HSBC Bank Malta cited a difficult first half for 2009 as it released its interim results amounting to a 25.3 per cent drop in pre-tax profits for the first six months of the year.

Speaking on Friday, HSBC Malta chief executive officer Alan Richards commented, “The first half of 2009 has been difficult.

“As predicted, the bank’s short-term financial performance has been affected. However, HSBC Bank Malta remains in very good shape and we are actively working to support the local economy.”

Profits before tax for the six months ended on 30 June amounted to e34.8 million – representing a e11.8 million, or 25.3 per cent, dip in profits compared to e46.6 million registered in the first half of 2008.

Mr Richards added, “This is a resilient performance in light of current market conditions. These results were achieved in spite of a general slowdown in economic activity, continued low interest rates that have resulted in significant margin compression, and ongoing volatility in equity and bond markets which have impacted our investment related businesses.

“Notwithstanding this, overall profitability relative to history, peers and industry benchmark remains strong with a return on equity of 15.6 per cent.”

Although the banking system in Malta remains stable, according to Mr Richards, “the outlook for the near term is challenging”.

He said, “It is apparent that mortgage lending and corporate activity in some sectors are slowing, impairments are likely to increase as the credit cycle continues to turn and our investment markets businesses will continue to experience volatility.

“We remain vigilant and continue to take a highly proactive approach to managing our balance sheet to remain liquid, well capitalised and able to support the domestic economy. HSBC’s commitment to strong capital and liquidity will stand both the bank and the local economy in good stead.”

Operating expenses, at e41 million, were 2.5 per cent lower compared to the same period in 2008, reflecting, the bank said in a statement, its “commitment to maintaining a strict discipline on expenses”.

The bank’s cost efficiency ratio, meanwhile, increased to 54.7 per cent from 47 per cent for the same period in 2008, primarily as a result of a 15.9 per cent decrease in operating income to e74.9 million.

Loans and advances to customers, meanwhile stood at e3,180.6 million on 30 June 2009, up e68.3 million, or 2.2 per cent, compared with the 31 December 2008 figure.

“In gross terms, the bank sanctioned e337.9 million in new lending for the first six months of this year, Mr Richards adds. “Loans to customers have grown by over seven per cent in the last 12 months. This is a strong performance considering the economic challenges we all face and reflects our active commitment to supporting the local economy.”

Customer deposits of e4,009.3 million at 30 June 2009 were down marginally by e7.3 million, or 0.2 per cent, compared with 31 December 2008.

Net interest income of e48.2 million represents a decline of 20.8 per cent compared to e60.8 million during the prior year period, reflecting a significant contraction in interest margin following ECB base rate cuts.

Fees and commission income of e15.2 million was slightly down on first half of 2008, as a result of the slowing economy.

Tax on profits was e12.3 million. Total tax payments including social security contributions and VAT totals e14.9 million.

The bank’s board is declaring an interim gross dividend of 7.7 euro cents per share (five euro cents net of tax). The ordinary dividend payment of e14.6 million is 65 per cent of current profits attributable to over 10,100 bank shareholders. This will be paid on 27 August 2009 to shareholders who are on the bank’s register of shareholders as at 12 August 2009.