On 20 November 2017, HSBC Malta Bank plc issued an interim directors’ statement for the period covering 1 July 2017 to 15 November 2017.
HSBC revealed that it suffered a decline in pre-tax profits when compared to the same period last year. The decline was broadly in line with management expectations consistent with the bank’s prioritisation of risk management actions in 2017 which impacted negatively non-interest income. Furthermore, the Bank made reference to the prevailing low interest rate environment and the reduction in the corporate loan book which also impinged negatively on interest income.
The Bank’s profitability was also adversely affected by an increase in loan impairment charges primarily due to a tightening in the impairment assessment of non-performing home loan exposures that have been delinquent for more than six years. In this respect, however, HSBC noted that such exposures remain well collateralised and the Bank is taking the necessary measures to recover the amounts due. Excluding the impact of the change in policy related to loan impairments, the charge would have been lower than the prior period. Meanwhile, HSBC continued to benefit from the cost savings related to the early voluntary retirement programme implemented during 2016. However, these savings were offset by additional investment in the financial crime compliance function and ongoing enhancement of customer due diligence.
The total amount of loans and advances to customers decreased slightly during the period under review as the abovementioned reduction in the corporate loan book outweighed the growth in retail lending which, in turn, was largely driven by increased mortgage business. Customer deposits also decreased slightly largely as a result of risk management actions. In the respect, HSBC also noted that its liquidity position remained strong and that regulatory capital ratios strengthened further as risk-weighted assets decreased in line with the reduction in loans and advances. As such, HSBC continues to exceed the fully loaded regulatory capital requirements and the Bank has now commenced a review to assess how best to deploy this capital moving forward.
Commenting on these latest developments, HSBC Malta’s CEO Mr Andrew Beane said: “2017 is a year where we have consciously focused on the acceleration of risk management actions which we believe is the right short-term strategic priority to protect long-term value for shareholders. Accordingly, our profitability is lower than 2016 but broadly in line with expectations. We have also seen increased usage of the bond market which reflects a continued high level of liquidity within the financial system. The bank believes it is important that the development of the bond market is managed prudently in order to avoid the creation of longer term risks to the economy. Looking forward, risk management will remain a key priority, however HSBC’s recent launch of our new small business service is an example of the actions we are beginning to take to increase focus on revenue growth and business development. We are pleased to have reached an agreement to divest a non-core portfolio from our insurance business that will enable the company to increase its focus on the domestic insurance market.”