Last week, US and European companies began publishing their financial statements as at June 30. Investors and financial analysts always closely follow the quarterly reporting seasons in large international capital markets as they provide important information for investors and the companies’ guidance for the next quarter is a key determinant of overall investor sentiment and performance.

This year’s reporting season takes on greater importance following the sharp upturn in equity markets despite the consistent hike in interest rates. In fact, at the start of the year, worries about a hard landing due to the interest rate hikes turned into fears of a widespread banking crisis in March. But the US stock market in particular overcame these headwinds and performed strongly, mainly due to the hype surrounding artificial intelligence.

In Malta, companies are obliged to report on a semi-annual basis while a few large companies also provide quarterly information to the market. The interim reporting season started yesterday with the publication of results by Mapfre Middlesea plc, followed by APS Bank plc and Bank of Valletta plc. Next week, HSBC Bank Malta plc and Malta International Airport plc are due to publish their interim financial statements on the same day.

After three very difficult years for Maltese investors, the MSE Equity Price Index staged a partial recovery of 5.5% in the past six months, mainly as a result of the sharp upturn in the two largest banks’ share prices. HSBC was the top performer in the first half of 2023 as its share price surged 69%, followed by BOV at +48.2%. BOV’s market capitalisation increased by €228 million in this year’s first six months, and more importantly, this took place on strong trading activity. BOV shares dominated overall trading activity as over €7 million worth of shares changed hands, surpassing the annual trading activity in this equity for each of the last three years. MIA and HSBC are the only other companies that also attracted a strong share of trading volumes, while weak activity continued to characterise the other shares.

There will be particular focus on whether the very positive results will lead to a more aggressive dividend policy by HSBC and the possible reinstatement of a sustainable dividend by BOV

In view of the sharp upturn in the share prices of the two large banks, and also in view of the new interest rate environment, the imminent issuance of the two largest banks’ financial results will be among the most important developments in the coming days.

In line with the robust earnings being reporting by the main US and European banks, together with their attractive dividend payments as well as share buyback programmes, many Maltese investors will be paying close attention to the local banks’ financial statements. Moreover, there will be particular focus on whether the very positive results will lead to a more aggressive dividend policy by HSBC and the possible reinstatement of a sustainable dividend by BOV following a long period of virtually no cash dividends. Such developments could be important catalysts for the continued recovery in investor sentiment across the local equity market.

While the elevated interest rate environment across the eurozone will surely result in bumper profits from the larger banks given their sizeable levels of liquidity, the upcoming announcements by all the four retail banks take on greater importance in view of the likely corporate actions by APS Bank plc and Lombard Bank Malta plc in the months ahead.

Following last year’s highly successful IPO, and the authority provided by shareholders at APS’s latest annual general meeting allowing the directors to issue bonds or other fixed-income securities amounting to a maximum of €150 million, the focus will now turn to the timing and pricing of this bond issue.

Lombard Bank Malta plc also requires additional capital, and during its recent AGM, shareholders empowered the board of directors to issue up to 65 million new issues. Here again, the focus will be on the timing and pricing of the rights issue, and eventually, the take-up by shareholders in the context of the bank’s shareholding structure.

The publication of MIA’s financial results will also be of great interest to its thousands of shareholders as well as to the market at large. Given the traffic results already published for the first half of 2023 showing that passenger movements rose 5.6% when compared to the first six months of 2019 (pre-COVID), the company is therefore expected to report a record financial performance for the first half of the year.

However, the main focus will be on whether MIA will revert back to its semi-annual dividend policy that was in place prior to the pandemic and the extent of the improved guidance on the traffic and financial forecasts for the upcoming six months. At the start of the year, MIA had projected that this year total passenger movements would amount to 6.3 million, a 7.7% growth over 2022’s 5.85 million passenger movements, and a 86% recovery of the 2019 record pre-pandemic traffic, which amounted to 7.31 million passengers. Following the sharper-than-expected recovery in passenger traffic in Malta as well as overseas, it would be interesting to gauge the new forecasts for 2023 and how they compare to the pre-pandemic figures.

Another main area of interest for the local equity market would be on the possible transfer of lease rights and obligations between GO plc and its subsidiary BMIT Technologies plc following its brief April 6 announcement.

While the upcoming announcements by the banks, MIA and GO will continue to shape overall sentiment and trading volumes, the smaller companies’ results are also important for the investing public. Following the various challenges faced by many companies in recent years, further confirmation of the post-pandemic recovery and overall financial strength of most companies could continue to generate added interest in the equity market.

 

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