HSBC Bank Malta plc - Interim Results & Dividend Announcement

On 30 July, the Board of Directors of HSBC Bank Malta plc approved for publication the financial statements for the six months ended 30 June 2007.

During the first six months of 2007, HSBC Bank Malta plc and its subsidiaries generated net interest income of Lm27.2 million, an increase of 19.1% over the previous year, on the back of strong growth in the Bank’s loan book and a favourable interest rate environment following the increase in the local central intervention rate. The net interest margin dropped from the record level of 61.2% in June 2006 to 54.9% possibly due to increased competitive pressures.

Meanwhile, non-interest income was largely unchanged at Lm15.2 million. Net fee and commission income grew by 6.6% to Lm6.7 million with a 3% increase in trading profits to Lm3.6 million. Other operating income, climbed from Lm1.4 million in the first half of 2006 to Lm3.1 million during the first six months of 2007 mainly due to the increase in the embedded value of the long-term assurance business. Net gains on disposal of non-trading financial instruments declined from Lm2.3 million to Lm1.3 million whilst income from insurance activities amounted to only Lm0.4 million compared to Lm1.5 million in the comparative period last year.

Total net operating income generated by the HSBC Malta Group in the first half of 2007 amounted to Lm42.3 million, 11.8% higher than the previous year. On the other hand, non-interest expenses edged 1.3% lower to Lm17 million, helping the cost to income ratio to improve strongly from 45.5% in 2006 to 40.1%. Staff costs dropped by 3.4% to Lm10.3 million whilst general and administrative expenses increased by 2% to Lm5.2 million. The charge for depreciation rose by 2.2% to Lm1.5 million.

HSBC’s operating profit before impairment allowances climbed by 23.3% in the first six months of the year to Lm25.3 million with net impairment reversals amounting to a mere Lm0.03 million (June 2006: Lm0.05 million).  The Bank reported that the credit quality of their loan book continued to improve as evidenced by the drop in Non-Performing Loans to just Lm35 million, representing only 3% of total net loans. Pre-tax profit during the first half of 2007 amounted to a record Lm25.3 million and after deducting tax of Lm8.5 million, the HSBC Malta Group registered a profit of Lm16.8 million. Earnings per share increased by 25% to 5c7.

Total assets of the HSBC Malta Group surpassed the Lm2 billion mark for the first time with assets of Lm2,031 million as at 30 June 2007. Loans and advances to customers increased by Lm49.2 million (4.4%) during the first six months of the year to Lm1,175.4 million with financial investments increasing to Lm200.3 million. Likewise, balances with the Central Bank of Malta, holdings of Treasury Bills and cash rose to Lm163.7 million. On the liabilities side, customers’ deposits increased by Lm42.8 million (2.9%) to Lm1,518.3 million in the first six months of the year with subordinated liabilities totalling Lm25 million, representing the two bonds issued to the General Public in the first quarter of the year. The advances to deposits ratio improved to 0.77 (June 2006: 0.76). Shareholders’ funds of Lm121.3 million translate into a net asset value per share of Lm0.416. HSBC’s annualised pre-tax return on equity (profit before tax divided by average shareholders’ funds) increased to 41.4% (June 2006: 31.6%). The annualised post-tax ROE similarly improved to 27.4% with the Group’s annualised return on assets (profit before tax divided by average assets) rising to 2.7% (June 2006: 2.5%).

CEO Shaun Wallis commented that HSBC adopts a policy of paying any surplus capital to shareholders. With this in mind, the Directors declared an interim ordinary gross dividend of 6c6 per share and a special gross dividend of 4c per share resulting in a total gross interim dividend of 10c6 per share (net dividend per share of 6c9), compared to the 2006 ordinary interim dividend of 5c3 per share. The 2007 half-yearly dividend will be paid on 22 August to those members on the share register as at close of trading on Friday 3 August. Mr. Wallis noted in the meeting with stockbrokers held shortly after the publication of the interim results that HSBC continues to maintain good liquidity and a strong capital position. Referring to the Group’s capital adequacy ratio, the CEO noted that following the payment of the interim dividend, this will drop to HSBC’s target level of 10%.