APS Bank announced a strong 2018 operating performance for both group and bank, with activity also reaching all-round record levels. Group operating income expanded by 4.6 per cent, from €42.8 million to €44.7 million (Bank: by 6.3 per cent to €45.7 million) and pre-tax profit increased by 1.5 per cent, from €18.4 million to €18.6 million (Bank: by 7.7 per cent to €19.7 million).
Deposit raising and lending activity grew by a strong 34.7 per cent and 28.1 per cent, to €1.65 billion and €1.31 billion, respectively, over 2017. This result was achieved on the back of continued growth in business momentum and heavy investment in people, technology, network transformation, functional and process reorganisation.
These results emerge from the audited financial statements for the year ended December 31, 2018, as approved by the board of directors on March 21, 2019. All main income constituents grew strongly, namely net interest income (up by 15.3 per cent on 2017) and fees and commissions (up by 24.7 per cent).
Households and home finance remained the largest source of credit activity. However, 2018 saw more diversification taking place towards commercial real estate and a growing book of international syndicated loan participations. Correspondingly, the bank operated within very prudent liquidity coverage (LCR) and net stable funding (NSFR) ratios which were maintained well above the regulatory minima, as the funding diversification strategy returned liquidity levels without necessarily compensating spreads.
On the contrary, the Central Bank and other bank balances continued to attract negative interest throughout the year under review.
Cost-efficiency at 50.7 per cent was only marginally higher than the 50 per cent of 2017, as personnel, operating and compliance expenses increased in support of the business growth. It should be underlined that realised gains in excess of €2 million on the transfer of securities to form the APS Diversified Bond Fund in 2017 were not repeated in 2018. On the other hand, the 2018 group results reflect a net, unrealised negative fair value movement in the performance of the Bond Fund during the year under review.
Overall, credit quality at bank level continued to improve, with NPLs to gross loans reducing from 4.2 per cent in 2017 to 3.8 per cent in 2018, with the stock of NPLs fairly distributed across sectors. A prudent credit loss experience (ECL estimated at 12 bp for 2018) and sustained recovery efforts also resulted in lower net impairment provisions compared to the previous year.
The group’s ROE remained strong at 9.7 per cent (2017: 10.9 per cent) while balance sheet growth was robust, with total assets increasing by 26.4 per cent to €1.9 billion. At 12.51 per cent (Bank: 12.47 per cent), the group total capital ratio, consisting primarily of Tier 1 equity, is down from last year (14.82 per cent and 14.19 per cent for group and bank, respectively) yet still affording an adequate headroom above the regulatory minimum. A capital development plan has now been formulated, discussions with share-holders have taken place and the first phase of a rights Issue is planned for the second quarter of 2019.
More numbers and statistics from the audited financial results will be published in the 2018 annual report which the shareholders will be invited to approve at the AGM on April 25. More news about the growth plans of APS Bank will be released in due course, starting from the conversion into APS Bank plc with effect from April 1.
CEO Marcel Cassar said: “The transformation of APS Bank into a strong market player continues across a number of fronts: organisational, network and processes, technology to enrich the customer proposition, strengthening governance and risk controls and improving the quality of the income statement. We also continue to gain further market share. The message that these numbers transmit is that amid a competitive and challenging environment, we have been able to draw on our market strengths and maximise on the business and revenue opportunities that they offer.”