HSBC Malta on Wednesday (today) announced that it reported €133.9 million in pre-tax profit for the year ended 31st December 2023, a sharp surge of €78.3 million or 141 per cent from the previous year.

The bank registered strong revenue growth across all three of its global businesses, supported by increasing net interest income, which enabled it to deliver its best return on equity in more than a decade.

Net interest income increased by 81 per cent to €195.8 million in 2023, particularly due to the higher interest rate environment, largely driven by higher interest on placement of excess liquidity.

In addition to this, net fee income decreased by €2.2 million to €19.5 million when compared to 2022, primarily a result of the removal of a high balance fee in July 2022. The bank stated that this was a “customer-driven decision” that was taken with the view of the rising interest rate environment. HSBC Malta has witnessed good growth in transaction banking, as well as higher volumes of international payments.

Net trading income was in line with that of 2022 at €7.6 million, with the bank stating that it will continue to “strengthen and deepen” its relationships with corporate and retail customers.

Operating costs for the year amounted to €102.4 million, representing a three per cent increase from 2022. This mainly came due to an increase in staff costs of €3.7 million, yet was partially offset by an insurance refund received in 2023 and costs savings on its real estate portfolio.

HSBC Malta also reported a release of expected credit losses (ECL) of €4.6 million during the year, a significant drop when compared to 2022’s €9.6 million. In 2022, its commercial banking business reported a net release of €12.3 million, mainly attributable to a significant recovery on a commercial non-performing loan which was largely provided for in prior years. The bank confirmed that the release in 2023 across retail and commercial banking was driven by an improvement in credit quality of its customers as well as an “improved forward economic outlook.”

Reported profit attributable to shareholders came in at €86.8 million, leading to earnings per share of €0.241, higher than the €0.10 achieved in the same period in 2022.

Additionally, HSBC Life Assurance (Malta) Ltd, the bank’s life insurance wing, recorded a profit before tax of €6.2 million, a €2.3 million increase from 2022’s figure. At the start of 2023, HSBC adopted IFRS 17 ‘Insurance Contracts,’ which required it to apply the requirements retrospectively with comparative data previously published under IFRS 4 ‘Insurance Contracts’.

In terms of net loans and advances, HSBC Malta experienced a €91.3 million decrease to €3.1 billion, while asset quality continued to improve through a 14 per cent reduction in commercial non-performing loans and 20 per cent decrease in retail non-performing loans.

Customer deposits grew by three per cent to €6.1 billion, with the bank also maintaining a healthy advance to deposit ratio at 50.2 per cent, while liquidity rations remained well in excess of regulatory requirements. Its financial investments portfolio also experienced an increase, growing by 31 per cent to €1.3 billion.

The bank’s common equity tier 1 capital was 20.6 per cent at the end of 2023, slightly higher than the 18.5 per cent recorded in 2022. Total capital ratio improved to 23.5 per cent in contrast to the 21.3 per cent registered at the end of the previous year. This improvement was largely a result of increased profits and higher revaluation reserves on its Hold-to-Collect investment portfolio, partially offset by higher capital deductions for non-performing loans.

Due to these results, HSBC Malta’s Board of Directors has resolved to recommend a dividend pay-out ratio of 40 per cent on report profits, with a final gross dividend of €0.09 per share (€0.0585 per share net of tax), bringing the total dividend for 2023 to €0.15 (€0.0975 net of tax). This is one of the highest annual dividends that the bank has paid in the last decade.

HSBC Malta confirmed that the final dividend will be paid on 25th April 2024 to shareholders on the bank’s register of shareholders on 19th March 2024, subject to approval at the Annual General Meeting scheduled for 18th April 2024.

The local bank’s positive financial results were also indicative of the upturn in performance that HSBC has had globally, with the parent HSBC company’s pre-tax profits skyrocketing to $30.3 billion (€28.1 billion) in 2023 when compared to 2022’s $17.1 billion (€15.8 billion). There was also a significant increase in reported revenue, going up by 30.6 per cent to $66.1 billion (€61.2 billion).

Commenting on the results in Malta, HSBC Bank Malta plc CEO Geoffrey Fichte stated that the record profit performance in 2023 reflected the “inherent strength” of the business and its balance sheet.

HSBC Bank Malta CEO Geoffrey Fichte / LinkedIn

“Our lines of business, commercial banking, wealth and personal banking, and global markets, continue to grow from their respective areas of strength and are looking to grow by supporting customers and maximising sustainable finance opportunities, leveraging our international advantage, maintaining proactive cost management and a robust risk management culture,” he added.

He said that HSBC Malta will “continue to adhere to the highest standards which are synonymous with the HSBC brand,” while also continuing to diligently work to “support growth in Malta’s economy by facilitating new business and cross-border trade.”

Mr Fichte noted that the bank is proud of milestones such as last August’s dividend pay-out, being the top performer in the Malta Stock Exchange in 2023, as well as paying one of its highest annual dividends in the last decade.

“Our people are the cornerstone of the bank so we will continue to empower our employees to reach their full potential to deliver customer service excellence and be the best versions of themselves by investing in opportunities for colleagues to develop skills, learn new capabilities, and adapt to the future, while reducing complexity and bureaucracy,” he affirmed.

He remarked that the bank achieved a number of awards such as Banker of the Year from the Financial Times due to its employees’ collective effort. Mr Fichte also referred to an agreement signed with the Malta Union of Bank Employees (MUBE) in January, stating that this is an “ambitious and ground-breaking agreement” that is characterised by “significant enhancements to employee pay, benefits, and retirement pension plans.”

Mr Fichte also commended the work done by the HSBC Malta Foundation, fulfilling the bank’s Corporate Sustainability strategy.

He also said that it was a “proud moment” for him to inaugurate the HSBC Hub, the bank’s new headquarters in Qormi. “We are investing over €30 million to transform this complex into a state-of-the-art office for colleagues and customers, with ample parking, latest technologies and flexible meeting spaces,” he said.

Mr Fichte also stated that the bank plans to replace and upgrade its ATM fleet.

“HSBC Bank Malta remains an active participant in the local economy and we are committed to continue offering the best service both to our customers and to the community we serve,” Mr Fichte concluded.