Triodos Bank’s Executive Board provides a perspective on the wider world it operates in, its impact and activity in 2017 and its prospects for the future.
Consolidated Financial Results
EUR 14.5 billion
The total amount of assets
under management, including
Triodos Bank and the
investment funds and
Private Banking, grew by
EUR 1.1 billion, or 8%,
to EUR 14.5 billion.
In 2017, Triodos Bank’s income grew by 10% to EUR 240 million (2016: EUR 218 million). Triodos Investment Management contributed EUR 34 million to this figure (2016: EUR 31 million). In 2017, commission income amounted to 35% (2016: 34%) 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 1.1 billion, or 8%, to EUR 14.5 billion, Triodos Bank’s balance sheet total grew by 9% to EUR 9.9 billion thanks to a steady growth of the funds entrusted and new capital raised during the year, in all branches. Growth of 10% was expected.
Triodos Bank’s total number of customers increased by 4%, against expected growth of between 10 to 15%, and now numbers 681,000 customers. While we continue to attract new customers in some of our markets our relatively low interest rate offering and reduced product marketing has contributed to limited growth in 2017.
Four 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 11% during the year (2016: 14%). This was mainly a consequence of growth in co-worker numbers (in FTE) and IT-costs, which both increased by 10% and 19% respectively. These changes helped to strengthen the organisation and supported continuing growth in business activities. Triodos Bank has upgraded, and continues to improve, its control framework to cope with the implementation of changing regulations and increased supervisory requirements, such as Asset Quality Review (AQR). Strategic investments in the development of the business, such as developments in our Socially Responsible Investment Offering, Personal Current Account in the UK and preparations for Brexit were responsible for further growth in costs. The ratio of operating expenses against income was 79% (2016: 79%).
Improving our efficiency continues to be a key focus area for the business. This work needs to accelerate and deepen across the organisation. We intend to go further, faster to improve efficiency in Triodos Bank because that enables us, ultimately, to deliver greater impact. Nevertheless we have managed to deliver a reasonable return on equity during the year, as detailed below.
Profit before tax, impairments for the loan portfolio and value adjustments to participating interests increased to EUR 50.1 million (2016: EUR 45.8 million). Impairment for the loan portfolio, or bad debts, decreased to EUR 1.8 million (2016: EUR 5.7 million). This represents 0.03% of the average loan book (2016: 0.10%). The relatively low historical impairment ratio is influenced by both good management and the wider economic cycle.
Net profit of
EUR 37.4 million,
up 28% on 2016.
The net profit is EUR 37.4 million, up by 28% (2016: EUR 29.2 million) for the reasons highlighted above. Triodos Bank delivered a Return on Equity of 3.9% in 2017 (2016: 3.5%).
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, in recent years market conditions have changed and given these developments adjusting this long-term target is under consideration. The trends described above continued in 2017 leading to the Return on Equity we expected.
In the current market, while Triodos Bank will continue to work on improving its profitability, it does not expect to easily outperform this target over the next three years; not least because investments will be made in the development of its investment management activities 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.
Earnings per share, calculated using the average number of outstanding shares during the financial year, were EUR 3.19 (2016: EUR 2.83), a 13% increase as a consequence of higher net profits. The profit is placed at the disposal of the shareholders.
Triodos Bank’s total number
of customers increased by
4%, against expected
growth of between 10 to
15%, and now numbers
Triodos Bank proposes a dividend of EUR 1.95 per share (2016: EUR 1.95). This means that the pay-out ratio (the percentage of total profit distributed as dividends) will be 61% (2016: 69%). Our policy is to have a pay-out ratio of between 50% and 70%.
Triodos Bank increased its share capital by EUR 77 million, or 11%, 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 2017. Overall growth has been satisfactory and sufficient to meet capital requirements. The number of depository receipt holders increased from 38,138 to 40,077. Equity increased by 12% from EUR 904 million to EUR 1,013 million. This increase includes net new capital and retained net profit. In 2017, Triodos Bank’s platform for trading in depository receipts continued to operate effectively. At the end of 2017, the net asset value for each depository receipt was EUR 83 (2016: EUR 82).
At the end of 2017 the total capital ratio and the Common Equity Tier 1 ratio were 19.2% (2016: 19.2%). Triodos Bank aims for a Common Equity Tier 1 ratio of 16% in a stable and predictable regulatory context.