On 15 May, HSBC Bank Malta plc issued its Interim Directors’ Statement covering the period from 1 January to 15 May. The Directors explained that trading conditions in 2009 for the financial services industry continue to remain challenging. As a result, core income and profitability levels during the period under review dropped as expected. In fact, profitability is being impacted by the following three main factors: (i) reduced revenues from lower business volumes, (ii) significant margin compression due to lower interest rates and (iii) lower profitability in the insurance and investment related businesses arising from volatility in the equity and bond markets.
During the first quarter of the year, HSBC increased its lending and the Bank did not experience any material deterioration in the credit quality of its loan book but expects impairments to increase as the credit cycle turns. On the other hand, deposits remain broadly stable despite the growing number of local government and corporate bond issues and increasing competitive pressures. The Directors also commented that HSBC’s liquidity and capital ratios remain strong and considerably ahead of regulatory requirements.
The Group’s CEO Mr. Alan Richards said in the statement that the Bank is expected to continue to suffer from volatility in the investment markets. Moreover margin compression due to low interest rates will significantly impact the Bank’s profitability if these are not revised upwards. However, the CEO reiterated that whilst 2009 is difficult and challenging, “HSBC is well positioned to weather the current storm and to support its customers and the local economy as a whole.”