A success story, whatever the background
The bank reporting season has opened with details of whopping profits registered by HSBC Malta during last year. This meant that the bank, which had taken over 70 per cent of Mid-Med Bank, has continued to travel on its upward slope of rising profits.
The bank reporting season has opened with details of whopping profits registered by HSBC Malta during last year. This meant that the bank, which had taken over 70 per cent of Mid-Med Bank, has continued to travel on its upward slope of rising profits. This observation always calls up an old thorn in the side of various observers of the banking scene, including yours truly: should the government have disposed of 70 per cent of Mid-Med Bank, irrespective of the price at which the deal was struck?
An ancillary question persists: would Mid-Med Bank, left to its local devices, have been as successful as HSBC Malta has turned out to be?
The first question is, by now, academic. Not even the MLP - I believe - will return to it if it is given a mandate to govern in general election of 8th March.
The second question travels in the realm of what-might-have-been hypothesis. No one can really tell. It is a definite fact that Mid-Med Bank had built up a strong momentum, and would have probably matched the Bank of Valletta's progress over the past decade. On the basis of that conclusion, it was a mistake to transfer control of Mid-Med Bank to the HSBC Group. On the other hand it is also a fact that the deal triggered off a transfer of the HSBC culture to Malta. The bank, since its Barclays days, had a strong grounding of professionalism.
That was sustained and strengthened during the Mid-Med Bank years, particularly in the period when Alfred Mifsud chaired the bank. What HSBC definitely transferred to Malta was its brand. It is recognised world-wide. The current slogan promoting HSBC as your local global bank encompasses that fact.
Foreign investors do bank with the Bank of Valletta, and they get an excellent service, too. But in terms of international banking there can be no doubt that HSBC Malta has a head start.
My own preferred approach would have achieved that as well. I wanted HSBC to set up shop in Malta, but as a tough third local bank, competing with Mid-Med and the BoV. We would have had the best of all worlds. It was not to be. The Nationalist government decided otherwise, and in such matters it is always the government of the day that calls the shots. They were called in favour of the public sector transferring its shares to the HSBC Group.
At the same time, over the years there has been an important development. Foreign banks have looked at the domestic market and concluded there were opportunities for them. Several banks have joined the local minnows, Lombard Bank Malta and APS Bank to compete with the big two. They are doing so not only in the context of wealth management. Increasingly, the more recent arrivals are targeting the retail level. That can only be good news, both for depositors as well as borrowers. It will take a long time for the newcomers to grow, certainly to anywhere remotely approaching the levels reached by the Bank of Valletta and HSBC Malta. Consider this summary:
HSBC Malta made a pre-tax profit of euro 114.7 million in 2007, up €18.3 (Lm7.8) on 2006. The after-tax profit of the bank and its subsidiaries stood at €76.4 million. Earnings per share rose to €0.262 from €0.214 a year earlier. 17.5 per cent higher deposits improved the bank's liquidity, to €4.3 billion in deposits. Loans or advances rose more slowly. The bank's pre-tax profit has been increasing steadily since 2001.
The bank's CEO said HSBC Malta was attracting substantial new institutional and corporate business to Malta from international consumers. Business brought to Malta from international banking contributed €8.74 million to profits.
There was an 8.7 per cent increase in non-interest income levels, including from growth in cards issued and increased card usage. More electronic point of sales machines were recorded, along with increased usage. Life insurance activity registered a 43 per cent increase in profitability over 2006, with a pre-tax profit of €13 million. During the year the bank paid about €43.56 million in taxes, including VAT and national insurance contributions.
The bank contributed around one million euros to the local community as part of its Corporate Social Responsibility. The board of directors will be recommending to the annual general meeting (to be held in April) a final ordinary dividend of €0.148 gross per share.
Together with the gross interim ordinary dividend of €0.154 and gross interim special dividends of €0.093 paid on August 22, last year, this yields a total gross dividend for the year of €0.395 per share, to give a cash payout of €75 million.
The performance confirms that the HSBC, twinning their expertise with first class local resources, found good grass to graze in Malta. The venture has been a success story. As forecast by its CEO in outlining the bank's 2007 performance, this year it will face a challenging year considering the current global market conditions, Malta's EU and eurozone membership and the resulting increase in competition. But HSBC is well placed to face them. The smaller banks have two good models to look up to in the Bank of Valletta and HSBC Malta.
An ancillary question persists: would Mid-Med Bank, left to its local devices, have been as successful as HSBC Malta has turned out to be?
The first question is, by now, academic. Not even the MLP - I believe - will return to it if it is given a mandate to govern in general election of 8th March.
The second question travels in the realm of what-might-have-been hypothesis. No one can really tell. It is a definite fact that Mid-Med Bank had built up a strong momentum, and would have probably matched the Bank of Valletta's progress over the past decade. On the basis of that conclusion, it was a mistake to transfer control of Mid-Med Bank to the HSBC Group. On the other hand it is also a fact that the deal triggered off a transfer of the HSBC culture to Malta. The bank, since its Barclays days, had a strong grounding of professionalism.
That was sustained and strengthened during the Mid-Med Bank years, particularly in the period when Alfred Mifsud chaired the bank. What HSBC definitely transferred to Malta was its brand. It is recognised world-wide. The current slogan promoting HSBC as your local global bank encompasses that fact.
Foreign investors do bank with the Bank of Valletta, and they get an excellent service, too. But in terms of international banking there can be no doubt that HSBC Malta has a head start.
My own preferred approach would have achieved that as well. I wanted HSBC to set up shop in Malta, but as a tough third local bank, competing with Mid-Med and the BoV. We would have had the best of all worlds. It was not to be. The Nationalist government decided otherwise, and in such matters it is always the government of the day that calls the shots. They were called in favour of the public sector transferring its shares to the HSBC Group.
At the same time, over the years there has been an important development. Foreign banks have looked at the domestic market and concluded there were opportunities for them. Several banks have joined the local minnows, Lombard Bank Malta and APS Bank to compete with the big two. They are doing so not only in the context of wealth management. Increasingly, the more recent arrivals are targeting the retail level. That can only be good news, both for depositors as well as borrowers. It will take a long time for the newcomers to grow, certainly to anywhere remotely approaching the levels reached by the Bank of Valletta and HSBC Malta. Consider this summary:
HSBC Malta made a pre-tax profit of euro 114.7 million in 2007, up €18.3 (Lm7.8) on 2006. The after-tax profit of the bank and its subsidiaries stood at €76.4 million. Earnings per share rose to €0.262 from €0.214 a year earlier. 17.5 per cent higher deposits improved the bank's liquidity, to €4.3 billion in deposits. Loans or advances rose more slowly. The bank's pre-tax profit has been increasing steadily since 2001.
The bank's CEO said HSBC Malta was attracting substantial new institutional and corporate business to Malta from international consumers. Business brought to Malta from international banking contributed €8.74 million to profits.
There was an 8.7 per cent increase in non-interest income levels, including from growth in cards issued and increased card usage. More electronic point of sales machines were recorded, along with increased usage. Life insurance activity registered a 43 per cent increase in profitability over 2006, with a pre-tax profit of €13 million. During the year the bank paid about €43.56 million in taxes, including VAT and national insurance contributions.
The bank contributed around one million euros to the local community as part of its Corporate Social Responsibility. The board of directors will be recommending to the annual general meeting (to be held in April) a final ordinary dividend of €0.148 gross per share.
Together with the gross interim ordinary dividend of €0.154 and gross interim special dividends of €0.093 paid on August 22, last year, this yields a total gross dividend for the year of €0.395 per share, to give a cash payout of €75 million.
The performance confirms that the HSBC, twinning their expertise with first class local resources, found good grass to graze in Malta. The venture has been a success story. As forecast by its CEO in outlining the bank's 2007 performance, this year it will face a challenging year considering the current global market conditions, Malta's EU and eurozone membership and the resulting increase in competition. But HSBC is well placed to face them. The smaller banks have two good models to look up to in the Bank of Valletta and HSBC Malta.