Tapping into overseas markets for future bond issues ‘cannot be ruled out,’ says APS Bank CEO

APS Bank plc CEO Marcel Cassar has stated that potentially delving into foreign markets for future subordinated bond issues “cannot be ruled out”.

He was speaking in a market briefing on Thursday during which the bank’s financial results for the first nine months of 2023 were presented. For the nine months ended 30th September 2023, APS Bank recorded €23.3 million in pre-tax profit at group level, representing an increase of 176.8 per cent improvement from the previous year’s €8.4 million.

At bank level, pre-tax profits marginally grew by 8.8 per cent to €23.6 million (9M2022: €21.7 million) APS stated that as the group continued to recover from 2022’s “unrealised, negative investment markets trends”, late-September volatility prompted mixed results, causing the bank’s solo performance to “outpace marginally” that of the group.

The group’s total assets and liabilities expanded by 12.4 per cent, reaching a total of €3.5 billion. The main contributor for this was the growth in loans and advances to customers, which grew by €363.2 million across retail, mainly home loans, commercial credit, as well as the international syndicated loan book, APS Bank said.

Additionally, earlier this week, APS Bank announced that the issue of €50 million unsecured subordinated bonds with a coupon rate of 5.85 per cent was granted approval by the Malta Financial Services Authority (MFSA). This was the first of a series of issues to be released from a wider €150 million bond issue, intended to form an integral part of its Tier 2 Capital requirements for European Union regulations. The funds of this issue will be used to meet part of the bank’s general financing requirements.

€15 million of the €50 million has already been committed to various third-party investors in a pre-allocation process, while the remaining €35 million is available for subscription. The general public and preferred applicants are eligible to participate through an intermediaries’ offer as from 30th October 2023. Unless APS Bank opts to terminate earlier, the offer shall close on 17th November 2023.

In the announcement of the financial results, Mr Cassar remarked that the bank is “confident” that the imminent launch of its bond issuance programme will “support a strong closing” of the current financial year and “pave the way for yet further growth in 2024”.

During today’s market briefing, Mr Cassar was questioned whether APS Bank would consider tapping into foreign markets for any future subordinated issues.

He replied that the bank’s management considered doing so, however it was “discarded at an early stage” given that APS Bank could “anticipate the appetite and interest at a local level, at least for this tranche”.

Despite this, Mr Cassar added that tapping into overseas markets in the future “cannot be ruled out”.

Turning to the financial results more specifically, Mr Cassar said in the announcement that APS Bank is pleased to report a “solid operating performance” for the period under review, as indicated by the “record numbers” across most of its income lines and the pre-tax profit figure.

“At the same time, monetary policy tightening keeps our margins under pressure as we pass on interest rate increases to depositors but not on home loan borrowers, and with the concerns of our commercial customers in mind. Thanks to the active management of our bond and syndicated loan portfolios, we are able to pick up good spreads while improving the geographic, industry, ESG and overall risk profile of our book,” he continued.

He remarked that even though banks across Europe, and in Malta, are expected to enjoy a “boost” to their profits due to the higher interest rates, Mr Cassar said that APS Bank’s sights are on “more medium-to-long term growth areas”, as the tailwinds from central banks’ measures to curb inflation are expected to slow down.

“Against a backdrop of mixed geopolitical, economic and market developments, APS Group is once again showing the way with a performance that balances a forward-looking, profitable business model with its role as a leading provider of credit to the Maltese economy and banker for the community,” he concluded.