Fundamentals remain strong despite Covid-19 challenges for HSBC Malta; pre-tax profit down to €10.4m

Reported profit before tax for HSBC Malta for the year ended 31 December 2020 was €10.4m. This represents a decrease of €20.3m or 66% compared to prior year, HSBC said in a statement announcing their end of year results.

The statement read that, while there were no notable items in 2020, adjusted profit before tax for 2019 excluded the impact of a restructuring provision of €16m and a provision release relating to brokerage remediation of €1.4m. Adjusted profit before tax of €10.4m decreased by €34.9m, or 77% versus 2019.

Reported profit attributable to shareholders was €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.

Net interest income decreased by 4% to €105.9m compared with the prior year. Lower interest paid on customer deposits as a result of repricing exercises and changes in deposit composition towards the short term was offset by lower average yields on debt securities and money market placements as well as lower overdraft and credit card balances arising from the current economic environment, the bank said.

“Net fee income decreased by €1.8m compared to 2019 driven by a reduction in activity due to Covid-19 across cards, payments, insurance and credit facilities. Net trading income increased by €1.3m mainly due to higher fair value gains on Visa shares,” the statement read. Operating costs for the year amounted to €97.4m.

Financial position and capital

Net loans and advances to customers increased by €7.2m to €3,265m with retail balances up 1% and commercial balances 1% lower than December 2019. The bank continued to improve the asset quality by reducing commercial NPL by 16% versus prior year. Retail NPL increased by 34% due to extended moratoria measures, the bank said

Customer deposits grew by 6% to €5,273m driven by retail deposits with commercial balances broadly flat. “The bank maintained a healthy advances to deposits ratio of 62% and its liquidity ratios remained well in excess of regulatory requirements.”

The bank’s capital ratios continued to improve with CET1 increasing from 16.4% to 18.0% and the total capital ratio improving from 19.0% to 20.7%.

“The Board recommended a dividend pay-out ratio of 15% on the cumulated 2019 and 2020 reported profits for entities in scope of the Capital Requirements Regulation and after deducting any dividend paid in relation to the same period. The final gross dividend will be 1.16 cents per share (0.75 cents per share net of tax),” the statement read.

Simon Vaughan Johnson, Chief Executive Officer at HSBC Bank Malta p.l.c., said: “HSBC remains a strong bank in spite of the Covid19 crisis and continues to maintain high standards through applying our core values and doing the right thing. We remain firmly committed to this ethos as we pivot the business towards Safe Growth in the years ahead.”

With the spectre of devastating climate change and sea-level rise approaching, the first casualties will be the sandy beaches which mark the soft boundary between the land and sea, Peter Gatt, a geologist, told The Malta Independent.

Gatt has studied the nature of Malta’s sandy beaches and their bays and published the results in a paper titled Embayment morphometrics, granulometry and carbonate mineralogy of sandy beaches in the Maltese Islands on the international journal of Marine Geology. Beaches make up a third of the world’s coastline and are classified as either carbonate, dominated by calcium carbonate or clastic, usually dominated by quartz, he said.

The study investigates the source of sand particles, their size and the types of bays which host Malta’s carbonate sandy beaches.

What Gatt finds about Malta’s sandy breaches is that they are quite different from other carbonate sandy beaches found from the Red Sea to the Atlantic Ocean. The sand found in Malta’s sandy beaches has two sources, the sand formed by the erosion of the limestone shoreface and the biogenic sand produced by marine organisms that produce a shell which is later broken up into sand particles. Malta’s sandy beaches have less than 20% of their sand coming from biogenic sources, which is far less when compared to other sandy beaches around the world, he explains. “This unusual situation is linked to the clay from the Blue Clay Formation that is found along the coast and under large areas covered by marine sand.”

This discovery has its consequences, Gatt says. Malta’s beaches are small and bays remain underfilled with sand, very often requiring beach nourishment if sea-level continues to rise. The study also proves new arrivals contributing to sand in Malta’s beaches that reflect the warming of the Mediterranean Sea, he says. The foraminifera Amphistegina which is more associated with the warm coasts of Libya and the Middle East is becoming common along some sandy beaches in Malta.

Sandy beaches are vital for Malta’s summer tourism and recreational activities. Peter Gatt emphasizes that if we are to enjoy these sandy beaches, we need to look into how they are adapting to climate change.