HSBC Malta suffered a 66% drop in profit in 2020 over the previous year, with the bank saying COVID-19 had a major impact on its profitability.  

In a company announcement, the bank on Tuesday reported profit before tax of €10.4m for the year ending December 2020, a decrease of €20.3m or 66% compared to the previous year. 

The bank's net fee income decreased by €1.8 million compared to 2019, which the bank says was driven largely by a reduction in activity due to the pandemic across cards, payments, insurance and credit facilities.

Operating costs also took a hit, amounting to €97.4 million compared to €120.7 million reported in 2019, the latter of which included a restructuring provision worth €16 million.

Excluding this provision, the bank said it delivered a cost reduction worth €7.3 million, or 7%, while absorbing inflationary and other expenses related to COVID-19.  

The coronavirus outbreak, HSBC said, had a material impact its performance in particular on the expected credit losses and other credit impairment charges of €25.6m and on the insurance subsidiary results.

Simon Vaughan Johnson, chief executive at HSBC Malta, said the banks’s financial performance in 2020 was “materially impacted by the COVID-19 outbreak.” 

“The increase in excepted credit losses reflected the impact of COVID-19 on the forward economic outlook. Losses incurred by the insurance subsidiary arose from adverse market movements. Both these impacts overshadowed the strong progress made on cost reduction as a result of rigorous cost management sustained throughout the year. Despite the impact of COVID-19, the bank’s fundamentals remain strong and underlying performance was resilient,” he said. 

Vaughan Johnson added that COVID-19 posed significant challenges for the bank’s personal and commercial customers.

HSBC’s priority during the pandemic, he said, has been to provide proactive support and flexibility to its customers.

“We have partnered with customers through payment moratoria, restructuring payments, short-term credit facilities and access to cash. We are providing facilities to support our commercial banking customers through both Malta Development Bank backed schemes and HSBC relief initiatives, as well as helping businesses to navigate the current environment,” the bank’s CEO said. 

In closing, Vaughan Johnson assured customers that “HSBC remains a strong bank in spite of the COVID-19 crisis”. 

The bank will be formally announcing its financial performance for 2020 at 2pm on Tuesday.  

In its statement, the bank said HSBC said that adjusted profit before tax for 2019 excluded the impact of a restructuring provision of €16.0m and a provision release relating to brokerage remediation of €1.4m. 

The reported profit attributable to shareholders stands at €7.6m resulting in earnings per share of 2.1 cents compared with 5.6 cents in the same period in 2019.

The bank said it had registered significant improvement in its cost base as a result of rigorous cost management and sustainable savings from the restructuring programme announced in 2019.

HSBS will be recommending a gross final dividend of 1.16 cents per share (0.75 cents per share net of tax).

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