APS Bank plc on Thursday announced that it recorded €28.9 million in pre-tax profit at bank level in 2022, representing a sharp 21.9 per cent increase from the previous year’s €23.7 million.
While this meant a significant upturn in performance for the bank, financial markets instability brought about by various macroeconomic challenges prompted a challenging year for the group, which saw pre-tax profit drop from 2021’s €24.1 million to €15.7 million.
Overall, operating expenses were on the rise, with significant increases to employee compensation and benefits, which amounted to €26.1 million at group level (2021: €21.8 million) and €25.5 million at bank level (2021: €21.4 million). Other notable changes also include rises in administrative expenses of 10 per cent and 9.8 per cent at group level and bank level, respectively.
The group also experienced a major increase in net losses on financial instruments, with this rising to €10.3 million from the previous year’s €152,000, a trend that was not experienced at bank level, where a net gain of €1.1 million was reported (2021: €215,000).
The group’s total equity expanded from €221 million to €261 million, while the bank’s increased from €198 million to €257 million, primarily as a result of rising interest rates’ direct, negative impact on reserves.
The Board of Directors agreed to recommend a final net dividend of €0.0174 per ordinary share, totalling €6.4 million, which is set to be paid by way of Scrip, with each shareholder having the option to receive either cash or new ordinary shares, at an attribution price of €0.57 per new ordinary share.
Commenting on the results, APS Bank Chairman Martin Scicluna said that the bank’s solo performance was “dampened by market losses” that arose out of investment activities and subsidiaries’ value in the bank’s books. Additionally, the “dilution” in the group’s profit was primarily a result of “unrealised investment losses with minimal credit losses experienced”.
APS Bank Chairman Martin Scicluna / APS Bank
Looking ahead, he remarked that the environment that APS Bank operates in “continues to be a challenging one with complex economic and financial variables, specific demands by the commercial community and the ongoing need to continue to service and anticipate retail clients’ needs”.
Mr Scicluna explained that the Board is focusing on a “forward-looking” strategic plan that puts “sustainable growth in a compliant manner” as its priority. “Refining a resilient business model, putting the customer first, and accelerating transformation are some of our prioritised strategic objectives,” he said, before adding that the Board’s agenda is geared towards delivering “long term value” to the benefits of its shareholders and all constituent parts of the economic, customers, employees, national economic wellbeing, and also assisting the vulnerable sections of the community.
APS Bank CEO Marcel Cassar remarked that while 2022 seemed to have a “promising start” as part of a “post-pandemic rebound”, the economy was met with “new shocks”. These include the Russian invasion of Ukraine, along with amplified supply chain challenges in energy and food prices led to inflationary pressures and interventions from monetary authorities.
“Such international developments are felt also in our widely open economy, partly cushioned by Government subsidies which however contribute to a build-up in public debt. In this complex environment, Malta is experiencing higher economic growth, milder inflation, and lower unemployment than its EU counterparts, aided in no small way by a stronger than expected tourism recovery and buoyant retail and property markets,” he said.
“Navigating through these choppy waters, we again delivered excellent results and our best bank solo performance ever,” he said, before adding that the risk of recession was heightened by geopolitical tensions, prompting central banks to raise interest rates.
He also explained that APS Bank’s “resoundingly successful” and “record-breaking” Initial Public Offering (IPO) in June, which was closed just hours after it was opened, was a “long-awaited step” that it had identified as an “integral part of the plan” to grow the bank through the diversification of its shareholder base.
He noted how in 2022, policy makers and central bankers across borders persisted in fighting inflation, “notwithstanding the implications for the capital markets and potentially, loan quality”.
“In the Eurozone alone, since July the European Central Bank (ECB) increased its deposit rate progressively to 2.5 per cent from -0.5 per cent, making it the largest and fastest increase in rates in the monetary union’s history. As banks adapt their strategies to the reality of higher interest rates, we shall manage this new scenario with the concerns of all our customers in mind,” Mr Cassar said.
He remarked that despite the impacts that these situations have had on its investment portfolio, APS Bank remains “comfortable” that these are of “sound credit quality” and that the “slide in valuations will continue to be clawed back over the coming financial periods”.
“2023 has started on solid footing and we look forward to more exciting prospects for APS Group, encouraged by strong customer confidence in our model and as opportunities to gain further market share continue to unfold,” he concluded.
APS Bank is one of Malta’s oldest banks and is a leading provider of financial services, offering persona, business and investments solutions. It is also licensed as an investment services firm, registered as a tied insurance intermediary. The bank’s distribution channels include a network of branches and ATMs that are complemented by an electronic banking platform that serves its retail and commercial customer base.