Performance of Banking Sector in Malta remains healthy
The banking sector in Malta remains well capitalised, highly liquid and profitable, and has continued to contribute to the local economy albeit at levels lower than hitherto observed. This emerges from a recent statement issued by the Malta Bankers’ Association (MBA).
Total assets of all the Association’s 24 member banks stood at slightly less than € 47 billion at the end of 2017. Of these, the six “core domestic banks (*)”, which have the strongest ties with the domestic economy, had a combined balance sheet total of € 22.5 billion (2016: € 21.3 billion), representing 207% of GDP, a ratio which is below the EU average.
Customer deposits with the “core domestic banks” maintained their upward trend, increasing by a further 3.4% to reach a record € 18.3 billion (2016: € 17.7 billion). Total deposits held with all banks now stand at € 25.4 billion. Commenting on these statistics, Mr Karol Gabarretta, the MBA’s Secretary General, said that “this indicates that despite historically low interest rates, Maltese households continued to demonstrate their trust in the local banking sector by increasing deposits at the core domestic banks mainly. In fact deposits from residents account for almost 90% of the deposits of the said core banks”.
Loans and Advances to Customers
Mr Gabarretta added that the “core domestic banks” as the main players within the local banking sector remain committed to ensure the proper financing of the economy, despite the challenges outlined above and other costs brought about by the on-going changes to the EU’s regulatory framework which was originally put in place following the 2008 global financial crisis. During 2017, credit provided by these banks increased by 1.1% and stood at € 10.6 billion at the year-end (2016: € 9.6 billion). Mr Gabarretta pointed out that notwithstanding this increase, as has been observed in the CBM’s Financial Stability Report for 2017 “resident lending to non-financial corporations (NFCs) by core domestic banks decreased as it became evident that NFCs are increasingly relying on other sources of financing, including loans from related companies, retained earnings as well as debt issuances”. He also remarked that the services sector particularly new economic sub-sectors such as e-gaming and I.T. is not too capital intensive, and as such does not require high levels of financing as may be the case with other established sectors such as the manufacturing sector.
Employment, Wages, Dividends and Taxation
The direct contribution of the banking sector – which besides the core domestic banks locally also comprises the non-core domestic banks and the international banks – to the local economy remains significant, as can be gauged from the 2017 figures below:
Full time bank employees 4,688
Payroll € 187.7 million
Taxation on profits € 111.3 million
Dividends paid to resident shareholders € 58.1 million
It is to be noted that the World Economic Forum’s Competitiveness Report 2017 – 2018, ranked Malta 17th out of 137 countries for the soundness of its banking system concluded Mr Gabarretta.
(*) APS Bank Ltd, BOV plc, BNF Bank plc, HSBC Bank Malta plc, Lombard Bank Malta plc, MeDirect Bank (Malta) plc as categorised by the CBM.