In the midst of the hectic reporting period in US, UK and European stock markets, Malta’s three largest retail banks – APS Bank plc, Bank of Valletta plc and HSBC Bank Malta plc – also published their Q3 financial figures.
The three banks’ level of reporting was somewhat different since quarterly updates are not a regulatory obligation unlike in larger, more developed capital markets overseas. While APS and BOV issued their entire income statement as well as the statement of financial position (balance sheet), HSBC Malta provided a detailed commentary on the main performance indicators. Nonetheless, there was sufficient detail in the HSBC Malta company announcement to arrive at some of the key figures to report on the trends during the year and compare these to the prior year.
HSBC Malta revenue rose by €19m (11%) in 2024’s first nine months when compared to the same period last year. This translates into a total operating income of around €190m from January to September 2024 and indicates that HSBC Malta achieved an operating income of over €62m in each 2024’s first three quarters.
HSBC Malta’s financial performance was also boosted by the improvement in the credit quality of its loan book, resulting in a release in expected credit losses of €10.8m in 2024’s first nine months; this is higher than the €3.7m released in the same period last year.
HSBC Malta reported a pre-tax profit for 2024’s first nine months of €118m, a 17% rise over €100.8m in the same period last year. Excluding the release in expected credit losses of €10.8m, the pre-tax profit in 2024’s first nine months is €107.2m.
On a quarterly basis, HSBC Malta generated average pre-tax profits (excluding the release of expected credit losses) of just over €35.7m in each of 2024’s first three quarters. To place this in perspective, the bank’s pre-tax profits in Q3 2022 were €17.2m at the time when interest rates had started to rise from the long period of very low interest rates across the eurozone that dented profitability across the banking sector.
The outcome of this study and any initiatives BOV may undertake could be an important milestone for Malta’s capital market as it can instigate other larger companies to also consider similar measures to provide added trading activity across the equity market
BOV’s net interest income surged 14.5% to €290.5m in 2024’s first nine months through the continued growth in gross interest income (+14% to €329.5m) primarily driven by an increase in the investment portfolio. Meanwhile, interest expenses increased 10% to €38.9m. Net interest income in Q3 2024 rose marginally to €97m from the previous quarter and was just below the peak of €98m in both Q4 2023 and Q1 2024.
Pre-tax profit amounted to €223.7m in 2024’s first nine months – 36.9% higher than the €163.4m made in the same period last year. Excluding the release in expected credit losses of €9.5m, pre-tax profit in 2024’s first nine months was €214.2m.
On a quarterly basis, BOV generated an average of €71.4m pre-tax profit in each of 2024’s first three quarters (excluding the release of expected credit losses); this is above the average profitability generated in 2023. Quarterly profits were below €25m before the ECB raised interest rates in the second half of 2022.
As at September 30, BOV’s loans to customers reached a record €6.69bn, which make up nearly half the bank’s interest-earning assets. Furthermore, BOV’s asset base also included nearly €6bn of fixed-income investments currently at a net
interest margin of 2.13% compared to 1.35% in Q3 2023. This investment portfolio is generating income of over €30m per quarter. Shareholders’ funds as at September 30 of €1.39bn translates into a net asset value per share of €2.373.
Despite APS Bank’s continued growth in gross interest income (+9.7% to €84.7m), net interest income fell 11.6% to €49.1m. This reflects the surge in interest expenses (+64.5% to €13.9m) due to new bonds issued towards the end of 2023 to boost capital, together with the policy of passing interest rate benefits to depositors. Quarterly net interest income in Q3 2024 fell for the fifth consecutive quarter to €15.9m from the peak of €18.8m in Q2 2023.
Pre-tax profit amounted to €16.5m, 29.2% below last year’s figure of €23.3m. On a quarterly basis, the pre-tax profit of €6.4m made in Q3 2024 is higher than the €5m generated in each of the previous two quarters, due to a reversal in expected credit losses in Q3 compared to charges incurred in 2024’s first two quarters.
APS sustained its growth momentum in loans and deposits, both reaching record levels. As at September 30, customer and syndicated loans reached €3.11bn, while customer deposits surpassed €3.44bn. Shareholders’ funds as at September 30 of €280.1m translates into a net asset value per share of €0.738.
While the banks’ performance figures were important to review, the main item of interest was the strategic review HSBC Malta’s parent company is undertaking. Last week, HSBC Malta’s directors said their focus remains on running its business, and that further updates will be provided as required. On his part, the APS CEO remarked that the bank is “continuously analysing opportunities that may arise in our natural market”. He added: “We believe there is a lot of potential in the bank that is yet to be unleashed, so we owe it to our stakeholders to explore possibilities to gain scale.”
The other important focal point for the investor community was the study BOV is undertaking to optimise shareholder value. The bank said that given the potential implications of the various measures, a comprehensive study by a ‘Big 4 firm’ is currently under way and due to be completed in early November. The study’s aims include assessing the financial and strategic rationale for a share buyback; improving the liquidity of BOV shares on the market and providing recommendations on the optimal implementation and timing of the programme. The bank said it will deliberate on the study’s outcome by the end of the year.
The outcome of this study and any initiatives BOV may undertake could be an important milestone for Malta’s capital market as it can instigate some of the other larger companies to also consider similar measures to provide added trading activity across the equity market. Such initiatives are greatly needed given the continued weak volumes across most equities in Malta, with the exception of BOV, and the absence of any measures or proposals by the government in last week’s budget speech to grow the local capital market.
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