Warning about increased risk in bond market
Addressing stockbrokers and the media on Tuesday, HSBC Bank Malta CEO Andrew Beane joined other commentators who have recently expressed worries about the increasing long-term risk in the local bond market.
He added there were some causes of anxiety over liquidity issues in the context of an increased number of bond issues in the local market.
Mr Beane and HSBC Malta had cause to celebrate: after years of sacrifices and austerity, the bank now feels it is better repositioned. The board on Tuesday morning concurred, adding an extra special dividend to the statutory 65% of net profits, a €20m increase, as a gift to long-suffering shareholders.
The bank increased both the common equity tier 1 ratio (from 13.2% to 13.9%) and its total capital ratio (from 14.2% to 14.4%) over the space of one year.
Over the same period, the bank has seen net loans and advances to customers decrease by 5.8% as well customer deposits decrease by 4.7%.
This has made the bank leaner and stronger and the bank is thus fully prepared to welcome and meet the Council of Europe’s Moneyval delegation which will visit Malta later this year.
Over the past years, the bank has restructured its operations and increased checks and procedures – a tough time both for customers and for the bank itself.
This, of course, is not a time for celebration and relaxation but rather a time of confident and careful monitoring of all that is happening.
The past months have seen damage to Malta’s jurisdictional reputation, Mr Beane said. Efforts to safeguard Malta’s financial services reputation need to be stepped up.
Mr Beane explained that over the past year the bank completed changes to its business model so as to meet the highest global standards for compliance and risk management. While these actions reduced profitability in the short term, they have materially strengthened the bank’s risk profile and position it well for the future.
The bank continued to improve the asset quality by managing down non-performing exposures by over 20%year on year especially in the corporate sector. Non-performing loans as a percentage of total gross loans decreased further from 6.4% in 2016 to 5.3% in 2017.
Besides, as the economy improved, people and companies with loans found it easier to pay back.
The bank is also focusing on improved technology, which gives long-term value to the bank’s operations.
Replying to a question by this paper, Mr Beane said the Malta bank, along with HSBC worldwide is monitoring the outcome of the Brexit negotiations however they may pan out.