HSBC Malta has reported an annual profit before tax of €26.9 million for 2021, representing a major increase of €16.4 million or 157 per cent compared to the year before.

Adjusted profit before tax was €29.7 million, excluding the impact of a one-off restructuring provision of €2.8 million, marking a 184 per cent increase compared to the same figure for the year before, according to the bank’s annual statement, released on Tuesday via the Malta Stock Exchange.

This improved profitability was driven significantly by a small release of expected credit losses compared to the significant charges booked in 2020 as a result of the COVID pandemic.

Revenues from the bank’s insurance subsidiary were positively impacted by favourable market movements. However, performance was negatively impacted by higher actuarial losses of €3.4 million.

A number of other factors also had a negative impact on the bank's profits, including an increase in costs as a result of the restructuring provision, tighter regulatory monitoring, transformation expenses, increased regulatory fees and continued investment in digitalised solutions.

The negative interest rate environment and excess liquidity also played a role, decreasing the bank’s net interest income.

By the end of 2021, net loans and advances to customers decreased marginally by €67.9 million compared to the end of the year before, while customer deposits increased by seven per cent to €5.621 million.

A strong liquidity position was also recorded, with the advances to deposits ratio standing at 57 per cent.

Operating costs for the year amounted to €105.4 million, compared to €97.4 million reported in 2020.

This was driven not only by the aforementioned restructuring cost but also significantly compliance costs associated with non-increased monitoring, transformation, expenses, regulatory fees, fraud losses, as well as higher investment in digitisation.

Simon Vaughan Johnson/ LinkedIn

Providing his insights in a statement accompanying the report, Simon Vaughan Johnson, HSBC Bank Malta CEO, said: “HSBC’s financial performance in 2021 improved but continued to be impacted by the persistent COVID pandemic and negative market factors.”

Some of the negative market factors cited by Mr Vaughan Johnson include a sustained negative interest rate environment, pressures on margins and Malta’s greylisting by the Financial Action Task Force (FATF) which marks the country as an untrustworthy one to do business in – thus increasing compliance and regulatory burdens for businesses in the country.

During the year under review, HSBC Malta embarked on a number of initiatives and strategic realignments.

Notable amongst these was the opening of the bank’s largest branch, at 80 Mill Street, Qormi, which has extended weekday opening hours.

The company has also launched the Universal Banker relationship manager concept in Malta, whereby through investment in relationship manager training, it aims to allow customers to obtain multiple banking solutions through one point of contact.

Mr Vaughan Johnson also said the bank continued to invest in digital solutions, successfully launching two-factor authentication on the HSBC mobile app, providing customers with “a seamless” approval process which provides additional protection from online payment fraud.

Additionally, the bank continued to invest in its commercial platform, HSBCNet.

“During 2021, we have had another demanding year as COVID persisted. We continued to adapt our ways of working and our people have done a great job in maintaining business continuity throughout the year.

“We have capitalised on our employee platforms and tools so that our employees continue driving their personal development and improving their skills and abilities,” Mr Vaughan Johnson added.

Looking to the future, he concluded: “HSBC remains a strong bank that continues to be focused on growing our business in Malta. We continue to maintain high standards through applying our core values and doing the right thing by bringing the best that HSBC has to offer to the Malta market.

“We remain firmly committed to this ethos as we continue to pivot the business towards Safe Growth in the years ahead.”