On 3 August, HSBC Bank Malta plc published its interim results covering the six months ended 30 June 2016.
During the six months under review, the HSBC Malta Group registered a 6.4% increase in net interest income to €63.8 million as the 0.9% drop in gross interest income to €72.1 million (reflecting the continued decline in the yields on all interest-earning assets amid the prevailing low interest rate scenario) was offset by the 35% drop in interest expense to €8.3 million (on the back of decreasing funding costs).
Similarly, non-interest income grew by 11.2% to €33.2 million. However, the increase was largely due to the one-off gain of €10.8 million registered by the Group from the disposal of its shareholding in Visa Europe. In fact, excluding this one-off gain, the non-interest income of the HSBC Malta Group dropped by 25% to €22.37 million largely reflecting the 12% drop in net fee and commission income to €13.2 million following the discontinuation of the trust and stockbroking activities as well as the impact of the regulatory-induced reduction in the interchange fees for cards which came into effect at the end of 2015. Moreover, the Bank’s results were also adversely impacted by a 19.9% drop in trading profits to €3.9 million reflecting a combination of lower transaction volumes as well as declining profit margins on such transactions. Additionally, the pre-tax profit registered by the life assurance business of the Group dropped to €2 million during the month under review compared to €6.7 million in the first half of 2015 given adverse market movements. On the other hand, net other operating income improved by €0.4 million to €0.95 million representing gains on the sale of properties repossessed from non-performing clients.
Overall, the Group’s net operating income amounted to just over €97 million representing an 8% increase over the comparable figure for the six months ended 30 June 2015. Excluding the one-off gain of €10.8 million, the net operating income of the Group contracted by 4% to €86.2 million.
Non-interest expenses also increased by 3.8% to €51.8 million largely representing a full-year’s contribution to the Depositor Compensation scheme and the Single Resolution Fund whereas in the first six months of 2015 only half of the annual contribution was accrued. Excluding this, the Group’s cost base would have been relatively flat in spite of the 2% annual wage increase (as per the recently signed new Collective Agreement) which were offset by the initial benefits of the early retirement programme launched at the end of 2015.
As a result, operating profit increased by 13.3% to €45.2 million. Nonetheless, excluding the aforementioned one-off gain, the Group’s operating profit would have contracted by 13.7% to €34.4 million.
HSBC also incurred €3.9 million in loan impairments during the period under review compared to €3.6 million during the first six months of 2015. The half-year report notes that this figure comprises €9.2 million (HY2015: €17.7 million) in impairment charges and €5.2 million (HY2015: €14.1 million) in reversals of previous impairments.
This led to a pre-tax profit of €41.3 million for the period under review representing a 13.8% increase from the comparable figure of €36.3 million during the six months ending 30 June 2015. Once again, excluding the aforementioned one-off gain, the pre-tax profit of HSBC Malta for the six months under review would have amounted to €30.5 million representing a 15.9% drop from the previous comparable figure.
After accounting for a tax charge of €14.5 million, the Group’s profit for the period under review amounted to €26.85 million representing a 12.2% increase over the comparable figure for the first six months of 2015. This translates into an earnings per share of €0.0745 (HY 2015: €0.0664).
The Statement of Financial Position as at 30 June 2016 shows a 0.7% increase in total assets to €7.3 billion compared to the figures as at 31 December 2015 largely reflecting the 0.68% increase in loans and advances to customers to €3.3 billion. Similarly, total liabilities increased by 0.47% to €6.8 billion largely reflecting the 1% growth in customer deposits (both retail and corporate) to just over €5 billion. Overall, the Group’s equity base increased by 3.4% to €0.48 billion which translates into a net asset value per share of €1.323 (Dec 2015: €1.28).
The gross interim dividend increased by 39.2% to €0.071 per share (net: €0.0462) resulting in a higher payout ratio of 61.9% compared to 49.9% in the first six months of 2015. The dividend will be paid on 9 September 2016 to all shareholders as at the close of trading on Wednesday 10 August.