Income Statement 

During the period under review, APS Bank plc registered a pre-tax profit of €16.5 million at Group level (3Q 2023: €23.3 million) and €14.8 million at Bank level (3Q2023: €23.6 million). As anticipated earlier in the year, and despite a progressive improvement in performance over the past months, the results continue to lag those of 2023 mainly due to a contraction in net interest income, primarily driven by margin compression on loans and deposits. 

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In fact, net interest income for the 9M was €49.1 million, down on the €55.5 million for the same period in 2023. Interest receivable increased from €77.2 million in 2023 to €84.7 million, with growth being spread across both retail and commercial product lines. 

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This was more than neutralised by interest expense which increased to €35.6 million from €21.6 million in 2023, due to higher cost of MREL funding and the Bank’s policy of passing through the interest rate benefits to its depositors. 

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Net fee and commission income is up by 2.8% over 2023 to €6.4 million, reflecting overall business growth and revenue from insurance intermediation, pensions, investment services and cards. 

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Other income for the period amounted to €2.6 million, markedly up on the €1.1 million recorded for 3Q 2023 and resulting mainly from gains on movements in the portfolio of financial assets at both Group and Bank levels. 

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Net impairment charges for 3Q 2024 were €1.1 million, spread over the three Expected Credit Losses (ECL) stages and across a growing local commercial book and the international syndicated loan portfolio; the NPL (Non-performing loans) ratio of 1.7% – lowest in years – indicative of the quality of the book and strength of the Group’s credit underwriting standards.

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Operating expenses of €41.1 million are up by 4.1% on the €39.5 million for the corresponding 9M of 2023. Continued investment in top-end technology, including fraud prevention, digitalisation, regulatory, compliance and human resources, and associated cost inflation, are the key contributors. 

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The cost-to-income ratio for the 9M period was 70.8%, up from the 3Q 2023 ratio of 62.8% and in large part a result of the contraction in net interest income. 

Financial Position 

Total Group assets/liabilities at 30 September 2024 exceeded €3.9 billion, expanding by 7.2% (or €264.6 million) during the period under review. Key contributors were: 

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A growth in customer deposits which increased by €305.3 million to reach €3.4 billion, largely attributable to strategic product campaigning such as targeted offers of classic term deposits, new Kapital+ releases as well as initiatives promoting the Bank for everyday banking. 

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Countering the above increase, the Group reported a reduction in amounts owed to banks of €47.3 million, shifting dependencies to optimise on treasury lines and liquidity management. 

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Most of the fund raising went to the Bank’s loan books which grew by €226.6 million to reach €3.1 billion – home finance remaining the top contributor to growth now reaching €2.0 billion by 3Q 2024, with limited, cautious growth in the commercial and syndicated loan portfolios. 

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Taking advantage of opportunities created by the interest rate environment, cash balances with the Central Bank of Malta increased by €75.3 million to €206.3 million over the 9M under review, as the portfolio of debt and fixed income instruments contracted by €36.6 million to €405.4 million. 

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The pick-up in fund-raising and higher cash levels in 3Q 2024 resulted in Liquidity Coverage Ratios (LCR) hovering comfortably between 150% and 170%. 

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Total equity at the end of 3Q 2024 was €296.1 million, up by €8.7 million on December 2023, in part also thanks to the downward direction of interest rates and some uplift from market performance which further helped claw back unrealised losses in the Bank’s investments portfolio. 

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The Bank’s CET1 ratio stood at 14.4% (31 December 2023: 14.6%) and the Capital Adequacy Ratio at 20.0% (31 December 2023: 20.6%). 

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Assets under management remained stable thanks to generally positive market sentiment, with steady growth in both occupational and personal pension clients. 

CEO Marcel Cassar commented:

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“The easing of monetary policy and roll-out of interest rate cuts continue to contrast with heightened geopolitical risk and conflicts in various areas, a slowdown in economic growth in China and uncertainty around the outcome of presidential elections in the United States. As banks across Europe, including Malta, have benefited from a profits bonanza thanks to higher interest rates, retail banking strategies will now turn more defensive in the face of increasing headwinds: cost inflation, including from technology and fraud protection, rising customer expectations, uncertainty about interest rates and higher credit risk as post-pandemic economic boosts are now wearing off. At the same time, economic activity in Malta is resilient, although growth is expected to moderate from the high rates experienced in recent years while employment, inflation and debt/GDP indicators remain at healthy levels.

The APS Bank strategy remains focused on delivering simpler banking, by strengthening our products and digital offerings and enhancing the experience for all consumers. We are also taking a broader view of the interest rate cycle, noting that the measures we implemented in 2Q 2024 to ease margin pressures are helping us keep our pricing competitive while supporting profitability. As we continue to see steady growth in our customer and business base, along with improvements in efficiency and revenue potential, the Bank’s and Group’s strategy is focused on gaining scale and scope from the substantial, transformational investment we have been making in technology, talent and systems. We are confident that this will not only consolidate our market position and sustain our competitiveness but will also be in the best interests of all our stakeholders.”