Issue link: https://maltatoday.uberflip.com/i/1493442
3 NEWS 23.2.2023 FROM PAGE 1 e bank also saw a de- crease in the refund received on card scheme fees. On an underlying basis, the bank has sustained good progress in generating fee income. Net trading income in- creased by €2.2m as HSBC Malta continues to strength- en and deepen our relation- ships with our corporate cus- tomers. e bank's operating costs for the year reduced by 2% and amounted to €103.0m. Operating expenses include restructuring provisions of €1.5m in 2022 and €2.8m in 2021. Excluding the restruc- turing provisions, expens- es decreased by €1.1m, or 1%, compared to prior year, demonstrating continuously effective cost management actions. A number of factors con- tributed to the net decrease in adjusted costs of €1.1m. e most material contrib- utors were lower long term employee benefit costs in view of the increase in inter- est rates, savings on our com- mercial real estate costs and lower regulatory fees. ese cost savings were partially offset by higher amortisation of intangible assets since we continue to invest in digitalisation, high- er recharges from Group entities in view of increased outsourced services and higher costs incurred by the insurance subsidiary for the implementation of new ac- counting requirements. e effective tax rate was 34.4%. is translated into a tax expense of €19.7m, €10.6m higher than the €9.1m expense for 2021. e increase in tax expense re- sulted mainly from increased profits. HSBC Life Assurance (Malta) Ltd HSBC Life Assurance (Mal- ta) Ltd reported a profit be- fore tax of €4.8m compared to a loss of €3.0m in 2021. e positive variance in prof- itability of €7.8m is mainly attributable to rising inter- est rates and lower actuari- al losses, partially offset by higher expenses arising from increased costs associated with the implementation of new accounting require- ments. Financial position and capital Net loans and advances to customers decreased mar- ginally by €21.6m to €3,175m. Commercial balances de- creased by 1.9%, while retail balances decreased by 0.2%. Retail non-performing loans decreased by 34% mainly driven by mortgage upgrades on which mora- toria were extended during Covid-19. e bank registered an in- crease in new loans and oth- er facilities approved to com- mercial banking customers, which were up by over 30% on prior year. Customer deposits grew by 6% to €5,971m driven by both retail and commercial depos- its. e bank maintained a healthy advances to deposits ratio of 53% and its liquidity ratios remained well in excess of regulatory requirements. e financial investments portfolio increased by 19% to €1,005m. e increase was driven by higher liquidity as a result of the growth in cus- tomer deposits. During the year, the fair value of the hold-to-collect- and-sell investments was impacted by adverse price movements, as a result of the increase in term market yield curves, impacting nega- tively revaluation reserves by €23.2m. e bank took action to ad- dress the negative impact by entering into fair value hedg- es to mitigate against further decreases in market prices, as well as establishing a hold- to-collect portfolio. e risk appetite for invest- ment quality remained un- changed. e portfolio con- sists entirely of securities of sovereign and supranational issuers rated A- (S&P) or bet- ter. e bank's common equity tier 1 capital was 18.5% at 31 December 2022, compared to 18.4% at the end of 2021. e total capital ratio increased to 21.3% compared to 21.1% at 31 December 2021. e improvement in the capital ratios was driven by increased profits, partially offset by adverse price move- ments on financial instru- ments. e bank maintained a strong capital base and is fully compliant with the reg- ulatory capital requirements. CEO's outlook Simon Vaughan Johnson, Chief Executive Officer at HSBC Bank Malta p.l.c., said: "HSBC's financial perfor- mance in 2022 exceeded ex- pectations and was driven by rising interest rates, a signifi- cant credit recovery, increase in trading income and rigor- ous cost management actions. In 2022, the positive interest rate environment made an accretive contribution to our profitability, after many years of operating in a negative interest rate environment. We also reported increased revenue generated by our in- surance subsidiary due to fa- vourable market conditions, together with increased for- eign exchange income. "We are making good pro- gress on the transformation of our offices at 80 Mill Street, Qormi which is currently the largest real-estate project of its kind for HSBC in Europe. is important capital invest- ment in Malta will create a modern, fit-for-purpose busi- ness environment for all who work in or visit the campus and will facilitate a number of carbon net-zero initiatives that are fully aligned to our published targets. "We continued to launch new products for our cus- tomers as well as delivering on the digitalisation journey. In Q1 2022, we launched the new cards platform which provides customers with en- hanced features, services and security. e card fraud man- agement system has also been upgraded, enabling us to bet- ter protect our customers and the bank. During the year, we rolled out enhancements on both HSBCnet and the Mobile Banking Application. In Janu- ary 2023, HSBC Life launched the HSBC Key FIVE Critical Illness Cover plan which is a market-leading and stan- dalone critical illness insur- ance policy which is designed to support policyholders in the event of being diagnosed with any of the five most common critical illnesses. "We are a founding member of the Malta ESG Alliance, highlighting our ongoing commitment to decarbonise our operations and promote the transition in Malta to a net-zero economy. e bank has made significant progress on a study, being carried out in collaboration with the Mal- ta Chamber of Commerce, to make our campus at 80 Mill Street, Qormi a net-zero building and to use the ex- perience and learnings to es- tablish a blueprint for transi- tioning commercial buildings across Malta into more sus- tainable environments." EDITORIAL PAGE 9 Retail non-performing loans down 34% NICOLE MEILAK HSBC Malta's accidental doubling of the minimum down payment on home loans was a "genuine mis- take" and not a reaction to backlash, the bank's CEO said on Tuesday. Last week, it appeared that HSBC Malta quietly doubled the down payment require- ment on home loans from 10% to 20% and increased the interest rate to 3.1%. But speaking to sister news- paper MaltaToday on Tues- day, CEO Simon Vaughan Johnson said that this was a genuine mistake when updat- ing the website. "It was a gen- uine error that we needed to correct – which we did," John- son said. Indeed, the figure on the website was updated on the same day after the bank issued a statement saying that it will continue to offer home loans in line with its proposition up to a maximum of 90% loan- to-value. Shortly after the statement was issued, the HSBC website still showed that the Classic Home Loan product would be subject to a maximum loan- to-value of 80%, meaning the customer would have to put down a 20% down payment. Later in the evening, this was changed to 90%. Johnson also added that there have been no specific changes to the bank's lending policies and requirements. HSBC Malta's position in Malta Despite HSBC pulling out from non-Asian markets like France and Canada, Johnson said that he still sees opportu- nity for safe growth in Malta. He remarked that the bank is renovating its Qormi head- quarters, which represents the largest property investment of the bank's kind in Europe. He also said that there are no planned branch closures in Malta for the time being, with the existing 12 branches to re- main in operation. Johnson also touched on the possible removal of ener- gy subsidies, saying that this would change the risk land- scape in Malta. "Subsidies have helped support the cost of energy for all of us, with our cars and various other usages. It has been a huge support to the local community. We then need to analyse the impacts there may be for removing or reducing the subsidies." He did not elaborate on the specific impacts that a removal of subsidies would entail, re- marking that the effect would vary greatly between custom- ers and sectors. "But once that is removed, the cost of fuel will go up for all of us." Overall, the outlook for the local economy is positive. "But we've seen a number of shocks in the past year and past three years of COVID-19. We have to prepare for them as much as we can, but it's very difficult when you're not sure where they're coming from." HSBC CEO says loan down payment doubling was a 'genuine mistake' HSBC Malta: Improved financial performance driven by rising interest rates and non-performing loan recovery