HSBC Bank Malta plc - Full-Year Results & Dividend Announcement

On 16 February 2007, the Board of Directors of HSBC Bank Malta plc issued the preliminary profits statement for the year ended 31 December 2006. The Board of Directors have recommended a final ordinary gross dividend of 5c3 per share and a special dividend also of 5c3 gross per share resulting in a total gross final dividend of 10c6 per share (net dividend per share of 6c9) for approval at the forthcoming Annual General Meeting. The shares will trade ex-dividend as from Wednesday 28 February 2007.

During the twelve months ended 31 December 2006, HSBC Bank Malta plc and its subsidiaries generated net interest income of Lm46.96 million, an increase of 5.4% over the previous year. Gross interest income increased by 12.5% to Lm80.87 million as a result of continued growth in lending. Meanwhile, interest expenses surged to Lm33.9 million due to the higher interest rate environment for customer deposits. This resulted in a drop in the net interest margin to 58% from the record 62% level in 2005.

The Group’s focus on improving non-interest income has been successful with an 18.8% rise in non-interest income to Lm28.6 million.  Net fees and commissions grew by 14.7% on increased transactional activity of credit and debit card payments as well as a significant increase in activity in fund management, life assurance and stockbroking. Trading profits, mainly relating to foreign exchange activities, increased marginally to Lm7.3 million whilst net gains on disposal of non-trading financial instruments rose by 125% to Lm2.7 million. Moreover, other operating income amounted to Lm2.3 million compared to Lm0.7 million in 2005. Following a drop in net income from insurance instruments, income from insurance activities dropped by 7.6% to Lm3.5 million.

HSBC Bank Malta’s net operating income in 2006 increased by 10.1% to Lm75.6 million. Non-interest expenses rose by 7.5% to Lm33.8 million on a 5.5% increase in employee compensation to Lm21.2 million and a 10.6% rise in general and administrative expenses. Despite the increase in expenses, the higher growth in operating income contributed to a further improvement in the cost to income ratio to 44.7% from 45.8% in 2005.

After accounting for amortisation of goodwill, HSBC’s operating profit before impairment allowances amounted to Lm41.2 million, representing a rise of 12.7% from the comparative period. Net impairment reversals during the year totalled Lm181,000 (2005: Lm142,000).

The HSBC Bank Malta Group generated a record pre-tax profit of Lm41.4 million in 2006, 12.8% above last year’s previous record. After deducting tax of Lm14.6 million, the profits for the year amounted to Lm26.8 million (2005: Lm24.1 million), resulting in earnings per share of 9c2 (2005: 8c2).

Total assets of the HSBC Bank Malta Group amounted to Lm1.9 billion as at 31 December 2006, a rise of 14% compared to the previous year. Loans and advances to customers increased by Lm110 million (10.8%) to Lm1.1 billion. On the other hand, customers’ deposits increased by 7.9% (Lm108 million) to Lm1.5 billion. The advances to deposits ratio increased to 0.76. Shareholders’ funds dropped by 4% to Lm126.4 million resulting in a net asset value per share of Lm0.433.

HSBC’s return on equity (profit after tax divided by average shareholders’ funds) increased to 20.6% (2005: 18.3%). On a pre-tax basis, the return on equity is at a record of 32.8%. Meanwhile the Group’s return on assets increased to 2.37% from 2.3% in 2005. The capital solvency ratio as at 31 December 2006, before the payment of the special dividend, was at 10.9% (2005: 12.9%).

The Board of Directors has recommended a final ordinary gross dividend of 5c3 per share together with a special dividend also of 5c3 gross per share. The total gross final dividend to be recommended at the forthcoming Annual General Meeting amounts to 10c6 per share (6c9 net of tax). This dividend will be paid on 21 April 2007 to all those shareholders appearing on the Company’s share register as at close of trading on Tuesday 27 February for settlement on 2 March 2007. The equity begins trading ex-dividend as from 28 February 2007.

Following the interim dividend of 5c3 paid in August 2006, the total ordinary dividend in respect of the 2006 financial year amounts to 10c6 per share giving a payout ratio of 75%. Including the special final dividend of 5c3 results in a total gross dividend of 15c9 per share and a payout ratio of 112.5%.

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