HSBC Bank Malta plc - Interim Directors’ Statement

On 28 April, HSBC Bank Malta plc published a company announcement updating the market on its performance during the first three months of this year.

During this period, the Bank noted that the unprecedented COVID-19 outbreak has unavoidably caused significant disruption to Malta’s economy and while the Bank welcomes the measures taken by the government to protect jobs and safeguard companies, it is expected that Malta’s economy will contract sharply in 2020. Moreover, the outlook over the medium term remains uncertain and volatile as the pace and effectiveness of the recovery will be largely dependent on both local and international progress to combat the COVID-19.

Prior to COVID-19, the Bank had experienced a strong start to 2020, with business volumes ahead of the prior year. Furthermore, good progress continued to be achieved on cost reduction with operating expenses in the first quarter lower than in the same period in 2019 reflecting ongoing delivery of the strategic actions announced last year. Compared to December 2019, both loans and advances to customers (driven by strong growth in mortgages and increases in the commercial banking book) as well as customer deposits increased.

The environment, which supported this strong growth registered at the start of 2020 has clearly changed. Although the bank has not experienced material increases in specific credit losses from either business or retail customers (reflecting the benefit of support measures introduced by government, policy guidance from regulators and the bank’s conservative risk culture), the Board agreed to booked an expected credit loss provision of €7 million in the first quarter results to reflect the potential impact of COVID-19 in general. Excluding the subsidiaries, the Bank continued to be profitable during the first quarter, but at a lower level than the same period in 2019 in view of the increased credit loss provision. The Bank’s capital position remains exceptionally strong and exceeds regulatory requirements. Including the subsidiaries, the Bank’s results were impacted by the loss registered by HSBC Life Assurance (Malta) Limited on the back of the negative fair movements (to be expected in these market conditions) on its investment portfolio in the first quarter of the year. As a result, the HSBC Malta Group made a loss before tax of €7 million in the first quarter of 2020.

Andrew Beane, Chief Executive Officer of the Bank, stated that the priority of the Bank is to support Malta’s economy but it is inevitable that the prevailing circumstances will have significant negative implications for the Bank’s profitability. Nonetheless, HSBC’s well-established conservative approach to risk places the Bank in a strong position to withstand these challenges.