On 28 April 2022, APS Bank plc published a Quarterly Financial Update providing information about its performance in Q1 2022 when compared to the same period in 2021. In this respect, APS explained that net interest income surged by 14.8% to €14.7 million (Q1 2021: €12.8 million) as the continued strong growth in the loan book was also supported by the more efficient management of the bank’s funding base which also led to a marginal drop in interest expense.
On the other hand, APS recorded a loss of €1.4 million from its non-interest income activities reflecting the considerable adverse movements across financial markets which negatively impacted the performance of the APS Funds SICAV. Excluding these negative unrealised movements which amounted to €3.6 million, APS still recorded strong growth from its non-interest income operating activities. This was largely driven by the upsurge in net fee and commission income which rose by 55% to €1.7 million reflecting higher volumes of business in general as well as new non-banking revenue streams from investment services offerings including funds and pension plans.
On the expenditure side, total operating costs increased by just 8.4% to €10.3 million (Q1 2021: €9.5 million) reflecting continuous investments in IT and HR. Given the negative impact on income from the adverse market movements, the cost efficiency ratio deteriorated to 77.4% compared to 66.9% in Q1 2021. Meanwhile, APS recorded a lower level of net impairment charges which amounted to €0.6 million compared to €1 million in the first three months of 2021. In this respect, APS added that it continued to adopt a prudent approach to credit underwriting whilst all COVID-19 moratoria are now expiring with the last few facilities (mainly commercial) performing normally and not a single default experienced.
Overall, APS reported a profit before tax of €1.9 million compared to €3.8 million in Q1 2021. At Bank level, pre-tax profits amounted to €8.7 million which is more than twice than the €3.9 million figure reported in the comparable period in 2021.
The Statement of Financial Position as at 31 March 2022 shows that total assets increased by 3.6% to €2.90 billion when compared to the position as at the end of 2021. In particular, customer loans grew by 1.5% to €2.1 billion (which also represents a year-on-year growth of 13.3%) mainly as a result of higher demand for home loans which outstripped the slight drops in commercial and syndicated loans.
Total liabilities expanded by 4.2% to €2.68 billion largely driven by the 5% increase in customer deposits to €2.55 billion (+15% year-on-year). As a result of the sharper growth in deposits than loans, the loan-to-deposit ratio eased to 82.1% compared to 85% as at the end of 2021 and 83.4% as at 31 March 2021. Meanwhile, as total equity contracted to €213 million (31 December 2021: €220.8 million), the Bank’s CET 1 ratio eased to 12.7% (31 December 2021: 13%) whilst the Total Adequacy Ratio retracted to 16.7% (31 December 2021: 16.9%). However, these ratios satisfy the required regulatory thresholds and buffers.
Commenting on the Q1 2021 performance, APS Bank CEO Mr Marcel Cassar explained that: “2022 got off to an extraordinary start as the impetus which developed during 2021, on the back of a post-Covid economic rebound and more favourable global financing conditions, experienced a new series of shocks. Most prominently, the ongoing conflict between Russia and Ukraine has further disrupted supply chains, contributing to a now persisting inflation and the prospects for higher interest rates which could stifle recovery going forward. Such global developments are felt also in our widely open economy through higher costs of inputs and imported goods. On a positive note, recent estimates by the IMF revised domestic 2022 GDP growth at 4.8% (higher than EU estimates) and CPI inflation peaking at 4.7% in 2022, before returning to more normalised levels in 2023. Optimism that the FATF grey listing might be lifted later this year is also contributing to a more benign outlook for the Maltese economy.”
“Against this background, APS Bank continues to be a safe and trusted partner for customers, employees, shareholders and the broader community we proudly serve. Despite the various uncertainties, we continue to grow market share, our credit quality remains strong and customer confidence in our model is at its highest. In these challenging times the resilience we show is more important than ever.”
“Notwithstanding the market volatility impacting the Group, the Bank generated an annualised return on capital exceeding 12% for the quarter under review. As our outlook for the coming months continues to be cautioned by the circumstances around us, we enter the second quarter on top gear as we prepare to approach the market for new equity capital and a listing of the Bank’s ordinary shares for the first time in our history. The sentiment for the Initial Public Offering is proving to be very strong and we look forward to this round of capital raising as a gateway for the next, exciting phase of APS Bank’s development.”