Following the first publication in June 2016, PwC, in
collaboration with FinanceMalta, are publishing the next in a
series of semi-annual financial services surveys. This survey was
carried out in September/ October 2016 and respondents were invited
to give their views on various topics in comparison to their
sentiments 6 months earlier.
The survey shows 34% of respondents reporting increased business
volumes. This can be compared to the result of 59% reported in the
previous survey. Furthermore, 9% of respondents indicated increased
optimism on the overall business situation in the sector, slightly
down from the 18% reported in the previous survey.
Confidence in the banking sector has remained robust, with 36%
of respondents being more optimistic about the overall business
situation in the sector and the balance reporting unchanged
sentiment levels. This result remains similar to that reported in
the previous survey. Additionally, respondents from the banking
sector reported an increase in business volumes over the past 6
months and remain bullish about the next 6 month period with 64%
expecting further increases in activity. It appears that this
increase is expected to stem primarily from commercial rather than
retail customers. Growth in net interest as well as non-interest
income has continued to be reported in this survey. This growth is
driven mainly by increased trading in commercial banking
activities. 82% of respondents have reported no significant change
in non-performing loans, similar to that reported in the previous
survey. Furthermore, although total operating costs have continued
to increase, a net balance of 55% of banking respondents expect to
report an improvement in profitability going forward.
Within the insurance sector, 36% of firms reported increased
volumes of business in the past 6 months, down from 75% reported in
the previous survey. In fact, only 18% were more optimistic about
the overall business situation in the sector during the past 6
months. With regards to premium income, a net balance of 36% of
respondents expect an increase going forward (compared to 42% in
the previous survey). On the other hand, there is a reported drop
in net investment income. An increase in total operating costs was
reported by 75% of respondents, driven mainly by increased levels
of insurance claims as well as an increase in the average cost per
claim. Staff turnover within the sector has increased with 55% of
respondents indicating an increase in the past 6 months.
Furthermore, 36% of firms also experienced increased levels of
employment and 73% experienced increased payroll costs. Insurance
companies are also reporting higher capital expenditure,
particularly on IT systems as well as regulatory compliance.
Unlike their banking counterparts, 55% of insurance respondents
have indicated a drop in profitability in the past 6 months, with
36% expecting the decline to continue over the coming 6 month
Asset management firms have reported no change in volume of
business in the past 6 months and in fact, a net balance of 8%
expect volumes to decrease going forward. Additionally, a net
balance of 23% of respondents report to be less optimistic about
future prospects. Furthermore, a net balance of 8% have indicated
that income has declined, with 23% expecting further declines in
the next 6 months. Notwithstanding this decrease in activity, over
the next 6 months, 23% of asset management firms expect staff
levels to increase albeit at a slower rate. Furthermore, 62% of
respondents have reported an increase in operating costs in the
past 6 months, driven mainly by increased levels of employment and
therefore increased payroll costs.
Respondents were asked to evaluate Malta's overall
competitiveness as a financial centre. The main issues highlighted
related to the increasing burden of regulations and the difficulty
in finding suitably qualified human capital, with some suggesting
that employing non-EU nationals should be made easier. Some
respondents also highlighted the need to increase custodian
services in Malta. Sentiment was particularly negative in the asset
While the financial services sector is relatively healthy and
buoyant, respondents feel that there are challenges and threats on
the horizon. Costs are rising, especially those relating to human
capital and compliance, while proposed changes to EU regulations
appear to be on most firms' agenda, with many commenting that a
onesize- fits-all approach would be a disadvantage to Malta's
financial services industry.
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