Prof Lino Delia, APS Bank chairman talks about the bank’s expansion always within its main shareholder’s mission and outlines its successes and ambitious plans for the future.
With pre tax profits of Lm 3.2 million, a robust loan book, total assets now up to Lm 258 million and a view to expansion beyond our shores, APS Bank looks like it is indeed here to stay and flourish. Sitting in his chair in a humble office surrounded by vast quantities of books and material for his next paper, the bank’s chairman, Lino Delia is confident that this growth will continue in the years ahead. Where did the bank all start off however?
“APS Bank started off as a savings bank around 100 years ago and gave the opportunity to works to save money. You have to remember that this was before the welfare state and there were no pensions or social benefits in those far off days. State intervention was few and far between and this spurned Fr Vella, a Jesuit priest felt that he had to implement the Church’s social teachings in keeping with the encyclical, ‘Rerum Novarum’ through assistance measures such as rudimentary education, skills training and help for the purchase of medicines and such like. This led to the MUTUA concept where workers would save a small portion of their salary for pension requirements or medical insurance. The bank then started taking shape”.
APS had offices in each parish which would collect the deposits made by workers and the modus operandi remained like that until after the Second World War. In Archbishop Gonzi’s time, a general revaluation of the bank’s role within the Church took place.
“In the meantime, the State began to intervene in the social sector through compulsory education and social services. Although some reforms were put in place the bank continued to be a savings institution till around 1990 when a commercial license was applied for and this was granted. There were actually two philosophies amongst the bank’s directors at that time, one to sell the bank and the other to continue expanding it into different commercial fields”.
Fortunately, the latter opinion prevailed, with the bank’s directors deciding to go back to the roots as a savings bank but at the same time expanding into commercial fields whilst also complementing government’s services.
“We managed to structure the bank’s operations accordingly and set out on a logical plan. Amongst one of our aims was to enter the housing market in an aggressive manner by helping out individuals who would have found it much more difficult to jump onto the housing ladder. We came out with tailor made products such as the A-Plus account and also came up with competitive interest rates although there is obviously a limit to how much one can discount”.
APS has also continued to strengthen its links with the farming community by offering support finance for agricultural operators.
“We continued building on our reputation with farmers by improving our services at the Pitkali office where we also offer revolving loans linked to produce as security. We’re also planning to offer similar facilities to the fishing and meat producer’s communities but so far we have not launched products in these sectors”.
Moving on to the newly established company APS Consult, Mr Delia explained that this section would be tackling what could be termed as non banking financial business.
“We started identifying particular sectors but always keeping in mind our social position and mission. Today’s welfare state is pretty well established from the cradle to the grave, so to speak. However in today’s day and age, the last line of appeal is still the parish priest and we know of several cases where priests have forked out money to help destitute parishioners. APS Consult attempts to help in the restructuring of certain areas such as care for the elderly, the Church and also opportunities which prevail in the European Union. However we are also firmly entrenched in our social philosophy on which we were founded 100 years ago. We are in contact with similar banks from North Germany although these are more concentrated on asset management. We are an instrument which the Church can use to operate in various sectors and this is rather unique to Europe”.
APS Bank also organizes an annual seminar which deals with a specific topic having already tackled farming, fisheries, water and agriculture. Now it is time to move on to the restructuring of social services, Mr Delia explains.
“First of all, we are going to focus on the running of homes for the elderly. A rather daunting statistic is that in 20 years time, we shall have around 115,000 elderly persons in care, a number which we definitely cannot sustain if we do not plan properly for. Another worrying fact is the stark figure of around 800 new births from single mothers apart from a fast declining birth rate. What is going to happen to these persons in the next two decades if they are not guided properly? The problems look to be rather serious and unfortunately, little is being done to tackle them head on”.
The bank is committed to its three year plan by building the bank into a strong institution but also building ancillary structures that operate independently of the bank and help society evolve accordingly.
“Today there are quite a number of banks operating in Malta but it was decided by the Church that the bank can operate within society to effectively change that society. We are passing through a period of change and now, with the introduction of the Euro, change will have to be more drastic. The role of APS Consult is to facilitate these changes and to continually come up with policies and initiatives that will effectively assist society to cope and manage change”.
APS Bank has also expanded its staff from around 90 to over 200 in seven years, effectively since Prof. Delia took over the bank’s stewardship.
“While other banks are reducing their staff, we had to strengthen the core areas such as the legal department, IT and retail to be able to handle our ever increasing business toll. We also opened two new branches in Mosta and Paola and within a year, we will have opened our new operations centre in Swatar. One must also remember that our regulatory requirements have increased with new returns to be made to the Malta Financial services Authorities and now also to the European Central bank and this also creates a need for more qualified personnel”.
One can also copy products but at the end of the day, people will avail themselves of your services if you are original, Delia insists.
“The bank’s capital pertains to the shareholder but the deposits belong to the people. At present the Church has around Lm 11 million in capital from Lm 258 million so over Lm 230 million are customer deposits who are looking to maximise their return from their investment. We are the only bank who have to offer more advantageous interest rates to those who deposit while at the same time we have to offer competitive and lower interest rates to those who come and borrow from us. At present we are in a much better position than we were seven years ago with a legal department that contains four full time lawyers and obviously because business has increased considerably”.
Although APS Consult is planning to open its SICAV section shortly, the company is not based on fund management.
“As I have already explained, APS Consult attempts to consolidate certain sectors such as the agricultural sector which was partitioned into various non linked parts. Welfare services are also important and we are looking towards our links with the European Federation of Ethical and Alternative banks and Financiers (FEBEA) to achieve results in the elderly care sector, for example. We hope to create a policy document in this area which will be drawn up in conjunction with all stakeholders on a national level to come up with a clear and sustainable elderly care policy”.
However, the bank is not only interested in the elderly sector but is also branching out into sports and cultural activities.
“Obviously we cannot go into all areas at once but we will tackle each sector holistically and with a proper plan. We have already achieved some success in the musical sector with our series of sacred CDs and have also provided financing for a series of books in conjunction with the Maltese Academy of Writers. It is obviously important to be selective”.
APS’ success has been built on the expansion in home loans and the branching out into other sectors.
“As I already explained, we began by building up our home loan book and now are moving on into other sectors such as low interest loans, the A-Plus account and financing. Competition has obviously affected us but we have diversified our business in the process as we are obviously not out to destroy the competition. We are trusted with customer’s deposits and obviously we have to invest in ethical concerns so for example, we cannot invest in a betting company as that is not part of our policy. We are still cashing people’s cheques when other banks have discontinued this policy although admittedly, we have lost business from customers who expect perhaps too much from us”.
Profit remains important as the Church has come to depend greatly on the revenue which it manages to gain from the bank every year. Is the Church operating on a sustainable footing though?
“The Church is not involved in any sort of speculation and re-invests its dividend back into society, especially to maintain its homes and other going concerns. We do not really go into the sustainability of the dioceses but we do urge further consolidation into an eventual holding company which will reduce the tax burden. However the Companies Act does put certain obligations onto company owners and the Church, being the shareholder that it is, has much greater obligations in this regard. Still, it cannot continue handing out funds without a proper plan for social purposes as its long term sustainability will eventually be threatened”.
The bank also suffers some reduced profits from lower interest rates but the shareholder is willing to do so to continue serving its social mission.
“We remain committed to such a policy and when you are foregoing a substantial amount in fees and taxes for a home loan, it is obvious that the bottom line in profitability will be affected. However, the Church is happy to continue providing this social mission notwithstanding the eventual losses it incurs”.
I asked Prof Delia about the bank’s viewpoint on the current rampant borrowing for residences and whether this is healthy for the economy.
“We are very careful not to spread loans over a longer periods as one cannot guarantee that rates will remain as low as they are now. The dilemma which is to be faced is whether the rates will eventually rise considerably and repayments will become unsustainable. As I said, we lose quite a lot of loans due to this but we cannot borrow out on excessive periods as it would be unethical and obviously unsustainable”.
Prof Delia also warned that an interest rate hike by the ECB was to be expected shortly and after 1st January 2008, any movement by the ECB will automatically be adjusted to our base rate.
“All this will obviously have an effect on long term loans and although we are losing business to other banks, we are confident that our ethical standards and attractive rates will attract those clients who have faith in us”.
Finally, Prof Delia said that APS Bank was ready to begin expanding its operations within the wider context of the European Union.
“We will continue to search for new opportunities in various fields and I can say that we have already looked to financing some activity in the Eurozone although this was limited. We will continue using our contacts with Church banks and I believe that next year will see a considerable expansion in this area as well as a bigger role for APS Consult. We are also active in the encouragement of agricultural exports and remain committed to organize Church services, always however within a wider national context. These are just some of our ideas which we have for the future. With a newly refurbished branch in Gozo and our new state of the art centralized office in Swatar, we are confident that the bank will face the challenges of the future with confidence, always with our social mission in the forefront”.
With a young workforce (average age of 26, 60 per cent qualified personnel) and under the wise stewardship of Prof Delia and his team of managers, APS Bank looks poised to keep its market share and continue growing into new and exciting fields. The path is charted, all that is left is to build the blocks. Two years down the line, Prof Delia is confident that the bank will be transformed into an institution with vision and which will guarantee a higher return to its main shareholder, the Church.