APS Bank’s Profits Are Shrinking – So How Can It Afford HSBC Malta?
When speculation first emerged last year that APS Bank was eyeing HSBC Malta, it sent shockwaves through the local financial sector. APS’s share price surged, analysts debated the feasibility of such a move, and the bank’s CEO, Marcel Cassar, did little to shut down the conversation, calling it “an opportunity” while stopping short of confirming a deal.
But now, with APS Bank’s 2024 financial results in hand, the question is no longer just whether it wants to acquire HSBC Malta, but whether it can.
The numbers paint a mixed picture. APS has continued to grow, with total assets increasing by €500 million to €4.2 billion, deposits up by 17%, and its loan book expanding by 11%. These figures signal increasing market strength. However, at the same time, profitability has taken a major hit. Pre-tax profit fell more than 20% from €30.2 million to €23.8 million, net interest income dropped by 11%, and operating costs surged by 8%.
Acquiring HSBC Malta would be a monumental step up—one that would more than double APS’s size overnight. But does a bank already struggling with profitability and rising costs have the financial muscle to pull it off?
Can APS Afford an HSBC Takeover?
APS has been careful with its wording, stating that it would not pursue an acquisition “at any cost.” This is a way of keeping the door open while managing expectations. But with HSBC Malta still in play and no official confirmation of competing bidders, APS is one of the few banks that could make a move—if it can afford to.
That is where the financial results raise serious questions.
For starters, APS’s cost-to-income ratio has jumped from 61.6% to 68.7%, meaning the bank is now spending far more to generate revenue. This is not the profile of a financial institution flush with cash and looking to make a bold acquisition. Instead, it suggests a bank already facing the challenge of balancing expansion with profitability.
Interest expenses soared from €32.1 million to €49.2 million, eating into net interest income, while operating costs reached €56.9 million due to a combination of staff costs, regulatory demands, and inflationary pressures.
Meanwhile, APS’s dividend strategy—offering shareholders the option of cash or scrip shares—suggests that capital preservation is a priority. While common among banks, it raises the question of whether APS is in a strong enough position to absorb HSBC Malta without significantly straining its balance sheet.
If APS does make a move, it will need a financial partner. Whether that means teaming up with a foreign institution or securing government backing, a solo bid appears increasingly unrealistic given its latest results.
A Changing Banking Landscape
While APS’s financial results suggest caution, there are external factors working in its favour. European regulators continue to push for banking consolidation, arguing that fewer, stronger institutions create greater financial stability. If APS were to acquire HSBC Malta, it would cement itself as the second-largest bank in the country, creating a more competitive alternative to BOV.
However, consolidation only works when the acquiring bank has the financial resilience to absorb the risks that come with expansion. And this is where APS’s position starts to look fragile.
Unlike larger multinational banks, APS does not have the same level of financial cushioning. Its capital adequacy ratio has slipped slightly from 20.6% to 20.1%, while its Common Equity Tier 1 (CET1) ratio stands at 14.6%—stable but not exceptional for a bank looking to take on a much larger operation.
Then there’s the ownership question. APS Bank is still partly owned by the Maltese Church, and any large-scale acquisition would raise questions about how much the Church is willing to expand its role in the financial sector. Would it be willing to increase its exposure to such a transformative deal?
Furthermore, HSBC Malta’s business model differs significantly from APS’s. HSBC is an internationally connected bank with a strong focus on corporate clients, many of whom may not be eager to stick around if APS takes over. This raises another challenge: even if APS does acquire HSBC Malta, can it retain the business that makes HSBC attractive in the first place?
Reality vs. Market Speculation
Despite APS’s financial pressures, its share price has remained strong, largely buoyed by speculation about the HSBC Malta acquisition. This raises a crucial question: is market sentiment being driven by genuine confidence in APS, or simply by the idea of a deal happening?
The HSBC question has been hanging over APS for months, but these latest financial results suggest that, if an acquisition is on the table, it will not happen easily. A major capital injection, significant restructuring, and external financial backing would all be required for the bank to pull it off without overextending itself.
If APS ultimately decides not to pursue HSBC Malta, it will need to clarify its future strategy. Will it focus on organic growth? Double down on digital banking? Seek other acquisitions? Right now, the narrative has been shaped by the HSBC speculation, but the bank’s actual financial position suggests a need for caution.
One thing is certain: APS is growing, but growth alone is not enough. The bank must now prove that it has the financial resilience to back up its ambitions. If HSBC Malta is truly in its sights, the coming months will determine whether APS is a serious contender—or simply a bank caught up in market hype.
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