On 24 February, HSBC Bank Malta plc published its 2011 full-year results revealing a pre-tax profit of €88.3 million which represents a 6.3% rise over the pre-tax profit registered in 2010.
On the income side, the Bank registered a 5.2% rise in net interest income to a record €129.3 million reflecting growth in mortgage lending and improved balance sheet management. Moreover, HSBC Malta benefitted from a €6.9 million unrealised gain relating to a one-off adjustment in the methodology of the insurance business in line with HSBC Group policies. Nonetheless, this gain was offset by the declining values of euro swaps also held by the Group’s insurance business. As a result, the life business reported a pre-tax profit of €11 million, representing a 15.4% drop from the previous year. The Bank also benefitted from a rise in foreign exchange volumes which led to a 21.9% increase in trading profits to €8.3 million. As announced late last year, HSBC Malta disposed of its card acquiring business which yielded a one-off gain of €10.2 million. On the other hand, HSBC Malta incurred a 2.1% drop in net fee and commission income which was mainly related to a slowdown in bond issuance activity in the local capital market.
On the costs side, the Bank incurred a one-off €8.5 million charge related to the voluntary retirement scheme launched last year in view of the Group’s costing cutting measures for long-term sustainability. Apart from this one-off expense, the Bank also incurred a further €2.5 million rise in costs mainly relating to utilities, regulatory fees and compliance costs. Overall, the Group’s non-interest expenses grew by 13.4% to €98.2 million. During 2011, the Bank also incurred a €2.1 million loss on the disposal of available for sale assets after it reduced its exposure to Eurozone debt in view of the prevailing sovereign debt crisis in the region.
This resulted in an 8.9% rise in operating profit to €97.5 million.
HSBC Malta also incurred a 50% increase in impairments from €5.5 million in 2010 to €8.3 million during the year under review. This increase was due to the €4 million impairment taken on the Greek government bonds held by the life insurance subsidiary which now have a net book value of less than €2 million. The results announcement also revealed that the Bank has no exposure to southern European government debt except for Malta Government Stocks. On the other hand, loan impairments dipped 0.1% lower to €4 million despite an increase in non-performing loans from 4% in 2010 to 5% during the year under review.
After accounting for taxation, HSBC Malta reported a net profit of €57.6 million, representing a 7.1% rise over the previous year’s profits. Nonetheless, if the one-off gains and charges are excluded, the Group’s profitability is largely in line with that of the previous year.
On the balance sheet side, total assets grew by 3.1% to €5,824 million mainly due to a 1.6% increase in loans and advances to customers to €3,344 million. Meanwhile, customer deposits dropped by 1.3% to €4,403 million. This provides a healthy advances to deposit ratio of 76%. During the year, the Bank maintained its conservative approach to capital as reflected by the 140 basis points increase in its capital ratio to 11.6% which exceeds the minimum regulatory requirement.
Looking ahead, the CEO of HSBC Malta commented that 2012 will also be very challenging as the growth in the Maltese economy will slow down due to the continuing uncertainty across the Eurozone.
The Directors of HSBC Malta recommended the payment of a final gross dividend of €0.072 per share (net: €0.047), which together with the interim gross dividend of €0.082 per share, give a total dividend for 2011 of €0.154 per share. The final dividend will be paid on 27 April to all shareholders as at close of trading on Tuesday 13 March 2012 after approval at the upcoming Annual General Meeting scheduled for 18 April 2012.
Download a copy of the HSBC Bank Malta plc Preliminary Statement of Annual Results for the year ended 31 December 2011.