HSBC profit falls by 26 per cent

HSBC Bank Malta yesterday announced a profit before tax of €71.2 million for the year ended December 31, 2009, a drop of €24.9 million, or 25.9 per cent, from the previous year.

Profit after tax was down 27.3 per cent, or €17.2 million, to €45.9 million, compared with €63.1 million in 2008.

"Despite the decline in profit compared to 2008, this was a resilient performance in light of exceptionally difficult market conditions," Alan Richards, HSBC Bank Malta CEO said during a briefing for media and stockbrokers.

Mr Richards said 2009 had been a challenging year for the bank and its customers.

"It has been a year characterised by pressure on profitability as a consequence of a general slowdown in economic activity, continued low interest rates, which have resulted in significant margin compression, and ongoing volatility in equity and bond markets which have inevitably impacted our investment-related businesses," he said.

However, HSBC continued to deliver strong results for its shareholders where profitability relative to history and peers remained attractive with a return on equity of 15 per cent.

Net interest income of €105 million in 2009 fell by 14.7 per cent, from €123 million in 2008, due to margin compression in the current low interest rate environment.

Despite a growth in loans and advances to customers of €114.2 million (gross new lending €662.2 million), interest receivable declined by €36.4 million, or 19.9 per cent.

Net fees and commission income of €32.4 million was slightly higher than 2008 levels of €31.8 million.

Growth in lending, card issuance and usage fees, account services and retail brokerage activities were offset by declines in fees from remittances and retail investments from subdued demand. Commission payable reduced year-on-year mainly due to subdued investment activity.

A company statement said insurance performance was robust in a challenging environment for investment and protection sales, and regular premium sales volumes were ahead of prior year.

Life insurance activities generated a satisfactory level of profit before tax of €11.7 million, down €4.7 million or 28.7 per cent compared to 2008 profit before tax of €16.4 million.

The fall in the bank's net other operating income from €3.7 million in 2008 to €0.9 million in 2009 was mainly due to the non-recurrence of gains from property disposals and a revaluation gain on investment property of €3.5 million reported in 2008.

Operating expenses of €83.8 million in 2009 decreased by €6.6 million, or 7.3 per cent, compared to €90.4 million in 2008. General and administrative expenses were slightly lower at €27.1 million "reflecting the bank's focus on cost control", the bank said.

Loans and advances to customers increased by €114.2 million in net terms during 2009 to €3,226.5 million, from €3,112.2 million in 2008, with growth across all lines of business - commercial, home loans and personal lending. New lending to customers was €662.2 million.

"Customer deposits rose by over €70 million which is a sign of the trust personal customers have placed in HSBC during a period characterised by a number of bond issues and growing competitive pressures," the bank said.

The bank is declaring a final gross dividend of 8c per share (5.2c net of tax). This will be paid on April 20 to shareholders on the bank's register of shareholders at March 4.

This, together with the gross interim ordinary dividend of 7.7c per share, results in a total gross dividend for the year of 15.7c. The final dividend amounted to €15.2 million which, when taken together with the interim dividend paid in August 2009, reached €29.8 million.

Mr Richards said the unprecedented global financial and economic upheaval impacted the economy, although Malta fared better than many of its European counterparts.

While there were clear signs of markets stabilising internationally, the outlook for the Maltese economy and general impairment levels in 2010 remained challenging, he said.

"Competition is increasing, and it is important we continue to emphasise our competitive advantages in the local market as an international bank. We have to focus on those areas where we have a natural advantage thanks to our brand, unique international franchise and group technology and systems," Mr Richards said.