Issue link: https://maltatoday.uberflip.com/i/789855
maltatoday, WEDNESDAY, 22 FEBRUARY 2017 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 registers €62.2 million pre-tax profi t in 2016 Matthew Vella HSBC Bank Malta has registered a pre-tax profi t of €62.2 million in 2016, representing a 33% jump from the previous year's compa- rable fi gure and the highest in the last three years. Excluding the effects of the provision for early voluntary retirement in 2015 (€14.7 million) and the gains on the sale of VISA Europe shares as well as the provision for brokerage remediation costs (net €2.8 million), adjusted pre-tax profits of HSBC Malta fell by 3.3% to €59.4 million from €61.4 million in 2015. Taxes of €22 million led to a net profit of €40 million, compared to €29.5 million in 2015. Assets climbed by 0.9% to €7,306 million. Net loans and advances to customers rose by 1% to €3,320 million, mainly reflecting continued growth in mortgages. Conversely, early prepayments in both retail and corporate loan books remained at a high level, creating a pressure on the margin and offsetting the effect of the record gross new loans sanctioned. Loan quality improved further in 2016 with non-performing exposures decreasing to 6.4% of gross loans and advances to customers compared to 7.0% in 2015. Similarly, total liabilities advanced by 0.8% to €6,832 million as customer deposits grew by a further 1% to €5,000 million. The advances-to-deposits ratio remained flat at 66%. Shareholders' funds increased by 2.7% to €473.5 million reflecting the profit registered during the year. This translates into a net asset value per share of €1.314 (FY2015: €1.280). During the year, HSBC Malta continued to build its regulatory capital base as its common equity Tier 1 capital increased to 13.0% from 12.4% as at the end of 2015. The board of directors recommended a final gross dividend of €0.041 per share (€0.027 per share net of tax), representing an increase of 57.7% over last year's final dividend. Together with the gross interim dividend €0.071 per share (net: €0.0462) paid on 9 September, 2016, the total gross dividend for the year amounts to €0.112 per share (€0.0728 per share net of tax), representing a 45.5% increase compared to the dividend declared with respect to 2015. HSBC Malta CEO Andrew Beane said profitability was in line with expectations, and highlighted cost-reduction efforts during 2016 that offset rising regulatory costs. Beane said the bank would be facing a more challenging environment driven by negative interest rates, increased regulatory expectations for higher levels of capital adequacy and for compliance with the highest global standards of financial crime risk management and the need to concurrently invest into new digital technology. "HSBC Malta is uniquely well positioned with capital levels exceeding regulatory requirements, transformational investments undertaken in financial crime risk management as well as plans to bring new digital innovation to Malta," Beane said. HSBC shares slide after 62% profit fall On a global level, HSBC reported a $7.1 billion pre-tax profit for 2016, down 62% on the $18.9 billion reported a year earlier. HSBC attributed the fall to a string of one-off charges, including the sale of its operations in Brazil. The UK lender said its performance had been "broadly satisfactory" given "volatile financial conditions" but warned a rise in global protectionism was a concern. The bank also announced a smaller-than-expected share buyback. That also helped undermine shares, which were down by more than 6% in London. Alluding to the US election and the UK's vote to leave the European Union, HSBC said 2016 would "be long remembered for its significant and largely unexpected economic and political events". "These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world," said chairman Douglas Flint. "The uncertainties created by such changes temporarily influenced investment activity and contributed to volatile financial market conditions." Looking ahead to 2017, the bank said the "outcome of the US election has added to concerns about a rise in protectionism". "This has been accentuated in many parts of the world by technological change and income inequality." HSBC said that any "amplification of this trend" would lead to a disruption in global trade and affect its traditional line of business. HSBC Bank Malta CEO Andrew Beane Corporate tax avoidance: Maltese Presidency secures Council's thumbs up on hybrid mismatches The Council of the European Un- ion has under the Maltese Presi- dency agreed its position on rules aimed at closing down 'hybrid mismatches' with the tax systems of third countries. The draft directive is the latest of a number of measures designed to prevent tax avoidance by large companies. The compromise text was presented by Finance Minister Edward Scicluna, as President of the Economic and Financial Affairs Council. The directive should provide tax authorities with the necessary tools to fight tax avoidance. It seeks to prevent companies from exploiting disparities between two or more tax jurisdictions to reduce their overall tax liability. Such arrangements can result in a substantial erosion of the taxable bases of corporate taxpayers in the EU. The directive will contribute to the implementation of 2015 OECD recommendations addressing corporate tax base erosion and profit shifting. The proposal addresses hybrid mismatches with regard to non- EU countries, given that intra-EU disparities are already covered by the 'anti-tax-avoidance directive' adopted in July 2016. It complements and amends that directive accordingly. The Council reached a compromise on the following issues: • for hybrid regulatory capital, a carve-out from the rules is established for the banking sector. The carve-out will be limited in time, and the Commission will be asked to present a report assessing the consequences; • for financial traders, a delimited approach is followed in line with that followed by the OECD; • as regards implementation, a longer timeline is foreseen than that set for the July 2016 directive. Implementation is set for 1 January, 2020 (one year later), and for 1 January, 2022 as concerns one specific provision. The directive is one of a package of corporate taxation proposals presented by the Commission in October 2016. Agreement was reached at a meeting of the Economic and Financial Affairs Council. The Council will adopt the directive once the European Parliament has given its opinion. "Today is yet another success story in our campaign for fairer taxation," said Pierre Moscovici, Commissioner for Taxation. "Step by step, we are eliminating the channels used by certain companies to escape taxation. I congratulate the Member States for agreeing on this tangible measure to clamp down on tax abuse and install a fairer tax environment in the EU." Member states will have until 31 December, 2019 to transpose the directive into national laws and regulations.