Church’s bank primes itself for growth

APS Bank will raise €13 million in capital through a rights issue for existing shareholders as it primes itself for growth, CEO Marcel Cassar said.

The one for 12 rights issue approved during the annual general meeting last week is the first phase in the bank’s capital development, which may include a bond issue further down the line.

Only last month, the bank, which is owned by the Catholic church, completed its transformation into a public liability company.

The step was necessary to allow the bank to expand its capital base.

Cassar said the rights issue will raise new equity worth €13 million in CET1 capital, and will be injected over the coming weeks.

APS Bank is owned by the Maltese and Gozitan dioceses with the Metropolitan Cathedral Chapter holding a very minor stake.

Cassar told BusinessToday the bank’s shareholders have all confirmed their intentions to subscribe to the rights issue in different proportions.

He said the first phase would be followed by phases two and three, which are intended to scale up the bank’s capital to “much higher levels”.

“We’re looking at raising €70 million by 2020 or 2021. A decision is yet to be taken on whether this will take the form of equity or a hybrid instrument, which could include features of bonds. But it’s still early days and those decisions are far away,” Cassar said.

The bank expected to have a clearer idea by the end of this year on which instruments it will use to raise the level of capital.

New omni-channel banking app

But the bank also aims to improve the customer experience through a new banking app – myAPS – which Cassar said could be seen as “the bank’s answer to Revolut”.

The app will be “omni-channel” in nature, meaning that it will allow customers to continue a service, via the app, which would have been originally started at a branch or over internet banking.

“myAPS will be the bank’s mobile app which won’t only be a mobile banking solution, but one which is omni-channel. We will be offering various touch points across mobile, an enhanced internet banking service and digital interaction in our branches,” Cassar said.

Bigger role in pensions-related solutions

He added that the bank was actively interested in the personal lending segment and retirement and pensions solutions, where it feels there is a considerable market gap.

He said the bank would be assisting the government with its recently announced home equity scheme – an income supplement through which retirees can liquidate up to 60% of their property’s value while continuing to live in their residence.

“As a bank, this is a segment which we like a lot, and we’ve been working on it for many months, so we welcome the new regulations and the government’s announcement,” Cassar underscored.

“We are now focusing on ensuring that our products are in line with those regulations, and we want to be a leader in this space, because we do believe there is a market gap in this sector. We know that lifestyles in Malta have improved, but the pension levels have not improved commensurably,” Cassar said.

He noted that equity release from property to supplement pensions was something the bank wanted to be involved in.

Net income up 15%

APS Bank saw its pre-tax profit increase by 1.5% in 2018, to €18.6 million from €18.4 million.

It registered a net income of 15% in 2018 over the previous year, with the bank now having almost €2 billion in total assets.

“We now have just under €2 billion in total assets. The bank has doubled in size over the past two years,” Cassar noted.

Operating income, however, saw a 6% decrease in 2018. While “practically all” of the bank’s capital is tier 1, because of the bank’s increasing balance sheet and the number of loans which it is offering, its solvency ratio has decreased from a high of 18% to around 13% as it entered 2019.

“This is still well above the minimum requirements,” Cassar emphasised.

In 2018, the bank experienced a growth in deposits of 28%, while lending increased by 25%.

Home loans remain the bank’s major market, constituting 62% of the total loan portfolio.

The bank has embarked on a strategy to increase its market share through strategic selective business development, pursuing an operating model centred on three main product segments: personal, business and investment, Cassar said.

Cassar added that the bank’s means of funding remain “highly diversified”, with no single source exceeding 4% of the funding base.