HSBC

HSBC Bank Malta p.l.c. 2010 Annual Results

Press Release   •   Feb 18, 2011 09:00 GMT

The following is the text of an advertisement which is to be published in the press in Malta on 19 February 2011 by HSBC Bank Malta p.l.c., a 70.03 per cent indirectly held subsidiary of HSBC Holdings plc.

Review of Performance

  • Profit before tax of €83.1 million for the year ended 31 December 2010 – up €11.9 million, or 16.7 per cent, compared with €71.2 million in 2009.
  • Profit attributable to shareholders of €53.8 million for the year ended 31 December 2010 – up €7.9 million, or 17.2 per cent, compared with €45.9 million in 2009.
  • Earnings per share for the year ended 31 December 2010 at 18.4 euro cent, compared with 15.7 euro cent for 2009.
  • Total assets of €5,664.6 million at 31 December 2010, up €546.8 million, or 10.7 per cent, compared with 31 December 2009.
  • Loans and advances to customers of €3,303.8 million at 31 December 2010, up €77.4 million, or 2.4 per cent, compared with 31 December 2009.
  • Customer deposits of €4,462.9 million at 31 December 2010, up €376.2 million, or 9.2 per cent, compared with 31 December 2009.
  • Return on equity of 16.1 per cent for the year ended 31 December 2010, compared with 15.0 per cent in 2009.
  • Capital adequacy ratio of 10.2 per cent at 31 December 2010, compared with 9.3 per cent at 31 December 2009.

Commentary

HSBC Bank Malta p.l.c. delivered a strong performance in the year ended 31 December 2010. The reported profit before tax of €83.1 million, an increase of 16.7 per cent, or €11.9 million, compared to 2009, was primarily driven by improved levels of revenues reflecting stronger net interest income as margin compression eased.

Net interest income improved by 17.0 per cent to €122.8 million in the year ended 31 December 2010 compared to €105.0 million in 2009 attributable to balance sheet growth and the unwinding of term deposits. Net fees and commission income of €34.3 million increased by 5.9 per cent, or €1.9 million, compared to the €32.4 million recorded in 2009. Strong growth was recorded in card issuance and usage fees and from trust and retail brokerage trading activities.

Insurance performance was robust in a challenging economic environment. Life insurance activities generated a profit before tax of €12.6 million in 2010, up €0.8 million, or 7.2 per cent, compared to €11.7 million in 2009. A gain of €19.7 million in net income from insurance financial instruments designated at fair value was reported compared to €26.7 million recorded in prior year reflecting the volatility in the European financial markets. Gains or losses recorded on this line are offset by corresponding movements in net other operating income and in policyholders' liabilities disclosed separately in the income statement.

HSBC Bank Malta continues to take a disciplined approach to cost management while continuing to invest in the business and IT systems. As a result, operating expenses increased by €3.8 million, or 4.6 per cent, to €87.6 million in 2010. This was driven mainly by a high level of investment in branch refurbishments, customer segmentation, channel and process migration and system improvements as well as rewarding performance in line with revenue growth. The investments made will deliver better value and an improved customer experience in the medium term. The cost efficiency ratio improved to 49.7 per cent compared to 52.5 per cent in 2009 as growth in operating income outpaced the increased expenditure.

In a challenging economic environment and from a low historic base, there was a modest €1.0 million increase in loan impairments to €5.3 million in 2010 from €4.2 million in 2009. This remains at the modest level of 16 basis points of the overall loan book.

Total assets grew by €546.8 million to €5,664.6 million at 31 December 2010 compared to €5,117.8 million in 2009. This liability driven growth was invested in treasury bills and debt securities as deposit growth exceeded loan demand and as part of the bank's liquidity management strategy.

Loans and advances to customers grew by €77.4 million in 2010 to €3,303.8 million, from €3,226.5 million in 2009, with growth seen in both the personal and commercial sectors. Mortgage market share remained stable. Following muted demand for corporate lending in the first nine months of 2010 stronger growth was registered in the last quarter. Gross new lending to customers amounted to €682.0 million which reflects the bank's continued support to the local economy and was a modest increase on prior year. The quality of the overall loan book remains good with non-performing loans at the 2010 year end representing 3.0 per cent of gross loans compared to 2.9 per cent in 2009.

Customer deposits grew by €376.2 million in 2010 to €4,462.9 million, testimony to the trust customers continue to place in HSBC during a period characterised by a number of bond issues and growing competitive pressures.

The available-for-sale investments portfolio remains well diversified and conservative. A fair value gain of €1.2 million on this portfolio was credited to revaluation reserves, net of tax.

The bank's liquidity position remains strong with an improved advances to deposits ratio of 74.0 per cent, compared with 79.0 per cent at 31 December 2009. The capital adequacy ratio at 10.2 per cent is well above regulatory requirements.

Alan Richards, Director and Chief Executive Officer of HSBC Bank Malta p.l.c., commented: "2010 was a difficult year but we are pleased both with the headline results and the progress we have made in transforming the bank for sustainable long-term growth. Our goal remains that of being the leading local and international bank in Malta.

"The local economy is performing relatively well and we anticipate continued growth for the foreseeable future. However, challenges within the global economy remain. Growth across Europe remains mixed, unemployment is still high, we have seen renewed stress in the Eurozone area and the impact of a number of government-led austerity measures are contributing to downside risks. We will continue to monitor the current situation closely as any slowdown in growth in Europe will inevitably impact Malta's open economy.

"There is still a lot to be done and 2011 will be another challenging year. However we continue to emphasise our competitive advantages as an international bank. We remain strongly capitalised, liquid and well placed to service the needs of our customers and support the local economy.

"The successful financial results for 2010 are testimony to the professionalism, commitment and hard work of our staff who performed admirably in demanding circumstances."

The Board is declaring a final gross dividend of 7.7 euro cent per share (5.0 euro cent net of tax). This will be paid on 21 April 2011 to shareholders who are on the bank's register of shareholders at 8 March 2011. This, together with the gross interim ordinary dividend of 7.9 euro cent per share, results in a total gross dividend for the year of 15.6 euro cent.

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