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€3,257m with retail balances up 6% and commercial balances 2% higher than December 2018. The bank continued to improve the asset quality by reducing non-performing exposures by 13% versus prior year.

Customer deposits grew by 2% to €4,977m with a 4% increase in retail deposits more than offsetting the 6% reduction in commercial. The bank maintained a healthy advances to deposits ratio of 65% and its liquidity ratios were well in excess of regulatory requirements.

The financial investments portfolio increased by 4% to €944m. The risk appetite for investment quality remained unchanged. The portfolio is managed as a high-quality liquidity buffer consisting of securities of sovereign and supranational issuers rated A- (S&P) or better.

The bank’s capital ratios continued to improve with CET1 increasing from 14.6% to 16.4% and the total capital ratio improving from 17% to 19%. The bank continued to have a strong capital base and is fully compliant with the regulatory capital requirements. The bank managed down RWAs across 2019 driven by placements of excess liquidity and improved collateral recognition. A €13m net dividend was paid from the Insurance subsidiary which also drove the increase in CET1.

While the bank continues to build up capital reserves for the new non-performing loan requirements, the proactive capital actions across 2019 enabled the bank to declare a 30% dividend on full year adjusted profits recognising the importance of the dividends to our shareholders. This will bring the full year 2019 dividend payout ratio to 44% on a reported basis. The final gross dividend will be 2.1 cents per share (1.4 cents per share net of tax) which, together with the gross interim dividend of 1.7 cents per share (1.1 cents per share net of tax) paid in September 2019, brings the total dividend for 2019 to 3.8 cents (2.5 cents net of tax).

The final dividend will be paid on 15 April to shareholders who are on the bank’s register of shareholders at 9 March.

Andrew Beane, chief Executive officer at HSBC Bank Malta plc, said: “HSBC’s financial performance in 2019 exceeded expectations driven by revenue growth in retail banking, excellent progress on cost management and a low level of expected credit losses. Performance in our commercial and insurance divisions was less strong and we have taken a number of actions to address this with both businesses demonstrating progress in the final quarter of the year. HSBC’s signature risk management standards and the positive trading performance have again enabled us to generate a dividend for shareholders.

“Looking to the future, it is clear that the way customers are using banks is profoundly changing with the rapidly growing adoption of digital services, notably on mobile devices. At the same time, the interest rate outlook has deteriorated which is creating pressure on the profitability of banking across the Eurozone.

“The Board considered these factors carefully in 2019 and concluded that to succeed over the longer term it was necessary to change elements of our business model in order to meet both these changing customer expectations and to enable a transition to a more sustainable cost platform which can accommodate the interest rate outlook. The restructuring actions we announced in October position HSBC well for the future and provide clarity to our customers and employees. The associated one-off costs are reflected in our reported numbers but they have not impacted our dividend which has been sustained at the same payout ratio on an adjusted basis.

“In 2020 we will see the full year benefit of the investments we made in digital last year while making new investments to upgrade our self-service channel and in our re-modelled branch network.

“I am particularly looking forward to the opening of our national flagship branch in Qormi later this year, which will be our largest branch in the country. In our commercial division we remain Malta’s leading international bank, uniquely able to connect Maltese companies into the global economy and high quality inbound investors to Malta.

“Turning to the operating environment it is clear that developments in the local market have regrettably caused further damage to Malta’s reputation as a financial services centre. Sustainable economic growth requires full compliance with the rules of the international financial system and the reviews of objective international bodies, such as Moneyval, have set out clearly that significant improvements are required. While we welcome the action plans that have been announced, 2020 will represent an essential test of the capacity of Malta’s institutions to demonstrate significant progress.

“At HSBC we are proud of our values and the standards we uphold. Our commitment to invest and remodel our business to further embed these standards in recent years has necessarily resulted in a business which is smaller but stronger. However, this phase of our strategy is complete and, as we evidenced in 2019, the future focused HSBC model is strongly profitable, is producing dividends for shareholders and is protecting our stakeholders from the range of risks we face. It is for these reasons that The Banker magazine, part of the Financial Times Group, has awarded HSBC the title of Malta’s best bank for the fourth consecutive year. I would like to thank my colleagues for their dedication and hard work in 2019 and our customers and shareholders for their trust.”