HSBC interim pro it before tax plunges to €1.8 million

The HSBC Interim Results have shown that its Profit before tax (PBT) for the first six months of 2020, ended 30 June, was €1.8 million, down €19.1 million from the same period in 2019.

In a statement regarding these results, the bank said that “the economic impact of the COVID-19 pandemic has been the main driver of the change in our financial performance in the first half of 2020. The resultant increase in expected credit losses contributed to a material fall in reported profit before tax compared with the same period last year, in addition to the market turmoil that has impacted our Insurance business.”

The bank also listed a number of other key findings.

Revenue was down 16% largely driven by revaluation losses within the Life Insurance subsidiary (‘HSBC Life Assurance (Malta) Limited’) as a result of adverse market movements (equity and interest rates). Excluding the insurance subsidiary, revenue declined by 1%, the bank said.

Expected credit losses increased by €9.7 million due to the impact of COVID-19.

The bank also noted that costs are 5% below the same period in 2019 “reflecting strong progress on the strategy announced in 2019.”

“During the first six months, lending increased by €32 million (1%) and deposits grew by €168 million (3%).” In addition, profit attributable to shareholders of €1.2 million for the six months, resulted in earnings per share of 0.3 cents compared with 3.8 cents in the same period in 2019.

The bank also said that there was a common equity Tier 1 capital ratio of 16.6% as at 30 June 2020, up from 16.4% at the end of 2019 well above regulatory requirements.

“Return on equity was of 0.5% for the six months, compared with 5.8% for the same period in 2019,” the bank added.

The bank said that in line with the European Central Bank recommendation that Eurozone banks should not make dividend payments at this time, regardless of capital strength, no interim dividend is being declared.

Simon Vaughan Johnson, Director and Chief Executive Officer of HSBC Malta, said: “the first six months of 2020 have been both challenging and transformative.

Due to the COVID-19 pandemic, the economy slowed significantly and some sectors drew to a near standstill.”

These hindrances meant two things for HSBC; first that the financial performance of the bank inevitably suffered in line with the rest of the economy. Second, “the real measure of its performance became its success in supporting its customers, colleagues and communities during the crisis, and in laying the groundwork for the recovery to come and the future safe growth of its franchise in Malta,” the statement read.

Throughout the pandemic,

“HSBC maintained a high level of business continuity and we now have over 80% of colleagues enabled to work from the safety of their home if needed while maintaining a branch network presence throughout the COVID-19 period. It also maintained strong capital and liquidity positions,” the statement continued.

The bank has since launched a series of customer focused initiatives at the outset of the COVID-19 pandemic, including capital repayment holidays, fee free temporary short-term working capital facilities and trade finance support, the bank said. In May, the bank also confirmed its participation in the Malta Development Bank COVID-19 Guarantee Scheme.

“This has been one of the most demanding periods that I can remember for all of our people and our valued customers. Many have had to juggle personal and professional priorities, while adapting to new and unfamiliar ways of working. I have been humbled by the dedication and commitment that my colleagues have shown in incredibly tough circumstances, and thank them sincerely for all they have done – and are doing – for our customers, communities and each other,” Vaughan Johnson said.

The bank is now focused on the future and on successfully executing its Safe Growth strategy, he said. “We will strive to achieve revenue growth as and when market conditions improve, whilst maintaining a strong risk management culture, with zero appetite for financial crime risk,” Vaughan Johnson added.

Notably, last week the BOV Group also announced that it has experienced a considerable loss due to the pandemic as it saw a 75% drop in its PBT during the first half of 2020 when compared to results of 2019.