Malta’s earnings season continued last week with the publication of the annual financial statements of BMIT Technologies plc and APS Bank plc. Given the important developments taking place in the banking sector as CrediaBank SA is expected to finalise the acquisition of HSBC Bank Malta plc in the first quarter of 2027, it is fundamental to continue monitoring the financial results and key performance indicators of the main players in the industry.
APS is Malta’s third largest bank in terms of total assets but second largest in terms of loans as it continues to win additional market share. The results published last Thursday provide evidence that the bank’s strategy is starting to translate into tangible financial benefits.
The first half of 2025 was a very challenging period for APS as it suffered from margin compression and abandoned the acquisition of HSBC Malta. But in the second half of the year, the APS group staged a remarkable recovery in its margins and profitability while raising fresh capital through a successful €45 million rights issue.
APS group generated pre-tax profit of €26.5 million in 2025, a 11.3% rise over the €23.8m achieved in 2024 and ahead of the forecast published at the time of the rights issue following a very strong final quarter of the year.
Evident progress on a quarterly basis
In order to review APS’s performance in 2025 in the best analytical manner, one must track the progression of the net interest margin (NIM) on a quarterly basis, given the bank’s decision to report its figures every three months to ensure the investing community is kept abreast of all developments.
The NIM stood at 1.65% in Q4 2024, and edged down to 1.63%. in Q1 2025. Since then, the NIM has accelerated markedly, reaching 1.81% in Q2, 1.97% in Q3, and 2.02% in Q4. This consistent upward progression in the past three quarters reflects the rebalancing of the deposit book away from more expensive fixed-term deposits towards lower-cost on-demand deposits incorporating current accounts and savings accounts (CASA), as defined by CEO Marcel Cassar in the 2025 annual report.
At the start of 2025, on-demand deposits accounted for 56% of overall customer deposits totalling €3.7 billion. By year-end, this had risen to 68%, with term deposits falling correspondingly from 44% to just 32%.
The shift in the deposit mix helped the bank reduce its cost of funds from 1.40% in 2024 to 1.11% in 2025 – just ahead of the forecast of 1.13% in the rights issue prospectus. This improvement in the funding mix, coupled with the growth in the loan book, was instrumental in driving the recovery in the net interest income, which surged by 20.1% throughout the full year to €78.7 million. The growth in the net interest income accelerated in H2 2025, amounting to €43.1 million compared to €35.6m in H1.
This was also reflected in the quarterly profitability of the APS group with pre-tax profit of €8.7 million in each of Q3 and Q4 2025, compared to much lower levels in the year’s prior two quarters. The upturn in profitability in 2025’s last two quarters helped the return on equity to rise to over 7%.
“APS now holds 25.6% of home loans in Malta”
Expanding market share
During 2025, APS Bank grew its loan book by over €350 million (with €130m during Q4 2025 alone) to €3.55 billion, representing growth of 11.3%. APS now holds a 25.6% share of home loans in Malta. The bank’s overall lending market share is of approximately 20%.
The non-performing loan ratio of APS, a key indicator of credit quality, closed the year at a record low of 1.36% – a remarkable achievement given the speed of balance sheet expansion in recent years, and one that reflects the high market share in mortgages.
On the deposit side, total deposits grew by €463 million during 2025 to €4.1 billion. On-demand deposits climbed €759 million to reach €2.8 billion, while fixed-term deposits fell by €296 million to €1.3 billion. The loan-to-deposit ratio of APS was of 86% at the end of 2025.
Strengthened capital position
Following the abrupt termination of the bank’s efforts to acquire HSBC in the first half of 2025, APS successfully raised €45 million in fresh equity through a rights issue in Q4 2025. The capital injection materially strengthened the bank’s capital position with the Tier 1 ratio improving from 14.3% at the end of 2024 to 17.6% in December 2025. The high level of capital provides the bank with ample capacity to continue its balance sheet expansion and the strategic flexibility to pursue growth – including, as the CEO has signalled, potential inorganic opportunities.
The capital raised also had an important impact on the bank’s ownership structure as AROM Holdings Ltd (the wholly-owned vehicle of the Archdiocese of Malta) saw its stake diluted below 50% for the first time (42.95% as at December 31, 2025) and the Gozo diocese, the second qualifying shareholder, at 10.31%, thereby bringing the free float to 46.7%. Since the IPO in 2022, the majority shareholder had clearly indicated its strategy of diluting its equity stake over time.
Clear guidance for 2026
The 2026 targets published by APS during the market briefing in February and reiterated by CFO Ronald Mizzi last week are a natural flow from the trends already visible in SH 2025. The bank is targeting a net interest margin exceeding 2% for 2026, cost of funds below 1%, a cost-to-income ratio in the low 60s, loan growth of 5% to 10%, revenue growth of 15% to 20%, and a post-tax return on equity (ROE) of 6% to 7%. This should translate into a pre-tax profit of €33.8 to €39.7 million, and a net profit of €22 to €25.8 million.
Investors may be pleased to note that the NIM already crossed the 2% threshold in Q4 2025, and the senior management of APS clearly indicated that the cost of funds is below 1% in the first two months of 2026, which should lead to record profits in Q1 2026 as the deposit mix rebalancing is still ongoing.
Loan growth of 5% to 10% should be achievable given the 11% growth in 2025 and the structural demand for home loans in Malta. Revenue growth of 15% to 20% from the level of €89.3 million in 2025 would bring overall group revenue to €102.7 to €107.2 million in 2026 (total income in Q4 2025 reached €24.7 million – the highest quarterly revenue figure for the bank).
Perhaps the most ambitious target is to improve the cost-to-income ratio to the “low 60s” from the level of 70.7% in 2025, which, however, included some one-off expenses. APS’s cost base grew by 10.8% in 2025 to €63.1 million, split up as follows: staff costs: +12% to €33.3 million; administrative expenses: +5% to €23.6 million; depreciation and amortisation charges: +12% to €6.2 million in line with the ongoing technology investment programme.
Investors’ key focus in the coming quarters as APS presents its Q1 2026 on April 30 and then the interim financial statements on July 30 should be on whether the bank is achieving most of its targets for 2026, and especially that it can consistently deliver quarterly profits of between €9 and €10 million across the full calendar year. This would help strengthen the ROE – a key metric for valuation purposes – to above the bank’s cost of capital.
If this is achieved, the re-rating of APS shares would be warranted as the share price is currently trading at a 32% discount to the book value of €0.72 per share.
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