Issue link: https://maltatoday.uberflip.com/i/1128919
13.06.19 10 INTERVIEW The Church's bank... its mission APS Bank CEO Marcel Cassar talks to Business Today about the dramatic changes underway in the local banking landscape and how the Church's bank is gearing up to face the challenges ahead MASSIMO COSTA APS Bank is a church owned bank. What makes it different from other local banks? In terms of its structure, authorisation and general fabric as a credit institution, APS Bank is no different from any other bank. It is licensed and supervised by the MFSA and subject to all the applicable laws and regulations in Malta. Because of our growth in recent years, we are becom- ing increasingly systemically important in Malta, although falling short of coming under the direct supervision of the ECB; in fact we're classified as "high priority" amongst the category of banks that come right after those supervised by the ECB. I would say that what makes APS dif- ferent is the fact that our ethos, culture and market interests are very communi- ty-based. Our mission statement says it best: "to be the community bank in Malta". Founded in 1910, APS is the oldest bank in Malta in terms of uninterrupted histo- ry. Our origins lie in a project started in Valletta by a Jesuit priest who set up a mu- tual help society aimed at forming casse di risparmio (savings chests) in aid of the agricultural class and the needy. So this is how the bank started, and that character continues to imbue our philosophy and set of values. But we are also a commercial bank and so we support not only individuals and families, but also the business community. Nowadays, the bank is increasingly pres- ent in the business sphere, because we felt there was a space – and an opportunity – for an alternative bank that has an interest in the community, which also includes the business community. I should also add that the bank's board of directors is appointed by the main shareholders - the Archdiocese of Malta and the Diocese Gozo. It is a high-calibre board with the members, all lay persons, chosen for their professional track record, competence and expertise. Earlier this year APS Bank completed its transition into a public liability company and subsequently announced that it was raising €13 million in capital through a one-for-12 rights issue. You had also mentioned that there would be two subsequent "phases" through which the bank would be raising capital in the future, through either rights issues or other instruments. What does the bank have in mind, and what is the importance for APS of raising additional capital? A bank's ability to grow is directly related to its access to capital. is is mainly be- cause of regulation, especially so since the 2008 financial crisis. Unless a bank is able to increase its Own Funds, and therefore the amount of risk and size of exposures it can take on, it will be limited in expanding its revenue. is is something I learnt very early in my career and it's always at the back of my mind: unless you grow, your customers will outgrow you! It's common sense really. And growing means being able to scale up our activities and revenue, which in turn fuels further growth. So this is what the capital raising exercise is aimed at – to support our growth. e exercise is happening in three phas- es over a four to five year span, allowing also time for business to be scaled up since the capital has to be put to use and rewarded. Phase 1, which consisted in a 1 for 12 rights issue, has just been com- pleted and the capital received. Between 2018 retained earnings and new equity we raised just under €25 million, as projected. Phase 2 is planned for the second half of 2020 or early 2021 and we will be target- ing another scaling up of capital – possi- bly €70 million or more – part of which can again come from retained earnings. In this Phase, however, we expect to see the existing shareholders diluting their share- holding while retaining control. ere is interest from a number of institutions, re- ligious orders and even foreign banks with a similar DNA to ours, in having an equity investment in the bank. is is encourag- ing but the exact formula – and also the type of financial instrument to be issued to these investors - will be determined in due course. We are still in very early days but there is a good possibility that our Phase 2 requirements will be met in this way. Phase 3 should then come in 2022 and will see us raising another €60 to €70 mil- lion. So it's a five-year capital development plan. As can be expected, this pre-suppos- es a certain momentum of expansion in the bank, which we are confident we can achieve, precisely because we have a plan to develop the business of the bank. APS will continue to be predominantly active in the Maltese market: you won't be see- ing us opening branches or subsidiaries abroad, it's not our business model and we don't have such plans. is does not mean we don't take overseas risk in our books, we do that and it's also necessary for di- versification; but that's different from em- barking on a cross-border development strategy, which is not in our plans. We feel there is further potential in the Maltese economy, which is not only growing but also transforming. We are seeing oppor- tunities and positioning ourselves to be in the right place at the right time following a very clear strategy. APS has launched a new omni- channel banking app, myAPS. What is behind the bank's strategy to improve its customers' experience? e launch of the app forms part of our programme of transformation as we grow. It means providing a number of channels through which we offer a banking experi- ence to our customers - branch, internet and mobile. Omni-channel means that a service may be started at a branch, con- tinued on mobile and finished via internet - or in whichever other order or combina- tion a customer wishes. I always emphasise that the community character of the bank has to remain, how- ever. We believe that for the foreseeable future we will still have customers who want to experience the bank physically, not just digitally. And the physical expe- rience will remain important for certain types of services, such as investment or general financial advice, which is also why we are transforming our branches to make them more contemporary. The bank has launched, in collaboration with the government, a new government equity-sharing scheme to help individuals buy property. Why does the bank feel it is important to be involved in this sector? is links to APS Bank's tradition of community banking and involvement. Fi- nancing home ownership and housing are key areas of our business. We have a lot of experience and play a leading part in the home lending sector, as we also support sectors like education, care, health and retirement. So home ownership is core to our ethos. e equity-sharing scheme had existed years back, then Government decided to revamp it. It was a privilege for us to work with Government in supporting this re- vamp, which also came at a very appropri- ate time as it coincided with our market development programme in the 2019- 2021 Business Plan. This scheme looks good, but it only applies to over 40s. What is the bank doing to help young couples and first-time buyers trying to get a bank loan to buy a property, considering the current property prices? APS is already strong in its offering of home loans for young people and espe- cially first-time buyers. We have different schemes and products as well as incen- tives, such as refunding of contract costs and certain fees and charges for first-time buyers. In 2017, we launched a Social Loan scheme in conjunction with Government, which was a first for Malta. is loan opened a corridor for persons who are on low income levels – practically at the margins of society – but who aim to own their property. It does not require the bor- rower to make a front contribution, i.e. it's 100% financing, has an incentivised rate of interest, charges are waived and there is a realistic capping on the amount that can be borrowed. Of course this product addresses social cases and also limits the type of property that can be acquired. We also note that the scheme created a certain awareness amongst developers about the need for property that caters for this seg- ment of society. So, between the Home Equity Sharing, the Social Loan and our general Home Loan offerings, we believe we have quite a range of financing schemes and products that should address the market require- ments. And we are always working on new products and ideas, so – watch this space. A bigger role in pensions-related solutions for the bank is also being floated. What will this entail? APS follows all the pensions-related developments, such as Government in- centives, and we are always quick on the