HSBC Malta reports resilient profitability for 2016, dividends increased

HSBC Bank Malta plc has reported a profit before tax of €62.2m for the year ended 31 December 2016. This represents an increase of €15.4m or 33% on the previous year.

The reported profit before tax incorporates two ‘non-recurring’ items which are excluded from the adjusted results as it is considered internally as a better reflection of management’s performance.

The first item relates to the gain on disposal of the bank’s membership interest in Visa Europe. During the first half of 2016 Visa Inc. completed the acquisition of Visa Europe. As a result of this transaction, the bank received upfront cash consideration and preference shares. The total amount of income recognised in the reported results in relation to this transaction is €10.8m.

The second item represents a provision of €8m set aside in relation to a legacy operational and regulatory failure in the bank’s now-closed brokerage business. This sum reflects the estimated cost of ensuring that customers affected by this specific issue are not disadvantaged in line with HSBC’s commitment to the highest standards of conduct and fairness.

The Bank has self-identified and self-reported the issue to the regulator, Malta Financial Services Authority. This issue relates to ‘execution only’ trades dealt in by customers purchasing complex instruments without the Bank undertaking an appropriateness test required by MiFID. The bank will contact affected customers directly once final details of the resolution approach are agreed with the Malta Financial Services Authority at which point the final costs will be confirmed.

Profit attributable to shareholders amounted to €40.2m resulting in earnings per share of 11.2 cent compared with 8.5 cent in 2015. The Board recommends a final gross dividend of 4.1 cent per share (2.7 cent per share net of tax). Together with the interim dividend paid in September 2016, the total gross dividend for the year will be 11.2 cent per share (7.3 cent per share net of tax), which represents a 45% increase compared to the 2015 dividend. The final dividend will be paid on 20 April 2017 to shareholders who are on the bank’s register of shareholders at 14 March 2017.

Andrew Beane, Chief Executive Officer at HSBC Bank Malta p.l.c., said: “The bank made significant progress in 2016 through implementation of our strategic plan, achieving a level of profitability on an adjusted basis that was in line with our expectations. In particular, strong progress was demonstrated on cost management which we signalled as a priority to shareholders in our 2015 results announcement and has enabled us to offset some of the challenges posed by the unprecedented level of interest rates and increased regulatory costs. The legacy charge relating to our now closed brokerage business is disappointing and dates back to an operational fail- ure that took place some ten years ago. However, I believe that HSBC’s approach to selfidentify, self-report and remediate this issue demonstrates to our customers that HSBC is committed to the highest standards of conduct by doing what is right for our customers at all times.

“The local economy continues to perform well and the outlook remains favourable, although it is important that there is continued focus on diversification to avoid an undue level of concentration in certain sectors. However, banking is experiencing a more challenging environment driven by negative interest rates, increased regulatory expectations for higher levels of capital adequacy and for compliance with the highest global standards of financial crime risk management and the need to concurrently fund investment into new digital technology. In the context of these challenges I believe HSBC is uniquely well positioned; we continue to exceed our end-point capital adequacy requirements; we have made transformational investments in financial crime risk management and we are well on the path to bring new digital innovation to Malta; indeed we were particularly pleased to be recognised by The Banker Magazine as Malta’s best bank for 2016.

“In the coming year, while we have a number of priorities including the re-launch of our small business services, embedding our market-leading financial crime compliance standards is our overarching focus. While we expect this to continue to impact profitability in the short term, it represents an investment in the future of the bank by enabling us to operate a business that is strong, safe and secure for customers, for employees and for shareholders for the long-term. I would like to thank my colleagues for their outstanding commitment to HSBC in 2016 and our customers and shareholders for their continued trust,” he said.

All three main business lines, Retail Banking and Wealth Management, Commercial Banking and Global Banking and Markets, continued to be profitable during 2016.