hsbcmalta-2023-12-31-en

HSBC Bank Malta p.l.c.

Annual Report and Accounts 2023

The HSBC Group

HSBC Bank Malta p.l.c. is a member of the HSBC Group, whose

ultimate parent company is HSBC Holdings plc. Headquartered in

London, HSBC Holdings plc is one of the largest banking and

ﬁnancial services organisations in the world. The HSBC Group’s

international network is spread across 64 countries and territories in

Europe, Asia, North America, Latin America, and the Middle East

and North Africa.

HSBC Bank Malta p.l.c.

Registered in Malta: C3177

Registered Office and Head Office:

116 Archbishop Street

Valletta VLT 1444

Malta

Telephone: 356 2380 2380

www.hsbc.com.mt

HSBC Holdings plc

Registered Office and Group Head Office:

8 Canada Square

London E14 5HQ

United Kingdom

Telephone: 44 020 7991 8888

www.hsbc.com


Contents
2	Chairman’s Statement
5	Chief Executive Officer’s review
16	Board of Directors and Company Secretary
18	Executive Committee and Head of Internal Audit
21	Report of the Directors
53	Directors’ Responsibilities Statement
54	Statement of compliance with the Code of Principles of Good Corporate Governance
62	Remuneration Report
69	Financial Statements
69	Income statements
70	Statements of comprehensive income
71	Statements of financial position
72	Statements of changes in equity
74	Statements of cash flows
75	Notes on the financial statements
185	Five-Year comparison: Income statements and statements of comprehensive Income
186	Five-Year comparison: Statements of financial position
187	Five-Year comparison: Statements of cash flows
187	Five-Year Comparison: Accounting ratios
188	Branches and offices


HSBC Bank Malta p.l.c. Annual Report and Accounts 2023	1

Chairman’s Statement

John Bonello, HSBC Bank Malta p.l.c. Chairman

We are happy to be announcing a very satisfactorily level of profits and proposed dividends for 2023. This was the result of the bank benefitting

from both a full year of favourable interest rates and from the hard work that has been put in to managing the risks of our business and the

efficiency of our operations and costs. The local economy has also performed remarkably well despite the turbulent international environment

which has seen a worrying increase in negative geopolitical events. The dominant sentiment continues to be uncertainty. Good news regarding

falling inflation rates in the major economies is quickly dampened by concerns over trade disruptions and the increased costs those bring with

them. Locally, inflation has become an issue that is receiving attention, however the economic outlook remains good.

Our bank remains fully focused on providing an enhanced experience for our customers and our employees. We will not lose sight of the fact

that we are committed to remain a safe and compliant bank and our determination to combat financial crime will continue for the benefit of the

bank, our customers, our people and the jurisdiction in general. At the same time, we will continue to invest in our customer experience through

our digital offerings, in a completely new ATM network, and in our new offices the first phase of which was opened in early 2024. We are very

proud of the innovative environment our new offices present for our people and customers.

A new Collective Agreement was signed after a detailed collaborative process with the MUBE which had a fair and satisfactory conclusion in

early 2024.

In 2024, we will be working hard to meet our reporting obligations under the Corporate Sustainability Reporting Directive (‘CSRD’) regulations

which will oblige the market to report on the progress we all have to make to meet our sustainability responsibilities.

Results

The reported profit before tax for the year ended 31 December 2023 was €133.9m, or 141% compared to 2022. This represents an increase of

€78.3m when compared with the prior year. The bank’s improvement in performance was driven by increasing net interest income and higher

profits from the insurance subsidiary. We continued experiencing improvement in the credit quality of our loan portfolio resulting in releases of

expected credit losses. Operating cost increased mainly driven by investment in people and technology.

More details on the financial results can be found in the CEO’s review.

Profit attributable to shareholders amounted to €86.8m, resulting in earnings per share of 24.1 cent compared with 10.0 cent in 2022.

The bank’s capital ratios improved marginally with CET1 increasing from 18.5% to 20.6% and the total capital ratio increasing from 21.3% to

23.5%. This improvement was driven by increased profits for the year and higher revaluation reserves on our Hold-to-Collect investment

portfolio partially offset by higher capital deductions for non-performing loans as we continue to gradually implement the capital requirements.

The bank maintain a strong capital base and is fully compliant with the regulatory capital requirements.

Whilst we continue to strengthen our capital base, we recognise the importance of dividends to our shareholders. The Board has thus

recommended a dividend pay-out ratio of 40% on reported profits.

The final gross dividend will be 15.0 cents per share (9.75 cents per share net of tax).

Chairman’s Statement


2	HSBC Bank Malta p.l.c. Annual Report and Accounts 2023

Our regulatory environment

During the course of 2023, the focus on prudential risk management by the regulatory and supervisory authorities continued, focusing mainly on

the bank’s governance and risk management activities as well as credit risk. The bank’s business model remained aligned to the principle of

sustainable growth, strict but safer prudential risk buffers, and robust compliance standards.

The regulatory engagement with the bank’s principal regulators has continued in a transparent manner, covering various risk themes and

assessments, including credit risk, which was undertaken as a result of the European Central Bank’s direct supervision and its supervisory

priorities. During this period, regulatory engagement was mainly focused on ensuring that governance and prudential risk management

structures, procedures and internal controls are operating effectively. This work continues to be pivotal to the regulators’ supervisory evaluation

process.

The Regulatory Development Programme of the bank has progressed on a number of new and enhanced requirements relating to the

Sustainable Finance Disclosure Regulation (‘SFDR’). Furthermore, preparatory work is underway in order to ensure compliance with upcoming

new EU Regulations in relation to payments, namely, the Payments Services Regulations and Instant Payments, as well as the Digital

Operational Resilience Act.

Throughout 2023, the bank remained in close engagement with regulators and industry bodies during the consultation and ongoing

implementation processes of other regulatory changes. The bank will continue to observe and monitor all of the upcoming relevant regulatory

developments in order to fully adhere to its legal and regulatory obligations, and to contribute to the European and local jurisdiction’s evolving

regulatory agenda and consultation process.

Our responsibility towards the community

Through the HSBC Malta Foundation, the bank seeks to work with numerous stakeholders in the community with the aim of creating a

sustainable future. Drawing from HSBC Group resources and a network of partners, we work to tackle critical problems in key areas of

sustainable finance, climate and future skills. We also remain committed to making a difference in other areas, such as, but not limited to, youth

education and the protection of our environment and heritage. We take pride in HSBC colleagues who contribute to the charities and causes

that they feel passionate about. In this regard, we grant all our employees a paid day to take leave and volunteer for work in the community.

The Foundation is, furthermore, immensely grateful for the support and guidance of our highly experienced HSBC Malta Foundation Board

members.

During 2023, the bank focused on creating a more sustainable planet and society, both internationally and locally. The bank has set out a series

of commitments to contribute to the global transition to a low-carbon economy and to become a net-zero bank. We are committed to reducing

our footprint through our operations, supply chain and financing portfolio. Our aim is to achieve net zero in our own operations and supply chain

by 2030 or sooner. We make regular and transparent disclosures to communicate our progress in line with guidelines set out by the Taskforce

on Climate-related Financial Disclosures guidelines. We encourage our customers and clients to do the same. HSBC Bank Malta p.l.c. is also

one of the founding members of the Malta ESG Alliance. The objectives of MESGA are to share a common vision for societal change and a

competitive Malta; bring benefits to the community; commit to credible, tangible and quantifiable initiatives; tap ESG market opportunities for

businesses and the Maltese Islands; regular measuring and reporting progress on initiatives; and motivate businesses sharing the same values

to follow and join.

Currently the HSBC Malta Foundation is sponsoring two major transformative projects in line with its strategic priorities. The first project is

linked to Future Skills which is aimed at looking into the skills required in the future of work. This three-year research project aims to identify the

skills needed for the future of work in Malta and to embed these skills in the national curriculum. The second project is linked with our climate

ambition and net zero strategy. This project which is being driven by the HSBC Malta Foundation in partnership with The Malta Chamber of

Commerce, Enterprise, and Industry, is entitled 'Maximising energy efficiency through building renovation: HSBC Case Study'. Through this

foundational study, HSBC is paving the way for more advanced research and policymaking and is leading the transition towards more

sustainable Maltese buildings. Featuring its offices in Qormi as a pivotal case study, HSBC is taking a leadership role in the transition to high

energy efficiency and low-carbon office buildings in Malta. It’s a ground-breaking project.

Every year, the HSBC Malta Foundation earmarks part of its funding for causes that are important to our community. During 2023, the

Foundation supported a number of projects including the Prince’s Trust International Achieve Programme, the JAYE (Young Enterprise) Malta

Foundation, The Malta Chamber of Commerce, the Malta Community Chest Fund Foundation and Fondazzjoni Patrimonju Malti amongst others.

I take this opportunity to thank all our employees whose support and dedication towards these initiatives and projects for the benefit of the

community we serve.

We concluded the year with another demonstration of community spirit and holiday generosity, thus bringing essential support and festive

cheer to those in need. Collaborating with 34 non-governmental organizations (NGOs) across Malta, the Foundation has ensured that the joy and

warmth of the festive season reach many, particularly those who are most vulnerable. This year's initiative, larger and more encompassing than

ever, involved the collection and distribution of a diverse range of items. The donations spanned from basic necessities such as food and

personal care items to more specific requests like children's gifts and educational materials. The collective effort of HSBC employees, alongside

contributions from some of our top clients and various local schools was a testament to the power of community involvement.


HSBC Bank Malta p.l.c. Annual Report and Accounts 2023	3

Representatives from the HSBC Malta Foundation and the NGOs which brought essential support and festive cheer to those who are most vulnerable

The HSBC Malta Foundation's Christmas initiative stands as a shining example of the community and solidarity achievable when individuals and

organizations unite to make a positive difference during the festive season. Participating NGOs included The Maltese Association of the

Sovereign Order of Malta, Dar Frate Jacoba, Smiling with Jerome, Dar Bjorn, Suret il-Bnieden, The National Foster Care Association, RISe, The

Ursuline Sisters, Dar Hosea, the MCAST Student Services, Caritas Malta, The Life Network Foundation, FSWS – Aġenzija Sedqa, St Jean Antide

Foundation, SOAR, Richmond Foundation, YMCA, The Soup Kitchen in Valletta, The Malta Trust Foundation, Building Bridges, S.T.A.N.D., Loop

Malta, Hospice Malta, Fondazzjoni Sebħ, Fidem, Dar il-Kaptan, Osanna Pia Home, Inspire, Kummissjoni Djakonija Żurrieq, The Foodbank Lifeline

Foundation and Fondazzjoni Dar il-Hena, each contributing significantly to the welfare of different groups within the community.

Our Board of Directors

During 2023, Henri Mizzi relinquished his post of Non-Executive Director of the bank with effect from 31 October 2023, following his

appointment as a Judge in the Superior Courts of Malta. His replacement will be announced in due course. In 2023, the process to obtain

regulatory approval for Alexiei Dingli, a Professor of Artificial Intelligence (AI), to become a member of the Board of HSBC Bank Malta p.l.c.

commenced. He was then formally appointed upon receipt of his regulatory approval in January 2024. This is reflective of the bank’s efforts in

digitalisation and to modernise its approach. Alexiei Dingli replaced Yiannos Michaelides who had reached the end of his tenure with the Bank.

The Board of Directors is grateful for Yiannos’ contributions over the years with his technical knowledge and commercial experience.

The Board of Directors of the bank is composed of colleagues whose varied areas of expertise and experiences contribute unparalleled insights

into the varied agendas debated during meetings through the year, thereby ensuring that all decisions taken are based on the highest ethical

standards and knowledge of the banking sector.

I feel privileged to serve as the Chairman of this outstanding group of people. On your behalf, I want to express to them my gratitude for their

focus and dedication to the work of the Board.

Our People

The success of our bank will always be largely down to the quality of our people and I have to congratulate and thank all our employees for the

effort they put in to serve our customers. I must firstly congratulate management for their outstanding leadership through the year.

Our bank is led by a highly professional, multi-skilled and committed management team. But it does not stop there. Throughout the organisation

we are fortunate to have people who are equally professional and proud to be part of HSBC and the global brand it represents. I would therefore

like to express my gratitude and that of our Board to all our people who work diligently every day to deliver HSBC’s services to our customers in

compliance with the highest standards.

Looking ahead

Despite the uncertainties that the global situation presents, I have no doubt that our customers will continue to build on past success and will be

seeking investment opportunities to grow their business. We will continue to eagerly support those opportunities that are aligned to our values.

We will also continue to leverage our unique ability to connect Maltese companies to the global economy.

I will conclude by expressing my gratitude to you, our shareholders, for your continued support and commitment to this bank. I assure you that

all at HSBC Bank Malta p.l.c. will continue to strive for the best outcomes for your investment.

Signed by John Bonello (Chairman) on 21 February 2024

Chairman’s Statement


4	HSBC Bank Malta p.l.c. Annual Report and Accounts 2023

Chief Executive Officer’s review

Geoffrey Fichte, CEO, HSBC Bank Malta p.l.c.

2023 was characterised by economic and geo-political uncertainty which was exacerbated by prevailing inflationary pressures as a result of the

Russia-Ukraine war and the tumultuous and tragic situation in the Middle East. Shock waves were, and to a large extent, are still being felt

globally and nationally.

Thankfully, Malta’s economy has been resilient despite the volatile international environment and it is encouraging to note that the European

Commission is forecasting that Malta will continue its strongest economic growth among EU countries this year as well. Malta’s economy is

robust with the lowest unemployment and fastest population growth in Europe. Key sectors remain strong. Nevertheless, we should be

cautious given heightened external threats.

In these uncertain times, the role of HSBC Bank Malta p.l.c. as a key player in the banking industry, and the leading international financial

institution in Malta, is even more pronounced. HSBC Bank Malta p.l.c. 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.

Despite the external economic environment, we succeeded in delivering innovative solutions to our customers and have invested time, effort

and capital in identifying and realising opportunities to grow the business for the long-term and offering a world of opportunity to our customers.

We are proud that in 2023, during the Interim financial results in August, the dividend pay-out was higher than the full dividend paid in 2022.

Our share price was the top performer in the Malta Stock Exchange in 2023, increasing by over 80%. Our annualized dividend yield was the

highest amongst listed banks in Malta.

The financial results being presented show a strong performance which clearly demonstrates that our strategy is delivering tangible results and

I’m confident that our future-focused and customer-centric strategy positions HSBC Bank Malta p.l.c. well for long-term success. The bank

achieved strong growth in profit in 2023 and the bank’s fundamentals remain robust and underlying performance was resilient.

We remain focused on the future, with a very strong appetite to grow our bank in a sustainable manner. We will continue to invest in our

business to meet the dynamic and evolving needs of our customers.


HSBC Bank Malta p.l.c. Annual Report and Accounts 2023	5

Our lines of business, Commercial Banking and Wealth, Personal Banking and Global Markets, continue to grow from their respective areas of

strength and are looking to grow by maximising sustainable finance opportunities, leveraging our international advantage, maintaining proactive

cost management and robust risk management. We continue to adhere to the compliance standards aligned to local regulations and the HSBC

Group which are a source of strength, stability and competitive advantage. We work diligently to support growth in Malta’s economy by

facilitating new business and cross-border trade.

Our people are the cornerstone of the bank so we will continue to empower our employees to reach their full potential and be the best versions

of themselves by investing in opportunities for colleagues to develop skills, learn new capabilities and adapt to the future, whilst reducing

complexity and bureaucracy.

It is to their collective credit that in 2023 HSBC Bank Malta p.l.c. was the recipient of renowned awards like Banker of the Year from the

Financial Times (December 2023), Market Leader and Best Service from Euromoney Cash Management Survey (November 2023) and Market

Leader and Best Service Provider from Euromoney Trade Finance Survey (March 2023).