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ANNUAL RESULTS 2016: TRIODOS BANK REALISES SOLID GROWTH IN CHALLENGING INTEREST ENVIRONMENT

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ANNUAL RESULTS 2016: TRIODOS BANK REALISES SOLID GROWTH IN CHALLENGING INTEREST ENVIRONMENT

Key performance milestones:

  • 9.4% growth of assets under management to EUR 13.5 billion
  • 14.4% growth in sustainable lending
  • Common Equity Tier 1 Ratio 19.2%
  • Net profit EUR 29.3 million (2015: EUR 40.7 million)

Triodos Bank and its investment funds’ finance:

  • contributed to generating green energy for 1.2 million households
  • helped 2.0 million individuals to benefit from education initiatives
  • provided inclusive finance for 13.7 million savers and 20.2 million borrowers in emerging markets, via 100 financial institutions

Total assets under management, comprised of Triodos Bank, Triodos Investment Funds and Triodos Private Banking grew in 2016 by 9% to EUR 13.5 billion.

Triodos Bank’s balance sheet total grew in 2016 by 11% to EUR 9.1 billion driven by a steady growth in funds entrusted and new capital raised.

Triodos Bank’s net profit of EUR 29.3 million represents a decrease of 28% compared to 2015, in line with expectations. This decrease can be attributed mainly to the introduction in 2016 of the contribution to the Deposit Guarantee Scheme (DGS) and low interest margins. The bank delivered a return on equity of 3.5% (2015: 5.5%).

The number of customers increased by 7.4%. By the end of 2016 Triodos Bank had 652,000 customers across our five European branches.

Financing sustainable business

Throughout 2016, Triodos Bank was able to convert close to 90% of the inflow of new funds entrusted into sustainable loans. The sustainable loans to funds entrusted ratio increased from 62% in 2015 to 64% in 2016.

Although the overall balance sheet grew 11%, income from interest did not grow due to lower interest margins. At the same time costs increased relative to volume as a result of higher staff costs to meet regulatory requirements and due to the contribution to the DGS.   In addition, Triodos Bank continues to invest in people and technology, anticipating the changing demand of our customers. This has resulted in a ratio of operating expenses against income of 79% (2015: 71%).

Impairments for the loan portfolio decreased further, from EUR 7.6 million in 2015, to EUR 5.7 million, or 0.10% of the average loan book compared to 0.16% in 2015.

The most important sectors we financed in 2016 were:

  • renewable energy, with a growth of 12%
  • sustainable mortgages, which were up 30% versus last year
  • healthcare, up with 21% and with significant growth potential.

Triodos Bank CEO Peter Blom: “We want to support and facilitate the new economy: social, sustainable and smart. This can be through financing renewable energy, organic agriculture and good food, but also healthcare, culture & art and social entrepreneurship. In a way, that brings people together and empowers them around practical, shared solutions to common questions by using money as a tool for change. And we are very pleased that more and more people are joining our ambition ‘to change finance in order to finance change’, expecting us to use their money in a positive way.”

Capital position

Triodos Bank’s equity increased in 2016 by 16%, to EUR 904 million.

The share capital increased by EUR 97 million, or 16%, by issuing new depository receipts throughout the year to retail investors in The Netherlands, Belgium, Spain and Germany. As a result the number of depository receipt holders increased to 38,138 (2015: 35,735). Almost all of our depository receipts are held by retail investors.

Due to volatility of the GBP to EUR exchange rates as a result of widespread market insecurity following the Brexit vote, it was decided not to launch a campaign to sell depository receipts in the United Kingdom in 2016.

The additional capital has helped Triodos Bank to maintain its position as a resilient financial institution. The Common Equity Tier 1 ratio was at the level of 19.2%, well above Triodos Bank’s own target of 16%. The leverage ratio of Triodos Bank at the end of 2016 was 8.8%. The minimum leverage ratio required by the regulator in Europe is 3%.

Prospects for 2017

Triodos Bank’s balance sheet total is expected to grow between 10% and 15%.

All branches will focus on continuing to deliver, or develop, a credible set of services. We are preparing to launch of a personal current account in the UK in 2017.

The number of customers is expected to grow in 2017 by between 5% and 10% across the Group.

We aim for controlled growth and want to realise a sustainable loans to funds entrusted ratio of between 65 and 75%.

The sustainable loan portfolio and funds entrusted are expected to increase by 10 to 15%. Triodos Bank will focus primarily on the quality and diversification of its loan portfolio.

Triodos Bank will aim for a Return on Equity of between 3% and 5% in 2017, and expects to be at the lower end of this band.

Investment Funds

Triodos Investment Funds invest in sustainable sectors such as inclusive finance, organic agriculture, cultural projects, renewable energy, sustainable real estate, and stock-market listed companies with a strong social and environmental performance (SRI).

Triodos Investment Management manages 17 funds, for both individual and institutional investors, totalling EUR 3.3 billion assets under management. The total growth of the investment funds was EUR 157 million, up 5% (2015: 19%). The relatively modest growth of the assets under management is in part due to Triodos Renewables plc (EUR 138 million) becoming independent from Triodos Bank. The company was no longer managed by Triodos Investment Management as of March 2016 and now operates under the name Thrive Renewables.

Worldwide, more and more investors are realising that how they invest their money now determines what the world will look like in the future. They are increasingly opting for meaningful and measurable impact investing solutions. Triodos Investment Management sees this as a promising development in light of the many challenges the world faces today, such as climate change and increasing inequality.

Triodos Organic Growth Fund (+25%), Triodos Microfinance Fund (+17%), Triodos Groenfonds (+14%) and Triodos Renewables Europe Fund (+14%) in particular have benefited from an increasing appetite for sustainable investments and have experienced substantial growth (in 2015 growth was: 11%, 32%, 9% and 3% respectively).

Dividend

Triodos Bank NV proposes a dividend of EUR 1.95 per depository receipt. The pay-out ratio is 69%.

2016 figures at a glance:

  • Triodos Bank balance sheet: EUR 9.1 billion (11% growth)
  • Triodos Investment Funds: EUR 3.3 billion (5% growth)
  • Private Banking assets under management: EUR 1.1 billion (14.5% growth)
  • Number of customers: 652,000 (7.4% growth)
  • Lending: sustainable businesses, projects and mortgages: 14.4% growth
  • Triodos Bank net profit: EUR 29.3 million (28% decline, in line with expectations)
  • Common Equity Tier 1-ratio: 19.2%
  • Number of co-workers: 1,271 (13.4% growth)

Key impact milestones:

In 2016 Triodos Bank and its investments funds’ finance:

  • contributed to generating green energy, equivalent to the electricity needs of 1.2 million European households, avoiding 1.7 million tonnes of CO2 emissions
  • helped 2.0 million individuals to benefit from education initiatives
  • provided inclusive finance for 13.7 million savers and 20.2 million borrowers in emerging markets, via 100 financial institutions

Triodos Bank in the UK

In 2016 Triodos’ UK branch continued to lend to a diverse range of sectors, including healthcare, energy, organic food and community ownership, enabling it to deliver its biggest ever year of net new lending of GBP 87.7m  (2015: GBP 61.1m), a rise of 43.5%.  The loan portfolio grew to GPB 709.8 million. This was tempered, however, by the pound’s fall against the euro, which resulted in a 1.4% decline in the total value of loans when converted to euros for reporting in Triodos Bank’s overall balance sheet.

Bevis Watts, Managing Director, Triodos Bank UK, said: “2016 was a highly successful year for us as we delivered our biggest year of lending while also growing the number of our personal savings customers. This is a significant achievement as it not only provides us with an excellent foundation from which to launch our first ever UK personal current account later this year, but also demonstrates that more and more UK consumers are actively choosing banks that are a force for good and a force for change.

“In terms of business banking we financed our largest ground mounted solar project, and launched an innovative finance initiative – ‘Warmer Homes and Greener Communities’ – that made a GBP 15 million funding pool available to the social housing sector to deliver environmental and social benefits. In 2017 we will also be looking to further diversify our lending into new sectors such as greening universities, while also seeking to support developments in the fields of energy efficiency and energy storage.

“Corporate finance was another positive for us in 2016 with over £12m of risk capital raised across seven deals, including a record timeframe for a successful bond issue (less than four weeks) in the Thrive Renewables issue. The Thrive bond was also part of the UK’s first Innovative Finance ISA that enables lenders to earn their interest free of income tax for the first time.”

 

 

Banking

ECB stays put but warns about surge in infections

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ECB stays put but warns about surge in infections 1

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.

Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.

But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.

“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.

Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.

Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.

She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.

The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.

MORE STIMULUS?

Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.

Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.

But she signalled those risks were less acute, in part thanks to the recent Brexit deal.

“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”

Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.

“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.

Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.

There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.

The ECB has indicated it may not even need it to use it all.

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.

Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.

Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.

With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.

(Editing by Catherine Evans)

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Banking

Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger

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Bank of Japan lifts next year's growth forecast, saves ammunition as virus risks linger 2

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and upgraded its economic forecast for next fiscal year, but warned of escalating risks to the outlook as new coronavirus emergency measures threatened to derail a fragile recovery.

BOJ Governor Haruhiko Kuroda said the board also discussed the bank’s review of its policy tools due in March, though dropped few hints on what the outcome could be.

“Our review won’t focus just on addressing the side-effects of our policy. We need to make it more effective and agile,” Kuroda told a news conference.

As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term interest rates and around 0% for 10-year bond yields.

In fresh quarterly projections, the BOJ upgraded next fiscal year’s growth forecast to a 3.9% expansion from a 3.6% gain seen three months ago based on hopes the government’s huge spending package will soften the blow from the pandemic.

But it offered a bleaker view on consumption, warning that services spending will remain under “strong downward pressure” due to fresh state of emergency measures taken this month.

“Japan’s economy is picking up as a trend,” the BOJ said in the report, offering a slightly more nuanced view than last month when it said growth was “picking up.”

While Kuroda reiterated the BOJ’s readiness to ramp up stimulus further, he voiced hope robust exports and expected roll-outs of vaccines will brighten prospects for a recovery.

“I don’t think the risk of Japan sliding back into deflation is high,” he said, signalling the BOJ has offered sufficient stimulus for now to ease the blow from COVID-19.

NO EXIT EYED

Many analysts had expected the BOJ to hold fire ahead of a policy review in March, which aims to make its tools sustainable as Japan braces for a prolonged battle with COVID-19.

Sources have told Reuters the BOJ will discuss ways to scale back its massive purchases of exchange-traded funds (ETF) and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.

Kuroda said the BOJ may look at such options at the review, but stressed a decision will depend on the findings of its scrutiny into the effects and costs of YCC.

He also made clear any steps the BOJ would take will not lead to a withdrawal of stimulus.

“It’s too early to exit from our massive monetary easing programme at this point,” Kuroda said. “Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now.”

(Reporting by Leika Kihara and Tetsushi Kajimoto; additional reporting by Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)

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Banking

World Bank, IMF agree to hold April meetings online due to COVID-19 risks

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World Bank, IMF agree to hold April meetings online due to COVID-19 risks 3

WASHINGTON (Reuters) – The International Monetary Fund and the World Bank have agreed to hold their spring meetings, planned for April 5-11, online instead of in person due to continued concerns about the coronavirus pandemic, they said in joint statement.

The meetings usually bring some 10,000 government officials, journalists, business people and civil society representatives from across the world to a tightly-packed two-block area of Washington that houses their headquarters.

This will be the third of the institutions’ semiannual meetings to be held virtually due to the pandemic.

(Reporting by Andrea Shalal; Editing by Chris Rees

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