APS Group registered pre-tax profits of €15.8 million in 2020, down from €26.8 million one year earlier. 

The result - a 41 per cent year-on-year decline – came as increases in the group’s operating expenses (up 15.8 per cent to €35.2m) outpaced growth in net interest income, which rose by 9.4 per cent to reach €48.9 million.

The vast majority of the group’s 2020 pre-tax profits – €15.5 million – came from APS Bank. The bank’s profits were down 28 per cent from the previous year, when it booked pre-tax profits of €21.6 million. 

Group total assets were up by €252 million or 11.6 per cent over the year to reach €2.4 billion. Lending activity rose by 13.8 per cnet to reach €1.8 billion, with over 60 per cent of growth coming from households and mortgage financing. 

Funding grew by 12 per cent to reach €2.2 billion, thanks to increased customer deposits and a €55 million 10-year bond issued in the last months of 2020. The year closed with Group equity of €206 million, an increase of €14.3 million compared to the prior year.

Group directors will be recommending the payment of a scrip dividend of €3.7 million (net dividend of €2.4 million), subject to regulatory approval.

Income

Net interest income grew by 9.4 per cent to €48.9 million, driven mainly by the continued growth in the Bank’s lending book. 

Interest receivable on loans and advances increased by €5.8 million to €56.5 million, counterbalanced by a €1.5 million contraction in interest receivable on debt securities used for liquidity purposes. This was largely the result of maturing fixed-income securities repricing at lower rates of return and was compounded by the pandemic-related financial market volatility. 

Other operating income totalled €7.9 million, dropping by 34.4% from the €12.0 million reported in 2019. This was mainly a result of the performance of the APS Diversified Bond Fund and the APS Global Equity Fund, which during 2020 recorded net gains on financial instruments of €0.5 million as opposed to the €4.0 million for 2019. 

Fees, commission and other operating income remained flat on the preceding year.

Expenses

Operating expenses increased by 15.8% to €35.2 million which, on the back of slower revenue growth and lower business volumes.  Higher overheads were largely due to the continuous investment in human capital, in technology and various projects, including to the physical infrastructure and branch network, that are ultimately contributing to an enhanced customer experience. 

There was an increase in costs related to regulatory requirements and COVID-19 preventive measures. 

Impairment losses

Net impairement losses roses five-fold to reach €5.5 million. The bank attributed this to growth in its lending portfolio, and the classification of a higher level of Stage 2 assets, reflecting an increase in credit risk due to uncertainty in the current economic environment.

CEO Marcel Cassar warned that significant uncertainty remained, despite COVID-19 vaccine rollout, but noted that banks were more robust than they were during the 2008 crisis. 

“As governments and banks continue to extend their assistance and loan moratoria into 2021, the coming months are critical to assess the scale of risk and how robust the economic recovery will be,” he said. 

“We posted the best possible results in what are probably the most challenging circumstances, considering European peers and benchmarks and even our own forecasts. 2021 will see us making progress for the next phase of our capital development plan, targeted for 2022. Our campaign to raise what would be the largest ever round of capital for APS Bank will demonstrate our long-term commitment to the Maltese economy, underpinned by a strategy and business model that are always true to our values,” Cassar added.