Annual Report and Financial Statements 2025
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MeDirect Bank (Malta) plc
Annual Report and
Financial Statements
2025
Annual Report and Financial Statements 2025
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Contents
Directors' Report ................................................................................................................................................ 3
Who We Are .................................................................................................................................................... 17
Group Board .................................................................................................................................................... 20
Statement of Compliance with the Principles of Good Corporate Governance ................................................. 24
Remuneration Report ...................................................................................................................................... 37
Financial Statements ....................................................................................................................................... 46
Statements of Financial Position ................................................................................................................. 47
Statements of Comprehensive Income ....................................................................................................... 48
Statements of Changes in Equity ................................................................................................................ 49
Statements of Cash Flows .......................................................................................................................... 50
Notes to the Financial Statements .............................................................................................................. 51
Five-Year Comparison ................................................................................................................................... 195
Company Information .................................................................................................................................... 201
Independent Auditor’s Report ........................................................................................................................ 202
Annual Report and Financial Statements 2025
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Directors’ Report
Annual Report and Financial Statements 2025
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We hereby present the annual report of MeDirect Bank (Malta) plc (the “Bank” or “MeDirect Malta”) and of the Bank and
its subsidiaries (“MeDirect” or the “Group”) for the year ended 31 December 2025
1
. These results reflect the consolidated
position of the Bank and its subsidiaries
2
.
A year of new beginnings
The year 2025 marked the beginning of a new chapter in MeDirect's growth journey. Following the signing of a share
purchase agreement in November 2024, the European Central Bank granted regulatory approval in August 2025 for the
acquisition of the Bank’s parent company, MDB Group Limited, by Banka CREDITAS a.s. ("Banka CREDITAS"), and the
transaction was duly completed in September 2025. Banka CREDITAS is part of the privately-owned CREDITAS Group
("CG"), a diversified investment group with interests in financial services, real estate and energy. Through this acquisition,
MeDirect gains a financially strong and strategically aligned controlling shareholder, one with the same challenger bank
DNA and a shared commitment to customer-centricity and innovation.
As part of its strategic vision for the Group, Banka CREDITAS invested €40 million of new capital to date, with a firm
commitment of additional investment in 2026. This provides the Group with the financial resources to accelerate its
existing growth strategy across its core markets of Malta and Belgium, whilst continuing to enhance its market-leading
digital banking platform. Notwithstanding this change in ownership, MeDirect's brand and identity remain fully intact.
MeDirect continues to be headquartered in Malta and remains firmly committed to serving its retail and corporate
customers across all markets in which it operates.
The year also saw a change in senior leadership. Following the departure of Arnaud Denis as Group Chief Executive
Officer effective 31 January 2025, Jean-Claude Maher assumed the role of Group Chief Executive Officer. Mr Maher,
previously the Group's Chief Operating Officer, brings more than 30 years of banking experience to the role, having held a
broad range of senior positions at Deutsche Bank AG across research, corporate banking, transaction banking, private
banking, and country management.
The change in ownership and leadership reinforces our strategy as a fully-fledged pan-European digital bank. The
Group's ambition remains to establish itself as the leading challenger bank in each of its core markets, deploying its
scalable and adaptable digital banking platform to meet the evolving needs of both retail and corporate customers. In the
near term, the Group's strategic priorities are centred on deepening its product offering for retail and corporate clients in
Malta and Belgium, growing market share organically and exploring new opportunities to scale its digital banking platform,
whilst maintaining the highest standards of credit discipline, risk management and customer service that have
underpinned its growth to date.
Growing client franchise in core markets
The Group continued to invest in brand development across its core markets of Malta and Belgium, with the objective of
deepening customer recognition and reinforcing its positioning as a trusted provider of banking and investment services.
During 2025, the Group’s client base grew by 8% to reach 168,000 by 31 December 2025, compared with 155,000 at
year-end 2024. At year-end 2025, the Group had about 133,000 retail clients in Belgium, 33,400 in Malta and 1,600 in the
Netherlands.
The Group's aggregate client financial assets reached €6.5 billion as of 31 December 2025, an increase of 10% from the
prior year end, with assets under custody rising by 16% to €2.4 billion over the same period, reflecting continued growth
across both individual and business client segments.
1
This report is prepared in accordance with the Maltese Banking Act (Cap 371) and the Maltese Companies Act (Cap. 386) (the “Act”) and complies with
the disclosure requirements of the Sixth Schedule to the Act.
2
The principal subsidiaries of the Bank are MeDirect Bank SA (“MeDirect Belgium”) and MeDirect Tech Limited. The Bank also consolidates certain
entities in respect of which MeDirect Malta and MeDirect Belgium have retained substantially all the underlying risks and rewards. These include Bastion
2020-1 NHG B.V., Bastion 2021-1 NHG B.V., Bastion 2022-1 NHG B.V., Bastion 2025-1 NHG B.V. each of which is a controlled special purpose entity
established in the Netherlands as part of the Group’s funding strategy, and Medifin Estates, a property leasing partnership.
Annual Report and Financial Statements 2025
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In Belgium, the number of investing clients increased by 34% to 50,000 by the end of 2025 - a net addition of nearly
13,000 investors - with overall client growth of 12.5% recorded over the same period.
In Malta, the corporate banking franchise expanded further, with the Group now serving over 650 business clients, offering
a comprehensive suite of products and features, tailored
lending, and banking solutions to both companies and
their principals. Lastly, following a strategic review, the
Board resolved to discontinue MeDirect’s Retail & Wealth
activities in The Netherlands, having concluded that the
continuation of the business would not deliver returns
commensurate with the Group's profitability or strategic
objectives. Notwithstanding the decision to exit, the
Group successfully retained a significant proportion of its
client relationships through a structured migration
campaign. Of the approximately 3,700 clients invited to
transition to the Group's Malta banking platform, around
60% elected to do so during the year. The campaign
remained ongoing at the year end, with the remaining
clients yet to confirm their decision. The decision to
discontinue its Retail & Wealth activities in The
Netherlands does not affect the Bank’s Dutch NHG or Buy-to-Let businesses.
Developing MeDirect’s cutting-edge digital platform
Over the course of 2025, MeDirect executed a disciplined programme of investment across Wealth Management and e-
Banking, delivering material enhancements that directly support revenue growth, operational resilience, regulatory
compliance, and long-term competitive differentiation. The strategic imperatives underpinning the delivery programme
were threefold:
- Deepening product capability to capture a greater share of client wallet across banking and wealth verticals;
- Accelerating the modernisation and internalisation of core technology, including the migration of mutual fund
execution to an internally managed service, the integration of a new pricing engine, and the expansion of the
proprietary Payments Hub, to lower cost-to-serve, and strengthen data sovereignty as well as its security and
fraud prevention features; and
- Reinforcing the Bank’s regulatory and risk management posture in an increasingly demanding supervisory and
geopolitical environment.
Wealth Management Platform
MeDirect’s wealth proposition lies at the heart of the Bank’s differentiated value. Partnering with globally recognised asset
managers - including BlackRock, Invesco, Janus Henderson, and Franklin Templeton – MeDirect offers clients a curated,
open-architecture investment platform spanning mutual funds, equities, ETFs, bonds, model portfolios, advisory, and
discretionary portfolio management services. In 2025, the Wealth division delivered a strategically significant portfolio of
initiatives that enhanced product depth, client experience, and operational rigour.
Product Enhancement and Client Proposition
Service-Level Selection for OTC Investment Orders
The introduction of mandatory service-level selection for over-the-counter investment orders represents a pivotal step in
aligning MeDirect’s advisory framework with evolving MiFID II requirements and client suitability obligations. This
enhancement ensures that each client interaction is appropriately classified and documented, reinforcing investor
protection while enabling MeDirect to deliver tiered, value-differentiated service propositions.
Annual Report and Financial Statements 2025
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Accumulator Income Solution
The launch of the Accumulator Income solution enhances MeDirect’s suitability-driven portfolio allocation capabilities,
enabling wealth advisors and clients to construct income-oriented portfolios calibrated to individual risk profiles. This
initiative aligns with growing demand for structured, outcome-oriented investment solutions and positions MeDirect
competitively within the broader European digital wealth management landscape.
Stop Loss and Take Profit Functionality
The delivery of Stop Loss and Take Profit order types equips clients with sophisticated, real-time risk management tools,
enabling automated execution at pre-defined price thresholds. This functionality enhances client autonomy in managing
portfolio risk, reduces exposure to adverse market movements, and aligns with MeDirect’s strategy of providing
institutional-grade capabilities within a retail and affluent client digital experience.
Technology Modernisation and Operational Efficiency
Model Portfolios
The comprehensive revamp of model portfolio administration streamlines the creation, rebalancing, and monitoring of
model portfolios, enhancing scalability as Assets under Management grow. This re-engineering effort replaces legacy
workflows with a modern, rules-based engine that improves accuracy, reduces operational burden, and supports
MeDirect’s ambition to scale its discretionary and advisory wealth offerings across multiple jurisdictions.
Automation of Asset Transfers
The automation of asset transfer workflows eliminated manual processing steps in the movement of client assets between
custodians and accounts, reducing settlement risk, accelerating turnaround times, and improving the client onboarding
experience for portfolio consolidation, a strategically important capability for attracting high-value clients migrating from
competing platforms.
Mutual Fund Execution Migration
The migration of mutual fund execution from legacy third-party infrastructure to an internally managed service constitutes
one of the most strategically significant technology decisions of the year. By internalising fund execution, MeDirect gains
direct control over order routing, execution quality, and cost structures, while eliminating dependency on external vendors
whose service levels and pricing trajectories posed a long-term strategic risk.
Near Real-Time Pricing Engine
The proprietary pricing revamp engine replaces externally sourced pricing data workflows with a modern, internally
operated service that enhances transparency, improves data quality, and reduces recurring vendor costs. This initiative
forms part of a broader data sovereignty strategy that positions MeDirect to leverage proprietary data assets for future
analytics, personalisation, and regulatory reporting capabilities.
e-Banking Platform
The e-Banking delivery sustained exceptional momentum throughout 2025, executing a wide-ranging programme of
enhancements across payments infrastructure, corporate capabilities, fraud prevention, customer experience, and
regulatory compliance. These investments reinforce MeDirect’s position as a digitally-native institution capable of
competing with both traditional banks and emerging challengers.
Annual Report and Financial Statements 2025
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Customer Relationship and Experience
CRM Platform Launch
The deployment of a new Customer Relationship Management (“CRM”) platform represents a foundational investment in
MeDirect’s client engagement infrastructure. The CRM enables a 360-degree view of client interactions across channels,
supports personalised communication and marketing automation, and provides relationship managers with actionable
insights to deepen wallet share. This platform is expected to serve as the backbone for future data-driven growth
initiatives, including cross-selling, retention analytics, and lifetime value optimisation.
Digital Onboarding and App Pairing
Streamlined digital onboarding and app pairing journeys reduce time-to-activation for new clients while maintaining
rigorous anti-fraud and Know Your Customer (KYC) controls. By minimising friction in the acquisition funnel, these
enhancements directly support MeDirect’s client growth targets across Malta and its broader European footprint.
Corporate Banking Expansion
Corporate Card Capabilities
The launch of corporate card services encompassing both virtual and physical card issuance, extends MeDirect’s value
proposition to business clients, complementing the Corporate Banking Platform launched in 2024. Virtual cards enable
immediate issuance for online procurement and subscription management, while physical cards support everyday
business expenditure. This expansion strengthens MeDirect’s positioning as a comprehensive digital banking partner for
small and medium-sized enterprises.
Building on the successful 2024 launch of the omni-channel Corporate Banking Platform with its integrated salary
payment module, MeDirect is now positioned to offer businesses a holistic digital banking ecosystem that unifies
corporate and personal account management under a single, frictionless experience.
Payments Infrastructure Transformation
SEPA Direct Debits
The introduction of SEPA Direct Debit capabilities enables MeDirect’s clients, both personal and business to initiate and
receive recurring euro-denominated collections across the Single Euro Payments Area. This capability is particularly
significant for business clients managing subscription billing, membership fees, and utility payments, and represents a
prerequisite for competing effectively in the European payments landscape.
Outbound Instant Payments
The launch of outbound SEPA Instant Payments delivers on a key strategic commitment signalled in the 2024 report and
positions MeDirect at the forefront of real-time payment adoption in Malta. Clients can now execute euro transfers that
settle within seconds, 24 hours a day, 365 days a year a capability that materially enhances MeDirect’s competitive
standing against both traditional banks and digital-first challengers.
Payments Hub Enhancements
Major enhancements to MeDirect’s proprietary Payments Hub have expanded processing capacity, improved automation
of payment routing and reconciliation, and enabled enterprise-grade integration patterns. These upgrades support the
MeDirect’s growing transaction volumes and provide a scalable foundation for future payment product innovation,
including multi-currency capabilities and open banking integrations.
Annual Report and Financial Statements 2025
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Security, Fraud Prevention and Regulatory Compliance
24/7 Fraud Prevention Services
The implementation of around-the-clock fraud stop services provides MeDirect’s clients with continuous protection against
unauthorised transactions, ensuring rapid response and containment capabilities regardless of time or day. This capability
reflects MeDirect’s commitment to best-practice fraud prevention standards and aligns with regulatory expectations.
Device Whitelisting and ThreatMetrix
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Integration
The introduction of device whitelisting and ThreatMetrix integration strengthens MeDirect’s multi-layered security
architecture by leveraging behavioural biometrics, device intelligence, and global threat data to detect and prevent fraud
at the point of authentication. These capabilities significantly reduce MeDirect’s exposure to account takeover, social
engineering, and device-based attack vectors. Beyond these technical enhancements, MeDirect continued its proactive
customer outreach programme, providing focused updates on emerging fraud threats and practical guidance on how
clients can protect themselves.
Regulatory Statements and Administrative Tools
The delivery of enhanced regulatory statement generation and administrative tooling support MeDirect’s compliance with
supervisory reporting obligations while improving operational efficiency for back-office teams. These enhancements
ensure that MeDirect maintains the highest standards of transparency and accountability in its regulatory interactions.
Strategic Delivery Summary
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ThreatMetrix, now LexisNexis® ThreatMetrix®, is a digital identity intelligence platform that analyses device and behavioural data in real time to identify
and prevent fraudulent online transactions and activity.
AREA
STRATEGIC PILLAR
KEY DELIVERABLES
Wealth
Product Depth
– OTC service-level selection
– Accumulator Income solution
– Stop Loss / Take Profit order types
Tech Modernisation
– Model portfolio revamp & rules-based engine
– Automated asset transfer workflows
– Correction tool redesign
Vendor Independence
– Mutual fund execution migration (in-house)
– Proprietary pricing engine
e-Banking
Client Experience
– New CRM platform (360° client view)
– Streamlined digital onboarding
– App pairing journey
Corporate
– Virtual & physical corporate cards
– Salary payment module enhancements
Payments
– SEPA Direct Debits
– Outbound Instant Payments
– Payments Hub capacity expansion
Security
– 24/7 fraud stop service
– Device whitelisting
– ThreatMetrix integration
– Anti-fraud customer outreach
Compliance
– Regulatory statement generation
– Back-office administrative tooling
Annual Report and Financial Statements 2025
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Financial performance
The financial year ending 31 December 2025 was a year of deliberate and consequential action. The Group recorded a
loss before tax of €6.1 million (2024: €5.0 million), an outcome that reflects the conscious and considered decisions of the
Board to accelerate the Group's strategic repositioning, absorb legacy costs and enter 2026 with a clean balance sheet
and a clear growth mandate. Three principal factors shaped the financial result for the year:
- The Group substantially completed its exit from the ICL asset class, reducing the net portfolio by 90% at the year
end. This was an accelerated and deliberate de-risking of the balance sheet, consistent with the Group's
strategic focus on its core retail and business banking franchises in Malta and Belgium. The impact was net nil
contribution to this year’s profitability, from the Group’s historically highest-margin asset class, with income offset
by disposals and wind-down costs.
- Leverage ratio constraints prevailing until the completion of the acquisition in September 2025 moderated
balance sheet growth, lending activity and revenue generation across both core markets for the greater part of
the year.
- Restructuring and reorganisation measures arising from the Group's strategic repositioning were enacted during
the year, alongside a post-acquisition balance sheet review that identified and resolved residual prior period
exposures, all fully charged in 2025; impact €4.0 million
Adjusting for €4.0 million one-off factors, the Group delivered an underlying net operating profit of €0.8 million in 2025
(2024: €14.3 million). Net underlying operating profit was driven by the following factors:
- Operating income amounted to €76.9 million, a decrease of €8.9 million or 10.3% (2024: €85.8 million), adjusted
for €0.8 million charge arising from the post-acquisition balance sheet review. The key driver of this reduction
was the accelerated exit from the ICL asset class, which accounted for approximately €10.3 million of the year-
on-year decline, reflecting the near-total wind-down of what had previously been the Group's highest-margin
lending portfolio.
- On the underlying basis, excluding the impact of the ICL portfolio, operating income grew €1.2 million or 1.3%.
The increase in net interest income was principally attributable to growth across all mortgage lending segments
and the Maltese business banking portfolio, partially offset by lower interest revenue on treasury investments,
which declined in line with the broader reduction in market interest rates during 2025. Net growth of €0.7 million
or 10.3% was registered in fees from the wealth business and other commissions for a total amount of €7.9
million in 2025.
- Operating costs increased by €4.7 million to €76.1 million (2024: €71.5 million), adjusted for €3.2 million charges
arising from restructuring, reorganisation measures, and the post-acquisition balance sheet review. The principal
driver of the underlying cost increase was €4.2 million of incremental regulatory charges in respect of Depositor
Compensation Schemes ("DCSs") and supervisory fees across the Group's Belgian and Maltese operations.
These charges are non-discretionary and regulatory in nature, excluding these levies, the Group’s cost base
remained broadly unchanged from the prior year, demonstrating a continued discipline in the management of its
expenses.
Expected credit losses (“ECLs”) for the financial year 2025 amounted to a €2.9 million net charge (2024: €19.3 million net
charge). The net movement in provisions for the year was predominantly attributable to the unwinding of credit provisions
held against the ICL portfolio, consistent with the Group's substantially completed exit from that asset class and the de-
recognition of the associated credit exposures.
On an underlying basis, the Group recorded a net operating profit of €0.8 million for the year. This was more than offset by
an adverse ECL charge of €2.9 million, resulting in an underlying loss before tax of €2.1 million. After absorbing €4.0
million of non-recurring charges arising from restructuring, reorganisation measures and the post-acquisition balance
sheet review, the reported loss before tax amounted to €6.1 million.
Annual Report and Financial Statements 2025
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Balance Sheet Position
The Group's total assets grew by 5.2% during the financial year, reaching €5.34 billion as of 31 December 2025 (31
December 2024: €5.07 billion), reflecting the continued execution of MeDirect's growth strategy and the sustained
expansion of its core business activities.
Balance Sheet transformation
The Group substantially completed its exit from the ICL asset class during 2025, through non-replacement of repayments
and targeted portfolio disposals, reducing the net ICL balance by 90% to €21.5 million at 31 December 2025, from €208.8
million at the prior year end. Two residual senior secured loan exposures remained in Malta and one revolving credit
facility in Belgium, the latter being in the process of wind-down.
Net loans and advances to customers grew by 3.3% to €3.0 billion at 31 December 2025, from €2.9 billion at the prior
year end. Excluding the ICL portfolio run-down, underlying lending balances grew by 10.4% across both core markets and
the majority of asset classes, reflecting continued diversification of the balance sheet. Key developments were as follows:
- MeDirect’s mortgage portfolio continued to be anchored by Dutch government-guaranteed NHG mortgages,
which represented 38% of total assets at the year end. The relative weighting of NHG mortgages within the
portfolio has been gradually reduced in line with the Group's strategic objective of achieving a more diversified
balance sheet composition. The partnership with HollandWoont, a leading Dutch NHG origination and servicing
platform, enables MeDirect to control the origination of NHG mortgages based on its strategic priorities and
market conditions.
- MeDirect’s Dutch Buy-to-Let mortgage portfolio, established in October 2022 in partnership with Build Finance,
reached €248.3 million as of 31 December 2025, representing 43% growth. Using the Build Finance platform,
MeDirect is building its Dutch Buy-to-Let business in a controlled manner and benefits from attractive risk-
adjusted returns.
- The volume of Belgian residential mortgage receivables acquired from Allianz surpassed €500 million,
representing growth of 48% over the prior year. This reflects the continued scaling of the Group's mortgage
acquisition activity, underpinned by a disciplined approach to credit selection and efficient capital deployment,
whilst maintaining strong portfolio quality.
- The Maltese mortgage portfolio continued to expand during 2025, generating solid year-on-year growth of 17%,
building on the suite of products offered to retail clients.
- The corporate banking franchise in Malta continued to gain momentum, with the business lending portfolio
growing by 35.6% during 2025, a significant acceleration from the 7.5% growth recorded in 2024. This was
underpinned by fully collateralised lending facilities and a sustained commitment to supporting local businesses.
The investment portfolio increased by a net €82.6 million or 6.1%. The gross rate of return on treasury investments
decreased from 3.2% in 2024 to 2.1% in 2025. One of the key contributing factors was the decrease in market rates, with
Euribor 3m declining by 1.4% on average between 2024 and 2025. The Group continued diversifying its investments into
“AAA” rated notes issued by securitisations of consumer finance, auto loans and mortgage loan receivables originated in
the Dutch and German markets.
The funding mix shifted moderately further toward customer deposits as the Group’s primary source of funding, mostly
through increased retail deposits. At year-end 2025, customer deposits stood at €4.1 billion, an increase of 6.7% from the
previous year’s €3.9 billion.
Annual Report and Financial Statements 2025
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Liquidity and capital position of the Group
Throughout the financial year, MeDirect maintained sound liquidity and capital positions, providing a solid foundation for
the continued execution of its business strategy and the pursuit of sustainable growth.
The MDB Group's liquidity remained in excess of minimum regulatory requirements. As of 31 December 2025, the
Liquidity Coverage Ratio (LCR) stood at 196% (2024: 183%), and the Net Stable Funding Ratio (NSFR) at 133% (2024:
122%), both reflecting the Group's prudent approach to liquidity risk management and its sound structural funding profile.
From a capital adequacy perspective, MDB Group’s Tier 1 capital ratio was 20.8% as of 31 December 2025 (2024:
16.4%), with a total capital ratio of 23.5% (2024: 19.8%). Both ratios exceeded applicable regulatory minimum
requirements, Pillar 2 recommendations, and internal management buffer thresholds, underscoring the Group's resilient
capitalisation and its capacity to absorb potential shocks while supporting business growth.
The leverage ratio of MDB Group increased to 4.8% at year-end 2025 (2024: 4.4%), reflecting both additional capital
invested by the shareholder and the Group's continued balance sheet discipline.
Asset Quality
During the financial year, the Group broadly concluded its de-risking strategy, marking a significant milestone in the
ongoing enhancement of its asset quality. Through the active management of its Non-Performing Loan ("NPL") portfolio,
including the selective divestment of non-performing exposures predominantly within the ICL portfolio, the Group achieved
a material reduction in its NPL ratio.
As of 31 December 2025, the NPL ratio stood at 0.9%, compared to 2.2% in the previous year, representing a reduction of
130 basis points year-on-year and reflecting the Group's disciplined approach to credit risk management and its
commitment to maintaining a high-quality loan book.
ESG and Social responsibility
During the year, MeDirect continued to embed Environmental, Social and Governance ("ESG") principles across its
operations and to foster ESG awareness throughout the organisation. Following the initial reporting of the Group's carbon
footprint in December 2023, MeDirect has maintained ongoing monitoring of its carbon emissions as part of its broader
approach to sustainability.
These efforts reflect the Board's commitment to reducing both the Group's own operational carbon footprint and its
financed emissions, in pursuit of the net-zero target by 2050, consistent with the objectives of the Paris Agreement.
4
In furtherance of this commitment, the Group's offices in Malta and Belgium hold LEED (Leadership in Energy and
Environmental Design)
5
and CWaPE (Commission wallonne pour l'énergie)
6
certifications respectively, demonstrating
adherence to recognised environmental standards across its principal operating locations.
4
The Paris Agreement is an international climate treaty adopted under the United Nations Framework Convention on Climate Change (UNFCCC) in
December 2015, establishing a global framework to limit global warming and achieve net-zero greenhouse gas emissions by 2050.
5
An internationally recognised green building certification programme, awarded to buildings that meet defined standards of energy efficiency,
sustainable design, and environmental performance.
6
Regulatory body for the energy market in the Walloon Region of Belgium. CWaPE certification recognises compliance with regional energy efficiency
and sustainability standards.
Annual Report and Financial Statements 2025
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Regulatory compliance remained central to the Group's ESG agenda. During the year under
review, MeDirect completed a Double Materiality Assessment, through which the key material
topics that will inform and underpin the Group's ESG strategy going forward were identified.
The Directors consider this a significant step in strengthening the Group's governance
framework and ensuring that its ESG commitments are grounded in a structured and
transparent assessment process.
The Group's ESG performance continued to receive independent external recognition.
EcoVadis awarded MeDirect a Gold Medal in 2025, placing the Group among the top five
percent of companies rated globally. Ongoing training and awareness initiatives remain an
organisational priority, ensuring the continued and consistent integration of ESG principles
throughout the Group's business processes and culture.
On the social front, the Group deepened its focus on Diversity, Equity, and Inclusion ("DEI") by becoming a signatory to
the Malta Diversity and Inclusion Charter. As of December 2025, MeDirect had employees from over thirty nationalities,
with 61% of the workforce being male and 39% female. MeDirect prides itself on developing its employees and promoting
from within. The Group contributes to the local communities in which it operates by supporting charitable organisations as
well as talented individuals in areas such as sports and culture through sponsorships, donations, and the voluntary
actions of its employees. Progress in implementing the requirements of the EU Accessibility Act further demonstrated
MeDirect's commitment to fostering an inclusive and accessible banking environment for all stakeholders.
Conclusion
In 2025, the Group successfully navigated a period of significant transition, emerging as a stronger, better-capitalised and
more strategically focused organisation. The completion of the acquisition by Banka CREDITAS marks the beginning of a
new chapter in the Group's development, bringing with it a financially strong and strategically aligned controlling
shareholder, €40 million of new capital and a firm commitment of further investment in 2026.
Notwithstanding the changes in ownership and senior leadership, MeDirect continued throughout 2025 to execute its
business strategy with consistency and purpose. The Group grew its client franchise across Malta and Belgium, expanded
the breadth of its digital banking and wealth management offering, and continued to invest in the proprietary technology
platform that underpins MeDirect's distinctive market proposition. The net loss recorded for the year was a loss of intent. It
reflected the Board's deliberate decision to front-load restructuring and reorganisation actions, de-risk the balance sheet,
and position the Group unequivocally for a return to sustainable profitability. The reported result was further magnified by
significant incremental regulatory charges, non-discretionary in nature, which arose unexpectedly during the year and are
likely to persist at a similar level going forward. The Group is committed to absorbing these charges within its operating
model as it continues its trajectory toward sustainable profitability.
Looking beyond 2026, the Group's strategic priorities are clear and executable: to grow its client franchise across Malta
and Belgium, to deepen client relationships through an increasingly seamless and comprehensive digital offering, to
extend the reach of its wealth management platform, to broaden and strengthen its business banking franchise in Malta
as a long-term and reliable partner to its business clients, and to generate stable and consistent returns for the benefit of
all stakeholders. The Group's ability to listen to client feedback, anticipate industry trends and adapt its offering
accordingly has been and will remain central to its competitive positioning.
With the support of Banka CREDITAS and a talented and committed team across Malta and Belgium, the Board enters
2026 with confidence - in the Group's strategy, in its people and in its platform.
Board of Directors
Under the Bank’s Articles of Association, directors shall be appointed for a maximum term of three years and may be re-
elected for additional three-year terms. Terms are staggered such that an election of at least two Board members shall
take place at each annual general meeting. Directors may be removed before the expiration of their term of office by
majority vote of the Bank’s shareholders in accordance with the Act or the Bank’s Memorandum and Articles of
Association.
Annual Report and Financial Statements 2025
13
The Directors of the Bank who held office during the year were:
Mr. Bart Bronselaer
- appointed as independent non-executive director on 27 November 2024 and became
Chair on 11 December 2024
Mr. Jean-Claude Maher
- appointed as chief executive officer and executive director on 13 March 2025
Ms. Izabela Banas
- appointed as chief financial officer and executive director on 4 September 2024
Mr. Philip English
- appointed as non-executive director on 21 August 2023
Ms. Dina Quraishi
- appointed as independent non-executive director on 6 July 2023
Mr. John Zarb
- appointed as independent non-executive director on 17 July 2017
Mr. Arnaud Denis
- appointed as chief executive officer and executive director on 15 October 2019 and
resigned on 31 January 2025
Ms. Lisa Fergus
- appointed as chief risk officer and executive director on 14 December 2023 and
resigned on 10 October 2025
Dividends and reserves
The accumulated losses of the Group amounted to €25.1 million (2024: €16.3 million) and of the Bank amounted to €25.6
million (2024: €17.1 million). After consideration of the financial results of the Group, the Directors of the Bank do not
recommend the payment of a final dividend. The Board has determined that the Group should conserve its capital to
maximise its ability to support its customers, to continue to strengthen its balance sheet and to invest selectively in its
platform.
Confirmation of MeDirect’s going concern assessment
After due consideration of MeDirect’s business, profitability projections, funding and capital plans, robust risk and internal
control processes and taking into account the broader macroeconomic outlook, the Directors confirm that in their opinion
MeDirect is in a position to continue operating as a going concern for the foreseeable future. The Board is satisfied that at
the time of approving these financial statements, MeDirect will have sufficient capital to meet not only its regulatory capital
and liquidity requirements but also any internal risk buffers and any buffers recommended by its regulators.
Enhancing risk governance
MeDirect recognises the importance of adopting robust enterprise-wide risk management principles across all areas of its
operations. The Group’s core objective in managing risk is to safeguard its customers, counterparties, and stakeholders,
while preserving financial resilience and supporting sustainable growth. Through the continued strengthening of its risk
management framework and governance structures, MeDirect remains committed to fostering a strong risk culture
embedded throughout the organisation, ensuring that risk considerations are integral to strategic decision-making and
day-to-day operations.
Annual Report and Financial Statements 2025
14
Managing risk effectively, efficiently, and sustainably is an integral part of the Group’s business strategy. MeDirect’s risk
management approach focuses on ensuring continued financial soundness and safeguarding the interests of its
stakeholders while retaining the ability to pursue value-creating business opportunities in a fast-changing environment.
This is achieved through high standards of corporate governance and sound risk management principles embedded in the
Enterprise Risk Management Framework (“ERMF”). The ERMF outlines the highest-level principles for risk management
by setting out standards, objectives and key responsibilities of different risks and groups across the Group.
MeDirect maintains a well-established risk governance structure, underpinned by an active Board of Directors, an
experienced senior management team and a centralised risk management function that operates independently of the
business lines.
The Board of Directors retains primary decision-making authority, supported by oversight from the Board-level Risk and
Compliance Committee. Executive-level governance is exercised through a number of dedicated committees, including
the Enterprise Risk Management Committee and Compliance and Financial Crime Committee.
The Board sets the tone from the top by defining the Group’s risk culture and holding ultimate accountability for prudent
and effective risk management. Clear governance arrangements ensure disciplined risk taking, defined responsibilities
and robust oversight.
Risk ownership and control remain embedded in the business and are cascaded from the bank’s senior management
through all three lines of defence, supported by independent risk and compliance oversight and complemented by internal
audit assurance. These functions operate with sufficient independence, resources and direct access to the Board to
provide credible challenge.
The Group has established a comprehensive and robust risk management framework which sets forth the steps
necessary to assess, manage, monitor, and report current and emerging risks, whilst continually seeking to improve and
evolve its risk management practices to ensure that it can proactively manage its risk environment.
MeDirect has designed its risk management framework to support and enable the sustainable delivery of its strategy. This
risk management framework ensures that new and proposed business lines, areas of growth, changes in technology and
management decisions have robust oversight and are well governed.
Risks are monitored through regular and timely risk reporting, enabling the proactive identification and management of
risks with the aim of reducing or avoiding undue exposure to various specific risk types. The ERMF identifies the following
principal risks which are: business model and strategy risk, capital adequacy, liquidity risk, credit risk, market risk
(including IRRBB, CSRBB and FX risk), operational risk, IT and information security risk, financial crime risk, regulatory
risk, reputational risk, geopolitical risk and sustainability risk. The framework also supports the identification of new and
emerging exposures relevant for MeDirect, for example, through the risk inventory, ensuring that evolving external
developments and changes in the Group’s operating environment are appropriately assessed, monitored and managed.
Risk appetite limits established by the Board set forth the amount and types of risk that MeDirect is prepared to accept or
tolerate when delivering its strategy. These risk appetite limits are embedded in policies, management authorities, and
limits across the Group. Frequent and close monitoring of all risk appetite limits, combined with comprehensive reporting
to management and the Board ensures that risk is maintained within acceptable levels in accordance with the Group’s risk
appetite.
In addition, all material risk categories are subject to stress testing analysis at a risk type and portfolio level to ensure that
MeDirect remains financially healthy during and after severe risk events. Stress testing is an important component of the
Group’s risk management framework and covers a wide range of idiosyncratic and market-wide scenarios. Beyond
providing senior management with insights into vulnerabilities under exceptional but plausible conditions, stress testing
forms an integral part of the annual budgeting and risk appetite–setting process.
Annual Report and Financial Statements 2025
15
Throughout the financial planning cycle, preliminary budget assumptions are used to update stress scenarios and perform
stress tests whose results are continuously refined and fed back into the budgeting process, ensuring that updated
capital, liquidity and credit risk projections inform risk taking plans. This iterative loop and ongoing process (conducted by
Risk Management department supported by Finance, ALM/Treasury and other teams from the first line), also informs the
definition of the Risk Appetite Statement, the calibration of risk appetite limits, and the assessment of medium term
balance sheet resilience. In doing so, stress testing enables the Group to identify potential risk segments in its business
model, validate the prudence of budget assumptions, and develop appropriate risk controls, contingency plans and
mitigating actions.
MeDirect’s Board regularly discusses and monitors controls, addressing any threats or emerging risks which could
potentially have an adverse effect on the operations or financial condition of the Group. Controls include, amongst others,
maintaining an adequate and diversified funding base, interest rate hedging aimed at protecting its balance sheet,
continuing reduction of credit risk and diversification of the balance sheet into lower-risk mortgage assets and robust
operational risk controls, particularly in view of the Group’s reliance on technology to improve the efficiency of its
operations.
Related parties
During the year ended 31 December 2025, other than the transactions described under note 35 to the financial
statements, there were no material changes in related party transactions as compared with those described in the
financial statements for the year ended 31 December 2024. In addition, no related party transactions materially affected
the financial position or liquidity of MeDirect.
MeDirect confirms that there were no material contracts to which it or any of its subsidiaries was a party in which any of its
directors was directly or indirectly interested.
7
Events after the reporting date
There were no events after the reporting date that would have a material effect on the financial statements of the Bank or
the Group.
Pillar 3 disclosures
MeDirect is required to publish Pillar 3 quantitative and qualitative disclosure requirements.
8
The Group publishes its full
Pillar 3 disclosures annually as a separate document that is available on MeDirect’s website.
Standard licence conditions applicable under the Investment Services Act (Cap. 370)
Licence holders are required to include in the Directors’ Report breaches of standard licence conditions under the
Investment Services Act (Cap. 370). The Directors confirm that no breaches of standard licence conditions and no other
breach of regulatory requirements under the Investment Services Act (Cap. 370) that were subject to administrative
penalty or regulatory sanction were reported during the financial year.
7
Statement pursuant to Capital Market Rule 5.70.1.
8
As governed by BR 07: Publication of Annual Report and Audited Financial Statements of Credit Institutions authorised under the Maltese Banking Act
(Cap. 371), issued by the MFSA, which follows the disclosure requirements of EU Regulation No 575/2013 (CRR) of the European Parliament and of the
Council of 26 June 2013 and the Commission Implementing Regulation (EU) 2021/637 of 15 March 2021.
Annual Report and Financial Statements 2025
16
Statement of Directors’ responsibilities for the financial statements
MeDirect is required by the Maltese Banking Act (Cap. 371) and the Maltese Companies Act (Cap. 386) to prepare
financial statements that give a true and fair view of the state of affairs of the Bank and the Group as of the end of each
reporting year and of the profit or loss for that year.
In preparing the financial statements, MeDirect is responsible for:
- ensuring that the financial statements of the Group and Bank have been drawn up in accordance with
International Financial Reporting Standards as adopted by the EU;
- selecting suitable accounting policies and applying them consistently;
- making judgements and estimates that are reasonable;
- accounting for income and charges relating to the accounting period on the accruals basis;
- valuing separately the components of asset and liability items;
- reporting comparative figures corresponding to those of the preceding accounting period; and
- preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Group
and Bank will continue in business as a going concern.
MeDirect is also responsible for designing, implementing, and maintaining internal controls designed to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error, and that
comply with the Maltese Companies Act (Cap. 386). MeDirect is also responsible for safeguarding the assets of the Bank
and the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements of the Bank for the year ended 31 December 2025 are included in the Annual Report 2025,
which is published in hard-copy printed form and will be made available on the Group’s website. MeDirect is responsible
for the maintenance and integrity of the Annual Report on the website in view of its responsibility for the controls over and
the security of its website. Access to information published on the Group’s website is available in other countries and
jurisdictions where legislation governing the preparation and dissemination of financial statements may differ from
requirements or practice in Malta.
Statement by the Directors pursuant to Capital Market Rule 5.68
9
The undersigned declare that to the best of their knowledge, the financial statements were prepared in accordance with
the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss
of the Bank and its subsidiaries included in the consolidation taken as a whole and that this report includes a fair review of
the performance of the business and the position of the Bank and its subsidiaries included in the consolidated financial
statements, together with a description of the principal risks and uncertainties that it faces.
Signed by Bart Bronselaer (Chair) and Jean-Claude Maher (Chief Executive Officer) on 11 March 2026.
9
Statement in accordance with SLC 7.60 of the Investment Services Rules for Investment Services providers regulated by the MFSA
Annual Report and Financial Statements 2025
17
Who we are
Annual Report and Financial Statements 2025
18
Our vision is
Delivering choice, transparency, and digital‑first banking
MeDirect Group is a Maltese-anchored bank, operating in Malta and Belgium, with a clear vision to provide individual
customers with a wide choice of high-quality investment and financial products. Through our open architecture model and
intuitive online and mobile platforms, we give access to some of the best investment solutions available on the market.
Combined with our daily banking and savings products, this makes MeDirect the ideal choice for self-driven individuals
looking to build their wealth with confidence.
In Malta, our focus on choice and excellence also extends to business customers. As a financial institution founded and
headquartered locally, we play an active role in supporting Malta’s economy. The country’s business community
increasingly relies on us as a trusted partner, using our digital business banking platform to access a full range of
transaction and lending solutions tailored to its needs.
Across both personal and business banking, challenging the larger, more established players within the sector is part of
our DNA. The choice we offer is backed by market‑leading expertise, from our funds and ETFs offering in Belgium to our
advisory and business services in Malta. This expertise, combined with technology, ensures we deliver both quality and
value.
The technology and resources to scale rapidly
Achieving our ambitions is made possible by our technology. MeDirect’s proprietary, modular banking platform enables us
to scale rapidly and integrate seamlessly with partners to deliver intuitive, customer centric solutions. By leveraging cloud-
agnostic, microservices-based architecture, we ensure rapid deployment, cost efficiency, and adaptability to market
demands.
This architecture gives us the flexibility and agility to respond swiftly to evolving market needs. The completion of our
acquisition by Banka CREDITAS a.s. in 2025, and the resulting investment in our Group, positions us strongly for
accelerated growth and innovation.
Consistent Values
At MeDirect, our values guide everything we do, and we thrive in the changing world around us:
Autonomy: We empower our customers and give them the tools to manage their money, their way. We encourage our
employees to take ownership of their work and grow their skills.
Innovation: We are results driven and constantly review how we go about delivering on our vision and improving our
value proposition.
Transparency: The financial world isn’t simple, but the MeDirect app is. We communicate clearly with our clients and
our colleagues.
Responsibility: We take our responsibilities to all our stakeholders seriously - customers, employees, regulators,
investors and the broader community.
Annual Report and Financial Statements 2025
19
Customer Proposition
These values underpin our customer proposition to deliver choice, transparency, and digital‑first banking by offering:
- Freedom and flexibility, embodied in our “My Money, My Choices” branding
- Comprehensive investment solutions, including brokerage, discretionary portfolio management and model
portfolios
- Business services that support business operations and growth
- Convenience and transparency through a seamless digital experience backed by competitive pricing
- Personalised advisory services in Malta through our branches
Looking Ahead
In partnership with Banka CREDITAS a.s., MeDirect is entering a new phase of expansion. We are focused on scaling our
banking platform, expanding our product range, and strengthening our presence. We are at an important point in our
journey and determined to deliver even greater value to our customers and stakeholders.
Annual Report and Financial Statements 2025
20
Group Board
Annual Report and Financial Statements 2025
21
Bart Bronselaer
Independent Chair and Non-Executive Director
- Joined the MDB Group Board on 27 November 2024 as Chair of the Board
- Joined the Board of Directors of MeDirect Bank SA on 12 January 2021 and served as
the Chair of the Board Risk Committee at MeDirect Bank SA through to March 2025.
Former key positions held:
- Head of Debt Markets, Merrill Lynch International (London)
- Chair of the Board of Directors, Royal Park Investments
- Director, Dexia NV
- Director, Dexia Credit Local
- Chief Executive Officer and Chair of the management committee ad interim of Dexia NV
and Director and Chief Executive Officer ad interim of Dexia Credit Local
External appointments:
- Director, United Pensions OFP
- Member of the Board of Schools of “Zusters Annunciaten,” a single board of directors
overseeing multiple schools organised into four separate groups.
Dina Quraishi
Non-Executive Director
- Appointed to the MDB Group Board on 6 July 2023 and is the Chair of the Risk and
Compliance Committee, member of the Audit Committee and observes the Nominations
and Remuneration Committee
- 20+ years of experience in risk management covering various sectors including payments,
FinTech, engineering and financial services.
Former key positions held:
- A former Chief Risk Officer and risk leader within several international corporates, Dina
has been a member of Malta’s independent National Climate Action Council since October
2024 and is a partner at Solvo Partners.
External Appointments:
- None.
John Zarb
Non-Executive Director
- Joined the MDB Group Board on 17 July 2017 and is the Chair of the Audit Committee
- 40 years of experience with PwC in Malta, retiring from his role as Partner in 2014
Former key positions held:
- Formerly President of Malta Institute of Accountants and served as Malta’s representative
on the EU Accounting Regulatory Committee and on the Accountancy Board for several
years
External appointments:
- Director, Foster Clark Products Ltd
- Board member and Chair of the Audit committee of Tumas Investments plc and board
member and Chair of the Remuneration Committee of its parent company, Tumas Group
Company Limited
Annual Report and Financial Statements 2025
22
Philip English
Non-Executive Director
- Joined the MDB Group Board on 21 August 2023
- 30+ years of experience focusing on portfolio management, security valuation, financial
markets and institutions and commercial banking.
Former key positions held:
- Served on the Board of Directors of the CFA Society Washington, DC
- Served on the Investment Management Committee for Raffa Wealth Management
External appointments:
- Research Associate Professor of Finance at the Fox School of Business, Temple
University
- Executive Director of the Fischer-Shain Centre for Financial Services and executive
member of its Board
Jean-Claude Maher
Director and Group Chief Executive Officer
- Joined MDB Group Ltd. as Director and Group Chief Executive Officer as of 17 March
2025.
- Previously joined MeDirect Bank SA/NV in February 2025 as Chief Operating Officer
Former key positions held:
- Served as Country Chief Operating Officer at Deutsche Bank, following a series of
progressively senior roles of increasing responsibility spanning June 1994 to July 2023.
External Appointments:
- None.
Izabela Banas
Director and Group Chief Financial Officer
- Joined MDB Group as Group Chief Financial Officer in June 2024 and formally as a
director on MDB Group Board on 4 September 2024.
Former Key Positions Held:
- 25+ years’ experience in finance at large corporations, 18 years in financial services
- CFO, Bank of Valletta plc
- CFO, HSBC Private Bank, EMEA
- Various senior management positions in finance at Credit Suisse, Willis Towers Watson
and General Electric
- Certified Lean Sigma Black Belt
External Appointments:
- Deputy Chair of the Malta Bankers Association.
The above is the Board as of the date of this Annual Report. In addition to the above, Mr. Martin Kubíček was nominated
as Group Chief Risk Officer and Executive Director of MDB Group Limited and MeDirect Bank (Malta) plc, subject to
regulatory approval. Furthermore, Mr. Steve Agius and Mr. Josef Holub were nominated as non-executive directors, whilst
Mr. Chris Portelli, the Group Chief Technology Officer was nominated as an executive director. All these appointments are
subject to regulatory approval.
Annual Report and Financial Statements 2025
23
Josef Holub
Nominated as Non-Executive Director (subject to regulatory approval)
- Nominated on 17 November 2025 as non-executive director and as a member of the
Board Nominations and Remuneration Committee and the Board Risk and Compliance
Committee
Former Key Positions Held:
- Chief Financial Officer and Board member, Banka CREDITAS
- CFO, Aviva životní pojišťovna a.s.
- Audit, PriceWaterhouse (now PWC)
- Economist, Škoda Plzeň
External Appointments:
- Member of the Supervisory Board and Audit Committee of Banka CREDITAS
Dr. Steve Agius
Nominated as Non-Executive Director (subject to regulatory approval)
- Nominated on 17 November 2025 as non-executive director and as a member of the
Board Risk and Compliance Committee
- Holds a PhD in the use of data to address cognitive flaws.
Former Key Positions Held:
- Chief Executive Officer, Identita Malta
- Chief Operations Officer and Head of COVID-19 Vaccination Programme, Mater Dei
Hospital, Malta
- Non-executive Director, Bank of Valletta plc
- Chief of Information and Development, Malta Communications Authority
External Appointments:
- CEO, Active Ageing and Community Care
- Visiting senior lecturer, Faculty of Economics, Management and Accountancy
Martin Kubíček
Nominated as Executive Director and Group Chief Risk Officer (subject to regulatory approval)
- Nominated as executive director and Group Chief Risk Officer on 17 November 2025.
Former Key Positions Held:
- Board Member and Chief Risk Officer, Max Banka
- Board Member and Chief Risk Officer, Expobank cz
- Head of Enterprise Risk Management, Moneta Money Bank
- Head of Enterprise Risk Management, GE Money Bank
External Appointments:
- Member of the Management Board and Chief Risk Officer, Banka CREDITAS
Chris Portelli
Group Chief Technology Officer and nominated as Executive Director (subject to regulatory approval)
- Nominated as executive director on 6 February 2026.
- Has been serving as Chief Technology Officer since May 2021. He held positions of
progressive succession & responsibility at the bank since May 2018
Former Key Positions Held:
- Service Manager – CSL Data Centre Services
External Appointments:
- None
Annual Report and Financial Statements 2025
24
Statement of Compliance with the
Principles of Good Corporate
Governance
Annual Report and Financial Statements 2025
25
Introduction
The Group hereby reports on the extent to which the Code of Principles of Good Corporate Governance (the “Code”)
has been adopted by MeDirect Bank (Malta) plc (“MeDirect Malta”) as required by the Capital Markets Rules of the
Malta Financial Services Authority.
The Group acknowledges that the Code does not dictate or prescribe mandatory rules but recommends principles of
good practice. However, the Directors believe that such practices are in the best interests of MeDirect Malta, its
shareholders and other stakeholders, primarily because compliance with principles of good corporate governance is
expected by investors on the Malta Stock Exchange and evidences the Directors’ and the Group’s commitment to a high
standard of corporate governance.
The Directors report that since MeDirect Malta is a company that only issues debt securities and has not issued equity
securities which are traded in a multilateral trading facility, it is exempt from disclosing the information prescribed in
Capital Markets Rules 5.97.1, 5.97.2, 5.97.3, 5.97.6 and 5.97.8 in this corporate governance statement. It is in the light of
these factors that the Directors are herein reporting on the corporate governance of MeDirect Malta.
The Directors are aware that the Code highlights principles which although of general application to listed companies are
adaptable by each company depending on its particular circumstances. Those circumstances are more often than not
determined by two factors: (i) the specific nature of the business of the company; and (ii) the fact that whilst certain
principles in the Code are applicable to companies the equity securities of which are listed on the Stock Exchange, they
are not altogether applicable, or not applicable in the same manner, to companies that fall within the definition of a listed
company by virtue of having issued debt instruments which are listed on the Malta Stock Exchange. In this context,
the Directors believe that the Group’s current organisational set up guarantees the proper and efficient functioning of
MeDirect Malta and provides adequate corporate governance safeguards.
Compliance with the Code
Principles
1
and 3: Board of Directors and composition of the Board
MeDirect Malta’s Board of Directors (the “Board”) included directors with a diverse range of skills and experience acquired
in senior roles with international banks and financial organisations, professional firms and government entities. At 31
December 2025, the MeDirect Malta Board consisted of four non-executive members and two executive members,
satisfying the rule that one third of the Directors should be Non-Executive Directors, with the majority of the Non-Executive
Directors being independent.
The Chair and the Chief Executive Officer of MeDirect Belgium have a standing invitation to attend discussions as observers;
however, they are excluded from any decision-making processes. The size and composition of the Board are considered fully
adequate for MeDirect Malta’s needs, reflecting an appropriate balance of skills and experience relative to the organisation’s
scale and operations.
All Directors are deemed to be fit and proper to direct the business of MeDirect Malta.
The Board of MeDirect Malta cooperates closely with the Board of its direct subsidiary, MeDirect Belgium, to ensure
consistent application of Group standards and coordination of activities, whilst at the same time respecting the
independence of each Board and their respective needs to meet all applicable statutory and regulatory obligations in
the jurisdictions in which they are organised and do business.
Annual Report and Financial Statements 2025
26
Principle 2: Chair and Chief Executive Officer
The offices of MeDirect Malta’s Chair and Chief Executive Officer are held by different individuals, avoiding concentration
of authority and power in one individual and differentiating the leadership of the Board from that of running MeDirect
Malta’s business.
MeDirect Malta’s Chair is responsible for (i) leading MeDirect Malta’s Board, (ii) ensuring that MeDirect Malta’s
Board receives precise, timely and objective information to enable it to take sound decisions and monitor effectively
the performance of the company, (iii) ensure effective communication with shareholders and (iv) encourage active
engagement by all Directors in discussions about key issues.
MeDirect Malta’s Chief Executive Officer (“CEO”) leads the MeDirect Malta Executive Committee, which is responsible for
the execution of the strategy approved by the Board. The MeDirect Malta CEO coordinates closely with the CEO of
MeDirect Belgium and its Executive Committee.
Principles 4, 5 and 8: Responsibilities of the Board, Board Meetings and Committees
The MeDirect Malta Board has the first level responsibility for executing the four basic roles of corporate governance:
accountability, monitoring, strategy formulation and policy development.
Functioning of the Board
The MeDirect Malta Board delegates the management and day-to-day running of the Group to the Group CEO, who
acts in coordination with the CEO of MeDirect Belgium, in accordance with such policies and directions as the Board
may from time to time determine, with the exception of the following matters which require the specific approval of the
Board:
- Overall business strategy;
- Key policies that may have a material impact on the Group;
- Overall risk strategy, including the risk appetite and risk management framework;
- Corporate governance structure, including the proper functioning of Board committees;
- The internal controls framework for the Group, setting forth the responsibilities of the Board and of management of
all business lines and internal units, including internal control functions, outsourced activities and distribution
channels;
- Amounts, types and distribution of both internal capital and regulatory capital with the aim of ensuring adequate
coverage of the risks of the Group;
-
Targets for liquidity management of the Group;
- Dividend policy, including recommendation for payment of any dividend;
- Remuneration practices, including remuneration of the members of the Board and senior management;
-
Arrangements ensuring that the individual and collective suitability assessments of the Board are carried out
effectively, that the composition and succession planning of the Board are appropriate and that the Board
performs its functions effectively, including the effectiveness of the Board Committees;
- Assessment and evaluation of key function holders;
- Arrangements ensuring the integrity of the accounting and financial reporting systems, including financial and
operational controls designed to ensure compliance with law and regulation as well as relevant standards; and
-
A conflicts of interest policy covering conflicts on an institutional level and for staff.
Annual Report and Financial Statements 2025
27
The Board is also responsible for setting a framework of values and a code of conduct in which the stated corporate and
risk culture can evolve and thrive. Each member of the Board should reinforce these values through their own behaviour
and decisions. The Board has oversight of the following:
-
The process of public disclosures and communications with external stakeholders and competent authorities;
and
- The overall activity, financial and risk situation of the Group, taking into account the economic environment, and
the implementation of sustainable strategic decisions that have a significant impact on the business.
The Board monitors, periodically reviews and addresses any weaknesses identified regarding the implementation of
processes, strategies and policies related to any of their approval and oversight responsibilities.
The Board may delegate some of its responsibilities, in particular its review and monitoring responsibilities, to Board
Committees, however it still retains oversight over these activities and remains responsible for ultimate decision-making.
Notices of the dates of scheduled meetings of MeDirect Malta’s Board together with supporting materials are circulated
to
the Directors in advance of such meetings. Advance notice is also given of ad hoc meetings of MeDirect Malta’s
Board to allow Directors sufficient time to arrange their commitments in order to be able to participate. Eighteen
meetings of the Board of MeDirect Malta were held during the 2025 financial year.
As soon as practicable after each Board meeting, minutes that faithfully record attendance, deliberations and decisions of
MeDirect Malta’s Board are prepared and circulated to all Directors.
Where common issues are being discussed, certain Board meetings are held jointly with the Board of MeDirect Belgium.
The following section sets forth details of the members of MeDirect Malta’s Board of Directors and of each of the
committees of MeDirect Malta’s Board.
Board of Directors - MeDirect Malta
The following table sets forth the percentage of meetings attended by each director during the financial year:
Meetings
attended
Bart Bronselaer
Independent Chair and Non-Executive Director
100%
John Zarb
Independent Non-Executive Director
94%
Dina Quraishi
Independent Non-Executive Director
100%
Philip English
Non-Executive Director
89%
Jean-Claude Maher*
Executive Director - Chief Executive Officer
100%
Arnaud Denis**
Executive Director - Chief Executive Officer
100%
Izabela Banas
Executive Director - Chief Financial Officer
100%
Lisa Fergus***
Executive Director - Chief Risk Officer
92%
* Jean-Claude Maher was appointed as an executive director on 13 March 2025.
** Arnaud Denis resigned on 31 January 2025.
*** Lisa Fergus resigned on 10 October 2025.
Annual Report and Financial Statements 2025
28
Committees of the Board
Certain responsibilities of the Board are delegated to Board committees. The Board committees play an essential role in
supporting the Board in fulfilling its responsibilities and ensuring that the highest standards of corporate governance are
maintained. Updates from the Chairs of the Board Committees are included as a standing agenda item in all routine Board
meetings.
The Committees coordinate their activities with the equivalent committees of MeDirect Belgium, and where common
issues are being addressed, certain meetings are held jointly with the equivalent committees of MeDirect Belgium.
Board Committees
A.
Audit Committee
The purpose of the Audit Committee is to oversee the quality and integrity of the Group’s financial reports, particularly the
key financial judgments, and review the accounting policies. In addition, the Audit Committee oversees the design adequacy
and operating effectiveness of the Group’s internal control framework and governance structure through the activities of the
Internal Audit Function. The primary responsibilities of the Group Audit Committee are the following:
- review accounting policies;
- monitor the Group’s financial and other disclosures, ensuring compliance with legal and regulatory requirements;
- review the qualifications, performance and independence of the external auditor;
- review and approve Internal Audit’s plan and oversee the execution of the plan; and
- assess the effectiveness of Internal Audit, including the adequacy and competence of its staff.
The members of the Audit Committee are:
John Zarb Committee Chair and Independent Non-Executive Director
Bart Bronselaer
Member and Independent Non-Executive Director
Dina Quraishi Member and Independent Non-Executive Director
In terms of Capital Markets Rules 5.117 and 5.118, John Zarb is the non-executive director whom the Group Board considers as
competent in accounting and/or auditing. John Zarb retired from his role as partner at PricewaterhouseCoopers at the end of
2014 after a career spanning over 40 years in the audit and advisory practices of the firm. He is a past President of the Malta
Institute of Accountants and served for a number of years on the Accountancy Board and as Malta’s representative on the EU
Accounting Regulatory Committee. John Zarb was also the Chair of PG plc and is currently a director of Tumas Investments
plc and director and Chair of the remuneration committee of Tumas Group Company Limited. He also serves as a director of
Foster Clark Products Limited.
During the year ended 31 December 2025, eleven meetings of the Audit Committees were held. The Group Chief Internal
Auditor attends the meetings as a standing invitee, unless there are exceptional circumstances. Other officers or
employees may be asked to join the meeting as required.
MeDirect Malta and MeDirect Belgium hold Joint Board Audit Committees in order to boost efficiency, improved
information sharing, and foster better interaction among independent non-executive directors,
all while respecting each
committee’s autonomy and legal obligations. Typical agenda items include presentations from
Finance, Internal Audit,
and statutory auditors, as well as the approval of financial statements and disclosures. For
matters specific to
MeDirect Malta, Belgian representatives excuse themselves to allow independent deliberation by the Malta members, and
a similar arrangement exists for MeDirect Belgium. Conflicts of interest are discussed separately,
and closed sessions
with auditors are conducted independently.
Annual Report and Financial Statements 2025
29
B. Nominations and Remuneration Committee
The Group’s Nominations and Remuneration Committee prepares and approves the Remuneration Report. The
disclosures in the Remuneration Report reflect the requirements of EU Capital Requirements Regulation (575/2013) to the
extent applicable to the financial year under review.
MeDirect Malta’s Nominations and Remuneration Committee includes only Non-Executive Directors with no personal
financial interest in the Group. The members of the Committee are Bart Bronselaer (Chair), John Zarb, and Philip English.
A separate Nominations and Remuneration Committee exists for MeDirect Belgium.
C. Board Risk and Compliance Committee
The primary purpose of the Board Risk and Compliance Committee is to assist the Group Board of Directors in its
oversight of management’s responsibility to execute an enterprise-wide risk management strategy and framework
designed to identify, assess and manage the Group’s strategic, credit and investment, market, and operational risks
within risk appetite. The Board retains overall responsibility for managing risk.
This is performed through an in-depth and detailed oversight of the Group’s risk management and compliance strategy,
policies and practices and monitoring its actual performance against the risk appetite approved by the Board. The Risk
function and the Compliance function both report to the Board Risk and Compliance Committee.
Amongst the primary responsibilities of the Board Risk and Compliance Committee are:
- to ensure that the Group’s risk strategy and Risk Appetite Framework (including its Risk Appetite Statement and
associated thresholds for escalation and related controls) are comprehensive and consistent with the Group’s
business strategy, objectives, corporate culture and values;
-
to assess, and report at least annually on, the effectiveness of the Group’s Risk Management Function, the
Compliance Function and the Money Laundering Reporting Officer, including the adequacy of staffing levels
and expertise as well as the completeness of the function’s coverage;
- to ensure the sufficiency and effectiveness of the process of pricing assets and liabilities; and
-
to vet and approve related party transactions in accordance with Capital Markets Rule 5.138.
The Board Risk and Compliance Committee has oversight of all the Group’s risk and compliance matters, even if they
arise in its main subsidiary, MeDirect Belgium, which has its own Board Risk and Compliance Committee.
The Board Risk and Compliance Committee coordinates its activities with the Board Risk and Compliance Committee of
MeDirect Belgium, and where common issues are being addressed, certain meetings are held jointly by the committees.
The current members of the Board Risk and Compliance Committee are:
Dina Quraishi Committee Chair and Independent Non-Executive Director
John Zarb Member and Independent Non-Executive Director
Philip English Member and Non-Executive Director
The Group Chief Financial Officer, the Group Chief Risk Officer, MeDirect Malta’s Chief Compliance Officer and the
MeDirect Malta Money Laundering Reporting Officer attend the Board Risk and Compliance Committee meetings by
invitation. The Group’s and MeDirect Belgium’s Board Chairs attend meetings as observers.
The Chair of the Committee reports on all matters to the Group’s Board after each meeting and notifies the Board of
any decisions made. The Committee makes whatever recommendations to the Group Board it deems necessary. The
Board Risk and Compliance Committee met nine times during the financial year.
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Principal Management Committees
A.
Malta Executive Committee (“Malta ExCo”)
The MeDirect Malta Board delegates the execution of MeDirect Malta’s strategy to the Malta ExCo. This
committee serves as a management forum to manage the execution of MeDirect Malta’s business priorities and
reinforce the governance of MeDirect Malta’s activities. It focuses on MeDirect Malta’s growth strategies and new
initiatives and monitors the ability of MeDirect Malta to respond to new regulatory developments. It meets on a
monthly basis and is responsible for the formulation and implementation of Board-approved strategies and plans
and for ensuring that the business is operated in accordance with such strategies and plans.
The Malta ExCo is chaired by the Group CEO and includes the Group Chief Financial Officer and the Group Chief Risk
Officer. The Group Chief Technology Officer, General Counsel and the Chief Internal Audit Officer (as an observer) are
standing invitees of the Malta ExCo.
MeDirect Belgium has a similar Executive Committee comprising the MeDirect Belgium CEO, Chief Financial Officer,
and Chief Risk Officer.
B. Enterprise Risk Management Committee (“ERMC”)
The ERMC (formally the Management Risk Committee) is a sub-committee of the Malta ExCo. Its purpose is to provide
executive risk management oversight and steering in Malta and on behalf of the Group, by monitoring, assessing, and
driving enterprise risk management activities and governance. This includes providing executive risk management
oversight of risk strategy, risk policy, risk appetite, risk tolerance, emerging risks and portfolio risk exposure across all
principal risk categories.
The ERMC has 4 sub committees:
- Management Credit Committee (MeDirect Malta and MeDirect Belgium operate a separate committees)
- Model Governance Committee (MeDirect Malta and MeDirect Belgium operate a combined committee)
- Compliance and Financial Crime Committee (MeDirect Malta only)
- ESG Committee (MeDirect Malta and MeDirect Belgium operate a combined committee).
The following are the main responsibilities of the EMRC:
- Oversee and advise the Malta ExCo and the Board Risk and Compliance Committee across all enterprise risk-
related matters;
- Monitor and oversee compliance with risk appetite limits and risk strategy across all principal risks at the
MeDirect Malta entity level and at the Group level and advise and escalate to the Board Risk and Compliance
Committee on risk appetite and risk tolerance-related matters, where necessary;
- Conduct an annual review of the following documents:
o Internal Capital Adequacy Assessment Process (“ICAAP”);
o Internal Liquidity Adequacy Assessment Process (“ILAAP”);
o Recovery Plan; and
o Climate-related and Environmental Risks (“CER”) Materiality Assessment.
-
Monitor and oversee the impact and action plans required to address emerging and strategic risks;
-
Review internal control systems to ensure effectiveness and report to the Board Risk and
Compliance Committee on the effectiveness of risk management and internal controls;
-
Provide oversight of the annual business continuity and crisis management tests; and
Annual Report and Financial Statements 2025
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-
Review how effectively management is embedding and maintaining an effective risk management
culture and a strong internal control environment designed to foster compliance with Group policies and
compliance requirements.
The members of the ERMC are the Group Chief Risk Officer (Chair), MeDirect Belgium Chief Risk Officer (Deputy
Chair), Chief Information Security Officer, Head of Credit Risk, Head of Prudential Risk, Head of Operational Risk and
Business Continuity, Head of Regulatory Affairs and Sustainability, Head of Data Protection, MeDirect Malta Chief
Compliance Officer, MeDirect Belgium Head of Compliance and Chief People Officer.
The EMRC for MeDirect Belgium is held jointly with the Group EMRC since most of the topics are common to
both entities.
B1. Management Credit Committee (“MCC”)
The MCC is a sub-committee of the Group ERMC. Its purpose is to oversee management of credit activities and
mitigation of credit risks and to ensure an effective credit management process.
The MCC is chaired by the Group Chief Risk Officer, with the Head of Credit Risk serving as deputy chair, both
holding the casting vote and a right of veto of all MCC decisions. The MCC meets monthly or as required for the
proper fulfilment of its duties. Specific matters relating to MeDirect Belgium are covered by the MeDirect Belgium
Management Credit Committee, which is a subcommittee of the MeDirect Belgium ExCo. All other portfolios are
discussed in a joint MCC meeting.
B2. Model Governance Committee (“MGC”)
The MGC is a sub-committee of the ERMC. Its purpose is to provide oversight of the implementation of the Model
Risk Management Framework, specifically the validation, monitoring and oversight of the models used in the
Group. The MGC oversees models developed internally and through third parties and aims to ensure that the risk of
adverse consequences from model errors or inappropriate use of modelled outputs is mitigated.
Members of the MGC are fully knowledgeable about the model risk management framework of the Group and have
a
broad understanding of the financial and business risks of the Group and the financial and business environment.
The
MGC is chaired by the Group Chief Risk Officer and meets every two months.
B3. Malta Compliance and Financial Crime Committee (“CFCC”)
The CFCC is a sub-committee of the MeDirect Malta ERMC. Its purpose is to provide risk management
oversight for MeDirect Malta in relation to compliance and financial crime risk by assessing and monitoring such risks
and by ensuring compliance with regulatory requirements, industry standard, and internal controls relating to such
risks. This includes providing risk management oversight of the strategy, policies, risk appetite and risk tolerance in
respect of compliance and financial crime risk, monitoring and addressing emerging risks and managing overall
compliance and financial crime risk exposure.
The CFCC has a functional reporting line to the BRCC. The committee is chaired by the Chief Compliance Officer, with
the MLRO acting as deputy chair. The committee meets at least monthly.
Annual Report and Financial Statements 2025
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B4. Environmental, Social and Governance (“ESG”) Committee
The ESG Committee is a sub-committee of the Group ERMC. It acts as an advisory body that provides preliminary
validation of matters pertaining to ESG actions and reports, including the implementation of ESG-related initiatives
and reporting, and monitoring of ESG-related risks and opportunities and climate-related and environmental risks
(“CER”).
The Committee aims to ensure that the implementation of ESG actions is consistent with the Group’s business
model, corporate culture and values, as well as risk management framework.
The Committee’s responsibilities include the following:
-
Oversee CER and ESG initiatives, including the regulatory requirements and reviews, applicability, priorities
and implementation;
-
Oversee CER and ESG related risks and opportunities;
-
Define the ESG strategy, action plans and initiatives;
-
Monitor the implementation of ESG Strategy, action plans and initiatives;
-
Recommend remedial actions to foreseen issues or delays to the Board of Directors; and
-
Discuss compliance and audit findings relating to ESG/CER matters.
The Committee reviews ESG-related disclosures/reports prior to discussion and notification/approval by the Board
of Directors.
The Committee members include key representatives of business units and control functions critical to the
management
of initiatives related to CER and ESG. The Committee is chaired by the Head of Sustainability.
C.
Asset and Liability Committee (“ALCO”)
The Asset Liability Management Committee (ALCO) is a key governance body within the Group responsible for
overseeing the management of the assets and liabilities to ensure an optimal balance between risk and return,
whilst maintaining adequate liquidity and regulatory compliance.
ALCO monitors and evaluates, at an integrated and consolidated exposures level, the liquidity, funding and capital
position of the Group on a continuous basis to ensure that business and regulatory requirements are met and to
provide tactical and strategic direction. On annual basis, ALCO evaluates and approves all core documents supporting the
Group’s liquidity, funding and capital positions.
Furthermore, the Committee oversees and exercises executive authority, in each case in accordance with the
risk appetite statement set by the Board of Directors, for:
- market risk positions (including foreign exchange) and hedging activities;
- interest rate risk and credit spread risk;
-
loan and deposit pricing, fund transfer pricing and trading activities;
- adherence with the approved investment strategy; and
- relevant policies and procedures
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ALCO meets at least once a month to review the most current financial and market information and to ensure cautious
management of balance sheet and market-related risks. The Committee is chaired by the Head of Assets and
Liabilities
Management and is composed of members of Executive Management.
D.
Operations
Committee
The purpose of the Group Operations Committee is to ensure that the Group has in place and operates effectively and
appropriately robust change management, project management, outsourcing and vendor management processes and
procedures. The Group Operations Committee also oversees ICT strategy implementation and monitoring, operational
and cyber security risks and data governance initiatives and ensures that arrangements related to business continuity
and disaster recovery are in place. The Group’s Operations Committee is a sub-committee of the Malta ExCo and
the MeDirect Belgium ExCo and is the decision-making body for matters described above under the delegated
authority from the Malta ExCo and the MeDirect Belgium ExCo.
The Operations Committee’s terms of reference are to oversee and take any necessary decisions in the following areas:
- Feasibility of the business and regulatory change requests;
-
Operational feasibility of the new products and services;
-
Governance of the onboarding and monitoring of key third party vendors;
-
Governance of the arrangements related to budgeted spending on change initiatives, business continuity and
disaster recovery and data retention and archiving; and
- Awareness and oversight of the arrangements related to ICT strategy and its implementation, operational risk
and cyber security and organisational design of the Group from the point of view of efficiency and change
sustainability.
The members of this committee include the Group Chief Technology Officer (Chair), Group Chief Executive Officer,
Chief Information Security Officer, Group Chief Risk Officer, MeDirect Belgium Chief Risk Officer, Interim Malta Chief
Risk Officer, Group Chief Financial Officer, MeDirect Belgium Chief Financial Officer, General Counsel, Head of Digital
Channels, Project Management Office Manager and Head of Procurement.
Code Provision 4.2.7 - Succession planning
MeDirect Malta has established a list of Key Personnel Substitutes to cover instances in which executive directors, key
personnel and managers are temporarily incapacitated or otherwise unable to complete their duties for a
significant period of time.
If such individuals are permanently unable to re-assume their duties, MeDirect Malta’s management, in consultation
with the Board, will designate permanent successors, either from MeDirect Malta’s existing management team or, if
appropriate, by selecting an outside candidate.
As part of succession planning and talent management, MeDirect Malta’s and MeDirect Belgium’s Boards and CEOs
ensure that MeDirect implements appropriate schemes to recruit, retain and motivate high quality executive officers.
They also encourage members of management to progress to higher levels, seek to maintain high morale amongst
MeDirect’s Malta’s personnel and identify high performing employees with the potential to take on more
responsibilities.
The succession plan ensures that MeDirect is empowering and developing its employees, with the aim of ensuring that
there is a pool of talent ready for advancement and promotion into increasingly challenging roles when they arise.
Annual Report and Financial Statements 2025
34
Principle 6: Information and professional development
Board members of MeDirect Malta and MeDirect Belgium receive regular updates on MeDirect’s strategic, operational,
corporate governance, compliance, risk management and financial plans and objectives.
MeDirect Malta’s and MeDirect Belgium’s Boards appoint their respective CEOs, taking into account the views of
the ultimate controlling shareholder and MeDirect Malta, respectively. The Boards’ training programmes aim to
improve
Board members’ awareness of risk, regulation and compliance developments in the financial services sector,
covering
topics ranging from ESG and sustainable finance to information technology and cyber security.
Directors of MeDirect Malta and MeDirect Belgium are given opportunities to update and develop their skills
and
knowledge through briefings by senior executives and externally run seminars. Moreover, directors have access to
independent professional advice relating to their roles as directors, at MeDirect’s expense.
The Company Secretary reports directly to the Board and is responsible for ensuring adherence to the Board
procedures
and dissemination of information amongst the Board, its committees and senior management.
Principle 7: Evaluation of the Board’s performance
Periodically, MeDirect Malta’s Board carries out an evaluation procedure whereby Board members are requested to
complete a questionnaire on the performance of the Board and its committees. The evaluation is co-ordinated by the
Board’s Chair, and all directors participate in the process. Feedback from the evaluation is presented to the
Nominations and Remuneration Committee.
Principles 9 and 10: Relations with shareholders and with the market and institutional shareholders
MeDirect Malta and MeDirect Belgium maintain ongoing communication with its shareholders and the market in respect
of its strategy and performance. During the year under review, MeDirect Malta issued various company announcements
and media releases to explain ongoing corporate developments, material events and transactions and their impact on
MeDirect Malta’s financial position. Through public announcements, MeDirect Malta’s website, financial reports and
interaction with the media in Malta, MeDirect Malta provides the market with regular, timely, accurate, comprehensive
and comparable information in sufficient detail to enable investors to make informed investment decisions in respect of
MeDirect Malta’s listed securities.
MeDirect Malta’s ultimate controlling shareholder is represented on its Board of Directors and actively monitors
its investment in MeDirect Malta. Following the acquisition by the CREDITAS Group, the directors nominated to
represent the new shareholder are awaiting regulatory approval before they can formally assume their Board
roles.
The Chairs of MeDirect Malta’s and MeDirect Belgium’s Audit, Nominations and Remuneration and Risk and
Compliance Committees are available to answer questions at the Annual General Meeting. In accordance with the
provisions of the Malta Companies Act, the directors shall, at the request of members of MeDirect Malta holding not
less than one-tenth of its paid-up share capital, convene an Extraordinary General Meeting of MeDirect Malta.
Annual Report and Financial Statements 2025
35
Principle
11:
Conflicts of interest
MeDirect Malta’s Articles of Association and the Belgian Code of Companies provide that any director of MeDirect
Malta and MeDirect Belgium respectively who is in any way, whether directly or indirectly, interested in a
transaction or proposed transaction with MeDirect must (i) declare to the other directors the nature of such interest, (ii)
unless otherwise determined by the unconflicted Directors, not participate in or be present for any discussion of any
such transaction or proposed transaction and (iii) not vote on any such transaction or proposed transaction.
On joining the MeDirect Malta Board and regularly thereafter, directors are informed and reminded of their
obligations relating to dealing in MeDirect Malta’s securities under applicable law and regulation, including the
Malta Capital Markets Rules.
Principle 12: Corporate social responsibility
MeDirect Malta remains committed to supporting the community. MeDirect Malta supported cultural, sporting, charitable
and educational organisations and initiatives throughout the year ending 31 December 2025.
In fulfilling its role as a responsible corporate citizen, MeDirect actively encourages its
employees to engage with and volunteer for causes they about which they care. This
approach has led to successful fundraising efforts for Hospice Malta and Inspire, as well as
staff volunteering with various organisations.
MeDirect actively supports individual initiatives throughout the
year. In 2025, employees continued to make use of the Bank’s
Volunteering Time Off policy, allowing employees to take two
additional paid leave days annually to volunteer with a non-profit
organisation, charity, or community group.
MeDirect’s commitment to its employees also extends to their
wellbeing and mental health. Through an ongoing partnership
with The Richmond Foundation, employees have access to
counselling services to support their personal and professional
lives.
Throughout the year, MeDirect regularly shared articles offering personal financial
management tips through its website, social media channels, and email newsletters. As part of its commitment to financial
education, MeDirect also launched the Ask the Advisor video series, in which expert advisors provide tips and insights into
the world of investing.
MeDirect’s financial contributions to charitable causes continued during 2025, including a
donation to L-Istrina, Malta’s annual national fundraiser in support of the Malta Community
Chest Fund Foundation. Beyond charitable donations, MeDirect remained a prominent
supporter of Malta’s cultural scene. The Soċjetà Filarmonika La Stella A.D. 1863
continued to receive backing from MeDirect Malta while the Bank also reaffirmed its
dedication to promoting excellence and a healthy lifestyle by renewing sponsorship
agreements with the Island Car Club and Otters ASC water polo club.
A donation to Hospice Malta,
an organisation which
provides palliative care
services free of charge to
patients in Malta and Gozo.
A donation to Inspire,
presented to mark World
Autism Day.
Sponsorship presentation of the
Gozitan waterpolo club Otters
ASC.
Annual Report and Financial Statements 2025
36
In 2025, MeDirect Belgium also reinforced its commitment to social responsibility through several meaningful initiatives. In
May, MeDirect donated €1,000 to Live in Colour to support their community projects. In October, MeDirect organised a
company walk to raise awareness for breast cancer, during which an additional €1,000 was donated to Think Pink, a non-
profit organisation dedicated to breast cancer prevention, awareness, and research.
During Easter, MeDirect also organised a chocolate egg initiative, with part of the proceeds donated to the United Fund
for Belgium, which contributes to the fight against poverty and supports people living with disabilities. Finally, for end-of-
year gifts, MeDirect Belgium chose to offer a gourmet food basket via Funds For Good, which supports local
entrepreneurs by promoting their sustainable products without taking any commission, thereby promoting social impact
and responsible trade.
Additionally, for the third year, MeDirect partnered with the local garbage disposal company to pick-up garbage in the
streets around the office in Brussels and, as part of Mobility Week, MeDirect organised an electric bike tour of Brussels to
promote sustainable transport among colleagues.
Other disclosures
There were no material contracts to which MeDirect Malta or its subsidiary were a party and in which any one of
MeDirect Malta’s directors was directly or indirectly interested.
Management’s internal controls over financial reporting
MeDirect Malta’s and MeDirect Belgium’s Boards are responsible for ensuring that senior management develops
and implements a sound system of internal controls and for reviewing its effectiveness. The system is designed to
manage, rather than eliminate, the risk of failure in order to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss. MeDirect operates a system of
internal controls that provides reasonable assurance of effective and efficient operations, including controls relating to
financial and operational matters and compliance with laws and regulations. Processes are in place for identifying,
evaluating and managing the significant risks facing MeDirect Malta and the Group.
The management of MeDirect is responsible for instituting and preserving sufficient internal control over financial
reporting. Internal control over financial reporting is a process designed under the supervision of the Group
Chief Financial Officer and the MeDirect Belgium Chief Financial Officer to provide reasonable assurance
regarding the
reliability of financial reporting and the preparation of financial statements for external reporting
purposes in accordance
with IFRS as adopted by the European Union.
Internal control over financial reporting includes policies and procedures that relate to:
-
maintaining records that, in reasonable detail, accurately and fairly reflect transactions and dispositions
of assets;
- providing reasonable assurances that transactions are recorded as necessary to permit preparation of
financial
statements in accordance with IFRS as adopted by the EU;
- ensuring that receipts and expenditures are made only in accordance with authorisations of management
and
the relevant Directors; and
-
providing reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use
or disposition of assets that could have a material effect on the financial statements.
Annual Report and Financial Statements 2025
37
Remuneration Report
Annual Report and Financial Statements 2025
38
Remuneration
governance
The primary purpose of the Group Nominations and Remuneration Committee (that also covers MeDirect Malta)
and the Nominations and Remuneration Committee of MeDirect Belgium (“NRCs”) is to review remuneration levels
in the
Group and to consider whether to approve performance-related and other variable bonus awards that may be
delivered in cash or share- linked instruments. A list of Material Risk Takers is revised and approved at least on an
annual basis.
The NRCs are charged with aligning the Group’s remuneration policy and in particular performance-related elements
of remuneration, with the Group’s business strategy and risk tolerance, objectives, values and long-term interests. The
key
objectives of the NRCs in this regard are the following:
- annual review of the proposals put forward by management relating to the principles of the remuneration
policy
and verification with management that they are effectively implemented;
- monitoring of the budgets allocated to the fixed salary increases for the forthcoming year and the
variable remuneration pools for the previous financial year; and
- annual review of the individual remuneration of senior management and staff members who are employed
in control functions, as well as that of staff with total remuneration above a threshold fixed by the NRCs.
One of the NRCs primary functions of the NRCs is to ensure that the Group is able to attract and retain suitable
employees at all levels at an acceptable cost. It may request market-related information from time to time, to
verify
the recommendations made by management. On an annual basis, the NRCs review the budgets allocated to the
fixed salary increases for the forthcoming year and the variable remuneration pools for the previous financial year and
review
the individual remuneration of senior management and staff members who are employed in control functions
such as Risk and Compliance, as well as that of staff with total remuneration above a threshold fixed by the relative
NRC.
Membership and meetings
The members of the Group’s NRC are:
Bart Bronselaer Committee Chair/Independent Non-Executive Board Chair
John Zarb
Independent Non-Executive Director
Philip English Non-Executive Director
The Group’s Chief People Officer acts as a secretary to the Committee, whilst the following were attendees throughout
the year, except where it was deemed that there may be a conflict of interest: the Group Chief Executive Officer,
the Chief Administration Officer, the other non-executive director, Dina Quraishi and the Chair of MeDirect Belgium,
Marcia De Wachter.
During the year ended 31 December 2025, the Group’s NRC met nine times. One meeting was held jointly with the
Belgian NRC. These meetings were attended by all members of the Group’s NRC.
Annual Report and Financial Statements 2025
39
Remuneration policy statement
The Remuneration Policy is owned by the Chair of the Group’s NRC and is approved by the Group’s Board of
Directors. The policy was developed in conjunction with the Group’s principal shareholder and the NRCs. The policy is
reviewed on an annual basis by the NRCs or when significant changes occur in related directives, guidance, best
practice and technical standards. The policy is also reviewed on an annual basis by the Internal Audit function to
ensure that it complies with all applicable legal and regulatory requirements. The NRCs may also require review of this
policy by external advisors to the extent deemed necessary or appropriate.
The purpose of the Remuneration Policy is to set out the overall principles that MeDirect Malta and MeDirect
Belgium
must follow when determining the remuneration and compensation of its management and staff. This policy
establishes an effective framework for determining role descriptions, performance measurement, risk adjustment of
compensation and linkages to reward. The Group Board and the MeDirect Belgium Board are responsible for ensuring
that remuneration
practices are based on sound governance processes that take into account the Group’s risk
strategy and profile.
The Boards, directly and through the NRCs, carry out effective monitoring and evaluation of adherence to the
remuneration policy and of the Group’s remuneration system on an ongoing basis. The NRCs and the Boards
monitor
the ongoing performance by executive directors and senior management and determine the design and
implementation
of an effective remuneration system. They also ensure that remuneration policies and practices
are consistent with a prudent, forward-looking approach, aimed at maintaining a sound capital base, and that all
awards of variable remuneration to Material Risk Takers are subject to malus and clawback arrangements and are
otherwise consistent with the Remuneration Policy.
Material Risk Takers, comprising members of staff whose actions have a material impact on the risk profile of the
Group,
are identified on the basis of the qualitative and quantitative criteria set out in the Commission Delegated
Regulation (EU) 2021/923. Material Risk Takers are also identified on the basis of additional criteria developed
internally. This category includes members of the Board of Directors, members of senior management and
business heads and key personnel of independent control functions such as the internal audit, compliance and risk
management.
Material Risk Takers also include:
-
Staff members authorised to approve or veto the introduction of new products;
-
Staff members authorised to take decisions on material credit risk exposures or is a member of a committee
which has authority to take decisions on material credit risk exposures; and
- Staff members who were awarded total remuneration in the previous financial year equal to or in excess of other
material risk takers (excluding non-executive, support function and control function roles).
The list of Material Risk Takers is reviewed and reconsidered by the Group’s and MeDirect’s Belgium’s NRCs at least
annually.
Remuneration consists of base salary and, where applicable, performance based or other variable compensation.
Performance-related compensation is determined both on (i) a Group basis, and (ii) an individual employee
basis.
Annual Report and Financial Statements 2025
40
Compliance with the Group’s rules and requirements and ongoing involvement in risk management are taken into
account when determining performance-based remuneration for employees. Other non-financial factors are considered
such as skills acquired, personal development, commitment to the Group’s business strategies and policies and
contribution to the performance of the team. Performance is measured in relation to non-financial and financial goals
and, where appropriate, failure to perform in non-financial areas of responsibility outweighs success in profit generation
in determining compensation. The remuneration of staff in control functions is designed to allow the Group to employ
qualified and experienced personnel in those functions and to take into account the nature of their responsibilities.
The Group Risk function provides advice in respect of the definition of suitable risk-adjusted performance measures,
as well as in assessing how the variable remuneration structure affects the risk profile and culture of the Group. The
Risk function also provides input into the process for determining bonus pools and the allocations of variable
remuneration awards to ensure that all relevant factors are considered in determining awards. The Risk function also
validates and assesses risk adjustment data, and a member of the Risk Committee provides input to the NRCs.
The Group Compliance function analyses how the Remuneration Policy affects the Group’s compliance, in all
jurisdictions
in which the Group operates, with legislation regulations and internal policies and conducts an annual
review of the
implementation of the Remuneration Policy. The Compliance function reports on identified compliance
risks and issues
of non-compliance, and its findings are taken into account in the review and oversight of the
Remuneration Policy.
The Internal Audit function carries out an independent annual review of the design adequacy, control
effectiveness and sound monitoring of the Remuneration Policy. The Internal Audit function also informs the NRC
of any negligent or unacceptable behaviour of key staff and management members which should be considered
during the review of remuneration levels and approval of performance-related and other variable bonus awards.
The Group’s Remuneration Policy includes malus and clawback provisions applicable to all material risk takers and
key personnel in control functions, including variable compensation paid in cash. Clawback, if applied, requires
employees
to pay back an amount already received. It can be applied for five years from the date of award or until
the end of the
applicable retention period, as applicable. Malus, if applies, permits reduction of incentive awards
before they become
payable or vest. Malus may be applied at any time during the applicable deferral period.
The Group can apply malus and clawback to variable remuneration if the affected employees were responsible for
significant losses to the Group or if standards of fitness and propriety were not met during the period for which the
variable remuneration was awarded.
Variable remuneration is paid or vests only if it is sustainable in relation to the financial and regulatory capital situation
of the Group as a whole. Subject to national contract and labour law, total variable remuneration may be reduced in the
event of negative financial performance of the Group. Reductions may affect, both current remuneration and payouts
of amounts previously earned.
Conflicts of interests relating to the Remuneration Policy and the award of remuneration under the policy are identified
and appropriately addressed.
In 2025 the Group reviewed the remuneration policy and the Deferred Bonus plan, but there were no changes.
Annual Report and Financial Statements 2025
41
The Group’s reward strategy
The quality and long-term commitment of employees is fundamental to the Group’s success. The Group aims to
attract,
retain and motivate highest quality employees who would like a long-term career with the Group and will
perform their role at a high level. The Group’s compensation package provides for fixed and variable remuneration.
Fixed remuneration
Fixed remuneration reflects the individual’s role, experience and responsibilities. It comprises base salary and, in some
cases, a fixed allowance relating to extra hours or work on public holidays, for example. Base salaries are expected to
comprise the majority of the Group’s overall compensation, benchmarked regularly, and are paid monthly by direct
credit to an employee’s personal account. Allowances are also paid monthly by direct credit. Fixed remuneration also
includes fixed benefits. Benefit packages are determined based on market practice and include medical and life
insurance for all employees across the Group. In Belgium and the United Kingdom, the Group contributes to defined
contribution pension schemes.
Employees of MeDirect Malta are also entitled to the following benefits:
Staff savings account
All Malta-based employees are entitled to make monthly after-tax deposits of a specified amount to an employee
savings account, benefiting from a favourable interest rate and payable in December.
Home loan subsidy
Home loans are offered to staff at favourable interest rates.
Variable remuneration
Variable remuneration may consist of performance bonuses and other variable bonuses and can be awarded in cash
or share linked instruments. Guaranteed sign-on payments and severance payments are awarded in cash. In
accordance with Article 92(1) (q) of directive 2013/36/EU (“CRD”), variable remuneration is not paid through vehicles
or methods that facilitate non-compliance with CRD or Regulation (EU) No 575/2013. In Belgium, a number of
employees opted to be paid the performance bonus in warrants or options rather than in cash.
Performance bonuses represent additional remuneration, payable to employees as a reward for achieving
specific goals or meeting predetermined targets. All variable remuneration is discretionary, irrespective of
performance, and
the amount of variable remuneration is not determined in advance. The Group may also award ad
hoc bonuses that are
linked to pre-determined KPIs in relation to specific projects.
Retention bonuses can be awarded on the condition that employee remains at a Group company for an agreed period.
Retention bonuses can be used to retain critical employees who are key to success of the realisation of the strategic
plan of the Group.
Grants of retention bonuses, guaranteed remuneration and/or severance payments are made in accordance with
applicable regulatory requirements, and any such remuneration is awarded in such form as is determined by the
NRCs, taking account of applicable regulatory requirements and Group policy.
Annual Report and Financial Statements 2025
42
Determination of variable remuneration pools
A variable remuneration pool is established for the Group as a whole and is calculated at Group level based on the
success of the Group in meeting its business objectives. In determining the variable remuneration pool, the Group
applies a prudent, forward-looking approach, consistent with maintaining a sound capital base. The Group expects that
in aggregate variable remuneration will not materially affect the capital position or ability to strengthen the capital base
of the Group or either of its banking subsidiaries.
The variable remuneration pool is determined based on the following factors:
- Financial results of the Group, the relevant subsidiary and/or the relevant business line, after taking into
account the cost of risk, capital and liquidity, with the aim of ensuring that the total amount of variable
remuneration does not undermine the Group’s or the subsidiary’s capacity to meet its objectives in terms of
capital requirements; and
- Qualitative factors such as market practices, conditions under which activities are carried out and risk
management.
The pool will be further adjusted to reflect all relevant identified current and future risks and the Group’s capital
position.
Such an adjustment may include the NRCs reducing pools of variable remuneration in the event of a
breach (or unacceptable risk of a breach) of any key regulatory ratios and/or reducing or not paying variable
remuneration to any
employee (whether or not a Material Risk Taker) who the NRC determines has caused or
contributed to any such breach
(or risk of a breach).
The variable remuneration pool is split between entities by taking into consideration the pools allocated in the previous
financial period, as well as other factors such as change in composition of staff and senior management and
market benchmarks.
The variable remuneration pool is approved by the NRC of MeDirect Malta and MeDirect Belgium.
Measures of performance as basis for awarding of bonuses
All personnel are compensated from the variable remuneration bonus pool based on their contribution to the
achievement of the Group’s business objectives as well as personal objectives. The allocations of individual variable
remuneration awards are correlated to the staff member’s formalised annual individual appraisal, that takes into
consideration quantitative and qualitative objectives known to the employee, as well as risk management
considerations.
Individuals are compensated from that bonus pool based on their contribution to the achievement of the Group’s
and/or the subsidiary’s business objectives. Individual criteria will also depend on the role of the individual. For
example, portfolio managers are judged on factors such as risk management, overall continuing performance of
the portfolio and contribution to development of the Group’s systems, whereas members of the Treasury function
are assessed on
effectiveness in managing liquidity as well as interest rate risk. The amount of variable remuneration
will vary depending
on the performance of the staff member, as well as of the staff member’s business unit and the
institution as a whole.
Annual Report and Financial Statements 2025
43
The appraisal process for all employees involves the following stages:
-
Objective setting at the beginning of the year
Goals are set for the development of the employee. Objectives may be technical (related to area of expertise and day-
to-day role) or behavioural (related to personal objectives).
- End of year appraisal
Employees prepare a self-appraisal, and the employee’s manager prepares an appraisal. The employee and the
manager meet to discuss performance and rating.
Individual allocation of the variable remuneration
All staff (including material risk takers)
The Chief People Officer initiates the process of gathering recommendations for salary revisions, bonuses and
promotions from heads of departments. A variable remuneration pool is allocated per department based on the bonus
pool of the Group. The individual departments then allocate the pool amongst their employees based on
performance.
All staff are eligible for performance-related variable remuneration, although the Group has full discretion as to whether
or not to pay variable remuneration on a Group-wide or an individual basis.
The amount payable to any individual under the annual variable remuneration plan is based on the following:
- The Group’s financial performance (profits before tax after cost of capital adjustments, cost-to-income ratio and
maintenance of all regulatory ratios across the Group (including CET1) within established risk appetite levels;
- Customer satisfaction (if applicable) based on the subjective assessment of the NRC;
-
Conduct risk (after the Risk function has shared its reports with the Board Risk Committee and based on the
Board Risk Committee’s recommendation to the NRC); and
- Personal performance against qualitative objectives and at least one quantitative objective.
Variable remuneration may not be linked directly to individual sales or revenues generation targets.
In exceptional circumstances, the allocation of variable remuneration may differ from the above procedure, as
determined on a case-by-case basis. The Chief Administration Officer together with the Chief People Officer ensure
that recommendations for salary revisions and bonuses do not exceed the allocated pool. The Group Chief Risk Officer
and the Chief Risk Officer of MeDirect Belgium must confirm that the bonus allocation is consistent with sound and
effective risk management practices and does not adversely affect the capital adequacy of both entities. Final
recommendations are discussed with the Group Chief Executive Officer and the Chief Executive Officer of MeDirect
Belgium for approval
before presentation to the NRC of the relevant entity.
Annual Report and Financial Statements 2025
44
Internal control functions
Whilst the overall bonus pool of the Group is based on the Group’s financial results, compensation for control
functions is not directly tied to the results of any business unit but should provide incentives for such staff to deliver
the highest level of performance. Control functions are judged on success in developing and implementing
appropriate policies, developing effective risk management controls and procedures, monitoring risk and building
control systems. The Group’s remuneration practices shall ensure that no material conflicts of interest arise in
respect of remuneration for staff in the Group’s control functions.
The methods used for determining the variable remuneration of control functions are designed to encourage staff
not to compromise their objectivity and independence. When control function staff receive variable remuneration,
it is determined separately from the business units they control, including the performance which results from
business decisions in which the control function is involved. The criteria used for assessing performance and risk
are based exclusively on internal control objectives.
Other matters on variable remuneration
In accordance with applicable remuneration regulations, the ratio between the variable components of remuneration
and the fixed components is limited to 100% (200% with shareholders’ approval subject to certain conditions being
met) for
variable remuneration paid to MeDirect Malta staff and 50% for variable remuneration paid to MeDirect
Belgium staff.
Where variable remuneration is more than €50,000 both for MeDirect Malta and MeDirect Belgium employees or
in certain other circumstances, a portion of the variable remuneration will be deferred and/or payable in the form of
instruments. During the financial year, no variable remuneration paid exceeded 100% of fixed remuneration (or 50% in
the case of MeDirect Belgium).
Variable remuneration may be paid in the following forms: 1) upfront cash; 2) an upfront share-linked award and/or
3) a deferred award of cash or share-linked instruments subject to deferral. An award for share-linked instruments
entitles the material risk taker to a cash payment based on the market value of a specified number of shares of the
Group at a given date but does not entitle the employee to shares or any interest in or right over such shares. Upfront
and deferred share-linked awards linked to a retention bonus are subject to a retention period of not less than one or
more than five years as determined by the relevant NRC. Any tranche of a deferred award which has not yet been
paid will lapse if the recipient leaves employment before the end of the deferral period, except in the case of specific
reasons described in the Deferred Bonus Plan and if approved by the relevant NRC. All share-linked instruments
awarded to date were issued to current and previous material risk takers.
Variable remuneration awarded in cash is normally paid in the first quarter of the subsequent financial year as
determined
by the NRCs. Variable remuneration paid to Material Risk Takers is subject to malus and clawback
provisions. The clawback provisions state that the bonus may have to be repaid if the recipient of an award
participated in or was responsible for conduct which resulted in significant losses to the Group and/or a business
unit, in case of failure to meet appropriate standards of fitness and propriety, including cases of fraud, dishonesty
or gross negligence, or in the case of significant reputational damage to the Group or a business unit or where
such conduct would lead to
regulatory actions. Clawback provisions may be applied ex post to variable remuneration
paid in cash and share-linked
instruments.
Annual Report and Financial Statements 2025
45
Malus may be applied at the discretion of the relevant NRC, and examples of the circumstances in which such
discretion to impose malus may be exercised are included in the Group’s Remuneration Policy. Malus provisions may
be applied ex ante to share-linked instruments.
Subject to regulatory de minimis limits, for Material Risk Takers, deferral will apply to at least 40% of annual
variable
remuneration (and up to at least 60% in certain circumstances as determined in accordance with applicable
regulations
by the relevant NRC), including both cash and instrument payments. The deferral period is five years,
with one-fifth of the deferred amount vesting at the end of each of the first five anniversaries of the award date.
Annual Report and Financial Statements 2025
46
Financial Statements
Annual Report and Financial Statements 2025
47
Statements of financial position
Group
Bank
2025
2024
2025
2024
Notes
€000
€000
€000
€000
ASSETS
Balances with central banks and cash
4
74,595
64,618
Derivative financial instruments
5
184
797
Loans and advances to financial institutions
6
54,327
37,074
Loans and advances to customers
7
391,787
413,821
Investments
- Securities portfolio
8
266,514
262,219
- Securitisation portfolio
8
84,488
120,714
- Asset-Backed Securitisation portfolio
8
32,784
13,699
- Subsidiaries
9
232,098
196,028
Property and equipment
10
2,298
3,497
Intangible assets
11
13,433
13,299
Investment property
13
-
17,042
Current tax assets
151
98
Deferred tax assets
14
9,910
9,910
Prepayments and accrued income
15
5,038
3,566
Other assets
16
9,290
8,595
Total assets
1,176,897
1,164,977
EQUITY
Called up issued share capital
17
117,450
117,450
Share premium
17
13,464
13,464
Shareholders’ contributions
17
172,997
133,196
Other reserves
17
2,498
1,522
Accumulated losses
17
(25,138 )
(16,327 )
(25,561)
(17,102)
Total equity
280,848
248,530
LIABILITIES
Derivative financial instruments
5
759
833
Amounts owed to financial institutions
18
6,093
6,744
Amounts owed to customers
19
808,518
827,626
Debt securities in issue
20
-
-
Subordinated liabilities
21
67,329
67,358
Current tax liabilities
-
-
Deferred tax liabilities
14
-
-
Provisions for liabilities and other charges
22
69
82
Accruals and deferred income
23
5,577
6,642
Other liabilities
24
7,704
7,162
Total liabilities
896,049
916,447
Total equity and liabilities
1,176,897
1,164,977
Memorandum items
Commitments to extend credit, guarantees and other commitments
33 -34
238,314
260,904
226,299
The notes on pages 51 to 194 are an integral part of these financial statements. The financial statements on pages 46 to 194 were approved and
authorised for issue by the Board of Directors on 11 March 2026. The financial statements were signed on behalf of the Board of Directors by Bart
Bronselaer (Chairman) and Jean-Claude Maher (Chief Executive Officer) as per the Directors’ Declaration on ESEF Annual Financial Report submitted
in conjunction with the Annual Financial Report.
Annual Report and Financial Statements 2025
48
Statements of comprehensive income
Group
Bank
2025
2024
2025
2024
Notes
€000
€000
€000
€000
Interest income *
29,397
38,820
Interest expense *
(91,352 )
(117,621 )
(15,201)
(17,724)
Net interest income
25
14,196
21,096
Fee and commission income
5,638
6,835
Fee and commission expense
(4,567 )
(5,302 )
(1,602)
(3,132)
Net fee and commission income
26
4,036
3,703
Net trading income
27
2,391
1,585
Net loss from financial instruments at fair value through profit or loss
(125 )
-
(125)
Share of results of subsidiary undertakings
9
6,670
3,515
Other operating income
– Realised gains/(losses) on disposal of other investments
27.1
(2)
-
– Realised gains on disposal of loans and advances
56
1
– Other income
1,721
1,041
Total operating income
29,068
30,816
Personnel expenses
28
(28,865 )
(26,828 )
(13,875)
(12,633)
Depreciation and amortisation
10-11
(5,933 )
(5,741 )
(5,172)
(3,918)
Other administrative expenses
29
(44,573 )
(38,885 )
(14,029)
(12,379)
Total operating expenses
(79,371 )
(71,454 )
(33,076)
(28,930)
Net operating (loss)/profit before changes in expected credit losses
(3,227 )
(4,008)
1,886
Change in expected credit losses and other credit impairment charges
30
(2,846 )
(19,332 )
(2,951)
(8,580)
Loss/Total comprehensive loss for the year before tax
(6,073 )
(5,022 )
(6,959)
(6,694)
Tax expense
31
(1,552 )
(856 )
(524)
(181)
Loss/Total comprehensive loss for the year
(7,625 )
(5,878 )
(7,483)
(6,875)
- Attributable to equity holders of the parent
* All interest income and expense is calculated using the effective interest rate (EIR) method.
The notes on pages 51 to 194 are an integral part of these financial statements.
Annual Report and Financial Statements 2025
49
Statements of changes in equity
Share capital
Share premium
Shareholders'
contributions
Other reserves
Accumulated
losses
Total
€000
€000
€000
€000
€000
€000
Group
Balance at 1 January 2024
(10,285 )
Total comprehensive income
Loss for the year
(5,878 )
(5,878 )
Total comprehensive income, net of tax
(5,878 )
(5,878 )
Transfer to legal reserve (Note 17)
(164 )
Balance at 31 December 2024
(16,327 )
Balance at 1 January 2025 | ( | |||||
Total comprehensive income Loss for the year | | ( | ( | |||
Total comprehensive income, net of tax | | ( | ( | |||
| Transaction with owners Shareholders' contributions (Note 17) | | |||||
Total transactions with owners | ||||||
Transfer to legal reserve (Note 17) | ( | |||||
Balance at 31 December 2025 | ( |
Share capital
Share premium
Shareholders'
contributions
Other reserves
Accumulated
losses
Total
€000
€000
€000
€000
€000
€000
Bank
Balance at 1 January 2024
117,450
13,464
133,196
3,340
(12,045)
255,405
Total comprehensive income
Loss for the year
-
-
-
-
(6,875)
(6,875)
Total comprehensive income, net of tax
-
-
-
-
(6,875)
(6,875)
Realisation of previously recognised fair
value reserve upon merger of
subsidiary with Bank (Note 17)
-
-
-
(1,982)
1,982
-
Transfer to legal reserve (Note 17)
-
-
-
164
(164)
-
Balance at 31 December 2024
117,450
13,464
133,196
1,522
(17,102)
248,530
Balance at 1 January 2025
117,450
13,464
133,196
1,522
(17,102)
248,530
Total comprehensive income
Loss for the year
-
-
-
-
(7,483)
(7,483)
Total comprehensive income, net of tax
-
-
-
-
(7,483)
(7,483)
Transaction with owners
Shareholders' contributions (Note 17)
-
-
39,801
-
-
39,801
Total transactions with owners
-
-
39,801
-
-
39,801
Realisation of previously recognised fair
value reserve upon merger of
subsidiary with Bank (Note 17)
-
-
-
(210)
210
-
Transfer to legal reserve (Note 17)
-
-
-
1,186
(1,186)
-
Balance at 31 December 2025
117,450
13,464
172,997
2,498
(25,561)
280,848
The notes on pages 51 to 194 are an integral part of these financial statements.
Annual Report and Financial Statements 2025
50
Statements of cash flows
Group
Bank
2025
2024
2025
2024
Notes
€000
€000
€000
€000
Cash flows from operating activities
Interest and commission receipts
38,048
45,492
Interest and commission payments
(94,812 )
(121,801 )
(16,426)
(20,525)
Payments to employees and suppliers
(86,709 )
(66,270 )
(27,648)
(25,612)
Operating cash flows before changes in operating assets/liabilities
(8,096 )
(6,026)
(645)
(Increase)/decrease in operating assets:
- Reserve deposit with central banks
(2,679 )
(7,087 )
(257)
(693)
- Loans and advances to financial institutions and customers
(90,114 )
(108,760 )
32,548
(23,835)
Increase/(decrease) in operating liabilities:
- Amounts owed to financial institutions and customers
(17,312)
(12,938)
- Other payables
(2,504 )
1,024
(286)
Tax paid
(2,089 )
(2,798 )
(579)
(54)
Net cash from/(used in) operating activities
9,398
(38,451)
Cash flows from investing activities
Additional investment in subsidiary
9
(29,400)
-
Acquisition of property and equipment
10
(104 )
(464 )
(102)
(377)
Acquisition and development of intangible assets
11
(3,931 )
(4,508 )
(4,115)
(4,383)
Acquisition of investments measured at amortised cost
8
(256,521 )
(259,454 )
(51,511)
(23,684)
Redemption and disposal of investments measured at amortised cost
8
64,167
71,933
Redemption of investments measured at
fair value through profit and loss
8
-
893
Net cash (used in)/from investing activities
(87,936 )
(41,818 )
(20,961)
44,382
Cash flows from financing activities
Redemption/repurchase of debt securities
20
(38,131 )
(272,049 )
-
-
Shareholders’ contribution
17
39,801
-
Principal element of lease payments
24
(1,167 )
(1,203 )
(931)
(1,340)
Net advances to immediate parent company
(2,345 )
(1,080 )
(1,272)
(7)
Net advances (to)/from other group companies
(18 )
1,752
390
Net cash (used in)/from financing activities
(1,860 )
(274,306 )
39,350
(957)
Net increase in cash and cash equivalents
27,787
4,974
Cash and cash equivalents at beginning of year
(22,313 )
80,925
75,951
Cash and cash equivalents at end of year
32
108,712
80,925
The notes on pages 51 to 194 are an integral part of these financial statements.
Annual Report and Financial Statements 2025
51
Notes to the financial statements
Annual Report and Financial Statements 2025
52
1. Summary of material accounting policy information
1.1 Reporting entity
incorporated in Malta with its registered address at The Centre, Tigne’ Point, Sliema, Malta, TPO 0001 . Since the last
The consolidated financial statements of MeDirect Malta as at and for the financial year ended 31 December 2025
comprise the financial statements of MeDirect Malta and its subsidiaries, together referred to as “the Group”. Therefore,
these financial statements report the consolidated financial results of MeDirect Malta for the financial year ended 31
December 2025, including the financial results of MeDirect Bank SA (“MeDirect Belgium”); Bastion 2020-1 NHG B.V.
(“Bastion 2020-1”), Bastion 2021-1 NHG B.V. (“Bastion 2021-1”), Bastion 2022-1 NHG B.V. (“Bastion 2022-1”) and
Bastion 2025-1 NHG B.V. (“Bastion 2025-1”), four controlled special purpose entities utilised as part of the Group’s
funding strategy in respect of the Dutch Mortgage business; MeDirect Tech Limited (“MeDirect Tech”) that leases
computer hardware and software to MeDirect Malta and MeDirect Belgium; and Medifin Estates, a property leasing
partnership.
The separate financial statements of MeDirect Malta reflect the financial results of the Bank.
MeDirect Belgium is a credit institution licensed in Belgium and is carrying out all of the Group’s activities in Belgium.
The principal customer-related activities of MeDirect Malta and MeDirect Belgium include an easy-to-use wealth platform
with access to fund houses and mutual funds, a suite of wealth products available through digital channels and attractive
MeDirect Belgium invests in Dutch residential mortgages via an established third-party mortgage originator in the
Netherlands and Belgian residential mortgage loan product in partnership with Allianz Benelux S.A/N.V.. This offering is
underpinned by a robust credit risk framework and will continue to diversify the asset base of MeDirect Belgium into the
residential mortgage sector. MeDirect Belgium also invests in Dutch buy-to-let mortgage business whereas MeDirect
Malta offers innovative and attractive home loan products in a client-oriented process.
MeDirect Malta continues to support the Maltese real economy through convenient banking services such as payment
services and foreign exchange and through lending to Maltese corporates on projects and to small and medium-sized
enterprises through fully collateralised lending facilities. MeDirect Malta also holds a consumer finance receivables
portfolio.
With de-risking broadly completed, leaves MeDirect Malta with a couple of exposures remaining in its International
Corporate Lending Portfolio of senior secured loans and MeDirect Belgium holding one revolving credit facility which is in
the process of being wound down.
The Group has retained substantially all risks and rewards pertaining to the activities of Bastion 2020-1, Bastion 2021-1,
Bastion 2022-1 and Bastion 2025-1 and hence to assets, liabilities and related income and expenditure attributable to
these entities, and as such, all assets, liabilities and related income and expenditure have been reflected within the
Group’s consolidated financial statements. Bastion 2020-1 was put into liquidation in December 2025.
MeDirect Belgium, in line with article 6 of the Securitisation Regulation (EU) No 2017/2402 of the European Parliament
and of the Council of 12 December 2017, undertook to retain, on an ongoing basis, a material net economic interest in the
Bastion securitisation transactions. This implies that the Group retains substantially all risks and rewards pertaining to the
activities of these securitisation structures and hence to the assets, liabilities and related income and expenditure
attributable to the structures and as such, all assets, liabilities and related income and expenditure of the securitisation
special purpose entities are reflected in the Group’s financial statements.
Annual Report and Financial Statements 2025
53
MeDirect Tech owns the key rights and licences, including software solutions that are utilised by both MeDirect Malta and
MeDirect Belgium. It leases out amongst other equipment, software and motor vehicles and provides related support
services to the other Group entities.
1.2 Basis of preparation
The Bank’s consolidated financial statements have been prepared in accordance with the requirements of International
Financial Reporting Standards (“IFRS”) as adopted by the European Union.
These financial statements have also been drawn up in accordance with the provisions of the Maltese Banking Act (Cap.
371) and the Maltese Companies Act (Cap. 386).
These financial statements have been prepared on the basis of the historical cost convention, except for:
- derivative financial instruments which are measured at fair value;
- recognised financial assets designated as hedged items in qualifying fair value hedge relationships which are
measured at amortised cost adjusted for changes in fair value attributable to the risk being hedged; and
- investment in subsidiaries in the Bank’s separate financial statements that are measured using the equity
method.
The material accounting policies adopted in the preparation of these financial statements are set out below. Unless
otherwise stated, these policies have been consistently applied to all the years presented.
The preparation of financial statements in conformity with IFRS Accounting Standards as adopted by the EU requires the
use of certain accounting estimates. It also requires the Directors to exercise their judgement in the process of applying
the Group’s accounting policies (see Note 3.1 – Critical accounting estimates and judgements in applying the Group’s
accounting policies).
Standards, interpretations and amendments to published standards effective in 2025.
During the financial year ended 31 December 2025, the Group adopted the following amendments to existing standards
but the adoption of these revisions to the requirements of IFRSs as adopted by the EU did not result in significant
changes to the Group’s accounting policies impacting the Group’s financial performance and position.
- Amendments to IAS 21: Lack of Exchangeability.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected
to significantly affect the current or future periods. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
Standards, interpretations and amendments to published standards issued but not yet effective.
The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of
the Group’s financial statements are disclosed below. The Group intends to adopt these standards and interpretations, if
applicable, when they become effective. These standards and interpretations are not expected to have a material impact
on the Group in the current or future reporting periods and on foreseeable future transactions except for IFRS 18, which is
further discussed below.
- Amendments to IFRS 9 and IFRS 7: Disclosures - Classification and Measurement of Financial Instruments,
effective 1 January 2026;
- Amendments to IFRS 9 and IFRS 7: Disclosures - Contracts Referencing Nature-dependent Electricity, effective
1 January 2026;
- Annual Improvements to IFRS Accounting Standards - Volume 11, effective 1 January 2026; and
Annual Report and Financial Statements 2025
54
IFRS 18 is set to replace IAS 1 Presentation of financial statements, introducing new requirements that will help to
achieve comparability of the financial performance of similar entities and provide more relevant information and
transparency to users. Even though IFRS 18 will not impact the recognition or measurement of items in the financial
statements, its impacts on presentation and disclosure are expected to be pervasive, in particular those related to the
statement of financial performance. IFRS 18 also requires the disclosure of management-defined performance measures
within the financial statements. Management is currently assessing the detailed implications of applying the new standard
on the Group’s and Bank’s financial statements. The new standard will be applicable from its mandatory effective date of 1
January 2027, with retrospective application.
Standards, interpretations and amendments that are not yet endorsed by the European Union, are not yet effective and
not early adopted
Certain new standards, amendments and interpretations to existing standards have been published by the date of
authorisation for issue of these financial statements but are not yet endorsed by the European Union. In the opinion of the
Directors, the adoption of these standards will not have significant impact on the financial statements of the Group.
- IFRS 19 Subsidiaries without Public Accountability: Disclosures, effective 1 January 2027; and
- Amendments to IAS 21: The Effects of Changes in Foreign Exchange Rates, effective 1 January 2027.
Appropriateness of going concern assumption in the preparation of the financial statements.
The Group’s business, profitability projections, funding and capital plans under base and stress scenarios, together with a
range of other factors such as the economic outlook along with ongoing developments in EU economies indicate that the
Group will have sufficient capital, under both the base and stress scenarios, to meet not only the regulatory capital
requirements but also any internal risk buffers and any buffers recommended by the regulators throughout the forthcoming
financial period. The projections confirmed that the Group will have an adequate level of funding and liquidity that may
allow the relevant minimum regulatory requirements to be satisfied.
The financial statements are therefore prepared on a going concern basis, as the Directors are satisfied that the Group
has the resources to continue in business for the foreseeable future, and that accordingly no material uncertainty exists
that may cast significant doubt about the Group’s ability to continue as a going concern and that may require disclosure in
terms of IAS 1. In making this assessment, the Directors have considered a wide range of information relating to present
and future conditions, including future projections of profitability, cash flows and the capital resources of the Group.
1.3 Consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity where the group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that
control ceases.
Consistent accounting policies are applied throughout the Group for the purposes of consolidation.
Annual Report and Financial Statements 2025
55
Accounting for business combinations between entities under common control
Business combinations between entities under common control, which do not fall within the scope of IFRS 3, are
accounted for using the predecessor method of accounting. Under the predecessor method of accounting, assets and
liabilities are incorporated at the predecessor carrying values, which are the carrying amounts of assets and liabilities of
the acquired entity from the financial statement amounts of the acquired entity.
No new goodwill arises in predecessor accounting, and any difference between the consideration given and the aggregate
book value of the assets and liabilities (as of the date of transaction) of the acquired entity, is included in equity in retained
earnings. The financial statements incorporate the acquired entity’s results only from the date on which the business
combination between entities under common control occurred and reflect the acquirees assets and liabilities as from that
date.
Accounting for investments in subsidiaries in the parent company’s separate financial statements
In the separate financial statements of the Bank, the investment in subsidiaries are accounted for using the equity
method.
1.4 Foreign currency transactions and balances
a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The functional currency of all Group entities
is the euro. The financial statements are presented in euro, which is also the Group’s presentation currency. The amounts
are rounded to the nearest thousand euro, unless otherwise stated.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
1.5 Financial assets
Initial recognition and derecognition
The Group recognises a financial asset in its statement of financial position when it becomes a party to the contractual
provisions of the instrument.
The Group initially recognises loans and advances to customers at the date of transfer of beneficial ownership or when
cash is advanced to borrowers. Investments and transactions in all other financial instruments consisting of regular way
purchases and sales are recognised on settlement date.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all risks and rewards of ownership or the Group has not
retained control of the asset.
When assets are sold to a third party with a concurrent total return swap on the transferred assets, the transaction is
accounted for as a secured financing transaction, retaining the asset on the statement of financial position because the
Group retains all or substantially all the risks and rewards of ownership of such assets.
Similarly, when assets are sold to a structure through which the Group is deemed to have retained all, or substantially all,
risks and rewards, the transferred assets are not derecognised.
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In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a
financial asset and it retains control over the asset, the Group continues to recognise the asset to the extent of its
continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.
In certain transactions the Group retains the obligation to service the transferred financial asset for a fee. The transferred
asset is derecognised if it meets the derecognition criteria. An asset or liability is recognised for the servicing contract if
Modifications of terms
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due
to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be
derecognised. If the cash flows of the renegotiated asset are substantially different, then the contractual rights to cash
flows from the original financial asset are deemed to have expired. In this case, the original financial asset is
derecognised, and the new financial asset is recognised at fair value.
When a loan is restructured as part of forbearance strategy and the restructuring results in derecognition of the existing
loan, the new loan is disclosed as forborne.
The accounting treatment in respect of the modification of terms of financial assets, including considerations made to
determine whether the terms of the renegotiated asset are substantially different, is described in more detail in the
‘Modified financial assets’ sub-section.
Classification and measurement
The classification and measurement criteria under IFRS 9 are driven by the entity’s business model for managing the
financial instruments and the contractual cash flow characteristics of the financial instruments.
In line with the provisions of IFRS 9, the Group classifies and measures all financial assets under any one of the following
categories:
- Amortised cost; or
- Fair value through profit or loss ("FVTPL").
The Group determines the classification and measurement basis for financial assets based on an assessment of both the
business model within which the financial assets are held and a review of the contractual terms of each financial asset to
determine if cash flows are solely payments of principal and interest (SPPI).
In this regard, subsequent to initial recognition, financial instruments are measured at:
- amortised cost if the financial asset is held within a business model whose objective is to hold financial assets in
order to collect contractual cash flows (‘Hold to Collect’) and the contractual terms of the financial asset give rise
to cash flows that are SPPI; or
- FVTPL if the financial asset does not pass the business model assessment referred to above or SPPI criteria.
In performing the SPPI assessment, the Group considers the following contractual terms to determine whether these
introduce variability in contractual cash flows that is inconsistent with a basic lending arrangement, amongst others:
- variable interest rates, which typically consider the time value of money, credit risk and other basic lending risks
and costs;
- leverage, which is a contractual cash flow characteristic that results in increased variability in contractual cash
flows;
- modifications of the time value of money; and
- contractual features that could alter the timing or amount of contractual cash flows of a financial asset, such as
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The Group has identified the following separate portfolios which require separate business model assessments due to the
fact that these are managed separately and by different business units / management teams, namely (i) the Dutch
Mortgage portfolio (including the buy-to-let mortgages portfolio); (ii) the Belgian Mortgage portfolio; (iii) the Maltese
Business Lending portfolio; (iv) the Maltese Mortgage portfolio; (v) the Consumer Finance receivables portfolio; (vi) the
International Corporate Lending portfolio(vii) the Securities Investment portfolio; (viii) the Securitisation Investment
portfolio; and (ix) the Asset-Backed Securitisation Investment portfolio.
Financial assets measured at amortised cost
Financial assets in a portfolio where the objective of the portfolio is to collect the contractual cash flows and which contain
contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are
measured at amortised cost. These financial assets are initially measured at fair value, which is generally the cash
consideration to originate or purchase the asset including any direct and incremental transaction costs, upon recognition.
The Group’s financial assets measured at amortised cost comprise primarily loans and advances to banks, loans and
advances to customers, comprising the Dutch Mortgage portfolio, the Belgian Mortgage portfolio, the Maltese Business
Lending portfolio, the Maltese Mortgage portfolio, the Consumer Finance receivables portfolio, the International Corporate
Lending portfolio, and a portfolio of debt securities classified under the Securities, Securitisation Investment and Asset-
Backed Securitisation Investment portfolio.
Financial instruments at fair value through profit or loss
Financial instruments that are held for trading or fail the SPPI test are classified in this category. These consist of certain
derivative financial instruments.
Reclassification of financial assets and liabilities
The Bank does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Bank acquires, disposes of, or terminates a business line. Financial liabilities are never
reclassified.
Impairment of financial assets measured at amortised cost
IFRS 9 requires the measurement of credit loss allowances on financial instruments using the expected credit loss (“ECL”)
impairment model using a forward-looking approach that emphasises shifts in the credit risk attached to a financial
instrument, and consequently the probability of future credit losses, even if no loss events have yet occurred.
Since movements in the fair value of financial instruments measured at FVTPL are recognised directly in profit or loss, no
credit loss allowances are deemed necessary for these financial instruments.
In contrast, financial assets measured at amortised cost, are subject to impairment requirements using the general
impairment model stipulated by IFRS 9. This is due to the fact that, since an integral aspect of the business model for
financial assets measured at amortised cost is to collect contractual cash flows, the effects of changes in credit risk are
more relevant to a user’s understanding than the effects of other changes, such as changes in market interest rates.
IFRS 9 impairment requirements are also applicable to loan commitments that are not measured at FVTPL (if the terms
and conditions of the arrangement give rise to an enforceable contract to extend credit) and financial guarantee contracts.
None of these are within the scope of IFRS 9 but are still subject to impairment requirements in accordance with IFRS 9.
Expected credit losses may be recognised for loans and advances to banks and customers, other financial assets
measured at amortised cost, debt instruments measured at amortised cost, and certain loan commitments and financial
guarantee contracts. The Group may commit to underwrite loans on fixed contractual terms for specified periods of time.
When the Group intends to hold the loan, the loan commitment is included in the impairment calculations set out below.
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Three stage expected credit loss approach
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition. The key
driver of the measurement of ECLs therefore relates to the level of credit risk for each exposure and, as a result, an
assessment of the change in credit risk over the expected life of an asset is a core element in determining the staging
criteria under IFRS 9. The three stages under IFRS 9 are as follows:
- Stage 1 - Financial instruments that have not had a significant increase in credit risk (SICR) since initial
recognition and not purchased or originated credit-impaired (POCI), or that have “low credit risk” at the reporting
date are classified in Stage 1. 12-month ECLs are recorded to measure the expected losses that result from
default events that are possible within 12 months after the reporting date;
- Stage 2 - Financial instruments that have experienced a SICR since initial recognition are classified in Stage 2.
Lifetime ECLs are recorded to measure the expected losses that result from all possible default events over the
expected life of the financial instrument; and
- Stage 3 / POCI- Financial instruments that demonstrate an increase in likelihood of default and which are
considered to be in default or credit-impaired (also at origination), are classified in Stage 3, also requiring the
measurement of lifetime ECLs. Financials instruments that provide evidence of being credit-impaired at initial
recognition, are classified as Purchase-Originated Credit Impaired (POCI), also requiring the measurement of
lifetime ECLs.
Non credit-impaired and without significant increase in credit risk (Stage 1)
ECL resulting from default events that are possible within the next 12 months (12-month ECL) are recognised for financial
instruments that are in Stage 1.
Financial instruments are all classified within Stage 1 upon initial recognition, unless a financial instrument is purchased or
originated credit-impaired (POCI) in which case the exposure is classified as POCI upon initial recognition and will remain
classified as such until derecognition. Therefore, the Group calculates a credit loss allowance based on 12-month ECL.
Subsequent changes in credit risk will be reflected in the staging of the exposure, with a transfer of the exposure to Stage
2 or 3 conditional upon the identification of a SICR or impairment respectively.
The provisions of IFRS 9 include a practical expedient to measure credit loss allowances using 12-month ECL for financial
instruments having low credit risk as at the reporting date. In practical terms, this means that, in those cases where a
financial instrument is deemed to have low credit risk, management is not required to perform an assessment to
determine whether a SICR has occurred. The Group considers “low credit risk” to exist in case of selected financial
instruments, for example listed bonds with an investment-grade credit rating by at least one major rating agency.
For all Stage 1 and 2 financial assets, interest income is recognised by applying the effective interest rate to the gross
carrying amount, prior to deduction of credit loss allowances.
Significant increase in credit risk (SICR) or Stage 2
The concept of default risk is central to IFRS 9. Therefore, a key risk parameter used by the Group in its credit risk
management activities is the probability that the obligor defaults, either within the next 12-month period (in case of Stage
1 exposures) or over the lifetime of the exposure (in case of Stage 2 exposures).
An assessment of whether credit risk has increased significantly since initial recognition is performed at least at each
reporting date by considering the change in the risk of default occurring over the remaining life of the financial instrument.
The assessment explicitly or implicitly compares the risk of default occurring at the reporting date compared with that at
initial recognition, taking into account reasonable and supportable information, including information about past events,
current conditions and future economic conditions.
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To assess a SICR event, the Group considers both actual and forward-looking information relating to external market
indicators, internal factors and borrower-specific information. The assessment is unbiased and to the extent relevant, uses
forward-looking information consistent with that used in the measurement of ECL. The analysis of credit risk is based on
multiple factors, and their relevance is driven by product type, characteristics of the financial instrument and the obligor.
Therefore, it is not possible to provide a single set of criteria that will determine what is considered to be a significant
increase in credit risk, and these criteria will differ for different types of lending. The internal credit risk management
framework comprises the use of both qualitative and quantitative SICR triggers.
The Group’s credit risk rating processes are designed to highlight exposures which require closer management attention
because of their greater probability of default and potential loss.
In this respect, the Group adopts a five-point credit quality classification system in order to rate the credit quality of its key
financial assets. Further detail on internal credit risk management is outlined in Section 2 (Financial Risk Management,
Credit Risk). Typically, an internal risk grade is assigned to each obligor by the business which is then reviewed by both
the Credit Risk Team, and the Management Credit Committee responsible for the oversight of the Group’s respective
portfolios. The following are the internal risk grades:
- Regular - No material credit concerns.
- Focus - No immediate prospect that a credit loss will ultimately be suffered, but worthy of closer credit oversight.
(This risk grade is not used for the International Corporate Lending portfolio).
- Under Surveillance - Significant increase in credit risk with identified concerns and some prospect that a credit
loss may ultimately be suffered.
- Doubtful - Likely that the contractual terms of the debt will not be met and that a credit loss will be suffered
(Impaired).
- Write-off - Full or partial write-down of exposures with no prospect of recovery.
An overview of the Group’s qualitative SICR assessment is provided below. However, the quantitative assessment
performed by the Group to identify a SICR varies across each of the Group’s portfolios of financial instruments and is
disclosed in the relevant sub-sections below.
It is possible for multiple instruments to the same customer to be classified under different stages. This may occur when
the Group holds exposures originated at differing points in time thereby potentially giving rise to differing default risk at
initial recognition, causing a variation in the relative increase in credit risk since origination between the different
instruments.
The Group has defined likely SICR triggers that are deemed most relevant in the Group Credit Risk policy. However,
triggers are not treated as exhaustive and are subject to robust credit risk management assessments. Qualitative SICR
trigger assessments are undertaken at least quarterly for each instrument and any identified SICR trigger events are
presented to the appropriate Management Credit Committee.
• International Corporate Lending portfolio:
Financial instruments within the Group’s International Corporate Lending portfolio are managed on an individual basis for
credit purposes, whereby the Group’s credit analysts have access to the obligors and their financial information, the latter
comprising both historical and forecasted financial information.
The SICR assessment for the International Corporate Lending portfolio comprises the following:
- Use of qualitative SICR triggers, including for example evidence of past due information, significant changes in
the operating or borrowing performance of the borrower;
- Use of quantitative SICR assessment based on a ratings-based approach using lifetime ‘Point in Time’ (PiT)
Probabilities of Default (PDs) (i.e. PD in current economic conditions); and
- Hard trigger (Internal credit classification) - financial asset that has a credit quality classification of “Under
surveillance” is Stage 2, classification of “Impaired” is Stage 3.
For the purposes of the quantitative SICR assessment, the Group has adopted a ratings-based approach (i.e. based on
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Due to the lack of sufficient internal history of defaults, the Group uses a credit risk modelling solution developed by an
external vendor to estimate unconditional PiT PDs by: (i) benchmarking the obligor’s financial statements with those of the
underlying model dataset; and (ii) applying a qualitative scorecard to adjust the quantitative unconditional PiT PDs to
better reflect obligor-specific peculiarities.
A forward-looking, probability weighted PiT PD estimated by the model is mapped to an implied default rating, which
adopts Moody’s public ratings agency scale terminology from C up to Aaa. When performing the SICR assessment, the
Group compares the implied rating at origination to the implied rating at the reporting date and determines the difference
in notches between them. The Group’s staging criteria is therefore deemed to be based on a ratings/notch deterioration
approach.
The quantitative SICR staging decision uses both a relative and an absolute threshold approach. The relative threshold
approach involves calculating the magnitude of the difference between the reporting date rating and the origination date
rating based on the deterioration in the number of notches between the two ratings. The appropriate stage is determined
based on the magnitude of this difference.
Although the Group has adopted a ratings-based approach (i.e. based on notch deterioration) for its SICR assessment,
each implied rating is represented by an underlying PD. A two-notch rating downgrade from origination is considered a
SICR trigger. ESG factors do not form part of the quantitative SICR staging assessment but are considered separately in
the measurement of ECL through a post-model management adjustment.
Lifetime PDs are determined by estimating the marginal PD for each year over the life of the financial instrument. For
example, for a five-year loan, PDs are calculated for each of the five years. The year-1 PD is calculated as the probability
of the loan defaulting within the first year of it being issued, whereas the year-2 PD is calculated as the probability of the
loan surviving the first year but defaulting in the second year. The same principle of survival applies to the PDs for the
remaining years. The summation of marginal PDs results in the derivation of the cumulative lifetime PD term structure.
Cumulative lifetime PDs increase at a diminishing rate as the residual life of the loan shortens.
PDs are determined upon origination date and at each subsequent reporting date at an obligor level rather than at a
facility level. Therefore, at any given date, multiple facilities attributable to the same obligor are assigned the same PD,
reflecting the borrower’s financial condition as at the date of the assessment. In this regard, different facilities with the
same obligor originated at the same time are expected to have an identical PD both at origination date as well as
subsequent reporting dates. However, facilities with the same obligor originated at different time intervals can have
different PDs upon origination, reflecting the borrower’s financial condition and credit risk at each respective origination
date, whereas identical PDs are determined at each subsequent reporting date in respect of all such facilities.
In this regard, a simple or absolute comparison of PDs at initial recognition and at the reporting date is not appropriate to
determine the stage of an exposure. All other things kept constant, the PD of a financial instrument is expected to reduce
with the passage of time. Thus, in order to take this into consideration, the Group estimates the annualised PD over the
remaining life of the financial asset as at the origination date and the annualised PD over the remaining life of the financial
asset as at the reporting date. The annualised PD measure is the cumulative PD for a given period, stated on a per-year
basis. These are then mapped to implied ratings which are used to determine potential SICR events and consequently the
credit stage of a financial instrument through a combination of relative and absolute thresholds using the implied credit
ratings.
Hard Trigger based on Internal Risk Classifications
The quantitative assessment through the Group’s implied credit rating staging criteria is considered alongside qualitative
SICR triggers and forms part of the overall SICR trigger assessment. In this regard, when qualitative SICR triggers are
observed by credit analysts, the Group applies a hard trigger based on the internal credit classification (Stage 2 for all
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• Dutch Mortgage portfolio
In respect of the Dutch national-guaranteed residential mortgage assets (for which losses are capped at 10% of expected
losses through the ‘Nationale Hypotheek Garantie’ or NHG, capping the LGD) classified within the Group’s Dutch
Mortgage portfolio, the primary determinant of SICR is a quantitative rule based on the change in PD between origination
and reporting date, and based on absolute PD thresholds. SICR is determined at “loan part” level – i.e. each facility (even
where the source of repayment is the same) is assessed for SICR.
The quantitative SICR trigger compares residual lifetime PD at reporting date versus residual lifetime PD at origination. To
identify whether an account experienced a SICR since initial recognition, a lifetime PD threshold is used.
In this respect, the following SICR triggers and backstops are applied and would result in a shift of these exposures to
Stage 2:
- Change in Probability of Default: lifetime PD of the exposure on the reporting date exceeds its lifetime PD at
initial recognition by more than 200%; or
- Absolute level: 12-month PD of the exposure on the reporting date exceeds 20%.
The following are also deemed to give rise to SICR:
- Forbearance events where exposures are not 30 days past due ("DPD");
- Where payments in respect of the exposure are 30 DPD or more.
Quantitative SICR triggers are not applied to mortgages / loan parts with a PD of 0.03% or below at reporting date. Such
exposures are deemed to qualify for the low credit risk exemption (Stage 1 without further staging assessment) in IFRS 9.
The appropriateness of the application of this exemption is periodically tested for portfolios on which it is applied.
• Belgian Mortgage and Dutch Buy-to-Let Mortgage portfolio
Staging for the Belgian Retail Residential Mortgages and Dutch Buy-to-Let Mortgage portfolios are similar as for Dutch
Residential Mortgages where primary determinants of SICR are delinquency, forbearance, and other quantitative rules
relating to the relative and absolute change in PD.
• Maltese Business Lending portfolio
For Maltese Business Lending assets, the Group is unable to use external credit ratings as all exposures are unrated, nor
rely on risk-modelling for quantifying credit risk for each asset, as no robust database exists for the asset class. The
Group therefore uses the evidence of past-due information as the primary driver of SICR triggers alongside other
qualitative SICR metrics.
Payments in respect of exposures within this portfolio that are more than 30-days past due are considered as evidencing
a SICR trigger.
Similar to the approach taken for the International Corporate Lending portfolio, the other identifier of SICR within the
Maltese Business Lending portfolio is the review by respective relationship managers which takes into consideration
qualitative SICR triggers such as a deteriorating risk classification with other banks (through the Central Credit Register),
requests for concessions and other financially related triggers as described previously in respect of the International
Corporate Lending portfolio.
Exposures within the Maltese Business Lending portfolio are therefore managed at an individual exposure level for credit
purposes, through relationship managers who have access to the customers and their financial information on a regular
basis. Such qualitative SICR trigger assessments are undertaken at least quarterly and any identified SICR trigger events
are presented to the appropriate Management Credit Committee. These SICR assessments could lead to changes in the
internal risk grade assigned to each borrower.
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• Maltese Mortgage portfolio
Staging for the Maltese Retail Residential Mortgages portfolio is similar as for Dutch Mortgages where primary
determinants of SICR are Delinquency, Forbearance, and other quantitative rules relating to the relative and absolute
change in PD.
• Consumer Finance receivables portfolio
To identify a SICR, the following triggers in the Group Credit Policy have been identified as the most relevant to the
Consumer Finance receivables portfolio:
- Quantitative triggers based on PD movements
- Hard triggers based Days Past Due
- Forbearance
Any debtor exposure that is more than 30-days past due is considered as evidencing a SICR trigger.
• Securities Investment portfolio
In order to monitor SICR in relation to its Securities Investment portfolio, the Group refers to external credit ratings from an
international credit rating agency. In this regard, an exposure is deemed to have low credit risk if it is assigned an
investment-grade status by one of these three external credit rating agencies.
Should the credit rating of a financial instrument fall below the investment-grade threshold, i.e. BBB (or equivalent) the
financial instrument is deemed to have suffered a SICR. As a result, the financial instrument will be re-classified as a
Stage 2 exposure, which will impact the measurement of the ECL charges, moving from a 12-month ECL calculation to a
lifetime ECL calculation.
• Securitisation Investment and Asset-Backed Securitisation Investment portfolios
Due to the unique characteristics of Collateralised Loan Obligation (“CLO”) and Asset-Backed Security (“ABS”) vehicles,
the definitions for SICR differ from the Group’s Credit Policy.
In respect of tranches (or notes) of CLOs and ABSs to which an investment-grade Implied Rating is assigned, the Group
makes use of the low credit risk exemption. As a result, the Group assumes that no SICR has occurred since initial
recognition as long as the tranche retains an investment-grade Implied Rating. Hence, the Group assumes that the credit
risk attributable to tranches to which the low credit risk exemption is applied has not increased significantly since initial
recognition.
Similar to the Securities Investment portfolio criteria, investment-grade rating is an example of a financial instrument that
may be considered as having low credit risk. Therefore, the Group measures 12-month ECL for publicly rated investment-
grade tranches of CLOs.
Notwithstanding the above, the following triggers in the Group Credit Policy have been identified as the most relevant to
the Group's investments in both AAA-rated CLO and ABS notes.
- Quantitative trigger based on a material reduction in the secondary market price of the notes in which MeDirect
invested (where feasible). Active trading of the note in which MeDirect is invested at or below 90c in the Euro
should trigger consideration of SICR.
- Quantitative triggers based on CLO / ABS vehicle performance triggers such as cash re-direction and/or
outstanding uncleared principal deficiency ledgers (or similar concept) and/or use of liquidity and/or reserve
funds to support the interest payment and amortisation of the debt tranche in which MeDirect invested.
- Hard trigger based on any external rating agency downgrade for the Class A CLO Senior notes (i.e. AAA rated at
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Credit impaired (Stage 3)
The Group defines a financial asset as credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred. IFRS 9 introduces a rebuttable presumption that default
does not occur later than when a contractual repayment relating to a financial asset is 90 days past due, unless
reasonable and supportable information is available to demonstrate that a more lagging criterion is more appropriate. This
presumption has not been rebutted by the Group for its lending portfolios, meaning that default is deemed not to have
occurred later than when a financial asset is 90 days past due. Although this presumption is applicable to all lending
portfolios managed by the Group, it is much more relevant for identifying defaulted exposures within the Maltese Business
Lending portfolio and the Dutch, Belgian and Maltese Mortgage portfolios.
The definition of default is addressed in more detail by guidelines issued by the European Banking Authority (EBA) and
the Basel Committee on Banking Supervision (BCBS). These guidelines provide detailed definitions of what should be
considered in the determination of defaulted exposures for regulatory purposes. As a result, the Group aligned the IFRS 9
definition of default, used for accounting purposes, to the definitions provided in the EBA and BCBS guidelines, thereby
ensuring that a single consistent view of credit risk is applied for internal risk management, regulatory capital and the
measurement of ECLs.
In this regard, defaulted exposures are those that satisfy either or both of the following criteria:
- material exposures which are past due by more than 90 days;
- the debtor is assessed as unlikely to pay its credit obligations in full without realisation of collateral, regardless of
the existence of any past-due amount or of the number of days past due.
Therefore, since the criteria for credit-impaired under IFRS 9 can be interpreted consistently with the definition of default
for regulatory purposes, all defaults in terms of regulation are deemed to be credit-impaired, and vice versa. Defaulted
exposures are therefore classified under Stage 3 for IFRS 9 purposes.
In order to define which events trigger “unlikeliness to pay”, the Group takes into account the situations and events listed
in the Capital Requirements Regulation (“CRR”) definition of default and in the IFRS definition of impairment
requirements.
IFRS 9 provides a list of events that may indicate that a financial asset is credit-impaired. The criteria that the Group uses
to determine that there is objective evidence of an impairment loss include:
- Significant financial difficulty of the issuer or borrower;
- A breach of contract, such as default or past due event;
- The lender(s) of the borrower having granted a concession(s) to the borrower for economic or contractual
reasons relating to the borrower’s financial difficulty (this would not have otherwise been considered);
- It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
- The disappearance of an active market for that financial asset because of financial difficulties; or
- The purchase or recognition of a financial asset at a deep discount that reflects the incurred credit losses.
For all Stage 3 financial assets, interest income is recognised by applying the effective interest rate to the amortised cost
or carrying amount of the financial instrument, i.e. gross carrying amount less credit loss allowances.
Write-offs
Financial assets and the associated credit loss allowances are normally written off, either partially or in full, when there is
no realistic prospect of recovery. In the case of international corporate loans, the determination is made after considering
facts and circumstances relating the borrower’s financial position, typically following a distressed restructure. Where loans
are secured, this is generally after receipt of any proceeds from the realisation of security. In circumstances where the net
realisable value of any collateral has been determined and there is no reasonable expectation of further recovery, write-off
may be earlier (see Note 2.2.5). In this respect, the Group writes off financial assets when the relevant Management
Credit Committee of MeDirect Malta and MeDirect Belgium determines that the balance is uncollectible, but this does not
constitute that the debt has been cancelled.
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Modified financial assets
In accordance with IFRS 9, the modification of contractual cash flows of a financial instrument could result in one of two
possible outcomes:
(i) If the modification is not considered to be significant, the modified cash flows are considered to pertain to the
original financial asset; or
(ii) If the modification is considered to be significant, the original asset is considered to be extinguished and
accordingly the original asset is derecognised and replaced by a new financial asset.
The assessment of whether a modification is considered to be significant is critical in determining the accounting
implications of modifications to an asset’s contractual cash flows. The Group applies judgement in assessing whether a
change in contractual terms (such as a change in interest rates, currency or the remaining term of the loan) is substantial
enough to represent an expiry of the original instrument.
In this regard, when considering a change in the contractual terms, the Group evaluates how the cash flows under the
revised terms compare with the cash flows under the original terms of the loan and also takes into consideration
qualitative factors. Qualitative considerations include extension of terms, insertion of credit enhancements, changes in
interest rates, etc. When a number of such considerations are present, in conjunction with the assessment of the
difference between the original and revised cashflows, a modification could be deemed to be substantial, resulting in the
derecognition of the financial instrument. When the modification is not substantial enough to result in the derecognition of
that financial asset, the Group recalculates the gross carrying amount of the financial asset as the present value of the
modified contractual cash flows discounted at the original effective interest rate (or credit-adjusted effective interest rate
for POCI financial assets). The difference is recognised as a modification gain or loss in profit or loss.
When there is a substantial modification to the terms of a financial asset resulting in the derecognition of the existing
financial asset and the subsequent recognition of the modified financial asset, the modified asset is considered a ‘new’
financial asset. Any new financial assets that arise following derecognition events as a result of substantial modification to
the terms of the instrument are classified as Stage 1 assets, unless the new financial asset is credit-impaired on initial
recognition, in which case it will be classified as a POCI financial asset. A loss is booked in profit or loss (normally as a
write-off) since the new instrument is recognised at fair value.
When the modification is not substantial enough to result in the derecognition of the financial asset, renegotiated loans
within the International Corporate and Maltese Business Lending portfolios are considered credit-impaired and
accordingly classified as Stage 3 assets unless no unlikeliness-to-pay events are deemed to have occurred. Assets that
are credit-impaired at the time of renegotiation remain in Stage 3 post renegotiation. When evidence suggests that the
renegotiated loan is no longer credit-impaired, the asset is transferred out of Stage 3. This is assessed on the basis of
historical and forward-looking information and an assessment of the credit risk over the expected life of the asset,
including information about the circumstances that led to the renegotiation. A full assessment from the appropriate
Management Credit Committee is required for approval that the exposure is no longer considered as credit-impaired.
With respect to loans within the Dutch and Maltese Mortgage portfolios, when the modification is not substantial enough to
result in derecognition, renegotiated loans are classified as credit impaired, and accordingly as Stage 3 assets, when the
exposure is 90 DPD and Stage 2 when less than 90 DPD. Renegotiated loans are classified based on whether the
modification indicates a significant increase in credit risk. Loans renegotiated for reasons other than financial difficulty
(e.g., refinancing for better terms) are not considered SICR and may remain in Stage 1.
Other than originated credit-impaired loans, all other modified loans could be transferred out of Stage 3 if they no longer
exhibit any evidence of being credit-impaired and, in the case of renegotiated loans, there is sufficient evidence to
demonstrate a significant reduction in the risk of non-payment of future cash flows over the minimum observation period,
and there are no other indicators of impairment. These loans could be transferred to Stage 1 or 2 based on the
mechanism as described below by comparing the risk of a default occurring at the reporting date (based on the modified
contractual terms) and the risk of a default occurring at initial recognition (based on the original, unmodified, contractual
terms). Any amount written off as a result of the modification of contractual terms would not be reversed but recorded as a
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Purchased or originated credit-impaired
Originated credit-impaired financial assets are those assets that are credit-impaired on initial recognition. The Group does
not expect to purchase any financial assets that are credit-impaired. However, there might be rare instances where the
Group originates new assets following a renegotiation or restructure for reasons relating to a borrower’s distressed
financial circumstances that otherwise would not have been considered, and which may result in the new assets to be
deemed POCI. The amount of change in lifetime ECL is recognised in profit or loss as an impairment gain or loss until the
POCI is derecognised, even if the lifetime ECL are less than the amount of ECL included in the estimated cash flows on
initial recognition.
Movement between stages
Financial instruments are transferred out of Stage 2 if their credit risk is no longer considered to be “significantly
increased” since initial recognition.
For IFRS 9 purposes, the Group has determined the below guideline approach to determine whether movement from
Stage 2 to Stage 1 is appropriate:
- Where qualitative triggers were used to determine SICR: Stage transfer from Stage 2 to Stage 1 is subjective.
Where implied rating SICR triggers were not a determinant for reclassification in the first instance, it is expected
that any qualitative SICR triggers that were observed that derived the SICR event must be fully resolved and
evidenced for a 90-day period prior to any reclassification.
- Where quantitative triggers were used to determine SICR, the financial asset must evidence an improvement
and return to the external or implied default risk rating at the point of inception (instrument should evidence an
implied default rating in line or better than the original inception rating in order to trigger a reclassification from
Stage 2 to Stage 1).
- Any instrument that is no longer 30-days past due can only be reclassified to Stage 1 when: (i) all contractual
arrears have been remediated (Nil days past due); and (ii) no further non-payment has been observed for a
minimum of 90 days. This is subject to regulatory materiality thresholds defined in the Group Credit Risk policy.
In addition, for exposures within the International Corporate and Maltese Business Lending portfolios, curing of Stage 2
exposures is governed by the Management Credit Committee Quarterly Portfolio Review process where supportive
evidence of improved performance and thereby stage transfer is reviewed and approved by the committee.
Similarly, for movement of Stage 3 corporate loans to either Stage 2 or Stage 1, a full assessment from the appropriate
Management Credit Committee is required for approval that unlikeliness to pay criteria are no longer present, the
exposure is no longer considered as impaired and there is no past due amount on the exposure (through settling of
amounts in a regular manner).
Stage transfer in respect of corporate exposures is also subject to a 12-month probation period where defaulted (Stage 3)
exposures are classified as NPEs before they can be upgraded to Stage 2. Meanwhile, stage transfer of defaulted retail
exposures is subject to a 3-month probation period, unless the default/NPE classification is the result of forbearance
measures for which a 12-month probation period applies.
For loans that are assessed for impairment on a portfolio basis, the evidence to support the stage transfer assessment
typically comprises a history of payment performance against the original or revised terms, as appropriate to the
circumstances. For loans that are assessed for impairment on an individual basis, all evidence is determined on a case-
by-case basis.
Movement between stages is aligned with the Group Credit Risk policy, and any exceptions are governed by the
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Measurement of expected credit losses
The Group first determines whether an increased likelihood of default is present for an individually assessed financial
asset, and then measures credit loss allowances using different models for non credit-impaired and credit-impaired
financial assets, as follows:
- If no evidence of impairment exists (Stage 1 and Stage 2 assets), the Group uses statistical models developed
by an external vendor to measure ECLs for exposures within the International Corporate Lending portfolio and
Maltese Business Lending portfolio at facility level.
- For credit-impaired exposures (Stage 3 assets), the Group generally models ECLs based on an internally
developed methodology to estimate the expected cash flows by reference to borrowers’ enterprise values and
forecasted operating cash flows for exposures within the International Corporate Lending portfolio and the
individual valuation of the underlying asset / collateral for exposures within the Maltese Business Lending
portfolio.
With respect to the Dutch Mortgages, Securitisation Investment and Securities Investment portfolios, the ECLs on all
assets (irrespective of staging) are modelled using statistical models developed by an external vendor. For the Belgian
and Maltese Mortgage Lending portfolios, the ECL for the mortgage portfolios is determined using internally developed
statistical models.
For the Asset Backed Securitisation Investment portfolio and the Consumer Finance receivables portfolio, ECLs are
determined utilising historical information and applying applicable credit enhancements.
ECLs are defined as the probability-weighted estimate of credit losses over the expected life of a financial instrument.
Credit losses are in turn defined as the present value of all expected cash shortfalls between contractual and expected
cash flows, discounted using the original effective interest rate (EIR).
Lifetime ECLs refer to the ECLs that result from all possible default events over the expected life of a financial instrument,
whilst 12-month ECLs are a portion of lifetime ECLs and represent the lifetime cash shortfalls that result if a default occurs
in the 12 months after the reporting date, weighted by the probability of the default occurring.
For each portfolio, the Group calculates ECLs on its financial instruments based on three key inputs, namely: probability
of default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”). The 12-month ECL is calculated by
multiplying the 12-month PD, LGD and EAD. Lifetime ECL is calculated on a similar basis for the entire residual life of the
exposure.
Non credit-impaired financial assets (Stage 1 & 2)
This section provides a detailed description of the methodology used by the Group to measure credit loss allowances in
respect of exposures classified as Stage 1 and Stage 2 assets using statistical models developed by an external vendor
(for the Dutch Mortgages, Securitisation Investment and Securities Investment portfolios) and internally developed models
(for the Belgian and Maltese Mortgages).
Probability of Default
One of the key risk parameters used by the Group in its ECL calculation is the probability that the obligor defaults either
within the next 12-month period (in case of Stage 1 exposures) or over the lifetime of the exposure (in case of Stage 2 / 3
exposures).
Since the PD is a probability measure used to capture the likelihood that a customer will default over a defined period of
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PDs for the Group’s portfolios are estimated based on statistical models developed by external vendors. These models
vary by portfolio and are calibrated using historical default data, internal risk assessments, or external credit ratings,
depending on the asset class. In particular, the models used for the International Corporate Lending, Maltese Business
Lending, and Securities Investment portfolios use rating scale to PD matrices calibrated based on historical default data
observed in the market and compiled by the external vendor. In respect of the International Corporate Lending portfolio,
PDs and implied ratings are modelled by benchmarking borrower-specific characteristics, including financial performance
and qualitative characteristics captured through a scorecard, with the underlying dataset. In respect of the Maltese
Business Lending portfolio, PDs are estimated through rating scale to PD matrices by mapping internal risk grades to
public ratings. In respect of exposures within the Securities Investment portfolio, PDs are generally estimated using public
ratings through rating scale to PD matrices.
With regard to the Dutch Mortgage portfolio, PDs are generated using models based on historical default rates observed
in the Netherlands for similar assets. With regards to the Belgium and Malta Residential Mortgages portfolio, PDs are also
generated using models based on proxies for historical default rates using external, publicly available sources for similar
assets. Asset-Backed Securitisations and Securitisation portfolios are allocated a nominal PD due to their low credit risk,
whilst the Consumer Finance receivables portfolio takes the lifetime PD based on the lifetime expected loss of this
portfolio.
Loss Given Default
The second key risk parameter used by the Group relates to the estimation of the recovery rate expected to be observed
in the event that a ‘default’ occurs. In this regard, the Group uses the LGD to capture this element within the ECL
calculation.
The LGD of an exposure measures the size of the estimated loss (as a proportion of the total EAD) that is expected to
materialise in the event of default. It is based on the difference between the contractual cash flows due and the cash flows
that the Group expects to receive, whether from cash flows or from any collateral. It takes into account the mitigating
effect of collateral value at the time it is expected to be realised and the time value of money. LGD for ECL measurement
includes the expected impact of future economic conditions and discounting back from estimated time of default to
reporting date using the original EIR.
In contrast with PDs, LGDs are estimated at a facility level. Whilst linked to the general credit risk of the obligor, recovery
rates are also impacted by the relative ranking of a particular facility within the obligor’s debt structure.
For assets within the Group’s International Corporate Lending portfolio, estimated recovery rates are measured using
statistical models developed by external vendors by benchmarking exposure-specific characteristics with the underlying
dataset.
The Group’s Securities Investment portfolio consists of covered bonds, bonds issued by supranational organisations,
sovereign bonds and corporate bonds. For its supranational exposures and sovereign exposures, the Group uses the
LGD values obtained from the statistical model developed by an external vendor while for covered bonds the LGD is
aligned with regulatory standards. The LGD for corporate bonds is modelled using the same methodology as for the
International Corporate Lending portfolio.
The LGD used for the Maltese Business Lending portfolio is driven by the loan-to-value ratio of the individual facilities,
whilst also taking into consideration other factors such as costs to sell, valuation haircuts and the time value of money.
The LGD for the Dutch Mortgage portfolio is modelled using the loan-to-value ratio of individual loan parts. Expected
recoveries are used to determine the expected loss and are modelled by reference to assumptions in relation to
valuations of different property types, haircut to sale proceeds and the time value of money. The LGD is then estimated at
10% of expected losses, since the NHG absorbs 90% of losses, adjusted for assumptions on expected NHG pay-outs and
claim rejection rates.
With regards to the Belgium and Malta Residential Mortgages portfolios, as the Group has insufficient loss data, LGD
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For the Securitisation Investment portfolio, as for PDs, the LGDs are determined by taking a nominal amount of the
investment made considering the low credit risk of the investment.
For the Asset-Back Securitisation Investment portfolio, the LGDs are determined by considering the value security within
the overall structure considering the low credit risk of the investment.
For the Consumer Finance receivables portfolio, a scorecard has been developed utilising historical loss data and
applicable credit enhancements.
Exposure at Default
The EAD is used to estimate the Group’s expected exposure at the time of default of an obligor, taking into account
expected changes in the exposure after the reporting date, including repayments of principal and interest, and any
expected drawdowns on committed facilities.
The maximum period over which ECLs are measured is the maximum contractual period over which the Group is exposed
to credit risk.
• International Corporate Lending portfolio
For the Group’s International Corporate Lending portfolio, the Group makes use of behavioural rather than contractual
maturity, thereby reflecting expectations on the exercise of prepayment or extension options. In this regard, for Revolving
Credit Facilities and Term Loans containing a prepayment option which is expected to be exercised by the obligor, the
Group adjusts the contractual maturity date to reflect the expected maturity date, thereby reflecting the expected payment
profile. Expected maturities are assessed quarterly, on a case-by-case basis, in order to determine any change to the
expected maturity.
To measure the EAD of off-balance sheet exposures, including loan commitments, the Group aligns the expected
drawdown on committed facilities with the credit conversion factors (CCFs) as set out in the Standardised Approach to
Credit Risk under the CRR.
• Dutch Mortgage portfolio
The EAD for the Dutch Mortgage portfolio is based on amortisation per the contractual payment profiles, taking into
account modelled prepayments. The maturity date is deemed to be equal to the contractual maturity of the mortgage. To
measure the EAD of off-balance sheet assets, the Group applies a 75% CCF.
• Belgian Mortgage portfolio
The EAD for the Belgian Residential Mortgage portfolio is based on the outstanding exposure amount as at reporting
date. To measure the EAD of off-balance sheet assets (commitments to lend), the Group applies an 80% CCF.
• Maltese Business Lending portfolio
For the Maltese Business Lending portfolio, the maturity date is deemed to be equal to the contractual maturity of the
exposure.
To measure the EAD of Revolving Credit Facilities the Group applies a 100% CCF, whereas the EAD for Term Loans is
assumed to be equivalent to the drawn amounts as at reporting date.
• Maltese Mortgage portfolio
The EAD for the Maltese Residential Mortgage portfolio is based on the outstanding exposure amount as at reporting
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• Consumer Finance receivables portfolio
For the Group’s Consumer Finance receivables portfolio, the EAD is assumed to be the full committed exposure.
• Securities Investment portfolio
For the Group’s Securities Investment portfolio, the maturity date is deemed to be equal to the contractual maturity of the
exposure, and the EAD assumed to be the full committed exposure.
• Securitisation Investment and Asset-Backed Securitisation Investment portfolios
For the Group’s Securitisation Investment and Asset-Backed Securitisation Investment portfolios, the EAD is based on the
outstanding exposure amount as at reporting date.
Credit-Impaired financial assets (Stage 3)
For Stage 3 assets in the International Corporate Lending and Maltese Business Lending portfolios, the Group estimates
ECL on an individual basis. When assessing impairment for these assets, the recoverable amount corresponds to the
present value of estimated future cash flows. In the case of collateralised exposures, typically within the Maltese Business
Lending portfolio, the estimation of the recoverable amount reflects the cash flows that may result from the liquidation of
the collateral discounted at the original effective interest rate.
For exposures in the International Corporate Lending portfolio, the Group deems these assets as very rarely secured by
assets whose value is easily observable. Therefore, recoverable amounts are usually calculated by projecting expected
cash flows using a discounted cash flow (“DCF”) approach to determine the Enterprise Value (“EV”) under multiple
scenarios. The recoverable amount under each scenario is estimated as the EV, plus available cash, less exit fees,
discounted using the estimated weighted average cost of capital (“WACC”) at a borrower level. The latter is determined
using multiple assumptions in respect of the cost of debt and cost of equity. The recoverable amount is then compared to
the EAD in order to determine any expected shortfalls / credit losses.
Hence for Stage 3 exposures the individual impairment allowance is measured as the difference between the asset’s
outstanding exposure, which is measured as the sum of the carrying amount and the expected future drawdown on off-
balance sheet commitments estimated by reference to CCFs, and the recoverable amount. The recoverable amount is the
weighted average of the base case and the downside case, with recoveries under each case capped separately at 100%.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is
recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously
recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in
profit or loss.
For exposures in the Maltese Business Lending portfolio, these are typically secured by real estate assets, cash collateral
or tradeable equities whose value is more easily observable. In this respect, the recoverable amount is usually calculated
on the basis of the present value of the estimated future cash flows of a collateralised financial asset, reflecting the cash
flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is
probable.
For the Securities Investment portfolio, recoverable amounts are assessed on a mark-to-market basis, using observable
market prices for the instruments held.
For the Dutch, Belgian and Maltese Mortgages and the Securitisation Investment and Asset-Backed Securitisation
Investment portfolios, the ECL on Stage 3 exposures is equivalent to the LGD parameter multiplied by the exposure
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For the Consumer Finance receivables portfolio, the Stage 3 ECL is equivalent to the amounts of the receivables that
experienced outstanding amounts that are past due by more than 90 days.
Forward-looking information
The recognition and measurement of ECL requires the incorporation of forward-looking information into the ECL estimates
to meet the measurement objective of IFRS 9. A particularly complex aspect is the need to consider a range of possible
forward-looking economic scenarios when calculating ECL, given the potential effect of non-linearities on ECL. Based on
the principle of non-linearity, the modelled increase in credit losses if conditions are expected to deteriorate exceeds the
decrease in credit losses if conditions improve. The Group takes into consideration reasonable and supportable
information relating to forecasts of future macroeconomic conditions in order to determine the expected level of and
movement in credit risk for specific obligors.
The Group first identifies macroeconomic variables (MEVs) which have the highest correlation to systemic credit risk
factors for its obligors using statistical methods developed by external vendors. These macroeconomic variables include
country-level variables that are deemed to have the highest correlation to the Group’s portfolios. The MEVs applied for
ECL calculations for each portfolio may differ. The MEVs that exhibit the highest level of correlation for exposures
classified within the International Corporate Lending, Maltese Business Lending and Securities Investment portfolios
principally comprise country-specific Gross Domestic Product (“GDP”), unemployment levels and the performance of
stock market indices. In addition, the House Price Index and national unemployment rates are key for exposures within
the Dutch, Belgian and Maltese Mortgage portfolios, whereas interest rates are used for calculating ECLs for exposures
within the Securitisation Investment portfolio.
IFRS 9 does not require every possible scenario to be identified. However, it requires the Group to estimate ECLs by
taking into consideration multiple forward-looking macroeconomic scenarios, since the use of a single ‘most likely’
scenario is not deemed sufficient. As a result, the measurement of ECLs in line with IFRS 9 involves the use of significant
judgement in developing alternative macroeconomic scenarios and / or management adjustments. In this regard, the
Group uses an external vendor solution to determine multiple forecasts of macroeconomic conditions (reflecting future
paths of the selected key macroeconomic variables). The Group then estimates an unbiased, forward-looking, probability-
weighted ECL by assigning probability weights to expected losses under each of the macroeconomic scenarios.
IFRS 9 does not require forecasts of future conditions to extend over the entire expected life of the financial instrument in
question. The Group uses macroeconomic forecasts from the external vendor for up to 20 quarters to estimate a forward-
looking ECL. For maturities that go beyond this 5-year period, the Group extrapolates projections from available data.
For the Asset-Backed Securitisation Investment portfolio and the Consumer Finance receivables portfolio, historical
information as well as credit enhancements are utilised to determine future ECLs.
Multiple forward-looking scenarios for Stage 3 Credit-impaired exposures
With regards to Stage 3 exposures within the Group’s International Corporate Lending portfolio, ECLs are based on a
DCF analysis aimed at assessing the level of credit risk in detail and estimating the recoverable amount for the
instrument. In line with IFRS 9 requirements, such exposures still require a consideration of multiple forward-looking
scenarios. The scenarios are designed specifically for each obligor in question by considering the different cash flows that
may accrue to the Group under the contractual agreement including those resulting from potential restructuring, which
may include derivative features including pay-outs if certain targets or objectives are met at a future date. Such scenarios
are designed by reference to estimated unlevered operating cash flows, typically over a three-year forecasted period,
together with a terminal value estimated using assumed stable cash flows under each scenario.
With regards to Stage 3 exposures within the Group’s Maltese Business Lending portfolio, different work-out options
available to the Group in respect of each impaired exposure, such as the initiation of court proceedings to enforce
foreclosure of collateral or reaching an amicable out-of-court agreement with the obligor to sell the collateral in the market
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In line with the requirements of IFRS 9, the Group assigns a probability weight, based on management judgement, to
each of the scenarios considered in the estimation of ECLs. Due to the high level of subjectivity involved, decisions
relating to the selection of scenarios, probabilities and assumed forecasted cash flows are subject to scrutiny through the
Group’s governance structure around credit risk.
In respect of exposures within the Dutch, Belgian and Maltese Mortgages, Securities, Securitisation Investment and
Asset-Backed Securitisation Investment and Consumer Finance receivables, the ECL on Stage 3 exposures is modelled
1.6 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position
when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis
1.7 Intangible assets
1.7.1 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net
assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in
‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on
goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
1.7.2 Computer software
Intangible assets with finite useful lives, such as purchased and internally developed computer software, are amortised,
on a straight-line basis, over their estimated useful lives. Estimated useful life is generally the lower of legal duration,
where applicable, and expected useful life. The estimated useful life of purchased software and developed computer
software ranges between 3 to 5 years. Costs incurred in the ongoing maintenance of software are expensed immediately
as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software elements
controlled by the Group are recognised as intangible assets when the following criteria are met:
- it is technically feasible to complete the software so that it will be available for use;
- management intends to complete the software and use it;
- there is an ability to use the software;
- it can be demonstrated how the software will generate probable future economic benefits;
- adequate technical, financial and other resources to complete the development and to use the software are
available; and
- the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software include the software development employee costs
and an appropriate portion of relevant overheads.
Capitalised development costs are amortised from the point at which the asset is ready for use. Other development
expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
1.8 Property, plant and equipment
All property, plant and equipment used by the Group is initially recorded at historical cost, including transaction costs and
borrowing costs. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
All property, plant and equipment is subsequently stated at historical cost less accumulated depreciation and impairment
losses.
Depreciation on assets, recognised in profit or loss, is calculated using the straight-line method to allocate their cost to
their residual values over their estimated useful lives, as follows:
- leasehold improvements 4 - 10 years (limited to lease term)
- computer equipment 3 - 5 years
- other equipment 4 years
- fixtures and fittings 10 years
- motor vehicles 5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in
profit or loss.
1.9 Impairment of non-financial intangible assets
Assets that have an indefinite useful life, for example goodwill or certain intangible assets, are not subject to amortisation
and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units).
The impairment test also can be performed on a single asset when the fair value less costs to sell or the value in use can
be determined reliably. Non-financial assets other than goodwill that suffered impairment are reviewed for possible
1.10 Investment property
Investment properties are stated at historical cost less depreciation. Historical cost includes transaction costs and
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance
are charged to profit or loss during the financial period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate the cost of the assets to their residual values over
their estimated useful lives, which for buildings is estimated at 50 years.
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The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 13).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in
1.11 Current and deferred income tax
The tax expense or credit for the year comprises current and deferred tax. Tax is recognised in profit or loss, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In the latter case, the tax is
also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when
the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle
the balances on a net basis.
1.12 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are
shown in equity as a deduction, net of tax, from the proceeds.
1.13 Financial liabilities
The Group recognises a financial liability on its statement of financial position when it becomes a party to the contractual
provisions of the instrument. The Group’s financial liabilities, other than derivative financial liabilities (refer to Note 1.14),
are classified as financial liabilities measured at amortised cost using the effective interest method.
These comprise principally amounts owed to financial institutions, amounts owed to customers, other payables and other
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1.14 Derivative financial instruments
Derivative financial instruments, including currency forwards and swaps, interest rate swaps and other derivative
contracts, are classified as held for trading derivatives unless designated as hedging instruments, and are initially
recognised at fair value on the date on which a derivative contract is entered into, and are subsequently remeasured at
their fair value. Fair values are obtained from valuation techniques for over-the-counter derivatives, including discounted
cash flow models. Fair values for currency forwards and swaps are determined using forward exchange market rates at
the end of the reporting period. Discounting techniques, reflecting the fact that the respective exchange or settlement will
not occur until a future date, are used when the time value of money has a significant effect on the fair valuation of these
instruments.
Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised
immediately in profit or loss. If a derivative is not designated in a qualifying hedge relationship, then all changes in its fair
value are recognised immediately in profit or loss as a component of net trading income.
The Group designates certain derivatives as hedging instruments in qualifying hedging relationships. On initial designation
of the hedge, the Group formally documents the relationship between the hedging instrument/s and hedged item/s,
including the risk management objective and strategy in undertaking the hedge, together with the method that will be used
to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the
hedge relationship as well as on an ongoing basis, as to whether the hedging instrument/s is/are expected to be ‘highly
effective’ in offsetting the changes in the fair value of the respective hedged item/s during the period for which the hedge
is designated, and whether the actual results of each hedge are within a range of 80-125 percent.
1.14.1 Fair value hedges
When a derivative is designated as a hedging instrument in a hedge of the change in fair value of a recognised asset or
liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised
immediately in profit or loss together with changes in the fair value of the hedged item that are attributable to the hedged
risk.
If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for fair
value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively.
Any adjustment up to that point of discontinuation to a hedged item for which the effective interest method is used, is
amortised to profit or loss as part of the recalculated effective interest rate of the item over its remaining life.
The Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU
carve-out version of IAS 39. The EU carve-out macro hedging rules enable a group of derivatives (or proportions) to be
viewed in combination and jointly designated as the hedging instrument in the Group’s macro fair value hedging model
and remove some of the limitations in fair value hedge accounting relating to hedging portfolios and under-hedging
strategies. Under the EU carve-out, hedge accounting may be applied to portfolios and ineffectiveness only arises when
the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that
bucket. The Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the
EU carve-out in respect of its retail operations after considering the duration gap between the International mortgages and
the Maltese Corporate Lending portfolio on the one hand and the portfolios on the other hand. The hedging activities are
designated as a portfolio fair value hedge in respect of the International Mortgages book and the Maltese Corporate
Lending portfolio, being the hedged items. Changes in the fair value of the derivatives are recognised in the statement of
comprehensive income together with the basis adjustment in relation to the International Mortgages and the Maltese
Corporate Lending portfolio (hedged items) insofar as attributable to interest rate risk (the hedged risk).
The Group establishes the hedging ratio by matching the notional of the derivatives with the principal of the portfolio being
hedged. Possible sources of ineffectiveness are as follows:
- Differences between the expected and actual volume of prepayments, as the Group hedges to the expected
Annual Report and Financial Statements 2025
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- Difference in the discounting between the hedged item and the hedging instruments, as cash collateralised
interest rate swaps are discounted using Overnight Indexed Swaps (OIS) discount curves, which are not applied
to the fixed rate mortgages;
- Hedging derivatives with a non-zero fair value at the date of initial designation as a hedging instrument; and
- Counterparty credit risk which impacts the fair value of uncollateralised interest rate swaps but not the hedged
items.
The gain or loss relating to the effective portion of interest rate swaps hedging fixed interest loans and securities is
The gain or loss relating to the ineffective portion is also recognised in profit or loss within interest income and disclosed
1.15 Provisions
Provisions for legal and other claims are recognised when the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount
has been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
1.16 Interest income and expense
Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest income’ and
‘interest expense’ in profit or loss using the effective interest method.
When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the
financial instrument (for example, prepayment options) but does not consider future credit losses.
Interest income and expense presented in the profit or loss include:
- interest on financial assets and financial liabilities measured at amortised cost calculated using the effective
interest method; and
- the effective portion of fair value changes attributable to qualifying hedging derivatives designated in fair value
hedges of interest rate risk, together with changes in fair value of the hedged items attributable to interest rate
risk.
Fair value changes attributable to other derivatives in hedging relationships which are discontinued are presented in ‘net
trading income’ with effect from the last date on which the hedge was demonstrated to be effective.
Interest on credit-impaired financial assets is recognised using the rate of interest used to discount the future cash flows
1.17 Fees and commissions
Fee and commission income and expenses that are an integral part of the loan, are included in the effective interest rate
of the financial asset or liability.
Other fee and commission income, comprising account servicing fees, underwriting fees, investment management fees,
foreign exchange fees, guarantee fees, placement fees and syndication fees, are recognised in profit or loss as the
related services are performed.
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Loan commitment fees for loans that are likely to be drawn down are deferred (together with related direct costs) and
recognised as an adjustment to the effective interest rate on the loan upon drawing of the loan.
When a loan commitment is not expected to result in the drawdown of a loan, the related loan commitment fees are
recognised in profit or loss on a straight-line basis over the commitment period.
Consideration payable to customers, comprising incremental costs in the form of cash amounts that the Group pays to
wealth management customers, are incurred in acquiring new customer contracts. These costs are deferred within “Other
assets” and subsequently recognised as an offset within fee and commission income, as follows:
- For customer contracts with a contractual fixed period, these costs are amortised over the contractual life.
- For customer contracts with no contractual fixed period, these costs are amortised over the estimated life of the
contracts, which is reviewed periodically by reference to the Group’s experience with attrition rates by wealth
management customers.
1.18 Net trading income
Net trading income comprises all realised and unrealised foreign exchange differences and all fair value changes arising
on derivatives held for trading, including derivatives that are not designated as hedging instruments and derivatives that
1.19 Net income from other financial instruments carried at fair value through profit or
loss
Net income from other financial instruments carried at fair value through profit or loss comprises all realised and
unrealised fair value changes, interest income, dividends and foreign exchange differences attributable to financial assets
carried at fair value through profit or loss.
1.20 Leases
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the future lease payments. Lease payments to be made under reasonably
certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that
the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-
use asset in a similar economic environment with similar terms, security and conditions.
Right-of-use assets are generally comprising the amount of the initial measurement of the lease liability and are generally
depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. In determining the lease
term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in
Annual Report and Financial Statements 2025
77
1.21 Share-based compensation
The Group operates a deferred bonus plan in the form of a share-based compensation plan whereby selected officers or
employees are awarded performance bonuses upon meeting specific performance conditions, or retention bonuses.
Together with upfront cash amounts, bonuses may comprise upfront share-linked awards and deferred share-linked
awards. Share-linked awards consist of share-linked instruments in the form of a number of notional ordinary shares of
the parent company, MDB Group Limited, computed by dividing the related portion of the bonus amount by the market
value of these ordinary shares at award date. Share-linked award bonuses are eventually settled in cash on the
settlement date (the expiry of the retention or delay period) on the basis of the market value of the ordinary shares of MDB
Group Limited determined on the settlement date, multiplied by the number of notional shares computed on the date of
award. Deferred share-linked awards attributable to retention bonuses are subject to a vesting period during which period
the specific officer or employee must remain in employment for vesting to occur. Meanwhile, performance bonuses vest
immediately, but are also subject to a deferral period. Therefore, both upfront and deferred share-linked awards are
subject to a retention or delay period, for settlement purposes, post vesting.
Share-based compensation is recognised as an employee benefit expense from grant date over the relative vesting
period, which in the case of retention bonuses occurs through graded vesting. The total amount to be expensed from
grant date over the vesting period is determined by reference to the fair value of the awards at the grant date, reflecting
the fair valuation of MDB Group Limited’s ordinary shares on award date. Accordingly, the Group amortises on a straight-
line basis the compensation cost arising on the grant of such awards over the nominal vesting period for employees
based on the graded vesting of the plan. The resultant liability is re-measured at the end of each reporting period and at
the date of settlement, with changes in fair value recognised in profit or loss.
1.22 Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for
a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt
instrument.
In the ordinary course of business, the Group gives financial guarantees, consisting of guarantees and acceptances. Such
financial guarantees are given to banks, financial institutions and other bodies on behalf of customers.
Financial guarantee contracts are initially measured at fair value and subsequently measured at higher of:
- The amount of the credit loss allowance (calculated as described in Note 1.5); and
- The premium received on initial recognition less income recognised in accordance with the principles of IFRS
15.
Loan commitments are the Group’s commitments to provide credit under pre-specified terms and conditions and are
measured at the amount of the credit loss allowance (calculated as described in Note 1.5).
For loan commitments and financial guarantee contracts, the credit loss allowance is recognised as a provision. However,
for contracts that include both a loan and an undrawn commitment and the Group cannot separately identify the expected
credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on
the undrawn commitment are recognised together with the credit loss allowance for the loan. To the extent that the
combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised
as a provision for liabilities and other charges.
Annual Report and Financial Statements 2025
78
1.23 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at face value less expected credit losses.
Cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition, including
cash in hand, unrestricted balances held with central banks, deposits held at call with financial institutions and other short-
term highly liquid investments with original maturities of three months or less.
Amounts owed to financial institutions that are repayable on demand or have a contractual maturity of three months or
less and which form an integral part of the Group’s cash management are included as a component of cash and cash
1.24 Customer assets
Customer assets are held with the Group in a fiduciary capacity and are segregated from the assets of the Group in
accordance with the applicable rules and regulations on protection of customer assets, except when such customer
assets are held by the Group to cover a required margin or when they are used to secure an obligation towards the
Group.
Customer assets are not presented within the Group’s statement of financial position.
2. Financial Risk Management
2.1 Introduction and overview
The Group’s core business activities include:
- deposit taking;
- the provision of wealth management and investment services;
- the granting of residential mortgage loans in the Dutch, Belgian and Maltese markets, the granting of buy-to-let
mortgages in the Dutch market and the relative securitisation of sub-portfolios of such Dutch residential
mortgage loans through RMBS transactions;
- the granting of loans to international and Maltese corporates; and
- the holding of consumer finance receivables.
The Group also provides basic retail services such as money transfer and spot currency exchange and its retail
customers may also use the MeDirect debit card that may be used globally, wherever Mastercard is accepted. As from
2024, MeDirect made digital wallets accessible for card users as customers may now connect their debit card to their
Apple Pay or Google Pay digital wallets. Currency swaps, foreign exchange forwards and interest rate swaps are also
entered into for risk management purposes.
In respect of funding, the Group continues to do securitisations of Dutch mortgages portfolios and to access the
international wholesale funding markets through bilateral repo lines and the Eurex repo platform.
The major components within the Group’s asset base are: the Dutch Mortgage portfolio, comprising residential mortgage
lending to Dutch customers; the Dutch buy-to-let mortgage portfolio; the Belgian Mortgage portfolio, comprising residential
mortgage lending to Belgian customers, the Maltese Mortgage and Business Lending portfolios, comprising residential
mortgage loans to retail customers to support the purchase of residential properties as their own dwellings and loans to
Maltese corporates; the International Corporate Lending portfolio which is in run-off, comprising loans to international
corporates; the Consumer Finance receivables portfolio; the Securities Investment portfolio principally comprising
investment-grade debt securities; the Securitisation Investment portfolio, comprising acquired positions in Collateralised
Loan Obligation (“CLO”) transactions managed by third parties; and the Asset-Backed Securitisation Investment portfolio,
Annual Report and Financial Statements 2025
79
The main financial risks assumed by the Group are: (a) counterparty credit risk arising primarily from loans and advances
to customers, and also from other financial instruments; (b) liquidity risk arising from maturity mismatches and committed
but undrawn revolving credit facilities; (c) market risk, including interest rate risk; and (d) operational risk, including cyber
security related threats.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and
processes for measuring and managing these risks and the Group’s management of capital.
2.1.1 Risk management framework
The Group recognises the need to have an effective and efficient Risk Management Function that is an integral part of the
Group’s strategic planning and management processes and has therefore adopted a comprehensive enterprise risk
management approach that provides a balance between sustainable growth and maximising long term value while
managing the associated risks. The Risk Management Function is actively involved in all material strategic and business
as usual risk management decisions, including budgets and change management, and is adequately structured to deliver
a holistic view of the whole range of risks faced by the Group in its strategic decision-making.
The Enterprise Risk Management Framework (“ERMF”) provides a comprehensive definition of the Group’s risk
management processes to enable informed risk-based decision-making. This framework provides a detailed structure as
to how the Group identifies, manages, measures and monitors material risks, including policies, procedures, risk limits
and risk controls. This ensures adequate, timely and continuous identification, measurement, assessment, monitoring,
management, mitigation and reporting of the risks at the business line, institution and consolidated or sub-consolidated
levels.
The Group’s objective is to deploy an integrated risk management approach that ensures an awareness of, and
accountability for, the risks taken throughout the Group and also to develop the tools needed to address those risks.
Strong risk management and internal controls are core elements of the Group’s strategy and culture. The Group has
adopted a risk management and internal control structure, referred to as the Three Lines of Defence (Figure 1), to ensure
it achieves its strategic objectives while meeting regulatory and legal requirements and fulfilling its responsibilities to
shareholders, customers and staff.
In the three lines of defence model, business line management is the first line of defence (including those functions that
are responsible for day-to-day operations and the Treasury function), the various risk control and compliance oversight
Annual Report and Financial Statements 2025
80
Each of these three “lines” play a distinct role within the Group’s wider governance framework. Although the Group adopts
a “three lines of defence” model, it is worth mentioning the additional interaction between the Group and its external
auditors and regulatory bodies adds further “lines of defence”, albeit they are not depended upon internally by the Group
to act in such capacities.
2.2 Credit risk
Credit risk is the risk of loss to the Group’s business or of adverse change in its financial position, resulting from
fluctuations in the credit standing of issuers of securities, customers, counterparties and any debtors in the form of default
or other significant credit loss event (e.g. downgrade or spread widening).
2.2.1 Management of credit risk
The Group’s Credit Policy establishes the principles, credit standards, monitoring and reporting requirements and
escalation and approval processes that govern the ongoing management of the Group’s credit risk exposure. The policy
applies to all subsidiaries of the Group and governs the associated credit frameworks for each asset class.
The Group’s Board of Directors has defined risk appetite limits based on the Capital Requirements Regulation (“CRR”),
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements
for credit institutions and investment firms and amending Regulation (EU) No 648/2012, governing large exposures as
well as prudential requirements. Exposure limits are monitored on a regular basis by the Risk, Corporate Credit and
Treasury teams. Amongst other things, the Credit Policy for each asset class outlines the following specific exposure and
trading limits:
- Concentration limits;
- Country limits;
- Portfolio limits; and
- Minimum credit quality within each asset class.
Limits on counterparty exposures are established by the Group’s Management Credit Committee (“MCC”). Such limits
relate to net exposure, after application of cash (and cash equivalent) collateral, as provided in industry standard
documentation, and are established to manage credit risk to banks and other financial institutions in connection with the
Group’s over-the-counter (“OTC”) derivative and repurchase agreement transactions. Settlement and delivery risk are
mitigated with industry-standard documentation such as the Loan Management Association (“LMA”) and International
Swaps and Derivative Association (“ISDA”) agreements, alongside associated Credit Support Annex (“CSA”) legal
documents. Any bilateral secured financing transaction is executed under a signed Global Master Repurchase Agreement
(“GMRA”) or an ISDA agreement.
The Group’s objective is to manage its credit portfolios maintaining a sound and prudent credit risk profile, whilst
optimising returns for the Group. To facilitate achieving this target, the Group invests in a diversified portfolio of financial
assets, including both high-quality securities with strong ratings stability and a diversified portfolio of loans to corporates,
whose higher returns are viewed as justifying a greater level of risk. In accordance with its business strategy, the Group
continued to reduce its exposure to the International Corporate Lending portfolio, with the expectation that the Group will
exit this asset class. The portfolio has reduced by 89.7% over the last financial year and represents less than 1% of the
loans and advances to customers.
Accordingly the Group’s credit risk taking activities comprise principally residential mortgage lending classified under the
Dutch, Belgian and Maltese Mortgage portfolios; lending to Maltese corporate clients, classified under the Maltese
Business Lending portfolio; Consumer Finance receivables portfolio; investments in debt securities classified under the
Securities Investment portfolio; investments in asset-backed securities classified under the Asset-Backed Securitisation
Investment portfolio, which activities are described below.
The Group’s financial assets are managed on a portfolio basis, considering correlations between asset classes. The
Group diversifies its exposures to avoid excessive concentration in particular countries, industries or types of financial
Annual Report and Financial Statements 2025
81
All exposures classified under the International Corporate Lending and Securitisation Investment portfolios undergo a
thorough analysis process, not only from an internal credit perspective but also from a legal, financial and credit ratings
The Group’s Corporate Credit and Risk teams, which manage the credit analysis and research process, are composed of
highly trained individuals with specialised skill sets and years of experience in Corporate Syndicated Loans markets. The
credit analysis and research process includes scenario analysis on investments to determine whether they can withstand
significant adverse credit, idiosyncratic and market events. Additionally, the portfolio is subject to a continual, thorough
monitoring and oversight process to identify any financial instruments which require increased monitoring of performance.
Further details on the credit approval and monitoring processes are provided within the Group’s Pillar 3 Disclosures report
available in the following webpage: https://www.medirect.com.mt/about-us/investor-relations.
In respect of the Maltese Business Lending portfolio, MeDirect Malta’s Corporate lending team is responsible for
performing the primary credit analysis on proposed credits, as well as performing regular borrower reviews to monitor the
performance of the underlying exposures, recommending appropriate courses of action and co-ordinating the decision-
making process. The Risk team is responsible for reviewing the primary credit analysis performed by the Corporate Credit
team, challenging key views and assumptions adopted by the first line of defence, including engaging in discussion during
Management Credit Committee meetings and providing recommendations on the appropriate course of action. Portfolio
and credit file reviews are performed regularly to monitor the performance of the underlying exposures and to evaluate the
level of credit risk within the portfolio, including the performance of market sectors and concentrations therein, with the
objective to build and maintain assets of high quality.
The Maltese Retail lending portfolio is not managed on an individual borrower basis, due to the high volume of relatively
low value and homogenous exposures but is instead monitored on a portfolio level basis. The Maltese lending unit will
alert the Management Credit Committee of any material issues or early warning signs identified and any MCC member
may ask for any credit to be reviewed in detail.
As referred to previously, the Group also has a Dutch and Belgian mortgage business line. The Dutch national-guaranteed
mortgage business line benefits from a private non-profit fund guarantee and government guarantee (indirectly), thus it
benefits from favourable credit risk weighting treatment as credit risk is deemed to be low. The residual credit risk arising
therefrom is managed by MeDirect Belgium’s Credit and Risk teams. On a regular basis a sample file review is performed
by the Business Team and presented at the ERMC. A number of mortgages that would have been originated in the prior
months are selected, some of which are subject to a detailed and complete file review with the remaining subject to a
high-level review. Emphasis is placed on NHG compliance, the borrower’s labour situation and income as well as on the
veracity of the collateral valuation. Furthermore, meetings are held on a regular basis in which the Dutch economy, Dutch
mortgage market, NHG developments and the snapshot of the credit risk profile of the portfolio is discussed, by reference
to risk appetite limits, internal credit classification of the current portfolio along with the development of the staging and
expected credit losses of the portfolio.
Credit risk involved in both the Dutch buy-to-let activity as well as the Belgian mortgage activity differs from Dutch
mortgages as they do not benefit from a third-party guarantee. Every application undergoes a thorough screening based
on a predefined set of criteria. If one or more requirements is not met, credit files are reviewed by a Joint Credit
Committee, comprised of a MeDirect Belgium’s Business and Risk delegation. To check the exhaustive and correct
application of predefined criteria, regular sample checks are organised on both data collected as well as assessments
performed. Moreover, regular controls are put in place to confirm the adequacy of processes, staffing, systems and
controls by 2nd and 3rd line of defence.
The Treasury function is responsible for managing the Securities investment portfolio, overseen by the risk function, under
the oversight of the Management Credit Committee (“MCC”) and the Board Risk and Compliance Committee. The Group
focuses on acquiring debt securities meeting the criteria of high-quality liquid assets (“HQLA”). Permitted assets in this
portfolio include government bonds (including regional governments), agencies and supranational institutions, covered
bonds as well as securities issued by financial institutions (some of which may carry a government guarantee) and Asset-
Annual Report and Financial Statements 2025
82
The Treasury function is also responsible for managing the AAA-rated CLOs, with the assistance of Finance and overseen
by the risk function, under the oversight of the Management Credit Committee (“MCC”).
The Malta Corporate Team are responsible for managing the Consumer Finance receivables portfolio, with the assistance
of Finance and overseen by the risk function, under the oversight of the Management Credit Committee (“MCC”).
The Group focuses on the quality and timeliness of the data used to inform management decisions. In particular,
enhanced credit risk monitoring is applied within the International Corporate Loan portfolio.
The following table presents the maximum exposure to credit risk from on-balance sheet and off-balance sheet financial
instruments, before taking account of any collateral held or other credit enhancements. For financial assets recognised on
balance sheet, the maximum exposure to credit risk equals their carrying amount for on balance sheet exposures. For
financial guarantees granted, it is the maximum amount that the Group would have to pay if the guarantees were called
upon. For loan commitments and other credit-related commitments, it is generally the full amount of the committed
facilities.
For the purposes of Note 2.2 – Credit risk, amounts related to “Investments measured at amortised cost” are inclusive of
basis adjustments attributable to the hedged risk.
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Net exposure:
Financial assets measured at amortised cost
Balances with central banks
272,563
206,868
74,593
64,616
Loans and advances to financial institutions
329,004
316,179
54,327
37,074
Loans and advances to customers
3,023,394
2,927,475
391,787
413,821
- International Corporate Lending portfolio
21,504
208,759
21,494
125,060
- Dutch Mortgage portfolio
2,265,686
2,205,956
-
-
- Belgian Mortgage portfolio
540,484
366,245
-
-
- IFRS basis adjustment: International Mortgage portfolio
(174,573)
(142,246)
-
-
- Maltese Business Lending portfolio
208,936
154,073
208,936
154,073
- IFRS basis adjustment: Maltese Business Lending portfolio
519
686
519
686
- Maltese Mortgage portfolio
151,367
129,274
151,367
129,274
- Consumer Finance receivables
9,471
4,728
9,471
4,728
Investments measured at amortised cost
1,441,455
1,358,820
383,786
396,632
- Securities portfolio
890,401
698,866
266,514
262,219
- Securitisation portfolio
392,060
514,669
84,488
120,714
- Asset-Backed Securitisation portfolio
158,994
145,285
32,784
13,699
Accrued income
2,670
1,454
822
481
Loans to related parties (included in other assets)
1,321
48
4,596
5,075
Other receivables (included in other assets)
2,769
1,501
2,577
1,326
Other assets (included in other assets)
34,728
23,334
2,012
2,057
5,107,904
4,835,679
914,500
921,082
Instruments mandatorily measured at fair value through profit or loss
185,928
175,310
184
797
- Held for trading derivative financial instruments
184
907
184
797
- Held for risk management derivative financial instruments
185,744
174,403
-
-
5,293,832
5,010,989
914,684
921,879
Commitments to extend credit, guarantees and other commitments
238,314
212,551
260,904
Annual Report and Financial Statements 2025
83
Summary of financial instruments to which the impairment requirements in IFRS 9 are applied
The following disclosures present the gross carrying/nominal amount of financial instruments measured at amortised cost
to which the impairment requirements in IFRS 9 are applied and the associated credit loss allowances.
Group
2025
2024
Gross carrying/
nominal amount
Credit loss
allowance
Gross carrying/
nominal amount
Credit loss
allowance
€000
€000
€000
€000
Financial assets measured at amortised cost
Balances with central banks
272,565
(2)
206,870
(2)
Loans and advances to financial institutions
329,005
(1)
316,180
(1)
Loans and advances to customers
3,032,791
(9,397)
2,942,417
(14,942)
- International Corporate Lending portfolio
26,458
(4,954)
221,366
(12,607)
- Dutch Mortgage portfolio
2,266,097
(411)
2,206,207
(251)
- Belgian Mortgage portfolio
541,482
(998)
366,799
(554)
- IFRS basis adjustment: International Mortgage
portfolio
(174,573)
-
(142,246)
-
- Maltese Business Lending portfolio
210,061
(1,125)
155,195
(1,122)
- IFRS basis adjustment: Maltese Business Lending
portfolio
519
-
686
-
- Maltese Mortgage portfolio
151,707
(340)
129,606
(332)
- Consumer Finance receivables
11,040
(1,569)
4,804
(76)
Investments measured at amortised cost
1,441,680
(225)
1,359,061
(241)
- Securities portfolio
890,488
(87)
698,961
(95)
- Securitisation portfolio
392,099
(39)
514,720
(51)
- Asset-Backed Securitisation portfolio
159,093
(99)
145,380
(95)
Accrued income
2,670
-
1,454
-
Loans to related parties (included in other assets)
1,321
-
48
-
Other receivables (included in other assets)
2,769
-
1,501
-
Other assets (included in other assets)
34,728
-
23,334
-
5,117,529
(9,625)
4,850,865
(15,186)
Commitments to extend credit, guarantees
and other commitments
238,425
(111)
212,829
(278)
Total
5,355,954
(9,736)
5,063,694
Annual Report and Financial Statements 2025
84
Bank
2025
2024
Gross carrying/
nominal amount
Credit loss
allowance
Gross carrying/
nominal amount
Credit loss
allowance
€000
€000
€000
€000
Financial assets measured at amortised cost
Balances with central banks
74,594
(1)
64,617
(1)
Loans and advances to financial institutions
54,328
(1)
37,075
(1)
Loans and advances to customers
399,775
(7,988)
418,465
(4,644)
- International Corporate Lending portfolio
26,448
(4,954)
128,174
(3,114)
- Maltese Business Lending portfolio
210,061
(1,125)
155,195
(1,122)
- IFRS basis adjustment: Maltese Business
Lending portfolio
519
-
686
-
- Maltese Mortgage portfolio
151,707
(340)
129,606
(332)
- Consumer Finance receivables
11,040
(1,569)
4,804
(76)
Investments measured at amortised cost
383,829
(43)
396,694
(62)
- Securities portfolio
266,533
(19)
262,259
(40)
- Securitisation portfolio
84,496
(8)
120,726
(12)
- Asset-Backed Securitisation portfolio
32,800
(16)
13,709
(10)
Accrued income
822
-
481
-
Loans to related parties (included in other assets)
4,596
-
5,075
-
Other receivables (included in other assets)
2,577
-
1,326
-
Other assets (included in other assets)
2,012
-
2,057
-
922,533
(8,033)
925,790
(4,708)
Commitments to extend credit, guarantees
and other commitments
260,973
(69)
226,456
(157)
Total
1,183,506
(8,102)
1,152,246
(4,865)
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject
to impairment.
| Group | Bank | |||
| 2025 | 2024 | 2025 | 2024 | |
| €000 | €000 | €000 | €000 | |
Instruments mandatorily measured at fair value through profit or loss | ||||
- Held for trading derivative financial instruments | 184 | 907 | 184 | 797 |
- Held for risk management derivative financial instruments | 185,744 | 174,403 | - | - |
185,928 | 175,310 | 184 | 797 |
2.2.2 Summary of credit quality of financial assets to which impairment requirements in IFRS 9 are applied
The Group’s credit risk rating processes are designed to highlight exposures which require closer management attention
because of their greater probability of default and potential loss.
As previously explained in the accounting policy (refer to Note 1.5), the Group adopts a five-point internal credit
classification rating scale in order to assess the relative credit quality of exposures within its portfolios of financial
instruments. In this respect, the members of the respective Management Credit Committees review the grading proposed
by the business and the Group’s Credit Risk teams. Each of the five internal credit classification ratings within the scale is
aligned to the Group’s approach for determining the relative staging of financial assets in line with the requirements
emanating from IFRS 9 as follows:
Stage 1 (Performing)
1. Regular - no material credit concerns.
2. Focus - no immediate prospect that a credit loss will ultimately be suffered, but worthy of close credit oversight.
Stage 2 (Underperforming)
3. Under Surveillance - significant increase in credit risk with identified concerns and some prospect that a credit
loss may ultimately be suffered.
Annual Report and Financial Statements 2025
85
Stage 3 (Non-performing)
4. Doubtful - it is likely that the contractual terms of the debt will not be met and that a credit loss will be suffered.
5. Write-off - full or partial write-down of exposures with little prospect of recovery.
Deteriorating Credits
The Group determines that a financial instrument is credit-impaired and in Stage 3 by considering an increased likelihood
of default, primarily whether:
- contractual payments of either principal or interest are past due by more than 90 days;
- there are other indications that the borrower is unlikely to pay, such as when a concession has been granted to
the borrower for economic or legal reasons relating to the borrower’s financial condition; and
- the loan is otherwise considered to be in default.
Credit impaired loans and advances are those that are classified as “Doubtful” or “Write-off”. These grades are assigned
when the Group considers that either the customer is unlikely to pay its credit obligations in full, without recourse to
security, or when the customer is more than 90 days past due on any material credit obligation to the Group. If
unlikeliness to pay is not identified at an earlier stage, it is deemed to occur when an exposure is more than 90 days past
due.
The Group is required to identify non-performing exposures (“NPEs”) and to assess the recoverability of the recognised
exposures.
Assessment is made at an obligor (rather than facility) level. This implies that in those cases where a particular debtor has
multiple facilities with the Group, the Group considers whether there are indications of unlikeliness to pay at the level of
the debtor, irrespective of the different levels of losses that can be incurred in respect of the different facilities resulting
from different levels of seniority.
Therefore, the definitions of credit-impaired is aligned as far as possible to the regulatory definition of ‘non-performing’ so
that Stage 3 represents all loans that are considered defaulted or otherwise credit-impaired. For further clarity, exposures
in respect of which a “default” is considered to have occurred, and exposures that have been found “credit impaired” in
accordance with IFRS as adopted by the EU, shall always be considered as “non-performing exposures”.
As described in more detail in section 1.5 of the financial statements, the Group’s staging assessment in respect of
exposures classified within the International Corporate Lending portfolio takes into consideration both qualitative and
quantitative criteria.
The impact on borrowers’ financial performance of the macroeconomic impacts of geopolitical tensions, seeing increased
cost and energy inflation on the financial performance of borrowers within the Group’s lending portfolios, is captured within
the quantitative assessment determined within the Group’s IFRS 9 model, since it is taken into account within the macro-
economic scenarios used to determine the probability weighted ECL, as well as in the life-time PiT PDs at reporting date
used to determine SICR by comparing the magnitude of the difference between the corresponding reporting date implied
rating and the origination date implied rating.
Exposures within the Securities Investment and Securitisation Investment portfolios are typically rated. Publicly rated
exposures predominantly meet the definition of investment-grade rating and, in this respect, are considered to have low
credit risk. A SICR assessment is only performed in respect of exposures to which a sub-investment-grade rating has
been attributed.
Annual Report and Financial Statements 2025
86
The following table presents information about the credit quality of financial assets held by the Group and the Bank to
which the impairment requirements in IFRS 9 are applied:
Group | Performing | Under performing | Non-performing | |||
Regular | Focus | Under surveillance | Doubtful | POCI | Total | |
As at 31 December 2025 | €000 | €000 | €000 | €000 | €000 | €000 |
| On-balance sheet at amortised cost: | ||||||
Balances with central banks | 272,563 | - | - | - | - | 272,563 |
Gross | 272,565 | - | - | - | - | 272,565 |
Credit loss allowances | (2) | - | - | - | - | (2) |
Loans and advances to financial institutions | 329,004 | - | - | - | - | 329,004 |
Gross | 329,005 | - | - | - | - | 329,005 |
Credit loss allowances | (1) | - | - | - | - | (1) |
Loans and advances to customers | 2,945,358 | 18,596 | 36,796 | 22,644 | - | 3,023,394 |
- International Corporate Lending portfolio | - | - | 10,496 | 11,008 | - | 21,504 |
Gross | - | - | 10,847 | 15,611 | - | 26,458 |
Credit loss allowances | - | - | (351) | (4,603) | - | (4,954) |
- Dutch Mortgage portfolio | 2,246,568 | 3,101 | 14,451 | 1,566 | - | 2,265,686 |
Gross | 2,246,681 | 3,101 | 14,697 | 1,618 | - | 2,266,097 |
Credit loss allowances | (113) | - | (246) | (52) | - | (411) |
- Belgian Mortgage portfolio | 512,402 | 15,482 | 8,183 | 4,417 | - | 540,484 |
Gross | 512,779 | 15,493 | 8,266 | 4,944 | - | 541,482 |
Credit loss allowances | (377) | (11) | (83) | (527) | - | (998) |
- IFRS basis adjustment: International Mortgage portfolio | (174,573) | - | - | - | - | (174,573) |
- Maltese Business Lending portfolio | 200,998 | 13 | 2,385 | 5,540 | - | 208,936 |
Gross | 201,354 | 13 | 2,398 | 6,296 | - | 210,061 |
Credit loss allowances | (356) | - | (13) | (756) | - | (1,125) |
- IFRS basis adjustment: Maltese Business Lending portfolio | 519 | - | - | - | - | 519 |
- Maltese Mortgage portfolio | 151,114 | - | 140 | 113 | - | 151,367 |
Gross | 151,429 | - | 142 | 136 | - | 151,707 |
Credit loss allowances | (315) | - | (2) | (23) | - | (340) |
- Consumer Finance receivables | 8,330 | - | 1,141 | - | - | 9,471 |
Gross | 8,351 | - | 1,150 | 1,539 | - | 11,040 |
Credit loss allowances | (21) | - | (9) | (1,539) | - | (1,569) |
Investments measured at amortised cost | 1,441,455 | - | - | - | - | 1,441,455 |
- Securities portfolio | 890,401 | - | - | - | - | 890,401 |
Gross | 890,488 | - | - | - | - | 890,488 |
Credit loss allowances | (87) | - | - | - | - | (87) |
- Securitisation portfolio | 392,060 | - | - | - | - | 392,060 |
Gross | 392,099 | - | - | - | - | 392,099 |
Credit loss allowances | (39) | - | - | - | - | (39) |
- Asset-Backed Securitisation portfolio | 158,994 | - | - | - | - | 158,994 |
Gross | 159,093 | - | - | - | - | 159,093 |
Credit loss allowances | (99) | - | - | - | - | (99) |
Accrued income | 2,670 | - | - | - | - | 2,670 |
Loans to related parties (included in other assets) | 1,321 | - | - | - | - | 1,321 |
Other receivables (included in other assets) | 2,769 | - | - | - | - | 2,769 |
Other assets (included in other assets) | 34,728 | - | - | - | - | 34,728 |
5,029,868 | 18,596 | 36,796 | 22,644 | - | 5,107,904 | |
Off-balance sheet at nominal amount: | ||||||
Commitments to extend credit, guarantees and other commitments | ||||||
Nominal amount | 234,412 | 7 | 3,931 | 75 | - | 238,425 |
Credit loss allowances | (111) | - | - | - | - | (111) |
| 234,301 | 7 | 3,931 | 75 | - | 238,314 |
Annual Report and Financial Statements 2025
87
Group
Performing
Under performing
Non-performing
Regular
Focus
Under surveillance
Doubtful
POCI
Total
As at 31 December 2024
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
206,868
-
-
-
-
206,868
Gross
206,870
-
-
-
-
206,870
Credit loss allowances
(2)
-
-
-
-
(2)
Loans and advances to financial institutions
316,179
-
-
-
-
316,179
Gross
316,180
-
-
-
-
316,180
Credit loss allowances
(1)
-
-
-
-
(1)
Loans and advances to customers
2,792,197
12,500
65,620
56,928
230
2,927,475
- International Corporate Lending portfolio
108,636
-
51,861
48,032
230
208,759
Gross
109,320
-
52,350
59,243
453
221,366
Credit loss allowances
(684)
-
(489)
(11,211)
(223)
(12,607)
- Dutch Mortgage portfolio
2,195,409
4,706
5,094
747
-
2,205,956
Gross
2,195,523
4,716
5,205
763
-
2,206,207
Credit loss allowances
(114)
(10)
(111)
(16)
-
(251)
- Belgian Mortgage portfolio
354,286
3,486
6,906
1,567
-
366,245
Gross
354,567
3,489
6,992
1,751
-
366,799
Credit loss allowances
(281)
(3)
(86)
(184)
-
(554)
- IFRS basis adjustment: International Mortgage portfolio
(142,246)
-
-
-
-
(142,246)
- Maltese Business Lending portfolio
142,461
4,308
1,423
5,881
-
154,073
Gross
142,813
4,313
1,423
6,646
-
155,195
Credit loss allowances
(352)
(5)
-
(765)
-
(1,122)
- IFRS basis adjustment: Maltese Business Lending portfolio
686
-
-
-
-
686
- Maltese Mortgage portfolio
129,274
-
-
-
-
129,274
Gross
129,606
-
-
-
-
129,606
Credit loss allowances
(332)
-
-
-
-
(332)
- Consumer Finance receivables
3,691
-
336
701
-
4,728
Gross
3,701
-
339
764
-
4,804
Credit loss allowances
(10)
-
(3)
(63)
-
(76)
Investments measured at amortised cost
1,358,820
-
-
-
-
1,358,820
- Securities portfolio
698,866
-
-
-
-
698,866
Gross
698,961
-
-
-
-
698,961
Credit loss allowances
(95)
-
-
-
-
(95)
- Securitisation portfolio
514,669
-
-
-
-
514,669
Gross
514,720
-
-
-
-
514,720
Credit loss allowances
(51)
-
-
-
-
(51)
- Asset-Backed Securitisation portfolio
145,285
-
-
-
-
145,285
Gross
145,380
-
-
-
-
145,380
Credit loss allowances
(95)
-
-
-
-
(95)
Accrued income
1,454
-
-
-
-
1,454
Loans to related parties (included in other assets)
48
-
-
-
-
48
Other receivables (included in other assets)
1,501
-
-
-
-
1,501
Other assets (included in other assets)
23,334
-
-
-
-
23,334
4,700,401
12,500
65,620
56,928
230
4,835,679
Off-balance sheet at nominal amount:
Commitments to extend credit, guarantees and other commitments
Nominal amount
208,879
443
2,070
1,437
-
212,829
Credit loss allowances
(185)
-
-
(93)
-
(278)
208,694
443
2,070
1,344
-
Annual Report and Financial Statements 2025
88
Under
Non-
Bank
Performing
performing
performing
Regular
Focus
Under surveillance
Doubtful
POCI
Total
As at 31 December 2025
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
74,593
-
-
-
--
-
74,593
Gross
74,594
-
-
-
-
-
74,594
Credit loss allowances
(1)
-
-
-
-
-
(1)
Loans and advances to financial institutions
54,327
-
-
-
-
-
54,327
Gross
54,328
-
-
-
-
-
54,328
Credit loss allowances
(1)
-
-
-
-
-
(1)
Loans and advances to customers
360,961
13
14,153
16,660
-
391,787
- International Corporate Lending portfolio
-
-
10,487
11,007
-
21,494
Gross
-
-
10,838
15,610
-
26,448
Credit loss allowances
-
-
(351)
(4,603)
-
(4,954)
- Maltese Business Lending portfolio
200,998
13
2,385
5,540
-
208,936
Gross
201,354
13
2,398
6,296
-
210,061
Credit loss allowances
(356)
-
(13)
(756)
-
(1,125)
- IFRS basis adjustment: Maltese Business Lending portfolio
519
-
-
-
-
-
519
- Maltese Mortgage portfolio
151,114
-
140
113
-
151,367
Gross
151,429
-
142
136
-
151,707
Credit loss allowances
(315)
-
(2)
(23)
-
(340)
- Consumer Finance receivables
8,330
-
1,141
-
-
-
9,471
Gross
8,351
-
1,150
1,539
-
11,040
Credit loss allowances
(21)
-
(9)
(1,539)
-
(1,569)
Investments measured at amortised cost
383,786
-
-
-
--
-
383,786
- Securities portfolio
266,514
-
-
-
-
-
266,514
Gross
266,533
-
-
-
-
-
266,533
Credit loss allowances
(19)
-
-
-
-
-
(19)
- Securitisation portfolio
84,488
-
-
-
-
-
84,488
Gross
84,496
-
-
-
-
-
84,496
Credit loss allowances
(8)
-
-
-
-
-
(8)
- Asset-Backed Securitisation portfolio
32,784
-
-
-
-
-
32,784
Gross
32,800
-
-
-
-
-
32,800
Credit loss allowances
(16)
-
-
-
--
-
(16)
Accrued income
822
-
-
-
-
-
822
Loans to related parties (included in other assets)
4,596
-
-
-
-
-
4,596
Other receivables (included in other assets)
2,577
-
-
-
-
-
2,577
Other assets (included in other assets)
2,012
-
-
-
-
-
2,012
883,674
13
14,153
16,660
-
914,500
Off-balance sheet at nominal amount
Commitments to extend credit, guarantees and other commitments
Nominal amount
257,446
7
3,496
24
-
260,973
Credit loss allowances
(69)
-
-
-
-
-
(69)
257,377
7
3,496
24
-
260,904
Annual Report and Financial Statements 2025
89
Bank
Performing
Under performing
Non-performing
Regular
Focus
Under surveillance
Doubtful
POCI
Total
As at 31 December 2024
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
64,616
-
-
-
-
64,616
Gross
64,617
-
-
-
-
64,617
Credit loss allowances
(1)
-
-
-
-
(1)
Loans and advances to financial institutions
37,074
-
-
-
-
37,074
Gross
37,075
-
-
-
-
37,075
Credit loss allowances
(1)
-
-
-
-
(1)
Loans and advances to customers
322,309
4,308
45,243
41,731
230
413,821
- International Corporate Lending portfolio
46,197
-
43,484
35,149
230
125,060
Gross
46,475
-
43,879
37,367
453
128,174
Credit loss allowances
(278)
-
(395)
(2,218)
(223)
(3,114)
- Maltese Business Lending portfolio
142,461
4,308
1,423
5,881
-
154,073
Gross
142,813
4,313
1,423
6,646
-
155,195
Credit loss allowances
(352)
(5)
-
(765)
-
(1,122)
- IFRS basis adjustment: Maltese Business Lending portfolio
686
-
-
-
-
686
- Maltese Mortgage portfolio
129,274
-
-
-
-
129,274
Gross
129,606
-
-
-
-
129,606
Credit loss allowances
(332)
-
-
-
-
(332)
- Consumer Finance receivables
3,691
-
336
701
-
4,728
Gross
3,701
-
339
764
-
4,804
Credit loss allowances
(10)
-
(3)
(63)
-
(76)
Investments measured at amortised cost
396,632
-
-
-
-
396,632
- Securities portfolio
262,219
-
-
-
-
262,219
Gross
262,259
-
-
-
-
262,259
Credit loss allowances
(40)
-
-
-
-
(40)
- Securitisation portfolio
120,714
-
-
-
-
120,714
Gross
120,726
-
-
-
-
120,726
Credit loss allowances
(12)
-
-
-
-
(12)
- Asset-Backed Securitisation portfolio
13,699
-
-
-
-
13,699
Gross
13,709
-
-
-
-
13,709
Credit loss allowances
(10)
-
-
-
-
(10)
Accrued income
481
-
-
-
-
481
Loans to related parties (included in other assets)
5,075
-
-
-
-
5,075
Other receivables (included in other assets)
1,326
-
-
-
-
1,326
Other assets (included in other assets)
2,057
-
-
-
-
2,057
829,570
4,308
45,243
41,731
230
921,082
Off-balance sheet at nominal amount
Commitments to extend credit, guarantees and other commitments
Nominal amount
223,596
67
1,913
880
-
226,456
Credit loss allowances
(99)
-
-
(58)
-
(157)
223,497
67
1,913
822
-
226,299
Annual Report and Financial Statements 2025
90
For securities within the Securities Investment, Securitisation Investment and Asset-Backed Securitisation Investment
portfolios, the Group’s credit quality classifications encompass a range of more granular external rating grades attributed
by external agencies to debt securities. The following table illustrates this information:
Measured at amortised cost
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Securities Investment portfolio
National and regional government securities, supranationals and agencies
· AAA
44,776
60,114
24,730
35,060
· AA+ to AA-
175,296
141,125
115,047
110,415
· A- to BBB-
10,524
65,521
-
15,073
Other securities
· AAA
327,764
331,941
71,586
69,085
· AA+ to AA-
87,410
100,165
30,059
32,586
· Not rated
244,631
-
25,092
-
890,401
698,866
266,514
262,219
Securitisation Investment portfolio
AAA
392,060
514,669
84,488
120,714
Asset-Backed Securitisation Investment portfolio
AAA
158,994
145,285
32,784
13,699
Total
1,441,455
1,358,820
383,786
396,632
These portfolios are also categorised under the five credit quality classifications used by the Group (i.e. regular, focus,
under surveillance, doubtful and write-off) and these ratings are determined by the Management Credit Committee.
As at 31 December 2025 and 2024, all the investments in the Securities Investment portfolio, Securitisation Investment
portfolio and Asset-Backed Securitisation Investment portfolio are classified as regular.
2.2.3 Detailed information on credit quality of financial assets
The following table provides an overview of the Group’s credit risk by stage and business segment, and the associated
ECL coverage.
Annual Report and Financial Statements 2025
91
Summary of credit risk (excluding financial instruments not subject to impairment requirements) by stage distribution and ECL coverage
Gross carrying/nominal amount
Credit loss allowance
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Group
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
%
%
%
%
%
As at 31 December 2025
On-balance sheet at amortised cost:
Balances with central banks
272,565
-
-
-
272,565
(2)
-
-
-
(2)
-
-
-
-
-
Loans and advances to financial institutions
329,005
-
-
-
329,005
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to customers
- International Corporate Lending portfolio
-
10,847
15,611
-
26,458
-
(351)
(4,603)
-
(4,954)
-
3.2
29.5
-
18.7
- Dutch Mortgage portfolio
2,249,782
14,697
1,618
-
2,266,097
(113)
(246)
(52)
-
(411)
-
1.7
3.2
-
-
- Belgian Mortgage portfolio
528,272
8,266
4,944
-
541,482
(388)
(83)
(527)
-
(998)
0.1
1.0
10.7
-
0.2
- IFRS basis adjustment: International Mortgage portfolio
(174,573)
-
-
-
(174,573)
-
-
-
-
-
-
-
-
-
-
- Maltese Business Lending portfolio
201,367
2,398
6,296
-
210,061
(356)
(13)
(756)
-
(1,125)
0.2
0.5
12.0
-
0.5
- IFRS basis adjustment: Maltese Business Lending portfolio
519
-
-
-
519
-
-
-
-
-
-
-
-
-
-
- Maltese Mortgage portfolio
151,429
142
136
-
151,707
(315)
(2)
(23)
-
(340)
0.2
1.4
16.9
-
0.2
- Consumer Finance receivables
8,351
1,150
1,539
-
11,040
(21)
(9)
(1,539)
-
(1,569)
0.3
0.8
100.0
-
14.2
Investments
- Securities portfolio
890,488
-
-
-
890,488
(87)
-
-
-
(87)
-
-
-
-
-
- Securitisation portfolio
392,099
-
-
-
392,099
(39)
-
-
-
(39)
-
-
-
-
-
- Asset-Backed Securitisation portfolio
159,093
-
-
-
159,093
(99)
-
-
-
(99)
0.1
-
-
-
0.1
Accrued income
2,670
-
-
-
2,670
-
-
-
-
-
-
-
-
-
-
Loans to related parties (included in other assets)
1,321
-
-
-
1,321
-
-
-
-
-
-
-
-
-
-
Other receivables (included in other assets)
2,769
-
-
-
2,769
-
-
-
-
-
-
-
-
-
-
Other assets (included in other assets)
34,728
-
-
-
34,728
-
-
-
-
-
-
-
-
-
-
Off-balance sheet at nominal amount:
Commitments to extend credit, financial guarantees
and other commitments
234,419
3,931
75
-
238,425
(111)
-
-
-
(111)
-
-
-
-
-
5,284,304
41,431
30,219
-
5,355,954
(1,532)
(704)
(7,500)
-
(9,736)
-
1.7
24.8
-
Annual Report and Financial Statements 2025
92
Gross carrying/nominal amount
Credit loss allowance
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Group
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
%
%
%
%
%
As at 31 December 2024
On-balance sheet at amortised cost:
Balances with central banks
206,870
-
-
-
206,870
(2)
-
-
-
(2)
-
-
-
-
-
Loans and advances to financial institutions
316,180
-
-
-
316,180
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to customers
- International Corporate Lending portfolio
109,320
52,350
59,243
453
221,366
(684)
(489)
(11,211)
(223)
(12,607
)
0.6
0.9
18.9
49.2
5.7
- Dutch Mortgage portfolio
2,200,239
5,205
763
-
2,206,2
07
(124)
(111)
(16)
-
(251)
-
2.1
2.1
-
-
- Belgian Mortgage portfolio
358,056
6,992
1,751
-
366,799
(284)
(86)
(184)
-
(554)
0.1
1.2
10.5
-
0.2
- IFRS basis adjustment: International Mortgage portfolio
(142,246)
-
-
-
(142,24
6)
-
-
-
-
-
-
-
-
-
-
- Maltese Business Lending portfolio
147,126
1,423
6,646
-
155,195
(357)
-
(765)
-
(1,122)
0.2
-
11.5
-
0.7
- IFRS basis adjustment: Maltese Business Lending portfolio
686
-
-
-
686
-
-
-
-
-
-
-
-
-
-
- Maltese Mortgage portfolio
129,606
-
-
-
129,606
(332)
-
-
-
(332)
0.3
-
-
-
0.3
- Consumer Finance receivables
3,701
339
764
-
4,804
(10)
(3)
(63)
-
(76)
0.3
0.9
8.2
-
1.6
Investments
- Securities portfolio
698,961
-
-
-
698,961
(95)
-
-
-
(95)
-
-
-
-
-
- Securitisation portfolio
514,720
-
-
-
514,720
(51)
-
-
-
(51)
-
-
-
-
-
- Asset-Backed Securitisation portfolio
145,380
-
-
-
145,380
(95)
-
-
-
(95)
0.1
-
-
-
0.1
Accrued income
1,454
-
-
-
1,454
-
-
-
-
-
-
-
-
-
-
Loans to related parties (included in other assets)
48
-
-
-
48
-
-
-
-
-
-
-
-
-
-
Other receivables (included in other assets)
1,501
-
-
-
1,501
-
-
-
-
-
-
-
-
-
-
Other assets (included in other assets)
23,334
-
-
-
23,334
-
-
-
-
-
-
-
-
-
-
Off-balance sheet at nominal amount:
Commitments to extend credit, financial guarantees and other
commitments
209,322
2,070
1,437
-
212,829
(185)
-
(93)
-
(278)
0.1
-
6.5
-
0.1
4,924,258
68,379
70,604
453
5,063,6
94
(2,220)
(689)
(12,332)
(223)
(15,464
)
-
1.0
17.5
49.2
Gross carrying/nominal amount
Credit loss allowance
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Bank
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
%
%
%
%
%
As at 31 December 2025
On-balance sheet at amortised cost:
Balances with central banks
74,594
-
-
-
74,594
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to financial institutions
54,328
-
-
-
54,328
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to customers
-
- International Corporate Lending portfolio
-
10,838
15,610
-
26,448
-
(351)
(4,603)
-
(4,954)
-
3.2
29.5
-
18.7
- Maltese Business Lending portfolio
201,367
2,398
6,296
-
210,061
(356)
(13)
(756)
-
(1,125)
0.2
0.5
12.0
-
0.5
- IFRS basis adjustment: Maltese Business Lending
portfolio
519
-
-
-
519
-
-
-
-
-
-
-
-
-
-
- Maltese Mortgage portfolio
151,429
142
136
-
151,707
(315)
(2)
(23)
-
(340)
0.2
1.4
16.9
-
0.2
- Consumer Finance receivables
8,351
1,150
1,539
-
11,040
(21)
(9)
(1,539)
-
(1,569)
0.3
0.8
100.0
-
14.2
Investments
- Securities portfolio
266,533
-
-
-
266,533
(19)
-
-
-
(19)
-
-
-
-
-
- Securitisation portfolio
84,496
-
-
-
84,496
(8)
-
-
-
(8)
-
-
-
-
-
- Asset-Backed Securitisation portfolio
32,800
-
-
-
32,800
(16)
-
-
-
(16)
-
-
-
-
-
Accrued income
822
-
-
-
822
-
-
-
-
-
-
-
-
-
-
Loans to related parties (included in other assets)
4,596
-
-
-
4,596
-
-
-
-
-
-
-
-
-
-
Other receivables (included in other assets)
2,577
-
-
-
2,577
-
-
-
-
-
-
-
-
-
-
Other assets (included in other assets)
2,012
-
-
-
2,012
-
-
-
-
-
-
-
-
-
-
Off-balance sheet at nominal amount:
Commitments to extend credit, financial guarantees
and other commitments
257,453
3,496
24
-
260,973
(69)
-
-
-
(69)
-
-
-
-
-
1,141,877
18,024
23,605
-
1,183,506
(806)
(375)
(6,921)
-
(8,102)
0.1
2.1
29.3
-
0.7
Annual Report and Financial Statements 2025
93
Gross carrying/nominal amount
Credit loss allowance
ECL coverage
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
Bank
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
%
%
%
%
%
As at 31 December 2024
On-balance sheet at amortised cost:
Balances with central banks
64,617
-
-
-
64,617
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to financial institutions
37,075
-
-
-
37,075
(1)
-
-
-
(1)
-
-
-
-
-
Loans and advances to customers
- International Corporate Lending portfolio
46,475
43,879
37,367
453
128,174
(278)
(395)
(2,218)
(223)
(3,114)
0.6
0.9
5.9
49.2
2.4
- Maltese Business Lending portfolio
147,126
1,423
6,646
-
155,195
(357)
-
(765)
-
(1,122)
0.2
-
11.5
-
0.7
- IFRS basis adjustment: Maltese Business Lending portfolio
686
-
-
-
686
-
-
-
-
-
-
-
-
-
-
- Maltese Mortgage portfolio
129,606
-
-
-
129,606
(332)
-
-
-
(332)
0.3
-
-
-
0.3
- Consumer Finance receivables
3,701
339
764
-
4,804
(10)
(3)
(63)
-
(76)
0.3
0.9
8.2
-
1.6
Investments
- Securities portfolio
262,259
-
-
-
262,259
(40)
-
-
-
(40)
-
-
-
-
-
- Securitisation portfolio
120,726
-
-
-
120,726
(12)
-
-
-
(12)
-
-
-
-
-
- Asset-Backed Securitisation portfolio
13,709
-
-
-
13,709
(10)
-
-
-
(10)
0.1
-
-
-
0.1
Accrued income
481
-
-
-
481
-
-
-
-
-
-
-
-
-
-
Loans to related parties (included in other assets)
5,075
-
-
-
5,075
-
-
-
-
-
-
-
-
-
-
Other receivables (included in other assets)
1,326
-
-
-
1,326
-
-
-
-
-
-
-
-
-
-
Other assets (included in other assets)
2,057
-
-
-
2,057
-
-
-
-
-
-
-
-
-
-
Off-balance sheet at nominal amount:
Commitments to extend credit, financial guarantees and other
commitments
223,663
1,913
880
-
226,456
(99)
-
(58)
-
(157)
-
-
6.6
-
0.1
1,058,582
47,554
45,657
453
1,152,246
(1,140)
(398)
(3,104)
(223)
(4,865)
0.1
0.8
6.8
49.2
0.4
|me> direct Annual Report and Financial Statements 2025
94
An exposure is “past due” when any amount of principal, interest or fee has not been paid on the date it was due. Past
due but not credit-impaired loans are those loans and advances for which contractual interest or principal payments are
past due but do not meet the Group’s criteria for “credit impaired” as outlined in the Three stage expected credit loss
(ECL) approach.
MeDirect Malta and MeDirect Belgium do not have any exposures forming part of the International Corporate Lending,
Securities Investment, Securitisation Investment and Asset-Backed Securitisation Investment portfolios which are past
due but not credit impaired. Past due but not credit-impaired facilities are attributable to the Maltese Business Lending
portfolio, representing exposures to counterparties domiciled in Malta and concentrated within the real estate and
construction sector, the Dutch Mortgage portfolio, representing residential mortgage exposures to households and
individuals domiciled in the Netherlands, the Belgian Mortgage portfolio, representing residential mortgage exposures to
households and individuals domiciled in Belgium, a small portfolio of professional lending exposures held for rental
purposes and the Maltese Mortgage portfolio, representing home loans granted to Malta individuals and the Consumer
Finance receivables, representing consumer lending to retail customers resident in Malta.
Unless identified at an earlier stage, all financial assets are deemed to have experienced a significant increase in credit
risk when they are more than 30 days past due. As at 31 December 2025 and 2024, no exposures within the Securities
Investment, Securitisation Investment and Asset-Backed Securitisation Investment portfolios were classified as Stage 2.
None of the Stage 2 exposures within the International Corporate Lending portfolio were past due as at 31 December
2025 and 2024.
In this regard, the following disclosure only presents the ageing of Stage 2 financial assets in the Maltese Business
Lending, Consumer Finance receivables and Dutch, Belgian and Maltese Mortgage portfolios. It distinguishes between
those assets that are classified as Stage 2 when they are either not past due or up to 30 days past due from those that
are classified as Stage 2 due to ageing and are more than 30 days past due (>30 DPD). Past due financial instruments
are those loans where customers have failed to make payments in accordance with the contractual terms of their facilities.
As at 31 December 2025, Stage 1 exposures with a gross carrying amount of €3.1 million (2024: €4.7 million) and €15.5
million (2024: €3.5 million) classified within the Dutch Mortgage and Belgian Mortgage portfolios were classified as past
due but not credit-impaired.
Gross exposure | Credit loss allowance | |||||
Stage 2 | Of which up to 30 DPD | Of which more than 30 DPD | Stage 2 | Of which up to 30 DPD | Of which more than 30 DPD | |
Group | €000 | €000 | €000 | €000 | €000 | €000 |
As at 31 December 2025 | ||||||
Dutch Mortgage portfolio | ||||||
- Loans and advances to customers | 14,697 | 8,853 | 5,844 | (246) | (5) | (241) |
Belgian Mortgage portfolio | ||||||
- Loans and advances to customers | 8,266 | 2,709 | 5,557 | (83) | (25) | (58) |
Maltese Business Lending portfolio | ||||||
- Loans and advances to customers | 2,398 | 2,398 | - | (13) | (13) | - |
Maltese Mortgage portfolio | ||||||
- Loans and advances to customers | 142 | - | 142 | (2) | - | (2) |
Consumer Finance receivables | ||||||
- Loans and advances to customers | 1,150 | 501 | 649 | (9) | (4) | (5) |
26,653 | 14,461 | 12,192 | (353) | (47) | (306) |
|me> direct Annual Report and Financial Statements 2025
95
Credit loss allowance
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Group
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Dutch Mortgage portfolio
- Loans and advances to customers
5,205
3,370
1,835
(111)
(2)
(109)
Belgian Mortgage portfolio
- Loans and advances to customers
6,992
3,048
3,944
(86)
(40)
(46)
Maltese Business Lending portfolio
- Loans and advances to customers
1,423
1,423
-
-
-
-
Consumer Finance receivables
- Loans and advances to customers
339
-
339
(3)
-
(3)
13,959
7,841
6,118
(200)
(42)
(158)
Gross exposure
Credit loss allowance
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Bank
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Maltese Business Lending portfolio
- Loans and advances to customers
2,398
2,398
-
(13)
(13)
-
Maltese Mortgage portfolio
- Loans and advances to customers
142
-
142
(2)
(2)
Consumer Finance receivables
- Loans and advances to customers
1,150
501
649
(9)
(4)
(5)
3,690
2,899
791
(24)
(17)
(7)
Gross exposure
Credit loss allowance
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Stage 2
Of which up
to 30 DPD
Of which more
than 30 DPD
Bank
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Maltese Business Lending portfolio
- Loans and advances to customers
1,423
1,423
-
-
-
-
Consumer Finance receivables
- Loans and advances to customers
339
-
339
(3)
-
(3)
1,762
1,423
339
(3)
-
(3)
|me> direct Annual Report and Financial Statements 2025
96
Distribution of financial instruments to which the impairment requirements in IFRS 9 are applied, by credit quality and
stage distribution
Gross carrying amount/nominal amount
Group
Regular
Focus
Under
surveillance
Doubtful
POCI
Total
Credit loss
allowance
Net
As at 31 December 2025
€000
€000
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
272,565
-
-
-
-
-
-
-
-
272,565
(2)
272,563
Loans and advances to financial institutions
329,005
-
-
-
-
-
-
-
-
329,005
(1)
329,004
Loans and advances to customers
- International Corporate Lending portfolio
- Stage 2
-
-
-
-
10,847
-
-
-
-
10,847
(351)
10,496
- Stage 3
-
-
-
-
-
-
15,611
-
-
15,611
(4,603)
11,008
- Dutch Mortgage portfolio
- Stage 1
2,246,681
3,101
-
-
-
-
-
-
2,249,782
(113)
2,249,669
- Stage 2
-
-
-
-
14,697
-
-
14,697
(246)
14,451
- Stage 3
-
-
-
--
-
-
1,618
-
-
1,618
(52)
1,566
- Belgian Mortgage portfolio
- Stage 1
512,779
15,493
-
-
-
-
-
-
528,272
(388)
527,884
- Stage 2
-
-
-
-
8,266
-
-
-
-
8,266
(83)
8,183
- Stage 3
-
-
-
-
-
-
4,944
-
-
4,944
(527)
4,417
- IFRS basis adjustment: International
Mortgage portfolio
(174,573)
-
-
-
-
(174,573)
-
(174,573)
- Maltese Business Lending portfolio
- Stage 1
201,354
13
-
-
-
-
-
-
201,367
(356)
201,011
- Stage 2
-
-
-
-
2,398
-
-
-
-
2,398
(13)
2,385
- Stage 3
-
-
-
-
-
-
6,296
-
-
6,296
(756)
5,540
- IFRS basis adjustment: Maltese Business
Lending portfolio
519
-
-
-
-
519
-
519
- Maltese Mortgage portfolio
- Stage 1
151,429
-
-
-
-
-
-
-
-
151,429
(315)
151,114
- Stage 2
-
-
142
-
-
142
(2)
140
- Stage 3
-
-
-
136
-
136
(23)
113
- Consumer Finance receivables
- Stage 1
8,351
-
-
-
-
-
-
-
-
8,351
(21)
8,330
- Stage 2
-
-
-
-
1,150
-
-
-
-
1,150
(9)
1,141
- Stage 3
-
--
-
-
-
-
1,539
-
-
1,539
(1,539)
-
Investments measured at amortised cost
- Securities portfolio
- Stage 1
890,488
-
-
-
-
-
-
-
-
890,488
(87)
890,401
- Securitisation portfolio
- Stage 1
392,099
-
-
-
-
-
-
-
-
392,099
(39)
392,060
- Asset-Backed Securitisation portfolio
- Stage 1
159,093
-
-
-
-
-
-
-
-
159,093
(99)
158,994
Accrued income
- Stage 1
2,670
-
-
-
-
-
-
-
-
2,670
-
-
2,670
Loans to related parties
(included in other assets)
- Stage 1
1,321
-
-
-
-
-
-
-
-
1,321
-
-
1,321
Other receivables (included in other assets)
- Stage 1
2,769
-
-
-
-
-
-
-
-
2,769
-
-
2,769
Other assets (included in other assets)
- Stage 1
34,728
-
-
-
-
-
-
-
-
34,728
--
34,728
Off-balance sheet at nominal amount:
Commitments to extend credit, financial
guarantees and other commitments
- Stage 1
234,412
7
-
-
-
--
-
-
234,419
(111)
234,308
- Stage 2
-
-
-
-
3,931
-
-
-
-
3,931
-
3,931
- Stage 3
-
-
-
-
-
--
75
-
-
75
-
75
5,265,690
18,614
41,431
30,219
-
-
5,355,954
(9,736)
5,346,218
|me> direct Annual Report and Financial Statements 2025
97
Gross carrying amount/nominal amount
Group
Regular
Focus
Under
surveillance
Doubtful
POCI
Total
Credit loss
allowance
Net
As at 31 December 2024
€000
€000
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
206,870
-
-
-
-
-
-
-
-
206,870
(2)
206,868
Loans and advances to financial institutions
316,180
-
--
-
-
-
-
-
-
316,180
(1)
316,179
Loans and advances to customers
- International Corporate Lending portfolio
- Stage 1
109,320
-
--
-
-
-
-
-
-
109,320
(684)
108,636
- Stage 2
-
-
-
-
52,350
-
-
-
-
52,350
(489)
51,861
- Stage 3
-
-
-
-
-
-
59,243
-
-
59,243
(11,211)
48,032
- POCI
-
--
-
-
-
-
-
-
453
453
(223)
230
- Dutch Mortgage portfolio
- Stage 1
2,195,523
4,716
-
-
-
-
-
-
2,200,239
(124)
2,200,115
- Stage 2
-
-
-
-
5,205
-
-
-
-
5,205
(111)
5,094
- Stage 3
-
-
-
-
-
-
763
-
-
763
(16)
747
- Belgian Mortgage portfolio
- Stage 1
354,567
3,489
-
-
-
-
-
-
358,056
(284)
357,772
- Stage 2
-
-
-
-
6,992
-
-
-
-
6,992
(86)
6,906
- Stage 3
-
-
-
-
-
-
1,751
-
-
1,751
(184)
1,567
- IFRS basis adjustment: International
Mortgage portfolio
(142,246)
-
-
-
-
-
-
-
-
(142,246)
-
-
(142,246)
- Maltese Business Lending portfolio
- Stage 1
142,813
4,313
-
-
-
-
-
-
147,126
(357)
146,769
- Stage 2
-
-
-
-
1,423
-
-
-
-
1,423
-
-
1,423
- Stage 3
-
-
-
6,646
-
6,646
(765)
5,881
- IFRS basis adjustment: Maltese Business
Lending portfolio
686
-
-
-
-
686
-
686
- Maltese Mortgage portfolio
- Stage 1
129,606
-
--
-
-
-
-
-
-
129,606
(332)
129,274
- Consumer Finance receivables
- Stage 1
3,701
-
--
-
-
-
-
-
-
3,701
(10)
3,691
- Stage 2
-
-
-
-
339
-
-
-
-
339
(3)
336
- Stage 3
-
-
-
-
-
---
764
-
-
764
(63)
701
Investments measured at amortised cost
- Securities portfolio
- Stage 1
698,961
-
--
-
-
-
-
-
-
698,961
(95)
698,866
- Securitisation portfolio
- Stage 1
514,720
-
--
-
-
-
-
-
-
514,720
(51)
514,669
- Asset-Backed Securitisation portfolio
- Stage 1
145,380
-
--
-
-
-
-
-
-
145,380
(95)
145,285
Accrued income
- Stage 1
1,454
-
--
-
-
-
-
-
-
1,454
-
-
1,454
Loans to related parties (included in other
assets)
- Stage 1
48
-
--
-
-
-
-
-
-
48
-
-
48
Other receivables
(included in other assets)
- Stage 1
1,501
-
--
-
-
-
-
-
-
1,501
-
-
1,501
Other assets (included in other assets)
- Stage 1
23,334
-
--
-
-
-
-
-
-
23,334
-
-
23,334
Off-balance sheet at nominal amount:
Commitments to extend credit, financial
guarantees and other commitments
- Stage 1
208,879
443
-
-
-
-
-
-
209,322
(185)
209,137
- Stage 2
-
-
-
-
2,070
-
-
-
-
2,070
-
-
2,070
- Stage 3
-
-
-
-
-
-
1,437
-
-
1,437
(93)
1,344
4,911,297
12,961
68,379
70,604
453
5,063,694
(15,464)
|me> direct Annual Report and Financial Statements 2025
98
Gross carrying amount/nominal amount
Bank
Regular
Focus
Under
surveillance
Doubtful
POCI
Total
Credit loss
allowance
Net
As at 31 December 2025
€000
€000
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
74,594
-
-
-
-
-
-
-
-
74,594
(1)
74,593
Loans and advances to financial institutions
54,328
-
-
-
-
-
-
-
-
54,328
(1)
54,327
Loans and advances to customers
- International Corporate Lending portfolio
- Stage 2
-
-
-
-
10,838
-
--
-
-
10,838
(351)
10,487
- Stage 3
-
-
-
-
-
-
15,610
-
-
15,610
(4,603)
11,007
- Maltese Business Lending portfolio
- Stage 1
201,354
13
-
-
-
-
-
-
201,367
(356)
201,011
- Stage 2
-
-
-
-
2,398
-
-
-
-
2,398
(13)
2,385
- Stage 3
-
-
-
-
-
-
6,296
-
-
6,296
(756)
5,540
- IFRS basis adjustment: Maltese Business
Lending portfolio
519
-
-
-
-
519
-
519
- Maltese Mortgage portfolio
- Stage 1
151,429
-
-
-
-
-
-
-
-
151,429
(315)
151,114
- Stage 2
-
-
-
-
142
-
-
-
-
142
(2)
140
- Stage 3
-
-
-
--
-
-
136
--
136
(23)
113
- Consumer Finance receivables
- Stage 1
8,351
-
-
-
-
-
-
-
-
8,351
(21)
8,330
- Stage 2
-
-
-
-
1,150
-
-
-
-
1,150
(9)
1,141
- Stage 3
-
-
-
-
-
-
1,539
-
-
1,539
(1,539)
-
Investments measured at amortised cost
- Securities portfolio
- Stage 1
266,533
-
-
-
-
-
-
-
-
266,533
(19)
266,514
- Securitisation portfolio
- Stage 1
84,496
-
-
-
-
-
-
-
-
84,496
(8)
84,488
- Asset-Backed Securitisation portfolio
- Stage 1
32,800
-
-
-
-
-
-
-
-
32,800
(16)
32,784
Accrued income
- Stage 1
822
-
-
-
-
-
-
-
-
822
-
-
822
Loans to related parties
(included in other assets)
- Stage 1
4,596
-
-
-
-
-
-
-
-
4,596
-
-
4,596
Other receivables
(included in other assets)
- Stage 1
2,577
-
-
-
-
-
-
-
-
2,577
-
--
2,577
Other assets (included in other assets)
- Stage 1
2,012
-
-
-
-
-
-
-
-
2,012
-
-
2,012
Off-balance sheet at nominal amount:
Commitments to extend credit, financial
guarantees and other commitments
- Stage 1
257,446
7
-
-
-
-
-
--
257,453
(69)
257,384
- Stage 2
-
-
-
-
3,496
-
-
-
-
3,496
-
3,496
- Stage 3
-
-
-
-
-
--
24
-
-
24
-
-
24
1,141,857
20
18,024
23,605
-
-
1,183,506
(8,102)
1,175,404
|me> direct Annual Report and Financial Statements 2025
99
Gross carrying amount/nominal amount
Bank
Regular
Focus
Under
surveillance
Doubtful
POCI
Total
Credit loss
allowance
Net
As at 31 December 2024
€000
€000
€000
€000
€000
€000
€000
€000
On-balance sheet at amortised cost:
Balances with central banks
64,617
-
-
-
-
-
-
-
-
64,617
(1)
64,616
Loans and advances to financial institutions
37,075
-
-
-
-
-
-
-
-
37,075
(1)
37,074
Loans and advances to customers
- International Corporate Lending portfolio
- Stage 1
46,475
-
-
-
-
-
-
-
-
46,475
(278)
46,197
- Stage 2
-
-
-
-
43,879
-
-
-
-
43,879
(395)
43,484
- Stage 3
-
-
-
-
-
-
37,367
-
-
37,367
(2,218)
35,149
- POCI
-
-
-
-
-
--
-
-
453
453
(223)
230
- Maltese Business Lending portfolio
- Stage 1
142,813
4,313
-
-
-
-
-
-
147,126
(357)
146,769
- Stage 2
-
-
-
-
1,423
-
-
-
-
1,423
-
-
1,423
- Stage 3
-
-
-
6,646
-
6,646
(765)
5,881
- IFRS basis adjustment: Maltese
Business Lending portfolio
686
-
-
-
-
686
-
686
- Maltese Mortgage portfolio
- Stage 1
129,606
-
-
-
-
-
-
-
-
129,606
(332)
129,274
- Consumer Finance receivables
- Stage 1
3,701
-
-
-
-
-
-
-
-
3,701
(10)
3,691
- Stage 2
-
-
-
-
339
-
-
-
-
339
(3)
336
- Stage 3
-
-
-
-
-
-
764
-
-
764
(63)
701
Investments measured at amortised cost
- Securities portfolio
- Stage 1
262,259
-
-
-
-
-
-
-
-
262,259
(40)
262,219
- Securitisation portfolio
- Stage 1
120,726
-
-
-
-
-
-
-
-
120,726
(12)
120,714
- Asset-Backed Securitisation portfolio
- Stage 1
13,709
-
-
-
-
-
-
-
-
13,709
(10)
13,699
Accrued income
- Stage 1
481
-
-
-
-
-
-
-
-
481
-
-
481
Loans to related parties
(included in other assets)
- Stage 1
5,075
-
-
-
-
-
-
-
-
5,075
-
-
5,075
Other receivables
(included in other assets)
- Stage 1
1,326
-
-
-
-
-
-
-
-
1,326
-
-
1,326
Other assets (included in other assets)
- Stage 1
2,057
-
-
-
-
-
-
-
-
2,057
-
-
2,057
Off-balance sheet at nominal amount:
Commitments to extend credit, financial
guarantees and other commitments
- Stage 1
223,596
67
-
-
-
-
-
-
223,663
(99)
223,564
- Stage 2
-
-
-
-
1,913
-
-
-
-
1,913
-
-
1,913
- Stage 3
-
-
-
-
-
-
880
-
-
880
(58)
822
1,054,202
4,380
47,554
45,657
453
1,152,246
(4,865)
1,147,381
|me> direct Annual Report and Financial Statements 2025
100
Reconciliation of changes in gross carrying/nominal amount and credit loss allowances for loans and advances to
customers, including accrued income, and other credit-related commitments
The following disclosure provides a reconciliation by stage of the Group’s gross carrying/nominal amounts and credit loss
allowances for loans and advances to customers for the International Corporate Lending portfolio, including credit-related
commitments. On-balance sheet exposures are shown at their gross carrying amounts whereas off-balance sheet
exposures are shown at their nominal amounts.
Within the following tables the line items “New business” and “Repayments and disposals” represent movements within
the Group’s International Corporate Lending portfolio in respect of gross carrying/nominal amounts and associated credit
loss allowances. “New business” represents new lending sanctioned during the financial year. Meanwhile, “Repayments
and disposals” reflect loan repayments and disposals that occurred during the financial year, which however relate to
loans that would only have existed on the Group’s balance sheet as at the end of the preceding financial reporting period.
Accordingly, repayments and disposals relating to loans sanctioned during the financial reporting period are netted off
against new lending included within “New business”.
The line item “Transfers of financial instruments” represents the impact of stage transfers on gross carrying/nominal
amounts and associated credit loss allowances determined as at the end of the financial reporting period. The line item
“Net remeasurement of ECL arising from stage transfers and changes in risk parameters, including climate risk”
represents the increase or decrease in credit loss allowances due to modified measurement basis from 12-month to
lifetime in relation to stage transfers. It also includes the effects of changes in other expected credit loss measurement
factors and model parameters such as, but not limited to, changes in time to maturity of assets; changes in underlying
credit ratings; changes in measurement of loss given default and changes in respect of multiple economic scenarios.
Finally, this line item also comprises the increase in ECL in respect of assets written off during the period measured as the
movement between 1 January and the date of write-off.
The decrease in credit loss allowances in the financial year ended 31 December 2025 was principally driven by the run off
of the International Corporate Lending portfolio leading to a decrease in ECLs of €7.8 million. Also, the expected credit
loss allowances decreased as a result of the disposal of Stage 3 loans and the realisation of ECLs on Stage 3 loans by
way of write-off amounting to €8.8 million as disclosed in the line item “Assets written off”.
The decrease in credit loss allowances in the financial year ended 31 December 2024 was principally driven by the
general improvement in financial condition experienced by borrowers within the portfolio, leading to significant repayments
and in turn a decrease in ECLs of €0.3 million. Also, the expected credit loss allowances decreased as a result of the
disposal of Stage 3 loans and the realisation of ECLs on Stage 3 loans by way of write-off amounting to €18.5 million as
disclosed in the line item “Assets written off”.
As per the following table, as at 31 December 2024, net exposures amounting to €78.2 million were transferred out of
Stage 1 into Stages 2 or 3 during the year, with net transfers to Stage 3 amounting to €46.7 million. The net
remeasurement of ECLs reflects the decrease in PDs and LGDs driven by point-in-time economic adjustments and more
pessimistic forward-looking macroeconomic scenarios being forecasted in the modelling of ECLs. As explained in more
detail in Note 2.2.7 – ‘Current Conditions and Forward-looking information incorporated in the ECL model’, the Group
|me> direct Annual Report and Financial Statements 2025
101
The following table provides a reconciliation of movements in gross carrying/nominal amounts and credit loss allowances,
by stage, for the International Corporate Lending portfolio, followed by an analysis of the gross carrying/nominal amount
and credit loss allowances as at 31 December 2025 and the ECL movement throughout the financial year.
Group
Non credit-impaired
Credit-impaired
Total
Stage 1
Stage 2
Stage 3
POCI
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit
loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Year ended 31 December 2025
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
International Corporate Lending
portfolio
At beginning of year
124,687
(753)
52,350
(489)
60,260
(11,276)
453
(223)
237,750
(12,741)
Repayments and disposals
(109,255)
685
(52,350)
489
(23,124)
1,432
-
-
-
-
(184,729)
2,606
Transfers of financial instruments
- Transfers from Stage 3
-
-
-
-
10,853
(267)
(10,853)
267
-
-
-
-
-
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters, including climate risk
-
43
-
(84)
-
(3,272)
-
-
-
(3,313)
Realisation of ECL through restructuring
and disposals
-
-
-
-
(8,246)
8,246
(453)
223
(8,699)
8,469
Other
(1,815)
-
-
(6)
-
-
(2,426)
-
-
-
-
-
-
(4,247)
-
At end of year
13,617
(25)
10,847
(351)
15,611
(4,603)
-
-
-
-
40,075
(4,979)
ECL released for the year
7,762
Assets written off
(8,792)
Other
(109)
-
Change in expected credit losses and other credit impairment charges for the year
(1,139)
Group
As at 31 December 2025
Year ended 31
December 2025
Gross carrying/ nominal
amount
Credit loss
allowance
ECL (charge)/release
€000
€000
€000
As per preceding table
40,075
(4,979)
(1,139)
Balances at central banks
272,565
(2)
-
Loans and advances to financial institutions
329,005
(1)
-
Loans and advances to customers
- Dutch Mortgage portfolio: drawn exposures
2,266,097
(411)
(160)
- Dutch Mortgage portfolio: undrawn commitments
21,643
(4)
-
- Belgian Mortgage portfolio: drawn exposures
541,482
(998)
(443)
- Belgian Mortgage portfolio: undrawn commitments
12,192
(13)
-
- Maltese Business Lending portfolio: drawn exposures
210,061
(1,125)
(300)
- Maltese Business Lending portfolio: undrawn commitments
142,962
(5)
-
- Maltese Mortgage portfolio: drawn exposures
151,707
(340)
(9)
- Maltese Mortgage portfolio: undrawn commitments
27,198
(64)
(12)
- Consumer Finance receivables: drawn exposures
11,040
(1,569)
(800)
- Consumer Finance receivables: undrawn commitments
1,398
-
-
Investments measured at amortised cost
- Securities portfolio
890,488
(87)
9
- Securitisation portfolio
392,099
(39)
12
- Asset-Backed Securitisation portfolio
159,093
(99)
(4)
Summary of financial instruments to which the impairment
requirements in IFRS 9 are applied through profit or loss
5,469,105
(9,736)
(2,846)
Total credit loss allowance/total income statement ECL charge for the year
(9,736)
|me> direct Annual Report and Financial Statements 2025
102
Bank
Non credit-impaired
Credit-impaired
Total
Stage 1
Stage 2
Stage 3
POCI
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit
loss
allowance
Gross
carrying/
nominal
amount
Credit
loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Year ended 31 December 2025
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
International Corporate Lending portfolio
At beginning of year
46,475
(278)
43,879
(395)
37,827
(2,248)
453
(223)
128,634
(3,144)
Repayments and disposals
(46,475)
278
(43,879)
395
(11,299)
650
-
-
(101,653)
1,323
Transfers of financial instruments
-
-
- Transfers from Stage 3
-
-
10,853
(267)
(10,853)
267
-
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters, including climate risk
-
-
-
(84)
-
(3,272)
-
-
-
(3,356)
Realisation of ECL through restructuring
and disposals
-
-
-
-
-
-
(453)
223
(453)
223
Other
-
-
(15)
-
(65)
-
-
-
(80)
-
At end of year
-
-
10,838
(351)
15,610
(4,603)
-
-
26,448
(4,954)
ECL charged for the year
(1,810)
Recoveries
24
Other
(63)
Change in expected credit losses and other credit impairment charges for the year
(1,849)
Bank
As at 31 December 2025
Year ended 31
December 2025
Gross carrying/
nominal amount
Credit loss
allowance
ECL (charge)/release
€000
€000
€000
As per preceding table
26,448
(4,954)
(1,849)
Balances at central banks
74,594
(1)
-
Loans and advances to financial institutions
54,328
(1)
-
Loans and advances to customers
- Maltese Business Lending portfolio: drawn exposures
210,061
(1,125)
(300)
- Maltese Business Lending portfolio: undrawn commitments
142,962
(5)
-
- Maltese Mortgage portfolio: drawn exposures
151,707
(340)
(9)
- Maltese Mortgage portfolio: undrawn commitments
27,198
(64)
(12)
- Consumer Finance receivables: drawn exposures
11,040
(1,569)
(800)
- Consumer Finance receivables: undrawn commitments
1,398
-
-
Investments measured at amortised cost
- Securities portfolio
266,533
(19)
21
- Securitisation portfolio
84,496
(8)
4
- Asset-Backed Securitisation portfolio
32,800
(16)
(6)
Summary of financial instruments to which the impairment
requirements in IFRS are applied through profit or loss
1,083,565
(8,102)
(2,951)
Total credit loss allowance/total income statement ECL charge for the year
(8,102)
(2,951)
Expected credit losses measured in respect of exposures within the Maltese Business Lending portfolio resulted in an
increase from €1.12 million to €1.13 million during the year (2024: an increase from €0.56 million to €1.12 million). The
Group’s credit risk is mitigated through the maintenance of adequate levels of collateralisation, typically by charges on
real estate properties. In this regard, movements in expected credit losses were largely driven by model and risk
parameter changes, primarily due to the economic recovery during the year, improving macroeconomic scenarios as well
as net book movements that were more than offset by deterioration in performance of certain borrowers as well as stage
transfers during the year.
The table also includes the credit loss allowances attributable to the Dutch Mortgage portfolio backed by the NHG
guarantee scheme, the Belgian Mortgage portfolio and the Maltese Mortgage portfolio, the credit loss allowances
attributable to the Securitisation Investment portfolio (acquired portions in CLO transactions managed by third party
entities), Securities Investment portfolio and Asset-Backed Securitisation Investment portfolio, included within
“Investments measured at amortised cost”. The ECL charge for the Group in respect of these portfolios is not considered
|me> direct Annual Report and Financial Statements 2025
103
The following table provides a reconciliation of movements in gross carrying/nominal amounts and credit loss allowances,
by stage, for the International Corporate Lending portfolio, followed by an analysis of the gross carrying/nominal amount
and credit loss allowances as at 31 December 2024 and the ECL movement throughout the financial year.
Group
Non credit-impaired
Credit-impaired
Total
Stage 1
Stage 2
Stage 3
POCI
Gross
carrying/
nominal
amount
Credit
loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit
loss
allowance
Year ended 31 December 2024
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
International Corporate Lending portfolio
At beginning of year
303,411
(2,774)
21,459
(711)
56,082
(9,325)
426
(212)
381,378
(13,022)
New business
19,621
(103)
-
-
-
-
-
-
-
-
--
-
-
19,621
(103)
Repayments and disposals
(121,070)
998
(11)
-
(42,232)
7,571
-
-
-
-
(163,313)
8,569
Transfers of financial instruments
- Transfers from Stage 1 to Stage 2
(52,952)
542
52,952
(542)
-
-
-
-
-
-
-
-
-
-
-
-
- Transfers to Stage 3
(25,295)
265
(21,448)
711
46,743
(976)
-
-
-
-
-
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters, including climate risk
-
319
-
53
-
(9,893)
-
(11)
-
(9,532)
Realisation of ECL through restructuring
and disposals
-
-
-
-
(1,347)
1,347
-
-
(1,347)
1,347
Other
972
-
-
(602)
-
-
1,014
-
-
27
-
-
1,411
-
-
At end of year
124,687
(753)
52,350
(489)
60,260
(11,276)
453
(223)
237,750
(12,741)
ECL released for the year
281
Assets written off
(18,497)
Other
31
Change in expected credit losses and other credit impairment charges for the year
(18,185)
Group
As at 31 December 2024
Year ended 31 December
2024
Gross carrying/ nominal
amount
Credit loss
allowance
ECL (charge)/release
€000
€000
€000
As per preceding table
237,750
(12,741)
(18,185)
Balances at central banks
206,870
(2)
-
Loans and advances to financial institutions
316,180
(1)
-
Loans and advances to customers
- Dutch Mortgage portfolio: drawn exposures
2,206,207
(251)
34
- Dutch Mortgage portfolio: undrawn commitments
32,446
(3)
-
- Belgian Mortgage portfolio: drawn exposures
366,799
(554)
(201)
- Belgian Mortgage portfolio: undrawn commitments
8,004
(14)
1
- Maltese Business Lending portfolio: drawn exposures
155,195
(1,122)
(835)
- Maltese Business Lending portfolio: undrawn commitments
103,521
(75)
-
- Maltese Mortgage portfolio: drawn exposures
129,606
(332)
47
- Maltese Mortgage portfolio: undrawn commitments
27,181
(52)
(52)
- Consumer Finance receivables: drawn exposures
4,804
(76)
(148)
- Consumer Finance receivables: undrawn commitments
1,090
-
-
Investments measured at amortised cost
- Securities portfolio
698,961
(95)
(29)
- Securitisation portfolio
514,720
(51)
131
- Asset-Backed Securitisation portfolio
145,380
(95)
(95)
Summary of financial instruments to which the impairment
requirements in IFRS 9 are applied through profit or loss
5,154,714
(15,464)
(19,332)
Total credit loss allowance/total income statement ECL charge for the year
(15,464)
|me> direct Annual Report and Financial Statements 2025
104
Bank
Non credit-impaired
Credit-impaired
Total
Stage 1
Stage 2
Stage 3
POCI
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Gross
carrying/
nominal
amount
Credit loss
allowance
Year ended 31 December 2024
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
International Corporate Lending portfolio
At beginning of year
139,383
(1,268)
9,716
(322)
53,105
(9,040)
426
(212)
202,630
(10,842)
New business
19,618
(103)
-
-
-
-
-
-
-
-
-
-
-
-
19,618
(103)
Repayments and disposals
(53,007)
343
(10)
-
-
(40,290)
8,294
-
-
-
-
(93,307)
8,637
Transfers of financial instruments
-
-
- Transfers from Stage 1 to Stage 2
(44,307)
500
44,307
(500)
-
-
-
-
-
-
-
-
-
-
-
-
- Transfers to Stage 3
(15,238)
181
(9,706)
322
24,944
(503)
-
-
-
-
-
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters, including climate risk
-
69
-
105
-
(1,338)
-
(11)
-
(1,175)
Realisation of ECL through restructuring and
disposals
-
-
-
-
(339)
339
-
-
(339)
339
Other
26
-
(428)
-
-
407
-
-
27
-
-
32
-
-
At end of year
46,475
(278)
43,879
(395)
37,827
(2,248)
453
(223)
128,634
(3,144)
ECL released for the year
7,698
Assets written off
(15,432)
Other
33
Change in expected credit losses and other credit impairment charges for the year
(7,701)
Bank
As at 31 December 2024
Year ended 31
December 2024
Gross
carrying/nominal
amount
Credit
loss
allowance
ECL (charge)/release
€000
€000
€000
As per preceding table
128,634
(3,144)
(7,701)
Balances at central banks
64,617
(1)
-
Loans and advances to financial institutions
37,075
(1)
-
Loans and advances to customers
- Maltese Business Lending portfolio: drawn exposures
155,195
(1,122)
(835)
- Maltese Business Lending portfolio: undrawn commitments
103,521
(75)
-
- Maltese Mortgage portfolio: drawn exposures
129,606
(332)
47
- Maltese Mortgage portfolio: undrawn commitments
27,181
(52)
(52)
- Consumer Finance receivables: drawn exposures
4,804
(76)
(148)
- Consumer Finance receivables: undrawn commitments
1,090
-
-
Investments measured at amortised cost
- Securities portfolio
262,259
(40)
(6)
- Securitisation portfolio
120,726
(12)
125
- Asset-Backed Securitisation portfolio
13,709
(10)
(10)
Summary of financial instruments to which the impairment
requirements in IFRS 9 are applied through profit or loss
1,048,417
(4,865)
(8,580)
Total credit loss allowance/total income statement ECL charge for the year
(4,865)
(8,580)
2.2.4 Loans and advances to customers with renegotiated terms and the Group’s forbearance policy
The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer
retention and other factors not related to a current or potential credit deterioration of the customer. An existing loan whose
terms have been modified would be derecognised in certain circumstances and the renegotiated loan recognised as a
new loan at fair value.
|me> direct Annual Report and Financial Statements 2025
105
Forbearance measures consist of concessions towards a debtor facing or about to face difficulties in meeting its financial
commitments (“financial difficulties”).
The Group renegotiates loans to customers in financial difficulties (referred to as “forbearance activities”) to maximise
collection opportunities and minimise the risk of default. Under the Group’s forbearance policy, loan forbearance is
granted on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is
evidence that the debtor made all reasonable efforts to pay under the original contractual terms and the debtor is
expected to be able to meet the revised terms.
A concession is defined in the European Banking Authority (“EBA”) final draft Implementing Technical Standards (2014)
and further set out in the EBA final guidance on Management of Non-performing and Forborne Exposures (2018), which
refer to either of the following actions:
- a modification of the previous terms and conditions of a contract which the debtor was considered unable to
comply with due to its financial difficulties (“troubled debt”) to allow for sufficient debt service ability, that would
not have been granted had the debtor not been in financial difficulties; or
- a total or partial refinancing of a troubled debt contract, that would not have been granted had the debtor not
been in financial difficulties.
The revised terms usually applied by the Group include extending the maturity, amending the terms of loan covenants and
partial write-offs where there is reasonable financial evidence to demonstrate the borrower’s inability to repay the loan in
full. MeDirect Malta’s Management Credit Committee regularly reviews reports on forbearance activities.
For the purposes of these financial statements, “loans with renegotiated terms” are defined as loans that have been
restructured due to a deterioration in the borrower’s financial position, for which the Group has made concessions by
agreeing to terms and conditions that are more favourable for the borrower than the Group had provided initially and that it
would not otherwise consider. A loan continues to be presented as part of loans with renegotiated terms until maturity,
early repayment or write-off, unless certain prescriptive conditions are met.
Typically, the Group either categorises a forborne exposure as performing or classifies the exposure as forborne non-
performing if unlikely-to-pay indicators are evidenced, as outlined in the Non-Performing and Default Exposure section of
the Group’s Credit Policy.
Renegotiated loans can be classified as non-credit-impaired where the renegotiation has resulted from significant concern
about a borrower’s ability to meet their contractual payment terms, but the renegotiated terms are based on current
market rates and contractual cash flows are expected to be collected in full following the renegotiation.
Non-credit-impaired renegotiated loans also include previously impaired renegotiated loans that have demonstrated
satisfactory performance over a period of time or have been assessed based on all available evidence as having no
remaining indicators of impairment.
On renegotiation, where the existing agreement is cancelled and a new agreement is made on substantially different
terms, or if the terms of an existing agreement are modified, such that the renegotiated loan is substantially a different
financial instrument, the loan would be derecognised and a new loan is recognised, for accounting purposes.
When determining whether a loan that is restructured should be derecognised and a new loan recognised, the Group
considers the extent to which the changes to the original contractual terms result in the renegotiated loan, considered as a
whole, being a substantially different financial instrument.
As outlined previously, renegotiated loans that are classified as credit-impaired/Stage 3 exposures at the renegotiation
date which have not had a substantial modification in terms, are not derecognised and remain disclosed as credit-
impaired/Stage 3 exposures until there is sufficient evidence of cure to demonstrate a significant reduction in the risk of
non-payment of future cash flows observed over a one-year period and there are no other indicators of impairment. In
contrast, when substantial modification has been made to the terms of the renegotiated loan, the old financial asset is
derecognised and a new financial asset is recognised, the latter being classified as a Stage 1 asset unless originated
|me> direct Annual Report and Financial Statements 2025
106
As at 31 December 2025 and 2024, none of the exposures within the Maltese Mortgage portfolio, the Dutch Buy to Let
Mortgage portfolio, Consumer Finance receivables portfolio, Securities Investment, Securitisation Investment and Asset-
Backed Securitisation Investment portfolios were forborne reflecting the fact that both the Securities Investment portfolio,
Securitisation Investment portfolio, and the Asset-Backed Securitisation Investment portfolio principally comprise of
investment grade exposures and that the Maltese and the Dutch Buy to Let mortgage portfolios have been in place for just
a few years. In this regard, any amounts disclosed in this section relate to forbearance activity within the International
Corporate Lending, Maltese Business Lending, Dutch and Belgian Mortgage portfolios.
The following table shows the carrying amount of the Group’s and Bank's loans and advances to customers classified
within the International Corporate Lending and Maltese Business Lending portfolios reflecting forbearance activity, by
stage and by past due status.
Group
International Corporate Lending portfolio
Maltese Business Lending portfolio
Non-forborne
exposures
Forborne exposures
Non-forborne
exposures
Forborne exposures
Total
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
Neither past due nor credit-impaired
-
-
201,367
-
201,367
Stage 2
Neither past due nor credit-impaired
10,847
-
-
-
10,847
Past due but not credit-impaired
- by up to 30 days
-
-
2,398
-
2,398
Stage 3
Credit-impaired, net of credit loss allowances
-
11,008
540
5,000
16,548
Loans and advances to customers, net of Stage 3 and POCI credit
loss allowances
10,847
11,008
204,305
5,000
231,160
Stage 1 credit loss allowances
-
-
356
-
356
Stage 2 credit loss allowances
351
-
13
-
364
Stage 3 credit loss allowances
-
4,603
4
752
5,359
Group
International Corporate Lending portfolio
Maltese Business Lending portfolio
Non-forborne
exposures
Forborne exposures
Non-forborne
exposures
Forborne exposures
Total
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
Neither past due nor credit-impaired
109,320
-
147,126
-
256,446
Stage 2
Neither past due nor credit-impaired
52,350
-
-
-
52,350
Past due but not credit-impaired
- by up to 30 days
-
-
1,423
-
1,423
Stage 3
Credit-impaired, net of credit loss allowances
10,651
37,381
1,180
4,701
53,913
POCI
Credit-impaired, net of credit loss allowances
-
230
-
-
230
Loans and advances to customers, net of Stage 3 and POCI credit
loss allowances
172,321
37,611
149,729
4,701
364,362
Stage 1 credit loss allowances
684
-
357
-
1,041
Stage 2 credit loss allowances
489
-
-
-
489
Stage 3 credit loss allowances
267
10,944
4
761
11,976
POCI credit loss allowances
-
223
-
-
Bank
International Corporate Lending portfolio
Maltese Business Lending portfolio
Non-forborne
exposures
Forborne exposures
Non-forborne
exposures
Forborne exposures
Total
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
Neither past due nor credit-impaired
-
-
201,367
-
201,367
Stage 2
Neither past due nor credit-impaired
10,838
-
-
-
10,838
Past due but not credit-impaired
- by up to 30 days
-
-
2,398
-
2,398
Stage 3
Credit-impaired, net of credit loss allowances
-
11,007
540
5,000
16,547
Loans and advances to customers, net of Stage 3 and POCI credit
loss allowances
10,838
11,007
204,305
5,000
231,150
Stage 1 credit loss allowances
-
-
356
-
356
Stage 2 credit loss allowances
351
-
13
-
364
Stage 3 credit loss allowances
-
4,603
4
752
5,359
|me> direct Annual Report and Financial Statements 2025
107
Bank
International Corporate Lending portfolio
Maltese Business Lending portfolio
Non-forborne
exposures
Forborne exposures
Non-forborne
exposures
Forborne exposures
Total
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
Neither past due nor credit-impaired
46,475
-
147,126
-
193,60
1
Stage 2
Neither past due nor credit-impaired
43,879
-
-
-
43,879
Past due but not credit-impaired
- by up to 30 days
-
-
1,423
-
1,423
Stage 3
Credit-impaired, net of credit loss allowances
10,650
24,499
1,180
4,701
41,030
POCI
Credit-impaired, net of credit loss allowances
-
230
-
-
230
Loans and advances to customers, net of Stage 3 and POCI credit
loss allowances
101,004
24,729
149,729
4,701
280,16
3
Stage 1 credit loss allowances
278
-
357
-
635
Stage 2 credit loss allowances
395
-
-
-
395
Stage 3 credit loss allowances
267
1,951
4
761
2,983
POCI credit loss allowances
-
223
-
-
223
The following table shows the carrying amount of the Group’s loans and advances to customers classified within the
Dutch and Belgian Mortgage portfolio reflecting forbearance activity, by stage and by past due status.
Group | Dutch Mortgage Portfolio | Belgian Mortgage Portfolio | |||
Non-forborne exposures Forborne exposures | Non-forborne exposures Forborne exposures | Total | |||
| €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2025 | |||||
Stage 1 | |||||
| Neither past due nor credit-impaired | 2,246,681 | - | 512,779 | - | 2,759,460 |
| Past due but not credit-impaired: | |||||
| - by up to 30 days | 3,101 | - | 15,493 | - | 18,594 |
Stage 2 | |||||
| Neither past due nor credit-impaired | 6,303 | 2,550 | 632 | 1,514 | 10,999 |
| Past due but not credit-impaired: | |||||
| - by up to 30 days | - | - | 562 | - | 562 |
| - by more than 30 days and up to 90 days | 4,121 | 1,723 | 5,415 | 143 | 11,402 |
Stage 3 | |||||
| Credit-impaired, net of credit loss allowances | 1,105 | 461 | 2,564 | 1,853 | 5,983 |
Loans and advances to customers, net of Stage 3 and POCI credit loss allowances | 2,261,311 | 4,734 | 537,445 | 3,510 | 2,807,000 |
Stage 1 credit loss allowances | 113 | - | 388 | - | 501 |
Stage 2 credit loss allowances | 141 | 105 | 65 | 18 | 329 |
Stage 3 credit loss allowances | 34 | 18 | 306 | 221 | 579 |
Group | Dutch Mortgage Portfolio | Belgian Mortgage Portfolio | |||
Non-forborne exposures | Forborne exposures | Non-forborne exposures Forborne exposures | Total | ||
| €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2024 | |||||
Stage 1 | |||||
| Neither past due nor credit-impaired | 2,195,523 | - | 354,581 | - | 2,550,104 |
| Past due but not credit-impaired: | |||||
| - by up to 30 days | 3,337 | - | 3,475 | - | 6,812 |
| - by more than 30 days and up to 90 days | 1,379 | - | - | - | 1,379 |
Stage 2 | |||||
| Neither past due nor credit-impaired | 157 | 2,887 | 257 | 2,301 | 5,602 |
| Past due but not credit-impaired: | |||||
| - by up to 30 days | - | 326 | - | - | 326 |
| - by more than 30 days and up to 90 days | 735 | 1,100 | 4,434 | - | 6,269 |
Stage 3 | |||||
| Credit-impaired, net of credit loss allowances | 493 | 254 | 1,308 | 259 | 2,314 |
Loans and advances to customers, net of Stage 3 credit loss allowances | 2,201,624 | 4,567 | 364,055 | 2,560 | 2,572,806 |
Stage 1 credit loss allowances | 124 | - | 284 | - | 408 |
Stage 2 credit loss allowances | 62 | 49 | 55 | 31 | 197 |
Stage 3 credit loss allowances | 16 | - | 153 | 31 | 200 |
As at 31 December 2025, Stage 1 exposures with a gross carrying amount of €151.4 million classified within the Maltese
Mortgage portfolio were neither past due nor credit-impaired. As at 31 December 2024, all exposures within the Maltese
|me> direct Annual Report and Financial Statements 2025
108
As at 31 December 2025, total gross forborne loans and advances to customers as a percentage of total gross loans and
advances to customers of the Group and Bank were equivalent to 1% (2024: 2.1%) and 5.3% (2024: 7.7%) respectively.
Interest income recognised by the Group and the Bank during the financial year ended 31 December 2025 in respect of
forborne exposures amounted to €0.5 million (2024: €4.0 million) and €0.3 million (2024: €1.8 million) respectively.
The movement in the gross carrying of forborne loans and advances to customers, before credit loss allowances is
analysed below:
| Group | Bank | |||
| 2025 | 2024 | 2025 | 2024 | |
| €000 | €000 | €000 | €000 | |
Year ended 31 December | ||||
At beginning of year | 61,398 | 88,661 | 32,365 | 71,740 |
Loans to which forbearance measures have been extended during the year without derecognition | 6,406 | 31,317 | 1,785 | 16,405 |
Capitalised interest | 297 | 1,631 | 297 | 1,631 |
Capitalised fees | - | (191) | - | (88) |
Repayments or disposals | (40,308) | (53,562) | (26,085) | (50,613) |
Loans exiting forborne status during the year without derecognition | (3,506) | (7,135) | (909) | (6,949) |
Write-offs | (63) | (219) | (63) | (219) |
Write-backs | 14,400 | - | 14,400 | - |
Amortisation of premium or discount | (7,698) | 17 | 89 | 49 |
Exchange differences | (1,080) | 879 | (517) | 409 |
At end of year | 29,846 | 61,398 | 21,362 | 32,365 |
Capitalised fees included in the table above reflect amounts disbursed by customers in relation to the origination of the
exposure. Such amounts are recognised as part of the gross carrying amount of the exposure in the form of deferred
income and amortised over the life of the instrument.
As at 31 December 2025, credit loss allowances in respect of the Group’s and Bank’s forborne loans were equivalent to
€5.7 million (2024: €12.0 million) and €5.4 million (2024: €2.9 million) respectively. Additions to credit loss allowances on
forborne loans during the year ended 31 December 2025 amounted to €3.7 million (2024: €10.5 million) and €3.4 million
(2024: €2.2 million) for the Group and Bank respectively. Reversals of credit loss allowances by the Group and Bank
forborne loans during the year ended 31 December 2025 amounted to €10.0 million (2024: €8.5 million) and €0.9 million
(2024: €8.5 million) respectively.
The following tables show the gross carrying amounts of the Group’s and Bank’s holdings of renegotiated loans and
advances to customers analysed by industry sector and stage:
Group
Bank
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Real estate and construction
-
-
2,861
-
2,861
-
-
2,861
-
2,861
Financial and insurance activities
-
-
15,611
-
15,611
-
-
15,610
-
15,610
Households and individuals
-
5,930
2,553
-
8,483
-
-
-
-
-
Transportation and Storage
-
-
2,891
-
2,891
-
-
2,891
-
2,891
-
5,930
23,916
-
29,846
-
-
21,362
-
21,362
Group
Bank
Stage 1
Stage 2
Stage 3
POCI
Total
Stage 1
Stage 2
Stage 3
POCI
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Accommodation and food service activities
-
-
21,051
-
21,051
-
-
9,604
-
9,604
Real estate and construction
-
-
2,571
-
2,571
-
-
2,571
-
2,571
Financial and insurance activities
-
-
26,570
453
27,023
-
-
16,495
453
16,948
Households and individuals
-
6,614
544
-
7,158
-
-
-
-
-
Transportation and Storage
-
-
2,891
-
2,891
-
-
2,891
-
2,891
Wholesale and retail trade, repairs of motor vehicles and
motorcycles
-
-
704
-
704
-
-
351
-
351
-
6,614
54,331
453
61,398
-
-
31,912
453
32,365
|me> direct Annual Report and Financial Statements 2025
109
The Group’s and Bank’s forborne loans classified within the International Corporate Lending portfolio as at 31 December
2025 consist of corporate exposures based in Europe, amounting to €11.0 million (2024: €37.6 million) and €11.0 million
(2024: €24.7 million) respectively. The forborne loans classified within the Maltese Business Lending portfolio are mainly
categorised as exposures to corporate customers within the real estate and construction sector. Forbearance measures in
respect of exposures classified within the Dutch and Belgian Mortgage portfolios are limited to payment arrangements,
allowing customers to repay the amounts in arrears in addition to the regular monthly instalment. Past due amounts are
thereby regularised within an agreed number of months. The forborne loans classified within the Dutch and Belgian
Mortgage portfolios are categorised as exposures to households and individuals in the previous tables.
2.2.5 Write-offs
Financial assets written off by the Group and Bank during the financial year ended 31 December 2025 amounted to €9.1
million (2024: €19.4 million) and €0.3 million (2024: €16.4 million) respectively and were all resulting from renegotiations
of financial instruments as described in further detail in note 2.2.4 – “Loans and advances to customers with renegotiated
terms and the Group’s forbearance policy”.
2.2.6 Collateral
The Group holds collateral against loans and advances to customers classified under the Maltese Business Lending and
the Dutch, Belgian and Maltese Mortgage portfolios in the form of hypothecary rights over immovable assets, and
registered rights over movable assets and guarantees. The assets held as collateral are assigned a fair value at the time
of credit approval. The assigned value is regularly monitored to identify assets that need revaluation.
Depending on the customer’s standing and the type of product, in certain circumstances facilities may be provided on an
unsecured basis, although the Group has limited appetite for such agreements. In most lending facilities, a charge over
collateral is obtained and considered in determining the credit risk appetite and risk-return profile of all lending decisions.
In the event of a default, the Group may utilise the collateral as a source of repayment. Depending on its form, collateral
can have a significant financial effect in mitigating exposure to credit risk.
Collateral received by the Group includes residential and commercial property, as well as financial collateral such as debt
securities and cash on deposit. The immovable property collateral received in respect of exposures within the Maltese
Business Lending and Maltese Mortgage portfolios, the Dutch Mortgage portfolios and the Belgian Mortgage portfolios are
mainly located in Malta, the Netherlands and Belgium respectively.
The following tables show the gross carrying amount and associated credit loss allowances of the loans and advances to
customers classified under the Maltese Business Lending portfolio by level of collateral expressed through the loan-to-
value (“LTV”) ratio. The collateral measured for the purposes of the following tables consists of fixed first charges on real
estate, and charges over cash and marketable financial instruments. The collateral amounts represent the expected
market value on an open market basis for real estate: no adjustment has been made to the collateral for any expected
costs of recovery. Cash is valued at its nominal value and marketable securities at their fair value. If an exposure is fully
cash secured (100% LTV), no ECL is measured in this respect, whereas ECL is calculated on exposures which are
partially cash secured and having a LTV ratio less than 100%.
|me> direct Annual Report and Financial Statements 2025
110
Group and Bank
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
a) Not collateralised
130,408
(241)
-
-
130,408
(241)
b) Fully collateralised
- Up to 50% LTV
16,421
-
-
-
16,421
-
- 51% to 75% LTV
42,616
(66)
-
-
42,616
(66)
- 76% to 90% LTV
8,855
(49)
-
-
8,855
(49)
c) Partially collateralised
- greater than 100% LTV
3,067
-
-
-
3,067
-
201,367
(356)
-
-
201,367
(356)
Stage 2
a) Not collateralised
2,398
(13)
-
-
2,398
(13)
2,398
(13)
-
-
2,398
(13)
Stage 3
a) Not collateralised
52
(4)
1,481
(152)
1,533
(156)
b) Fully collateralised
- Up to 50% LTV
-
-
4,271
(600)
4,271
(600)
c) Partially collateralised
- greater than 100% LTV
492
-
-
-
492
-
544
(4)
5,752
(752)
6,296
(756)
Total
204,309
(373)
5,752
(752)
210,061
(1,125)
Group and Bank
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
a) Not collateralised
110,246
(246)
-
-
110,246
(246)
b) Fully collateralised
- Up to 50% LTV
13,564
(1)
-
-
13,564
(1)
- 51% to 75% LTV
16,667
(76)
-
-
16,667
(76)
- 76% to 90% LTV
6,581
(34)
-
-
6,581
(34)
- 91% to 100% LTV
68
-
-
-
68
-
147,126
(357)
-
-
147,126
(357)
Stage 2
a) Not collateralised
1,423
-
-
-
1,423
-
1,423
-
-
-
1,423
-
Stage 3
a) Not collateralised
65
(4)
2,570
(161)
2,635
(165)
b) Fully collateralised
- 51% to 75% LTV
122
-
2,892
(600)
3,014
(600)
c) Partially collateralised
- greater than 100% LTV
997
-
-
-
997
-
1,184
(4)
5,462
(761)
6,646
(765)
Total
149,733
(361)
5,462
(761)
155,195
(1,122)
|me> direct Annual Report and Financial Statements 2025
111
The following table shows the gross carrying amount and associated credit loss allowances of the loans and advances to
customers classified under the Dutch Mortgage portfolio by level of collateral expressed through the LTV ratio. The
collateral measured for the purposes of the table below consists of fixed first charges on real estate.
Group
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
a) Fully collateralised
- Up to 50% LTV
574,757
(18)
-
-
574,757
(18)
- 51% to 75% LTV
1,342,107
(69)
-
-
1,342,107
(69)
- 76% to 90% LTV
316,981
(25)
-
-
316,981
(25)
- 91% to 100% LTV
15,693
(1)
-
-
15,693
(1)
c) Partially collateralised
- greater than 100% LTV
244
-
-
-
244
-
2,249,782
(113)
-
-
2,249,782
(113)
Stage 2
a) Fully collateralised
- Up to 50% LTV
38
-
879
-
917
-
- 51% to 75% LTV
9,739
(109)
2,682
(104)
12,421
(213)
- 76% to 90% LTV
647
(32)
712
(1)
1,359
(33)
10,424
(141)
4,273
(105)
14,697
(246)
Stage 3
a) Fully collateralised
- Up to 50% LTV
363
(7)
203
-
566
(7)
- 51% to 75% LTV
303
(11)
-
-
303
(11)
- 76% to 90% LTV
473
(16)
276
(18)
749
(34)
1,139
(34)
479
(18)
1,618
(52)
Total
2,261,345
(288)
4,752
(123)
2,266,097
(411)
Group
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
a) Fully collateralised
- Up to 50% LTV
451,058
(14)
-
-
451,058
(14)
- 51% to 75% LTV
1,292,556
(75)
-
-
1,292,556
(75)
- 76% to 90% LTV
393,155
(29)
-
-
393,155
(29)
- 91% to 100% LTV
61,722
(6)
-
-
61,722
(6)
b) Partially collateralised
- greater than 100% LTV
1,748
-
-
-
1,748
-
2,200,239
(124)
-
-
2,200,239
(124)
Stage 2
a) Fully collateralised
- Up to 50% LTV
124
(4)
679
(1)
803
(5)
- 51% to 75% LTV
753
(58)
3,086
(26)
3,839
(84)
- 76% to 90% LTV
15
-
548
(22)
563
(22)
892
(62)
4,313
(49)
5,205
(111)
Stage 3
a) Fully collateralised
- Up to 50% LTV
-
-
106
-
106
-
- 51% to 75% LTV
279
(6)
148
-
427
(6)
- 76% to 90% LTV
230
(10)
-
-
230
(10)
509
(16)
254
-
763
(16)
Total
2,201,640
(202)
4,567
(49)
2,206,207
(251)
|me> direct Annual Report and Financial Statements 2025
112
The following table shows the gross carrying amount and associated credit loss allowances of the loans and advances to
customers classified under the Belgian Mortgage portfolio by level of collateral expressed through the LTV ratio. The
collateral measured for the purposes of the table below consists of fixed first charges on real estate.
Group
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
a) Fully collateralised
- Up to 50% LTV
59,282
(34)
-
-
59,282
(34)
- 51% to 75% LTV
178,527
(126)
-
-
178,527
(126)
- 76% to 90% LTV
233,150
(185)
-
-
233,150
(185)
- 91% to 100% LTV
54,878
(42)
-
-
54,878
(42)
b) Partially collateralised
- greater than 100%
2,435
(1)
-
-
2,435
(1)
528,272
(388)
-
-
528,272
(388)
Stage 2
a) Fully collateralised
- Up to 50% LTV
826
(5)
803
(6)
1,629
(11)
- 51% to 75% LTV
2,554
(22)
260
(4)
2,814
(26)
- 76% to 90% LTV
2,782
(32)
-
-
2,782
(32)
- 91% to 100% LTV
447
(6)
594
(8)
1,041
(14)
6,609
(65)
1,657
(18)
8,266
(83)
Stage 3
a) Fully collateralised
- Up to 50% LTV
196
(21)
3
-
199
(21)
- 51% to 75% LTV
252
(27)
489
(52)
741
(79)
- 76% to 90% LTV
1,015
(111)
768
(82)
1,783
(193)
- 91% to 100% LTV
1,246
(131)
814
(87)
2,060
(218)
c) Partially collateralised
- greater than 100% LTV
161
(16)
-
-
161
(16)
2,870
(306)
2,074
(221)
4,944
(527)
Total
537,751
(759)
3,731
(239)
541,482
(998)
Group
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
a) Fully collateralised
- Up to 50% LTV
39,597
(24)
-
-
39,597
(24)
- 51% to 75% LTV
112,973
(85)
-
-
112,973
(85)
- 76% to 90% LTV
162,753
(139)
-
-
162,753
(139)
- 91% to 100% LTV
42,479
(36)
-
-
42,479
(36)
b) Partially collateralised
- greater than 100% LTV
254
-
-
-
254
-
358,056
(284)
-
-
358,056
(284)
Stage 2
a) Fully collateralised
- 51% to 75% LTV
2,362
(24)
617
(7)
2,979
(31)
- 76% to 90% LTV
1,553
(21)
796
(11)
2,349
(32)
- 91% to 100% LTV
776
(10)
888
(13)
1,664
(23)
4,691
(55)
2,301
(31)
6,992
(86)
Stage 3
b) Fully collateralised
- Up to 50% LTV
338
(36)
-
-
338
(36)
- 76% to 90% LTV
720
(75)
290
(31)
1,010
(106)
- 91% to 100% LTV
249
(26)
-
-
249
(26)
c) Partially collateralised
- greater than 100% LTV
154
(16)
-
-
154
(16)
1,461
(153)
290
(31)
1,751
(184)
364,208
(492)
2,591
(62)
366,799
(554)
|me> direct Annual Report and Financial Statements 2025
113
The following table shows the gross carrying amount and associated credit loss allowances of the loans and advances to
customers classified under the Maltese Mortgage portfolio by level of collateral expressed through the LTV ratio. The
collateral measured for the purposes of the table below consists of fixed first charges on real estate.
Group and Bank
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Stage 1
a) Not collateralised
19,539
(52)
-
-
19,539
(52)
b) Fully collateralised
- Up to 50% LTV
27,354
(43)
-
-
27,354
(43)
- 51% to 75% LTV
40,901
(82)
-
-
40,901
(82)
- 76% to 90% LTV
63,268
(137)
-
-
63,268
(137)
c) Partially collateralised
Greater than 100% LTV
367
(1)
-
-
367
(1)
151,429
(315)
-
-
151,429
(315)
Stage 2
a) Fully collateralised
- Up to 50% LTV
142
(2)
-
-
142
(2)
142
(2)
-
-
142
(2)
Stage 3
a) Fully collateralised
- 51% to 75% LTV
136
(23)
-
-
136
(23)
136
(23)
-
-
136
(23)
151,707
(340)
-
-
151,707
(340)
Group and Bank
Non-forborne
Forborne
Total
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
Gross carrying
amount
Credit loss
allowance
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Stage 1
a) Not collateralised
21,278
(72)
-
-
21,278
(72)
b) Fully collateralised
- Up to 50% LTV
19,726
(37)
-
-
19,726
(37)
- 51% to 75% LTV
32,211
(79)
-
-
32,211
(79)
- 76% to 90% LTV
56,391
(144)
-
-
56,391
(144)
129,606
(332)
-
-
129,606
(332)
As at 31 December 2025, the Group and the Bank held senior secured loans to international borrowers classified under
the International Corporate Lending portfolio which amounted to €10.6 million (2024: €198.9 million) and €10.6 million
(2024: €108.4 million) respectively. In respect of such financial assets, the Group normally has a right over the borrower’s
unencumbered assets. The Consumer Finance receivables lending is uncollateralised.
All the Group’s and Bank’s exposures classified under the Securities Investment portfolio as at 31 December 2025 and
2024 are unsecured with the exception of a sub-portfolio of covered bonds amounting to €435.3 million (2024: €432.1
million) and €101.6 million (2024: €101.7 million), respectively, which are backed by a separate group of assets in the
form of loans. Similarly, all exposures classified under the Securitisation Investment portfolio as at 31 December 2025 and
2024 and the Asset-Backed Securitisation Investments portfolio are also backed by a separate group of assets in the form
of loans.
2.2.7 Current Conditions and Forward-looking information incorporated in the ECL model
Point-in-time, forward-looking PD and LGD modelling methodology
The modelling methodology used by the Group in the measurement of credit loss allowances in respect of Stage 1 and
Stage 2 exposures leverages current and multiple scenarios of future projections of macroeconomic data beyond the
reporting date in order to determine point-in-time PDs and incorporate forward-looking information. Statistical models used
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114
As explained in more detail in Note 1.5 of the financial statements, for the International and Maltese Corporate Lending
and Securities portfolios the models use rating scale to TTC PD matrices calibrated on the basis of an underlying dataset
of market observations to firstly determine a TTC PD and accordingly an implied rating for each borrower. The TTC PD
implied rating is determined by calibrating borrowers’ financial and non-financial profile with those of observable rated
peers. An exposure’s implied rating is then converted to an unconditional PiT PD using a methodology which utilises
market capitalisation/equity volatility and leverage of comparable firms, with shocks to a firm’s stock price translated into
corresponding shocks to the credit risk metric attributable to the underlying exposure. Therefore, equity market
performance is a key variable for incorporating current conditions into the Group’s ECL modelling methodology,
particularly in the conversion from TTC to PiT PDs.
The methodology then utilises macroeconomic correlation models in order to determine the historical correlation of a
borrower’s financial performance with overall country or region-level macroeconomic conditions, with the correlation
factors estimated principally by reference to borrower size as well as the industry in which the borrower operates. Multiple
macroeconomic forecasts developed by an external vendor are then applied to PiT PDs to produce probability-weighted
forward-looking conditioned PiT PDs in line with the requirements of IFRS 9. The conditioning of PDs by reference to
multiple macroeconomic scenarios reflects forecasted quarter-on-quarter changes in macroeconomic variables (such as
GDP, unemployment and HPI) over the PD term structure of the exposure. The Group’s modelling methodology therefore
estimates a point-in-time and forward-looking measure of default risk. The same methodology is also used to estimate PiT
LGDs.
Input parameters similar to those of the Corporate and Securities portfolios do not exist for determining implied ratings of
the Maltese Business Lending portfolio, mainly due to existing data limitations within the Maltese market. Therefore,
implied ratings are assigned by the Credit Risk team using professional judgement by reference to default rates
experienced in similar markets as well as the financial performance and position of the borrower in relation to financial
performance and position at origination. A similar approach to that adopted for Corporate and Securities portfolios is
applied to determine conditional PiT PDs, using the TTC implied risk ratings based on internal risk classifications by the
Credit Risk team which are then adjusted to PiT forward looking PDs as described above.
For Dutch residential mortgages, PiT PDs and LGDs are determined using loan and borrower characteristics such as
loan-to-value (‘LTV’) and loan-to-income (‘LTI’) inputs, calibrated based on historical data of proxy NHG loans from RMBS
transactions which are adjusted to incorporate current and forward-looking macroeconomic variables and data such as
unemployment rates, real GDP growth and house price indices. Likewise, for the Dutch buy-to-let portfolio, PiT PDs and
LGDs are determined using loan and borrower characteristics which are adjusted to incorporate current and forward-
looking macroeconomic variables and data such as regional unemployment rates, real GDP growth and regional house
price indices.
PiT PDs for Maltese mortgages are based on the actual six months NPL ratio published by the Central Bank of Malta in its
Financial Stability Report and the actual quarterly NPL ratio published by the European Banking Authority in its Risk
Dashboard Report, adjusted to incorporate forward-looking macroeconomic variables including real GDP growth,
unemployment rates, a 10-year treasury rates, compensation of employees and household disposable income.
For the Belgian mortgages, the PiT PDs are mainly based on the Belgium Mortgage industry level NPL data published by
the National Bank of Belgium adjusted to incorporate forward-looking macroeconomic variables including unemployment
In respect of defaulted / Stage 3 exposures classified within the International Corporate Lending portfolio, the Group
utilises an internally developed discounted cash flow methodology in order to estimate the net present value of forecasted
operating cash flows under multiple forward-looking scenarios discounted using the borrower-specific weighted average
cost of capital (“WACC”). In this regard, forward-looking expectations based on the impact of changing macroeconomic
conditions on the borrower are reflected in multiple scenarios of operating cash flows developed by management, which
are discounted and probability-weighted in accordance with the requirements of IFRS 9.
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115
Similarly, the expected recoveries in respect of defaulted / Stage 3 exposures classified within the Maltese Business
Lending portfolio are estimated by reference to multiple work-out options determined on the basis of an individual
borrower assessment and taking into consideration the impact of macroeconomic conditions on the recoverable amount
under each scenario.
The model used to measure credit loss allowances in respect of all exposures classified within the Dutch, Belgian and
Maltese Mortgage portfolio estimates PDs and LGDs by reference to historical information observed in that jurisdiction for
similar assets as well as multiple forward-looking macroeconomic forecasts for the respective economy developed by the
external vendor.
The current U.S. administration has contributed to an elevated level of uncertainty and volatility in the global economic
environment, with Europe’s economy remaining particularly exposed amid ongoing trade policy measures and uncertainty
regarding their scope, duration and economic impact. Existing and potential trade restrictions could negatively affect
global trade flows and economic growth, with adverse effects on the EU’s exports and investment through weakened
confidence and persistent uncertainty. In addition, geopolitical risks remain heightened and could further deteriorate
economic conditions. The macroeconomic scenarios and forward-looking information applied in the estimation of ECL are
subject to a significant degree of estimation uncertainty and management judgement. The forecasting of economic
conditions therefore inherently involves a higher level of risk and subjectivity.
This has required an elevated level of review to ensure that the macroeconomic methodology used by the Group,
provided by a reputable third party, results in plausible scenarios that adequately captures the uncertainties previously
mentioned. The scenarios were assessed as appropriate and sufficiently prudent for the Group’s impairment assessment.
Judgement is still required in the determination of macroeconomic forecasts reflecting potential future economic
conditions under difference scenarios and their impact on PDs and LGDs.
Forecasts of future economic conditions
The Group applies macroeconomic scenarios sourced from an external vendor to the PD and LGD term structures for the
estimation of credit loss allowances in respect of Stage 1 and Stage 2 exposures classified within the International
Corporate Lending and Maltese Business Lending portfolios, as well as in respect of all exposures classified within the
Dutch Mortgage (inclusive of the Dutch Buy-to-Let portfolio), Belgian Mortgage, Maltese Mortgage and Securities
Investment portfolios. The macroeconomic scenarios represent the Group’s view of the range of potential outcomes, and
application of these scenarios captures the non-linearity of expected credit losses under different scenarios for all
portfolios.
The Group has chosen three macroeconomic scenarios that include a central, or baseline, scenario and two “alternative”
scenarios to reflect upside and downside scenarios. The scenarios are constructed by the external vendor based on a
target severity for each of the scenarios. While the baseline scenario is by design in the middle of possible future
economic outcomes, the alternative scenarios capture alternative economic conditions that are equally distanced from the
baseline in terms of their severity as per the assumptions of the external vendor. After their construction, the scenarios are
each assigned probability weights based on the external vendor’s severity distribution and on how well they approximate
(simulated) possible future economic developments. The scenarios are generated/refreshed on a quarterly basis.
The macroeconomic scenarios used in the Group’s modelling of credit loss allowances reflect a range of possible
macroeconomic paths. These scenarios incorporate potential economic impacts arising from geopolitical tensions,
assumptions regarding U.S. tariffs on the EU and other trading partners, developments in energy markets, monetary and
In light of ongoing geopolitical tensions and the economic uncertainty arising from recent International policy
developments, the Group conducted rigorous monitoring of macroeconomic forecasts developed by the external vendor to
assess the adequacy and reasonableness of the scenarios. Accordingly, the macroeconomic scenarios were reviewed on
|me> direct Annual Report and Financial Statements 2025
116
The scenarios have been benchmarked and assessed against the macroeconomic forecasts for the Euro area published
by the ECB, in line with ECB guidance, with the latest publication available being the one published in December 2025. In
this respect, the Group’s forward looking macroeconomic scenarios are deemed to be aligned with the ECB’s
macroeconomic forecasts for the Euro area.
As at 31 December 2025, management selected to use three scenarios developed and recommended by the external
vendor which are deemed to be mostly aligned with the December 2025 ECB Staff projections. As per the preceding year,
management selected the Baseline, the Upside, and the Downside 2 scenarios.
The scenarios used for the purposes of determining the ECL as at 31 December 2025 are described below.
Baseline
- The U.S. administration imposes tariffs on the EU and other trading partners, with rates settling only moderately
above the baseline tariff of 10%. The effective tariff rate on goods from the EU increases to approximately 13%.
- U.S. President seeks to engage with Russia and Ukraine, but the conflict continues with varying intensity, as
negotiations fail to lead to lasting peace. The U.S. significantly scales back military aid to Ukraine. European
countries agree to fill the gap but do not fully compensate for the loss of U.S. financial support. The situation at
the front worsens, but Ukraine mostly manages to prevent a collapse.
- For the Middle East tensions, an enduring peace solution that satisfies all parties is hard to find, but an all-out
regional conflict is ultimately avoided.
- European oil and gas prices hover around multiyear lows as global supply increases in the face of sluggish
growth in global demand. Tensions in the Middle East and sanctions on Russian oil companies do not disrupt
global oil supply. Europe successfully manages to halt imports of Russian gas without affecting import prices.
- Supply chains come under renewed pressure as firms navigate the erratic tariff policy, but severe strains are
avoided.
- ECB does not implement further cuts and keeps the deposit rate at 2% for the foreseeable future, before hiking
once to bring rates in line with the assumed neutral rate of 2.25%.
- Structural factors such as high debt levels and a declining working-age population bear down on eurozone
growth over the long-term.
Upside
- U.S. tariffs drop from current levels. This is a result of the U.S. changing its strategy regarding tariffs, potentially
under pressure from the U.S. courts and/or Congress, and comes only after the U.S. declares victory thanks to
concessions from other countries. The end of tariffs for the EU is facilitated by increased purchases of natural
gas and/or U.S.-made weapons, as well as the lowering of tariffs on some imports from the U.S.
- The U.S.'s attempts to negotiate a settlement between Russia and Ukraine are partially successful with an
enduring ceasefire. Supplies of commodities such as oil, gas and food from the region increase
- The supply side of the economy expands strongly, driven by productivity gains, while slack in the economy
proves more substantial than initially thought. The global economy picks up robustly, boosting manufacturing
output. Productivity gains and the expansion of the supply side of the economy are stronger.
- Global energy prices are slightly higher than in the baseline, reflecting stronger demand that is met by robust
supply.
- Given the stronger economy and slightly higher inflation, the ECB realises that it made a mistake taking rates
below neutral and raises them back to neutral levels.
|me> direct Annual Report and Financial Statements 2025
117
Downside 2
- The trade war escalates again after a period of calm. The overall tariff rate is between 15% and 20%.
- Tensions over Russia's invasion of Ukraine increase. Fears grow that NATO will be dragged into the conflict,
which leads to an even sharper decline in confidence.
- Worries emerge that the conflict in the Middle East will develop further and destabilise the region. This is
facilitated by the U.S. and/or Isreal escalating tensions with Iran.
- Tensions between the U.S. and China persist and intensify, with barriers to shipping along the Taiwan Strait.
- The euro zone's domestic political risks intensify and lead to a selloff in financial markets.
- Business investment declines as does the demand for labour.
- After some hesitation, the ECB rapidly cuts rates, taking the deposit rate below neutral but above zero.
- To limit stress in sovereign and interbank markets, the ECB restarts its purchase of government bonds, provides
forward guidance about its future policy moves, and further loosens the eligibility criteria for the collateral it
accepts from banks.
- As national budgets come under pressure from high debt levels and stress in sovereign debt markets, additional
defence spending is limited. However, the worsening situation in Ukraine means more urgent pressure to
increase defence spending. Even as defence spending rises, the economic boost is weak given the broader
downturn and financial market constraints. As a result, these actions are insufficient in counteracting the
economic downturn.
The year-on-year forecasts for 2025 to 2028 for key macro-economic variables (MEVs) under each of the scenarios
described above are within this section.
The Group’s weighting allocation approach is that weights represent the share of outcomes that are best approximated by
a scenario (not the likelihood of a specific scenario occurring). The Group has assigned the probability weightings to each
scenario using the mid-point approach through which the probability weight assigned to each scenario would be
dependent on the mid-points between the percentiles (representing the severity of the scenario) which each scenario
represents along the distribution curve. Management selected this mid-point approach since it is an approach
recommended by the external vendor and, the scenarios and probability weight chosen are deemed to be mostly aligned
with the December 2025 ECB Staff projections.
The scenarios selected, together with the relative probability weightings relative to the severity distribution provided by the
external vendor for each scenario, are disclosed in the table below:
External vendor Scenarios | Upside | Baseline | Downside 2 |
External Vendor Severity | 90% | 50% | 10% |
Probability Weight | 30% | 40% | 30% |
The following tables present the year-on-year growth rates for the key macroeconomic variables provided by the external
vendor under the baseline and the five alternative scenarios referred to above for the measurement of ECL for all
portfolios as at 31 December 2025 and 2024.
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118
For the International Corporate Lending and Securities portfolios, MEVs are determined for each country, with the
forecasted MEV data in respect of the countries to which the Group is mostly exposed being presented in the following
tables. Eurozone MEVs are used in some cases, rather than country-level MEVs, as the former are deemed to have a
higher correlation to the country specific portfolio assets. For exposures within the Maltese Business Lending portfolio and
the Maltese Mortgages portfolio, Malta-specific MEVs are used for the measurement of credit loss allowances. The key
MEVs used for the estimation of ECL for exposures classified within the Corporate and Securities portfolios comprise real
GDP growth, the performance of stock market indices and unemployment rates.
With respect to the Dutch Mortgage portfolio (inclusive of the Dutch Buy-to-Let portfolio), the Group utilises regional-level
as well as national-level MEVs as appropriate in order to capture regional level peculiarities. The key MEVs used for the
estimation of ECL in respect of exposures classified within these portfolios comprise the house price index, unemployment
rates, a 10-year treasury rates, and real GDP growth with the national level forecasts used in the ECL calculation being
disclosed in the table hereunder.
For the Belgian Residential Mortgages portfolio, the key MEVs used for the estimation of ECL are national levels of house
price index, unemployment rates, real GDP growth, claims on private sector and compensation of employees.
With respect to the Maltese Residential Mortgages portfolio, the key MEVs used for the estimation of ECL are real GDP
|me> direct Annual Report and Financial Statements 2025
119
Economic Scenarios: Year-on-year Forecasts (2025 – 2028) for key MEVs
International Lending and Treasury
Local Lending
Dutch Mortgages
Belgium Mortgages
UK
US
Eurozone
Malta
Netherlands
Belgium
Key Drivers
ECL Scenario
2025
2026
2027
2028
2025
2026
2027
2028
2025
2026
2027
2028
2025
2026
2027
2028
2025
2026
2027
2028
2025
2026
2027
2028
Real GDP -
Growth %
Upside
1.2%
4.9%
1.8%
1.6%
1.6%
3.8%
2.1%
2.4%
1.1%
3.7%
1.6%
1.6%
3.9%
4.6%
3.5%
2.4%
1.2%
4.0%
1.8%
1.5%
1.2%
3.5%
1.3%
1.6%
Baseline
1.2%
1.3%
1.5%
1.7%
1.6%
2.2%
1.8%
2.2%
1.1%
1.4%
1.7%
1.7%
3.9%
1.5%
3.9%
2.8%
1.2%
1.3%
1.8%
1.7%
1.2%
1.2%
1.4%
1.7%
Downside 2
1.2%
-3.9%
1.8%
2.8%
1.6%
-2.5%
1.4%
3.1%
1.1%
-4.0%
2.3%
2.9%
3.9%
-4.0%
4.4%
3.9%
1.2%
-4.0%
2.1%
3.7%
1.2%
-4.2%
1.9%
2.8%
Unemployment
Rate - Average
%
Upside
4.8%
4.7%
4.2%
4.1%
4.2%
3.9%
3.9%
3.8%
6.4%
6.0%
5.6%
5.6%
2.9%
3.1%
3.2%
3.2%
3.9%
3.8%
3.5%
3.6%
6.1%
5.8%
5.3%
5.4%
Baseline
4.8%
5.1%
5.0%
5.0%
4.2%
4.7%
4.7%
4.4%
6.4%
6.4%
6.2%
6.1%
2.9%
3.2%
3.3%
3.3%
3.9%
4.1%
4.1%
4.0%
6.1%
6.1%
6.0%
5.9%
Downside 2
4.8%
6.3%
7.6%
7.7%
4.2%
7.4%
8.1%
6.7%
6.4%
7.0%
7.8%
7.6%
2.9%
3.2%
3.5%
3.6%
3.9%
4.5%
5.8%
5.3%
6.1%
6.6%
7.4%
7.3%
Stock Market
Index - Growth
%
Upside
16.7%
7.3%
-1.3%
1.9%
14.4%
1.0%
1.1%
6.4%
21.1%
10.0%
0.7%
1.8%
0.9%
19.3%
1.4%
7.3%
-
-
-
-
-
-
-
-
Baseline
16.7%
-2.6%
1.3%
4.6%
14.4%
-5.9%
1.5%
7.6%
21.1%
1.6%
2.5%
3.3%
0.9%
13.4%
1.4%
8.0%
-
-
-
-
-
-
-
-
Downside 2
16.7%
-21.5%
10.1%
11.0%
14.4%
-34.6%
7.7%
21.3%
21.1%
-30.1%
13.5%
16.2%
0.9%
-7.3%
10.4%
12.9%
-
-
-
-
-
-
-
-
10Yr Treasury
Rate - Average
%
Upside
-
-
-
-
-
-
-
-
-
-
-
-
3.5%
3.8%
3.9%
3.9%
2.8%
3.0%
3.1%
3.1%
-
-
-
-
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
3.5%
3.7%
3.7%
3.7%
2.8%
2.8%
2.8%
2.8%
-
-
-
-
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
3.5%
3.0%
2.8%
2.8%
2.8%
2.0%
1.7%
1.7%
-
-
-
-
House Price
Index %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
4.4%
3.3%
2.1%
0.7%
3.5%
3.8%
1.7%
1.1%
1.9%
3.4%
2.9%
2.9%
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
4.4%
2.3%
1.4%
0.6%
3.5%
0.8%
1.2%
2.0%
1.9%
2.9%
2.6%
2.8%
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
4.4%
0.0%
0.0%
0.1%
3.5%
-6.7%
-3.1%
6.9%
1.9%
1.6%
-0.2%
4.2%
Household
Disposable
Income -
Growth %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
0.2%
2.8%
2.8%
2.9%
-
-
-
-
-
-
-
-
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
0.2%
5.5%
3.0%
3.4%
-
-
-
-
-
-
-
-
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
0.2%
-1.4%
-2.1%
2.9%
-
-
-
-
-
-
-
-
Claims on
Private Sector -
Growth %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.7%
3.5%
3.4%
3.2%
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.7%
3.0%
3.1%
3.1%
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.7%
2.1%
2.3%
2.9%
Compensation
of Employees -
Growth %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
1.6%
5.7%
4.8%
4.7%
-
-
-
-
4.7%
5.6%
5.5%
4.8%
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
1.6%
3.5%
4.9%
4.7%
-
-
-
-
4.7%
3.7%
4.7%
4.6%
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
1.6%
2.2%
2.5%
3.3%
-
-
-
-
4.7%
-0.6%
2.2%
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Economic Scenarios: Year-on-year Forecasts (2024 – 2027) for key MEVs
International Lending & Treasury
Local Lending
Dutch Mortgages
Belgian Mortgages
UK
US
Eurozone
Malta
Netherlands
Belgium
Key Drivers
ECL
Scenario
2024
2025
2026
2027
2024
2025
2026
2027
2024
2025
2026
2027
2024
2025
2026
2027
2024
2025
2026
2027
2024
2025
2026
2027
Real GDP - Growth %
Upside
1.5%
5.6%
1.4%
2.0%
2.5%
3.3%
2.0%
2.2%
1.1%
3.4%
1.4%
1.8%
4.9%
7.9%
4.7%
3.1%
1.8%
3.7%
1.4%
1.4%
-
-
-
-
Baseline
1.5%
2.1%
1.2%
2.1%
2.5%
1.9%
1.5%
2.0%
1.1%
1.2%
1.5%
1.9%
4.9%
4.8%
5.2%
3.4%
1.8%
1.0%
1.4%
1.7%
-
-
-
-
Downside 2
1.5%
-3.5%
1.5%
3.3%
2.5%
-2.5%
1.8%
3.3%
1.1%
-4.5%
2.0%
3.2%
4.9%
-1.1%
5.8%
4.6%
1.8%
-4.5%
1.7%
3.7%
-
-
-
-
Unemployment Rate - Average %
Upside
4.3%
3.9%
3.7%
3.7%
4.0%
3.3%
3.3%
3.5%
6.4%
6.2%
5.9%
5.8%
3.2%
3.2%
3.1%
3.0%
3.7%
3.6%
3.4%
3.6%
5.6%
5.6%
6.0%
6.0%
Baseline
4.3%
4.4%
4.5%
4.6%
4.0%
4.1%
4.1%
4.1%
6.4%
6.4%
6.4%
6.3%
3.2%
3.2%
3.2%
3.1%
3.7%
3.8%
4.0%
4.0%
5.6%
5.8%
6.1%
6.1%
Downside 2
4.3%
5.5%
7.1%
7.3%
4.0%
7.3%
8.0%
6.6%
6.4%
7.1%
7.9%
7.5%
3.2%
3.3%
3.4%
3.5%
3.7%
4.3%
5.8%
5.3%
5.6%
6.4%
8.0%
8.3%
Stock Market Index - Growth %
Upside
10.1%
9.8%
-2.2%
1.5%
32.3%
5.9%
-2.1%
3.7%
14.8%
11.7%
0.8%
1.5%
3.1%
24.1%
-3.0%
8.4%
-
-
-
-
-
-
-
-
Baseline
10.1%
-0.3%
0.4%
4.3%
32.3%
-0.1%
-1.7%
4.9%
14.8%
0.8%
2.0%
3.8%
3.1%
16.3%
-3.0%
9.4%
-
-
-
-
-
-
-
-
Downside 2
10.1%
-19.6%
9.1%
10.5%
32.3%
-34.6%
5.9%
19.6%
14.8%
-32.4%
15.4%
17.7%
3.1%
-7.4%
6.2%
15.3%
-
-
-
-
-
-
-
-
10Yr Treasury Rate - Average %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.6%
2.6%
2.8%
2.9%
-
-
-
-
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.6%
2.5%
2.5%
2.6%
-
-
-
-
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2.6%
1.6%
1.3%
1.5%
-
-
-
-
House Price Index %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
5.0%
6.7%
2.2%
0.5%
7.8%
6.4%
3.5%
1.1%
-0.8%
3.2%
2.4%
2.3%
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
5.0%
5.5%
1.4%
0.5%
7.8%
3.4%
2.7%
1.8%
-0.8%
1.8%
2.4%
2.1%
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
5.0%
2.4%
-0.3%
0.7%
7.8%
-4.6%
-1.8%
6.2%
-0.8%
-2.9%
0.1%
1.6%
Household Disposable Income -
Growth %
Upside
-
-
-
-
-
-
-
-
-
-
-
-
9.3%
7.6%
3.3%
3.2%
-
-
-
-
2.2%
2.8%
2.4%
2.1%
Baseline
-
-
-
-
-
-
-
-
-
-
-
-
9.3%
7.2%
3.0%
2.9%
-
-
-
-
2.2%
1.4%
1.2%
1.7%
Downside 2
-
-
-
-
-
-
-
-
-
-
-
-
9.3%
2.5%
2.7%
2.9%
-
-
-
-
2.2%
-0.6%
-1.5%
|me> direct Annual Report and Financial Statements 2025
121
Model adjustments and management overlays
ECB guidance states that subjective model inputs and post-core model adjustments (overlays) may be used given the
current level of uncertainties. These need to be directionally consistent with objective and verifiable evidence such as
observable macroeconomic variables and forward-looking forecasts. Overlays should be supported by adequately
documented processes and subject to strict governance oversight.
Management is confident that the modelled macroeconomic scenarios from the external vendor include reasonable,
economic, and geopolitical risk assumptions and the model outputs are appropriately reflecting the current market
conditions.
ECL sensitivity analysis in respect of macroeconomic scenarios
Notwithstanding the significant number of assumptions and different aspects forming part of the Group’s methodology for
modelling credit loss allowances in respect of exposures classified within the Group’s portfolios of financial instruments,
the ECL measurement is deemed to be most sensitive to the inherent level of estimation uncertainty in respect of the
modelling of macroeconomic forecasts.
The Group is hereby presenting the sensitivity analysis in respect of credit loss allowances attributable to the Stage 1 and
Stage 2 exposures classified within the International Corporate Lending and Maltese Business Lending portfolios, as well
as in respect of all exposures classified within the Dutch Mortgage (inclusive of the Dutch Buy-to-Let portfolio), Belgian
Mortgage, Maltese Mortgage, and Securities Investment portfolios as at 31 December 2025 and 2024, estimated by
determining the range of credit loss allowances which would have been measured as at each date by assigning a 100%
weighting to each of the macroeconomic scenarios developed by the external vendor, as presented in the following table.
Scenario sensitivity | Upside | Baseline | Downside 2 |
Group | |||
| 2025 | |||
Probability Weight 2025 | 30% | 40% | 30% |
ECL as at 31 December 2025 | 2,414,154 | 2,620,762 | 3,479,190 |
| 2024 | |||
Probability Weight 2024 | 30% | 40% | 30% |
ECL as at 31 December 2024 | 2,210,395 | 2,624,572 | 4,519,649 |
Bank | |||
| 2025 | |||
Probability Weight 2025 | 30% | 40% | 30% |
ECL as at 31 December 2025 | 979,738 | 1,153,228 | 1,817,108 |
| 2024 | |||
Probability Weight 2024 | 30% | 40% | 30% |
ECL as at 31 December 2024 | 1,169,588 | 1,392,774 | 2,371,262 |
It is to be noted that the weighted average ECL cannot be reconciled by applying the relative probability weights to the
ECL outcomes under each scenario since staging might change across the scenarios when using a 100% weighting (e.g.
an exposure might be classified as Stage 2 in one out of five individual scenarios, and as Stage 1 in the weighted average
scenarios).
Although duly taken into consideration, the impact of macroeconomic scenarios on the measurement of credit loss
allowances in respect of credit-impaired / Stage 3 exposures classified within the International Corporate Lending portfolio
is less pronounced compared to other borrower-specific factors used to forecast operating cash flows under different
scenarios. Accordingly, the sensitivity impact was not considered to be significant.
The Group has integrated ESG considerations, including climate-related and environmental risk factors, into its credit risk
management framework and IFRS 9 ECL methodology. Climate-related risks are incorporated through forward-looking
|me> direct Annual Report and Financial Statements 2025
122
For the Dutch Mortgage portfolio, the Group incorporates climate-related risks through climate-adjusted macroeconomic
scenarios sourced from an external specialist provider. A statistical model developed by the same provider is used to
translate these scenarios into impacts on PD and LGD parameters, which are reflected in the estimation of climate-
adjusted credit loss allowances.
For the Maltese Business Lending portfolio and the Belgian and Maltese mortgage portfolios, climate-related risks are
incorporated primarily through stresses applied to collateral values pledged as security. In relation to transition risk, the
introduction of climate-related regulations and higher energy efficiency standards may require borrowers to incur
additional capital expenditure to upgrade properties, potentially reducing disposable income and increasing PD. In
addition, energy efficiency requirements may exert downward pressure on property values. The Group reflects this
through stressed HPI assumptions applied to collateral values for LGD modelling purposes.
As at 31 December 2025 and 2024, the increase in expected credit losses recognised in relation to climate risk was not
deemed material to warrant further disclosures.
Other portfolios
For its Asset-Backed Securitisation Investment portfolio, the Group has adopted the low credit risk exemption since as at
reporting date the credit risk on this portfolio has not increased significantly since initial recognition.
For its Consumer Finance receivables portfolio, the Group has adopted the simplified approach in that the loss allowance
is always measured at an amount equal to the portfolio's lifetime expected credit losses and a provision matrix is used to
determine the ECL.
2.2.8 Concentration of credit risk exposures
2.2.8.1 Concentration of investment securities
Securities Investment portfolio
The Group monitors concentrations of investment securities for credit risk by type of exposure. An analysis of
concentrations of credit risk at the reporting date for the financial year ended 31 December 2025 and 2024 is shown in the
following table.
Measured at amortised cost | ||||
Group | Bank | |||
| 2025 | 2024 | 2025 | 2024 | |
| €000 | €000 | €000 | €000 | |
Concentration by type | ||||
As at 31 December: | ||||
Carrying amount: | ||||
Covered bonds | 435,270 | 432,107 | 101,645 | 101,672 |
National and regional government | 345,116 | 245,847 | 134,700 | 139,635 |
Supranational and agencies | 110,015 | 20,912 | 30,169 | 20,912 |
Total | 890,401 | 698,866 | 266,514 | 262,219 |
Securitisation Investment portfolio
The Group’s and Bank’s Securitisation Investment portfolio comprise the investment in CLO transactions managed by
third-party entities, amounting to €389.7 million (2024: €510.7 million) and €84.0 million (2024: €119.7 million) for the
Group and Bank respectively. The Group’s and Bank’s investment in CLO transactions managed by third-party entities
comprise positions in the most senior tranche of 20 different CLOs at Group (2024: 24) and 7 at Bank level (2024: 8), all
|me> direct Annual Report and Financial Statements 2025
123
As at 31 December 2025, credit loss allowances in respect of exposures classified under the CLO transactions managed
by third-party entities measured at amortised cost amounted to €39 thousand (2024: €51 thousand) and €8 thousand
(2024: €12 thousand) for the Group and Bank respectively.
Asset-Backed Securitisation Investment portfolio
The Group's and Bank's Asset-Backed Securitisation Investment portfolio comprises the investment in AAA-rated Dutch
and German securitisations of a pool of unsecured consumer loans, auto loan receivables, and residential mortgage
loans.
Credit loss allowances amounting to €99 thousand (2024: €95 thousand) and €16 thousand (2024: €10 thousand) were
recognised in respect of these exposures for the Group and Bank respectively.
2.2.8.2 Concentration of loans and advances to customers
An analysis of concentration of loans and advances to customers, excluding IFRS basis adjustment, by industry sector
and geography is shown in the following tables.
As at 31 December 2024, exposures to UK counterparties classified under the International Corporate Lending portfolio
|me> direct Annual Report and Financial Statements 2025
124
Exposures classified under Maltese Business Lending, Consumer Finance receivables, Maltese Mortgage, Dutch and
Belgian Mortgage portfolios are categorised as EU exposures in the following tables with the Maltese Business Lending
portfolio classified under “real estate activities” and “construction” sectors whereas the Consumer Finance receivables,
Dutch, Belgian and Maltese retail mortgage portfolio classified under the “household and individuals” sector. The
exposures disclosed in these tables are exclusive of the IFRS basis adjustment.
Group | Gross carrying amount | Credit loss allowance | ||||||||
| EU | Other European countries | North America | Asia | Total | EU | Other European countries | North America | Asia | Total | |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
Stage 1 | ||||||||||
As at 31 December 2025 | ||||||||||
Construction | 130,944 | - | - | - | 130,944 | (272) | - | - | - | (272) |
Households and individuals | 2,937,834 | - | - | - | 2,937,834 | (837) | - | - | - | (837) |
Real estate activities | 70,423 | - | - | - | 70,423 | (84) | - | - | - | (84) |
3,139,201 | - | - | - | 3,139,201 | (1,193) | - | - | - | (1,193) | |
Stage 2 | ||||||||||
As at 31 December 2025 | ||||||||||
Construction | 2,205 | - | - | - | 2,205 | (13) | - | - | - | (13) |
Financial and insurance activities | 10,847 | - | - | - | 10,847 | (351) | - | - | - | (351) |
Households and individuals | 24,255 | - | - | - | 24,255 | (340) | - | - | - | (340) |
Real estate activities | 193 | - | - | - | 193 | - | - | - | - | - |
37,500 | - | - | - | 37,500 | (704) | - | - | - | (704) | |
Stage 3 | ||||||||||
As at 31 December 2025 | ||||||||||
Construction | 2,897 | - | - | - | 2,897 | (156) | - | - | - | (156) |
Financial and insurance activities | 15,611 | - | - | - | 15,611 | (4,603) | - | - | - | (4,603) |
Households and individuals | 8,237 | - | - | - | 8,237 | (2,141) | - | - | - | (2,141) |
Real estate activities | 3,399 | - | - | - | 3,399 | (600) | - | - | - | (600) |
30,144 | - | - | - | 30,144 | (7,500) | - | - | - | (7,500) | |
Total | 3,206,845 | - | - | - | 3,206,845 | (9,397) | - | - | - | (9,397) |
Group | Nominal amount | Credit loss allowance | ||||||||
| EU | Other European countries | North America | Asia | Total | EU | Other European countries North America Asia | Total | |||
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 €000 | €000 | ||
Commitments to purchase financial assets, | ||||||||||
commitments to extend credit, guarantees | ||||||||||
and other commitments | ||||||||||
As at 31 December 2025 | ||||||||||
Construction | 117,721 | - | - | - | 117,721 | (5) | - | - - | (5) | |
Financial and insurance activities | 13,617 | - | - | - | 13,617 | (25) | - | - - | (25) | |
Households and individuals | 62,431 | - | - | - | 62,431 | (81) | - | - - | (81) | |
Real estate activities | 44,656 | - | - | - | 44,656 | - | - | - - | - | |
238,425 | - | - | - | 238,425 | (111) | - | - - | (111) | ||
|me> direct Annual Report and Financial Statements 2025
125
Group
Gross carrying amount
Credit loss allowance
EU
Other
European
countries
North
America
Asia
Total
EU
Other
European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Stage 1
As at 31 December 2024
Construction
89,566
-
-
-
89,566
(247)
-
-
-
(247)
Financial and insurance activities
25,493
8,051
7,440
-
40,984
(262)
(54)
(28)
-
(344)
Households and individuals
2,691,602
-
-
-
2,691,602
(750)
-
-
-
(750)
Information and communication
16,796
-
-
-
16,796
(106)
-
-
-
(106)
Manufacturing
18,026
-
5,388
-
23,414
(85)
-
(35)
-
(120)
Professional, scientific and technical
activities
8,001
-
-
-
8,001
(22)
-
-
-
(22)
Real estate activities
57,560
-
-
-
57,560
(110)
-
-
-
(110)
Wholesale and retail trade, repairs of
motor vehicles and motorcycles
12,080
-
8,045
-
20,125
(92)
-
-
-
(92)
2,919,124
8,051
20,873
-
-
2,948,048
(1,674)
(54)
(63)
-
(1,791)
Stage 2
As at 31 December 2024
Construction
1,544
-
-
-
1,544
-
-
-
-
-
Financial and insurance activities
17,305
-
9,319
-
26,624
(348)
-
(105)
-
(453)
Households and individuals
12,536
-
-
-
12,536
(200)
-
-
-
(200)
Professional, scientific and technical
activities
25,577
-
-
-
25,577
(36)
-
-
-
(36)
Real estate activities
28
-
-
-
28
-
-
-
-
-
56,990
-
9,319
-
66,309
(584)
-
(105)
-
(689)
Stage 3
As at 31 December 2024
Accommodation and food service
activities
-
21,222
-
-
21,222
-
(1,366)
-
-
(1,366)
Construction
2,742
-
-
-
2,742
(165)
-
-
-
(165)
Financial and insurance activities
37,670
-
-
-
37,670
(9,729)
-
-
-
(9,729)
Households and individuals
3,278
-
-
-
3,278
(263)
-
-
-
(263)
Real estate activities
3,904
-
-
-
3,904
(600)
-
-
-
(600)
Wholesale and retail trade, repairs of
motor vehicles and motorcycles
351
-
-
-
351
(116)
-
-
-
(116)
47,945
21,222
-
-
69,167
(10,873)
(1,366)
-
-
(12,239)
POCI
As at 31 December 2024
Financial and insurance activities
453
-
-
-
453
(223)
-
-
-
(223)
453
-
-
-
453
(223)
-
-
-
(223)
Total
3,024,512
29,273
30,192
-
3,083,977
(13,354)
(1,420)
(168)
-
(14,942)
Group
Nominal amount
Credit loss allowance
EU
Other
European
countries
North
America
Asia
Total
EU
Other
European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Commitments to purchase financial assets,
commitments to extend credit, guarantees and other
commitments
As at 31 December 2024
Accommodation and food service activities
-
1,017
-
-
1,017
-
(65)
-
-
(65)
Construction
102,393
-
-
-
102,393
(75)
-
-
-
(75)
Financial and insurance activities
-
-
15,366
-
15,366
-
-
(69)
-
(69)
Households and individuals
68,721
-
-
-
68,721
(69)
-
-
-
(69)
Real estate activities
25,332
-
-
-
25,332
-
-
-
-
-
196,446
1,017
15,366
-
212,829
(144)
(65)
(69)
-
(278)
|me> direct Annual Report and Financial Statements 2025
126
Bank
Gross carrying amount
Credit loss allowance
EU
Other
European
countries
North
America
Asia
Total
EU
Other
European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Stage 1
As at 31 December 2025
Construction
130,944
-
-
-
130,944
(272)
-
-
-
(272)
Households and individuals
159,780
-
-
-
159,780
(336)
-
-
-
(336)
Real estate activities
70,423
-
-
-
70,423
(84)
-
-
-
(84)
361,147
-
-
-
361,147
(692)
-
-
-
(692)
Stage 2
As at 31 December 2025
Construction
2,205
-
-
-
2,205
(13)
-
-
-
(13)
Financial and insurance activities
10,838
-
-
-
10,838
(351)
-
-
-
(351)
Households and individuals
1,292
-
-
-
1,292
(11)
-
-
-
(11)
Real estate activities
193
-
-
-
193
-
-
-
-
-
14,528
-
-
-
14,528
(375)
-
-
-
(375)
Stage 3
As at 31 December 2025
Construction
2,897
-
-
-
2,897
(156)
-
-
-
(156)
Financial and insurance activities
15,610
-
-
-
15,610
(4,603)
-
-
-
(4,603)
Households and individuals
1,675
-
-
-
1,675
(1,562)
-
-
-
(1,562)
Real estate activities
3,399
-
-
-
3,399
(600)
-
-
-
(600)
23,581
-
-
-
23,581
(6,921)
-
-
-
(6,921)
Total
399,256
-
-
-
399,256
(7,988)
-
-
-
(7,988)
Bank
Nominal amount
Credit loss allowance
EU
Other European
countries
North
America
Asia
Total
EU
Other European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Commitments to purchase financial assets,
commitments to extend credit, guarantees and other
commitments
As at 31 December 2025
Construction
117,721
-
-
-
117,721
(5)
-
-
-
(5)
Financial and insurance activities
70,000
-
-
-
70,000
-
-
-
-
-
Households and individuals
28,596
-
-
-
28,596
(64)
-
-
-
(64)
Real estate activities
44,656
-
-
-
44,656
-
-
-
-
-
260,973
-
-
-
260,973
(69)
-
-
-
(69)
|me> direct Annual Report and Financial Statements 2025
127
Bank
Gross carrying amount
Credit loss allowance
EU
Other
European
countries
North
America
Asia
Total
EU
Other
European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Stage 1
As at 31 December 2024
Construction
89,566
-
-
-
89,566
(247)
-
-
-
(247)
Financial and insurance activities
10,811
-
7,438
-
18,249
(104)
-
(28)
-
(132)
Households and individuals
133,307
-
-
-
133,307
(342)
-
-
-
(342)
Information and communication
6,792
-
-
-
6,792
(39)
-
-
-
(39)
Manufacturing
8,045
-
5,388
-
13,433
(50)
-
(35)
-
(85)
Professional, scientific and technical activities
8,001
-
-
-
8,001
(22)
-
-
-
(22)
Real estate activities
57,560
-
-
-
57,560
(110)
-
-
-
(110)
314,082
-
12,826
-
326,908
(914)
-
(63)
-
(977)
Stage 2
As at 31 December 2024
Construction
1,395
-
-
-
1,395
-
-
-
-
-
Financial and insurance activities
17,305
-
999
-
18,304
(348)
-
(11)
-
(359)
Households and individuals
339
-
-
-
339
(3)
-
-
-
(3)
Professional, scientific and technical activities
25,575
-
-
-
25,575
(36)
-
-
-
(36)
Real estate activities
28
-
-
-
28
-
-
-
-
-
44,642
-
999
-
45,641
(387)
-
(11)
-
(398)
Stage 3
As at 31 December 2024
Accommodation and food service activities
-
9,604
-
-
9,604
-
(618)
-
-
(618)
Construction
2,742
-
-
-
2,742
(165)
-
-
-
(165)
Financial and insurance activities
27,412
-
-
-
27,412
(1,484)
-
-
-
(1,484)
Households and individuals
764
-
-
-
764
(63)
-
-
-
(63)
Real estate activities
3,904
-
-
-
3,904
(600)
-
-
-
(600)
Wholesale and retail trade, repairs of motor
vehicles and motorcycles
351
-
-
-
351
(116)
-
-
-
(116)
35,173
9,604
-
-
44,777
(2,428)
(618)
-
-
(3,046)
POCI
As at 31 December 2024
Financial and insurance activities
453
-
-
-
453
(223)
-
-
-
(223)
453
-
-
-
453
(223)
-
-
-
(223)
Total
394,350
9,604
13,825
-
417,779
(3,952)
(618)
(74)
-
(4,644)
Bank
Nominal amount
Credit loss allowance
EU
Other
European
countries
North
America
Asia
Total
EU
Other
European
countries
North
America
Asia
Total
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Commitments to purchase financial assets,
commitments to extend credit, guarantees and
other commitments
As at 31 December 2024
Accommodation and food service activities
-
460
-
-
460
-
(30)
-
-
(30)
Construction
102,393
-
-
-
102,393
(75)
-
-
-
(75)
Financial and insurance activities
70,000
-
-
-
70,000
-
-
-
-
-
Households and individuals
28,271
-
-
-
28,271
(52)
-
-
-
(52)
Real estate activities
25,332
-
-
-
25,332
-
-
-
-
-
225,996
460
-
-
226,456
(127)
(30)
-
-
(157)
2.2.9 Offsetting financial assets and financial liabilities
The Group is eligible to present certain financial assets and financial liabilities on a net basis in the statement of financial
position in accordance with the Group’s policy described in Note 1.6 ‘Offsetting Financial Instruments’.
The following tables set out:
- the impact of offsetting financial assets and financial liabilities on the consolidated statement of financial
position.
- the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar
agreement; and
- the available financial collateral received or pledged in relation to the total amounts of assets and liabilities that
were not offset.
|me> direct Annual Report and Financial Statements 2025
128
The Group enters into derivative transactions under International Swap and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the amounts owed by each counterparty on a single day in respect of all
transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the
other. In certain circumstances such as when an event of default occurs, all outstanding transactions under the agreement
are terminated and settled in a single net amount per currency.
The ISDA agreements do not meet the criteria for offsetting the positive and negative values in the statement of financial
position. This is attributable to the fact that the Group and its counterparties do not have any currently legally enforceable
right to settle on a net basis or to realise the asset and settle the liability simultaneously because the right to offset is
enforceable only on the occurrence of future credit events.
The Group also pledges and receives collateral in the form of cash and marketable securities primarily for sale and
repurchase agreements and for margining purposes on OTC derivative transactions. Pledges are generally conducted
under terms that are usual and customary for standard contracts and transactions of this nature. The rights of set off
relating to such collateral are conditional upon the default of the counterparty. The financial instruments subject to such
collateral arrangements are included in the table below within ‘Financial collateral pledged/(received)’.
The net amount of financial instruments that do not meet the on-balance sheet offsetting criteria, including collateral
pledged and received, presented within the following tables is equal to the amount presented in the statement of financial
position for that instrument.
The following table shows financial instruments subject to offsetting, enforceable master netting arrangements and similar
agreements.
Group
Related amounts not offset in the
statement of financial position
Gross amounts
of recognised
financial
instruments
Gross amounts of
recognised financial
instruments offset in
the statement of
financial position
Net amounts of
financial
instruments
presented in the
statement of
financial position
Amounts
subject to
master netting
arrangements
Financial collateral
pledged/(received)
(incl. cash)
Net amount
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Derivative financial instruments
185,928
-
185,928
(40)
-
-
185,888
Loans and advances to financial institutions
414,036
(85,032)
329,004
-
-
(11,164)
317,840
Investments - Securities Portfolio
890,401
-
890,401
-
--
(125,795)
764,606
Investments - Securitisation Portfolio
392,060
-
392,060
-
-
(124,363)
267,697
Investments - Asset-Backed Securitisation
Portfolio
158,994
-
158,994
-
-
158,994
2,041,419
(85,032)
1,956,387
(40)
(261,322)
1,695,025
Financial liabilities
Derivative financial instruments
(11,204)
-
(11,204)
40
11,164
-
-
Amounts owed to financial institutions
(294,846)
85,032
(209,814)
-
-
250,158
40,344
(306,050)
85,032
(221,018)
40
261,322
40,344
|me> direct Annual Report and Financial Statements 2025
129
Group
Related amounts not offset in the
statement of financial position
Gross amounts
of recognised
financial
instruments
Gross amounts of
recognised financial
instruments offset in
the statement of
financial position
Net amounts of
financial
instruments
presented in the
statement of
financial position
Amounts
subject to
master netting
arrangements
Financial collateral
pledged/(received)
(incl. cash)
Net amount
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Derivative financial instruments
175,310
-
175,310
(396)
-
-
174,914
Loans and advances to financial institutions
316,179
-
316,179
-
-
(32,285)
283,894
Investments - Securities Portfolio
698,866
-
698,866
-
-
(130,362)
568,504
Investments - Securitisation Portfolio
514,669
-
514,669
-
-
(123,697)
390,972
Investments - Asset-Backed Securitisation
Portfolio
145,285
-
145,285
-
-
145,285
1,850,309
-
1,850,309
(396)
(286,344)
1,563,569
Financial liabilities
Derivative financial instruments
(32,681)
-
(32,681)
396
32,285
-
-
Amounts owed to financial institutions
(179,777)
-
(179,777)
-
-
254,059
74,282
(212,458)
-
(212,458)
396
286,344
74,282
Derivative financial liabilities and loans and advances to financial institutions are offset as a netting agreement is in place
with the counterparty in order to set-off the liabilities against the assets received. There is a legal right to settle, or
Bank
Related amounts not offset in the
statement of financial position
Gross amounts
of recognised
financial
instruments
Gross amounts of
recognised financial
instruments offset in
the statement of
financial position
Net amounts of
financial
instruments
presented in the
statement of
financial position
Amounts
subject to
master netting
arrangements
Financial collateral
pledged/(received)
(incl. cash)
Net amount
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Derivative financial instruments
184
-
184
(59)
-
-
125
Loans and advances to financial institutions
61,735
(7,408)
54,327
-
--
(700)
53,627
Investments - Securities Portfolio
266,514
-
266,514
-
-
(17,368)
249,146
Investments - Securitisation Portfolio
84,488
-
84,488
-
-
-
-
84,488
Investments - Asset-Backed Securitisation
Portfolio
32,784
-
32,784
-
-
32,784
445,705
(7,408)
438,297
(59)
(18,068)
420,170
Financial liabilities
Derivative financial instruments
(759)
-
(759)
59
700
-
Amounts owed to financial institutions
(13,501)
7,408
(6,093)
-
-
17,368
11,275
(14,260)
7,408
(6,852)
59
18,068
11,275
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130
Bank
Related amounts not offset in the
statement of financial position
Gross amounts
of recognised
financial
instruments
Gross amounts of
recognised financial
instruments offset in
the statement of
financial position
Net amounts of
financial
instruments
presented in
the statement
of financial
position
Amounts subject
to master netting
arrangements
Financial collateral
pledged/(received)
(incl. cash)
Net amount
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Derivative financial instruments
797
-
797
(163)
-
-
634
Loans and advances to financial institutions
37,074
-
37,074
-
-
(670)
36,404
Investments - Securities Portfolio
262,219
-
262,219
-
-
(17,106)
245,113
Investments - Securitisation Portfolio
120,714
-
120,714
-
-
-
-
120,714
Investments - Asset-Backed Securitisation
Portfolio
13,699
-
13,699
-
-
13,699
434,503
-
434,503
(163)
(17,776)
416,564
Financial liabilities
Derivative financial instruments
(833)
-
(833)
163
670
-
-
Amounts owed to financial institutions
(6,744)
-
(6,744)
-
-
17,106
10,362
(7,577)
-
(7,577)
163
17,776
10,362
As at 31 December 2025, the Group’s and Bank’s derivative financial liabilities subject to master-netting agreements have
a fair value of €40 thousand (2024: €0.4 million) and €59 thousand (2024: €0.2 million) respectively. Within the preceding
table, these have been capped at the fair value of the derivative assets of the Group and Bank amounting to €40
2.3 Liquidity Risk
2.3.1 Management of liquidity risk
In line with the Group’s Liquidity Risk Management Policy, management of the Group’s liquidity position is the
responsibility of its Treasury Operations and ALM function under the oversight of the Asset and Liability Committee
(“ALCO”) and the Board Risk and Compliance Committee ("BRCC"). The Treasury Operations and ALM function have
primary responsibility for managing and reporting the Group’s projected liquidity position (the “base case”) to the ALCO.
The Group’s Risk team ensures that all liquidity risks are independently identified, measured, overseen and reported. In
particular, the Risk team has primary responsibility for monitoring liquidity risk, including defining potential adverse liquidity
scenarios (“stress cases”) that are considered for assessing the Group’s exposure to these scenarios and for assessing
the effectiveness of contingency plan funding measures, bringing to attention any potential shortfalls in liquidity
contingencies.
The Group’s liquidity risks principally relate to its banking activities and the Group’s Board of Directors sets, approves and
oversees the implementation of the targets for liquidity management of the Group. Analysis of liquidity risk is the joint
responsibility of the Group’s Treasury Operations and ALM and Risk functions under the oversight of the ALCO and of the
BRCC.
MeDirect Malta and MeDirect Belgium are subject to capital and liquidity regulatory requirements and other restrictions
such as those emanating from the large exposures framework that may limit their ability to transact with affiliates. Thus,
the ability of the Group to transfer liquidity or capital between entities is subject to regulatory restrictions, which may limit
the availability of liquidity for the Group as a whole.
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131
Management Asset and Liability Committee
The Group has established an Asset and Liability Committee (“ALCO”) to ensure the Group has in place, and operates
effectively, appropriate and robust strategies and policies to manage and optimise the Group’s asset-liability mix and
oversee the Group’s capital, liquidity, funding, interest rate risk and foreign exchange (“FX”) risk position. Group ALCO
cascades Group strategies down across each business line and legal entities and across risk types and products. Group
ALCO oversees and, where necessary, approves Group policies and objectives for assets and liability management,
capital and funding management and allocation, market risk position and hedging activity, liquidity monitoring, capital
usage and efficiency, product-pricing, fund transfer pricing, dealing and trading activities according to the risk appetite
statement set by the Group Board. Group ALCO’s authority covers MeDirect Bank (Malta) plc and MDB Group Limited.
Belgium ALCO’s authority covers MeDirect Bank SA. Group ALCO is a sub-committee of the Group EXCO.
Board Risk and Compliance Committee
The Board delegates to the Board Risk and Compliance Committee ("BRCC") its oversight responsibilities of the risk
function. Therefore, the BRCC represents the principal forum for overseeing the Group’s liquidity and funding risk. In
addition, it is responsible for recommending to the Board an appropriate liquidity and funding risk appetite and for
approving liquidity risk-related policies and recommendations. The BRCC is also responsible for ensuring that all liquidity
risk controls are in accordance with regulatory requirements and best practice and for advising the Board on the
coordination and prioritisation of liquidity risk management issues throughout the Group.
The BRCC reviews regular reports on the liquidity position of the Group, including the review of stress testing scenarios to
assess the resilience of its liquidity buffers in relation to internal liquidity metrics and the minimum regulatory requirements
comprising the Liquidity Coverage Ratio (“LCR”) and the Net Stable Funding Ratio (“NSFR”). It is informed immediately of
new and emerging liquidity concerns and ensures that Executive management takes appropriate remedial actions to
address the concerns, including the viability of contingency funding options in light of monthly stress test results.
Roles and responsibilities
The Group’s Treasury team, under the leadership of the Group Chief Financial Officer has primary responsibility for
managing and reporting the Group’s projected liquidity position (the “base case”). For liquidity purposes, the Group’s
balance sheet, encompassing both assets and liabilities, is managed on an intraday and day-to-day basis, and includes
monitoring compliance with metrics of current liquidity. The department is also responsible for forecasting the Group’s
future cash flow profile, as well as for analysis and management of the Group’s deposit book.
The Group’s Risk team, under the leadership of the Group Chief Risk Officer (“CRO”), has primary responsibility of
independently monitoring current liquidity performance as well as defining potential adverse liquidity scenarios that should
be considered, and for reporting exposure to these scenarios (the “downside case”). Under the leadership of the Group
CRO, it is responsible for ensuring that all significant risks relating to liquidity are properly identified and clearly
incorporated into the Group’s risk management and reporting framework. It is also responsible for producing reports that
show and analyse the Group’s sensitivity to external events related to liquidity, including the definition of severe but
plausible events that could constitute stress scenarios.
Funding strategy
Banks traditionally perform a role of liquidity transformation, whereby they fund through liabilities that are liquid in the short
to medium term, in order to invest in longer term and less liquid assets. This mismatch of liquid liabilities and less liquid
assets is a near universal feature of bank balance sheets and clearly leads to a risk if liabilities cannot be rolled over when
|me> direct Annual Report and Financial Statements 2025
132
The Group’s strategy to mitigate this risk has four main components:
- Diversifying deposit product offerings as its primary instrument of funding by focusing on the retail and corporate
markets to maximise granularity and by expanding outside Malta indirectly through platforms to reduce its
dependence on a single market;
- Limiting its exposure to wholesale funding withdrawal by locking in term, rather than short-dated, funding against
illiquid assets (where this is used at all: illiquid assets are primarily deposit funded) and by either diversifying its
sources of funding in general or ensuring that it does not rely on funding that is at the discretion of market
counterparties;
- Maintaining a contingency source of funding by ensuring that substantially all of its HQLA Securities Investment
portfolio is eligible for funding at Eurex or at the ECB, as well as ensuring that other AAA-rated debt instruments
are eligible for use as collateral against multiple repo lines, if alternative sources are unavailable; and
- Holding a much higher than typical proportion of assets that could over time be liquidated or against which
funding can be obtained in the secondary market.
The Group’s objective is to maintain a prudent funding structure drawn from diverse funding sources in the short-,
medium- and long-term.
Potential funding sources may include, but are not limited to:
- Deposits from retail and corporate customers;
- Bond issuance, either secured (for example through the issuance of RMBSs, the latter representing one of the
main sources of funding for the Dutch Mortgage portfolio), senior unsecured or subordinated;
- Issuance of capital instruments; and
- Central Bank funding.
MDB Group Limited is the parent company of MeDirect Malta and this parent company together with its subsidiaries are
referred to as “the Regulatory Group” or “MDB Group”. The MDB Group and MeDirect Malta comply with the Liquidity
Coverage Ratio (“LCR”) in relation to short-term liquidity and monitor the Net Stable Funding Ratio (“NSFR”) in order to
assess long-term liquidity:
- The Liquidity Coverage Ratio (“LCR”): The ratio aims to ensure that institutions are able to withstand a 30-day
period of stress by virtue of having sufficient unencumbered High Quality Liquid Assets (“HQLA”). HQLA consist
of cash or assets that can be converted into cash at little or no loss of value in the markets. The LCR metric is
designed to promote the short-term resilience of the Group’s and Bank’s liquidity profile.
During the year ended 31 December 2025 and 2024, the LCR was within both the regulatory minimum and the risk
appetite set by the Group. As at 31 December 2025 and 2024, the Group’s and Bank's LCR was above 100% at all times.
- The Net Stable Funding Ratio (“NSFR”): This ratio looks at the relationship between long-term assets and long-
term funding. The NSFR requires institutions to maintain sufficient stable funding relative to required stable
funding and reflects a bank’s long-term funding profile (funding with a term of more than a year). It is designed to
complement the LCR and the NSFR requirement is of 100%.
The Group’s and Bank's NSFR remained above the minimum legal requirement of 100% and the risk appetite set by the
Group at all times during the financial year ended 31 December 2025 and 2024.
2.3.2 Liquidity risk reporting
Reliable liquidity management reporting is essential to provide the Executive and the Board with timely and forward-
looking information on the Group’s liquidity position. Reporting of risk measures is done on a weekly and monthly basis
and compares current liquidity exposures to established limits and stress tests to identify any emerging pressures and
limit breaches.
|me> direct Annual Report and Financial Statements 2025
133
The Group’s Risk team report regular stress testing of its liquidity profile, as well as the availability of contingency funding
options through both its ILAAP and monthly Maximum Cumulative Outflow (“MCO”) report. The MCO analyses the likely
risks to the Group’s liquidity position and quantifies its ability to withstand the associated shocks through deployment of
management contingency funding plan options. Summarised results from all the various analyses are used as inputs to
the MCO, with the liquidity impacts of different levels of severity of both idiosyncratic and market-wide scenarios modelled
across a twelve-month time horizon. In addition, the Group’s Liquidity Contingency Plan (“LCP”) analyses the availability
and practicability of its contingency funding measures with regards to idiosyncratic and market-wide stress scenarios.
Impacts are assessed at Group level, as well as at MeDirect Malta and MeDirect Bank SA individual levels.
The Risk team also monitors deposit concentration within its monthly risk management report where the Group’s top ten
depositors are monitored by also looking at the corporate sector and the product maturity ladder.
2.3.3 Contractual maturity ladder
The following is an analysis of financial assets and liabilities by remaining contractual maturities as at the reporting date,
with the exception of the analysis of loans and advances to customers classified under the International Corporate
Lending and Dutch and Belgian Mortgage portfolios, debt securities in issue and subordinated liabilities, that are based on
the expected maturities based on the date when the instruments are expected to be fully repaid, since this is how the
liquidity of the Group is monitored on a regular basis. Refer also to Note 2.3.5 that provides an analysis of encumbered
investments.
Cash flows on customer deposits are disclosed based on the contractual maturity date, thus resulting in a significant
negative liquidity gap in the “Not more than 1 month” bucket mainly because of deposit savings accounts that are
contractually repayable on demand, so they get placed in the earliest time bucket in the contractual maturity ladder.
Expected cash flows on customer deposits vary significantly from the contractual cash flows shown in the following table.
Customer deposits are largely repayable on demand but diversification of these deposits by number and type of
depositors, and the past experience of the Bank would indicate that these customer accounts provide a long-term and
stable source of funding for the Bank.
Group
Not more than 1
month
Between 1 and 3
months
Between 3 months and
1 year
Between 1 and 5
years
More than 5 years
No maturity date
Total
€000
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Assets
Balances with central banks
234,516
-
-
-
-
38,047
272,563
Derivative financial instruments
296
1,502
3,343
27,880
152,907
-
185,928
Loans and advances to financial institutions
329,004
-
-
-
-
-
329,004
Loans and advances to customers
26,975
54,561
212,663
1,259,006
1,644,243
-
3,197,448
- International Corporate Lending portfolio
268
-
-
21,236
-
-
21,504
- Dutch Mortgage portfolio
16,189
29,517
146,496
887,178
1,186,306
-
2,265,686
- Belgian Mortgage portfolio
6,059
17,859
50,777
206,384
259,405
-
540,484
- Maltese Business Lending portfolio
4,088
5,218
8,129
118,700
72,801
-
208,936
- Maltese Mortgage portfolio
4
1,234
3,963
20,435
125,731
-
151,367
- Consumer Finance receivables
367
733
3,298
5,073
-
-
9,471
Investments
28,361
26,926
190,552
378,230
817,386
-
1,441,455
- Securities portfolio
28,361
26,926
190,552
378,230
266,332
-
890,401
- Securitisation portfolio
-
-
-
-
392,060
-
392,060
- Asset-Backed Securitisation portfolio
-
-
-
-
158,994
-
158,994
Accrued income
2,670
-
-
-
-
-
2,670
Loans to related parties (incl. in other assets)
-
--
-
-
-
-
1,321
1,321
Other receivables (incl. in other assets)
-
--
-
-
-
-
2,769
2,769
Other assets (incl. in other assets)
-
-
-
-
-
-
34,728
34,728
Subtotal
621,822
82,989
406,558
1,665,116
2,614,536
76,865
5,467,886
- IFRS basis adjustment: International Mortgage portfolio
-
-
-
-
-
(174,573)
(174,573)
- IFRS basis adjustment: Maltese Business Lending portfolio
-
-
-
-
-
519
519
Total financial assets
621,822
82,989
406,558
1,665,116
2,614,536
(97,189)
5,293,832
Liabilities
Derivative financial instruments
234
-
658
5,438
4,874
-
11,204
Amounts owed to financial institutions
584
209,230
-
-
-
-
209,814
Amounts owed to customers
3,587,924
99,511
346,985
104,518
82
-
4,139,020
Debt securities in issue
-
1,890
282,532
317,975
-
-
602,397
Subordinated liabilities
-
950
55,414
10,965
-
-
67,329
Lease liabilities (incl. in other liabilities)
391
8
399
781
50
-
1,629
Total financial liabilities
3,589,133
311,589
685,988
439,677
5,006
-
5,031,393
Liquidity gap
(2,967,311)
(228,600)
(279,430)
1,225,439
2,609,530
Cumulative liquidity gap
(2,967,311)
(3,195,911)
(3,475,341)
(2,249,902)
359,628
|me> direct Annual Report and Financial Statements 2025
134
Group | Not more than 1 month | Between 1 and 3 months | Between 3 months and 1 year | Between 1 and 5 years | More than 5 years | No maturity date | Total |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2024 | |||||||
Assets | |||||||
Balances with central banks | 171,500 | - | - | - | - | 35,368 | 206,868 |
Derivative financial instruments | 396 | - | 2,254 | 23,058 | 149,091 | 511 | 175,310 |
Loans and advances to financial institutions | 302,425 | 13,754 | - | - | - | - | 316,179 |
Loans and advances to customers | 23,083 | 51,700 | 174,986 | 1,168,771 | 1,650,495 | - | 3,069,035 |
- International Corporate Lending portfolio | 1,378 | 2,834 | 231 | 198,965 | 5,351 | - | 208,759 |
- Dutch Mortgage portfolio | 13,647 | 35,593 | 133,964 | 756,235 | 1,266,517 | - | 2,205,956 |
- Belgian Mortgage portfolio | 3,181 | 7,157 | 27,182 | 118,689 | 210,036 | - | 366,245 |
- Maltese Business Lending portfolio | 4,698 | 4,901 | 8,692 | 74,324 | 61,458 | - | 154,073 |
- Maltese Mortgage portfolio | 7 | 870 | 3,367 | 17,897 | 107,133 | - | 129,274 |
- Consumer Finance receivables | 172 | 345 | 1,550 | 2,661 | - | - | 4,728 |
Investments | - | 29,331 | 9,943 | 490,028 | 829,518 | - | 1,358,820 |
- Securities portfolio | - | 24,991 | 9,816 | 490,028 | 174,031 | - | 698,866 |
- Securitisation portfolio | - | 3,914 | 127 | - | 510,628 | - | 514,669 |
- Asset-Backed Securitisation portfolio | - | 426 | - | - | 144,859 | - | 145,285 |
Accrued income | 1,454 | - | - | - | - | - | 1,454 |
Loans to related parties (incl. in other assets) | - | - | - | - | - | 48 | 48 |
Other receivables (incl. in other assets) | - | - | - | - | - | 1,501 | 1,501 |
Other assets (incl. in other assets) | - | - | - | - | - | 23,334 | 23,334 |
Subtotal | 498,858 | 94,785 | 187,183 | 1,681,857 | 2,629,104 | 60,762 | 5,152,549 |
- IFRS basis adjustment: International Mortgage portfolio | - | - | - | - | - | (142,246) | (142,246) |
- IFRS basis adjustment: Maltese Business Lending portfolio | - | - | - | - | - | 686 | 686 |
Total financial assets | 498,858 | 94,785 | 187,183 | 1,681,857 | 2,629,104 | (80,798) | 5,010,989 |
Liabilities | |||||||
Derivative financial instruments | 165 | - | 755 | 8,813 | 22,948 | - | 32,681 |
Amounts owed to financial institutions | 22,600 | 157,177 | - | - | - | - | 179,777 |
Amounts owed to customers | 3,165,521 | 150,342 | 421,194 | 142,909 | 69 | - | 3,880,035 |
Debt securities in issue | 5,590 | 11,181 | 49,210 | 575,692 | - | - | 641,673 |
Subordinated liabilities | - | 950 | 55,687 | 10,721 | - | - | 67,358 |
Lease liabilities (incl. in other liabilities) | 109 | 413 | 755 | 1,942 | 70 | - | 3,289 |
Total financial liabilities | 3,193,985 | 320,063 | 527,601 | 740,077 | 23,087 | - | 4,804,813 |
Liquidity gap | (2,695,127) | (225,278) | (340,418) | 941,780 | 2,606,017 | ||
Cumulative liquidity gap | (2,695,127) | (2,920,405) | (3,260,823) | (2,319,043) | 286,974 |
Bank
Not more
than 1
month
Between 1 and
3 months
Between 3
months and
1 year
Between 1
and 5 years
More than 5
years
No maturity
date
Total
€000
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Assets
Balances with central banks
67,249
-
-
-
-
7,344
74,593
Derivative financial instruments
184
-
-
-
-
-
184
Loans and advances to financial institutions
54,327
-
-
-
-
-
54,327
Loans and advances to customers
4,726
7,185
15,390
165,435
198,532
-
391,268
- International Corporate Lending portfolio
267
-
-
21,227
-
-
21,494
- Maltese Business Lending portfolio
4,088
5,218
8,129
118,700
72,801
-
208,936
- Maltese Mortgage portfolio
4
1,234
3,963
20,435
125,731
-
151,367
- Consumer Finance receivables
367
733
3,298
5,073
-
-
9,471
Investments
12,892
-
119,247
114,427
137,220
-
383,786
- Securities portfolio
12,892
-
119,247
114,427
19,948
-
266,514
- Securitisation portfolio
-
-
-
-
84,488
-
84,488
- Asset-Backed Securitisation portfolio
-
-
-
-
32,784
-
32,784
Accrued income
822
-
-
-
-
-
822
Loans to related parties (incl. in other assets)
-
-
-
-
-
4,596
4,596
Other receivables (incl. in other assets)
-
-
-
-
-
2,577
2,577
Other assets (incl. in other assets)
-
-
-
-
-
2,012
2,012
Total financial assets
140,200
7,185
134,637
279,862
335,752
16,529
914,165
- IFRS basis adjustment: Maltese Business Lending portfolio
-
-
-
-
-
519
519
Total financial assets
140,200
7,185
134,637
279,862
335,752
17,048
914,684
Liabilities
Derivative financial instruments
139
-
44
388
188
-
759
Amounts owed to financial institutions
6,093
-
-
-
-
-
6,093
Amounts owed to customers
524,311
62,533
195,829
25,833
12
-
808,518
Subordinated liabilities
-
950
55,414
10,965
-
-
67,329
Lease liabilities (incl. in other liabilities)
411
40
528
982
251
-
2,212
Total financial liabilities
530,954
63,523
251,815
38,168
451
-
884,911
Liquidity gap
(390,754)
(56,338)
(117,178)
241,694
335,301
Cumulative liquidity gap
(390,754)
(447,092)
(564,270)
(322,576)
12,725
|me> direct Annual Report and Financial Statements 2025
135
Bank
Not more
than 1
month
Between 1
and 3
months
Between 3
months and 1
year
Between 1
and 5 years
More than 5
years
No maturity
date
Total
€000
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Assets
Balances with central banks
57,529
-
-
-
-
7,087
64,616
Derivative financial instruments
286
-
-
-
-
511
797
Loans and advances to financial institutions
37,012
62
-
-
-
-
37,074
Loans and advances to customers
6,255
7,839
13,840
211,258
173,943
-
413,135
- International Corporate Lending portfolio
1,378
1,723
231
116,376
5,352
-
125,060
- Maltese Business Lending portfolio
4,698
4,901
8,692
74,324
61,458
-
154,073
- Maltese Mortgage portfolio
7
870
3,367
17,897
107,133
-
129,274
- Consumer Finance receivables
172
345
1,550
2,661
-
-
4,728
Investments
-
23,012
5,440
211,911
156,269
-
396,632
- Securities portfolio
-
22,091
5,313
211,911
22,904
-
262,219
- Securitisation portfolio
-
896
127
-
119,691
-
120,714
- Asset-Backed Securitisation portfolio
-
25
-
-
13,674
-
13,699
Accrued income
481
-
-
-
-
-
481
Loans to related parties (incl. in other assets)
-
-
-
-
-
5,075
5,075
Other receivables (incl. in other assets)
-
-
-
-
-
1,326
1,326
Other assets (incl. in other assets)
-
-
-
-
-
2,057
2,057
Subtotal
101,563
30,913
19,280
423,169
330,212
16,056
921,193
- IFRS basis adjustment: Maltese Business Lending portfolio
-
-
-
-
-
686
686
Total financial assets
101,563
30,913
19,280
423,169
330,212
16,742
921,879
Liabilities
Derivative financial instruments
163
-
-
627
43
-
833
Amounts owed to financial institutions
6,744
-
-
-
-
-
6,744
Amounts owed to customers
541,768
64,374
153,198
68,268
18
-
827,626
Subordinated liabilities
-
950
55,687
10,721
-
-
67,358
Lease liabilities (incl. in other liabilities)
84
489
730
1,660
70
-
3,033
Total financial liabilities
548,759
65,813
209,615
81,276
131
-
905,594
Liquidity gap
(447,196)
(34,900)
(190,335)
341,893
330,081
Cumulative liquidity gap
(447,196)
(482,096)
(672,431)
(330,538)
(457)
Current accounts and savings deposits payable on demand or at short notice of the Group and Bank amounted to €3,587
million (2024: €2,299 million) and €524 million (2024: €332 million), respectively, as at 31 December 2025. This amount is
disclosed within the ‘Not more than 1 month’ maturity grouping. As at 31 December 2025 savings deposits with a
withdrawal notice period of one month amounting to €546 thousand (2024: €339 thousand) and €416 thousand (2024:
€211 thousand) for the Group and the Bank respectively, are disclosed within the ‘Between 1 and 3 months' maturity
grouping. In addition, as at 31 December 2025 savings deposits with a withdrawal notice period of three to six months
amounting to €66 million (2024: €82 million) and €15 million (2024: €11 million) for the Group and the Bank respectively,
are disclosed within the ‘Between 3 months and 1 year’ maturity grouping. Furthermore, as at 31 December 2025, savings
deposits with a withdrawal notice period of one year for the Group amounting to €12 million (2024: €21 million), are
disclosed within the ‘Between 1 year and 5 years’ maturity grouping. However, in practice these deposits are maintained
with the Group and Bank for longer periods; hence the effective date of repayment is later than the contractual date.
As of 31 December 2025, unencumbered financial assets classified as Securities Investments measured at amortised
cost with a carrying amount of €818.6 million (2024: €568.0 million) and €253.4 million (2024: €245.1 million) for the
Group and the Bank respectively, form part of the high-quality liquid asset portfolio for LCR purposes. Accordingly, they
may be liquidated within one month.
As at 31 December 2024, the Group’s and Bank’s cash from margin balances amounting to €24.5 million and €7.4 million,
respectively, may become available upon maturity of the contract, favourable change in the market value/change in the
|me> direct Annual Report and Financial Statements 2025
136
2.3.4 Residual contractual maturities of financial liabilities
The following is an analysis of undiscounted cash flows payable under the principal non-derivative financial liabilities by
remaining contractual maturities as at the reporting date, except for debt securities in issue and subordinated liabilities for
which undiscounted cash flows payable are presented by expected maturities in line with the Contractual Maturity Ladder
presented in Note 2.3.3.
Group | Carrying amount | Total outflows | Not more than 1 month | Between 1 and 3 months | Between 3 months and 1 year | Between 1 and 5 years | More than 5 years |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2025 | |||||||
Non-derivative liabilities | |||||||
Amounts owed to financial institutions | |||||||
- Due to clearing houses | 178,074 | 178,074 | - | 178,074 | - | - | - |
- Due to other banks | 31,740 | 31,740 | 31,740 | - | - | - | - |
Amounts owed to customers | 4,139,020 | 4,152,036 | 3,587,997 | 99,878 | 353,300 | 110,772 | 89 |
Debt securities in issue | 602,397 | 627,985 | - | 4,141 | 292,009 | 331,835 | - |
Subordinated liabilities | 67,329 | 70,748 | - | 1,073 | 57,602 | 12,073 | - |
Lease liabilities (included in other liabilities) | 1,629 | 1,711 | 396 | 8 | 443 | 813 | 51 |
5,020,189 | 5,062,294 | 3,620,133 | 283,174 | 703,354 | 455,493 | 140 | |
Group | Carrying amount | Total outflows | Not more than 1 month | Between 1 and 3 months | Between 3 months and 1 year | Between 1 and 5 years | More than 5 years |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2024 | |||||||
Non-derivative liabilities | |||||||
Amounts owed to financial institutions | |||||||
- Due to clearing houses | 157,177 | 157,177 | - | 157,177 | - | - | - |
- Due to other banks | 22,600 | 22,600 | 22,600 | - | - | - | - |
Amounts owed to customers | 3,880,035 | 3,892,945 | 3,165,573 | 151,164 | 426,477 | 149,662 | 69 |
Debt securities in issue | 641,673 | 682,344 | 5,945 | 11,890 | 52,329 | 241,626 | 370,554 |
Subordinated liabilities | 67,358 | 72,893 | - | 1,073 | 57,602 | 14,218 | - |
Lease liabilities (included in other liabilities) | 3,289 | 3,510 | 115 | 427 | 773 | 2,093 | 102 |
4,772,132 | 4,831,469 | 3,194,233 | 321,731 | 537,181 | 407,599 | 370,725 |
Bank
Carrying
amount
Total
outflows
Not more than 1
month
Between 1 and 3
months
Between 3 months
and 1 year
Between 1 and
5 years
More than
5 years
€000
€000
€000
€000
€000
€000
€000
31 December 2025
Non-derivative liabilities
Amounts owed to financial institutions
- Due to other banks
6,093
6,093
6,093
-
-
-
-
Amounts owed to customers
808,518
817,231
524,352
62,775
202,549
27,543
12
Subordinated liabilities
67,329
70,748
-
1,073
57,602
12,073
-
Lease liabilities (included in other liabilities)
2,212
2,269
410
41
553
1,013
252
884,152
896,341
530,855
63,889
260,704
40,629
264
Bank
Carrying
amount
Total
outflows
Not more than 1
month
Between 1 and 3
months
Between 3 months
and 1 year
Between 1 and
5 years
More than
5 years
€000
€000
€000
€000
€000
€000
€000
31 December 2024
Non-derivative liabilities
Amounts owed to financial institutions
- Due to other banks
6,744
6,744
6,744
-
-
-
-
Amounts owed to customers
827,626
833,499
541,796
64,673
155,365
71,647
18
Subordinated liabilities
67,358
72,893
-
1,073
57,602
14,218
-
Lease liabilities (included in other liabilities)
3,033
3,184
91
496
772
1,723
102
904,761
916,320
548,631
66,242
213,739
87,588
120
|me> direct Annual Report and Financial Statements 2025
137
The following is an analysis of undiscounted cash flows relating to the Group’s and Bank’s principal derivative financial
instruments by remaining contractual maturities as at the reporting date:
Group | Carrying amount | Inflows/ (Outflows) | Not more than 1 month | Between 1 and 3 months | Between 3 months and 1 year | Between 1 and 5 years | More than 5 years |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
31 December 2025 | |||||||
Derivative assets | |||||||
Derivative financial instruments | |||||||
- Interest rate swaps | 185,744 | 205,893 | 1,571 | 2,207 | 14,612 | 70,310 | 117,193 |
- Foreign exchange swaps | 184 | (216) | (216) | - | - | - | - |
Inflows | 47,322 | 47,322 | - | - | - | - | |
Outflows | (47,538) | (47,538) | - | - | - | - | |
185,928 | 205,677 | 1,355 | 2,207 | 14,612 | 70,310 | 117,193 | |
Derivative liabilities | |||||||
Derivative financial instruments | |||||||
- Interest rate swaps | 10,968 | (17,180) | (452) | (678) | (5,468) | (10,724) | 142 |
- Foreign exchange swaps | 236 | 228 | 228 | - | - | - | - |
| Inflows | 36,196 | 36,196 | - | - | - | - | |
| Outflows | (35,968) | (35,968) | - | - | - | - | |
11,204 | (16,952) | (224) | (678) | (5,468) | (10,724) | 142 | |
Group | Carrying amount | Inflows/ (Outflows) | Not more than 1 month | Between 1 and 3 months | Between 3 months and 1 year | Between 1 and 5 years | More than 5 years |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
31 December 2024 | |||||||
Derivative assets | |||||||
Derivative financial instruments | |||||||
- Interest rate swaps | 174,403 | 201,341 | 2,577 | 3,328 | 20,871 | 78,186 | 96,379 |
- Foreign exchange swaps | 396 | (409) | (409) | - | - | - | - |
| Inflows | 55,922 | 55,922 | - | - | - | - | |
| Outflows | (56,331) | (56,331) | - | - | - | - | |
| - Other derivative financial instruments (no maturity) | 511 | - | - | - | - | - | - |
175,310 | 200,932 | 2,168 | 3,328 | 20,871 | 78,186 | 96,379 | |
Derivative liabilities | |||||||
Derivative financial instruments | |||||||
- Interest rate swaps | 32,516 | (37,071) | 370 | 119 | (5,354) | (19,282) | (12,924) |
- Foreign exchange swaps | 165 | 151 | 151 | - | - | - | - |
| Inflows | 16,972 | 16,972 | - | - | - | - | |
| Outflows | (16,821) | (16,821) | - | - | - | - | |
32,681 | (36,920) | 521 | 119 | (5,354) | (19,282) | (12,924) |
Bank
Carrying
amount
Inflows/
(Outflows)
Not more than 1
month
Between 1 and 3
months
Between 3
months and 1
year
Between 1 and
5 years
More than
5 years
€000
€000
€000
€000
€000
€000
€000
31 December 2025
Derivative assets
Derivative financial instruments
- Foreign exchange swaps
184
(216)
(216)
-
-
-
-
Inflows
47,322
47,322
-
-
-
-
Outflows
(47,538)
(47,538)
-
-
-
-
184
(216)
(216)
-
-
-
-
Derivative liabilities
Derivative financial instruments
- Interest rate swaps
623
(1,362)
(114)
(13)
(449)
(814)
28
- Foreign exchange swaps
136
128
128
-
-
-
-
Inflows
24,607
24,607
-
-
-
-
Outflows
(24,479)
(24,479)
-
-
-
-
759
(1,234)
14
(13)
(449)
(814)
28
|me> direct Annual Report and Financial Statements 2025
138
Bank
Carrying
amount
Inflows/
(Outflows)
Not more than 1
month
Between 1 and 3
months
Between 3
months and 1
year
Between 1
and 5 years
More than
5 years
€000
€000
€000
€000
€000
€000
€000
31 December 2024
Derivative assets
Derivative financial instruments
- Foreign exchange swaps
286
(319)
(319)
-
-
-
-
Inflows
44,114
44,114
-
-
-
-
Outflows
(44,433)
(44,433)
-
-
-
-
- Other derivative financial instruments (no
maturity)
511
-
-
-
-
-
-
797
(319)
(319)
-
-
-
-
Derivative liabilities
Derivative financial instruments
- Interest rate swaps
670
(659)
75
-
(136)
(596)
(2)
- Foreign exchange swaps
163
151
151
-
-
-
-
Inflows
16,972
16,972
-
-
-
-
Outflows
(16,821)
(16,821)
-
-
-
-
833
(508)
226
-
(136)
(596)
(2)
|me> direct Annual Report and Financial Statements 2025
139
2.3.5 Encumbered assets
The following tables set out the availability of the Group’s and Bank’s financial assets to support future funding. The
International Mortgage portfolios and Maltese Business Lending portfolio exclude any IFRS basis adjustments.
Encumbered
Unencumbered
Group
Pledged as collateral
Other*
Available as
collateral
Other**
Total
€000
€000
€000
€000
€000
31 December 2025
Balances with central banks and cash
-
38,047
234,518
-
272,565
Derivative financial instruments
-
-
-
185,928
185,928
Loans and advances to financial institutions
244,121
-
-
84,883
329,004
Loans and advances to customers
-
-
-
3,197,448
3,197,448
- International Corporate Lending portfolio
-
-
-
21,504
21,504
- Dutch Mortgage portfolio
-
-
-
2,265,686
2,265,686
- Belgian Mortgage portfolio
-
-
-
540,484
540,484
- Maltese Business Lending portfolio
-
-
-
208,936
208,936
- Maltese Mortgage portfolio
-
-
-
151,367
151,367
- Consumer Finance receivables
-
-
-
9,471
9,471
Investments
250,158
-
1,191,297
-
1,441,455
- Securities portfolio
125,795
-
764,606
-
890,401
- Securitisation portfolio
124,363
-
267,697
-
392,060
- Asset-Backed Securitisation portfolio
-
-
158,994
-
158,994
Accrued income
-
-
-
2,670
2,670
Loans and advances to related parties (included in other assets)
-
-
-
1,321
1,321
Other receivables (included in other assets)
-
-
-
2,769
2,769
Other assets (included in other assets)
-
-
-
34,728
34,728
494,279
38,047
1,425,815
3,509,747
5,467,888
Encumbered | Unencumbered | |||
Group | Pledged as collateral Other* | Available as collateral | Other** | Total |
| €000 €000 | €000 | €000 | €000 | |
31 December 2024 | ||||
Balances with central banks and cash | - 35,368 | 171,502 | - | 206,870 |
Derivative financial instruments | - - | - | 175,310 | 175,310 |
Loans and advances to financial institutions | 247,349 - | - | 68,830 | 316,179 |
Loans and advances to customers | - - | - | 3,069,035 | 3,069,035 |
- International Corporate Lending portfolio | - - | - | 208,759 | 208,759 |
- Dutch Mortgage portfolio | - - | - | 2,205,956 | 2,205,956 |
- Belgian Mortgage portfolio | - - | - | 366,245 | 366,245 |
- Maltese Business Lending portfolio | - - | - | 154,073 | 154,073 |
- Maltese Mortgage portfolio | - - | - | 129,274 | 129,274 |
- Consumer Finance receivables | - - | - | 4,728 | 4,728 |
Investments | 255,470 - | 1,103,350 | - | 1,358,820 |
- Securities portfolio | 130,861 - | 568,005 | - | 698,866 |
- Securitisation portfolio | 124,609 - | 390,060 | - | 514,669 |
- Asset-Backed Securitisation portfolio | - - | 145,285 | - | 145,285 |
Accrued income | - - | - | 1,454 | 1,454 |
Loans and advances to related parties (included in other assets) | - - | - | 48 | 48 |
Other receivables (included in other assets) | - - | - | 1,501 | 1,501 |
Other assets (included in other assets) | - - | - | 23,334 | 23,334 |
| 502,819 35,368 | 1,274,852 | 3,339,512 | 5,152,551 |
Encumbered
Unencumbered
Bank
Pledged as collateral
Other*
Available as
collateral
Other**
Total
€000
€000
€000
€000
€000
31 December 2025
Balances with central banks and cash
-
7,344
67,251
-
74,595
Derivative financial instruments
-
-
-
184
184
Loans and advances to financial institutions
7,446
-
-
46,881
54,327
Loans and advances to customers – corporate
-
-
-
391,268
391,268
- International Corporate Lending portfolio
-
-
-
21,494
21,494
- Maltese Business Lending portfolio
-
-
-
208,936
208,936
- Maltese Mortgage portfolio
-
-
-
151,367
151,367
- Consumer Finance receivables
-
-
-
9,471
9,471
Investments (Note 8)
17,368
-
366,418
-
383,786
- Securities portfolio
17,368
-
249,146
-
266,514
- Securitisation portfolio
-
-
84,488
-
84,488
- Asset-Backed Securitisation portfolio
-
-
32,784
-
32,784
Accrued income
-
-
-
822
822
Loans and advances to related parties (included in other assets)
-
-
-
4,596
4,596
Other receivables (included in other assets)
-
-
-
2,577
2,577
Other assets (included in other assets)
-
-
-
2,012
2,012
24,814
7,344
433,669
448,340
914,167
|me> direct Annual Report and Financial Statements 2025
140
Encumbered
Unencumbered
Bank
Pledged as collateral
Other*
Available as
collateral
Other**
Total
€000
€000
€000
€000
€000
31 December 2024
Balances with central banks and cash
-
7,087
57,531
-
64,618
Derivative financial instruments
-
-
-
797
797
Loans and advances to financial institutions
6,923
-
-
30,151
37,074
Loans and advances to customers – corporate
-
-
-
413,135
413,135
- International Corporate Lending portfolio
-
-
-
125,060
125,060
- Maltese Business Lending portfolio
-
-
-
154,073
154,073
- Maltese Mortgage portfolio
-
-
-
129,274
129,274
- Consumer Finance receivables
-
-
-
4,728
4,728
Investments (Note 8)
17,106
-
379,526
-
396,632
- Securities portfolio
17,106
-
245,113
-
262,219
- Securitisation portfolio
-
-
120,714
-
120,714
- Asset-Backed Securitisation portfolio
-
-
13,699
-
13,699
Accrued income
-
-
-
481
481
Loans and advances to related parties (included in other assets)
-
-
-
5,075
5,075
Other receivables (included in other assets)
-
-
-
1,326
1,326
Other assets (included in other assets)
-
-
-
2,057
2,057
24,029
7,087
437,057
453,022
921,195
*Represents assets that are not pledged for funding purposes but that the Group believes it is restricted from using to
secure funding, for legal or other reasons.
**Represents assets that are not restricted for use as collateral, but that the Group would not consider as readily available
2.4 Market risk
Market risk arises from fluctuations in key market variables, including interest rates, foreign exchange rates, and credit
spreads. These changes can have a direct impact on the Group’s financial performance, affecting its income streams and
the valuation of its holdings in financial instruments. Unlike credit risk, market risk is not tied to the credit standing of an
obligor or issuer but rather to broader economic and market conditions.
Effective market risk management is crucial to ensure the Group remains resilient in the face of volatile market conditions.
The primary objective is to identify, measure, and control these exposures within well-defined and acceptable parameters.
At the same time, the Group aims to strategically manage these risks to optimise the return on risk. This involves
balancing the need to protect the Group’s financial stability with opportunities to enhance performance through prudent
2.4.1 Management of market risks
The responsibility for managing market risk lies with the Group’s Treasury team, under the monitoring of the Group’s Risk
team. Oversight is provided by the Group’s Asset and Liability Committee (ALCO) and the Board Risk and Compliance
Committee, as outlined in the Group’s policies on Foreign Exchange (FX) Risk and Interest Rate Risk and Credit Spread
Risk in the Banking Book (IRRBB & CSRBB).
2.4.2 Foreign exchange risk
Foreign exchange (FX) risk refers to potential fluctuations in the value of the Group’s positions due to changes in foreign
currency exchange rates. To minimise FX risk, the Group adopts a proactive hedging strategy for all significant exposures
within its risk appetite. The primary FX risks are associated with US Dollar and GB Pound movements stemming from the
Group’s corporate banking operations. The Group mitigates these risks by aligning foreign currency-denominated
liabilities with corresponding assets in the same currency. Any residual mismatches are closely monitored, and the
Treasury team is authorised to employ financial instruments such as spots, forwards, and swaps to effectively hedge FX
exposures.
The following table provides an analysis of the principal financial assets and financial liabilities of the Group and the Bank
into relevant currency groupings. The International Mortgage portfolios and Maltese Business Lending portfolio exclude
|me> direct
141
Group | EUR currency | GBP currency | USD currency | Other | Total |
| €000 | €000 | €000 | €000 | €000 | |
As at 31 December 2025 | |||||
Financial assets | |||||
Balances with central banks and cash | 272,565 | - | - | - | 272,565 |
Derivative financial instruments | 185,928 | - | - | - | 185,928 |
Loans and advances to financial institutions | 305,493 | 7,374 | 5,870 | 10,267 | 329,004 |
Loans and advances to customers | 3,197,214 | - | 234 | - | 3,197,448 |
- International Corporate Lending portfolio | 21,270 | - | 234 | - | 21,504 |
- Dutch Mortgage portfolio | 2,265,686 | - | - | - | 2,265,686 |
- Belgian Mortgage portfolio | 540,484 | - | - | - | 540,484 |
- Maltese Business Lending portfolio | 208,936 | - | - | - | 208,936 |
- Maltese Mortgage portfolio | 151,367 | - | - | - | 151,367 |
- Consumer Finance receivables | 9,471 | - | - | - | 9,471 |
Investments | 1,441,455 | - | - | - | 1,441,455 |
- Securities portfolio | 890,401 | - | - | - | 890,401 |
- Securitisation portfolio | 392,060 | - | - | - | 392,060 |
- Asset-Backed Securitisation portfolio | 158,994 | - | - | - | 158,994 |
Accrued income | 2,670 | - | - | - | 2,670 |
Loans to related parties (included in other assets) | 1,282 | 39 | - | - | 1,321 |
Other receivables (included in other assets) | 2,640 | 129 | - | - | 2,769 |
Other assets (included in other assets) | 34,728 | - | - | - | 34,728 |
5,443,975 | 7,542 | 6,104 | 10,267 | 5,467,888 | |
Financial liabilities | |||||
Derivative financial instruments | 11,204 | - | - | - | 11,204 |
Amounts owed to financial institutions | 209,807 | 7 | - | - | 209,814 |
Amounts owed to customers | 4,035,861 | 37,883 | 47,086 | 18,190 | 4,139,020 |
Debt securities in issue | 602,397 | - | - | - | 602,397 |
Subordinated liabilities | 63,169 | 4,160 | - | - | 67,329 |
Lease liabilities (included in other liabilities) | 1,629 | - | - | - | 1,629 |
Other liabilities (included in other liabilities) | 9,785 | 561 | 98 | 15 | 10,459 |
4,933,852 | 42,611 | 47,184 | 18,205 | 5,041,852 | |
Net on-balance sheet financial position | (35,069) | (41,080) | (7,938) | ||
Notional of derivative financial instruments | 35,086 | 41,096 | 8,015 | ||
Residual exposure | 17 | 16 | 77 |
Group
EUR currency
GBP currency
USD currency
Other
Total
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Balances with central banks and cash
206,870
-
-
-
206,870
Derivative financial instruments
175,310
-
-
-
175,310
Loans and advances to financial institutions
294,541
5,484
5,130
11,024
316,179
Loans and advances to customers
3,047,369
21,213
453
-
3,069,035
- International Corporate Lending portfolio
187,093
21,213
453
-
208,759
- Dutch Mortgage portfolio
2,205,956
-
-
-
2,205,956
- Belgian Mortgage portfolio
366,245
-
-
-
366,245
- Maltese Business Lending portfolio
154,073
-
-
-
154,073
- Maltese Mortgage portfolio
129,274
-
-
-
129,274
- Consumer Finance receivables
4,728
-
-
-
4,728
Investments
1,358,820
-
-
-
1,358,820
- Securities portfolio
698,866
-
-
-
698,866
- Securitisation portfolio
514,669
-
-
-
514,669
- Asset-Backed Securitisation portfolio
145,285
-
-
-
145,285
Accrued income
1,454
-
-
-
1,454
Loans to related parties (included in other assets)
-
48
-
-
48
Other receivables (included in other assets)
1,499
2
-
-
1,501
Other assets (included in other assets)
23,334
-
-
-
23,334
5,109,197
26,747
5,583
11,024
5,152,551
Financial liabilities
Derivative financial instruments
32,681
-
-
-
32,681
Amounts owed to financial institutions
179,777
-
-
-
179,777
Amounts owed to customers
3,783,694
35,654
45,597
15,090
3,880,035
Debt securities in issue
641,673
-
-
-
641,673
Subordinated liabilities
62,983
4,375
-
-
67,358
Lease liabilities (included in other liabilities)
3,161
128
-
-
3,289
4,703,969
40,157
45,597
15,090
4,804,813
Net on-balance sheet financial position
(13,410)
(40,014)
(4,066)
Notional of derivative financial instruments
13,415
39,748
4,248
Residual exposure
5
(266)
182
|me> direct Annual Report and Financial Statements 2025
142
Bank
EUR currency
GBP currency
USD currency
Other
Total
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Balances with central banks and cash
74,595
-
-
-
74,595
Derivative financial instruments
184
-
-
-
184
Loans and advances to financial institutions
36,204
5,483
3,073
9,567
54,327
Loans and advances to customers
391,034
-
234
-
391,268
- International Corporate Lending portfolio
21,260
-
234
-
21,494
- Maltese Business Lending portfolio
208,936
-
-
-
208,936
- Maltese Mortgage portfolio
151,367
-
-
-
151,367
- Consumer Finance receivables
9,471
-
-
-
9,471
Investments
383,786
-
-
-
383,786
- Securities portfolio
266,514
-
-
-
266,514
- Securitisation portfolio
84,488
-
-
-
84,488
- Asset-Backed Securitisation portfolio
32,784
-
-
-
32,784
Accrued income
822
-
-
-
822
Loans to related parties (included in other assets)
4,557
39
-
-
4,596
Other receivables (included in other assets)
2,575
2
-
-
2,577
Other assets (included in other assets)
2,012
-
-
-
2,012
895,769
5,524
3,307
9,567
914,167
Financial liabilities
Derivative financial instruments
759
-
-
-
759
Amounts owed to financial institutions
4,273
651
522
647
6,093
Amounts owed to customers
724,868
34,763
32,027
16,860
808,518
Subordinated liabilities
63,169
4,160
-
-
67,329
Lease liabilities (included in other liabilities)
2,212
-
-
-
2,212
Other liabilities (included in other liabilities)
4,195
475
99
(27)
4,742
799,476
40,049
32,648
17,480
889,653
Net on-balance sheet financial position
(34,525)
(29,341)
(7,913)
Notional of derivative financial instruments
34,539
29,360
7,966
Residual exposure
14
19
53
Bank
EUR currency
GBP currency
USD currency
Other
Total
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Balances with central banks and cash
64,618
-
-
-
64,618
Derivative financial instruments
797
-
-
-
797
Loans and advances to financial institutions
19,264
3,605
3,870
10,335
37,074
Loans and advances to customers
403,083
9,599
453
-
413,135
- International Corporate Lending portfolio
115,008
9,599
453
-
125,060
- Maltese Business Lending portfolio
154,073
-
-
-
154,073
- Maltese Mortgage portfolio
129,274
-
-
-
129,274
- Consumer Finance receivables
4,728
-
-
-
4,728
Investments
396,632
-
-
-
396,632
- Securities portfolio
262,219
-
-
-
262,219
- Securitisation portfolio
120,714
-
-
-
120,714
- Asset-Backed Securitisation portfolio
13,699
-
-
-
13,699
Accrued income
481
-
-
-
481
Loans to related parties (included in other assets)
4,455
118
502
-
5,075
Other receivables (included in other assets)
1,324
2
-
-
1,326
Other assets (included in other assets)
2,057
-
-
-
2,057
892,711
13,324
4,825
10,335
921,195
Financial liabilities
Derivative financial instruments
833
-
-
-
833
Amounts owed to financial institutions
6,744
-
-
-
6,744
Amounts owed to customers
743,305
33,806
36,685
13,830
827,626
Subordinated liabilities
62,983
4,375
-
-
67,358
Lease liabilities (included in other liabilities)
2,905
128
-
-
3,033
816,770
38,309
36,685
13,830
905,594
Net on-balance sheet financial position
(24,985)
(31,860)
(3,495)
Notional of derivative financial instruments
25,292
31,787
4,175
Residual exposure
307
(73)
680
The Group and Bank uses derivative financial instruments to hedge movements in foreign exchange rates by entering
derivative contracts with notional amounts which substantially reflect the net exposure in each currency. As a result, the
Group and Bank are not materially exposed to fluctuations in foreign exchange rates as evidenced in the preceding
tables, reflecting the policy to eliminate foreign exchange risk as much as is practicable.
|me> direct Annual Report and Financial Statements 2025
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In view of the Group’s policy for managing currency risk, the Board does not deem necessary the presentation of a
sensitivity analysis disclosing how profit or loss and equity would have been affected by changes in foreign exchange
rates that were reasonably possible at the end of the reporting year.
2.4.3 Interest rate risk
The Group’s and MeDirect Belgium’s Interest Rate Risk in the Banking Book (IRRBB) position is managed through a
three-lines-of-defence model, ensuring a layered approach to risk management.
The First Line of Defence is represented by the Group/Belgium ALM team. This team actively monitors and manages the
day-to-day interest rate risk exposures, aligning them with the strategic objectives of the Group.
The Second Line of Defence is within the Risk team, which operates independently of the ALM function. This team is
tasked with establishing risk limits, monitoring adherence to these limits, and providing oversight to ensure risks are
managed in line with the Group’s and MeDirect Belgium’s IRRBB policy.
The Third Line of Defence is performed by Internal Audit, which independently reviews the effectiveness of the controls
and processes in place to manage IRRBB. This layer provides an additional level of assurance to the Group’s senior
management and governing bodies.
The monitoring and reporting activities are subject to oversight by the Group/MeDirect Belgium Asset and Liability
Interest rate risk is actively managed by comparing the interest rate risk profile of the Group’s assets with that of its
liabilities. This involves assessing mismatches between the two and taking appropriate actions to mitigate any significant
exposure. Unmatched interest rate risks arising from the balance sheet are hedged through the use of interest rate
derivatives, primarily interest rate swaps. These instruments enable the Group to reduce potential variability in its earnings
and safeguard its financial stability.
Interest rate risk reporting and analysis
As part of its monitoring duties, the Group’s Risk team prepares and reports on the Group’s interest rate risk position on a
monthly basis. The report outputs show the effects of a number of internal and regulatory interest rate shocks on the:
- Group's projection and sensitivity of net interest income – ∆NII;
- Group’s projection and sensitivity of economic value of equity – ∆EVE; and
- Time bucket sensitivity of the interest rate gap – PV01.
The Group measures its exposure adopting both contractual and behavioural views (where items without deterministic
maturity are assigned certain level of stickiness). The impact of the automatic options embedded in the banking book
structure is assessed under ∆NII, ∆EVE and PV01.
|me> direct Annual Report and Financial Statements 2025
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The following table discloses the mismatch of the dates on which interest rates on financial assets and liabilities either will
be reset to market rates levels, or the date on which instruments mature, based on contractual terms. Actual cash flows
on reset dates may differ from contractual dates owing to the possible exercise of behavioural options such as
prepayments. In the following tables, loans and advances to customers classified under the Dutch and Belgian Mortgage
portfolios and subordinated liabilities, are based on the expected maturities, that is the date when the instruments are
expected to be fully repaid, since this is how the interest rate risk of the Group is monitored on a regular basis. In addition,
contractual terms of the other instruments may not be representative of the behaviour in respect of financial assets and
liabilities. The International Mortgage portfolios and Maltese Business Lending portfolio exclude any IFRS basis
adjustments.
Repricing in:
Group
Carrying
amount
Not more than 3
months
Between 3 months
to 1 year
Between 1 and 3
years
Between 3 and 5
years
More than 5
years
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Balances with central banks
272,563
272,563
-
-
-
-
Loans and advances to financial
institutions
329,004
329,004
-
-
-
-
Loans and advances to customers
3,197,448
332,146
325,328
700,854
588,951
1,250,169
- International Corporate Lending
portfolio
21,504
21,504
-
-
-
-
- Dutch Mortgage portfolio
2,265,686
83,829
242,217
561,594
394,618
983,428
- Belgian Mortgage portfolio
540,484
17,866
50,835
116,933
93,699
261,151
- Maltese Business Lending portfolio
208,936
207,735
1,201
-
-
-
- Maltese Mortgage portfolio
151,367
112
27,777
17,254
100,634
5,590
- Consumer Finance receivables
9,471
1,100
3,298
5,073
-
-
Investments
1,441,455
682,284
175,462
165,023
152,354
266,332
- Securities portfolio
890,401
131,230
175,462
165,023
152,354
266,332
- Securitisation portfolio
392,060
392,060
-
-
-
-
- Asset-Backed Securitisation
portfolio
158,994
158,994
-
-
-
-
5,240,470
1,615,997
500,790
865,877
741,305
1,516,501
Financial liabilities
Amounts owed to financial
institutions:
209,814
31,740
178,074
-
-
-
- Due to clearing houses
178,074
-
178,074
-
-
-
- Due to other banks
31,740
31,740
-
-
-
-
Amounts owed to customers
4,139,020
3,686,632
313,111
113,064
26,131
82
Debt securities in issue
602,397
602,397
-
-
-
-
Subordinated liabilities
67,329
12,348
54,981
-
-
-
5,018,560
4,333,117
546,166
113,064
26,131
82
Interest rate repricing gap
(2,717,120)
(45,376)
752,813
715,174
1,516,419
Impact of hedging interest rate
derivatives – notional amounts
174,775
1,771,850
25,967
(360,690)
(305,119)
(1,132,008)
Net interest rate repricing gap
(945,270)
(19,409)
392,123
410,055
|me> direct Annual Report and Financial Statements 2025
145
Repricing in:
Group
Carrying amount
Not more
than 3
months
Between 3
months to 1
year
Between 1 and
3 years
Between 3 and
5 years
More than 5 years
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Balances with central banks
206,868
206,868
-
-
-
-
Loans and advances to financial
institutions
316,179
316,179
-
-
-
-
Loans and advances to customers
3,069,035
410,058
189,543
440,142
546,898
1,482,394
- International Corporate Lending
portfolio
208,759
208,759
-
-
-
-
- Dutch Mortgage portfolio
2,205,956
49,239
133,965
343,027
413,208
1,266,517
- Belgian Mortgage portfolio
366,245
10,338
27,182
65,114
53,575
210,036
- Maltese Business Lending portfolio
154,073
140,576
13,497
-
-
-
- Maltese Mortgage portfolio
129,274
629
13,349
29,340
80,115
5,841
- Consumer Finance receivables
4,728
517
1,550
2,661
-
-
Investments
1,358,820
734,147
200,451
164,792
203,327
56,103
- Securities portfolio
698,866
84,191
190,453
164,792
203,327
56,103
- Securitisation portfolio
514,669
504,671
9,998
-
-
-
- Asset-Backed Securitisation portfolio
145,285
145,285
-
-
-
-
4,950,902
1,667,252
389,994
604,934
750,225
1,538,497
Financial liabilities
Amounts owed to financial institutions:
179,777
32,583
147,194
-
-
-
- Due to clearing houses
157,177
9,983
147,194
-
-
-
- Due to other banks
22,600
22,600
-
-
-
-
Amounts owed to customers
3,880,035
3,365,703
371,449
117,786
25,093
4
Debt securities in issue
641,673
641,673
-
-
-
-
Subordinated liabilities
67,358
1,389
55,249
10,720
-
-
4,768,843
4,041,348
573,892
128,506
25,093
4
Interest rate repricing gap
(2,374,096)
(183,898)
476,428
725,132
1,538,493
Impact of hedging interest rate
derivatives – notional amounts
141,887
1,381,550
384,600
(559,033)
(220,890)
(986,227)
Net interest rate repricing gap
(992,546)
200,702
(82,605)
504,242
552,266
|me> direct Annual Report and Financial Statements 2025
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Repricing in:
Bank
Carrying
amount
Not more than 3
months
Between 3
months to 1
year
Between 1 and 3
years
Between 3 and 5
years
More than 5
years
€000
€000
€000
€000
€000
€000
As at 31 December 2025
Financial assets
Balances with central banks
74,593
74,593
-
-
-
-
Loans and advances to financial
institutions
54,327
54,327
-
-
-
-
Loans and advances to customers
391,268
230,441
32,276
22,327
100,634
5,590
- International Corporate Lending
portfolio
21,494
21,494
-
-
-
-
- Maltese Business Lending portfolio
208,936
207,735
1,201
-
-
-
- Maltese Mortgage portfolio
151,367
112
27,777
17,254
100,634
5,590
- Consumer Finance receivables
9,471
1,100
3,298
5,073
-
-
Investments
383,786
175,679
104,158
38,622
45,379
19,948
- Securities portfolio
266,514
58,407
104,158
38,622
45,379
19,948
- Securitisation portfolio
84,488
84,488
-
-
-
-
- Asset-Backed Securitisation
portfolio
32,784
32,784
-
-
-
-
903,974
535,040
136,434
60,949
146,013
25,538
Financial liabilities
Amounts owed to financial
institutions:
6,093
6,093
-
-
-
-
- Due to other banks
6,093
6,093
-
-
-
-
Amounts owed to customers
808,518
582,550
199,921
19,643
6,392
12
Subordinated liabilities
67,329
12,348
54,981
-
-
-
881,940
600,991
254,902
19,643
6,392
12
Interest rate repricing gap
(65,951)
(118,468)
41,306
139,621
25,526
Impact of hedging interest rate
derivatives – notional amounts
(623)
112,000
(12,000)
(45,000)
(10,000)
(45,000)
Net interest rate repricing gap
46,049
(130,468)
(3,694)
129,621
(19,474)
Repricing in:
Bank
Carrying
amount
Not more than 3
months
Between 3
months to 1
year
Between 1 and 3
years
Between 3 and 5
years
More than 5
years
€000
€000
€000
€000
€000
€000
As at 31 December 2024
Financial assets
Balances with central banks
64,616
64,616
-
-
-
-
Loans and advances to financial
institutions
37,074
37,074
-
-
-
-
Loans and advances to customers
413,135
266,782
28,396
32,001
80,115
5,841
- International Corporate Lending
portfolio
125,060
125,060
-
-
-
-
- Maltese Business Lending portfolio
154,073
140,576
13,497
-
-
-
- Maltese Mortgage portfolio
129,274
629
13,349
29,340
80,115
5,841
- Consumer Finance receivables
4,728
517
1,550
2,661
-
-
Investments
396,632
163,167
129,029
38,587
65,849
-
- Securities portfolio
262,219
38,752
119,031
38,587
65,849
-
- Securitisation portfolio
120,714
110,716
9,998
-
-
-
- Asset-Backed Securitisation
portfolio
13,699
13,699
-
-
-
-
911,457
531,639
157,425
70,588
145,964
5,841
Financial liabilities
Amounts owed to financial
institutions:
6,744
6,744
-
-
-
-
- Due to other banks
6,744
6,744
-
-
-
-
Amounts owed to customers
827,626
607,025
152,335
59,504
8,758
4
Subordinated liabilities
67,358
1,389
55,249
10,720
-
-
901,728
615,158
207,584
70,224
8,758
4
Interest rate repricing gap
(83,519)
(50,159)
364
137,206
5,837
Impact of hedging interest rate
derivatives – notional amounts
(670)
63,000
-
(44,000)
(16,000)
(3,000)
Net interest rate repricing gap
(20,519)
(50,159)
(43,636)
121,206
2,837
|me> direct Annual Report and Financial Statements 2025
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The Group's exposure to interest rate risk primarily arises from mismatches in the repricing terms of its assets and
liabilities. Its asset base is composed of both short- and long-duration portfolios. The short-duration portfolio includes high-
quality securities within the Investments portfolio and the International Corporate Lending portfolio, which typically reprice
periodically. In contrast, the long-duration portfolio consists of the Dutch and Belgian Mortgage portfolios, which have
extended maturities. The presence of interest rate floors embedded in most of the International Corporate Lending
portfolio is a mitigation factor of the repricing risk in case rates decrease. Beyond repricing mismatches, fluctuations in
market interest rates can also affect the Mark-to-Market (MtM) value of the Group’s fixed-rate instruments.
The net interest rate repricing gap is attributable to differences between the behavioural and the contractual view of
repricing profile. The Interest rate risk measurement, limits and hedging decisions are based on the behavioural view of
repricing profile. The interest rate gaps under the behavioural view are kept at low levels resulting in conservative interest
rate risk taken by the Group.
The Group’s and MeDirect Belgium’s long-term risk exposure to interest rate risk is managed through a hedging strategy
which uses a series of plain vanilla interest rate swaps that form a run-off profile matching a mortgage portfolio run-off
profile with behavioural pre-payment assumptions.
A positive interest rate sensitivity gap exists where more assets than liabilities reprice during a given period. Although a
positive gap position tends to benefit net interest income in a rising interest rate environment, the actual effect will depend
on several factors, including the extent to which repayments are made earlier or later than the contracted date and
variations in interest rates within repricing periods and among currencies.
Similarly, a negative interest rate sensitivity gap exists where more liabilities than assets re-price during a given period. A
negative gap position tends to benefit net interest income in a declining interest rate environment, but the actual effect will
depend on the same factors as for positive interest rate gaps.
The management of interest rate risk attributable to interest rate repricing gap limits is supplemented by monitoring the
sensitivity of the Group’s financial assets and liabilities to various interest rate scenarios under the stress testing
framework whilst the extent of the difference between risk factors on the asset side and liability side is monitored through
the re-fixing gap analysis.
The estimated impact on the Group’s Net Interest Margin (“NIM”) and on Economic Value based on scenarios and
assumptions prescribed by the EBA guidelines on the management of interest rate risk arising from non-trading book
activities (EBA/RTS/2022/10) would be as follows:
31 December 2025
- NIM would increase by €1.8 million in a parallel up scenario and decrease by €10.7 million in the parallel down
scenario.
- Economic value of equity would decrease by €10.3 million in a parallel up scenario and decrease by €10.9
million in the parallel down scenario.
31 December 2024
- NIM would decrease by €0.1 million in a parallel up scenario and decrease by €4 million in the parallel down
scenario.
- Economic value of equity would increase by €1.1 million in a parallel up scenario and increase by €0.6 million in
|me> direct Annual Report and Financial Statements 2025
148
The main assumptions used in the model utilised to measure the benchmarks referred to above are:
- Interest bearing assets are assumed to mature on their expected maturity or behavioural prepayment profile and
are not replaced for the ∆EVE purposes (run off balance sheet);
- Interest bearing assets are assumed to mature on their expected maturity and are replaced on like for like basis
for the ΔNII purposes (constant balance sheet);
- The Dutch NHG and Belgian Retail mortgages are assumed to follow a CPR curve over and above the
contractual principal payment schedule;
- In addition to the legal floor on regulated savings accounts of MeDirect Belgium, there is an implicit zero floor
option on retail customer deposits as the Group will not charge negative rates to the retail segment of its
customer base;
- The Δ NII and Δ EVE metrics includes the effect of changes in value of the contractual automatic options
embedded in the banking book assets;
- Customer deposits follow their behavioural schedule;
- Behavioural schedules are conditional to interest rate scenarios; and
- Sensitivities to behavioural assumptions are measured on a quarterly basis as part of the ICAAP whereas the
IRRBB measurement has been validated and adapted to cater for novel characteristics of new product lines.
Interest rate movements affect reported equity in the following ways:
- retained earnings arising from increases or decreases in net interest income after taking into consideration the
net impact of interest rate hedging instruments; and
- fair value reserves arising from increases or decreases in fair values of investments measured at fair value
through other comprehensive income reported directly in equity.
2.4.4 Credit Spread Risk
The Group has a portfolio of Treasury securities (held mainly as High-Quality Liquid Assets - HQLAs) and other low credit
risk bearing assets which give rise to the Credit Spread Risk in the Banking Book (“CSRBB”).
Exposure to movements in securities prices can be decomposed into the exposure to interest rates and to spreads which
for a same level of creditworthiness fluctuate on a daily basis as a result of the changes in the market demand and
liquidity for certain securities.
The Group quantified the credit spread through the difference between the security’s market yield at the valuation date
and the risk-free rate and is strengthening its market value risk assessment including metrics related to the Marked-to-
Market value sensitivity to spreads. For assets being hold to their maturities, the Group is not directly exposed to their
market value variations. Nevertheless, the credit spread is an important market risk category for the Group given the
existence of the Treasury and highly rated securities, mainly held for liquidity purposes, which could potentially be used as
contingency assets in case of severe liquidity stress. This risk is however mitigated by the high credit quality requirement
2.5 Environmental, Social and Governance-related (“ESG”) risk
During 2025, the Group continued to integrate ESG risk assessments into its internal business processes to ensure
appropriate ESG risk management.
The Board of Directors are ultimately responsible for approving and overseeing the implementation of the Group’s
strategic objectives, principal policies and procedures, including its ESG Strategy and Climate-related and Environmental
Risks ("CER")/ESG risk procedures and commitments that are incorporated into the Group’s wider risk management
framework. Moreover, the Board reviews and approves the Group’s Non-Financial report together with the Group Annual
Report & Financial Statements ensuring that all material ESG-related topics are covered and disclosed.
|me> direct Annual Report and Financial Statements 2025
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The Board structure enables the Group to coordinate its CER/ESG policies and procedures to ensure consistency on
matters affecting all entities within the Group across all jurisdictions including Malta, Belgium and the UK. By setting the
ESG agenda at the parent level, the Board ensures a common ESG strategic framework which can be deployed and
implemented across the Group, including at the subsidiary level. This helps to ensure that ESG is given appropriate
priority on the Group’s agenda and that ESG factors are embedded in the decision-making processes at all levels of the
Group structure.
The Board maintains oversight of CER/ESG risks via the risk management reports that are reported during the routine
Board meetings by the Chief Risk Officer.
The ESG Committee has the overall responsibility to oversee CER/ESG risks and initiatives, including oversight of the
MeDirect ESG strategy and agenda implementation, whilst providing advice and support to the Board of Directors on
CER/ESG-related matters. The Committee consists of top management of main functions, including Finance, Risk,
Compliance and other functions. The Head of Regulatory Affairs and Sustainability is the Chair of the Committee and the
Belgium Chief Risk Officer is the co-Chair. The Internal Audit function is a permanent invitee to the Committee as an
observer in order to maintain its independent status.
Moreover, the Group incorporated CER across the three lines of defence (“LoD”) by updating business procedures and
policies, the Risk Management Framework, Compliance Monitoring Plans and Internal Audit Plan.
Business functions (1LoD) are responsible for identifying, assessing and managing ESG risks within their specific
operations and for incorporating the management of such risks in the various stages of their business processes
including, amongst others, the credit process. Business functions are expected to implement the Group’s procedures and
policies related to ESG risks in their day-to-day business operations.
The Group Risk Management function (2LoD) is responsible for developing and tracking a dashboard of relevant CER
and ESG risk indicators within the existing risk reporting frameworks of the Group. It has integrated ESG risks in the risk
identification and management process. In 2025, the Group Risk Management function continued enhancing the
Sustainability Risk Appetite Statement, ESG risk inventory and the transmission channel table to cover the full impact of
ESG, including CER, on the traditional financial and non-financial risk categories.
Moreover, the Risk function reviews and updates on an annual basis the Group CER Materiality Assessment that
analyses the sensitivity of the Group’s businesses to physical and transition risks using a forward-looking approach. The
Risk Management function is responsible for monitoring and evaluating ESG risks, setting risk appetite and tolerance
thresholds and establishing a risk management framework and procedures, incorporating ESG risks.
The Compliance function (2LoD) is responsible for preparing a Compliance Action and Monitoring Plan, which is approved
by the Board of Directors, that addresses ESG from a conduct perspective. The Compliance function operates
independently from the business units but advises and assists business units and other internal functions to ensure that
operations are in line with policies, procedures and regulations.
The IAF (3LoD) is responsible for executing a multi-year audit plan across the Group. On a periodic basis, the IAF
provides confirmation that ESG principles are adhered to and that CER risks have been addressed appropriately.
Relevant internal audit observations, conclusions and audit reports are periodically collated and made available to the
Head of Sustainability, the ESG Committee and the Boards of Directors and Management Committees, as appropriate.
The implementation of related internal audit recommendations is periodically tracked and formally reported at Executive
and Audit Committee level. This information complements the reports provided by the first and second lines of defence.
All the strategic objectives and commitments related to CER/ESG were incorporated in the ESG Strategy “On the path to
sustainability for 2022-2024/25”. During 2025, the Group reviewed the ESG Strategy to ensure continued consistency with
the CER Materiality Assessment. A progress report is presented to the ESG Committee and Board of Directors for
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The Risk and appropriate Business functions continue to adopt (hard) risk appetite limits into its Risk Appetite Statements
for all lending portfolios linked to physical and/or transition climate risks, such as high flood risk and high sea-level
increase risk regions, poor EPC scoring (yearly energy efficiency) of the mortgaged properties, sectors highly contributing
to climate change, and exclusion sectoral lists. The Group will continue to monitor these limits, and applies escalation
procedure, in line with the Risk Appetite Framework, in case of a breach in limits.
The Group also incorporated the impact of CER on its operational centres and reputation, as part of its operational
framework. The Business Continuity Plan (“BCP”) includes scenarios related to natural hazards (e.g. storm, earthquake,
flooding), power failure and political and social instability, among others. MeDirect has a setup where the employees can
work from home via VPN in case of such extreme situation and it has been tested and functioning without any issue. In
2025, the Operational & Reputational Risk Appetite Statement was updated to include a metric on the number of
operational losses resulting from ESG-related failures. In addition, ESG impact has been added in the Operational Risk
Procedure for RCSA exercises in 2025-2026.
The Risk function reviews and updates on an annual basis the Group CER Materiality Assessment that analyses the
sensitivity of the Group’s businesses to physical and transition risks using a forward-looking approach. In 2025, the Group
carried out this annual exercise to analyse the main CER that may impact MeDirect strategy, business model, asset
portfolios, funding sources, treasury and hedging, wealth management services, as well as the business operating centres
in which it operates. The assessment was validated by the Board.
The Board-approved assessment covered on and off-balance sheet assets and contingencies and addressed acute and
chronic physical risks (Floods/Fluvial, Sea Level Risk, Drought/Extreme Heat, Forest Fire/Wildfire, Biodiversity Loss,
Water Stress) as well as transition risks (Policy/Regulations, Stranding Risk, Market Sentiment, Technology Change)
across different time horizons (short, medium and long). The Group utilised Munich Re’s Location Risk Intelligence
platform and European Climate Risk Typology maps to assess physical risks, supplemented by Moody’s Investor
Services’ analysis, including sectoral heatmaps as well as research from Moody’s Analytics. The materiality assessment
was led by the Risk function in collaboration with various business units and was presented to the ESG Committee and
approved by the Board.
The assessment concluded that the Group’s exposure to residual CER is low, in particular in the short- to medium- term.
Exposure to sector concentration and transition risk is high overall, driven by an expected modest yet notable impact over
the medium-longer term of between 3-10 years and a negligible impact over the shorter-term of up to 3 years. The CER
materiality assessment further concluded that the main risk is to the construction sectors, albeit the MT Corporate portfolio
is mainly short-dated in nature (<5-year term). Primary risks remain transition to more stringent construction standards
and usage of materials / techniques will put at risk smaller and less capable real estate developers. However, more than
50% of outstanding loans are between 0-5 years maturity and therefore exposure to longer term transition risks can be
managed strategically with green lending initiatives and through regulatory changes expected for SMEs over the medium
term.
These sectors are also exposed to physical risk related to drought / extreme heat and water stress. This risk is mitigated
by the limited exposure and low-medium term maturity of these portfolios. Moreover, the Group monitors exposure to
these sectors, as the corporate construction and real estate sectors are classified as sectors which contribute significantly
to climate change.
As at 31 December 2025, exposures to high flood risk areas are as follows:
2025
% of Dutch NHG mortgage portfolio exposure in high flood risk areas
0.00%
% of Dutch Buy-to-let mortgage portfolio exposure in high flood risk areas
0.00%
% of Belgian mortgage portfolio exposure in high flood risk areas
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Physical risk in the Dutch NHG mortgage portfolio is partly mitigated through property insurance and/or National Mortgage
Guarantee (NHG) protection. Under the Terms and Conditions (“T&Cs”) of HollandWoont and the NHG programme
governing Dutch NHG mortgages borrowers must insure properties against fire and storm damage. Flood risk is only
sometimes covered by such insurance. If there is a residual loss it is likely to be compensated by the NHG cover.
For Dutch professional residential buy-to-let mortgages originated under the Build T&Cs property insurance is in also
required, but flood risk is not always included. The T&Cs of Allianz in relation to Belgian mortgage loans provide that
property insurance (including flood risk) is mandatory. Moreover, property insurance is required for Maltese retail
mortgage loans.
Notwithstanding these risks, the Group has assessed its residual risk as low, particularly in the short- to medium-term.
The assessment indicates that based on its current CER/ESG risk profile, no additional capital or liquidity buffer is
required to cover potential impact of CER risk.
Moreover, CER has been also assessed from both the normative and economic perspectives of the ICAAP, which
assesses its impact on the profit or loss, capital requirements and solvency (PD, LGD). The Group has incorporated
climate-related scenarios into its stress testing processes, which encompass both physical and transition risks over a
three-year time horizon. The updated 2024 capital stress tests include scenarios linked to MeDirect operation (physical
risk related to significant weather conditions impacting MT operation) and credit portfolios (NGFS Scenario Combined
Orderly Net Zero 2050 Scenario and transition risk related to new CER regulations impose on homeowners with energy-
inefficient properties to renovate their houses with the impact on capital and capital ratios). The impact on of the CER
transition scenario on the capital is €21.6 million less than the budgeted amount of capital over the considered stress
horizon, and on the impairment the impact is €28.4 million impairments over and above the budgeted amount of
impairments. The impact of the CER physical scenario on the capital is €15.0 million operational loss.
The Group continues to evolve its stress testing processes and to enhance existing processes to be able to conduct
adequate and plausible Climate Risk Stress Tests to make informed decisions.
In reference to the ESMA's Public Statement on Accounting for Carbon Allowances in Financial Statements, the Group
does not have carbon allowances in its balance sheet.
2.6 Capital management - regulatory capital
The Group’s regulator, the ECB’s Joint Supervisory Team (the “JST”) sets and monitors capital requirements for the Group
based on the capital requirements prescribed within CRR III and Capital Requirements Directive (“CRD VI”).
As a result, the Group is required to maintain a prescribed ratio of total capital to total risk-weighted assets. The Group
does not engage in trading and is exempt from having a trading book. Risk-weighted assets on the banking book are
determined according to specified requirements that seek to reflect the varying levels of risk attached to assets including
balances with counterparties and other illiquid assets.
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The Group complies with the provisions of the CRR in respect of regulatory capital and it applies the standardised
approach for credit risk. For regulatory purposes, the Group’s capital base is divided in two main categories, namely
Common Equity Tier 1 Capital and Tier 2 Capital.
- Common Equity Tier 1 Capital which includes ordinary share capital, share premium, shareholders’
contributions, retained earnings, fair value reserve and other regulatory adjustments relating to items that are
included in equity but are treated differently for capital adequacy purposes including deductions relating to
Reserve for Depositor Compensation Scheme (‘Other reserves’) and certain other regulatory items; and
- Tier 2 Capital consists of subordinated liabilities in issue, which rank after the claims of all depositors (including
financial institutions) and all other creditors.
MDB Group Ratios
| 2025 | 2024 | |
% | % | |
CET 1 Ratio | 20.8 | 16.4 |
Total Capital Ratio | 23.5 | 19.8 |
Group’s policy is to maintain a good capital base to maintain investor, creditor and market confidence and to sustain future
development of the business. The impact of the level of capital on shareholders’ return is also recognised and the Group
recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and the
advantages and security afforded by a sound capital position.
MDB Group Limited is subject to the same supervision as that exercised over credit institutions. Accordingly, in terms of
article 7(2) of the CRR, the obligation of MeDirect Malta to comply with the disclosure requirements relating to own funds,
capital requirements, large exposures, and transferred credit risk have been waived.
In this respect, the Regulatory Group has complied with all externally imposed capital requirements throughout the year.
2.7 Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal or, in its absence, the most advantageous market to
which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Group measures the fair value of an instrument using quoted prices in an active market for that
instrument. A market is regarded as active if the transactions for the asset or liability take place with sufficient frequency
and volume to provide pricing information on an ongoing basis. The judgement as to whether a market is active may
include, but is not restricted to, the consideration of factors such as the magnitude and frequency of trading activity, the
availability of prices and the size of bid/offer spreads.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the
factors that market participants would take into account in pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price - i.e., the
fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs
from the transaction price and the fair value is evidenced neither by the quoted price in an active market for an identical
asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial
instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition
and the transaction price. Subsequently, that difference is recognised in profit or loss only to the extent that it arises from a
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If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long
positions at a bid price and liabilities and short positions at an ask price.
2.7.1 Fair value hierarchy
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements:
- Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
- Level 2: inputs other than quoted market prices included within Level 1 that are observable either directly (i.e.,
as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market
prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly
observable from market data. Financial instruments which are generally included in this category include certain
loans and advances to customers and over-the-counter derivatives where the fair value is based on observable
inputs.
- Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique
includes inputs not based on observable data and the unobservable inputs have a significant effect on the
instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar
instruments for which significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
2.7.2 Use of valuation techniques
In the event that the market for a financial instrument is not active, a valuation technique is used. Valuation techniques
may incorporate assumptions about factors that other market participants would use in their valuations, including:
- the likelihood and expected timing of future cash flows from the instrument.
- selecting an appropriate discount rate for the instrument; and
- judgement to determine what model to use to calculate fair value in areas where the choice of valuation model is
particularly subjective.
A range of valuation techniques is employed, dependent on the instrument type and available market data. Most valuation
techniques are based upon discounted cash flow analyses, in which expected future cash flows are calculated and
discounted to present value using a discounting curve. Prior to considering credit risk, the expected future cash flows may
be known, as would be the case for the fixed leg of an interest rate swap, or may be uncertain and require projection, as
would be the case for the floating leg of an interest rate swap. Projection utilises market forward curves, if available.
Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and
other premiums used in estimating discount rates, bond and foreign currency exchange rates and expected price
volatilities and correlations.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received
to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement
date.
The Group uses widely recognised valuation models for determining the fair value of common and simple financial
instruments, such as interest rate and currency swaps, that use only observable market data and require minimal
management judgement and estimation.
Fair values of investment securities in inactive markets are based on:
- quoted prices of similar instruments, performing numerical procedures such as interpolation when input values
do not directly correspond to the most active market trade parameters; or
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Observable prices and model inputs are usually available in the market for listed debt and equity securities, exchange
traded derivatives and simple over the counter derivatives such as interest rate swaps. Availability of observable market
prices and model inputs reduces the need for management judgement and estimation and reduces the uncertainty
associated with determining fair values. Availability of observable market prices and inputs varies depending on the
products and markets and is prone to changes based on specific events and general conditions in the financial markets.
2.7.3 Financial instruments measured at fair value
The following table analyses financial instruments measured at fair value at the end of the reporting year, in terms of the
respective levels within the fair value hierarchy into which the respective fair value measurement is categorised. The fair
value amounts are based on the carrying amounts reflected in the statement of financial position.
As at 31 December 2025 | As at 31 December 2024 | |||||||
Group | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | |
Assets | ||||||||
Instruments mandatorily measured at fair value through | ||||||||
profit or loss | ||||||||
- Derivative financial instruments | - | 185,928 | - | 185,928 | - | 174,799 | 511 | 175,310 |
Liabilities | ||||||||
Derivative financial instruments | - | 11,204 | - | 11,204 | - | 32,681 | - | 32,681 |
As at 31 December 2025
As at 31 December 2024
Bank
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
€000
€000
€000
€000
€000
€000
€000
€000
Assets
Instruments mandatorily measured at fair value through
profit or loss
- Derivative financial instruments
-
184
-
184
-
286
511
797
Liabilities
Derivative financial instruments
-
759
-
759
-
833
-
833
Level 2 assets principally comprise derivatives held for risk management that are fair valued based on valuation models
with the key methodology utilised comprising the calculation of the net present value of a series of expected cash flows,
considering the different terms of each specific contract/instrument (discounted cash flow approach). These models use
as their basis independently sourced market parameters including, for example, interest rate yield curves. Market
parameters are either directly observable or are implied from observable instrument prices. The model may perform
numerical procedures in respect of pricing such as interpolation when input values do not directly correspond to the most
active market trade parameters.
The following table shows a reconciliation of the fair value measurements in Level 3 of the fair value hierarchy:
Securitisation investment
portfolio measured at fair value
through profit or loss
Derivative financial instruments
measured at fair value through
profit or loss
Group
2025
2024
2025
2024
€000
€000
€000
€000
Year ended 31 December
At beginning of year
-
1,018
511
511
Changes in fair value
-
(125)
(511)
-
Realised
-
(893)
-
-
At end of year
-
-
-
Bank
Securitisation investment
portfolio measured at fair value
through profit or loss
Derivative financial instruments
measured at fair value through
profit or loss
2025
2024
2025
2024
€000
€000
€000
€000
Year ended 31 December
At beginning of year
-
1,018
511
511
Changes in fair value
-
(125)
(511)
-
Realised
-
(893)
-
-
At end of year
-
-
-
511
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As at 31 December 2024, the Group's exposure to Level 3 assets consisted of tax warrants. Accordingly, a sensitivity
analysis of the fair value measurement to changes in observable inputs was not deemed relevant.
2.7.3.1 Transfers between levels
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting year during which
the transfer has occurred. There were no transfers between levels of the fair value hierarchy during the financial years
ended 31 December 2025 and 31 December 2024.
2.7.4 Financial instruments not measured at fair value
The following table sets out the fair values of financial instruments not measured at fair value and analyses them in terms
of the respective level within the fair value hierarchy into which the respective fair value measurement is categorised. This
table includes only financial instruments in respect of which fair value is estimated to be materially different than the
carrying amounts.
As at 31 December 2025 | |||||
Group | Level 1 | Level 2 | Level 3 | Total fair values | Total carrying amount |
| €000 | €000 | €000 | €000 | €000 | |
Assets | |||||
Loans and advances to customers | - | - | 2,573,728 | 2,573,728 | 2,806,170 |
- Dutch Mortgage portfolio | - | - | 2,067,520 | 2,067,520 | 2,265,686 |
- Belgian Mortgage portfolio | - | - | 506,208 | 506,208 | 540,484 |
Investments | 884,232 | 159,070 | 391,823 | 1,435,125 | 1,441,455 |
- Securities portfolio | 884,232 | - | - | 884,232 | 890,401 |
- Securitisation portfolio | - | - | 391,823 | 391,823 | 392,060 |
- Asset-Backed Securitisation portfolio | - | 159,070 | - | 159,070 | 158,994 |
Total financial assets | 884,232 | 159,070 | 2,965,551 | 4,008,853 | 4,247,625 |
Liabilities | |||||
Debt securities in issue | - | - | 603,736 | 603,736 | 602,397 |
Subordinated liabilities | 54,489 | - | 11,996 | 66,485 | 67,329 |
Total financial liabilities | 54,489 | - | 615,732 | 670,221 | 669,726 |
As at 31 December 2024 | |||||
Group | Level 1 | Level 2 | Level 3 | Total fair values | Total carrying amount |
| €000 | €000 | €000 | €000 | €000 | |
Assets | |||||
Loans and advances to customers | - | 45,475 | 2,397,154 | 2,442,629 | 2,644,944 |
- International Corporate Lending portfolio | - | 45,475 | 27,187 | 72,662 | 72,743 |
- Dutch Mortgage portfolio | - | - | 2,030,003 | 2,030,003 | 2,205,956 |
- Belgian Mortgage portfolio | - | - | 339,964 | 339,964 | 366,245 |
Investments | 685,806 | 145,264 | 513,500 | 1,344,570 | 1,358,820 |
- Securities portfolio | 685,806 | - | - | 685,806 | 698,866 |
- Securitisation portfolio | - | - | 513,500 | 513,500 | 514,669 |
- Asset-Backed Securitisation portfolio | - | 145,264 | - | 145,264 | 145,285 |
Total financial assets | 685,806 | 190,739 | 2,910,654 | 3,787,199 | 4,003,764 |
Liabilities | |||||
Debt securities in issue | - | - | 642,698 | 642,698 | 641,673 |
Subordinated liabilities | 54,637 | - | 10,900 | 65,537 | 67,358 |
Total financial liabilities | 54,637 | - | 653,598 | 708,235 | 709,031 |
As at 31 December 2025
Bank
Level 1
Level 2
Level 3
Total fair values
Total carrying amount
€000
€000
€000
€000
€000
Assets
Investments
263,539
32,843
84,470
380,852
383,786
- Securities portfolio
263,539
-
-
263,539
266,514
- Securitisation portfolio
-
-
84,470
84,470
84,488
- Asset-Backed Securitisation portfolio
-
32,843
-
32,843
32,784
Total financial assets
263,539
32,843
84,470
380,852
383,786
Liabilities
Subordinated liabilities
54,489
-
11,996
66,485
67,329
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As at 31 December 2024
Bank
Level 1
Level 2
Level 3
Total fair values
Total carrying amount
€000
€000
€000
€000
€000
Assets
Loans and advances to customers
- International Corporate Lending portfolio
-
7,972
8,992
16,964
16,914
Investments
256,093
13,696
120,423
390,212
396,632
- Securities portfolio
256,093
-
-
256,093
262,219
- Securitisation portfolio
-
-
120,423
120,423
120,714
- Asset-Backed Securitisation portfolio
-
13,696
-
13,696
13,699
Total financial assets
256,093
21,668
129,415
407,176
413,546
Liabilities
Subordinated liabilities
57,637
-
10,900
65,537
67,358
* The Group's International mortgage portfolios disclosed in the preceding tables are presented exclusive of the IFRS basis adjustment equivalent to
€174.6 million (2024: €142.2 million).
In addition to the above, as disclosed in note 21 to the financial statements, in February 2021 MDB Group Limited issued
€11 million fixed rate reset callable subordinated notes. The proceeds from the issuance of these notes were lent to
MeDirect Malta as a subordinated loan, that is disclosed within the subordinated liabilities note.
The fair value of €12.0 million (2024: €10.9 million) of these notes was determined by projecting the cashflows to the first
call date and discounting with January-end ESTR curves to obtain the spread over the said curve. The fair value
calculation considers the impact of the rise in interest rates throughout this period which is the most likely meaningful
contribution to the change in fair value. The spread over the ESTR curves during this period was utilised to measure the
present values of future cashflows.
The Level 1 fair values reflected in the tables above consist of the closing bid price quoted in an active market in respect
of debt securities classified under the Securities Investment portfolio and subordinated bonds issued by the Group.
The Level 2 fair value disclosures of the Asset-Backed Securitisation Investment portfolio reflected in the tables above
consist of the closing bid prices based on quotes from multiple contributors, including both executable and indicative
quotes.
As at 31 December 2024, the Level 2 and Level 3 fair value disclosures of the International Corporate Lending portfolio
mainly comprise price quotations sourced from an online platform in respect of internationally traded loans and advances,
consisting of the Group’s international loan book with foreign corporates. As at 31 December 2025, loans and advances to
customers forming part of the International Corporate Lending portfolio of the Group and Bank amounting to €21.5 million
(2024: €205.9 million) and €21.5 million (2024: €123.3 million) respectively, net of expected credit losses, have not been
reflected within the preceding table given that there were no observable market prices or any public information available
but the contractual terms of these instruments, that mainly re-price within three months, and the nature of the borrowers,
are similar to those of the instruments in the preceding table and thus their fair valuation characteristics would not differ
significantly from those of the instruments included in the preceding table.
The Level 3 assets also include the following:
- The Group’s and Bank’s investments in tranches of securitisation structures amounting to €389.7 million (2024:
€510.6 million) and €84.0 million (2024: €119.7 million) respectively, which are mainly rated AAA, and for which
a fair value is determined using third party valuation models to estimate the net present value of a series of
expected cash flows, taking into consideration instrument-specific contractual terms (discounted cash flow
approach). Amongst other things, these models take into consideration the characteristics of the underlying
portfolio of assets (including quality of underlying assets), historical portfolio performance, and the liability
structure of the CLO transaction. These models also make use of independently sourced market parameters
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- Dutch mortgages amounting to €2,265.7 million (2024: €2,206.0 million) and Belgium mortgages amounting to
€540.5 million (2024: €366.2 million), included in Loans and advances to customers. In order to derive their fair
value as at 31 December 2025 and 2024, the Group bootstraps the average of the top three interest rate quotes
offered by Dutch government-backed mortgage loan lenders in the Netherlands and Belgian mortgage loan
lenders in Belgium respectively for every mortgage fixed rate tenor to create a zero coupon discount curve and
applies this curve to discount the projected future cashflows. In addition, to estimate the future cashflows, the
Group considers both instrument-specific contractual terms and estimated conditional prepayment rates.
The Group’s financial instruments not measured at fair value comprise balances with central banks, loans and advances
to financial institutions, and amounts owed to financial institutions and customers. The fair values of these financial assets
and liabilities are not disclosed given that the carrying amount is a reasonable approximation of fair value because these
are either re-priced to current market rates frequently or are short-term in nature.
As at 31 December 2025, all the Group’s and Bank’s exposures classified under loans and advances to financial
institutions amounting to €329.0 million (2024: €316.2 million) and to €54.3 (2024: €37.1 million) respectively, and
balances with central banks amounting to €272.6 million (2024: €206.9 million) and to €74.6 million (2024: €64.6 million)
respectively, reprice or mature in less than one year. Hence their fair value is not deemed to differ materially from their
carrying amount at the reporting date.
As at 31 December 2025, the carrying amount for loans and advances to customers classified under the Maltese
Business Lending portfolio amounting to €208.9 million (2024: €154.1 million), Maltese Mortgage portfolio amounting to
€151.4 million (2024: €129.3 million) and Consumer Finance receivables portfolio amounting €9.5 million (2024: €4.7
million) approximates their fair value because these loans are repriceable at the Group’s discretion.
Fair values referred to above are estimated using discounted cash flows, applying market rates.
The ‘Amounts owed to financial institutions’ of the Group and the Bank as at 31 December 2025 amounting to €209.8
million (2024: €179.8 million) and €6.1 million (2024: €6.7 million), respectively, and ‘Amounts owed to customers’ of the
Group and the Bank amounting to €4.0 billion (2024: €3.7 billion) and €781.4 million (2024: €757.1 million) respectively,
sourced from the Maltese and Belgian markets, re-price or mature in less than one year. Hence their fair value is not
deemed to differ materially from their carrying amount at the reporting date. Fair values of these liabilities are estimated
using discounted cash flows, applying current rates offered for deposits of similar remaining maturities. The fair value of a
demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount
payable is required to be paid.
The fair value estimates of balances with central banks, loans and advances to financial institutions, and amounts owed to
financial institutions are considered Level 2 fair value estimates, whilst the fair value estimates of loans and advances to
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158
3. Accounting estimates and judgements
3.1 Critical accounting estimates and judgements in applying the Group’s accounting
policies
Estimates and judgements are continually evaluated and based on historical experience and other factors including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates are, by definition,
seldom equal the related actual results. These estimates and assumptions present a risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year. The Group’s management also makes
judgements, apart from those involving estimations, in the process of applying the entity's accounting policies that may
have a significant effect on the amounts recognised in the financial statements.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
Information about assumptions, estimations and uncertainties that have a significant risk of resulting in a material
adjustment in the year ending 31 December 2026 is set out below in relation to estimated cash flows for the purposes of
applying the effective interest method and the impairment of financial instruments.
3.2 Expected credit losses on loans and advances to customers
Financial assets measured at amortised cost are evaluated for impairment on the basis described in Accounting Policy
Note 1.5. Expected credit losses (“ECL”) on loans and advances represent management’s best estimate of expected
credit losses on the loan portfolios subject to IFRS 9 impairment requirements at the end of the reporting period. In this
respect, management is required to exercise judgement in defining what is considered to be a significant increase in credit
risk or an unlikeliness-to-pay event, in determining the expected lifetime and point of initial recognition of financial
instruments, and in making assumptions and estimates to incorporate relevant information about past events, current
conditions and forecasts of economic conditions when calculating expected credit losses.
The measurement of credit loss allowances in respect of loans and advances to customers in line with IFRS 9 principles
requires complex statistical analyses and modelling assumptions, with ECL models built and calibrated principally by
reference to historical information in respect of default levels and loss severities. However, due to the inherent level of
estimation uncertainty in modelling such aspects of the ECL calculation, a significant element of expert judgement is
required to ensure that model parameters produce an ECL output which is reasonable and appropriate in light of existing
conditions.
For loans within the Group’s International Corporate Lending and Maltese Business Lending portfolios, judgement is firstly
required in determining whether there is objective evidence that an exposure is credit-impaired. In performing this
assessment, management applies a significant level of judgement in evaluating all relevant information on indicators of
unlikeliness-to-pay, including the consideration of factors that immediately indicate deterioration in the financial condition
of borrowers, but also in respect of factors that impact the outlook of borrowers affecting their ability to pay, as described
in Note 1.5. A higher level of judgement is required for loans to borrowers showing continued signs of financial difficulty
similar to those experienced during the preceding financial year, and for borrowers that are performing better compared to
the prior year to understand whether the improvements are sustainable going forward. These judgements are reflected
within forecasted cash flow forecasts under different scenarios for Stage 2 borrowers particularly when assessing their
unlikeliness to pay.
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The measurement of credit loss allowances in respect of defaulted exposures is performed through an internally
developed model based upon management’s best estimate of the present value of the cash flows that are expected to be
received under multiple forward-looking scenarios. As described in note 2.2.1 the Group utilises a DCF approach. In
estimating cash flows for defaulted exposures within the International Corporate Lending portfolio, management makes
judgements about a debtor’s financial situation and future repayment prospects, taking into consideration management
plans for growth within the current environment. In this regard, judgement is applied in estimating the expected future
cash flows from each borrower under the different scenarios, assigning probabilities to those scenarios, and determining
appropriate discount rates reflecting borrower-specific characteristics. The determination of operating cash flows under
multiple scenarios requires a significant level of judgement in order to adequately capture the current economic
conditions.
The estimates of recoverable cash flows for each defaulted borrower are independently reviewed and challenged by the
Group’s credit risk function, and approved by the Group’s Management Credit Committee.
During 2025 and 2024, the Group extended loan forbearance measures to borrowers experiencing financial difficulties by
agreeing to modify the contractual payment terms of loans in order to improve collection opportunities or to avoid default.
Where forbearance activities are present, higher levels of judgement and estimation uncertainty are involved in
determining their effects on credit loss allowances. Significant judgement was required in determining whether substantial
modifications were made to contractual terms, thereby requiring derecognition of the extinguished financial instrument(s)
and the recognition of the new financial instrument(s). In addition, whether such restructuring led to the recognition of new
financial instruments or the continuing recognition of the pre-restructured debt, the determination of the relative staging of
the post-restructured debt and the measurement of the associated credit loss allowances are also deemed to be highly
judgemental.
For exposures classified as Stage 1 and Stage 2 within the International Corporate and Maltese Business Lending
portfolios, and all exposures within the Dutch, Belgian and Maltese Mortgage portfolios, the Group measures credit loss
allowances on the basis of complex models with a number of underlying assumptions. Particularly, in respect of the
International Corporate portfolio, the level of estimation uncertainty is exacerbated in respect of:
(i) modelling PiT PDs and LGDs;
(ii) forecasting macroeconomic scenarios for the purposes of estimating probability-weighted credit loss allowances;
(iii) the determination of expected maturities of facilities, particularly in the case of International Corporates classified
as Stage 2; and
(iv) assessing if there has been a significant increase in credit risk, which comprise a combination of qualitative and
quantitative criteria, as described in Note 1.5.
The PD, LGD and EAD models used for the measurement of credit loss allowances for the International Corporate
Lending, Maltese Business Lending and Dutch Mortgage portfolio are developed by an external vendor, enabling the
estimation of these three key risk parameters at a facility level using statistical models, mainly by benchmarking exposure-
specific characteristics against an underlying dataset. Specifically, PDs and LGDs are developed on a name-by-name
basis by reference to the default and loss history of comparable borrowers with similar characteristics in terms of size,
industry and country of operations.
In this regard, the methodology together with the assumptions and parameterisation used in the calibration of the model
are reviewed on a regular basis by management in order to ensure that the model output remains appropriate in view of
the Group’s observed default and credit loss history. A significant level of judgement is required in order to assess the
continuing appropriateness and reasonableness of the PiT PDs and LGDs being determined by the statistical models. In
this respect, it is noteworthy to mention that the Group’s IFRS 9 model for determining PiT PDs is particularly sensitive to
equity market data. As a result, given that equity prices are driven by factors unrelated to creditworthiness, a significant
level of expert judgement is required to determine the reasonableness of ECL model outputs. As described in more detail
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160
Similarly, significant judgement was also required in the modelling and selection of macroeconomic forecasts as well as in
calibration of the severities and respective probability weights of macroeconomic scenarios used in the determination of
ECLs. Judgement in this respect has been amplified by the heightened level of uncertainty triggered by the
unprecedented economic and socio-political conditions being currently experienced across countries and industries. In
this respect, a number of modelling assumptions are required, based on expert judgement, in order to form a view on the
impact of the conflict between Russia and Ukraine and between Israel and Hamas on macroeconomic variables in specific
countries and industries.
Hence, as at 31 December 2025, the development of multiple forward-looking macroeconomic scenarios taking into
consideration all these variables represents a key element of estimation uncertainty in the measurement of credit loss
allowances. In addition, as described in Note 2.2.7 of the financial statements, the Group ensures that the modelled
macroeconomic forecasts provided by the external vendor that supplies the Group with the applicable modelled scenarios
for the purposes of ECL modelling are aligned with the ECB staff macroeconomic projections published in December
2025.
In view of the high subjectivity involved in forecasting scenarios and the sensitivity of the ECL to the key changes in the
number, selection and probability weightings applicable to the different scenarios, the Group has recalculated the ECL
under the different scenarios both by applying a 100% weight to each scenario, as well as by re-calibrating the probability
weights to scenario severities determined by the external vendor as in the preceding year, i.e. prior to any post-model
adjustments. The effect of this uncertainty on the ECL outcome is disclosed in the sensitivity analysis of the measured
credit loss allowances as at 31 December 2025 and 2024 presented in Note 2.2.7 of the financial statements.
The determination of expected maturities, which is particularly relevant for Stage 2 exposures within the International
Corporate Lending portfolio, is based on behavioural maturity, reflecting management expectations on the exercise of
prepayment options, based on borrowers’ ability to refinance their debt in the open market. The level of subjectivity in
determining expected maturities increases significantly when increased credit risk is experienced by such borrowers as it
diminishes their refinancing abilities over the shorter term. In this context, management continues to monitor the expected
maturities of borrowers in Stage 2 by reference to borrower specific information as well as by benchmarking the expected
timing of future recoveries against actual outcomes to ensure that they remain appropriate.
The identification of SICR events, particularly in respect of the International Corporate Lending portfolio, requires
significant judgement in order to assess the severity of the impact of significant events on the financial performance and
financial condition of such borrowers. In this respect, during 2025 and 2024, increased reliance has continued to be made
by the Group on its qualitative staging criteria, particularly through the introduction of caps on implied ratings and notch
downgrades to ensure that borrower specific risks as at the end of the financial reporting period are captured in as timely
a manner as possible.
3.3 Valuation of derivatives and hedge accounting
The level of management judgement required in establishing fair value of derivative financial instruments is limited for
those instruments valued using valuation models which are standard across the industry and where all parameter inputs
are quoted in active markets.
The level of subjectivity and degree of management judgement required is more significant for those derivative financial
instruments valued using specialised and sophisticated models and where some or all of the parameter inputs are less
liquid or less observable. Management judgement is required in the selection and application of appropriate parameters,
assumptions and modelling techniques. Where no market data are available for a particular instrument then pricing inputs
are determined by assessing other relevant sources of information such as historical data and making appropriate
adjustment to reflect the actual instrument being valued and current market conditions. Further, some valuation
adjustments may require the exercise of management judgement to achieve fair value.
Moreover, the accounting treatment of the hedging relationship and the effectiveness test is based on a number of
assumptions that include amongst others the expected future early redemptions and renegotiations of the International
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161
Financial assets and liabilities carried at fair value are required to be disclosed according to the inputs to the valuation
method that are used to determine their fair value. Specifically, segmentation is required between those valued using
valuation techniques based on observable parameters (level 2) and valuation techniques using significant unobservable
parameters (level 3). Management judgement is required in determining the category to which certain instruments should
be allocated. This specifically arises when the valuation is determined by a number of parameters, some of which are
observable and others are not.
4. Balances with central banks and cash
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
At amortised cost:
Balances with central banks
272,563
206,868
74,593
64,616
Cash
2
2
2
2
272,565
206,870
74,595
64,618
As at 31 December 2025, balances held with central banks include reserve deposits of the Group amounting to €38.1
million (2024: €35.4 million) relating to the Minimum Reserve Requirement in terms of Regulation (EC) No 1745/2003 of
the ECB, of which €7.3 million (2024: €7.1 million) relates to MeDirect Malta, bearing interest at 0% per annum. Other
balances with central banks held by the Group with the National Bank of Belgium amounting to €167.3 million (2024:
€114.0 million) are subject to a positive interest rate of 2% (2024: positive interest rate of 3%) per annum. The remaining
balances that are held with Central bank of Malta are subject to a positive interest rate of 2% per annum (2024: 3% per
annum).
Balances with central banks in the preceding table are shown net of credit loss allowances amounting to €2 thousand
(2024: €2 thousand) and €1 thousand (2024: €1 thousand) as at 31 December 2025 for the Group and the Bank
5. Derivative financial instruments
The Group established derivative lines with counterparties to purchase foreign exchange swaps, interest rate swaps and
other appropriate instruments approved for hedging risks.
The Group uses over-the-counter foreign exchange swaps to hedge its exposure to changes in foreign exchange rates. All
foreign exchange swaps mature within 1 month (2024: 1 month) from the reporting date.
The Group uses over-the-counter interest rate swaps to hedge its exposure to interest rate risk emanating from a portfolio
of international fixed-rate mortgages (see Note below – macro fair value hedging under the EU carve-out version of IAS
39). The gains on the related hedging instruments during the year ended 31 December 2025 were €32.8 million (2024:
losses of €40.1 million). The losses on the hedged items arising during the year attributable to the hedged risk were €32.4
million (2024: gains of €39.8 million).
The Group also uses using over-the-counter interest rate swaps to hedge its exposure to interest rate risk emanating from
a portfolio of fixed-rate corporate loans (see Note below – macro fair value hedging under the EU carve-out version of IAS
39). The gains on the related hedging instruments during the year ended 31 December 2025 were €0.2 million (2024:
losses of €0.7 million). The losses on the hedged items arising during the year attributable to the hedged risk were €0.2
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162
As from 2025, the Group and Bank used over-the-counter interest rate swaps to hedge its exposure to changes in the fair
values of specific fixed rate securities attributable to changes in market interest rates (micro fair value hedging). Interest
rate swaps were matched to fixed rate securities in designated fair value hedging transactions. The gains on the hedged
items arising during the year ended 31 December 2025 attributable to the hedged risk were €0.1 million. The losses on
the related hedging instruments for the Group and Bank during the year ended 31 December 2025 were €0.1 million.
Foreign exchange and interest rate swaps are commitments to exchange one set of cash flows for another, resulting in an
economic exchange of currencies or interest rates (for example, fixed rate for floating rate).
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Derivative financial assets- fair value
185,928
175,310
184
797
Derivative financial liabilities- fair value
(11,204)
(32,681)
(759)
(833)
The Group applies fair value hedge accounting on micro level in which one hedged item is hedged with one or multiple
hedging instruments as well as on macro level whereby a portfolio of items is hedged with multiple hedging instruments.
For macro hedges of interest rate risk, the Group applies the EU ‘carve-out’ version of IAS 39. The EU ‘carve-out’ rules for
macro hedging enable a group of derivatives (or proportions) to be viewed in combination and jointly designated as the
hedging instrument and remove some of the limitations in fair value hedge accounting relating to hedging net positions of
loans and core deposits and under-hedging strategies. Thus, natural interest rate hedges are used in the first place, which
is the interest rate risk associated with liabilities (e.g. retail funding, wholesale funding), to determine the net exposure.
The remaining exposure is hedged in a portfolio hedge, using the EU ‘carve-out’ version of IAS 39, in which a portion of
the lending portfolio is designated as a hedged item for hedge accounting purposes.
The Group applies the following types of hedge accounting:
Fair value hedges
Hedging the interest rate risk in respect of loans and advances to customers (macro hedge)
The first hedged portfolio comprises fixed-rate mortgages of MeDirect Belgium (refer to Note 7). The International
mortgages portfolios have a fixed-rate interest period of more than 240 months. The second hedged portfolio comprises
fixed-rate corporate lending of MeDirect Malta (refer to Note 7). These are corporate loans that have a fixed-rate interest
period of more than 60 months.
The hedging instruments are interest rate swaps entered into as part of interest rate risk management in the Asset and
Liability Management (‘ALM’) process. The risk being hedged is the risk of change in fair value of the portfolio attributable
to movements in market interest rates. Effectiveness assessments are performed on a retrospective and a prospective
basis, using the dollar offset method.
Hedge ineffectiveness can arise from:
- Differences in timing of cash flows of hedged items and hedging instruments;
- Different interest rate curves and the intra period movement of these curves applied to forecast and discount of
the cash flows of the hedged item and hedging instruments; and
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163
Hedging the interest rate risk in respect of fixed rate debt securities (micro hedge)
The hedged positions are fixed rate securities managed by the Treasury team.
The hedging instruments are interest rate swaps entered into as part of interest rate risk management in the Asset and
Liability Management (‘ALM’) process. The risk being hedged is the risk of change in fair value of the portfolio attributable
to movements in market interest rates. The interest rate risk on specific fixed-income investments held by MeDirect Malta
(refer to Note 8), on an individual asset basis, is hedged by swapping the coupon to a floating interest rate using interest
rate swaps. The country or credit spread is not hedged. Effectiveness assessments are performed on a retrospective and
a prospective basis, using the dollar offset method.
Hedge ineffectiveness can arise from:
- Differences in timing of cash flows of hedged items and hedging instruments; and
- Different interest rate curves and the intra period movement of these curves applied to forecast and discount of
the cash flows of the hedged item and hedging instruments.
The fair values of the held for trading derivatives and derivatives designated as hedging instruments in fair value hedges
together with the related notional amounts, distinguishing between micro hedges and macro hedges for the purposes of
hedge accounting, are as follows:
Group
Bank
Notional
Fair
value
Notional
Fair
value
Notional
Fair value
Notional
Fair
value
2025
2025
2024
2024
2025
2025
2024
2024
€000
€000
€000
€000
€000
€000
€000
€000
Derivatives held for trading – Assets
Instrument type:
- Foreign exchange swaps
47,322
184
54,704
396
47,322
184
44,178
286
- Other derivative financial instruments
-
511
-
511
184
907
184
797
Derivatives held for trading – Liabilities
Instrument type:
- Foreign exchange swaps
36,196
(236)
16,996
(165)
24,607
(136)
16,996
(163)
(236)
(165)
(136)
(163)
Net derivatives held for trading
(52)
742
48
634
Derivatives designated as hedging instruments in fair value hedges – Assets
Instrument type:
- Interest rate swaps maturing in:
More than one year and
less than five years
- Macro hedges
816,582
32,838
705,173
25,312
-
-
-
-
More than five years
- Macro hedges
1,224,468
152,906
1,044,727
149,091
-
-
-
-
185,744
174,403
-
-
Derivatives designated as hedging instruments in fair value hedges – Liabilities
Instrument type:
- Interest rate swaps maturing in:
More than one year and
less than five years
- Macro hedges
76,932
(5,728)
1,170,550
(9,568)
-
-
60,000
(627)
More than five years
- Micro hedges
20,000
(107)
-
-
20,000
(107)
-
-
- Macro hedges
277,050
(5,133)
401,500
(22,948)
112,000
(516)
3,000
(43)
(10,968)
(32,516)
(623)
(670)
Net derivatives designated as hedging instruments
in fair value hedges
174,776
141,887
(623)
(670)
The carrying amounts and the accumulated basis adjustment for the International Mortgage portfolios and the Maltese
Business Lending portfolio are respectively included in the statement of financial position within Loans and advances to
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164
The accumulated negative basis adjustment within loans and advances to customers amounting to €174.6 million (2024:
negative basis adjustment amounting to €142.2 million) also includes the accumulated unamortised fair value hedge
adjustments of €0.5 million (2024: €0.1 million) related to hedges within the International Mortgage portfolios that have
been discontinued and are now amortised. There has been no such case within the Maltese Business Lending hedges.
The carrying amounts for the fixed-income investments are respectively included in the statement of financial position
6. Loans and advances to financial institutions
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
At amortised cost:
Repayable on call and at short notice
245,531
283,943
47,176
30,359
Term loans and advances
83,473
32,236
7,151
6,715
329,004
316,179
54,327
37,074
As at 31 December 2025, €150.7 million (2024: €205.5 million) of the Group’s loans and advances to financial institutions
were pledged as collateral, most of which were in relation to the funding of the purchase of Dutch mortgages amounting to
€140.4 million (2024: €197.1 million) and in relation to the funding of the purchase of Belgium mortgages amounting to
€10.3 million (2024: €8.4 million).
Besides the above, the Group has amounts of €74.5 million (2024: €23.7 million) that are held for the purposes of margin
requirements on hedging instruments attributable to the Dutch Mortgage lending business and are hence considered
encumbered.
As at 31 December 2025, other loans and advances to financial institutions of the Group, most of which were pledged in
favour of Eurex Clearing AG in relation to clearing of derivative financial instruments, amounting to €4.6 million (2024:
€14.7 million) and other loans and advances to financial institutions of the Bank amounting to €3.1 million (2024: €2.5
million) were encumbered. In addition, loans and advances to financial institutions of the Group and Bank also include
€5.3 million (2024: €5.3 million) and €4.3 million (2024: €4.3 million) respectively in the form of cash that has been
contributed to a derivatives clearing fund held by Eurex Clearing AG, of which the Group is a member. The clearing fund
protects members against losses until they leave the clearing fund.
Loans and advances to financial institutions as at 31 December 2025 and 2024 were neither past due nor credit-impaired
and no forbearance measures were applied by the Group and the Bank in this respect. In addition, loans and advances to
financial institutions in the preceding table are shown net of credit loss allowances amounting to €1 thousand as at 31
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165
7. Loans and advances to customers
Bank
2025
2024
2025
2024
€000
€000
€000
€000
International Corporate Lending portfolio
- Term loans and advances: corporate
26,458
221,366
26,448
128,174
Dutch Mortgage portfolio
- Term loans and advances: retail
2,266,097
2,206,207
-
-
Belgian Mortgage portfolio
- Term loans and advances: retail
541,482
366,799
-
-
IFRS basis adjustment - International mortgage portfolio
(174,573)
(142,246)
-
-
Maltese Business Lending portfolio
- Repayable on call and short notice: corporate
1,833
3,514
1,833
3,514
- Term loans and advances: corporate
208,228
151,681
208,228
151,681
IFRS basis adjustment - Maltese Business Lending portfolio
519
686
519
686
Maltese Mortgage portfolio
- Term loans and advances: retail
151,707
129,606
151,707
129,606
Consumer Finance receivables
11,040
4,804
11,040
4,804
Gross loans and advances to customers
3,032,791
2,942,417
399,775
418,465
Less: Credit loss allowances
(9,397)
(14,942)
(7,988)
(4,644)
3,023,394
2,927,475
391,787
413,821
The negative fair value/basis adjustment amounting to €174.6 million (2024: negative fair value/basis adjustment
amounting to €142.2 million) is attributable to interest rate swaps entered into as part of the interest rate risk on the
International Mortgage portfolio management in the ALM process to hedge the risk of change in fair value of the portfolio
attributable to movements in market interest rates (refer to Note 5). The movement led to losses on hedged items
attributable to the hedged risk amounting to €32.4 million (2024: gains of €39.8 million) as disclosed in Note 25 to these
financial statements.
As at 31 December 2025, the positive fair value/basis adjustment amounting to €0.5 million (2024: positive fair value/basis
adjustment amounting to €0.7 million) is attributable to interest rate swaps entered into as part of the interest rate risk on
the Maltese Business Lending portfolio management in the ALM process to hedge the risk of change in fair value of the
portfolio attributable to movements in market interest rates (refer to Note 5). The movement led to losses on hedged items
attributable to the hedged risk amounting to €0.2 million (2024: gains of €0.7 million) as disclosed in Note 25 to these
financial statements.
As disclosed in further detail in Note 20, as at 31 December 2025 Dutch retail mortgages amounting to €1,542.0 million
(2024: €1,140.3 million) have been securitised through three (2024: three) Residential Mortgage-Backed Security
(“RMBS”) transactions. As risks and rewards were deemed to have been retained by MeDirect Belgium, as at 31
December 2025 and 2024, these were recognised on the Group’s statement of financial position.
The Group’s Dutch Mortgage portfolio in the preceding table mainly consist of Dutch retail residential mortgages with the
Group | Allowance booked under | ||||||||||
| Stage 1 | Stage 2 | Stage 3 | POCI | Total | |||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||
| €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | ||
Credit loss allowances: | |||||||||||
- International Corporate Lending | - | (684) | (351) | (489) | (4,603) | (11,211) | - | (223) | (4,954) | (12,607) | |
- Dutch Mortgage portfolio | (113) | (114) | (246) | (120) | (52) | (17) | - | - | (411) | (251) | |
- Belgian Mortgage portfolio | (388) | (284) | (83) | (86) | (527) | (184) | - | - | (998) | (554) | |
- Maltese Business Lending portfolio | (356) | (357) | (13) | - | (756) | (765) | - | - | (1,125) | (1,122) | |
- Maltese Mortgage portfolio | (315) | (332) | (2) | - | (23) | - | - | - | (340) | (332) | |
- Consumer Finance receivables | (21) | (10) | (9) | (3) | (1,539) | (63) | - | - | (1,569) | (76) | |
(1,193) | (1,781) | (704) | (698) | (7,500) | (12,240) | - | (223) | (9,397) | (14,942) | ||
Bank
Allowance booked under
Stage 1
Stage 2
Stage 3
POCI
Total
2025
2024
2025
2024
2025
2024
2025
2024
2025
2024
€000
€000
€000
€000
€000
€000
€000
€000
€000
€000
Credit loss allowances:
- International Corporate Lending
-
(278)
(351)
(395)
(4,603)
(2,218)
-
(223)
(4,954)
(3,114)
- Maltese Business Lending portfolio
(356)
(357)
(13)
-
(756)
(765)
-
-
(1,125)
(1,122)
- Maltese Mortgage portfolio
(315)
(332)
(2)
-
(23)
-
-
-
(340)
(332)
- Consumer Finance receivables
(21)
(10)
(9)
(3)
(1,539)
(63)
-
-
(1,569)
(76)
(692)
(977)
(375)
(398)
(6,921)
(3,046)
-
(223)
(7,988)
(4,644)
|me> direct Annual Report and Financial Statements 2025
166
Loans and advances relating to exposures within the Group’s and Bank’s International Corporate Lending portfolio
amounting to €8.8 million and €5 thousand respectively (2024: €18.5 million and €15.4 million respectively) have been
written off during the financial year. As at 31 December 2024, credit loss allowances amounting to €8.2 million and €7.9
million of the Group and Bank, respectively relating to such write-offs have been released to profit or loss.
As at 31 December 2024, the Group derecognised loans and advances to three European corporations with a gross
carrying amount of €38.0 million for the Group and €34.2 million for the Bank as a result of restructuring procedures. As at
the date of restructuring, credit loss allowances recognised in respect of these financial instruments amounted to €8.2
million for the Group and €7.9 million for the Bank. These financial instruments were replaced by new loans and advances
to customers with a gross carrying amount of €36.8 million for the Group and €34.8 million for the Bank that were
classified as hold to collect financial assets measured at amortised cost on initial recognition. The holding of the new
loans and advances to customers represent the continuing interaction with these customers.
8. Securities and Securitisation Investment portfolios
Securities Investment portfolio
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Investments measured at amortised cost including basis
adjustment attributable to the hedged risk
- Debt and other fixed income securities
890,488
698,961
266,533
262,259
- Less: Credit loss allowances
(87)
(95)
(19)
(40)
890,401
698,866
266,514
262,219
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Measured at amortised cost
Debt securities and other fixed income securities
Issued by public bodies
- foreign national and regional governments
345,116
245,847
134,700
139,635
- supranational
110,015
20,912
30,169
20,912
Issued by other bodies
- foreign banks
435,270
432,107
101,645
101,672
890,401
698,866
266,514
262,219
Listing status
- listed on foreign recognised exchanges
890,401
698,866
266,514
262,219
890,401
698,866
266,514
262,219
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Measured at amortised cost
Year ended 31 December
At beginning of year
698,866
710,930
262,219
284,602
Additions
221,000
77,000
30,000
-
Redemptions
(28,919)
(90,311)
(26,000)
(23,100)
Gains on hedged items attributable to the hedged risk
854
1,273
854
1,273
Amortisation of premium/discount
(3,072)
(991)
(447)
(473)
Movement in accrued interest
1,663
994
(133)
(77)
Movement in credit loss allowances
9
(29)
21
(6)
At end of year
890,401
698,866
266,514
262,219
Investment securities with a nominal value of €865.7 million and €247.9 million for the Group and the Bank respectively
are held with Eurex to serve as collateral against the provision of borrowing facilities (2024: €669 million and €244.3
million respectively). These include investment securities that are held on balance sheet with a carrying amount of €869.8
million and €245.9 million for the Group and Bank respectively (2024: €675.7 million and €243.6 million respectively).
The cash value of unutilised borrowing facilities (headroom) of the Group and the Bank as at 31 December 2025 which
are secured by the investment securities referred to above amounted to €849.0 million (2024: €649.8 million) and €242.8
million (2024: €235.7 million) respectively.
As at 31 December 2025, MeDirect Malta also had a repo facility, covered by a global master repurchase agreement,
whereby a financial institution makes available to MeDirect Malta a committed repo facility up to a maximum facility size of
|me> direct Annual Report and Financial Statements 2025
167
As at 31 December 2025 and 2024, an amount of €3.9 million (2024: €3.9 million) in the form of High Quality Liquid
Assets have been contributed by the Group and Bank to a derivatives clearing fund held by Eurex Clearing AG, of which
the Bank is a member. The clearing fund protects members against losses until they leave the clearing fund.
As at 31 December 2025, an amount of €43.5 million and €5.5 million in the form of High-Quality Liquid Assets were also
contributed by Group and Bank respectively to Eurex Clearing AG to cover for daily margining (2024: €43.5 million and
€5.5 million respectively).
Furthermore, as at 31 December 2025, the Group and Bank also held €5.5 million (2024: €5.5 million) in the form of High
Quality Liquid Assets with Saxo Bank as collateral for trading purposes.
Investment securities with a nominal value of €70.2 million (2024: €75.2 million) and a carrying amount of €70.4 million
(2024: €75.3 million) are also pledged as part of the cooperation with the Blauwtrust Groep to access their multi-investor
platform to purchase newly originated Dutch mortgages.
As at 31 December 2025, investment securities held by the Group and the Bank with a nominal value of €2.6 million
(2024: €2.2 million) and a fair value of €2.6 million (2024: €2.1 million) were pledged as a “payment commitment” in favour
of the Maltese Depositor Compensation Scheme (DCS).
The interest rate risk on specific fixed-income investments (refer to Note 5), on an individual asset basis, is hedged by
swapping the coupon to a floating interest rate using interest rate swaps. The country or credit spread was not hedged.
The hedges provide protection for changes in fair value of the relevant fixed-income investments attributable to
movements in market interest rates. Effectiveness assessments are performed on a retrospective and a prospective
basis, using the dollar offset method. As at 31 December 2025, the interest rate risk on specific fixed-income investments
held by the Group and Bank with a carrying amount of €19.9 million was hedged by swapping the coupon to a floating
interest rate using interest rate swaps. This included a positive fair value/basis adjustment amounting to €0.1 million.
As at 31 December 2025 and 2024, the Group and the Bank had no commitment to purchase further investment
securities.
Securitisation Investment portfolio
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Investments measured at amortised cost
- Debt and other fixed income securities
392,099
514,720
84,496
120,726
- Less: Credit loss allowances
(39)
(51)
(8)
(12)
392,060
514,669
84,488
120,714
Measured at amortised cost
Measured at fair value through
profit or loss
Group
2025
2024
2025
2024
€000
€000
€000
€000
Year ended 31 December
At beginning of year
514,669
609,688
-
1,018
Additions
-
37,500
-
-
Redemptions
(121,061)
(131,404)
-
(893)
Amortisation of premium/discount
146
79
-
-
Changes in fair value
-
-
-
(125)
Movement in accrued interest
(1,706)
(1,325)
-
-
Movement in credit loss allowances
12
131
-
-
At end of year
392,060
514,669
-
-
|me> direct Annual Report and Financial Statements 2025
168
Measured at amortised cost
Measured at fair value through
profit or loss
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Year ended 31 December
At beginning of year
120,714
159,807
-
1,018
Additions
-
10,000
-
-
Redemptions
(35,714)
(48,833)
-
(893)
Amortisation of premium/discount
(7)
9
-
-
Changes in fair value
-
-
-
(125)
Movement in accrued interest
(509)
(394)
-
-
Movement in credit loss allowances
4
125
-
-
At end of year
84,488
120,714
-
-
These investments represent portions in CLO transactions corresponding to tranches with the highest credit rating in such
CLO structures which are managed by third party entities, that are listed on recognised exchanges but not centrally
traded. The underlying assets for these CLO transactions are leveraged loans, predominantly senior secured leveraged
loans, and high yield corporate bonds. As at 31 December 2025, positions with a nominal value of €389.7 million (2024:
€510.6 million) and €84.0 million (2024: €119.7 million) in total for the Group and the Bank respectively, are held in a ‘hold
to collect’ business model and measured at amortised cost.
As at 31 December 2025 and 2024, the Group had pledged €123.7 million of the CLO transactions in favour of third
parties in collateral upgrade transactions, where the Group instead received liquid assets of €105.0 million as described in
LCR Delegated Act (Commission Delegated Regulation (EU) 2015/61).
Reclassification of investments
In June 2022, the Group and Bank changed the business model for managing those investments within the Securities and
Securitisation Investments portfolios that were originally deemed to be “Hold to collect and sell” and therefore were
measured at fair value through other comprehensive income.
The change in business model was attributable to the fact that the first half of 2022 represented the end of the
diversification from the international corporate lending business to the Dutch, Belgian and Maltese mortgages business.
As a result, on 1 July 2022 these investments of the Group and Bank with a carrying amount of €919.5 million and €272.4
million respectively were reclassified out of the fair value through other comprehensive income measurement category
and into the amortised cost measurement category, at an amortised cost of €950.9 million and €280.8 million respectively.
As at 31 December 2025, the Investments - Securities portfolio and the Investments - Securitisation portfolio included
investments with a carrying amount of €201.7 million and €287.2 million respectively for the Group (2024: €227.4 million
and €343.0 million) and €119.2 million and €44.0 million respectively for the Bank (2024: €144.8 million and €49.7 million)
that were part of this reclassification that took place on 1 July 2022. The fair value of these investments as at 31
December 2025 in the Investments - Securities portfolio and the Investments - Securitisation portfolio was equivalent to
€199.4 million and €287.1 million respectively for the Group (2024: €220.7 million and €341.9 million) and €118.3 million
and €44.0 million respectively for the Bank (2024: €141.6 million and €49.6 million). If these investments had not been
reclassified out of the fair value through other comprehensive income category so that they are measured at amortised
cost, between 1 July 2022 and 31 December 2025 fair value gains of €9.2 million and fair value gains of €5.0 million
would have been recognised on the Securities portfolio within the other comprehensive income of the Group and Bank
respectively (1 July 2022 to 31 December 2024: fair value gains of €5.4 million and fair value gains of €3.2 million
respectively) whereas fair value gains of €13.4 million and fair value gains of €1.9 million would have been recognised on
the Securitisation portfolio within other comprehensive income of the Group and Bank respectively (1 July 2022 to 31
|me> direct Annual Report and Financial Statements 2025
169
Asset-Backed Securitisation Investment portfolio
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Investments measured at amortised cost
- Debt and other fixed income securities
159,093
145,380
32,800
13,709
- Less: Credit loss allowances
(99)
(95)
(16)
(10)
158,994
145,285
32,784
13,699
Grouph
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Measured at amortised cost
Year ended 31 December
At beginning of year
145,285
-
13,699
-
Additions
35,521
144,954
21,511
13,684
Redemptions
(21,666)
-
(2,455)
-
Amortisation of premium/discount
(10)
-
1
-
Movement in accrued interest
(132)
426
34
25
Movement in credit loss allowances
(4)
(95)
(6)
(10)
At end of year
158,994
145,285
32,784
13,699
The Group's and Bank's Asset-Backed Securitisation Investment portfolio consists of investments in ‘AAA’ rated Class A
notes of securitisation transactions (ABS / RMBS) of consumer finance, auto loans and mortgage loans receivables from
9. Investment in subsidiaries
Name of subsidiary
Country of incorporation/ formation
Nature of business
Equity interest
2025
2024
%
%
MeDirect Bank SA
Belgium
Banking
100
100
MeDirect Tech Limited
Malta
Leases of software and equipment
100
100
Medifin Estates (partnership)
Malta
Operating lease of offices
100
100
| 2025 | 2024 | |
| €000 | €000 | |
Year ended 31 December | ||
At beginning of year | 196,028 | 192,513 |
Additions | 29,400 | - |
Share of results and reserves | 6,670 | 3,515 |
At end of year | 232,098 | 196,028 |
At 31 December | ||
Cost | 254,890 | 225,490 |
Share of results and reserves | (22,792) | (29,462) |
Net book amount | 232,098 | 196,028 |
MeDirect Belgium was incorporated on 16 June 2014 and was authorised as a Belgian credit institution on 1 June 2015.
MeDirect Belgium’s principal activities comprise those of offering competitive and cost-effective savings and wealth
management products to the Belgian retail market and the financing of Dutch and Belgian mortgages, including RMBS
transactions. On 30 September 2025, MeDirect Malta injected a further €29.4 million into MeDirect Belgium.
MeDirect Tech Limited was incorporated on 20 July 2011 and its principal activities comprise those of leasing out property,
equipment and intangible assets (predominantly software) and providing related support services to MeDirect Malta and
MeDirect Belgium.
Medifin Estates is a partnership set up on 5 June 2012. This partnership enters into certain operating leases for property
to be used as offices and branches which are then leased to the Bank.
|me> direct Annual Report and Financial Statements 2025
170
10. Property and equipment
Group
Improvements to
premises
Computer
equipment
Other
equipment
Fixtures and
fittings
Motor
vehicles
Right-of-use
assets
Total
€000
€000
€000
€000
€000
€000
€000
As at 1 January 2024
Cost
432
4,548
165
1,239
80
10,275
16,739
Accumulated depreciation
(266)
(3,241)
(129)
(627)
(36)
(6,349)
(10,648)
Net book amount
166
1,307
36
612
44
3,926
6,091
Year ended 31 December 2024
At beginning of year
166
1,307
36
612
44
3,926
6,091
Additions
43
392
8
21
-
-
464
Disposals
-
(92)
-
-
-
-
(92)
Depreciation for the year
(51)
(612)
(18)
(155)
(16)
(1,039)
(1,891)
Depreciation released on disposals
-
52
-
-
-
-
52
At end of year
158
1,047
26
478
28
2,887
4,624
As at 31 December 2024
Cost
475
4,848
173
1,260
80
10,275
17,111
Accumulated depreciation
(317)
(3,801)
(147)
(782)
(52)
(7,388)
(12,487)
Net book amount
158
1,047
26
478
28
2,887
4,624
Year ended 31 December 2025
At beginning of year
158
1,047
26
478
28
2,887
4,624
Additions
-
102
2
-
-
-
104
Modification of lease
-
-
-
-
-
(612)
(612)
Disposals
-
(255)
-
-
-
-
(255)
Write-off
(96)
-
(8)
(112)
-
-
(216)
Depreciation for the year
(53)
(459)
(12)
(154)
(16)
(906)
(1,600)
Depreciation released on write-off
58
-
3
-
-
-
61
Depreciation released on disposals
-
247
-
78
-
-
325
At end of year
67
682
11
290
12
1,369
2,431
As at 31 December 2025
Cost
379
4,695
167
1,148
80
9,663
16,132
Accumulated depreciation
(312)
(4,013)
(156)
(858)
(68)
(8,294)
(13,701)
Net book amount
67
682
11
290
12
1,369
Bank
Improvements to
premises
Computer
equipment
Other equipment
Fixtures and
fittings
Right-of-use
assets
Total
€000
€000
€000
€000
€000
€000
As at 1 January 2024
Cost
351
2,006
95
922
9,930
13,304
Accumulated depreciation
(211)
(1,457)
(71)
(394)
(6,383)
(8,516)
Net book amount
140
549
24
528
3,547
4,788
Year ended 31 December 2024
At beginning of year
140
549
24
528
3,547
4,788
Additions
-
377
-
-
-
377
Modification of lease
-
-
-
-
(198)
(198)
Disposals
-
(92)
-
-
-
(92)
Depreciation for the year
(37)
(229)
(10)
(131)
(1,023)
(1,430)
Depreciation released on disposals
-
52
-
-
-
52
At end of year
103
657
14
397
2,326
3,497
As at 31 December 2024
Cost
351
2,291
95
922
9,732
13,391
Accumulated depreciation
(248)
(1,634)
(81)
(525)
(7,406)
(9,894)
Net book amount
103
657
14
397
2,326
3,497
Year ended 31 December 2025
At beginning of year
103
657
14
397
2,326
3,497
Additions
-
102
-
-
-
102
Disposals
-
(89)
-
-
-
(89)
Depreciation for the year
(37)
(218)
(6)
(129)
(902)
(1,292)
Depreciation released on disposals
-
80
-
-
-
80
At end of year
66
532
8
268
1,424
2,298
As at 31 December 2025
Cost
351
2,304
95
922
9,732
13,404
Accumulated depreciation
(285)
(1,772)
(87)
(654)
(8,308)
(11,106)
Net book amount
66
532
8
268
1,424
2,298
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As at 31 December 2025 and 2024 the Group and Bank operated from four and five immovable properties respectively
which are held under lease agreements.
The right-of-use assets disclosed in the preceding table reflect the following assets relating to leases:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Premises
1,369
2,887
1,369
2,178
Computer equipment
-
-
46
123
Other equipment
-
-
9
25
1,369
2,887
1,424
2,326
The movement in the carrying amount of right-of-use assets is analysed in the following table:
Group
Premises
Computer
equipment
Other equipment
Total
€ 000
€ 000
€ 000
€ 000
As at 1 January 2024
Cost
9,409
796
70
10,275
Accumulated depreciation
(5,483)
(796)
(70)
(6,349)
Net book amount
3,926
-
-
3,926
Year ended 31 December 2024
At beginning of year
3,926
-
-
3,926
Depreciation for the year
(1,039)
-
-
(1,039)
At end of the year
2,887
-
-
2,887
As at 31 December 2024
Cost
9,409
796
70
10,275
Accumulated depreciation
(6,522)
(796)
(70)
(7,388)
Net book amount
2,887
-
-
2,887
Year ended 31 December 2025
At beginning of year
2,887
-
-
2,887
Modification of lease
(612)
-
-
(612)
Depreciation for the year
(906)
-
-
(906)
At end of the year
1,369
-
-
1,369
As at 31 December 2025
Cost
8,797
796
70
9,663
Accumulated depreciation
(7,428)
(796)
(70)
(8,294)
Net book amount
1,369
-
-
Bank
Premises
Computer
equipment
Other equipment
Total
€000
€000
€000
€000
As at 1 January 2024
Cost
7,722
1,848
360
9,930
Accumulated depreciation
(4,724)
(1,459)
(200)
(6,383)
Net book amount
2,998
389
160
3,547
Year ended 31 December 2024
At beginning of year
2,998
389
160
3,547
Modification of lease
-
(44)
(154)
(198)
Depreciation for the year
(820)
(222)
19
(1,023)
At end of the year
2,178
123
25
2,326
As at 31 December 2024
Cost
7,722
1,804
206
9,732
Accumulated depreciation
(5,544)
(1,681)
(181)
(7,406)
Net book amount
2,178
123
25
2,326
Year ended 31 December 2025
At beginning of year
2,178
123
25
2,326
Depreciation for the year
(809)
(77)
(16)
(902)
At end of the year
1,369
46
9
1,424
As at 31 December 2025
Cost
7,722
1,804
206
9,732
Accumulated depreciation
(6,353)
(1,758)
(197)
(8,308)
Net book amount
1,369
46
9
1,424
The relevant lease liabilities are disclosed and analysed in Note 24 to these financial statements.
|me> direct Annual Report and Financial Statements 2025
172
11. Intangible assets
Group
Computer
software
Right-of-use
assets
Trademarks
Total
€000
€000
€000
€000
As at 1 January 2024
Cost
30,014
4,108
-
34,122
Accumulated amortisation
(14,059)
(4,108)
-
(18,167)
Net book amount
15,955
-
-
15,955
Year ended 31 December 2024
At beginning of year
15,955
-
-
15,955
Additions
3,918
-
590
4,508
Modification of lease
(247)
-
-
(247)
Amortisation and impairment charges for the year
(3,808)
-
(42)
(3,850)
At end of year
15,818
-
548
16,366
As at 31 December 2024
Cost
33,685
4,108
590
38,383
Accumulated amortisation
(17,867)
(4,108)
(42)
(22,017)
Net book amount
15,818
-
548
16,366
Year ended 31 December 2025
At beginning of year
15,818
-
548
16,366
Additions
3,931
-
-
3,931
Write-off
(101)
-
-
(101)
Amortisation and impairment charges for the year
(3,785)
-
(548)
(4,333)
At end of year
15,863
-
-
15,863
As at 31 December 2025
Cost
37,515
4,108
590
42,213
Accumulated amortisation
(21,652)
(4,108)
(590)
(26,350)
Net book amount
15,863
-
-
Bank
Computer
software
Right-of-use
assets
Trademarks
Total
€000
€000
€000
€000
As at 1 January 2024
Cost
18,954
5,992
-
24,946
Accumulated amortisation
(7,887)
(4,758)
-
(12,645)
Net book amount
11,067
1,234
-
12,301
Year ended 31 December 2024
At beginning of year
11,067
1,234
-
12,301
Additions
3,793
66
590
4,449
Modification of lease
-
(963)
-
(963)
Amortisation and impairment charges for the year
(2,426)
(20)
(42)
(2,488)
At end of year
12,434
317
548
13,299
As at 31 December 2024
Cost
22,747
5,095
590
28,432
Accumulated amortisation
(10,313)
(4,778)
(42)
(15,133)
Net book amount
12,434
317
548
13,299
Year ended 31 December 2025
At beginning of year
12,434
317
548
13,299
Additions
3,748
367
-
4,115
Write-off
(101)
-
-
(101)
Amortisation and impairment charges for the year
(3,149)
(183)
(548)
(3,880)
At end of year
12,932
501
-
13,433
As at 31 December 2025
Cost
26,394
5,462
590
32,446
Accumulated amortisation
(13,462)
(4,961)
(590)
(19,013)
Net book amount
12,932
501
-
13,433
The right-of-use assets reflected in the preceding table related to leased computer software. The relevant lease liabilities
are disclosed and analysed in Note 24 to these financial statements.
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173
As at 31 December 2025, internally generated software included within Computer software in the table above amounted
to €9.7 million (2024: €9.3 million) and €9.7 million (2024: €9.3 million) for the Group and Bank respectively. Capitalised
staff costs in respect of the financial year ended 31 December 2025, included within the Group's and Bank's “Additions” to
Computer software in the table above amounted to €3.0 million (2024: €3.3 million). Meanwhile, amortisation recognised
during the year in respect of internally generated software amounts to €2.6 million (2024: €2.0 million).
Amortisation of amounts capitalised by the Group and Bank of €3.1 million (2024: €2.6 million) had not yet commenced by
the end of the reporting year.
Impairment charges recognised during the year in respect of such assets, reflected in the tables above, are deemed
insignificant and accordingly no further disclosures were presented in this respect.
There were no capitalised borrowing costs related to the acquisition of software during the year (2024: nil).
12. Non-current assets held for sale
A property that had been acquired in satisfaction of debt was reclassified to investment property in 2024, as it formed an
integral part of an investment property acquired in the course of the 2024.
| Group and Bank | ||
| 2025 | 2024 | |
| €000 | €000 | |
Year ended 31 December | ||
At beginning of year | - | 1,785 |
Reclassification to investment property (Note 13) | - | (1,785) |
At end of year | - | - |
Property acquired in satisfaction of debt consisted of immovable property that had been pledged as collateral by
customers and are made available for sale in an orderly fashion. The Group does not generally occupy such properties for
its business use.
13. Investment property
The Group's investment property consisted of a property in Malta comprising both commercial and residential units.
During the financial year ended 31 December 2024, the Group acquired an investment property through a court auction
as settlement of debt. Additionally, part of the same building already owned by the Bank and previously classified as non-
current assets held for sale, was reclassified as an investment property, as at 31 December 2024, as both properties were
intended to be held for long-term rental income and capital appreciation.
| Group and Bank | ||
| 2025 | 2024 | |
| €000 | €000 | |
Year ended 31 December | ||
At beginning of year | 17,042 | - |
Additions | - | 15,257 |
Disposals | (16,840) | - |
Depreciation | (202) | - |
Reclassification from non-current assets held for sale (Note 12) | - | 1,785 |
At end of year | - | 17,042 |
The Group accounted for its investment properties at historic cost less depreciation in line with IAS 40. During the
financial year ended 31 December 2025, the Group recognised rental income of €0.8 million from the property, whereas
the direct operating expenses incurred in relation to this property amounted to €0.3 million. This property was disposed of
in 2025.
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174
14. Deferred tax assets and liabilities
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Deferred tax assets
17,730
17,512
9,910
9,910
Deferred tax liabilities
-
(196)
-
-
Deferred tax assets and liabilities are attributable to the following:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Property and equipment
(983)
(1,075)
(781)
(879)
Derivative financial instruments
-
(95)
-
(95)
Unutilised wear and tear allowances
26
-
-
-
Unutilised tax losses
11,702
14,555
8,207
9,074
Unutilised notional interest deduction
145
-
-
-
Credit loss allowances
2,892
4,458
2,484
1,810
Taxation in overseas jurisdictions
3,948
(527)
-
-
17,730
17,316
9,910
9,910
Deferred tax assets and liabilities of the Group and Bank amounting to €1.0 million (2024: €1.5 million) and €0.8 million
(2024: €1 million) respectively were offset as there is a legally enforceable right to offset current tax assets against current
tax liabilities and the deferred income taxes relate to the same fiscal authority.
Deferred taxes are calculated on all temporary differences under the liability method and are measured at the tax rates
that are expected to apply to the period when the asset is realised or the liability is settled based on tax rates (and tax
laws) that have been substantively enacted by the end of the reporting period. The principal tax rates used are 35%
(2024: 35%) in relation to the Maltese jurisdiction and 25% (2024: 25%) in respect of the Belgian fiscal authority.
Under notional interest deduction rules for Maltese corporate income tax purposes, Maltese entities may claim a
deduction of notional interest computed by reference to risk capital and a benchmark interest rate.
Excess notional interest deduction in Malta which cannot be utilised against chargeable income for the respective financial
year can be carried forward and added to the notional interest deduction for the following financial year. Unutilised
notional interest deduction does not have an expiry date. A deferred tax asset is recognised in respect of unutilised
notional interest deduction only to the extent that it is probable that sufficient future taxable profits will be available against
which the unutilised deduction can be used.
Movements in deferred tax during the year:
Group | At beginning of year | Recognised in profit or loss | At end of year |
| €000 | €000 | €000 | |
Year ended 31 December 2025 | |||
Property and equipment | (1,075) | 92 | (983) |
Derivative financial instruments | (95) | 95 | - |
Unutilised wear and tear allowances | - | 26 | 26 |
Unutilised tax losses | 14,555 | (2,853) | 11,702 |
Unutilised notional interest deduction | - | 145 | 145 |
Credit loss allowances | 4,458 | (1,566) | 2,892 |
Taxation in overseas jurisdictions | (527) | 4,475 | 3,948 |
17,316 | 414 | 17,730 | |
At beginning of year | Recognised in profit or loss | At end of year | |
| €000 | €000 | €000 | |
Year ended 31 December 2024 | |||
Property and equipment | (1,036) | (39) | (1,075) |
Investments measured at fair value through profit or loss | 132 | (132) | - |
Derivative financial instruments | (95) | - | (95) |
Unutilised tax losses | 12,340 | 2,215 | 14,555 |
Unutilised notional interest deduction | 77 | (77) | - |
Credit loss allowances | 6,026 | (1,568) | 4,458 |
Taxation in overseas jurisdictions | (261) | (266) | (527) |
17,183 | 133 | 17,316 |
|me> direct Annual Report and Financial Statements 2025
175
Bank
At beginning of year
Recognised in profit or loss
At end of year
€000
€000
€000
Year ended 31 December 2025
Property and equipment
(879)
98
(781)
Derivative financial instruments
(95)
95
-
Unutilised tax losses
9,074
(867)
8,207
Credit loss allowances
1,810
674
2,484
9,910
-
9,910
At beginning of year
Recognised in profit or loss
At end of year
€000
€000
€000
Year ended 31 December 2024
Property and equipment
(618)
(261)
(879)
Derivative financial instruments
(95)
-
(95)
Unutilised tax losses
5,338
3,736
9,074
Credit loss allowances
5,298
(3,488)
1,810
9,923
(13)
9,910
As at 31 December 2025, deferred tax assets attributable to MeDirect Malta are equivalent to €9.9 million (2024: €9.9
million), while deferred tax assets attributable to MeDirect Belgium are equivalent to €7.8 million (2024: €7.4 million).
The recognised deferred tax assets as at 31 December 2025 are expected to be recovered or settled principally after
more than 12 months from the end of the reporting period. Unutilised tax losses and unutilised notional interest deduction
have no expiry date and can be carried forward indefinitely.
The following table provide an analysis of the underlying amounts on which deferred tax assets were not recognised by
the Group and the Bank as deferred income tax assets are recognised only to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be utilised.
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Property and equipment
9,084
5,142
9,084
5,142
Unutilised tax losses
50,892
49,027
33,004
25,283
Unutilised notional interest deduction
146,427
118,357
146,427
118,357
206,403
172,526
188,515
148,782
15. Prepayments and accrued income
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Prepayments
5,678
3,511
4,216
3,085
Accrued income
2,670
1,454
822
481
8,348
4,965
5,038
3,566
16. Other assets
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Amounts receivable from:
- immediate parent company
1,321
48
1,320
48
- subsidiary companies
-
-
3,279
5,027
Deferred customer contract costs
1,138
1,132
105
137
Other receivables
2,769
1,501
2,577
1,326
Other assets
34,728
23,334
2,009
2,057
39,956
26,015
9,290
8,595
Amounts receivable from subsidiaries as at 31 December 2025 and 2024 are unsecured. These consisted of a revolving
loan amounting to €2.0 million (2024: €2.9 million) that was subject to interest at the rate of three-month EURIBOR floored
at 0% and was repayable after one year from the date when repayment is demanded, unless an event of default occurs in
which case the loan is repayable in full immediately.
Amounts receivable from immediate parent company and other amounts receivable from subsidiaries are unsecured,
interest free and repayable on demand.
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176
As at 31 December 2025, the Group’s ‘other assets’ includes balances amounting to €19.5 million (2024: €16.9 million)
held with a third-party mortgage originator in the Netherlands until the relevant NHG eligibility criteria for specific loan
applications relating to the Dutch Mortgage portfolio are fulfilled in the future.
As at 31 December 2025, the Group’s ‘other assets’ includes balances amounting to €2.6 million (2024: €3.8 million) held
with a third-party mortgage originator in Belgium until the relevant criteria for specific loan applications relating to the
Belgian Mortgage portfolio are fulfilled in the future.
As at 31 December 2025, 'other assets' of the Group and Bank include an amount of €0.8 million (2024: €0.8 million) and
€0.8 million (2024: €0.8 million) respectively placed in an account held in respect of the Single Resolution Fund as an
Irrevocable Payment Commitment ('IPC') in terms of the Recovery and Resolution Regulations. No further Irrevocable
Payment Commitments were made in the financial year ended 31 December 2025 and 2024.
None of these assets are deemed credit-impaired at 31 December 2025 and 2024 and expected credit losses in relation
to such balances were deemed to be insignificant.
17. Capital and reserves
Group and Bank | ||
| 2025 | 2024 | |
No. | No. | |
Share capital | ||
Authorised: | ||
| Ordinary ‘A’ shares of €1 each | 299,999,999 | 299,999,999 |
| Ordinary ‘B’ shares of €1 each | 1 | 1 |
300,000,000 | 300,000,000 | |
| 2025 | 2024 | |
| € | € | |
Issued and fully paid up: | ||
| Ordinary ‘A’ shares of €1 each | 117,450,106 | 117,450,106 |
| Ordinary ‘B’ shares of €1 each | 1 | 1 |
117,450,107 | 117,450,107 | |
Rights and entitlements attached to ordinary shares
The holders of Ordinary ‘A’ shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at general meetings of the Bank. Ordinary ‘B’ shareholders are not entitled to vote and do not carry any
dividend entitlement. The holders of the Ordinary ‘A’ shares and the holders of the Ordinary ‘B’ shares shall be equally
entitled to receive notice of general meetings of the Bank.
Share premium
Share premium as at the reporting date represents the amounts paid up by the Bank’s shareholders in capital issues in
excess of the par value. As at 31 December 2025, the share premium amounts to €13.5 million (2024: €13.5 million).
Shareholders’ contributions
By virtue of board resolutions dated 19 September 2025 and 24 September 2025, the Bank accepted capital contributions
from MDB Group Limited amounting to €39.2 million and €0.8 million respectively. The amount credited to shareholders'
contribution is net of €0.2 million in relation to transaction costs associated with these shareholder contributions.
The terms and conditions of the contributions granted render these instruments equity in nature in accordance with the
requirements of IAS 32: Financial Instruments - Presentation:
- The Bank has no obligation to bear any servicing cost or transfer any economic benefits of any kind to the
Contributor or any other person in return; and
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177
Other reserves
As at 31 December 2025, the other reserves of the Bank were equivalent to €0.4 million (2024: €0.6 million). The
difference between the purchase consideration of €35.3 million upon acquisition of Mediterranean Corporate Bank Limited
in 2015 and the fair value of the identifiable net assets acquired of €57.5 million, amounting to €22.4 million, had been
reflected within other comprehensive income, as a fair value reserve, in the Bank’s separate financial statements for
preceding financial years in view of the Bank’s previous accounting policy whereby investments in subsidiaries were
treated as available-for-sale investments within the separate financial information. Upon the merger of Mediterranean
Corporate Bank Limited into MeDirect Malta, this reserve was categorised as another reserve comprising an adjustment
to equity arising on merger, rather than a fair value reserve. A portion of this reserve has been treated as realised, and
reclassified to retained earnings, reflecting the proportion of the difference arising on acquisition referred to above, which
is linked to underlying net assets which would have been realised in the meantime.
As at 31 December 2025, other reserves of the Group, also accounted for by the Bank under the equity method, consists
of a legal reserve amounting to €2.1 million (2024: €0.9 million) that is required to be maintained by MeDirect Belgium in
line with Article 7:211 of the Belgian Companies Code which requires MeDirect Belgium to assign at least 5% of MeDirect
Belgium’s net profits to the legal reserve until such legal reserve amounts to 10% of MeDirect Belgium share capital.
All reserves at the reporting date, except for the Group’s and the Bank’s retained earnings and shareholders’
Dividends
18. Amounts owed to financial institutions
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Term deposits
209,583
179,570
35
-
Other
231
207
6,058
6,744
209,814
179,777
6,093
6,744
As at 31 December 2025, amounts owed to financial institutions of the Group amounting to €31.5 million (2024: €32.4
million) included in term deposits and consisting of repos are secured by a pledge over the Group's investments (refer to
Note 8).
As at 31 December 2025, amounts owed to financial institutions of the Bank included amounts due to subsidiaries
amounting to €5.9 million (2024: €6.7 million).
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178
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Repayable on call and at short notice
3,486,573
3,015,028
414,625
364,066
Term deposits
652,447
865,007
393,893
463,560
4,139,020
3,880,035
808,518
827,626
As at 31 December 2024, amounts owed to customers of the Group and Bank included amounts due to Medifin
Investments Limited, the ultimate parent company of the Bank up till 9 September 2025 (see Note 40), amounting to €0.6
million.
As at 31 December 2024, amounts owed to customers of the Group and Bank included amounts due to immediate parent
company amounting to €1.3 million and amounts due to other group companies amounting to €3 thousand.
As at 31 December 2024, amounts due to ultimate parent company, immediate parent company and other group
20. Debt securities in issue
Group | ||
| 2025 | 2024 | |
| €000 | €000 | |
Year ended 31 December | ||
At beginning of year | 641,673 | 916,747 |
Amortisation of premium recognised in profit or loss | (811) | 7,375 |
Amortisation of issue costs recognised in profit or loss | 496 | (7,222) |
Movement in accrued interest | (830) | (3,178) |
Repurchase | - | (272,049) |
Redemptions | (38,131) | - |
At end of year | 602,397 | 641,673 |
As at 31 December | ||
Original face value of notes issued | 600,587 | 638,718 |
Unamortised note premium | 656 | 1,467 |
Unamortised note issue costs | (737) | (1,233) |
Accrued interest expense | 1,891 | 2,721 |
Net carrying amount | 602,397 | 641,673 |
As at 31 December | ||
Bastion 2021-1 NHG B.V. | 283,437 | 297,689 |
Bastion 2022-1 NHG B.V. | 318,960 | 343,984 |
Net carrying amount | 602,397 | 641,673 |
Bastion 2020-1 NHG B.V.
By virtue of a base prospectus dated May 2020, MeDirect Belgium had successfully securitised part of its Dutch retail
mortgage portfolio raising €350.0 million through a RMBS transaction, listed on Luxembourg Stock Exchange. As part of
the transaction the mortgage portfolio was sold to Bastion 2020-1, a special purpose securitisation vehicle established in
the Netherlands, which was controlled by MeDirect Belgium.
This RMBS was subject to interest of 0.60% per annum above 3-month Euribor (including floor at 0%) up to the first
optional redemption date, and interest of 1.00% per annum above 3-month Euribor (including floor at 0%) from the first
optional redemption date being April 2025, payable quarterly. All bonds were redeemable at par and were to become due
for final redemption in April 2057, however, MeDirect Belgium exercised its right to redeem the bond in the first optional
redemption date as specified in the base prospectus.
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179
An institutional investor had acquired the Class A notes of the RMBS equivalent to €350.0 million, that had a senior
ranking vis-à-vis all the junior tranches retained by MeDirect Belgium. MeDirect retained substantially all risks and
rewards of the underlying securitised Dutch government-backed mortgage portfolio and accordingly controlled Bastion
2020-1. As a result, the mortgage portfolio, the senior notes of Bastion 2020-1 held by the institutional investor and related
income and expenditure were reflected in the Group’s financial statements.
During the financial year ending 31 December 2024, MeDirect Belgium repurchased €273.0 million of Class A notes of
Bastion 2020-1 from the institutional investor. As at 31 December 2024, these Class A notes were held by MeDirect
Belgium.
On the first optional redemption date at the end of April 2025, MeDirect Belgium fully redeemed the remaining outstanding
notes of its first RMBS transaction, Bastion 2020-1 NHG, equivalent to €278.8 million. In December 2025, Bastion 2020-1
NHG B.V. was placed into liquidation.
Bastion 2021-1 NHG B.V.
In January 2021, MeDirect Belgium securitised a further part of its Dutch retail mortgages portfolio through a RMBS
transaction listed on Luxembourg Stock Exchange, whereby a principal amount of €414.0 million of the Dutch Mortgage
portfolio was sold to a securitisation special purpose entity, Bastion 2021-1 NHG B.V., established in the Netherlands,
which is controlled by MeDirect Belgium.
This RMBS is subject to interest of 0.70% per annum above 3-month Euribor (including floor at 0%) up to the first optional
redemption date, and interest of 1.05% per annum above 3-month Euribor (including floor at 0%) from the first optional
redemption date being August 2026, payable quarterly. All bonds are redeemable at par and shall become due for final
redemption in August 2058, however, MeDirect Belgium reserves the right to redeem the bond in particular circumstances
specified in the base prospectus.
An institutional investor acquired the Class A notes of the RMBS equivalent to €350.0 million, having a senior ranking vis-
à-vis all the junior tranches retained by MeDirect Belgium. MeDirect retains substantially all risks and rewards of the
underlying securitised Dutch government-backed mortgage portfolio and accordingly controls Bastion 2021-1. As a result,
the mortgage portfolio, the senior notes of Bastion 2021-1 held by the institutional investor and related income and
expenditure are reflected in the Group’s financial statements.
On each of the Notes Payment Dates of Bastion 2021-1, falling on 20 February 2025, 20 May 2025 and 20 August 2025,
amounts of €11.9 million, €75 thousand and €2.2 million of Class A notes, pertaining to the senior tranche were redeemed.
Bastion 2022-1 NHG B.V.
By virtue of a base prospectus dated 25 November 2022, MeDirect Belgium successfully securitised part of its Dutch retail
mortgage portfolio raising €368.5 million through placement with external investors of A1 notes of the RMBS transaction,
listed on Luxembourg Stock Exchange. As part of the transaction the mortgage portfolio was sold to Bastion 2022-1, a
special purpose securitisation vehicle established in the Netherlands, which is controlled by MeDirect Belgium.
This RMBS is subject to interest of 0.60% per annum above 3-month Euribor (including floor at 0%) up to the first optional
redemption date, and interest of 1.20% per annum above 3-month Euribor (including floor at 0%) from the first optional
redemption date being March 2028, payable quarterly. All bonds are redeemable at par and shall become due for final
redemption in May 2060, however, MeDirect Belgium reserves the right to redeem the bond in particular circumstances
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180
An institutional investor acquired Class A notes of this RMBS equivalent to €369.0 million, having a senior ranking vis-à-
vis all the junior tranches retained by MeDirect Belgium. MeDirect retains substantially all risks and rewards of the
underlying securitised Dutch government-backed mortgage portfolio and accordingly controls Bastion 2022-1. As a result,
the mortgage portfolio, the senior notes of Bastion 2022-1 held by the institutional investor and related income and
expenditure are reflected in the Group’s financial statements.
On each of the Notes Payment Dates of Bastion 2022-1, falling on 20 February 2025 and 20 August 2025, amounts of
€16.3 million and €7.7 million of Class A notes, pertaining to the senior tranche were redeemed.
Bastion 2025-1 NHG B.V.
On April 30, 2025, the Group successfully closed Bastion 2025-1 NHG, its fourth and largest Dutch Residential Mortgage
Backed Securities transaction, backed by a portfolio of Dutch prime NHG mortgage loans.
The Group retained both the Class A1 notes and the Class A2 notes amounting to €616.7 million and €76.6 million
respectively, providing the group with a contingency funding source and offering the potential to secure external funding
through future remarketing.
21. Subordinated liabilities
Group and Bank
2025
2024
€000
€000
Year ended 31 December
At beginning of year
67,358
66,871
Foreign exchange differences
(213)
192
Transaction costs amortised to profit or loss
188
292
Movement in accrued interest
(4)
3
At end of year
67,329
67,358
Analysed as follows:
5% Subordinated Unsecured Bonds 2022 – 2027
20,231
20,351
4% Subordinated Unsecured Bonds 2024 – 2029
35,184
35,337
Callable loan from immediate parent company
11,914
11,670
67,329
67,358
On 16 October 2017, MeDirect Malta announced the issue of euro equivalent of €20 million 5% Subordinated Unsecured
Bonds 2027 maturing on 13 October 2027 with an annual redemption option starting 13 October 2026 held by MeDirect
Malta. The bonds were issued on the Malta Stock Exchange in euro and pound sterling. The interest payable is fixed at
5% (effective interest rate of 5.19%) and the bonds are redeemable at their nominal value. The amounts subscribed
consisted of £1.2 million (euro equivalent to €1.3 million) bonds in pound sterling and €18.7 million bonds in euro.
On 8 October 2019, MeDirect Malta announced the issue and listing of €35.0 million 4% Subordinated Unsecured Bonds
denominated in euro and pound sterling maturing on 5 November 2029 with an annual early redemption option starting 5
November 2026 held by MeDirect Malta. The bonds were issued on the Malta Stock Exchange in euro and pound sterling.
The interest payable is fixed at 4% (effective interest rate of 4.2%) and the bonds are redeemable at their nominal value.
The amounts subscribed consisted of £2.4 million (euro equivalent to €2.8 million) bonds in pound sterling and €32.2
million bonds in euro.
As at 31 December 2025, the euro equivalent contractual amount due at maturity on the Subordinated Unsecured Bonds
listed on the Malta Stock Exchange was €55.0 million (2024: €55.2 million).
As at 31 December 2025 and 2024, the amounts due to immediate parent company comprise a callable loan granted by
MDB Group Limited to MeDirect Malta amounting to €11.0 million (2024: €10.7 million), which is due on 10 February 2031
with an annual early repayment option starting on 10 February 2026, the terms of which mirror those of the subordinated
notes issued by MDB Group Limited on the Global Exchange Market of Euronext Dublin. As a result, the loan bears a
fixed interest rate of 9.75% per annum until 10 February 2026 and thereafter will bear interest at a fixed rate which was
set by the Agent Bank at 12.6%.
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181
The above liabilities will, in the event of the winding up of MeDirect Malta, be subordinated to the claims of depositors and
22. Provisions for liabilities and other charges
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Credit loss allowances in respect of loan commitments
and financial guarantee contracts
Year ended 31 December
At beginning of year
202
298
82
218
Change in expected credit losses
(91)
(96)
(13)
(136)
At end of year
111
202
69
82
Payment commitments
The Group provides payment commitments to the Depositor Compensation Scheme ("DCS") in Malta and the Single
Resolution Fund ("SRF") in Malta and Belgium. These contributions form part of the broader European framework
designed to safeguard financial stability and protect depositors.
The DCS provides compensation, up to certain limits, to eligible customers of credit institutions that are unable, or likely to
be unable, to pay claims against them. The DCS may impose a further contribution on the Group to the extent the
contributions imposed to date are not sufficient to cover the compensation due to customers in any future possible
collapse.
The ultimate contribution to the industry as a result of a collapse cannot be estimated reliably. It is dependent on various
uncertain factors including the potential recovery of assets by the DCS, changes in the level of protected products
(including deposits and investments) and the population of DCS members at the time. At 31 December 2025, assets
pledged in favour of the DCS comprised debt securities within the Securities portfolio measured at amortised cost with a
carrying amount of €2.5 million (2024: €2.2 million). The Depositor Compensation Scheme reserve amounts to €2.5
million (2024: €2.0 million).
In addition, in accordance with article 70(3) of Regulation (EU) No 806/2014 of the European Parliament and of the
Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and
certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending
Regulation (EU) No 1093/2010, the available financial means of the SRF may include irrevocable payment commitments
which are fully backed by unencumbered collateral of low-risk assets. The share of irrevocable payment commitments
cannot exceed 30% of the total amount of contributions. At 31 December 2025, irrevocable payment commitments to the
SRF by the Group and Bank amounted to €0.8 million (2024: €0.8 million), reflecting cash collateral to the SRF. The cash
collateral is classified within 'Other assets' in the statement of financial position.
The Group carried out an assessment of the liability arising from its payment commitments to the Deposit Compensation
Scheme and the Single Resolution Fund. The evaluation was performed on the basis that the Bank’s financial statements
are prepared on a going concern basis. In forming its view, the Bank considered the broader economic environment,
including the performance of the Maltese economy, which remains strong and continues to record growth above the EU
average. The Maltese financial sector also performed robustly during the year, despite a challenging global landscape
characterised by persistent geopolitical tensions. The domestic banking system remained resilient, supported by ample
capital and liquidity buffers. The assessment also took into account that domestic credit flows remained heavily
concentrated in property‑related sectors, reinforcing concentration risks, although overall asset quality has thus far
remained sound and stable.
After considering these factors, together with the discounting of expected cash flows and the low probability that the
payment commitments to the Deposit Compensation Scheme and the Single Resolution Board would be exercised, the
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182
23. Accruals and deferred income
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Other accrued expenses
9,094
8,608
5,577
6,620
Deferred income
4,887
3,075
-
22
13,981
11,683
5,577
6,642
24. Other liabilities
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Amounts due to subsidiary companies
-
-
42
-
Indirect taxes payable
1,139
1,137
472
455
Lease liabilities
1,629
3,289
2,212
3,033
Other liabilities
10,371
5,522
4,978
3,674
13,139
9,948
7,704
7,162
Amounts due to subsidiary companies
Amounts due to subsidiaries are unsecured, interest free and repayable on demand.
Lease liabilities
The lease liabilities associated with the recognised right-of-use assets are analysed below.
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Non-current
Premises
802
2,191
802
1,633
Computer equipment
-
-
-
55
Other equipment
-
-
55
16
Computer software
-
-
343
177
802
2,191
1,200
1,881
Current
Premises
827
1,098
831
870
Computer equipment
-
-
51
84
Other equipment
-
-
91
15
Computer software
-
-
39
183
827
1,098
1,012
1,152
Total
1,629
3,289
2,212
3,033
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an
option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised.
The Group has certain lease contracts that include extension and termination options. The Group applies judgement in
evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it
considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After
the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances
that is within its control that affects its ability to exercise or not to exercise the option to renew or to terminate.
The extension options in leases relating to premises, with the last extension covering till April 2032, have been included in
the lease liability as the lease term reflects the exercise of such options.
The contractual undiscounted cash flows attributable to lease liabilities are analysed in Note 2.3.4.
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The movement in the carrying amount of these liabilities is analysed in the following table:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Year ended 31 December
At beginning of year
3,289
4,339
3,033
5,419
Additions
368
-
368
-
Modification of lease
(612)
-
-
(1,161)
Payments
(1,535)
(1,203)
(1,299)
(1,340)
Interest charge
119
153
110
115
At end of year
1,629
3,289
2,212
3,033
The income statement reflects the following amounts relating to leases:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Interest expense (Note 25)
119
153
110
160
Other liabilities
25. Net Interest Income
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Interest income
Loans and advances to financial institutions
31,892
57,368
2,511
1,809
Loans and advances to customers
- interest on loans and advances to customers
105,673
126,447
22,953
32,660
- (losses)/gains representing ineffective portion of fair value hedges
386
(283)
(14)
17
Investment securities
- interest on investment securities
20,470
12,054
4,402
4,798
- amortisation of net premiums on investment securities
(2,926)
(912)
(454)
(464)
- gains representing ineffective portion of fair value hedges
(1)
-
(1)
-
Total interest income
155,494
194,674
29,397
38,820
Interest expense
Amounts owed to financial institutions
5,761
3,392
433
1,048
Amounts owed to customers
63,022
71,728
10,997
12,746
Lease liabilities
119
153
110
160
Debt securities in issue
18,789
38,578
-
-
Subordinated liabilities
2,344
2,480
2,344
2,480
Other liabilities
1,317
1,290
1,317
1,290
Total interest expense
91,352
117,621
15,201
17,724
Net interest income
64,142
77,053
14,196
21,096
As at 31 December 2024, an amount of €5.1 million and €2.9 million relating to credit-impaired financial assets is included
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184
The following table discloses the gains and losses arising from fair value hedge relationships and the resulting ineffective
portion recognised in net interest income:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Micro hedging:
(Losses)/gains on hedging instruments (Securities Investments)
(107)
-
(107)
-
Gains on hedged items attributable to the hedged risk – basis
adjustment to Securities Investments measured at amortised
cost (see Note 8)
106
-
106
-
(1)
-
(1)
-
Macro hedging:
Gains/(losses) on hedging instruments
(International Mortgage portfolio)
32,800
(40,100)
-
-
(Losses)/gains on hedged items attributable to the hedged risk –
basis adjustment to International Mortgage portfolio (see Note 7)
(32,400)
39,800
-
-
Gains/(losses) on hedging instruments
(Maltese Business Lending portfolio)
153
(669)
153
(669)
(Losses)/gains on hedged items attributable to the hedged risk –
basis adjustment to Maltese Business Lending portfolio
(see Note 7)
(167)
686
(167)
686
386
(283)
(14)
17
Net gains/(losses) representing ineffective portion
of fair value hedges
385
(283)
(15)
26. Net fee and commission income
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Fee and commission income
Corporate secured lending fee income
244
2,022
69
1,978
Banking transactions fee income
1,791
1,920
1,764
1,899
Investment services fees
9,158
8,064
3,535
2,893
Other fee income
1,276
458
270
65
Total fee and commission income
12,469
12,464
5,638
6,835
Fee and commission expense
Corporate secured lending fee expense
49
1,789
3
1,789
Banking transactions fee expense
663
672
403
396
Investment services transaction and custody fees
2,942
2,531
697
759
Other fee expense
913
310
499
188
Total fee and commission expense
4,567
5,302
1,602
3,132
Net fee and commission income
7,902
7,162
4,036
3,703
The Group’s and the Bank’s net fee and commission income excludes income and expenses that form an integral part of
the effective interest rate on financial assets and financial liabilities that are not at fair value through profit or loss, but in
the financial year ended 31 December 2025, includes income of €0.2 million (2024: €2 million) and expenses of €0.1
million (2024: €1.8 million) relating to such financial assets and liabilities.
The net revenue arising during 2025 (i.e. the gross revenue less any commissions directly related to the acquisition of the
said gross revenue) derived from activities in relation to the Bank’s investment services licence in Malta amount to €2.8
27. Net trading income
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Net income from foreign exchange activities
1,072
1,600
1,064
1,585
Net gain on disposal of investment property
1,327
-
1,327
-
2,399
1,600
2,391
1,585
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185
27.1 Realised gains/(losses) on disposal of other investments
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Investments measured at amortised cost
974
-
(2)
-
28. Personnel expenses
Personnel expenses incurred, including remuneration and emoluments paid to the directors of MeDirect Malta and
MeDirect Belgium, are analysed as follows:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Directors’ emoluments
- salaries
3,881
3,301
2,489
1,896
- defined contribution social security costs
52
57
52
50
- fees
810
888
413
458
- other emoluments
145
155
145
155
Staff costs
- salaries
24,663
23,514
12,591
12,322
- defined contribution social security costs
2,174
2,172
1,045
1,011
Staff costs capitalised within Intangible Assets (Note 11)
(2,860)
(3,259)
(2,860)
(3,259)
28,865
26,828
13,875
12,633
The directors of MeDirect Tech Limited do not receive any Directors’ emoluments as they are employed within the MDB
Group and their remuneration for 2025 and 2024 are presented above within ‘Staff costs’.
The Group’s and Bank’s salary costs include expenses for defined contributions plans amounting to €0.4 million (2024:
€0.4 million) and €0.2 million (2024: €0.2 million).
The weekly average number of persons employed during the year, including executive directors, was as follows:
Group
Bank
2025
2024
2025
2024
No.
No.
No.
No.
Executive and senior management
23
26
14
15
Other managerial, supervisory and clerical
354
332
293
274
Other
6
6
6
6
383
364
313
295
The number of persons employed by the Group and Bank as at the reporting date, including executive directors, was 386
As disclosed in the remuneration report, share-based payments are granted to certain executive directors and other
material risk takers under a performance and retention bonus plan, where they are entitled to share-linked instruments,
subject to a deferral period not greater than five years, the value of which is based on changes in the fair value of the
ordinary shares of MDB Group Limited but which are settled in cash and hence do not entitle the employees to shares or
|me> direct Annual Report and Financial Statements 2025
186
2025
2024
Vested
Unvested
Vested
Unvested
Group
€000
€000
€000
€000
Total outstanding deferred remuneration – share-based payments
Year ended 31 December
At beginning of year
1,346
394
1,661
653
Awarded throughout the year
-
70
-
42
Vested throughout the year
220
(220)
196
(196)
Paid throughout the year
(354)
-
(650)
-
Performance and other adjustments throughout the year
(232)
133
139
(105)
At end of year
980
377
1,346
2025
2024
Vested
Unvested
Vested
Unvested
Bank
€000
€000
€000
€000
Total outstanding deferred remuneration – share-based payments
Year ended 31 December
At beginning of year
1,209
394
1,487
653
Awarded throughout the year
-
-
-
42
Vested throughout the year
150
(150)
196
(196)
Paid throughout the year
(330)
-
(608)
-
Performance and other adjustments throughout the year
(169)
133
134
(105)
At end of year
860
377
1,209
394
The total expense recognised during the financial year ended 31 December 2025, disclosed in the table above within
‘salaries’ amounted to €0.2 million (2024: €0.8 million) and €0.2 million (2024: €0.7 million) for the Group and Bank
respectively. The resultant liability as at 31 December 2025, arising from deferred share-based payments and presented
in the statement of financial position with ‘Accruals and deferred income’, amounted to €1.4 million (2024: €1.9 million)
29. Other administrative expenses
Other administrative expenses are analysed as follows:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
IT support and telecommunication costs
9,348
8,738
2,181
2,097
Legal, professional and marketing expenses
11,850
12,514
4,208
5,294
Regulatory expenses
12,169
7,945
2,603
822
Indirect taxation
4,639
4,177
1,820
1,656
Other expenses
6,567
5,511
3,217
2,510
44,573
38,885
14,029
12,379
Included in other administrative expenses are fees charged by the Group’s independent auditors for the year as follows:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Audit services
579
657
250
270
Other assurance services
40
105
40
47
Tax related services
16
79
-
-
Other non-audit services
100
43
-
43
Other non-audit services consisted of regulatory advisory services in respect of the Group’s compliance with elements of
the accounting and regulatory framework it is exposed to or which the Group will be exposed to in the future. These non-
audit services have no linkage whatsoever to the audited financial statements.
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30. Change in expected credit losses and other credit impairment charges
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Change in expected credit losses
Loans and advances to customers, including credit-related
commitments
- International Corporate Lending portfolio
7,653
312
(1,873)
7,731
- Dutch Mortgage portfolio
(160)
34
-
-
- Belgian Mortgage portfolio
(443)
(200)
-
-
- Maltese Business Lending portfolio
(3)
35
(3)
35
- Maltese Mortgage portfolio
(21)
(5)
(21)
(5)
- Consumer Finance receivables
(1,494)
(76)
(1,494)
(76)
Investments measured at amortised cost
- Securities portfolio
9
(29)
21
(6)
- Securitisation portfolio
12
131
4
125
- Asset-Backed Securitisation portfolio
(4)
(95)
(6)
(10)
Other credit impairment charges
Recoveries
- International Corporate Lending portfolio
29
-
29
-
- Consumer Finance receivables
694
-
694
-
Amounts written off on loans and advances to customers
- International Corporate Lending portfolio
(8,821)
(18,497)
(5)
(15,432)
- Maltese Business Lending portfolio
(297)
(870)
(297)
(870)
- Consumer Finance receivables
-
(72)
-
(72)
(2,846)
(19,332)
(2,951)
(8,580)
31. Tax expense
Income tax expense
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Current tax expense
- current year tax charge
1,966
989
524
168
Deferred tax (Note 14)
- current year tax
(414)
(133)
-
13
Income tax charge
1,552
856
524
181
The tax recognised in profit or loss on the Group’s and the Bank’s loss before tax differs from the theoretical amount that
would arise using the applicable tax rate in Malta, which is the Bank’s country of incorporation, as follows:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Loss before tax
(6,073)
(5,022)
(6,959)
(6,694)
Tax at the applicable rate of 35%
(2,126)
(1,758)
(2,436)
(2,343)
Tax effect of:
Non-deductible expenses
2,225
1,436
884
335
Unrecognised deferred tax movements (Note 14)
2,618
2,401
4,082
3,328
Non-temporary deferred tax differences
-
574
-
240
Income not subject to tax
(442)
(1,595)
(442)
(365)
Share of results of subsidiary undertaking
-
-
(2,334)
(1,230)
Effect of different tax rates
(524)
(646)
-
-
Other
(199)
444
770
216
Income tax charge
1,552
856
524
181
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32. Cash and cash equivalents
Balances of cash and cash equivalents as shown in the statements of cash flows are analysed below:
Group
Bank
2025
2024
2025
2024
€000
€000
€000
€000
Analysis of cash and cash equivalents:
Cash in hand
2
2
2
2
Call deposits
93,216
67,747
47,554
30,138
Target 2 overnight deposits
234,516
171,500
67,249
57,529
Amounts owed to financial institutions with original maturity of less than 3 months
(209,814)
(179,777)
(6,093)
(6,744)
Per Statement of cash flows
117,920
59,472
108,712
80,925
Adjustments to reflect:
Other balances with central banks
38,047
35,368
7,344
7,087
Deposits with original maturity of over 3 months and encumbered deposits
235,788
248,432
6,773
6,936
Per Statement of financial position
391,755
343,272
122,829
94,948
Group
Bank
2025
2024
2025
2024
Notes
€000
€000
€000
€000
Analysed as follows:
Balances with central banks and cash
4
272,565
206,870
74,595
64,618
Loans and advances to financial institutions
6
329,004
316,179
54,327
37,074
Amounts owed to financial institutions
18
(209,814)
(179,777)
(6,093)
(6,744)
391,755
343,272
122,829
94,948
33. Contingent liabilities
As at 31 December 2025, the Group and Bank had cash secured guarantee obligations amounting to €19.4 million (2024:
34. Commitments
Commitments to lend
Commitments to lend represent undrawn formal standby facilities, credit facilities and other similar commitments to lend.
As at 31 December 2025, the Group had undrawn commitments of €13.6 million (2024: €16.4 million) under international
lending revolving credit facilities. As at 31 December 2024, the Bank had undrawn commitments of €0.5 million under
international lending revolving credit facilities. In addition, lending commitments in relation to the Group’s Dutch Mortgage
portfolio amounted to €21.6 million (2024: €32.4 million), Belgian Mortgage portfolio amounted to €12.2 million (2024: €8
million) and Maltese Mortgage portfolio amounted to €27.2 million (2024: €27.2 million).
As at 31 December 2025, undrawn facilities on corporate term loans of the Group and Bank in Malta amounted to €143
million (2024: €103.5 million) and undrawn facilities under Consumer Finance receivables amounted to €1.4 million (2024:
€1.1 million).
As at 31 December 2025, the Bank had undrawn lending commitments in relation to the lending revolving credit facility to
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35. Related parties
Immediate and ultimate parent company
The ultimate controlling party of the Bank was AnaCap Financial Partners II L.P. until 9 September 2025 (Note 40) and
Ms. Barbora Hubáčková subsequent to this date.
The ultimate parent company of the Bank was Medifin Investments Limited, a non-cellular company incorporated and
registered in Guernsey up till 9 September 2025. From that date the ultimate parent company has been Creditas B.V., a
financial holding company which is incorporated and registered in the Netherlands.
The intermediate parent company of the Bank was Medifin Finance Limited, a non-cellular company incorporated and
registered in Guernsey, until 9 September 2025. Subsequent to this date, the intermediate parent company has been
Banka CREDITAS a.s., a credit institution incorporated and registered in Czech Republic.
The immediate parent company of MeDirect Malta is MDB Group Limited, which is a company incorporated and
registered in Malta.
Related parties of the Group and the Bank include the subsidiaries, the ultimate controlling party, the ultimate parent
company, the intermediate parent company, the immediate parent company, all entities controlled by the ultimate
controlling party and the ultimate parent company, Key Management Personnel, close family members of Key
Management Personnel and entities which are controlled or jointly controlled by Key Management Personnel or their
close family members.
Transactions with Key Management Personnel
Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and
controlling the activities of the Group, being the Directors of MDB Group Limited, MeDirect Malta and MeDirect Belgium.
Key Management Personnel compensation consisting of Directors’ remuneration is disclosed in Note 28. The Group also
provides non-cash benefits to Key Management Personnel, including gross rent payable on accommodation based in
Malta, presented within ‘Personnel expenses’, and health and life insurance premiums paid by the Group amounting to
€0.1 million in the financial year ended 31 December 2025 (2024: €0.1 million), presented within ‘Other administrative
expenses’.
Related party balances and transactions
During the course of its activities, the Group conducted business on commercial terms with all related parties.
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The following table provides the total amount of Group transactions which have been entered into, and Group balances
with, related parties of the Group for the relevant financial year:
Year ended 31 December 2025
As at 31 December 2025
Income from
Expenses charged by
Amounts owed by
Amounts owed to
Transaction/balance
Related party
related parties
related parties
related parties
related parties
type
€000
€000
€000
€000
Ultimate parent company
3
-
-
-
Service charge fees
(Pre 9 September 2025 - Note 40)
Immediate parent company
5
-
-
-
Service charge fees
-
1,317
-
-
Interest expense
-
-
1,321
-
Other assets
-
-
-
11,914
Subordinated liabilities
Other group companies
3
-
-
-
Service charge fees
(Pre 9 September 2025 - Note 40)
Key management personnel
-
-
-
341
Amounts owed to customers
Year ended 31 December 2024
As at 31 December 2024
Income from
related parties
Expenses charged by
related parties
Amounts owed by
related parties
Amounts owed to
related parties
Transaction/balance type
Related party
€000
€000
€000
€000
Ultimate parent company
5
-
-
-
Service charge fees
-
-
-
619
Other liabilities
Immediate parent company
5
-
-
-
Service charge fees
-
1,290
-
-
Interest expense
-
-
48
-
Other assets
-
-
-
11,670
Subordinated liabilities
-
-
-
1,333
Amounts owed to customers
Other group companies
5
-
-
-
Service charge fees
-
-
-
3
Amounts owed to customers
Key management personnel
-
10
-
-
Interest expense
-
-
-
293
Amounts owed to customers
Furthermore, as detailed in Note 17, by virtue of board resolutions dated 19 September 2025 and 24 September 2025, the
Bank accepted capital contributions from MDB Group Limited amounting to €39.2 million and €0.8 million respectively.
On 30 September 2025, MeDirect Malta injected a further €29.4 million into MeDirect Belgium.
Throughout the financial year MeDirect Malta recharged employee compensation and benefits to MeDirect Belgium
amounting to €6.8 million (2024: €5.7 million) and received €1.1 million from MeDirect Belgium in relation to IT support
and security services (2024: €0.9 million). In the financial year ended 31 December 2025, MeDirect Malta charged interest
of €60 thousand (2024: €135 thousand) on its loans and advances to MeDirect Tech Limited. MeDirect Belgium paid
commitment fees to MeDirect Malta throughout the financial year 2025 of €284 thousand (2024: €285 thousand) on a
revolving credit facility of €70.0 million provided by MeDirect Malta. As at 31 December 2024, MeDirect Malta paid
commitment fees amounting to €11 thousand on a revolving credit facility provided by MeDirect Belgium. The revolving
credit facility was terminated in 2024.
Throughout the financial year MeDirect Malta was charged IT support charges by MeDirect Tech Limited amounting to
€0.4 million (2024: €0.6 million) and charges relating to leases treated in accordance with IFRS 16 requirements
amounting to €0.8 million (2024: €1.4 million).
In 2025, the Bank entered into a Master Agreement governing financial transactions with its intermediate parent company,
Banka CREDITAS a.s. Under this agreement, the parties may enter into financial transactions or incorporate its provisions
into the terms of certain or all such transactions, thereby subjecting them to the Master Agreement. No financial
transactions were entered into under this arrangement in 2025.
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36. Segmental information
The Group’s core activity is lending, carried out from Malta and Belgium and focused on Dutch, Belgian, and Maltese
mortgage lending, as well as retail consumer finance receivables in Malta. Its operations are complemented by
investments in high‑quality collateralised instruments, including covered bonds, guaranteed senior bank debt,
sovereign‑linked securities, and AAA‑rated tranches of securitisation vehicles and asset‑backed securities. The Group
also maintains a lending book comprising Maltese corporate loans and a small number of remaining exposures from its
international corporate lending portfolio, which is currently being wound down. Income generated from these assets is
further supported by revenues from the Group’s wealth management activities
The Group’s internal management reporting to the Board of Directors and Senior Management is primarily structured by
jurisdiction. Senior Management reviews these jurisdiction‑specific reports to guide resource allocation and evaluate
performance. In areas where it is relevant, these reports are further supported by consolidated analyses covering the
Group’s overall revenue streams.
Further details on the Group’s products, services, and geographical coverage are presented in Notes 2, 7, 8, 25 and 26 to
the financial statements. These notes outline the Group’s financial risks, sectoral and geographical credit concentrations,
and the revenue generated from its single reportable segment. The investment portfolio is broadly diversified, comprising
a wide range of exposures across government entities, financial institutions, and other corporate issuers.
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2025
2024
Malta
Belgium
Total
Malta
Belgium
Total
€000
€000
€000
€000
€000
€000
Turnover *
37,698
134,365
172,063
46,463
162,224
208,687
of which interest
income
29,032
126,462
155,494
38,019
156,655
194,674
of which fee and
commission income
5,638
6,831
12,469
6,835
5,629
12,464
of which other
operating income/(loss)
3,028
1,072
4,100
1,609
(60)
1,549
Interest expense
(14,920)
(76,432)
(91,352)
(17,383)
(100,238)
(117,621)
Fee expense and other
losses
(1,602)
(2,965)
(4,567)
(3,133)
(2,169)
(5,302)
Change in expected
losses and other credit
impairment charges
- International
Corporate Lending
(1,897)
758
(1,139)
(7,701)
(10,484)
(18,185)
- Dutch Mortgages
-
(160)
(160)
-
34
34
- Belgian Mortgages
-
(443)
(443)
-
(200)
(200)
- Maltese Business
Lending
(300)
-
(300)
(835)
-
(835)
- Maltese Mortgages
(21)
-
(21)
(5)
-
(5)
- Consumer Finance
Receivables
(800)
-
(800)
(148)
-
(148)
- Other
18
(1)
17
109
(102)
7
Total change in expected
losses and other credit
impairment charges
(3,000)
154
(2,846)
(8,580)
(10,752)
(19,332)
Personnel expenses
(15,216)
(13,649)
(28,865)
(14,348)
(12,480)
(26,828)
Depreciation and
amortisation
(5,264)
(669)
(5,933)
(2,627)
(3,114)
(5,741)
Other operating
expenses
(11,527)
(33,046)
(44,573)
(9,640)
(29,245)
(38,885)
(Loss)/profit before tax
(13,831)
7,758
(6,073)
(9,248)
4,226
(5,022)
Taxation
(110)
(1,442)
(1,552)
(36)
(820)
(856)
(Loss)/profit after tax
(13,941)
6,316
(7,625)
(9,284)
3,406
(5,878)
Capital expenditure
3,096
939
4,035
4,648
324
4,972
2025
2024
Malta
Belgium
Total
Malta
Belgium
Total
Total assets (€million)
938
4,400
5,338
960
4,112
5,072
Total liabilities (€million)
887
4,170
5,057
907
3,917
4,824
Full time equivalent staff (No)
315
71
386
298
72
370
* Turnover is defined as interest income, fee and commission income and other operating income. The turnover and interest income allocated to Belgium
in the financial year ended 31 December 2024 includes interest charged to MeDirect Malta amounting to €11 thousand.
As at 31 December 2024, total assets allocated to Malta included investment property amounting to €17 million.
The Group carried out its activities in the countries listed above under the name of MeDirect Malta in Malta and in the
The preceding table also covers the disclosure required by Article 89 of CRD V whereby the Group must disclose
information about turnover, number of employees, profit before tax, tax and public subsidies received by country, taking
into account all jurisdictions in which it operates. During the year ended 31 December 2025, the Group received a
government grant of €14 thousand from the Ministry for the European Funds. In 2024, the Group did not receive any
|me> direct Annual Report and Financial Statements 2025
193
37. Investor compensation scheme
In accordance with the provisions of the Investor Compensation Scheme Regulations, issued under the Maltese
Investment Services Act (Cap. 370), licence holders are required to transfer a variable contribution to an Investor
Compensation Scheme Reserve and place the equivalent amount with a bank, pledged in favour of the Scheme.
Alternatively, licence holders can elect to pay the amount of variable contribution directly to the Scheme. Throughout the
financial years ended 31 December 2025 and 2024, MeDirect Malta was not required to pay any variable contribution to
the Scheme.
38. Assets held on a nominee basis
As part of its Wealth Management proposition, the Group acts as a nominee holder of financial instruments on behalf of
customers under its Investment Services licence. Assets held on a nominee basis are not assets of the Group and are not
recognised in the statements of financial position. Accordingly, the Group is not exposed to any credit risk relating to such
placements, as it does not guarantee these investments.
At 31 December 2025, the total assets held by the Group and the Bank on behalf of customers amounted to €2,383.9
million (2024: €2,056.8 million) and €980.1 million (2024: €886.2 million) respectively.
39. Events after the reporting date
There were no events after the reporting date that would have a material effect on the financial statements.
40. Developments in connection with the shareholding of MDB Group
Limited
On 22 October 2024, MeDirect Malta announced that Banka CREDITAS a.s. had submitted a binding offer to Medifin
Finance Limited to acquire the entire shareholding of MDB Group Limited.
MeDirect Malta later confirmed, on 29 November 2024, that Medifin Finance Limited and Banka CREDITAS a.s. had
signed a share purchase agreement for the full acquisition of MDB Group Limited, contingent upon regulatory approval.
On 29 August 2025, MeDirect Malta reported that the European Central Bank had informed Bank CREDITAS a.s. that it
had no objections to the proposed acquisition. The successful acquisition of all shares in MDB Group Limited by Banka
CREDITAS a.s., along with one of its affiliates, was effective as from 9 September 2025.
As a result of the acquisition, the Bank became a wholly-owned subsidiary of Banka CREDITAS a.s. and part of the larger
Creditas Group.
|me> direct Annual Report and Financial Statements 2025
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41. Statutory information
MeDirect Bank (Malta) plc is a limited liability company and is incorporated in Malta.
The ultimate controlling party of MeDirect Malta was AnaCap Financial Partners II L.P. until 9 September 2025 (Note 40)
and Ms. Barbora Hubáčková subsequent to this date.
The ultimate parent company of MeDirect Malta is Creditas B.V. , a financial holding company, which is incorporated and
registered in the Netherlands with its registered address at De Boelelaan 30, Unit 3.14, 1083HJ Amsterdam, Netherlands.
The immediate parent company of MeDirect Malta is MDB Group Limited , a limited liability company, which is
incorporated and registered in Malta with its registered address at The Centre, Tigne Point, Sliema TPO 0001.
MDB Group Limited prepares consolidated financial statements of the group of which MeDirect Malta together with its
subsidiaries form part. These consolidated financial statements will be filed and available for public inspection at the Malta
Business Registry in Malta and on the Group’s website https://www.medirect.com.mt/about-us/investor-relations.
Banka CREDITAS a.s. prepares consolidated financial statements of the group of which MDB Group Limited together with
its subsidiaries form part. These consolidated financial statements may be viewed on https://www.creditas.cz.
|me> direct Annual Report and Financial Statements 2025
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Five-year comparison
|me> direct Annual Report and Financial Statements 2025
196
Five-year comparison: Statements of comprehensive income
Group
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Interest income
155,494
194,674
173,755
80,687
74,156
Interest expense
(91,352)
(117,621)
(91,434)
(22,949)
(27,108)
Net interest income
64,142
77,053
82,321
57,738
47,048
Net fee and commission income
7,902
7,162
5,101
6,129
5,684
Net trading income
2,399
1,600
547
1,408
2,687
Net (loss)/income from financial
instruments at fair value through profit
or loss
-
(125)
447
4,728
353
Other operating income
1,701
74
129
4,660
331
Total operating income
76,144
85,764
88,545
74,663
56,103
Personnel expenses
(28,865)
(26,828)
(24,291)
(24,296)
(22,512)
Depreciation and amortisation
(5,933)
(5,741)
(5,572)
(6,156)
(6,876)
Other administrative expenses
(44,573)
(38,885)
(43,382)
(37,131)
(38,390)
Change in expected credit losses and
other credit impairment charges
(2,846)
(19,332)
(945)
2,041
(2,326)
(Loss)/profit before tax
(6,073)
(5,022)
14,355
9,121
(14,001)
Taxation
(1,552)
(856)
(2,408)
(460)
(1,324)
(Loss)/profit for the year
(7,625)
(5,878)
11,947
8,661
(15,325)
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss
Fair valuation of financial investments
measured at fair value through other
comprehensive income
- Net change in fair value, before tax
-
-
-
(31,421)
(3,823)
- Net amount reclassified to profit or
loss, before tax
-
-
-
32,823
-
Income tax relating to above items
-
-
-
(393)
1,109
-
-
-
1,009
(2,714)
Items that will not be reclassified
subsequently to profit or loss
Fair valuation of financial investments
measured at fair value through other
comprehensive income
- Net change in fair value
-
-
-
-
1,991
Other comprehensive income, net of tax
-
-
-
1,009
(723)
Total comprehensive income, net of tax
(7,625)
(5,878)
11,947
9,670
(16,048)
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Five-year comparison: Statements of financial position
Group
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Assets
Balances with central banks and cash
272,565
206,870
265,453
149,929
328,626
Derivative financial instruments
185,928
175,310
207,950
363,382
42,688
Loans and advances to financial institutions
329,004
316,179
358,393
402,987
193,724
Loans and advances to customers
3,023,394
2,927,475
2,753,672
2,389,293
2,324,303
Investments
1,441,455
1,358,820
1,321,636
1,268,039
1,277,268
Property and equipment
2,431
4,624
6,091
7,574
9,186
Intangible assets
15,863
16,366
15,955
13,306
13,031
Non-current assets classified as held for sale
-
-
1,785
1,785
1,785
Investment property
-
17,042
-
-
-
Current tax assets
1,216
1,040
205
635
1,297
Deferred tax assets
17,730
17,512
17,525
17,524
18,377
Prepayments and accrued income
8,348
4,965
4,747
18,473
14,314
Other assets
39,956
26,015
23,017
28,978
13,527
Total assets
5,337,890
5,072,218
4,976,429
4,661,905
4,238,126
Equity
Called up issued share capital
117,450
117,450
117,450
117,450
117,450
Share premium
13,464
13,464
13,464
13,464
13,464
Shareholders’ contribution
172,997
133,196
133,196
133,196
133,196
Reserve for general banking risks
-
-
-
3,798
3,798
Other reserves
2,066
880
716
224
(785)
Accumulated losses
(25,138)
(16,327)
(10,285)
(25,538)
(34,199)
Total equity
280,839
248,663
254,541
242,594
232,924
Liabilities
Derivative financial instruments
11,204
32,681
25,464
5,306
1,131
Amounts owed to financial institutions
209,814
179,777
374,959
545,135
273,349
Amounts owed to customers
4,139,020
3,880,035
3,310,469
2,787,600
2,960,865
Debt securities in issue
602,397
641,673
916,747
969,569
658,293
Subordinated liabilities
67,329
67,358
66,871
54,831
54,994
Current tax liabilities
56
2
980
48
2
Deferred tax liabilities
-
196
342
358
803
Provisions for liabilities and charges
111
202
298
1,263
1,223
Accruals and deferred income
13,981
11,683
12,256
24,303
23,723
Other liabilities
13,139
9,948
13,502
30,898
30,819
Total liabilities
5,057,051
4,823,555
4,721,888
4,419,311
4,005,202
Total equity and liabilities
5,337,890
5,072,218
4,976,429
4,661,905
4,238,126
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Five-year comparison: Statements of cash flows
Group
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Cash flows from operating activities
Interest and commissions receipts
173,425
200,840
172,220
93,798
78,072
Interest and commission payments
(94,812)
(121,801)
(62,223)
(21,797)
(32,070)
Payments to employees and suppliers
(86,709)
(66,270)
(68,660)
(65,642)
(65,748)
Operating cash flows before changes in
operating assets/liabilities
(8,096)
12,769
41,337
6,359
(19,746)
(Increase)/decrease in operating assets:
Reserve deposit with central banks
(2,679)
(7,087)
(1,804)
(561)
(2,390)
Loans and advances to financial institutions
and customers
(90,114)
(108,760)
(192,894)
(621,510)
(307,382)
Increase/(decrease) in operating liabilities:
Amounts owed to financial institutions and
customers
246,668
506,289
401,388
(16,079)
197,927
Other payables
4,554
(2,504)
2,654
1,423
4,278
Tax (paid)/refunded
(2,089)
(2,798)
(1,061)
258
(228)
Net cash from/(used in) operating activities
148,244
397,909
249,620
(630,110)
(127,541)
Cash flows from investing activities
Acquisition of property and equipment
(104)
(464)
(242)
(1,455)
(803)
Acquisition/development of intangible assets
(3,931)
(4,508)
(6,257)
(4,304)
(3,650)
Acquisition of investments measured at
amortised cost
(256,521)
(259,454)
(231,750)
(271,819)
(65,000)
Acquisition of investments measured at fair
value through other comprehensive income
-
-
-
-
(448,569)
Redemption/disposals of investments measured
at amortised cost
172,620
221,715
183,606
35,000
255,295
Redemption of investments measured at fair
value through other comprehensive income
-
-
-
240,653
122,297
Redemption of investments measured at fair
value through profit or loss
-
893
5,292
-
-
Net cash used in investing activities
(87,936)
(41,818)
(49,351)
(1,925)
(140,430)
Cash flows from financing activities
Shareholders’ contributions
39,801
-
-
-
-
Issuance of debt securities
-
-
-
366,437
498,955
Redemption/repurchase of debt securities
(38,131)
(272,049)
(58,688)
(55,161)
(393,082)
Principal element of lease liabilities
(1,167)
(1,203)
(1,177)
(1,148)
(1,166)
Net advances (to)/from ultimate parent
company
-
-
-
(37)
318
Net advances (to)/from immediate parent
company
(2,345)
(1,080)
611
66
11,667
Net advances (to)/from group companies
(18)
26
-
(107)
8,400
Net cash (used in)/from financing activities
(1,860)
(274,306)
(59,254)
310,050
125,092
Net increase/(decrease) in cash and cash
equivalents
58,448
81,785
141,015
(321,985)
(142,879)
Cash and cash equivalents at beginning of year
59,472
(22,313)
(163,328)
158,657
301,536
Cash and cash equivalents at end of year
117,920
59,472
(22,313)
(163,328)
158,657
|me> direct Annual Report and Financial Statements 2025
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Five-year comparison: Accounting ratios
Group
2025
2024
2023
2022
2021
€000
€000
€000
€000
€000
Net interest income and other operating income to total
assets
1.5%
1.8%
1.8%
1.7%
1.3%
.
Operating expenses to total assets
1.6%
1.5%
1.5%
1.5%
1.6%
Cost to income ratio
104.2%
83.3%
82.7%
90.5%
120.8%
(Loss)/profit before tax to total assets
(0.1%)
(0.1%)
0.3%
0.2%
(0.3%)
(Loss)/profit after tax to total assets
(0.2%)
(0.1%)
0.2%
0.2%
(0.4%)
(Loss)/profit before tax to equity
(2.4%)
(2.0%)
5.7%
3.9%
(5.6%)
(Loss)/profit after tax to equity
(3.0%)
(2.4%)
4.8%
3.7%
(6.2%)
The equity and total assets figure for the accounting ratios listed above are based on the simple average value for the
financial year.
Group
2025
2024
2023
2022
2021
No
No
No
No
No
Shares in issue
117,450,107
117,450,107
117,450,107
117,450,107
117,450,107
Group
2025
2024
2023
2022
2021
€
€
€
€
€
Net assets per share
2.15
2.13
2.13
1.97
2.12
Group
2025
2024
2023
2022
2021
(Losses)/earnings per share (cents)
based on (loss)/profit after tax
(6c)
(5c)
10c
7c
(13c)
|me> direct Annual Report and Financial Statements 2025
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Shareholder register information
Analysis of the share capital of MeDirect Bank (Malta) plc as at 31 December 2025:
MeDirect Bank (Malta) plc C34125
Type and class of shares
Issued shares
% Paid
up
Nominal value per share in EUR
MDB Group Limited
Ordinary A
117,450,106
100
1.000000
Number of shares
Number of
holders
Class A
117,450,106
1
Class B
1
1
Analysis of the share capital of the parent company of MeDirect Bank (Malta) plc, MDB Group Limited, as at 31 December
2025:
MDB Group Limited C34111
Type and class of shares
Issued shares
% Paid up
Nominal value per share in EUR
Banka CREDITAS a.s.
Ordinary
56,406,547
100
1.000000
There were no changes in the holding reflected above up to 11 March 2026.
|me> direct Annual Report and Financial Statements 2025
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Company information
Company secretary
Galea, Cressida
Senior management and key officers
The senior management and key officers as at the date of approval of this annual report were:
Maher, Jean Claude
Executive Director and Group Chief Executive Officer
Banas, Izabela
Executive Director and Group Chief Financial Officer
Kubíček, Martin
Nominated as an Executive Director and Group Chief Risk Officer
Bonello Ghio, Lorraine
Chief Administration Officer
Breemeersch, Chris
Group Chief Internal Audit Officer
Camilleri, Emma
Chief People Officer
Crossley, Wayne
Head – Operations
Galea, Cressida
Head of Sustainability and Regulatory Affairs
Portelli, Chris
Chief Technology Officer and nominated as an Executive Director
(awaiting regulatory approval)
Pullicino, Simon
General Counsel
Redaelli, Giancarlo
Chief Compliance Officer
Subramanian, Murali
Chief Commercial Officer
Moreau, Alain
Executive Director and Chief Executive Officer – MeDirect Belgium
Fenech, Marija
Executive Director and Chief Risk Officer - MeDirect Belgium
Phe Funchal, Jean-Marcel
Executive Director and Chief Financial Officer – MeDirect Belgium
Ceysens, Bruno
Head - Compliance - MeDirect Belgium
De Boe, Thomas
Head - Belgium Mortgages - MeDirect Belgium
Kwasniak, Michal
Head - Treasury and ALM - MeDirect Belgium
Menezes, Isabelle
Head - Internal Audit - MeDirect Belgium
Van de Velden, Kim
Registered address
MeDirect Bank (Malta) plc
The Centre, Tigne Point
Sliema TPO 0001
Malta
Telephone
+356 2557 4000
|me> direct Annual Report and Financial Statements 2025
202
Independent Auditor’s Report
203
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
Opinion
We have audited the separate and consolidated financial statements of MeDirect Bank (Malta) plc (the “Bank”) and its
subsidiaries (the “Group”) set on pages 46 to 194, which comprise the separate and consolidated statement of financial
position as at 31 December 2025, the separate and consolidated statement of comprehensive income, separate and
consolidated statement of changes in equity and the separate and consolidated statement of cash flows for the year then
ended, and notes to the separate and consolidated financial statements, including material accounting policies
information.
In our opinion, the accompanying separate and consolidated financial statements give a true and fair view of the separate
and consolidated financial position of the Bank and the Group as at 31 December 2025, and of their separate and
consolidated financial performance and their separate and consolidated cash flows for the year then in accordance with
International Financial Reporting Standards as adopted by the European Union (“IFRS”) and in accordance with the
requirements of the Banking Act (Cap. 371) (the “Banking Act”) and the Companies Act (Cap.386) (the “Companies Act”)
of the Laws of Malta.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) and the Companies Act. Our
responsibilities under those standards and under the Companies Act are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the Bank and the Group in
accordance with the International Code of Ethics for Professional Accountants (including International Independence
Standards) as issued by the International Ethics Standards Board of Accountants (the “IESBA Code”), as applicable to audits
of financial statements of public interest entities, together with the ethical requirements that are relevant to our audit of
the financial statements of public interest entities in accordance with the Accountancy Profession (Code of Ethics for
Warrant Holders) Directive issued in terms of the Accountancy Profession Act, Cap. 281 of the Laws of Malta. We have also
fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Ernst & Young Malta Limited
Regional Business Centre
Achille Ferris Street
Msida MSD 1751
Malta
Tel: +356 2134 2134
Fax: +356 2133 0280
ey.malta@mt.ey.com
ey.com
204
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of material
misstatements due to fraud
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the
responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report,
including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond
to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the nying
financial statements.
Measurement of expected credit losses of the loans and advances to customers of the Bank and the Group
The Bank’s and Group’s loans and advances to customers, which comprise of corporate loans and advances, mortgages
and other facilities amounting to 33% of the total assets (Eur 392m) of the Bank and 57% of the Group (Eur 3,023m),
respectively at 31 December 2025. The expected credit losses (ECL) on the loans and advances to customers portfolios, as
described and disclosed in notes 1.5, 2.2, 3.2, 7 and 30 represents 2.0% and 0.3% of the Bank’s and of the Group’s gross
loans and advances to customers as at 1 December 2025.
ECL calculations are based on complex statistical analyses and modelling assumptions developed by external vendors or
internally. A significant element of judgement is required to ensure that model parameters produce an ECL output which
is reasonable and appropriate in light of existing conditions.
Measurement of ECL for stage 1 and 2 exposures
The stage model of the Bank and the Group is detailed in Note 1.5. For exposures classified as Stage 1 and Stage 2, the
Bank and the Group measures credit loss allowances on the basis of the following key inputs: Probability of Defaults (PDs)
and Loss Given Defaults (LGDs).
The Bank and the Group applies macroeconomic scenarios sourced from an external vendor to the PD and LGD term
structures for the estimation of credit loss allowances in respect of Stage 1 and Stage 2 exposures.
205
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
Measurement of ECL for stage 3 exposures
In respect of defaulted / Stage 3 exposures, the Bank and the Group utilises an internally developed discounted cash flow
(“DCF”) methodology in order to estimate the net present value of forecasted operating cash flows under multiple
forward-looking scenarios discounted using the borrower-specific discount rate.
Reasons for designation as a KAM
The determination of ECL requires significant judgment across various dimensions, including credit risk assessment,
estimation of default rates and loss given default, incorporation of forward-looking information and model calibration,
and professional skepticism to ensure accurate and reliable ECL calculations. In performing this assessment, management
evaluates all relevant information on indicators of unlikeliness-to-pay, including the consideration of factors that
immediately indicate deterioration in
he financial condition of borrowers, but also in respect of factors that impact the outlook of borrowers affecting their
ability to pay.
The Bank and the Group utilises a DCF approach for its defaulted exposures. In estimating the cash flows, management
makes judgements about a borrower’s financial situation and future repayment prospects under different scenarios,
assigning probabilities to each scenarios, and determining appropriate discount rates reflecting borrower specific
characteristics.
Audit procedures to address the key audit matter
Our audit procedures over the measurement and adequacy of expected credit losses included amongst others:
• Obtained understanding of key process and implementation of the controls relating to the credit issuance, the
credit risk management (including periodic credit review, monitoring of the borrower's credit quality using
indicators and the determination of the staging), ECL estimation process and the flow of information between
systems.
ECL measurement for Stage 1 and Stage 2 exposures
• Involved our Quantitative Specialist to assess the appropriateness of the ECL measurement model, for a sample
of portfolios, in line with IFRS 9 requirements;
• Assessed the reasonableness of key assumptions with the involvement of our Quantitative Specialist including:
− the Staging of the loans, historical migrations and staging sensitivity;
− the PD’s generated by the models;
− the relevant data points for the determination of the LGD;
• Other procedures on key assumptions and inputs:
− Performed relationship analysis and benchmarked the historical and projected PD’s estimated by the model
as at year end with PDs for exposures with similar credit quality available from various independent sources;
206
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
ECL measurement for Stage 1 and Stage 2 exposures
− Performed relationship analysis and benchmarked the LGDs estimated by the model with recoveries
experienced for similar credit exposures available from various independent sources;
− For a sample of borrowers, independently assessed the appropriateness of the credit grading and staging
based on the latest available borrowers’ financial information;
• Tested the accuracy of the model data inputs used against source data including borrowers’ information such as
key financial data points, sector, geographic location, days past due, amongst others, as applicable.
ECL measurement for Stage 3 exposures
• For stage 3 loans we obtained understanding of the borrower’s latest developments and inspected information
available to assess the prospects of recoverability;
• Assessed the appropriateness of the DCF methodology and reasonability of key inputs with the involvement of
our Valuation specialist including:
− the discount rate used in determining the present value;
− assess the appropriateness of collateral value;
− DCF shadow recalculation incorporating additional sensitivity analysis.
We have also assessed the adequacy of disclosures relating to the Bank’s and the Group’s expected credit losses on loans
and advances to customers presented in notes 1.5, 2.2, 3.2, 7 and 30 to the financial statements.
Valuation of derivatives and hedge accounting of the Group
The net value of the derivatives of the Group amounted to 62% of the net assets as at year end, as disclosed in Notes 1.14,
2.2.9, 3.3 and 5.
Derivative financial instruments mainly comprise of currency forwards, currency swaps and interest rate swaps. They are
classified as held for trading derivatives unless designated as hedging instruments and are initially recognised at fair value
and subsequently remeasured at fair value. Fair values for currency forwards and swaps are determined using forward
exchange market rates at the end of the reporting period.nThe Group applies fair value hedge accounting to portfolio
hedges of interest rate risk (macro hedging) under the EU carve-out version of IAS 39 in respect of its retail operations
after considering the duration gap between the Dutch and Belgian mortgages and core deposits. The hedging activities
are designated as a portfolio fair value hedge in respect of the mortgage book, being the hedged items. In establishing fair
value, management is required to exercise judgment in selection and application of appropriate parameters. Moreover,
the accounting treatment of the hedging relationship requires management to forecast future early repayments of
mortgages.
207
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
Reasons for the designation as a key audit matter
The valuation of the fair value of derivatives is based on a number of estimates and assumptions, inbuilt within the
valuation techniques, which are not readily observable on the market. Moreover, the establishment of the correct
accounting treatment of the hedging relationship and the effectiveness test is based on a number of assumptions that
include amongst others the expected future early redemptions and renegotiations of the mortgages.
Audit procedures to address the key audit matter
Our audit procedures over the valuation of derivatives and hedge accounting included amongst others:
• Obtained understanding of the key process and implementation of controls relating to the valuation of derivatives
and hedge accounting;
• Compared the fair values of the derivatives recognized by the Group to the valuation issued by the Group’s
external counterparties;
• On a sample basis, recalculated the fair value of derivatives using the term of the instrument and key inputs from
independent sources including benchmark interest rate curves;
• Assessed the Group’s hedging documentation to determine whether it meets the criteria as described in the
“carved-out” version of IAS 39 as adopted by the European Union;
• Assessed the reasonableness of the model used by the Group to forecast future early repayments and
renegotiations of mortgage loans and back tested to recent financial years;
• Compared the volume of hedging derivatives with the projected volume of hedged mortgage loans over future
time buckets to identify any over-hedging situations;
• Assessed the effectiveness tests performed by the Group to determine whether the hedging relationships are
effective and whether the ineffectiveness was calculated correctly;
• Assessed the appropriateness of the hedge accounting in line with the results of the Group’s model and testing.
We have also assessed the relevance of disclosures relating to the Group’s valuation of derivatives and hedge accounting
presented in notes 1.14, 2.2.9, 3.3 and 5 to the financial statements.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the
Annual Report, other than the financial statements and our auditor’s report thereon.
Our opinion on the separate and consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon other than our reporting on other legal and regulatory requirements.
208
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the separate and
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report t fact. We have nothing to report in this regard.
Responsibilities of the directors and those charged with governance for the financial statements
The Directors are responsible for the preparation and fair presentation of the separate and consolidated financial
statements in accordance with IFRS and the requirements of the Companies Act and the Banking Act and for such internal
control as the directors determine is necessary to enable the preparation of separate and consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate and consolidated financial statements, the directors are responsible for assessing the Bank’s
and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the Bank and/or Group to cease
operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s and the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the separate and consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these separate and consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
throughout the audit. We also:
• identify and assess the risks of material misstatement in the consolidated and separate financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control;
209
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on the audit of the financial statements
Auditor’s responsibilities for the audit of the financial statements
• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Bank’s and the Group’s internal control;
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the Directors;
• conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Bank’s and the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in
the separate and consolidated financial statements or, if such
• disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Bank and/or Group to
cease to continue as a going concern;
• evaluate the overall presentation, structure and content of the separate and consolidated financial statements,
including the disclosures, and whether the separate and consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation. plan and perform the group audit
to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units
within the group as a basis for forming an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and review of the audit work performed for the purposes of the group audit. We
remain solely responsible for our audit opinion.
We communicate with the those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate treats or safeguards
applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the separate and consolidate financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
210
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on other legal and regulatory requirements
Matters on which we are required to report by the Companies Act
Directors’ report
We are required to express an opinion as to whether the Directors’ report has been prepared in accordance with the
applicable legal requirements. In our opinion the Directors’ report has been prepared in accordance with the Companies
Act.
In addition, in the light of the knowledge and understanding of the Bank and the Group and its environment obtained in
the course of the audit, we are required to report if we have identified material misstatements in the Directors’ report.
We have nothing to report in this regard.
Other requirements
We also have responsibilities under the Companies Act to report if in our opinion:
• proper accounting records have not been kept;
• proper returns adequate for our audit have not been received from branches not visited by us;
• the separate and consolidated financial statements are not in agreement with the accounting records and returns;
• we have not received all the information and explanations we require for our audit.
We have nothing to report to you in respect of these responsibilities.
Appointment
We were appointed as the statutory auditor by the General Meeting of the Shareholders of the Bank and the Group on
27 April 2022. The total uninterrupted engagement period as statutory auditor, including previous renewals and
reappointments, amounts to 4 years.
Consistency with the additional report to the audit committee
Our audit opinion on the separate and consolidated financial statements expressed herein is consistent with the additional
report to the audit committee of the Bank and the Group, which was issued on 5 March 2026.
Non-audit services
No prohibited non-audit services referred to in Article 18A(1) of the Accountancy Profession Act, Cap. 281 of the Laws of
Malta were provided by us to the Bank and the Group, and we remain independent of the Bank and the Group as described
in the Basis for opinion section of our report. No other services besides statutory audit services and services disclosed in
the annual report and in the separate and consolidated financial statements were provided by us to the Bank and the
Group and its controlled undertakings.
211
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on other legal and regulatory requirements
Report on compliance with the requirements of the European Single Electronic Format Regulatory Technical Standard
(the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6
We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive 6 issued by
the Accountancy Board in terms of the Accountancy Profession Act (Cap. 281) - the Accountancy Profession (European
Single Electronic Format) Assurance Directive (the “ESEF Directive 6”) on the annual financial report of the Bank and the
Group for the year ended 31 December 2025, entirely prepared in a single electronic reporting format.hResponsibilities
of the directors
The directors are responsible for the preparation of the annual financial report, including the separate and consolidated
financial statements and the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in
accordance with the requirements of the ESEF RTS.
Our responsibilities
Our responsibility is to obtain reasonable assurance about whether the annual financial report, including the separate and
consolidated financial statements and the relevant electronic tagging therein comply in all material respects with the ESEF
RTS based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with
the requirements of ESEF Directive 6.
Our procedures included:
• Obtaining an understanding of the entity's financial reporting process, including the preparation of the annual
financial report, in accordance with the requirements of the ESEF RTS.
• Obtaining the annual financial report and performing validations to determine whether the annual financial report
has been prepared in accordance with the requirements of the technical specifications of the ESEF RTS.
• Examining the information in the annual financial report to determine whether all the required taggings therein
have been applied and whether, in all material respects, they are in accordance with the requirements of the ESEF
RTS.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the annual financial report for the year ended 31 December 2025 has been prepared, in all material
respects, in accordance with the requirements of the ESEF RTS.
212
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on other legal and regulatory requirements
Matters on which we are required to report by the Capital Markets Rules
Corporate governance statement
The Capital Markets Rules issued by the Malta Financial Services Authority (MFSA) require the directors to prepare and
include in their annual report a statement of compliance providing an explanation of the extent to which they have
adopted the Code of Principles of Good Corporate Governance and the effective measures that they have taken to ensure
compliance throughout the accounting period with those Principles.
The Capital Markets Rules also require the auditor to include a report on the statement of compliance prepared by the
directors. We are also required to express an opinion as to whether, in the light of the knowledge and understanding of
the Bank and the Group and its environment obtained in the course of the audit, we have identified material
misstatements with respect to the information referred to in Capital Markets Rules 5.97.4 and 5.97.5.
We read the statement of compliance and consider the implication for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements included in the annual report. Our responsibilities
do not extend to considering whether this statement is consistent with the other information included in the annual
report.
We are not required to, and we do not, consider whether the Board’s statements on internal control included in the
statement of compliance cover all risks and controls, or form an opinion on the effectiveness of the Bank’s and the Group’s
governance procedures or its risk and control procedures.
In our opinion:
• the corporate governance statement set out on pages 24 to 36 has been properly prepared in accordance with
the requirements of the Capital Markets Rules issued by the Malta Financial Services Authority
• in the light of the knowledge and understanding of the Bank and the Group and its environment obtained in the
course of the audit the information referred to in Capital Markets Rules 5.97.4 and 5.97.5 are free from material
misstatement
Other requirements
Under the Capital Markets Rules we also have the responsibility to review the statement made by the Directors, set out
on page 16, that the business is a going concern, together with supporting assumptions or qualifications as necessary.
We have nothing to report to you in respect of these responsibilities.
213
A member firm of Ernst & Young Global Limited.
Registered in Malta No: C30252
INDEPENDENT AUDITOR’S REPORT
to the Shareholders of MeDirect Bank (Malta) plc
Report on other legal and regulatory requirements
Matters on which we are required to report by the Banking Act
We also have responsibilities under the Banking Act to report on the following matters:
• whether we have obtained all the information and explanations which, to the best of our knowledge and belief,
were necessary for the purpose of our audit;
• whether in our opinion, proper books of account have been kept by the Bank, so far as appears from our
examination of those books;
• whether the Bank’s financial statements are in agreement with the books of account;
• whether in our opinion, and to the best of our knowledge and belief and, on the basis of the explanations given
to us, the financial statements give the information required by law in force in the manner so required.
We have nothing to report in respect of these responsibilities.
The partner in charge of the audit resulting in this independent auditor’s report is
Shawn Falzon for and on behalf of
Ernst & Young Malta Limited
Certified Public Accountants
11 March 2026
