On 27 April 2021, APS Bank plc published a Quarterly Financial Update providing information about its performance in Q1 2021 when compared to the same period in 2020. In this respect, APS Bank explained that net interest income increased by 11.3% to €12.8 million (Q1 2020: €11.5 million) as gross interest income grew by 8.7% to €16.3 million (reflecting the continued positive trend in lending activity) whilst interest expense remained unchanged at €3.5 million.
APS Bank also recorded growth in non-interest income as this increased markedly to €2.2 million compared to €0.5 million in Q1 2020 reflecting the non-recurrence of the net fair losses of €1.5 million on the value of investment securities incurred in the first three months of 2020 which had resulted from the market volatility caused by the pandemic.
On the expenditure side, total operating costs increased by just over 30% to €10.3 million (Q1 2020: €7.9 million) reflecting higher levels of investments in IT and HR as well as higher regulatory and pandemic-related costs. Given the higher percentage increase in costs than the growth in income, the bank’s cost efficiency ratio deteriorated to 68.7% compared to 65.8% in Q1 2020. Meanwhile, net impairment charges remained virtually flat at €1 million as despite the further substantial growth in the lending book, expected default rates remained broadly unchanged. In this respect, APS Bank also added that during Q1 2021, there have been no material changes to its credit staging composition whilst it wrote-off €0.2 million of legacy exposures which were deemed to be no longer recoverable. Moreover, more retail customers are successfully exiting the moratoria period, a trend that started in Q4 2020 but has also continued in 2021.
Overall, the bank reported a pre-tax profit of €3.8 million which is almost twice as much as the level of €2 million recorded in Q1 2020. After accounting for a tax charge of €1.4 million, APS Bank posted a net profit of €2.4 million which, in turn, translates into an annualised return on average equity of 4.8% (Q1 2020: 0.5%).
The Statement of Financial Position as at 31 March 2021 shows that total assets increased by 4.3% (or +€103.4 million) to €2.52 billion when compared to the position as at the end of 2020 as customer loans grew by 2.7% to €1.85 billion (mainly as a result of higher demand for household and mortgage financing) whilst treasury assets increased by 23% (or +€98 million) to €522 million. Similarly, total liabilities climbed by 4.6% to €2.32 billion on the back of the substantial increase in customer deposits of 4.5% (or +€96 million) to €2.22 billion. Given the stronger percentage increase in customer deposits than the growth in customer loans, the loans-to-deposits ratio eased to 83.4% compared to 84.9% as at 31 December 2020. Meanwhile, although total equity increased slightly further to €207.6 million, the bank’s CET 1 ratio eased to 13.7% (31 December 2020: 15.1%) whilst the Total Adequacy Ratio retracted to 18% (31 December 2020: 19.5%).
Commenting on the Q1 2021 performance, APS Bank CEO Mr Marcel Cassar explained that: “Usually our first quarter is the most challenging, this year especially so as the pandemic effects continue to bite. We are confident that our business model will endure and overcome the current uncertainty, yet the extent of the rebound of key sectors such as tourism is going to be critical even for the short-to-medium term economic recovery. As we experience a gradual pickup in business sentiment, we shall maintain a prudent watch on credit underwriting and asset quality, mindful that pandemic-related developments will continue to shape the landscape for quite some time to come.”