You are going out with a bond programme just over a year from your Initial Public Offering (IPO). How come?

For banks, capital is the ‘oxygen’ they need to grow. The IPO of June 2022 was about ordinary equity, in technical terms that’s called Tier 1 capital. The bond programme will raise our debt capital, or Tier 2, plus we need to meet regulatory requirements – what are known as MREL.

Why a ‘programme’ and what’s so different about it?

It allows us the flexibility to issue bonds from time to time according to our requirements. At the Annual General Meeting of last May, the shareholders approved an issuance programme of up to €150 million, which is also what the Base Prospectus approved by the MFSA contains. If required, we can ask our shareholders to renew or revise that authority at a next General Meeting.

So, what is MREL?

MREL stands for ‘Minimum Requirement for own funds and Eligible Liabilities’, they are the instruments which certain banks must hold in order to prevent a resolution to be met from taxpayers’ money. It can comprise equity and eligible debt, including deposits. Although the origins of MREL go back to the financial crises of 2008, the requirements are still being phased in over the years.

How did you establish the size of the offer at ‘up to €50 million’, from a total programme of €150 million?

As I stated, MREL can be made up of different types of instruments and we have been building up our MREL over the past months. This meant that we could limit the size of the bond issue. At one point we were looking at €70 million or more, but we then decided on a lesser amount.

So are you being cautious about the likely take-up of the offer, limiting it to €50 million max?

Not at all, but debt capital needs to be employed efficiently. So we will tap into the issuance facility according to our requirements – that’s the beauty of it.

You just announced another excellent performance, for the nine months ended September 2023. How much of that is on the back of rising interest rates?

As I have commented elsewhere, we are passing on interest rate increases to depositors but not on home loan borrowers. And we are also mindful to keep the borrowing costs of our corporate and commercial customers in check. We look to pick up good spreads on our bond and syndicated loan books, which helps us support our interest rate strategy.

But how sustainable do you believe that strategy to be over the coming months?

Clearly there are pressures and these will grow as our cost of funding increases. But we have been managing and even widening our margins, it’s also a question of volumes and finding the right balance. Despite home finance being a mainstay of our retail activity, our asset mix is quite diversified and our commercial and syndicated loan books continue to provide us with good returns for risks that we like.

We announced a solid operating performance and strong results on the back of a business model which is tried and profitable, with excellent prospects for 2024

The Bank’s loan portfolio has been growing quite strongly, yet you barely posted any changes in provisions & non-performing loans (NPL). This suggests a strong and performing loan book. What’s your comment?

First, our credit underwriting standards are very high. Not only is our risk appetite prudent but we are also selective when it comes to business acceptance; nothing strange about this, and we are also actively and continuously working at reducing our NPLs. But it equally has to do with our policy of interest rate transmission, i.e. by not raising borrowing costs we are also limiting the risk of future defaults and protecting the quality of the book.

For some months we have been seeing local banks and Government offering deposits and bonds at attractive rates. Is this ‘thirst’ for funding impacting APS Bank’s prospects of growth?

As interest rates started rising in 2022 and with Government borrowing more to finance its budget, people became attracted to new MGS and treasury bill issues with higher yields. So banks have reacted by paying more to preserve their deposit base. Different banks manage the situation differently, and what I can say is that we have managed ours quite well as our results, and business prospects, show.

Last question: despite the announcement of good results, your share price dropped over the last days. To what do you ascribe that?

Let me guess… We announced a solid operating performance and strong results on the back of a business model which is tried and profitable, with excellent prospects for 2024. And we also communicate information frequently and transparently, which is what markets usually like. But I can understand the effects of e.g. our scrip dividend distributions at a below-market attribution price. And we are also mindful that certain shareholders wanted to sell off some of their holdings to ‘make space’ in their portfolios for the 5.8% bonds as the launch date approaches. Markets do behave in strange ways but there will also be something rational, somewhere! 

Approved and issued by APS Bank plc (‘’the Bank’’), APS Centre, Tower Street, B’Kara BKR 4012. The Bank is regulated by the Malta Financial Services Authority (‘’MFSA’’) to carry out Investment Services activities under the Investment Services Act 1994. The MFSA authorised the Base Prospectus and the admissibility to listing on the Malta Stock Exchange of the Unsecured Subordinated Bonds – Bail-in-able Instrument (‘’the Bonds’’) pursuant to the Capital Markets Rules. Prospective investors should refer to the Base Prospectus and the Final Terms issued by the Bank, both dated 24 October 2023, which may be downloaded from the website of the Bank on apsbank.com. mt/bonds. Copies of the Base Prospectus and Final Terms are also available from Authorised Intermediaries listed in the Final Terms. The offer period is between 30 October 2023 and 17 November 2023, or earlier as may be determined by the Bank. Prospective investors are to be aware that they are about to purchase securities that are not simple and may be difficult to understand. Anyone wishing to acquire Bonds of the Bank should read the Prospectus before making any investment decision, to fully understand the potential risks and rewards associated with investing in the Bonds. The Bonds are complex financial instruments and may not be suitable for all types of investors. Authorised intermediaries may only distribute the bonds to retail clients subject to a suitability test to be performed in respect of such applicants, irrespective of the investment service being provided. Investors may lose part or all of their capital under a resolution action. The value of the investments can go up or down and past performance is not necessarily indicative of future performance. The approval of the Prospectus by the MFSA should not be understood as an endorsement of the Bonds offered and admitted to trading on the Official List of the MSE.