APS Bank plc - Quarterly Update

On 25 April 2024, APS Bank plc published a Quarterly Financial Update providing information about its performance in Q1 2024 when compared to the same period in 2023.

Net interest income dropped by 9% to €16.7 million (Q1 2023: €18.4 million) as the increase in gross interest income (+€4.5 million to €28.2 million) was outweighed by higher interest expenses (+€6.1 million to €11.5 million). APS explained that the higher interest environment resulted in a pressure on margins.

Excluding the impact of fair value movements, APS registered an increase of 18.8% in non-interest income to €2.4 million, driven by higher fees and commission income reflecting growth in various business streams. However, in relation to the consolidation of the APS Diversified Bond Fund, APS recognised fair value losses on financial assets of €0.12 million compared to positive movements of €0.67 million in 2023.

APS also recorded a marginally higher level of net impairment charges totalling €1.26 million compared to €0.91 million in the first three months of 2023. The Bank noted that the Q1 2024 impairments reflect credit charges principally related to local commercial loans and international syndicated lending.

Total operating costs increased by 5.6% to €13.5 million largely reflecting higher administrative expenses. As a result, the cost-to-income ratio climbed to 68.2% compared to 59.1% in Q1 2023.

Overall, the APS Group reported a quarterly profit before tax of €5.03 million (Q1 2023: €7.91 million) and a net profit for the period of €3.45 million (Q1 2023: €5.44 million).

The Statement of Financial Position as at 31 March 2024, when compared to the position as at the end of 2023, shows that total assets increased by 1.8% to €3.73 billion. Customer loans, including syndicated loans, grew by 1% to €2.91 billion while cash and reserves with the Central Bank of Malta increased by 12.8% to €147.9 million.

Total liabilities also grew by 1.8% to €3.43 billion largely driven by a 1.7% increase in customer deposits to €3.19 billion. As a result, the loan-to-deposit ratio remained relatively unchanged at the 91% level.

Shareholders’ funds increased by 0.7% to €274.9 million, which translates into a net asset value per share of €0.728 (31 December 2023: €0.723). The Bank’s CET 1 ratio eased to 14.2% (31 December 2023: 14.6%) whilst the Total Adequacy Ratio moved marginally lower to 20.1% (31 December 2023: 20.6%).

Commenting on the Q1 2024 performance, APS Bank CEO Mr Marcel Cassar explained that: “The strategy remained pinned on not increasing home loan rates to offer the lowest possible pricing on products that represent APS’ social and green agenda, remaining competitive with commercial lending, while at the same time passing on interest rate increases to depositors”.

The CEO explained that despite the current pressure on margins, APS is taking the necessary corrective actions and remains confident that the business model will deliver stronger, sustained returns over the medium to longer term. The Group is also confident of the traction generated by the investment in its transformation programme, while recognised that it needs more scale to make that efficiency work and create value for all stakeholders.