APS Bank plc - Quarterly Update

On 26 October 2023, APS Bank plc published a Quarterly Financial Update providing information about its performance during the nine-month period ended 30 September 2023.

Net interest income surged by 18.9% to €55.5 million driven by the continued growth in the loan book and the higher interest rates on fixed-income and liquid securities. In fact, gross interest income rose by 34.7% to €77.2 million compared to €57.3 million in the corresponding period in 2022. On the other hand, interest expense doubled to €21.6 million (3Q 2022: €10.6 million) reflecting the marked increase in customer deposits and higher interest rates on certain deposits.

APS also recorded strong growth of 13.9% in net fee and commission income to €6.2 million reflecting the general increase in banking activities to a wider customer base. APS also registered gains of around €1.1 million on other financial assets, foreign exchange and other income, which is a significant improvement to the net loss of €7.3 million last year following the negative impact of €8.41 million related to the performance of APS Funds SICAV.

The Group also recorded a marginal net impairment charge of €0.25 million compared to a reversal of €0.1 million in the corresponding period last year, mainly attributable to the growth of the Bank’s loan book. As such, net operating income improved to €62.6 million compared to €44.9 million in the first nine months of 2022.

On the expenditure side, total operating costs increased by 16.7% to €39.5 million reflecting continuous investments in human resources, technology, regulatory and compliance requirements as well as general inflationary pressures. Nonetheless, in view of the sharper increase in income, the cost efficiency ratio was contained at 62.8%.

Elsewhere, APS recorded a contribution of €0.2 million from its share of results of associates, compared to a net loss of €2.58 million in the first nine months of 2022.

After accounting for a tax charge of €8.3 million, the Group reported a net profit of €15 million (3Q 2022: €0.9 million), which translates into an annualised return on average equity of 7.4%. On a standalone basis, the Bank registered a net profit of €15.4 million which is also higher than the €14.2 million recorded in the corresponding period in 2022.

The Statement of Financial Position as at 30 September 2023, when compared to 31 December 2022, shows that total assets increased by 12.4% (+€385 million) to just under €3.5 billion, principally composed of customer loans of €2.55 billion (+€322 million), treasury investments of €442 million (-€18 million), and syndicated loans of €177 million (+€42 million).

Similarly, total liabilities expanded by 12.9% (+€368 million) to €3.22 billion largely reflecting the 11.6% increase (+€315 million) in customer deposits to just over €3 billion. As a result of the sharper increase in customer loans and syndicated loans than deposits, the loan-to-deposit ratio climbed to 90% from 87.1% as at the end of 2022. Shareholders’ funds increased by 5.9% to €265.2 million, which translates into a net asset value per share of €0.702. In terms of capital position, the Bank’s s CET1 ratio stood at 15.3% as at 30 September 2023 (31 December 2022: 15.2%) and the Capital Adequacy Ratio at 18.6% (31 December 2022: 18.8%).

Commenting on the performance, APS Bank CEO Mr Marcel Cassar stated that: ““We are pleased to report a solid operating performance for the period under review, as shown by record numbers across most income lines and pre-tax profits of just under €24 million. At the same time, monetary policy tightening keeps our margins under pressure as we pass on interest rate increases to depositors but not on home loan borrowers, and with the concerns of our commercial customers in mind. Thanks to the active management of our bond and syndicated loan portfolios, we are able to pick up good spreads while improving the geographic, industry, ESG and overall risk profile of our book.

While banks across Europe, and in Malta, are expected to enjoy a boost to their profits from higher interest rates, our sights are on more medium-to-long term growth areas as the tailwinds from central banks’ measures to curb inflation are expected to slow down. Against a backdrop of mixed geopolitical, economic and market developments, APS Group is once again showing the way with a performance that balances a forward-looking, profitable business model with its role as a leading provider of credit to the Maltese economy and banker for the community. We are also confident that the imminent launch of our bond issuance programme, aimed at shoring up our Tier 2 and regulatory requirements, will support a strong closing of the current financial year and pave the way for yet further growth in 2024.”