Key financial results:
- 6.6% growth in balance sheet to EUR 12.9 billion
- 4.6% growth in sustainable loans
- Addition to ECL provision EUR 12.6 million
- Funds under Management by Investment Management and Private Banking: EUR 5.7 billion
- 4.7% growth of total Assets under Management to EUR 18.6 billion
- Net profit of EUR 6.7 million (63% decrease)
- Strong capital position; Common Equity Tier 1 ratio 19.7%
Commenting on the Triodos Bank 2020 half year results, Peter Blom, Chair of the Executive Board of Triodos Bank said: “The first half of 2020 we have been confronted with unexpected challenges that will leave marks on many parts of society. In the short term, we will face economic challenges, especially if COVID-19 related government support schemes expire before an economic recovery has fully emerged. In the medium and long term, the business and projects we finance - and therefore Triodos Bank itself - are well positioned to be part of the reset of the economy: more sustainable and more socially inclusive.”
In the six months to 30 June 2020, Triodos Bank increased its lending with 4.6%, supporting sustainable enterprises, institutions and projects (first six months 2019: 5.7%). The residential mortgages portfolio increased by 13.8%, compared to 14.6% in the same period last year.
The loans to funds entrusted ratio is 75% at the end of June 2020 and is stable compared to previous year.
The addition to the expected credit loss (“ECL”) provision in the first half year amounted to EUR 12.6 million, compared to EUR 2.0 million in the same period in 2019. The main contributor to the increase of the ECL in 2020 are the forward-looking macroeconomic parameters, which are strongly affected by the negative economic outlook for 2020 due to the COVID-19 crisis.
Triodos Investment Funds
In the first half of 2020, Triodos Investment Management’s funds under management remained stable at EUR 4.9 billion (end of 2019: EUR 4.9 billion). Although some funds experienced a negative impact from the COVID-19 pandemic and its consequences, other funds were less impacted, leading to an overall stable result for Triodos Investment Management in the first six months of 2020.
Details on the performance of the funds can be found at: www.triodos-im.com.
Total assets under management by Triodos Group increased by 4.7% to EUR 18.6 billion in the first half of the year. This increase of assets under management was primarily driven by a strong increase of the balance sheet by EUR 797 million in the first half year to EUR 12.9 billion per 30 June 2020 (end of 2019: EUR 12.1 billion). Private Banking and Investment Management activities were responsible for slightly increased funds under management by EUR 38 million to 5.7 billion at the end of June 2020 (end of 2019: EUR 5.7 billion).
Total income slightly increased in the first half of 2020 compared to 2019 due to higher interest income from increased loan volumes, despite declining margins as a result of the historically low interest environment in Europe.
Our cost base has increased slightly in the first half of 2020 but was below plan. The ratio of operating expenses against income was 85% for the first half of the year (first 6 months of 2019: 82%).
Net profit in the first six months was EUR 6.7 million, which is EUR 11.4 million below the same period last year. This significant reduction of the bank’s net profit compared to the same period last year was almost entirely driven by substantial increase of the ECL provisions, as required under IFRS accounting rules, to a total of EUR 12.6 million over the first six months of the year. As previously announced, Triodos Bank has changed the accounting standard from Dutch GAAP to IFRS in 2020.
Capital and liquidity position
In the first half of this year the bank’s total capital position remains strong. The Common Equity Tier 1 ratio strengthened to 19.7% per end of June 2020 (end of 2019: EUR 17.8%), due to the withdrawal of the dividend proposal for 2019 and the introduction of the improved ‘SME and Infrastructure supporting factors’ within the amended Capital Requirements Regulation II (CRR II) framework. This ratio is well above the regulatory requirement and above our internal minimum target.
The bank’s overall liquidity position has remained solid throughout. The group’s Liquidity Coverage Ratio (LCR) was 205% at the end of June 2020, well above the regulatory requirements.
Due to the decision to suspend the depository receipt trading on 18 March 2020, the amount of equity investors stayed the same until the end of June 2020 with a capital position of EUR 1.2 billion.
The leverage ratio of the bank is 8.1%.
As a result of the COVID-19 pandemic, the bank faces uncertainties regarding the measures taken by governments supporting the economy which will potentially impact the bank’s growth and profitability for the current year.
Triodos Bank has implemented various measures and will continue to closely monitor developments to safeguard the bank’s operations and to ensure business continuity towards clients. Triodos Bank aims to keep its capital and liquidity position robust and resilient, in line with internal target ratios and well above the regulatory minimum requirements.
The overall loan portfolio benefits from geographical diversification and reflects modest asset risk. However, the COVID-19 crisis is presenting new challenges and uncertainties, as governments and economies are adjusting to rapidly evolving local and regional pandemic spread and subsequent containment measures. The scale and duration of the pandemic and possible future lockdown measures across Europe potentially influence performance going forward. Therefore, it is yet uncertain to what extent returns realised in the second half of this year will be partially offset by further increase of ECL provisions.
In the short term, Triodos Bank’s customers will face economic challenges, especially when COVID-19 related government support schemes expire. In the medium and long term, Triodos Bank’s customers - and therefore Triodos Bank itself - are well positioned to be part of the economic recovery that should emerge as more sustainable and socially inclusive.