HSBC says it can better serve customers without dependency on correspondent banks

HSBC Malta can offer commercial clients a better service for international payments thanks to its position as a global bank with a wide network, CEO Simon Vaughan said during a presentation of the bank’s financial statement for 2020.

Meanwhile, continuing depressed interest rates present a “profound challenge” to profitability, he said.

The bank’s financial statement for last year shows a notable drop in profits of 66 per cent, largely due to ballooning Expected Credit Losses (ECL) and a signifcant loss made by its subsidiary, HSBC Life Assurance Ltd.

Nonetheless, despite the challenge times, the bank has maintained strong capital and liquidity, has achieved growth in lending and despots, and has significantly reduced costs, Mr Vaughan said.

There were achieved through an inward-looking mindset for the last four years, he said, resulting in a reduced risk profile with strong foundations for future growth.

Noting that HSBC was first in the market with working capital loans and extensions to trade loans, the bank’s CEO welcomed figures showing that SEPA payments are increasing while cheque volumes are down 60 per cent over the year.

Asked whether the Expect Credit Losses (ECL) of €25 million were a conservative figure, given that it amounts to less than one per cent of the total loans and advances, Mr Vaughan said it is impossible to say whether it is conservative or it the amount might increase going forward.

However, he said, HSBC applies “very very rigorous” assessments on the ECL it books, saying he believes it to be an appropriate figure for the situation envisaged over the coming months.

CFO Charlotte Cilia added that impairments were increased in line with accounting requirements, although she conceded that the exercise was a subjective one.

“We looked into future projections of GDP as well as unemployment,” she said, “so the numbers we booked are based on models, but also based on our understanding of how the market is responding to the pandemic”, noting that despite it being a small amount, it nonetheless represents a significant year-on-year increase.

Answering another question about expected changes to the competitive landscape due to Revolut’s acquisition last week of a banking license for Malta, Mr Vaughan said the biggest change would be a drive for further digitalisation of the banking environment.