Triodos Bank’s Executive Board provides a perspective on the wider world it operates in, its impact and activity in 2016 and its prospects for the future.
Consolidated Financial Results
EUR 13.5 billion
The total amount of assets
under management, including
Triodos Bank and the
investment funds and
Private Banking, grew by
EUR 1.2 billion, or 9%,
to EUR 13.5 billion.
In 2016, Triodos Bank’s income grew marginally by 3% to EUR 218 million (2015: EUR 212 million). Triodos Investment Management and Triodos Investment Advisory Services contributed EUR 31 million to this figure (2015: EUR 31 million). In 2016, commission income amounted to 34% (2015: 32%) of total income, in line with expectations.
The total amount of assets under management including Triodos Bank and the investment funds and Private Banking grew by EUR 1.2 billion, or 9%, to EUR 13.5 billion, Triodos Bank’s balance sheet total grew by 11% to EUR 9.1 billion thanks to a steady growth of the funds entrusted and new capital raised during the year, in all branches. Without the devaluation of the British Pound, prompted by the results of the Brexit referendum, the growth of the balance sheet would have been 13%. This represents a very positive outcome given growth of 10% was expected.
Triodos Bank’s total number of customers increased by 7%, against expected growth of between 10 to 15%, and now numbers 652,000 customers.
Two years ago we refined the definition of a customer so that this data is reported more consistently and accurately across all branches. We continue to report the number of accounts in the Annual Report’s Key Figures section.
Continuing growth in loans, deposits, and equity despite low interest rates and returns, shows that Triodos Bank’s commitment to values based banking is more relevant than ever to a growing number of people and businesses who choose to make a much more conscious choice about their bank and the sustainable direction of their money.
Operational expenses increased by 14% during the year. This significant increase was due to the introduction of a new contribution to the Dutch Depository Guarantee System (DGS), a strengthening of the organisation to cope with the implementation of fast changing regulations and increased supervisory requirements, and investments in the development of the business. The ratio of operating expenses against income rose to 79% (2015: 71%).
Profit before tax, impairments for the loan portfolio and value adjustments to participating interests decreased to EUR 45.9 million (2015: EUR 61.4 million). Impairment for the loan portfolio, or bad debts, decreased to EUR 5.7 million (2015: EUR 7.6 million). This represents 0.10% of the average loan book (2015: 0.16%). The relatively low historical impairment ratio reflects the depth of knowledge Triodos Bank has in the sustainable sectors it works with and the strength of its relationships with its borrowing customers.
Net profit of
EUR 29.3 million,
down 28% on 2015.
The net profit is EUR 29.3 million, down by 28% (2015: EUR 40.7 million) for the reasons highlighted above. Triodos Bank delivered a Return on Equity of 3.5% in 2016 (2015: 5.5%). So far the medium-term objective has been to grow the Return on Equity to 7% of Triodos Bank’s equity in normal economic conditions. This target should be seen as a realistic, long-term average for the type of banking activity that Triodos Bank engages in. However, last year we recognised that market conditions had changed. The trend of very low interest rates and increasing regulatory costs and capital requirements continued in 2016 leading to the lower Return on Equity we had expected. Triodos Bank met its goal of a Return on Equity between 3% and 5% in 2016.
In the current market, while Triodos Bank will continue to work on improving its profitability, it does not expect to outperform easily this target over the next three years; not least because investments will be made in the development of its investment management activities, the launch of a current account in the UK in 2017 and the opening of a fully-fledged French office in the coming years, subject to further preparatory work and the approval of the authorities.
As capital and liquidity requirements may increase even further and given uncertain regulatory developments, we prefer to continue to maintain a relatively high equity base and a substantial liquidity surplus which puts additional downward pressure on the Return on Equity. In this context Triodos Bank will again aim for a Return on Equity of between 3% and 5% in 2017, and expects to be at the lower end of this band.
Earnings per share, calculated using the average number of outstanding shares during the financial year, were EUR 2.83 (2015: EUR 4.40), a 36% decrease as a consequence of lower net profits. The profit is placed at the disposal of the shareholders.
Triodos Bank’s total number
of customers increased by
7%, against expected
growth of between 10 to
15%, and now numbers
Triodos Bank proposes a dividend of EUR 1.95 per share (2015: EUR 1.95). This means that the pay-out ratio (the percentage of total profit distributed as dividends) will be 69% (2015: 44%). Our policy is to have a pay-out ratio of between 50% and 70%.
Triodos Bank increased its share capital by EUR 97 million, or 16%, thanks to depository receipt issues targeting retail investors in particular, which ran throughout the year in The Netherlands, Belgium, the UK, Spain and Germany.
The number of individual depository receipt holders continued to increase in 2016. Overall growth has been satisfactory and sufficient to meet capital requirements. The number of depository receipt holders increased from 35,735 to 38,138. Equity increased by 16% from EUR 781 million to EUR 904 million. This increase includes net new capital and retained net profit. In 2016, Triodos Bank’s platform for trading in depository receipts continued to operate effectively. At the end of 2016, the net asset value for each depository receipt was EUR 82 (2015: EUR 81).
At the end of 2016 the total capital ratio and the Common Equity Tier 1 ratio were 19.2% (2015: 19.0%). Triodos Bank aims for a Common Equity Tier 1 ratio of 16% in a stable and predictable regulatory context.