Under the Microscope 2015

62 Pages·2015·29.68 MB·English

FINANCIAL SERVICES
Under the
Microscope
A Review of the Maltese Banking
Sector for Financial Year 2014
October 2015
A REVIEW OF THE MALTESE BANKING SECTOR 1
Foreword
Juanita Bencini Noel Mizzi
Partner, Risk Consulting Partner,
Advisory Services Audit Services
KPMG Malta KPMG Malta
At KPMG in Malta (“KPMG”) we have the licensing of all three, confrming • How do banks operating in the
long felt that the Maltese market lacked our standing in the market as leaders in same space compare?
a publication which provides insightful the banking space. Despite this growth
analysis of the performance of Maltese however, the availability of impartial • What trends are we currently see-
licensed banks, over a given period. It fnancial analysis for the country’s credit ing in the banking sector?
is with this in mind that we present our institutions remains very limited and
• What do we think will be the most
frst edition of Under the Microscope. generally restricted to the major players
important issues that Maltese
The frst truly comprehensive stock-take in the domestic market. This publication
licensed banks will have to deal
of banks in Malta. seeks to go some way to resolving this
with over the coming year?
issue and aims to be a point of refe-
The banking sector in Malta has wit- rence for those interested in getting a
Whether you are an industry professio-
nessed signifcant growth in the past clearer understanding of the banking
nal or just looking to gain an overview
decade. Indeed, since Malta’s acces- industry in Malta. More specifcally, in
of the sector, we hope that you fnd
sion to the EU in 2004 we have seen this review, we provide answers to the
this publication an interesting and
the number of banks grow from 16 to following four questions:
insightful read.
28. During 2014 alone, three banks
were licensed by year-end and KPMG • How are the major credit institu-
is proud to have been associated with tions performing?
© 2015 KPMG, a Maltese Civil Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (‘KPMG International’),
a Swiss entity. All rights reserved.
Table of contents
04 07 09 13 12 14
Introduction Glossary Approach The Profle of Regulators Key Figures
Maltese Banks
17 25 33 39
Key Figures Core Domestic Banks Non-Core Domestic Banks International Banks Industry Outlook
APS Bank Limited BAWAG Malta Bank Limited AgriBank plc
Banif Bank (Malta) plc FCM Bank Limited CommBank Europe Limited
Bank of Valletta plc FIMBank plc Deutsche Bank (Malta) Ltd
HSBC Bank Malta plc IIG Bank (Malta) Ltd ECCM Bank plc
Lombard Bank Malta plc Izola Bank plc Ferratum Bank plc
Mediterranean Bank plc Sparkasse Bank Malta plc NBG Bank Malta Limited
Nemea Bank plc
Novum Bank Limited
Pilatus Bank Ltd
4 A REVIEW OF THE MALTESE BANKING SECTOR
Introduction
Juanita Bencini Mark Curmi Noel Mizzi Anthony Pace
Partner, Senior Manager, Partner, Partner,
Risk Consulting Banking Advisory Services Audit Services Taxation Services
Advisory Services
[phone] [phone] [phone] [phone]
A REVIEW OF THE MALTESE BANKING SECTOR 5
Malta’s fnancial services sector, of Malta an attractive domicile with a sig-
which banking is a major part, currently nifcantly lower cost of doing business
directly contributes 8.5% of the coun- than other parts of the EU.
try’s GDP and around 8.5% indirectly
1 In this Report we will be looking more
to GDP .
closely at what makes banks in Malta
The increase in the number of registe- successful – where they differ from
red banks in Malta since EU accession one another and what they have in
in 2004 reads a staggering 75%. More common. The banks have been divided
impressive is that this growth was into the following categories: core
registered without a loss of stability. domestic, non-core domestic and
Indeed, the World Economic Forum international. The main sections of
(WEF) found Malta’s banks to be the this publication contain an analysis of
2
10th soundest in the world in 2014 . the banks’ fnancial positions and key
trends.
So what characteristics have made
Malta such an attractive international f- The fnal section brings KPMG’s insight
nancial centre? Eurozone membership and expertise through the pen of our
is undeniably important, but more sig- competent subject matter experts on
nifcant is the country’s highly-qualifed trends and issues relevant to the Mal-
yet cost-effective workforce, favourable tese banking industry.
tax system for corporations and robust
legal and regulatory frameworks. The
culmination of these factors make
© 2015 KPMG, a Maltese Civil Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (‘KPMG International’),
a Swiss entity. All rights reserved.
INTRODUCTION
Helping you cope with
Regulatory Change
Complexity and change are driven by numerous forces,
both external (regulations, marketplace events) and internal
(new products, business models)- all of which impact your
organisation. KPMG’s Risk Consulting Team can shape the
thinking of Boards and Management regarding complex
business issues. The team is composed of dedicated
specialists who are well placed to assist you with your
efforts towards regulatory compliance and beyond.
The team, which is supported by a wider global network,
is experienced in managing diverse issues including,
but not limited to, regulatory compliance, anti-money
laundering, governance structures and capital
management.
We welcome the opportunity to discuss what
KPMG’s Risk Consulting Team can offer to you.
Contact us:
Juanita Bencini
Partner, Risk Consulting Advisory Services
T. [phone]
A REVIEW OF THE MALTESE BANKING SECTOR 7
Glossary
AEoI Automatic Exchange of Information HTM Held-to-maturity
AIFs Alternative Investment Funds KYC Know Your Customer
AQR Asset Quality Review IAS International Accounting Standards
BCBS239 Basel Committee on Banking Supervision IFRS International Financial Reporting
Rule 239 Standards
Bn Billion LAC Loans and Advances to Customers
CAR Capital Adequacy Ratio LBT Loss before tax
CBM Central Bank of Malta M Million
CET1 Common Equity Tier 1 M&A Mergers and Acquisitions
CIR Cost-to-Income Ratio MFSA Malta Financial Services Authority
CMU Capital Markets Union NAV Net Asset Value
Cr Credit NED Non-Executive Director
CRS Common Reporting Standards NII Net Interest Income
DAC Directive on Administrative Cooperation NIL Net Impairment Losses
Dr Debit OECD Organisation for Economic Co-operation
ECB European Central Bank and Development
ECL Expected Credit Losses OF Own Funds
ECOFIN The Economic and Financial Affairs Council OI Operating Income
ESCB European System of Central Banks PAT Proft after tax
EU European Union PB Price to Book
EUSD European Union Savings Directive PBT Proft before tax
FATCA Foreign Account Tax Compliance Act PCC Protected Cell Company
FIAU Financial Intelligence Analysis Unit RICC Recognised Incorporated Companies
FTT Financial Transactions Tax ROE Return on Equity
FVOCI Fair Value Through Other Comprehensive SMEs Small and Medium-Sized Enterprises
Income SSM Single Supervisory Mechanism
FVTPL Fair Value Through Proft or Loss UCITS Undertakings for the Collective
FY13 Financial Year 2013 Investment in Transferable Securities
FY14 Financial Year 2014 US United States
GDP Gross Domestic Product WEF World Economic Forum
© 2015 KPMG, a Maltese Civil Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (‘KPMG International’),
a Swiss entity. All rights reserved.
GLOSSARY
Key Sector Information
6
Economy • Infation rate of 0.8% (2014) (June 2015:
• Total GDP: €8.0 billion3 (Q2 2015: €2.1billion4). 1.1%)7.
• Real GDP Growth: 3.5%3 (Q2 2015: 5.2%4): • Largest contributors to Gross Value Added
(2014): Trade, Accommodation (22.3%);
• GDP per capita in Purchasing Power Stan-
Public Administration and Defence, Education
dards relative to the EU-27 average (2014):
5 (19.4%); Manufacturing (12.2%); Arts and
85% .
Entertainment (9.8%) ;Financial and Insurance
• Unemployment rate (2014 Q4): 5.9%6 (June Activities (7.2%)7.
7
2015: 5.5%) .
Regulators • The Financial Intelligence Analysis Unit aids in
• The Malta Financial Services Authority (MFSA) the fow and analysis of information so as to
acts as the sole Regulator for Credit and combat money laundering and the funding of
Financial institutions in Malta. terrorism.
• In view of the fact that Malta is part of the
Eurozone, the Central Bank of Malta is now
integrated with the ECB.
Government • Malta’s Sovereign rating.
• The current Labour Government came into • Fitch: A/F1;
power in 2013. Next elections are due in 2018. • S&P: BBB+/A-2;
• This Government has promised continued • Moody’s: A315.
support for the fnancial services sector. 9
• Government Defcit 2014: 2.1% of GDP .
10
• Total Government debt 2014: 68% of GDP .
Taxation • Maximum personal taxation rate of 35%, for
• Double taxation treaties with 69 countries11. those earning €60,001 upwards. Tax free inco-
me up to € 8,500 under single rates.
• Corporation tax of 35% but full imputation
tax system which completely eliminates the • Highly qualifed foreign executives can beneft
economic double taxation of company profts. from a fat rate of 15% tax rate on income up
to €5m. Any income over and above this will
• Apart from operating a full imputation system,
be tax-free.
Malta operates a tax refund system redu-
cing the effective tax rate to between nil and
6.25%.
(Sources: NSA Gross Domestic Product: Q4/20141, CBM Quarterly Update: Q3 20142,MFSA Annual Report 20143,Finance Malta ‘Banking Sector Guide 2015-164,Eurostat5,http://mfsa.
com.mt/pages/licenceholders.aspx6, CBM FSR update 20147, www.fnancemalta.org/double-taxation-agreements8, https://ird.gov.mt/services/taxrates.aspx#20159,GCI 2014/1510
A REVIEW OF THE MALTESE BANKING SECTOR 9
Banks • Leverage Ratio 2014: Core Banks: 7.3%,
12 Non-Core Banks: 10.4%, International Banks:
• 28 active credit institutions .
14
50.1% .
13
• Loans 2014: €16.4 billion .
• Average Capital Adequacy Ratio 2014: Core
13
• Deposits 2014: €31.2 billion .
Banks : 14.9%, Non-core Banks: 18.7%, Inter-
13
• Total Assets 2014: €52 billion : 14
national Banks: 54.3% .
13
• 135 Bank Offces and Branches .
th
• Ranked 10 of 144 countries for soundness
2
of banks in 2014 .
Insurance • The only full European member state to offer
Protected Cell Company legislation, allowing
• Mature domestic market.
risks to be written through individual cells.
15
• 9 domestic players .
• Can passport their services to other EU
15
• 60 licensed insurance undertakings :
countries.
15
• 45 Non-Life ;
• The RICC structure is similar to that of a PCC.
15
• 6 Life ;
The difference between the RICC and PCC
15
• 2 Composite ; structure is that each incorporated cell within
15 the RICC is a separate legal entity.
• 7 Reinsurance .
Trusts & Funds Funds
Trusts • Winner of Hedge Fund Review award’s “Most
16 Favoured Domicile in Europe” in 2014.
• 89 registered trusts in Malta (June 2015) .
16,17
• Funds registered in Malta (June 2015): 617 .
• Foreign trusts can re-domicile to Malta wi-
13
thout having to dissolve and re-incorporate. • Net Asset Value 2014: €9.7bn .
IFC • Highly educated workforce -60% of students
18
continue onto further education .
(International Financial Centre)
th
th • Ranked 24 of 144 in capacity to attract talent
• Ranked 36 of 144 countries for Financial
2
2 in 2014 .
Market Development .
th
• Ranked 13 of 144 countries for strength of
2
auditing and reporting standards .
© 2015 KPMG, a Maltese Civil Partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (‘KPMG International’),
a Swiss entity. All rights reserved.
KEY SECTOR INFORMATION