On 1 August 2023, HSBC Bank Malta plc published its interim results covering the six-month period ended 30 June 2023.
Net interest income surged by 94% to €89.7 million (H1 2022: €46.2 million) driven by the strong growth in gross interest income (+90% to €97.5 million), which offset the higher interest expense (+55% to €7.78 million). In this respect, HSBC explained that the performance benefitted from the rising interest rates, which sharply contrasts the negative interest rates that were charged on overnight deposits in the first six months of 2022.
Meanwhile, non-interest income remained virtually unchanged at €16.6 million. HSBC explained that the corresponding items for 2022 were restated following the introduction of new International Financial Reporting Standards for insurance contracts. HSBC also explained that while the Group sustained good progress in the generation of fee as well as foreign exchange income, the performance was impacted by the removal of the high balance fee in July 2022.
The financial performance was also impacted by a net reversal of expected credit losses of €2.55 million, which however was lower than the reversal of €11.8 million posted in the comparable period last year, largely attributable to the recovery on a commercial non-performing loan. The 2023 reversal reflected the more favourable economic projections.
Net operating income amounted to €108.8 million compared to €74.6 million in the first six months of 2022.
On the expenditure side, total operating costs dropped by 13.2% to €49.5 million (H1 2022: €57.1 million) reflecting a change in the Depositor Compensation Scheme legislation and overall cost discipline. As a result, the cost-to-income ratio improved sharply to 46.6% compared to 90.9% in H1 2022.
After accounting for a tax charge of €20.8 million, HSBC reported a net profit of €38.5 million (restated H1 2022: €11.6 million) which translates into an annualised return on average equity of 16.2% (H1 2022: 5.1%).
The Statement of Financial Position as at 30 June 2023 compared to the restated financial position as at 31 December 2022 shows that total assets remained practically unchanged at €7.39 billion, with minimal changes across the principal assets. In fact, customer loans decreased by €28 million to €3.15 billion and balances with the CBM, T-Bills and cash dropped by €19.3 million to €1.57 billion, while the Bank’s financial investments increased by €96.6 million to €1.10 billion. Similarly, total liabilities increased minimally by €6.90 billion, principally composed of customer deposits, which declined by €40 million to €5.93 billion. As a result of the marginal drop in customer deposits and customer loans, the loan-to-deposit ratio remained unchanged at 53%. Shareholders’ funds as at 30 June 2023 amounted to €492.5 million which translates into a net asset value per share of €1.367. The Bank’s capital ratios eased lower but remained well above regulatory requirements with the Common Equity Tier 1 capital ratio standing at 17.8% (31 December 2022: 18.5%) and the Total Capital ratio at 20.6% (31 December 2022: 21.3%). In this respect, HSBC noted that the deterioration in the capital ratios was driven by the build-up of the capital requirements of non-performing loans and did not include the unverified profits for the first six months of the year. Nonetheless, the Directors explained that the capital base remained strong and fully compliant with the regulatory capital requirements.
The Board of Directors declared a net interim dividend of €0.039 per share, which represents the highest interim dividend paid by HSBC Malta in seven years. The dividend is payable on 15 September 2023 to all shareholders as at close of trading on 10 August 2023.
HSBC Malta’s new CEO Mr Geoffrey Fichte explained that the company is confident of the local economy and will continue to focus on growing the business and investing in the future. The major ongoing investment is a €30 million project for a new headquarters in Qormi, while upcoming investments include the upgrading and replacing of all the ATM fleet. The CEO concluded that “HSBC is positive on Malta and we have identified many opportunities to grow our business here”.