Last week a number of companies in the US and Europe began publishing their financial statements as of 30th June 2023. The quarterly reporting seasons across the large international capital markets are always closely followed by investors and financial analysts since they provide important information to investors and the guidance by companies for the upcoming quarter is a key determinant of overall investor sentiment and performance. This year’s reporting season takes on greater importance following the sharp upturn in equity markets despite the consistent hike in interest rates. In fact, at the start of the year, worries about a hard landing arising from the interest rate hikes turned into fears of a widespread banking crisis in March. However, the US stock market in particular, overcame these headwinds and performed strongly mainly as a result of the hype surrounding artificial intelligence.
In Malta, companies are obliged to report on a semi-annual basis while a few of the large companies also provide quarterly information to the market. The interim reporting season commenced yesterday with the publication of results by Mapfre Middlesea plc followed by APS Bank plc and Bank of Valletta plc (BOV). Next week, HSBC Bank Malta plc and Malta International Airport plc (MIA) are due to publish their interim financial statements on the same day.
After three very difficult years for Maltese investors, the MSE Equity Price Index staged a partial recovery of 5.5 per cent in the past six months mainly as a result of the sharp upturn in the share prices of the two largest banks. HSBC was the top performer in the first half of 2023 as its share price surged by 69 per cent followed by BOV at +48.2 per cent. BOV’s market capitalisation increased by €228 million in the first six months of 2023 and more importantly, this took place on strong trading activity. BOV shares dominated overall trading activity as more than €7 million worth of shares changed hands, surpassing the annual trading activity in this equity for each of the last three years. MIA and HSBC are the only other companies that also attracted a good share of trading volumes while weak activity continued to characterise the other shares.
In view of the sharp upturn in the share prices of the two large banks and also in view of the new interest rate environment, the imminent issuance of the financial results by the two largest banks will be among the most important developments in the coming days. In line with the robust earnings being reported by the main banks in the US and Europe together with their attractive dividend payments as well as share buyback programmes, many Maltese investors will be paying close attention to the financial statements of the local banks. Moreover, particular focus will be on whether the very positive results will impinge on a more aggressive dividend policy by HSBC and the possible reinstatement of a sustainable dividend by BOV following a long period of virtually no cash dividends. Such developments could be important catalysts for the continued recovery in investor sentiment across the local equity market.
While the elevated interest rate environment across the eurozone will surely result in bumper profits from the larger banks given their sizeable levels of liquidity, the upcoming announcements by all the four retail banks takes on greater importance in view of the likely corporate actions by APS Bank plc and Lombard Bank Malta plc in the months ahead.
Following last year’s highly successful initial public offering and the authority provided by shareholders during the last annual general meeting of APS allowing the directors to issue bonds or other fixed-income securities amounting to a maximum of €150 million, the focus will now turn to the timing and pricing of this bond issue.
Lombard Bank Malta plc also requires additional capital and during the recent Annual General Meeting, shareholders empowered the board of directors to issue up to 65 million new issues. Here again, the focus will be on the timing and pricing of the rights issue and eventually the take-up by the various shareholders in the context of the shareholding structure of the bank.
The publication of financial results by Malta International Airport plc will also be of great interest to the thousands of shareholders as well as to the market at large. Given the traffic results already published for the first half of 2023 showing that passenger movements increased by 5.6 per cent when compared to the first six months of 2019 (pre-COVID), the company is therefore expected to report a record financial performance for the first half of the year. However, the main focus will be on whether the company will resort to their semi-annual dividend policy that was in place prior to the pandemic and the extent of the improved guidance on the traffic and financial forecasts for the upcoming six months. At the start of the year, MIA had projected that during 2023, total passenger movements would amount to 6.3 million representing growth of 7.7 per cent over the 5.85 million passenger movements of 2022 and a recovery of 86 per cent of the record pre-pandemic traffic in 2019 which amounted to 7.31 million passengers. Following the sharper-than-expected recovery in passenger traffic in Malta as well as overseas, it would therefore be interesting to gauge the new forecasts for 2023 and how these compare to the pre-pandemic figures.
Another main area of interest for the local equity market would be the possible transfer of lease rights and obligations between GO plc and its subsidiary BMIT Technologies plc following the brief announcement that took place on 6th April.
While the upcoming announcements by the banks, as well as MIA and GO, will continue to shape overall sentiment and trading volumes, the results by the smaller companies are also important for the investing public. Following the various challenges faced by many companies over recent years, further confirmation of the post-pandemic recovery and overall financial strength of the majority of companies could continue to generate added interest towards the equity market.
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In the current high interest rate environment, investors have many opportunities to deploy excess liquidity into positively yielding financial instruments