Issue link: https://maltatoday.uberflip.com/i/1504928
5 NEWS 3.8.2023 HSBC Malta registered €59.3 million in profit before tax for the six months ended 30 June 2023 was, an increase of €41.8m from the same period in 2022, following IFRS 17 restatements. Higher profits reflect the value of the bank's large and diversified customer base, higher interest rates, better per- formance by the insurance subsidiary and lower costs. ese positive var- iances were partially offset by lower credit recoveries due to a significant re- covery on a commercial non-perform- ing loan reported in H1 2022. Net interest income ('NII') increased by €43.4m to €89.7m compared with €46.2m in the same period in 2022. e increase in NII reported by the global businesses was due to interest rate rises. e European Central Bank increased the interest rate on their overnight de- posit facility from -0.5% on 26 July 2022 rising to 3.5% as from 21 June 2023 and therefore the bank's surplus liquidi- ty position was no longer being placed at negative rates. Non-funds income (fees and commissions and trad- ing income) decreased by €2.3m. is was largely driven by the removal of the high balance fee in July 2022, which was a customer-driven decision taken by the bank in view of the rising interest rate environment. On an underlying basis the bank sustained good progress in the generation of fee as well as foreign exchange income by utilising its customer service transactional capability. Operating expenses decreased by €7.5m to €49.5m, compared with €57.1m in the same period in 2022. is was mainly due to higher regulatory fees reported in H1 2022 as a change in the Depositor Compensation Scheme legislation was enacted requiring banks to anticipate the cash contributions payable in 2023 and 2024. In 2023, HSBC Malta also received a refund from insurance in relation to operational losses reported in prior years. On an underlying basis, expens- es remained relatively flat as cost saving initiatives and cost discipline mitigated increased investment and inflation. During the six months, the bank re- ported a release of expected credit losses ('ECL') of €2.6m, compared to a release of €11.8m reported in the same period last year. e release in 2023 considered more favourable economic projections while 2022 projections re- flected economic uncertainty mainly due to the Russia - Ukraine war and in- flationary pressures. In 2023 HSBC Malta also experienced the curing of non-performing loans on which moratoria measures were ex- tended during the Covid period to help customers navigate through such diffi- cult times. In H1 2022, the bank had re- ported a significant recovery on a com- mercial non-performing loan which was largely provided for in prior years. e effective tax rate was 35% in H1 2023 com- pared to 34% in 2022. is translated into an interim tax ex- pense of €20.8m. HSBC Life Assurance (Malta) Ltd re- ported a profit of €1.6m compared to a loss of €3.2m reported in the same pe- riod last year, as restated in accordance with IFRS 17. In H1 2023, we have seen lower volatility in the market compared to the same period last year. e volatil- ity in market prices negatively impacted the insurance subsidiary results in 2022. Financial position and capital Net loans and advances to customers amounted to €3,147m, a marginal de- crease of €28m or 0.9% when compared to 31 December 2022. e bank contin- ued to improve asset quality by reduc- ing non-performing loans by 10%. It also retained a prudent credit policy to ensure long term sustainability of its service proposition while also deliver- ing value for its shareholders. e bank's investment portfolio in- creased by €97m to €1,101m and was composed of highly rated securities and continued to be conservatively positioned with the lowest investment grade of A-. Customer accounts were €5,930m as at 30 June 2023, a marginal decrease of €41m or 0.7% compared to 31 Decem- ber 2022. e bank had a satisfactory advances-to-deposits ratio of 53%, and its liquidity ratios were well in excess of regulatory requirements. e bank's common equity tier 1 cap- ital was 17.8% as at 30 June 2023, com- pared to 18.5% at the end of 2022. e total capital ratio decreased to 20.6% compared to 21.3% at 31 December 2022. e deterioration in the capital ratios was driven by the build-up of the capital requirements for non-per- forming loans. e regulations require us to build-up capital reserves for long outstanding non-performing exposures over the years. e June 2023 ratios ex- clude the unverified profits for the peri- od under review. e bank maintained a strong capital base and is fully compli- ant with the regulatory capital require- ments. e bank said in a statement it is de- termined to maintain a strong capital base, at the same time recognising the importance of dividends to its share- holders. e Board has thus recommended an interim gross dividend of 6.0 cents per share which amounts to an interim gross dividend of €21.6m. e interim dividend will be paid on 15 September 2023 to shareholders who are on the bank's register of shareholders on 14 August 2023. Geoffrey Fichte, the new Chief Execu- tive Officer of HSBC Malta, said: "e turnaround strategy of HSBC Malta is off to a strong start with first half results showing higher profits be- fore tax as a result of an increase in rev- enue, improved credit quality and ef- fective cost management. is positive performance was achieved thanks to the support of our customers and col- leagues, while we continue to invest in our business to meet the dynamic and evolving needs of customers. By generating greater value for share- holders, we are recommending an inter- im gross dividend of 6.0 cents per share which is higher than the full dividend paid in 2022 and represents our highest interim dividend in seven years. We are confident in the local economy, and continue to focus on growing our business, while investing in the future. Our main priority is improving custom- er services through better digital chan- nels for customers while not losing the personalised service of our team. We leverage on our global strength being the leading international banking brand in Malta. Our major investment in a new head- quarters for Malta is now over 60% complete, representing a €30m invest- ment. We are excited to move into this state-of-the-art green building in the near future. e HSBC Hub is pur- posely built for the long-term success of our customers and colleagues. Other major investments in the future of our business include upgrading and replac- ing 100% of our ATM fleet, green loans, digital and future skills training. Sustainability represents the biggest transformation in the banking sector. We are already taking action to reduce our carbon footprint but recognise that our biggest impact comes from working with customers to help them transi- tion to a net zero economy and become more sustainable through our green loan offers." HSBC Malta registers €59.3m pre-tax profit, announces highest interim dividend in 7 years Geoffrey Fichte is the new Chief Executive Officer of HSBC Malta