APS Bank plc announces the publication of the financial results extracted from the Group and Bank unaudited management accounts for the quarter ended 31 March 2024, (also referred to as the “period”, “1Q” or “3M”) as presented to the Board of Directors on 25 April 2024.
Financial Performance
During the period under review, APS Bank plc registered a pre-tax profit of €5.0 million at Group level (1Q2023: €7.9 million) and €4.4 million at Bank level (1Q2023: €7.0 million). As anticipated, the interest rate environment already prevailing since the second half of 2023, coupled with the build-up in MREL, continued piling pressure on margins, with increases in administrative and compliance expenses resulting in lower returns compared to the same period last year.
a) Net interest income for the quarter under review was €16.7 million, with interest receivable increasing by €4.5 million over 1Q2023. Correspondingly, with interest rates remaining high and amidst continued competitive pressures, interest payable more than doubled over 1Q2023, contracting total net interest income by €1.7 million. The anticipation of interest rates easing over the coming months is expected to result in more stable cost of funding and improved margins.
b) Net fee and commission income of €2.4 million, up by 8.1% over the same period last year, reflects the growth in business, with the main commission streams being insurance, investments, cards and transactional banking.
c) At Group level, other operating income fared lower compared to 2023, mainly due to the strong rebound from one of the Group’s sub-funds which was not repeated in 1Q2024. At Bank level, figures marginally improved over last year, with other operating income being the main contributor to such increase.
d) Net impairment losses of €1.3 million reflect credit charges on loans across the three IFRS 9 stages mostly on the local commercial book and international syndicated lending. The non performing loan (NPL) ratio positively crossed the 2% level, ending at 1.9% down from 2.2% in December 2023.
e) Operating expenses amounted to €13.5 million, rising marginally by €0.7 million when compared to 1Q2023. Technology and regulatory costs together with inflationary pressures mainly contributed to this with a total aggregate increase of €0.5 million. Cost-to-income ratio for the period under review was of 69.9% (1Q2023: 59.9%).
Financial Position
The Group grew the balance sheet at a slower pace than 1Q2023, continuing with the emphasis on high credit underwriting standards, improving NPL ratios while prudently managing the loans/deposits mix.
f) Total Group Assets/Liabilities grew by 1.8% during the 3M under review, reaching a total of €3.7 billion.
g) The main contributors were the growth in loans and advances to customers and syndicated loans, which expanded by €28.8 million across the retail, mainly home loans, commercial and international syndicated loan books.
h) Cash reserves at the Central Bank of Malta and loans and advances to banks followed with a total increase of €26.9 million, up by €16.8 million and €10.2 million respectively.
i) Funding from customers grew by €52.6 million during 1Q2024, 90% of the increase being attributable to fixed term deposits.
j) Equity closed the end of the first quarter of 2024 at €291.1 million, up by €3.7 million over December 2023.
k) The Bank’s CET1 ratio stood at 14.2% (31 December 2023: 14.6%) and the Capital Adequacy Ratio at 20.1% (31 December 2023: 20.6%).
CEO Marcel Cassar commented:
“Having reported consistent growth in revenues and profits over most financial periods in recent years, these first quarter results might look like a reversal of fortunes. But what we’ve been experiencing since last year, thanks to an environment of higher interest rates, was anticipated to show up in a compression of our interest margins. The strategy behind our business model remained pinned on not increasing home loan rates, offering lowest possible pricing on products that represent our social and green agenda, remaining competitive with our commercial lending while at the same time passing on interest rate increases to our depositors. During the quarter under review we also increased our ECL charge mainly to reflect higher uncertainty around an old (pre-2013) legacy NPL which will not be repeated in future financial periods.
As Malta continues to perform well, and the global economy shows signs of resilience supported by a more benign outlook on inflation, it is easy to overlook that there are some very rough seas out there, with many geopolitical hotspots that continue to fuel uncertainty. The Maltese banking system also continues to benefit from high levels of liquidity, which boosted profits and capital ratios in 2023 but are not necessarily contributing to an equitable transmission of interest rates across loans and deposits pricing. Despite the current pressure on our margins, we are taking the necessary corrective actions and are confident that our business model will deliver stronger, sustained returns over the medium to longer term. 1Q2024 has seen us rolling out products, services and technologies that are making APS Bank more the ‘primary bank’ for our customers. We are also confident of the traction generated by the investment in our transformation programme, equally our business strategy needs more scale to make that efficiency work and create value for all our stakeholders.”
