Triodos Bank’s impact by year end 2020 in brief:
- 561 projects co-financed in the sustainable energy sector, with total generating capacity of 5,100 MW producing the equivalent of the electricity needs of 4.8 million households worldwide
- Financed the equivalent of 33 million meals produced in the organic farming and food sector
- 38.4 million people provided with access to financial services via inclusive finance
- 59,000 people provided with accommodation via social housing projects financed
- Helped over 500 creative companies in the culture sector to continue their activities through the COVID-19 crisis
- Founding signatory of global Finance for Biodiversity Pledge
- Vision on how to Reset the Economy published in response to COVID-19 crisis
Key financial performance information:
- 15% growth in balance sheet to EUR 13.9 billion
- 12% growth in sustainable lending; mortgage portfolio grew by 39%
- Net profit: EUR 27.2 million (2019: EUR 39.0 million)
- Addition to the ECL (Expected Credit Losses) provision: EUR 23.9 million (2019: EUR 3.3 million)
- Funds under Management by Investment Management and Private Banking: EUR 6.4 billion (2019: EUR 5.7 billion)
- 14% growth of total Assets under Management to EUR 20.3 billion
- Strong capital position; Total Capital Ratio: 18.8%; Common Equity Tier 1 ratio 18.7%
- Leverage ratio: 8.8% (2019: 8.5%)
- Return on Equity: 2.3% (2019: 3.4%)
- Number of customers: 728,056 (2019: 721,039)
- Number of co-workers: 1,592 (2019: 1,493)
Peter Blom, Chair of the Executive Board and CEO of Triodos Bank commented:
"In a year of exceptional global disruption, Triodos Bank has been able to realise positive impact and solid growth. Both our loan portfolio and investment management activities contributed to this growth. In the short term we have to deal with the economic challenges related to COVID-19, but we are convinced that in the medium and long term, the sectors we finance are well positioned to contribute to a reset of the economy. A reset that will lead to an economy that is more sustainable and more socially inclusive. Many of our customers and the businesses we finance are frontrunners in a rapidly changing economic paradigm and Triodos will support them in realising this ambition.”
In 2020 Triodos Bank increased its lending to sustainable businesses and projects with 12% (2019: 11%), despite challenging global economic circumstances due to the COVID-19 pandemic. The residential mortgages portfolio increased by 39%, compared to 31% last year.
The loans to funds entrusted ratio is 78% at the end of 2020 (2019: 77%).
Impairment losses on financial instruments (loans and securities) increased to EUR 24.2 million (2019: EUR 3.7 million). The impairments represent 0.27% of the average loan book (2019: 0.05%). This relatively high impairment ratio is primarily caused by increased stage 1 and stage 2 ECL provisions due to the downward management adjustments in addition to macro-economic parameters caused by the COVID-19 pandemic. The resulting increase in ECL impairments had a significant impact on the net profit for the year 2020.
Operational expenses increased by 5% to EUR 245 million (2019: EUR 234 million) during the year. Having realised further cost efficiencies and keeping the co-worker cost nearly flat, the operational expenses still increased due to regulatory and compliance costs (e.g. KYC and Anti Money Laundering activities). A non-recurring impairment of EUR 5 million was recorded for the office buildings in Zeist, The Netherlands, due to the decision to sell these offices and centralise all Dutch activities in the office building at De Reehorst in Driebergen.
The ratio of operating expenses against income remained stable at 80% (2019: 80%). Improving our efficiency continues to be a key focus area for the bank.
Triodos Bank achieved a net profit of EUR 27.2 million, down by 30% (2019: EUR 39.0 million). This 30% lower profit compared to 2019 was primarily caused by recorded impairment expenses of EUR 24.2 million for financial instruments (loans and securities) in 2020 (2019: EUR 3.7 million), as macro-economic parameters that drive the ECL calculation model worsened with the start of the COVID-19 crisis. Triodos Bank delivered a positive return on equity of 2.3% in 2020 (2019: 3.4%).
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Triodos Investment Funds
The COVID-19 pandemic and the range of mitigating measures taken around the world resulted in disruptions to commodity markets, global trade, supply chains and tourism, ultimately leading to an economic downturn.
The Triodos Investment funds were less sensitive to the downward appreciation of those sectors impacted most by the pandemic, such as the oil & gas and aviation industry, as they are excluded from investments due to Triodos’ investment approach.
As a result of the mitigating measures and continued confidence among its investor base, Triodos Investment Management was able to realise an overall growth in assets under management by 10% (2019: 18%) to EUR 5.4 billion. The net inflow of funds was 8%. The investment funds overall gained 3% of their value following stock exchange movements in 2020.
The investment funds publish separate annual reports, and most have their own Annual General Meeting. Details can be found at: www.triodos-im.com.
Triodos Bank’s equity position increased by EUR 7 million to EUR 1,208 million per end of December 2020 (2019: 1,201 million). This increase includes net new capital by Depository Receipt growth and retained net profit. The growth of the equity in combination with the implementation of new Capital Regulatory Requirements (CRR II) resulted in a strong capital base per end of December 2020, which is sufficient to meet the capital requirements set by the prudential regulator.
At the end of 2020 the Total Capital Ratio was 18.8% (2019: 17.9%) and the Common Equity Tier-1 (CET-1) ratio was 18.7 % (2019: 17.9%). In 2020 Triodos Bank issued Tier 2 capital in the UK to the amount of EUR 6.4 million.
On 5 January 2021, trade in Depository Receipts (DRs) was suspended, as a trade pattern developed where the room available to Triodos Bank to repurchase the DRs would likely be increasingly utilised in the short term. The room available for repurchase is limited by prudential regulation to 3% of the bank’s CET-1 capital. Triodos Bank will closely monitor the situation to see if balanced trading is considered possible again and the suspension can be lifted. At the same time alternatives are researched with the aim to realise a structural improvement for current limited tradability of the Depository Receipts.
The number of Depository Receipt holders at the end of 2020 was 43,614 (2019: 44.401).
Fitch Ratings (Fitch) announced on 16 February 2021 it has assigned Triodos Bank a Long-Term Issuer Default rating at ‘BBB’ with a stable outlook and a Viability Rating at ‘bbb’. Fitch’s rating analysis was done at the request of Triodos Bank. The rating gives Triodos Bank a better position on the financial markets should the need arise. It will improve access to institutional debt funding and potentially reduce the cost of funding.
Triodos Bank in 2021
An important focus for Triodos Bank is to address the strategic challenge presented by the suspension of trade of the Depository Receipts of ordinary shares (“DRs”), the impact this has on our Depository Receipt holders and on our broader capital strategy.
Triodos Bank expects to grow its fee income over time by growing the activities of Triodos Investment Management as well as fees-based banking activities. Triodos Bank has the ambition to grow its bank balance sheet modestly, maintaining a stable loan to deposit ratio. Both will increase our positive impact, contributing to a fair return while maintaining an overall modest risk appetite.
External developments may influence the ability to grow volumes and profit. Triodos Bank will respond to these developments, seizing the opportunities that present itself in a pro-active way. Fulfilling the bank’s mission while maintaining a sound level of risk and return remain key.
Triodos Bank’s capital and liquidity position is expected to remain robust and resilient, in line with internal target ratios and well above the regulatory minimum requirements.
The geographical diversification of the loan portfolio contributes to a moderate asset risk profile and therefore reduces the earnings volatility. As the COVID-19 pandemic continues and economic developments will remain uncertain, the buildup of the ECL provision may continue through the year 2021 in line with the IFRS requirements.
In the short-term, Triodos Bank’s business customers will face economic challenges, especially if COVID-19 related government support schemes expire. However, in the medium and long term, Triodos Bank believes its customers are well positioned to be part of the economic recovery - more sustainable and socially inclusive - that is expected to emerge.
Triodos Bank’s dividend policy - under normal circumstances - is to distribute to Depository Receipt holders a fair share of the profits realised. Considering the still ongoing COVID-19 pandemic, the European Central Bank (ECB) has published new guidelines for the distribution of profits in December last year, setting a maximum pay-out ratio of 15% of the total profit of 2019 and 2020 combined.
In line with these new guidelines of the ECB and DNB, Triodos Bank proposes a dividend of EUR 0.65 per share (2019: EUR 0.00).
Important dates for shareholders and depository receipt holders:
Publication of Annual Report 2020 18 March 2021
Annual General Meeting 21 May 2021
Ex-dividend date 25 May 2021
Dividend payment date 28 May 2021