“Inflation picks up…”

Eurozone inflation accelerated last month but underlying price growth eased unexpectedly.

Eurozone inflation picks up, but core unexpectedly slows

Eurozone inflation accelerated last month but underlying price growth eased unexpectedly, adding to arguments for a smaller interest rate hike at the European Central Bank’s regular policy meeting on Thursday.

Inflation has slowed sharply from double-digit readings late last year but remains far too high, making another rate hike a necessity and leaving only its size up for debate, with ECB policymakers split between a 25 and a 50-basis point move.

Overall price growth in the 20 nations sharing the euro currency picked up to 7.0% in April from 6.9% a month earlier, Eurostat said on Tuesday, in line with expectations in a Reuters poll of economists.

But the focus in recent months has been squarely on underlying or core inflation, a surprising rise in which has suggested that price pressures are mounting, and that the ECB lacks a firm understanding of where inflation could be heading.

Excluding volatile food and fuel prices, core inflation slowed to 7.3% from 7.5%, while an even narrower measure, which excludes alcohol and tobacco, slowed to 5.6% from 5.7%, coming below forecasts for 5.7% for its first decline since last June.

The ECB has raised interest rates by at least 50 basis points at each of its past six meetings.

Some policymakers, including French central bank chief Francois Villeroy de Galhau, have made the case for a more measured move this month, arguing that the ECB has already lifted borrowing costs sharply enough to restrict the economy.

But others, including board member Isabel Schnabel, have said that a 50-basis point move needs to remain among the options because price growth is proving sticky, raising the risk that it could level off above the ECB’s 2% target.

Nearly all 26 members of the Governing Council appear to agree that more policy tightening is required after a record 350 basis points of rate increases since July.

A key worry is that wage growth is now accelerating above expectations, and this will drive up the cost of services, the single largest item in the consumer price basket.

Services inflation accelerated to 5.2% from 5.1% but the price growth of non-energy industrial goods, another crucial segments, slowed to 6.2% from 6.6%.

Investors see the ECB’s 3% deposit rate rising to around 3.75% by the end of the summer although rate expectations have been volatile in recent months, moving in a wide range since the financial market turbulence of March.

HSBC soothes shareholders with restored dividend as profit triples

The strong results reported by HSBC and Asian rival DBS (DBSM.SI) on Tuesday underscore how aggressive policy tightening has lifted profit margins, even though it has also sparked banking sector turmoil in the U.S. and other markets.

On Monday, regulators seized First Republic Bank (FRC.N) and sold its assets to JPMorgan Chase & Co (JPM.N), in a deal to resolve the largest U.S. bank failure since the 2008 financial crisis and draw a line under the bank sector jitters.

With the rate cycle nearing a peak, the challenge for the likes of HSBC, Europe’s largest bank, will be to sustain its margins this year and beyond.

CEO Noel Quinn said the results showed HSBC’s strengths in a rising rate environment and played down the risks of further contagion for the banking sector.

“We do not believe there is a global banking crisis on the horizon. We do not see a negative impact on our business” as a consequence of First Republic Bank’s rescue, Quinn told a conference call.

HSBC posted a pre-tax profit of $12.9 billion for the quarter ended March, versus $4.2 billion a year earlier. The profit was much higher than the $8.64 billion average estimate of 17 analysts compiled by the bank.

The bank’s shares rose as high as 6% in London, the second-best performer on the day in the benchmark FTSE index (FTSE).

The bank said the planned $10 billion sale, originally slated to be completed by the end of this year, will now only likely go through in the first quarter of 2024.

Malta

BOV reports €46.5 million pre-tax profit for the first quarter of 2023

The BOV Group has reported a Profit before Tax of €46.5 million for the first quarter of 2023, up by €24 million from the same period last year, according to a company announcement.

Revenues stood at €95.5 million, which is €36.6 million higher than in first quarter 2022, almost wholly generated by growth in net interest income. The Bank estimated that around one-fifth of this growth reflected the pass-through of the increase in interest rates effected by the European Central Bank, mainly to Euribor denominated loans to business customers. Growth in business and home loan portfolios also contributed to the higher net interest income, as did higher effective rates on the home loan portfolio through the repricing of facilities granted at temporary competitive interest rates in recent years.

The Bank said that it is now in the last year of BOV 2023 Strategy where the Bank is taking forward a number of initiatives across key strategic areas. In parallel, the Bank said that it has initiated the formulation for the new strategy to cover the next three years.

Malta Company Announcements:

Malita Investments p.l.c

The board of directors are recommending the payment of a final net dividend of €0.0142 per share to all shareholders as at the close of trading on Friday 24 March 2023. The dividend will be paid on Thursday 11 May 2023 subject to shareholders’ approval at the upcoming Annual General Meeting scheduled to be held on Thursday 27 April 2023.

BMIT Technologies p.l.c

The board of directors are recommending the payment of a net dividend of €0.0246 per share. Shareholders are expected to receive the dividend payment on 12 May 2023 subject to shareholders’ approval during the upcoming Annual General Meeting which is scheduled to be held on 10 May 2023.

GO p.l.c

The board of directors are recommending the payment of a net dividend of €0.09 per share which is payable on 15 May 2023 to all shareholders as at the close of trading on 5 April 2023 subject to shareholders’ approval at the upcoming Annual General Meeting scheduled for 11 May 2023.

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