The group said that its “steady performance” was maintained by continuous capital investments in operational assets and human resources. The group added that it will continue to focus on its strategic investments, on further product improvements and on pursuing its internationalisation plans.

“It is encouraging to report a steady performance across all segments within our group, which continues to deliver robust results despite competitive pressures,” said Norman Aquilina, Farsons Group Chief Executive.

“The changing market landscape and changes in consumer spending patterns, along with growing concerns on packaging waste, will continue to be important challenges for the Group, as will the maintenance of equitable market conditions that ensure a level playing field for all operators in the sector,” Mr Aquilina added.

Due to fierce market competition fuelled by “newly-important brands” and pricing challenges, the brewing and beer segment only recorded a marginal increase, the press statement says. Nevertheless, the beverage and food importation segment registered an improved 10.3% contribution to profit, while the franchised food retailing establishments maintained growth with an 8.6% turnover increase.

“The group reaffirms its commitment in internationalising the business while remaining prudently optimistic of the growth potential in existing and new markets,” Group Chairman Louis A Farrugia. “The Board of Directors recognise that the long-term investment strategy deployed over the years will continue to prove beneficial in providing in an efficient, competitive and profitable manner the diversified high-quality product mix sought by our customers,” Mr Farrugia added.

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Common equity Tier 1 capital ratio rose to 16.2% by the end of H1, up from 14.6% at the end of 2018, which the bank says is “well above regulatory requirements”. The total capital ratio increased to 18.8% compared to 17.0% on 31 December 2018.

HSBC Malta’s cost efficiency ratio improved to 73% by end-June from 74% for the same period in 2018. However, return on equity dropped to 5.8% for the six months ended 30 June 2019, from 6.1% for the same period in 2018.

Net loans and advances to customers were up by €73m to €3.183b, as compared to 31 December 2018 with strong growth across the RBWM mortgage portfolio and marginal growth in the commercial lending book.

Customer deposits, however, dropped by 1% €38m to €4.850b compared to 31 December 2018 with increases in retail deposits offset by a reduction in commercial banking deposits. The bank says it maintained a “healthy” advances-to-deposits ratio of 66% and its liquidity ratios were well in excess of regulatory requirements.

The bank’s financial investments portfolio increased by €53m to €958m and composed of highly-rated securities and is conservatively positioned with the lowest investment grade of A-, the press statement sent to BM says.

Profit attributable to shareholders amounted to €13.6m resulting in earnings per share of 3.8 cents compared with 4.0 cents in the first half of 2018. The board proposes to maintain the current dividend payout ratio of 30% and recommends an interim gross dividend of 1.7 cents per share — 1.1 cents per share net of tax. The interim dividend will be paid on 18 September to shareholders who are on the bank’s register as at 16 August.

‘Good set of results’

“These are a good set of results as the bank emerges from the implementation of its successful risk management strategy with increasing momentum. Strategically we are now focused on the delivery of world-class customer service to support growth,” said Andrew Beane, Director and Chief Executive Officer of HSBC Bank Malta Plc.

“Progress in retail banking is ahead of expectations with significant market share gains achieved in new customer acquisition and home loans without increasing risk appetite. Retail banking will also benefit from a number of digital innovations the bank will launch in the second half of the year,” the CEO added.

Net interest income (NII) decreased marginally to €53.6m compared with €54.1m in the same period in 2018 with contraction in the commercial bank loan book interest and a further decline in the average yield on the investment book. The decline was largely offset by the growth in NII within the mortgage book and effective management of excess liquidity, HSBC says.

Non-interest income (fees and commissions and trading income) dropped by €0.6m, which is largely driven by a reduction in fees due to the disposal of a specific insurance portfolio in December 2018 and a reduction in management fees within the Asset Management Company partly offset by strong performance in foreign exchange.

HSBC Life Assurance Malta Ltd reported a profit before tax of €2.4m, some 39% higher than the same period of 2018. The increase was partly driven by positive market movements in 2019 which were not seen in the first half of 2018. In addition, the insurance subsidiary registered a 2% increase in premium income, as a result of the growth in pensions posts the launch of the new Employee Pension Plan to all HSBC Bank Malta employees in December 2018.

“Following completion of significant risk management actions, commercial banking has now stabilised and the performance of our insurance company improved. Both of these divisions require further work to increase profitability and are a strategic focus for the board. We have launched a quarter of a billion euro lending fund to signal to the market that our commercial division has returned to a growth focus,” the CEO said.

Dropping expenses

Operating expenses dropped by 2% to €53.6m compared with €54.9m in the same period in 2018. HSBC says that this reduction reflects the bank’s continuous focus on cost control and the implementation of initiatives at cost base streamlining through outsourcing and processes optimisation.

Expected Credit Loss (ECL) was a release of €1.0m versus a charge of €3.4m in 2018. Results of the first half benefited from the non-reoccurrence of the significant ECL seen in 2018. The bank says it continues to maintain a conservative provisioning approach. Overall asset quality remained satisfactory and total nonperforming loans further declined from €136m to €125m during the first six months of 2019.

“Progress on costs is encouraging and the bank is committed to further reduce its cost-efficiency ratio over time. Additionally, HSBC’s signature credit discipline has delivered further reductions to the risk profile of our portfolio. While Malta’s economic performance and outlook remain positive, we are positioning the bank for the long-term economic cycle and remain cautious in growing exposure to higher risk sectors such as corporate real estate,” Mr Beane said.

“We welcome actions being taken by the local authorities to reform corporate insolvency practices and augur this be completed at pace. The bank’s capacity to better use its capital to support lending into the economy and, if appropriate, higher dividends will significantly increase once these reforms are concluded,” the CEO he added.

The effective tax rate in the first half of the year came to 35%, which translated into a tax expense of €7.3m, some €5.5m higher than the same period in 2018. During the first six months of 2018, the bank benefited from a specific tax treatment applied on a one-off transaction.

“Finally, as is the case with all Domestic Systemically Important Banks in the Single Supervisory Mechanism, HSBC is in early-stage discussions with the European Central Bank Single Resolution Board to understand the requirements that will apply for new Required Eligible Liabilities, commonly known as MREL. MREL is likely to further increase capital requirements for the sector and the bank intends to provide more detail with the 2019 annual results as these requirements become clearer,” Mr Beane concluded.

EDITORIAL NOTE: The present article has been updated by adding HSBC Malta CEO Andrew Beane’s photo as the cover picture.

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For the comparative period of the previous year, the Group registered a pre-tax profit of €13.5 million, which included a litigation loss provision of €75 million, the press statement adds.

Group operating income, which has remained at last year’s level, amounted to €127 million. Recurrent costs grew by 27% to €81m as compared to the same period a year earlier. BOV attributes the increasing costs chiefly to fees and expenses related to the ongoing transformation programme and on the substantial recruitment of resources in the group’s control functions. The impairment charge for the period is just under €1m, compared to reversals of €20 million booked for the corresponding period, the press statement adds.

Customer deposits grew by €223m to €10.6b by the end of the first half of the year as compared to December 2018. Net advances at amortised cost increased by €126m to €4.5b over the same period. Shareholders’ funds, comprising capital reserves, has topped the €1 billion mark for the first time in the Group’s history.

‘Full transformation mode’

BOV Chairman Deo Scerri underscored that the group is in a “full transformation mode” as BOV embarked on a two-year transformation programme, in agreement with its supervisors, with the assistance of two international consultancy firms.

“The aim is to ensure the long-term sustainability of the institution, by reducing the risk profile of the business model, strengthening capital buffers and enhancing the anti-financial crime framework. The increased costs reported in these results primarily reflect the costs of this programme. We do not see these costs as recurring overheads, but as a solid investment in the future,” Mr Scerri said.

“We are in the process of exiting a number of businesses and closing down a large number of higher-risk relationships, all of which naturally result in a loss of income. The situation is further impacted by heightened competition from non-traditional players and by the persisting low interest rate environment. Despite all this, the Group has managed to maintain the same income levels as last year. This shows the resilience of our core operations,” Mr Scerri added.

S&P’s rating comes expected

Standard & Poor’s has lowered the long term credit rating for the bank BBB with a negative outlook, to BBB- with a stable outlook. Short term rating was revised from A-2 to A-3. S&P justified its decision by stating perceived weaknesses in BOV’s internal control frameworks and to the potential impact of ongoing litigation cases. S&P named BOV’s sound franchise, customer confidence and ample liquidity as being among its major strengths.

Chairman Scerri said S&P’s decision had not come unexpected, in view that the rating outlook had already been set as “negative” last year. The chairman said that the underlying factors for the lowered rating — the need for strengthening internal controls, government and oversight — are being addressed in the transformation programme.

In reference to BOV’s USD clearing situation, Mr Scerri announced that Raiffeisen Bank International had recently opened accounts denominated in US dollars for BOV. He added that BOV’s short term objective is to put into place the necessary mechanism to enable it to offer full USD services, assuring that the bank is on the verge of achieving this objective. The longer-term objective is that the bank will have access to a wider network of USD correspondents.

“The Board has chosen to retain its prudent stance and has resolved not to declare an interim dividend, with the aim of further strengthening the Bank’s capital buffers, especially in the context of its status as a systemically important institution. This is in line with our strategy of foregoing short term benefits in the interest of long term stability. The situation will be re-assessed at the year-end, in consultation with supervisory authorities,” Mr Scerri said.

Mr Scerri expressed his full confidence in BOV’s future as a strong, secure and profitable institution. “The ongoing transformation programme will result in a stronger and safer bank, that will continue to play a leading role in tomorrow’s economy while delivering fair and sustainable returns to its shareholders,” the chairman added.

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The bank says that consolidated results additionally reflect the positive fair value movement in the APS diversified bond fund during the period under review pushing group pretax profit to €14.9m compared to €9.3m in 2018.

Net interest income grew by 14.4% while net non-interest income — in the main part, Fees and Commissions — increased by 11.9%, according to extracts from the unaudited accounts of the bank for the six months ended 30 June. As a result, Operating Income grew by 13.9%, from €22.9m in 2018 to €26.1m in 2019.

Despite continuing cost pressures arising from investment in personnel and other operating expenses, including risk and compliance, technology, security and process transformation, always in support of the orderly business growth, cost-efficiency was maintained around the 53% level, the press statement adds.

APS says that balance sheet activity remains the main driver behind the growth, as deposit raising and lending grew by 5.5% and 8.6%, to €1.74b and €1.45b respectively, since 31 December 2018.

On the one hand, high liquidity permits liquidity coverage (LCR) and net stable funding (NSFR) ratios to be maintained well above the regulatory minima. On the other hand, surplus liquidity creates challenges as a low or negative interest rate environment persists, the press statement adds.

While the bank remains buoyant about its growth prospects in line with its 2019-2021 business plan, funding strategies may need to be adjusted to optimise spread management.

Late in May the Bank received €13m of new CET1 equity at the conclusion of a rights issue which, as announced and on top of retained earnings from 2018, marked the conclusion of Phase 1 of its Capital Development Plan. This injection not only supports the capital adequacy of APS Bank but provides a platform for its future progress, the bank believes. The CET 1 Capital ratio as at the end of June stood at 14%, well above the statutory minimum. Key performance ratios for NPLs and profitability (adjusted ROAE) remained strong, at 3.1% and 10%, respectively, the bank press statement adds.

“APS Bank is continuing with its plans of scaling up around a core business model that looks at selective growth and diversification of both its funding and credit base. At the same time, we continue to strengthen governance, risk controls and technology to enrich the customer experience in a safe and prudent way. Our gradual gain in market share also continues in a business environment that remains competitive and challenging,” said Marcel Cassar, CEO of APS Bank.

The post APS Bank sees €11.4m pretax profit in H1 first appeared on The Malta Business Weekly.

Profit before tax amounted to GBP 17.7m, while profit after tax came to GBP 15.1m. Earnings per share were GBP 0.067.

Gross winnings revenue from the Swedish market for the first quarter of 2019 amounted to SEK 207.4m after deduction of bonuses of SEK 137.9m.

The number of active customers during the first quarter was 1,631,636. “All-time high in active customers but, as expected, profits for the quarter significantly impacted by the new local licence in Sweden,” said Henrik Tjärnström, CEO of Kindred Group.

The CEO praised “strong levels of activity” across all markets and “all-time highs” for active customers and sports betting turnover. According to the CEO, investment in marketing activities focusing on responsible gambling in Sweden and football sponsorships in the United Kingdom were the main drivers of the results.

Swedish market reregulation leads to short-term margin pressure

“As anticipated for several years, the reregulation of the Swedish market resulted in significant short-term margin pressure, particularly in the first quarter. The single biggest impact came from all legacy and new Swedish customers being awarded one additional bonus under the terms of the new licensing system,” according to the CEO.

“The significant uptake on customer bonuses, especially in January and February, resulted in bonus expenditure increasing with GBP 6.6m for the first quarter compared with the same period last year. Bonus costs stabilised later in the quarter and by March, they were lower than last year with full-year costs expected to be lower than for 2018,” Mr Tjärnström added.

Gross winnings revenue, as well as EBITDA, was significantly affected by the Swedish betting duties paid of GBP 5.2m but also marketing investments increasing with GBP 3.8m, the press statement by the group says. “The total effect on Group EBITDA from the Swedish market opening in the first quarter was a reduction of GBP 18.9 million compared to the first quarter last year,” the CEO said.

Gross winnings revenue from mobile grew by 17% in the first quarter of the year as compared to the same period a year earlier, and amounted to 77% of the group’s total gross winnings revenue, while some 57% of the group’s gross winnings revenue, came from locally-regulated markets.

“For the period 1 April to 21 April 2019, the daily average Gross winnings revenue in GBP was 10 per cent higher (12 per cent in constant currency) than for the same period last year,” Mr Tjärnström added.

The post Kindred’s gross winnings revenue ups 8% in Q1 2019 first appeared on The Malta Business Weekly.

Bank of Valletta Group had a profit before tax of €71.2m in the year ending on 31 December 2018, after providing for a litigation provision of €75m, according to an announcement today by BOV. Profit before deducting provision thus amounted to €146.2m, a year-on-year increase of 5.8%.

Pre-tax return on equity stated before the litigation provision was of 14.9% in 2018, dropping from the preceding year’s 16.5%. This same ratio, reported net of tax, amounted to 9.9% per annum, as compared to a ratio of 7.3% for banks in the eurozone, according to the press statement. The Group’s Core Equity Tier One ratio rose to 18.3, from 16.1% in December 2017.

BOV sees that the main driver for its results is a sustained demand for credit in the local market — especially in terms of home loans, as well as corporate and SME lending.

Gross advances to customers reached €4.6bn, an increase of 3%. BOV said that income from credit cards and payments recorded “satisfactory growth”, without giving an exact rate in its press release. Customer deposits were at €10.4bn, while total group assets stood at €12.1bn, at the end of the year.

‘Challenging’ year behind amid restructuring

Despite the results, that the financial institution tagged as “strong”, BOV says it left behind a truly challenging year. “These challenges ranged from the entry of new players into the financial services industry to comply with new regulation such as GDPR and MiFID ii, including the necessary IT development and the training of staff,” says Deo Scerri, Chairman of BOV.

The chairman underlined that the institution grabs challenges by the horns, making efforts to turn them into growth and building on the results by investing in the future. The group’s pipeline contains “heavy investment” in IT and fintech solutions, as well as focus on strengthening its capital buffers and on giving strategic priority to increasing its anti-financial crime and cyber defence mechanisms.

Although the press statement does not make mention of exact examples related to IT security, such commitment comes timely after BOV has recently been involved in a cyber hacking attempt. The attack the bank’s systems went under in mid-February forced operations to be shut down. BOV found that eleven payments had been initiated to foreign payment accounts in a total value of €13m. BOV asked for the cancellation of transfers and requested them to be reversed. However, news reports suggest it is difficult to say when the funds will be restored, and whether they can be restored in their entirety.

BOV says that during the course of the last year, they continued restructuring the business model, with the objective of lowering risk profile.

“The programme is multi-faceted and includes the winding down of certain business lines, the re-dimensioning of others, the revision of the Risk Appetite Framework, the enhancement of risk policies and comprehensive training programmes covering the entire organisation from the Board of Directors downwards,” the BOV press statement says.

BOV pays out no dividend for 2018

Confirming an earlier announcement, the press statement quotes the chairman as saying that the Board of Directors resolved not to pay out or recommend any cash dividend for the financial year 2018.

Explaining the decision, the board mentions “uncertainty arising from a number of legacy litigation cases”, which the group says led to the board giving up on “top priority to capital conservation, despite its confidence in the robustness of its legal position.” The bank says that to avoid future unexpected losses “the most efficient way of strengthening capital is to reinvest profit in the business, rather than paying it out in the form of a dividend,” the press statement records.

“It is always wise to sacrifice short term benefits — in this case, the payment of a cash dividend — in the interest of long term stability. And that is exactly what the Board did when it decided against a cash dividend payout for 2018,” BOV says.

However, the board says it will make a bonus share issue of one new share for every ten shares held by investors, which, despite not constituting a cash dividend, the group believes may offer “some value to shareholders, even in the form of possible tax benefits.”

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