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maltatoday, WEDNESDAY, 25 FEBRUARY 2015 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way HSBC Malta profi ts down by 42% Tim Diacono HSBC Malta made €52 million in pre-tax profi t in 2014, registering a drop in profi t of €38m (42%) when compared with 2013. "2014 was a very challenging year," HSBC Malta chief executive Mark Watkinson told a news conference to announce the bank's financial results for 2014. "The eurozone economy is still under considerable pressure and is only predicted to grow by 1% this year. In January, the French economy witnessed negative inflation for the first time in five years, which is incredibly worrying for regulators and European central banks. Part of the reaction to this fear of deflation was a record low interest rate." He said that while there is evidence of growth in Malta's economy, a lag effect exists with regard to financial institutions and no significant loan growth evidence has been seen. The bank's operating expenses stood at €98m, 6% higher when compared with 2013. "Our expenses for last year were impacted by additional compliance and regulatory costs of €5 million associated with the build-up of the Compliance function, the European Central Bank Comprehensive Assessment, higher regulatory fees and an increase of €1m in early voluntary retirement costs," Watkinson said. "Excluding these incremental costs, expenses were held flat to 2013, despite an annual increase in staff salaries and the impact of inflation." The bank said in an earlier statement that its common equity tier 1 ratio increased to 10.6% in 2014, up from 9.4% in 2013. Its cost efficiency ratio, that compares operating cost to net operating income, was 57%, up by 50% in 2013. Gross new lending to customers increased by 19% to €710m but net loans and advances to customers of €3,273m were in line with 2013. "In the current low interest rate environment there has been a heightened tendency for customers, both commercial and retail, to use excess funds to repay loans early," Watkinson said. "The mortgage book, the bank's largest lending portfolio, continued to show positive net growth." Customer deposits increased by 8% to €4,867m as of 31 December, 2014. Its return on equity for 2014 stood at 7.7%, down from 13.9% in 2013. The advance to deposit liquidity ratio improved from 73% to 67%. 'Interesting' next few years ahead Watkinson admitted that 2015 is set to be another difficult and challenging year, largely due to the low interest environment and the European Central Bank's new quantitative easing programme. "The asset purchases by the European Central Bank will be based on the size of the countries' economies," Wilkinson said. "It will be interesting to see how much quantitative easing will impact this market but our banks have remained liquid and we are now looking at further opportunities to lend money so as to deploy this liquidity. "Oil prices will facilitate growth and we've recently started seeing genuine signs of a commitment towards private investment into Malta's market. I think Malta will become a very interesting market within the next three to five years." HSBC Malta CEO Mark Watkinson addressing the media Annual infl ation down to -0.6% in the euro area Euro area annual infl ation was -0.6% in January 2015, down from -0.2% in De- cember. This was the lowest rate record- ed since July 2009. In January 2014 the rate was 0.8%. European Union annual infl ation was -0.5% in January 2015, down from -0.1% in December. A year earlier the rate was 0.9%. These figures were issued by Eurostat, the statistical office of the European Union. In January 2015, negative annual rates were observed in 23 Member States. The lowest annual rates were registered in Greece (-2.8%) and Bulgaria (-2.3%). Positive annual rates were recorded in Malta (0.8%), Austria and Romania (both 0.5%), Sweden (0.4%) and the United Kingdom (0.3%). Compared with December 2014, annual inflation fell in almost all Member States, except Cyprus, Malta and Sweden. The largest upward impacts to euro area annual inflation came from restaurants and cafés, and rents (+0.14 percentage points each) and tobacco (+0.07 pp), while fuels for transport (-0.77 pp), heating oil (-0.24 pp) and telecommunications (-0.05 pp) had the biggest downward impacts. Download the MaltaToday App now Money Market Report for the week ending February 20, 2015 BOV Valletta Business Centre relocates to new premises Island Hotels posts record 8.8 million EBITDA ECB Monetary Operations On Monday, February 16, the European Central Bank (ECB) announced its weekly main refinancing operation (MRO). The auction was conducted on Tuesday, February 17, and attracted bids from euro area eligible counterparties of €122.11 billion, €17.58 billion higher than the bid amount of the previous week. The amount was allotted in full at a fixed rate equivalent to the prevailing MRO rate of 0.05%, in accordance with current ECB policy. On Wednesday, February 18, the ECB conducted a seven-day US dollar funding operation through collateralised lending in conjunction with the US Federal Reserve. This operation was carried out at a fixed rate of 0.62% and did not attract bids from euro area eligible counterparties. Domestic Treasury Bill Market In the domestic primary market for Treasury bills, the Treasury invited tenders for 28-day and 182-day bills maturing on March 20 and August 21, 2015, respectively. Bids of €16.00 million were submitted for the 28- day bills, with the Treasury accepting €2.00 million, while bids of €15.00 million were submitted for the 182- day bills, with the Treasury accepting €8.00 million. Since €15.10 million worth of bills matured during the week, the outstanding balance of Treasury bills decreased by €5.10 million, to stand at €209.94 million. The yield from the 28-day bill auction was 0.010%, i.e. 1.0 basis point lower than on bills with a similar tenor issued on January 30, 2015, representing a bid price of 99.9992 per 100 nominal. The yield from the 182-day bill auction was 0.032%, i.e. 0.5 basis point lower than on bills with a similar tenor issued on February 13, 2015, representing a bid price of 99.9838 per 100 nominal. During the week under review, there was no trading on the Malta Stock Exchange. On Tuesday the Treasury invited tenders for 91-day and 182-day bills maturing on May 29 and August 28, 2015, respectively. Bank of Valletta is relocating its Val- letta Business Centre to the third Floor at No. 45, Triq ir-Repubblika, Valletta this Friday. The Valletta Business Centre will be operating from the present premises until tomorrow Thursday. The bank said it reassured its clients that all services will remain uninterrupted, and there will not be any change, either in e-mail addresses or in telephone numbers. It added that the Business Centre was redesigned with a view to ensure that clients receive the highest level of service, and are free to discuss their financial needs with the utmost confidentiality. Since the Business Centre will now reside within the same premises of BOV Branch in Triq ir-Repubblika, clients will have easier access to the full range of products and services offered by the branch. It invited its clients to contact its Customer Service Centre on 2131 2020 for further information, or in the case that they require additional assistance during the relocation period. Island Hotels Group Holdings plc yesterday reported a turnover from continuing operations of €36,558,717 representing an increase of 19% over the previous year, and Earnings before Interest, Taxation, Deprecia- tion and Amortisation (EBITDA) of €8,793,625, representing an increase of 46%. After taking into consideration depreciation, investment income and finance costs, the group reported a profit before tax of €2,466,995 compared to €685,561 in 2013. A further net gain of €1,202,385 from discontinued operations was recorded, and after a provision for tax of €936,924, the profit for the year after tax was €2,732,456 (2013 – €554,719). The group also reported exchange gains of €1,437,025, arising almost entirely from the year-end translation of a goodwill balance on foreign operations and a final total comprehensive income for the year attributable to the owners of the holding company of €4,169,481. Total shareholders' funds at the year- end amounted to €40,372,697 (2013 – €36,203,216). In an announcement to the Malta Stock Exchange the group explained that its business in 2014 remained unchanged and comprised the ownership and operation of hotels in Malta and the provision of accommodation, catering and related services. The group is made up of a holding company that acts as an investment company, together with its subsidiaries and jointly controlled entities. Despite difficult market conditions continuing to prevail in many of the group's source markets, tourist arrivals in 2014 were buoyant and reached record levels. This, together with the group's own marketing efforts, resulted in slightly higher occupancy levels and significantly better rates in the hotels and thus higher profits. The group also experienced a higher level of Vacation Ownership sales and this, coupled with the efforts initiated in previous years to reduce the cost base of this part of the business, resulted in significantly higher profits. An increased volume of activity in the event catering area of the business was also registered, whilst the Costa Coffee outlets in Malta also began to realise the potential expected from this investment. Focus on that area of the business will now also include Spain. Through its investment in Buttigieg Holdings Limited, after the year-end, the group opened its first Costa Coffee outlet in Barcelona with a further seven outlets contracted to open in the forthcoming months. On 16 January 2015, the directors issued a statement whereby the major shareholders of the group had reached an agreement in principle for the sale of the entire shareholding of the group to International Hotel Investors plc (IHI). YOUR FIRST CLICK OF THE DAY www.maltatoday.com.mt