HSBC Bank Malta plc - Interim Directors’ Statement

On 12 November 2021, HSBC Bank Malta plc issued an Interim Directors’ Statement updating the market on its performance during the nine-month period ended 30 September 2021. During this period, the Bank posted a profit before tax of €25.2 million which is significantly higher than the €12.2 million generated during the comparable period in 2020. Moreover, excluding one-time restructuring provisions and related transformation costs amounting to €3.4 million, the adjusted profit before tax stood at €28.6 million which, in turn, translates into an annualised post-tax return on equity of around 5%.

The improved financial performance was mainly driven by higher insurance income which was partially offset by a decrease in interest income. In aggregate, revenues were €5.8 million higher than the comparable period in 2020 reflecting the positive movements across international financial markets which boosted the performance of the Bank’s insurance subsidiary compared to the adverse mark to market movements recorded in 2020. On the other hand, net interest income dropped as a result of the persistently low and negative interest rate scenario as well as the increase in surplus liquidity. Moreover, although the Bank experienced a healthy level of new lending, this was overshadowed by increased prepayments. In fact, whilst net loans and advances to customers were maintained at the same levels as reported as at the end of 2020 (at around €3.26 billion), customer deposits increased by 4.6% (or +€242 million) to €5.5 billion. Accordingly, the loan-to-deposit ratio slipped to a new multi-year low of 59.2% compared to 61.1% as at end June 2021 and 61.9% as at 31 December 2020.

On the expenditure side, adjusted costs were €0.9 million higher than those reported in the same period in 2020. While the Bank continued to realise cost savings from the implemented cost strategies and ongoing proactive cost management measures, HSBC Malta incurred higher fees linked to the Deposit Compensation Scheme as well as overall regulatory and compliance requirements. Meanwhile, expected credit losses were broadly maintained unchanged at the levels booked at 31 December 2020. The additional charge of €0.1 million for the period under review was linked to the deterioration of particular facilities which was partially offset by releases resulting from improvements in the macroeconomic environment and other facilities.

From a liquidity and capital position perspective, HSBC Malta noted that its buffers and capital ratios remained strong and in excess of regulatory requirements.

Commenting on the performance up to September 2021, HSBC Malta’s CEO Mr Simon Vaughan Johnson explained that: “Whilst we reported a good performance during the nine-month period ended 30 September 2021, delivering strong growth in profitability, we retain a cautious outlook on the external risk environment. We remain determined to pursue our safe growth strategy and to continue supporting our customers and the community that we serve as we emerge from the pandemic. Sustainability is a key element of this strategy and we are fully committed both to providing our customers in Malta with sustainable investment choices and to facilitating the transition to net zero.”

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