APS Bank plc on Thursday (today) announced that it has registered €23.3 million in pre-tax profit at group level for the opening nine months of 2023.

This represents an increase of 176.8 per cent from the €8.4 million recorded in the corresponding period last year.

At bank level, pre-tax profits marginally grew by 8.8 per cent to €23.6 million (9M2022: €21.7 million). APS stated that as the group continued to recover from 2022’s “unrealised, negative investment markets trends”, late-September volatility prompted mixed results, causing the bank’s solo performance to “outpace marginally” that of the group.

Interest income for the nine months under review grew to €77.2 million, an increase of 34.7 per cent (€19.9 million) over the figure from the same period last year. The bank stated that this was largely driven by “robust growth” in the loans portfolio together with generally higher asset yields. Interest rates continued to rise over the course of the reporting period, leading to deposits and non-euro funding to be repriced higher, resulting in interest costs of €21.6 million (9M2022: €10.6 million).

Net fee and commission income came in at €6.2 million, consistent with the bank’s growth in business activity and ensuing commission streams from lending, card-related transactions, investments, and local and foreign transaction banking.

Instability within financial markets in September, together with the prior interest rate hikes, resulted in the group’s recovery to be “slowed down”. However, €0.4 million in net trading gains was still registered for the reporting period. This was also the case for its share of results from associates, which despite returning negatively for the third quarter, remained in positive territory for the nine-month period at €0.2 million (9M2022: €2.6 million loss)

Net impairment charges for the period were €0.3 million compared to a €0.1 million writeback in the same period last year, with movements mainly attributable to growth in APS Bank’s loans and advances book.

APS Bank registered a 16.7 per cent increase in operating expenses in the nine-month period when compared to the €33.8 million recorded in the corresponding period last year, mainly due to costs related to human resources, recruitment, new technologies, regulatory and compliance requirements, security, insurance, and general inflationary rises.

Its cost-to-income ratio for the period under review was contained at 62.8 per cent (9M2022: 75.6 per cent).

The group’s total assets and liabilities expanded by 12.4 per cent, reaching a total of €3.5 billion. The main contributor for this was the growth in loans and advances to customers, which grew by €363.2 million across retail, mainly home loans, commercial credit, as well as the international syndicated loan book, APS Bank said.

Cash reserves at the Central Bank of Malta rose by €73.5 million, yet this was counterweighed by a €49.9 million contraction in liquidity with other banks.

APS Bank said that as interest rates continued to rise in 2023, customers “moved in search of a pick-up in returns”, as indicated in the significant shift towards fixed-term deposits and the increase in blended funding cost.

Equity as at the end of the nine-month period came in at €278.5 million, an increase of €6.5 million over the figure at the end of 2022.

Commenting on the results, CEO Marcel Cassar said that APS Bank is pleased to report a “solid operating performance” for the period under review, as indicated by the “record numbers” across most of its income lines and the pre-tax profit figure.

“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,” he continued.

He remarked that even though banks across Europe, and in Malta, are expected to enjoy a “boost” to their profits due to the higher interest rates, Mr Cassar said that APS Bank’s 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,” he stated.

Launch of bond issuance programme

Earlier this week, APS Bank announced that the issue of €50 million unsecured subordinated bonds with a coupon rate of 5.85 per cent was granted approval by the Malta Financial Services Authority (MFSA). This was the first of a series of issues to be released from a wider €150 million bond issue, intended to form an integral part of its Tier 2 Capital requirements for European Union regulations. The funds of this issue will be used to meet part of the bank’s general financing requirements.

€15 million of the €50 million has already been committed to various third-party investors in a pre-allocation process, while the remaining €35 million is available for subscription. The general public and preferred applicants are eligible to participate through an intermediaries’ offer as from 30th October 2023. Unless APS Bank opts to terminate earlier, the offer shall close on 17th November 2023.

In the announcement of the financial results, Mr Cassar remarked that the bank is “confident” that the imminent launch of its bond issuance programme will “support a strong closing” of the current financial year and “pave the way for yet further growth in 2024”.

During a market briefing earlier today, Mr Cassar was questioned whether APS Bank would consider tapping into foreign markets for any future subordinated issues. He replied that the bank’s management considered doing so, however it was “discarded at an early stage” given that APS Bank could “anticipate the appetite and interest at a local level, at least for this tranche”.

Despite this, Mr Cassar added that tapping into overseas markets in the future “cannot be ruled out”.