group’s annualised return on equity (profit after tax divided by average shareholders’ funds) increased to 21.1% (June 2005: 18%) with annualised return on assets also rising to at 2.5% from 2.3% in June 2005.

Following the announcement of the results, Director and Chief Executive Officer Mr Shaun Wallis commented “Our results for the first six months reflect continued business growth in all customer groups and across all product lines. We remain optimistic about economic activity and HSBC’s business prospects in Malta.”

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