Developing a European network is fundamental to Triodos Bank. It allows it to build and share expertise and use it to benefit a fast-growing Triodos Bank community. It brings a credible set of values-based financial services to hundreds of thousands of business and personal customers, and grows sustain­able banking’s scale and impact. While Triodos Bank’s values bind customers and co-workers, there are important differences between countries. Regulations, tax incentives and government ap­proach­­es to sustainability are sometimes markedly different in diverse markets. Local culture, within and between countries, also impacts on how Triodos Bank approaches its work.

Retail activities developed further in 2018 as people and sustainable enterprises continue to choose to partner with Triodos Bank.

While the Spanish office is managing costs well, it is in a steep transition curve, dealing with a declining short-term interest market. Its business has shifted to create a better balance between renewable energy and small and medium-sized enterprise lending and will take some time to start delivering significant revenue. The German branch reached operational break-even in 2018. It aims to deliver a net profit in the coming two years.

Progress of the French activities in Triodos Finance, supported by Triodos Bank in Belgium has been positive. France remains an important market for Triodos Bank: a full presence in France is in line with the mission of Triodos to be a European bank, the French market offers good business opportunities and a large scale and being in France offers diversification potential for the group. The option to open a lean business banking branch in France has been analysed thoroughly and is viable, albeit that the profitability outlook and marginal contribution to the group is modest given the prevailing low interest climate. However, considering the current overall profitability outlook, combined with the need to devote full attention to urgent, operational challenges for the Group, we decided to continue the French presence as an agency for the foreseeable future and to postpone opening a branch.

Loans

Outstanding loans per sector in 2018

Outstanding loans per sector (pie chart)

The growth of the quality and size of the loan portfolio is an important indicator of the contribution Triodos Bank makes towards a more sustainable economy. All the sectors it works in qualify as sustainable and the companies and projects it finances contribute to delivering Triodos Bank’s mission (as detailed below).

To make sure that Triodos Bank only finances sustainable enterprise, potential borrowers are first assessed on the added value they create in these areas. The commercial feasibility of a prospective loan is then assessed and a decision made about whether it is a responsible banking option. The criteria or guidelines Triodos Bank uses to assess companies can be viewed on www.triodos.com.

Triodos Bank’s main focus remains on the existing sectors in which it has already developed considerable expertise and where it considers more growth, diversification and innovation to be possible.

Environment 40% (2017: 38%)

This sector consists of renewable energy projects such as wind and solar power, hydro-electric, heat and cold storage, and energy saving projects. It also includes organic agriculture and projects across the entire agricultural chain, from farms, processors and wholesale companies to natural food shops. Environ­mental technology, such as recycling companies and nature conservation projects, is also represented.

Social 23% (2017: 23%)

This sector includes loans to traditional businesses or non-profit organisations and innovative enterprises and service providers with clear social objectives, such as social housing, loans to fair trade businesses, integration for people with disabilities or at risk of social exclusion and health care institutions.

Culture 13% (2017: 14%)

This sector covers loans to organisations working in education, retreat centres, religious groups, cultural centres and organisations, and artists.

Residential sustainable mortgages 21% (2017: 16%)

The retail sector of the loan book is primarily comprised of residential sustainable mortgages including a small amount of other private loans and overdrafts on current accounts.

Municipalities 3% (2017: 9%)

The remaining proportion of the loan book is primarily comprised of some limited short-term loans to municipalities. These investment-type loans in the public sector are included in the loan portfolio in accordance with regulations related to financial reporting.

Total lending

The lending sectors above describe the main sectors Triodos Bank is involved in. Parts of these sectors are also financed by both Triodos Bank itself and its investment funds (see Triodos Investment Management below).

Triodos Bank’s goal is to lend between 75% and 85% of its funds entrusted to sustainable projects. The total loan portfolio, including short term loans to municipalities, as a percentage of the total amount of funds entrusted was 76% in 2018 (2017: 76%). Without the short term loans to municipalities, the ratio increased to 75% on the previous year (2017: 70%). After focusing on this area in recent years we have successfully brought this important ratio into balance. We intend to continue to build on and improve the ratio between loans and funds entrusted.

The quality of the loan book remained satisfactory overall. This, and a continuing focus on maintaining and diversifying a high quality loan portfolio, led to a minor increase of the impairments for the loan portfolio to 0.05% of the average loan book (2017: 0.03%). This is lower than we anticipated and lower than Triodos Bank’s long-term internal benchmark for impairments of 0.25%. These impairments are taken in case potential losses resulting from defaults by borrowers become a reality.

10%

Growth of the loan portfolio amounted to EUR 676 million, or 10%.

Growth of the loan portfolio amounted to EUR 676 million or 10%.

Excluding the short-term loans to municipalities the sustainable loan portfolio would have grown by approximately 17%, mainly because of the increase of the mortgage portfolio by 36%. The expected growth of the sustainable loan portfolio was 20%. The increase in business loans was limited to 13%. The distribution of growth over the sectors has been deliberate to achieve more diversification and to lower the risk profile of the portfolio.

Competition between banks in the lending market has revived after a period of restructuring and recapitalisation. Banks regard sustainability as an emerging market and have continued to make inroads into it, competing aggressively to take advantage of available lending opportunities.

Funds entrusted

Amounts in millions of EUR

31.12.2018

31.12.2017

 

EUR

%

EUR

%

The Netherlands

4,020.0

42

3,547.5

41

Belgium

1,906.8

20

1,763.4

20

United Kingdom

1,198.5

13

1,102.3

13

Spain

2,031.6

21

2,005.9

23

Germany

401.3

4

302.8

3

Total

9,558.2

100

8,721.9

100

Amounts in millions of EUR

31.12.2018

31.12.2017

 

EUR

%

EUR

%

Saving accounts

4,661.9

49

4,205.0

48

Deposits and time accounts

1,136.9

12

1,188.8

14

Other funds entrusted

3,759.4

39

3,328.1

38

Total

9,558.2

100

8,721.9

100

Funds entrusted, including savings, enable Triodos Bank to finance companies and organisations that benefit people, the environment and culture. An increase of the funds entrusted is an important indicator of Triodos Bank’s ability to attract sufficient funds to finance sustainable organisations.

10%

Despite strong competition in all savings markets, funds entrusted grew by 10% across the European branches.

Triodos Bank’s branches offer a variety of sustainable financial products and services as part of its key strategic objective to offer a full set of services to customers. This has been achieved in some branches and is being developed in others. A new personal current account was launched in the UK, during the year, for example. Collectively this led to a marked growth in funds entrusted which increased by EUR 836 million, or 10%, against expected growth of approximately 10%.

Detailed retail and business customer research took place across the group during 2018, using Net Promoter Score (NPS) methodology. This technique is widely used across the business sector to measure customer satisfaction. It is based on asking customers whether they would recommend Triodos Bank to a friend or colleague.

Triodos Bank’s NPS score across the retail group is 25 (the figure between Triodos Bank ‘promoters’ –45% and ‘detractors’ –17%). This figure is an overall NPS on all indicators. It is much better than the average for large banks. The equivalent figure for business clients is 20. Triodos Bank’s principles as a sustainable bank are the main reason to recommend the bank according to the research. The detailed results will be used to improve our offering and service and revisited in future years.

269

In 2018, 269 organisations received total donations of EUR 61 thousand.

Together, this resulted in continuing growth in all the countries where Triodos Bank operates due in part to a growing profile, more efficient and customer-friendly account opening processes, and a receptive market keen to use their money more consciously.

By offering our savers, in some countries, the opportunity to donate part of the interest they receive to a charity, many social organisations receive support every year. In 2018, 269 organisations (2017: 366) received total donations of EUR 61 thousand (2017: EUR 84 thousand) in this way. The low interest rate climate and low interest rates on savings accounts make it more difficult, and sometimes even impossible, for some customers to donate part of the interest they receive.

Prospects for retail and business banking

Triodos Bank’s balance sheet total is expected to grow more modestly. Growth of between 5% and 10% is expected in 2019. We want to continue to deliver a loans to deposits ratio of between 75% and 85%.

The sustainable loan portfolio and funds entrusted are expected to grow by up to 20% and up to 10% respectively. Triodos Bank’s ambition is to focus primarily on the profitability, impact and diversification of its loan portfolio. In that context we will put extra effort into identifying loans to frontrunners in their fields; the entrepreneurs developing the sustainable industries of the future.