APS Bank plc announces the publication of its financial results extracted from the Group and Bank unaudited management accounts for the nine months ended 30 September 2023, (also referred to as the “period”, “3Q” or “9M”) as presented to the Board of Directors on Thursday 26 October 2023.
Financial Performance
For the nine months under review APS Bank plc registered pre-tax profits of €23.3 million for the Group (3Q2022: €8.4 million) and €23.6 million for the Bank (3Q2022: €21.7 million). As the Group continued to recover from the unrealised, negative investment markets trends of 2022, late-September volatility led to mixed results causing the Bank solo performance to outpace marginally that of the Group.
a) Interest income for the 9M under review grew by €19.9 million or 34.7% over the same period last year, largely driven by robust growth in the loans portfolio and generally higher asset yields.
b) As interest rates continued to rise, domestic deposits and non-EUR funding repriced higher, increasing interest costs to €21.6 million, or €11.0 million more than the same period last year.
c) Net fee and commission income of €6.2 million was up by 13.9% on 9M2022. This was consistent with the growth in business activity and ensuing commission streams from lending, card related transactions, investments and local and foreign transaction banking.
d) Financial markets instability late in September, following shortly after two summer interest rate hikes, slowed down the recovery at Group level despite still returning €0.4 million net trading gains for the 9M compared to almost €9 million unrealised loss for the comparative period.
e) This sentiment also impacted the ‘Share of Results from Associates’ which returned negatively for the quarter but remained in positive territory for the period at €0.2m (9M2022, loss of €2.6m).
f) Net impairment charges for the period were €0.3 million compared to a €0.1 million writeback in 3Q2022, movements mainly attributable to the growth in the loans and advances book.
g) Operating expenses of €39.5 million grew by 16.7% compared to the €33.8 million for 3Q2022. Drivers for this increase were costs related to human resources, recruitment, new technologies, regulatory and compliance requirements, security, insurance and general inflationary rises.
h) Cost-to-income ratio for the period under review was contained at 62.8% (3Q2022: 75.6%).
Financial Position
i) Total Group Assets/Liabilities grew by 12.4% during the 9M under review, reaching a total of €3.5 billion.
j) The main contributor was the growth in loans and advances to customers, which expanded by €363.2 million across retail, mainly home loans, commercial credit as well as the international syndicated loan book.
k) Cash reserves at the Central Bank of Malta increased by €73.5 million, counterweighed by a contraction of €49.9 million in liquidity with other banks, optimising short-term yields.
l) Corresponding with the increase in the main asset lines, funding from customers and banks grew by €347.5 million, or 12.6% over the 9M under review.
m) As interest rates continued to rise in 2023, customers moved in search of a pick-up in returns, as reflected in the significant shift towards fixed-term deposits and commensurate increase in blended funding cost.
n) Equity closed 3Q2023 at €278.5 million, up by 6.5% or €17.0 million over December 2022 and helped in part by a €5.6 million scrip dividend plough-back.
o) The Bank’s CET1 ratio stood at 15.3% (31 December 2022: 15.2%) and the Capital Adequacy Ratio at 18.6% (31 December 2022: 18.8%).
CEO Marcel Cassar commented: “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.”
