APS Bank plc on Thursday (today) announced that it recorded a pre-tax profit of €10.1 million during the first six months of 2024 (1H 2024), a decrease of 39.9 per cent from the €16.8 million recorded in the same period last year, primarily due to compression in interest rate margins.
This was also the case at bank level, where it registered a profit before tax of €9.9 million in 1H 2024, a sharp decrease from the €16.1 million recorded in 1H 2023.
The results were published on Thursday in APS Bank’s interim financial update for 1H 2024.
As was the case in the first three months of 2024, the reporting period was marked by margin compression resulting from higher interest rate expenses, driven by a buildup of minimum requirement for own funds and eligible liabilities (MREL) late in 2023.
During 1H 2024, APS Bank generated €56 million in interest income, an increase of €6.4 million or 11.4 per cent when compared the same period last year. The bank said that this growth in interest income was felt across the main credit product lines, namely retail, commercial and syndicated loans, as well as the liquidity holdings of cash and treasury instruments.
Interest expense surged upwards by 83.2 per cent from €12.5 million in 1H 2023 to €22.9 million in 1H 2024. APS Bank said that this was a result of the higher interest paid on euro deposits, reflecting the pass-through of interest rates and significantly more competitive pricing on various savings products in an increasingly tight market.
Net fee and commission income rose by 12.7 per cent to €4.5 million (1H 2023: €4 million), in sync with the growth in business activity of the group.
Other operating income for the reporting period amounted to €0.9 million, 30.8 per cent lower than 1H 2023. This was due to lower group results in the trading of financial instruments at the level of its investment in the APS Funds SICAV plc Diversified Bond Fund.
APS Bank’s net impairment losses totalled €2 million.
The group also closed the six-month period with a non-performing loans ratio of 1.9 per cent, its lowest level in a number of years.
Operating expenditure for 1H 2024 amounted to €27 million, up by 2.5 per cent on 1H 2023. APS Bank attributed this increase to sustained investment in technology, regulatory and compliance requirements, professional fees and employee compensation.
The cost-to-income ratio for the period under review was 70 per cent, higher than the 62.1 per cent registered in 1H 2023.
At group level, APS Bank’s total assets stood at €3.8 billion at the end of the reporting period, a growth of three per cent over the €3.7 billion recorded at the end of 2023.
Its main growth streams were net loans and advances to customers and its syndicated loan portfolio, growing by €138.4 million to €3 billion. Home financing was a main contributor. Other debt and fixed income instruments contracted by €28 million.
Total liabilities closed at €3.5 million, a growth of €108 million over the previous period. This was driven by increases in customer deposits, going up by €158.8 million. There was also a €51.2 million reduction in amounts owed to banks.
APS Bank also announced that its Board of Directors has resolved to declare the payment of an interim net dividend of €2 million (gross dividend of €3,076,923), equating to €0.00527 cents per ordinary share (gross dividend of €0.00811 cents per ordinary share).
The interim dividend, which is still subject to regulatory approval, will be given to shareholders appearing on the company’s register on 22nd August 2024 (last trading day is 20th August 2024).
Commenting on the results, CEO Marcel Cassar said that the second half of 2024 is expected to present “steadier global economic growth” with an easing of monetary policy and further interest rate cuts as inflationary pressures continue to moderate.
“At the same time, regional differences, geopolitical risks and trade tensions will need to be managed carefully in order to calm down market volatility and potential asset price corrections,” he added.
As a result, major European banks, including the core Maltese ones, “have remained resilient, largely operating with ample liquidity and capital headroom that enabled them to post record profits helped mainly by the high interest rate conditions.”
However, Mr Cassar said that there are “beneath-the-surface challenges” for banks as the environment remains “highly dynamic and competitive.”
He affirmed that APS Bank’s business model is to take a more medium to long-term view beyond the recent interest rate cycle which has delivered substantial profits to some banks.
“The corrective actions we announced earlier this year to ease pressure on our margins started to yield results in the second quarter, as profitability improved while our pricing remained competitive,” Mr Cassar stated.
The CEO said that while there have been improvements in efficiency, revenue generation and all-round business expansion, APS Bank will “continue to explore further avenues of growth” which can give it scale and strengthen its market position.
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