Issue link: https://maltatoday.uberflip.com/i/1212321
20.02.2020 2 NEWS MATTHEW VELLA HSBC Bank Malta has reported an adjusted profit before tax for 2019 €45.3 million in a year during which it closed several retail branches to move operations to a flagship headquarters branch in Qormi. The profits were an increase of €8.8 million (24% over 2018). The adjusted results exclude the im- pact of a €16 million restructuring position in 2019, and a €1.4m bro- kering remediation provision, which leaves profit before tax at €30.7 mil- lion, a reduction of €7.8m over 2018. Reported profit attributable to shareholders was €20.2m resulting in earnings per share of 5.6 cents com- pared with 8.0 cents in the same peri- od in 2018. HSBC reported a 1% ncrease to €110.1m in net interest income, de- spite a European Central Bank depos- it rate declining further, but with the bank increasing revenues on excess li- quidity due to proactive management within the same conservative risk ap- petite. Net non-interest income marginal- ly decreased with strong fee perfor- mance within commercial banking as a result of the new fees offset by a reduction in fee income within In- surance due to the disposal of a spe- cific insurance portfolio in December 2018. Net trading income increased by €1.8m due to a fair value gain on VISA shares. Reported operating costs were €120.7m, which includes the restruc- turing provision of €16.0m which will deliver sustainable savings from 2020 onwards with full annualised saving delivered in 2021. Excluding the restructuring pro- vision, adjusted operating expenses were €104.7m, an improvement of €3.7m or 3% driven by a number of cost initiatives which more than off- set the inflationary costs, new pension expenses and continued investments in digital. Expected credit loss (ECL) for the year ended 31 December 2019 was €0.4m, an improvement of €3.1m versus 2018. The low charge in 2019 was driven by a number of recoveries and repayments across both retail and commercial. There was a €1.4m positive move- ment in the provision for brokerage remediation costs in 2019. In 2016, the bank raised a provision totalling €8m in relation to a remediation of the legacy operational failure in the bank's brokerage business. During 2017, the remediation programme was largely completed and it was assessed that a partial reversal of the conservatively estimated provision was warranted. In this regard, a reversal of €1.8m was effected in 2017. In 2018, an ad- ditional reversal of €2m was effected and the final provision of €1.4m was released in 2019 as the programme is now deemed closed. CEO Andrew Beane said the bank's financial performance in 2019 exceed- ed expectations, driven by revenue growth in retail banking, progress on cost management, and a low level of expected credit losses. "Looking to the future, it is clear that the ways customers are using banks is profoundly changing with the rapidly growing adoption of digital services, notably on mobile devices. At the same time, the interest rate outlook has deteriorated which is creating pressure on the profitability of bank- ing across the Eurozone… "The restructuring actions we an- nounced in October position HSBC well for the future and provide clarity to our customers and employees. The associated one-off costs are reflect- ed in our reported numbers but they have not impacted our dividend which has been sustained at the same payout ratio on an adjusted basis." In 2020 HSBC expanded its digital offering, and this will open a national flagship branch in Qormi after closing down several branches in other parts of Malta. Beane complained of "further dam- age to Malta's reputation as a financial services centre" due to Malta's eco- nomic growth lacking full compliance with the rules of the international fi- nancial system. "The reviews of objective interna- tional bodies, such as Moneyval, have set out clearly that significant im- provements are required. While we welcome the action plans that have been announced, 2020 will represent an essential test of the capacity of Malta's institutions to demonstrate significant progress." Financial performance Adjusted profit before tax for the year ended 31 December 2019, which excludes the impact of notable items, of €45.3m, which represents an in- crease of €8.8m, or 24% compared with prior year. Reported profit before tax which in- cludes the impact of a one-off restruc- turing provision of €30.7m, a decrease of €7.8m or 20%. The investment in restructuring will deliver sustainable cost savings going forward. Recommended gross final dividend of 2.1 cents per share (1.4 cents per share net of tax). Adjusted cost efficiency ratio of 70% compared with 73% for 2018. Reported profit attributable to shareholders of €20.2m for the year ended 31 December 2019 resulting in earnings per share of 5.6 cents com- pared with 8.0 cents in the same peri- od in 2018. Strong capital base with a common equity tier 1 ratio of 16.4% up from 14.6% at the end of 2018. Total capital ratio was 19.0% compared to 17.0% at 31 December 2018. Return on equity of 4.3% for the 12 months ended 31 December 2019 re- flecting the investment in restructur- ing compared with 6.1% for the same period in 2018. Excluding notable items return on equity is 6.4%. Net loans and advances to customers were €3,257m, up €147m or 5% com- pared with 31 December 2018. Customer deposits increased by 2% to €4,977m at 31 December 2019. Strong Liquidity Position with ad- vances to deposits ratio marginally higher at 65%. HSBC Malta posts €30.7m pre-tax profit in 2019