HSBC Bank Malta p.l.c. first half 2008 results - highlights

25 July 2008

The following is the text of an advertisement which is to be published in the press in Malta on 25 July 2008 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 €46.6 million for the six months ended 30 June 2008 - down €12.4 million, or 21.1 per cent, compared with €59.0 million for the same period in 2007.
• Profit attributable to shareholders down 23.1 per cent, or €9.0 million, to €30.1 million, compared with €39.1 million over the comparable period in 2007.
• Earnings per share at 10.3 euro cents, compared to 13.4 euro cents for the same period in 2007.
• Loans and advances to customers of €2,968.9 million at 30 June 2008 - up €146.6 million, or 5.2 per cent, compared with 31 December 2007.
• Core customer deposits of €3,394.5 million at 30 June 2008 - up €18.8 million compared with 31 December 2007.
• Total assets of €5,100.8 million, up €205.8 million, or 4.2 per cent, compared with 31 December 2007. Total liabilities of €4,828.0 million, up €209.2 million, or 4.5 per cent, compared with 31 December 2007.
• Annualised return on capital employed of 22.0 per cent for the six months ended 30 June 2008, compared to 27.6 per cent in the first half of 2007.

Commentary by Alan Richards, Director and Chief Executive Officer, HSBC Bank Malta:

"The first half of 2008 has been challenging and profit before tax for the six months ended 30 June 2008 of €46.6 million is disappointing. This result represents a decline of 21.1 per cent in profit before tax, compared to the same period last year. The prior period did however include significantly stronger revenue flows from pre euro conversion foreign exchange and investment dealing activities. Overall profitability remains strong with a return on equity of 22.0 per cent.

"Increases in loans and advances generated a steady growth in interest receivable. This was off-set by the increase in interest payable on retail deposits and margin compression from heightened competition and euro conversion. Net interest income of €60.8 million represents a decline of 3.9 per cent compared to €63.3 million during the prior year period, which included a significant recovery from previously non-performing loans.

"Fees and commission income of €15.5 million was in line with the first half of 2007, despite reduced levels of business activity during the first quarter of 2008 due to Malta’s adoption of the euro on 1 January 2008 and the general elections. Adopting the euro also affected foreign exchange dealing income which, at €3.7 million, was significantly lower than the €8.5 million earned in the six months to 30 June 2007. Life insurance business generated a profit before tax of €6.4 million, up 5.6 per cent on the same period of the previous year.

"Operating expenses of €42.0 million are 6.1 per cent higher compared to the same period in 2007 with a cost efficiency ratio of 47.2 per cent compared to 40.1 per cent for the same period in 2007. Expense growth in the first half was primarily driven by non-recurring costs related to the euro conversion, increased staff costs and information technology investment.

"The quality of the overall loan book remains good, with loans and advances to customers continuing to increase. There was no deterioration in the quality of credit lending.

"The Available for Sale investments portfolio was marked down by €7.7 million at the close of the period. The mark-down was charged to revaluation reserves, net of tax effect.

"The bank is financially sound, liquid and has a conservative balance sheet policy with relatively low reliance on funding from the wholesale markets, and minimal investment in corporate securities.

"Whilst local market conditions are likely to be increasingly challenging, HSBC Bank Malta is well placed to support future business growth."

The Board is declaring an interim gross dividend of 11.9 euro cents per share (7.7 euro cents net of tax). This will be paid on 22 August 2008 to shareholders who are on the bank’s register of shareholders as at 6 August 2008.

Full media release (9 page pdf 58k)