HSBC Malta said today it made a pre-tax profit of €95m for the year ended 31 December 2012 – an increase of €7m, or 8%, compared with €88m in 2011.
Profit attributable to shareholders was of €62m – up €4m, or 7%, compared with €58m in 2011, resulting in earnings per share of 21.1 cent, up 7%.
Total assets totalled €5,886m, up €61m, or 1.0%, compared with 31 December 2011.
Customer accounts at the end of the year reached €4,517m, an increase of €114m, or 3%.
Return on equity for the year was 15.4%, compared with 15.7% in 2011.
The cost efficiency ratio improved to 48.7%, compared with 50.4% in 2011.
Capital adequacy ratio was 12.4%, compared with 11.6% at 31 December 2011.
The bank said the main factors driving the improvement in profit before tax were a strong performance from the life insurance company reflecting a recovery in investment returns and available-for-sale gains as a result of the repositioning of the bond portfolio. This performance more than offset the non-recurring gains made in 2011 on the sale of the card acquiring business and the refinement in the methodology used to calculate the present value of in-force long-term insurance policies.
All the three main business lines, Retail Banking and Wealth Management (RBWM), Commercial Banking (CMB) and Global Banking and Markets (GBM), were profitable in 2012.
Mark Watkinson, Director and Chief Executive Officer of HSBC Bank Malta, said: “HSBC Malta has delivered another positive set of results that saw pre-tax profit increase by 8% with a return on equity of 15.4%. This performance was achieved in spite of the continued travails of the eurozone, a low interest rate environment, heightened competition and softer demand.
“Despite all the current global and regional challenges, HSBC Malta has a clear strategy in place of assisting our customers, and Malta, to access broader global markets with faster growth, simplifying our business, improving the customer experience and driving greater organisational efficiency.”
The bank said its net interest income increased by 3% to €133m compared with €129m in 2011. The increase reflected growth in mortgage lending from new business and improved balance sheet management returns.
Net fee and commission income fell to €30m in 2012 compared with €34m in 2011. Growth in fee income for payments and cash management was more than offset by lower card fees following the sale of the merchant card acquiring business in December 2011.
A net gain of €4m was reported on the disposal of available-for-sale securities compared to a net loss of €2m in 2011.
Operating expenses of €96m were €2m or 2% lower than the previous year.
Net impairments were reduced from €8m to €6m in 2012. This was principally due to the non-recurrence of a €4m impairment taken on Greek government bonds held by the life insurance subsidiary in its available-for-sale bond portfolio in 2011. During 2012, following the Greek bonds restructuring programme, all Greek debt exposure was sold and no Southern European country government debt is now held in this portfolio.
Net loans and advances to customers increased by €10m to €3,354m. The bank’s share of the mortgage market was stable. Despite a softening in loan demand in the challenging economic conditions, gross new lending to customers amounted to €507m. This reflects the bank’s continued support to the Maltese economy.
Following on the same lines, the property market has also registered a positive growth in 2012, particularly thanks to the interest of foreign nationals looking at relocating to Malta, as well as an increase in the demand for properties by second time buyers. Another market which is growing fast is the property investments market. ‘Property has always been an excellent investment option in Malta. Regardless of the international economic slowdown, prices in Malta have maintained a stable level, having registered an overwhelming average of 5% capital appreciation over the last decade, as per Central Bank official figures published mid-2012. And with the current global financial turmoil, the instability of the dollar and the euro, and other international doom and gloom, property has become an even safer and stronger investment. “The growth in the letting market and the demand for buy-to-let properties is the cherry on the cake”, stated Mr Lupi, “with rental returns averaging between 3% to 5.5%, depending on the type and location of the property in question. This ensures that an investor buyer gets a safe investment with an ongoing rental return.”
Malta is primarily a knowledge and service based economy, with tourism, ITC and financial services playing a major component. The use of English as a joint first language has given Malta a huge commercial trading advantage and also provides a haven for English speakers looking to live and work overseas. Malta’s use of its tax system to attract both commercial investment and permanent residents has also proved a winner with a number of schemes available, targeting retirees, professionals and other individual and commercial interests. The quality of life in Malta also helps. With a warm climate all year round, the abundance of good restaurants, a striving social and cultural calendar and the innate warmth of the locals, all add up to make any relocation much simpler for any business.
In terms of property offering for commercial entities, Malta is also on the right track. “Today we are seeing a good number of development projects that are focusing on this market” says Joseph Lupi, Managing Director at Frank Salt Real Estate, leading real estate agency in Malta. “The Portomaso tower is one of the favourites, however there are many more in the pipeline, including The Exchange at Pendergardens in St Julians, Smart City, Skyparks at the Malta International Airport and many more.”