Key points for the financial year 2021 at a glance
Strong focus on accelerated climate measures supported by Triodos to finance the investments needed for the transition to a low-carbon economy
In a COVID-19 affected year, Triodos Bank reports a net profit of EUR 50.8 million after tax for 2021 (FY 2020: EUR 27.2 million)
Our sound performance in 2021 was supported by higher income of EUR 341.9 million, lower impairments resulting in a gain of EUR 0.4 million and a moderate cost growth of EUR 275.2 million, despite the ongoing margin pressure on funds entrusted
Overall loan business remains resilient, benefitting from high credit quality and a geographically well-diversified loan portfolio across Europe
Triodos Bank’s total assets under management increased by EUR 3.9 billion in 2021 to EUR 24.2 billion per end of December 2021 (FY 2020: EUR 20.3 billion)
Triodos Bank reports return on equity of 4.1% (FY 2020: 2.3%) and cost-income-ratio of 80% per end of December 2021 (FY 2020: 80%)
In line with bank’s dividend policy Triodos Bank will propose a dividend amount of EUR 1.80 per Depository Receipt at the Annual General Meeting in May 2022
Triodos Bank’s capital ratios remain resilient with CET-1 ratio of 17.5% and TCR of 21.3% in 2021, which improved due to additional Tier 2 capital of EUR 250 million from our first green bond issue in November 2021
Selected key drivers in 2021 are described in more detail in the next sections.
Triodos Bank’s total assets under management increased by EUR 3.9 billion in 2021 to EUR 24.2 billion, driven by a conscious year-on-year growth of the total balance sheet by EUR 2.6 billion to EUR 16.5 billion (end of 2020: 13.9 billion) and by the growth of our funds under management by EUR 1.3 billion in 2021 to EUR 7.7 billion per end of December 2021 (FY 2020: EUR 6.4 billion).
On the liability side, the growth of the total balance sheet was mainly driven by additional inflow of funds entrusted, participation in TLTRO tender III.7 and a successfully raised green bond that qualifies as subordinated Tier 2 instrument.
Funds entrusted increased by EUR 1.5 billion over the last 12 months, which resulted in an overall position of EUR 13.3 billion per end December 2021(end of 2020: EUR 11.7 billion). This overall increase of the liability side was further supported by our participation in the TLTRO tender III.7 with additional EUR 800 million summing up to a total position of EUR 1.6 billion per end December 2021(end of 2020: EUR 0.8 billion). Triodos Bank also successfully issued a EUR 250 million subordinated green bond, which fulfils the criteria of a subordinated Tier 2 instrument and therefore qualifies as additional capital for bank prudential purposes.
The bank’s equity position has marginally increased by EUR 42 million to EUR 1.3 billion per end of December 2021 but was overall quite stable compared with the remaining liability side. Triodos Bank suspended trading in its Depository Receipts (DRs) as per 5 January 2021. As result of that Triodos Bank initiated an extensive investigation on how to ensure its access to new core capital and restore the tradability of its DRs.
During the investigation, Triodos Bank analysed numerous options. We have concluded that listing our DRs on a community exchange (a so-called Multilateral Trading Facility or MTF) offers the best prospect of securing our access to capital and restoring tradability for our DR holders. After due consideration, including dialogues with DR holders and various other stakeholders, Triodos Bank announced its decision to proceed to a listing of DRs on an MTF on 22 December 2021. The implementation horizon for the MTF approach including mandatory regulatory approvals is estimated to take 12 to 18 months.
For 2021, the bank reports a return on equity (RoE) of 4.1% (2020: 2.3%), which is in line with the adjusted mid-term RoE ambition of 4% to 6% as communicated in the Extraordinary General Meeting of 28 September 2021. Triodos Bank believes that, despite the ongoing impact of COVID-19, annual RoE in this range is achievable in the mid-term (in previous years this was 3% to 5%).
On the asset side, our additional funding was primarily used to further develop our sustainable loan portfolio. Triodos Bank recorded a EUR 1.0 billion increase in sustainable loans in 2021 to reach EUR 10.2 billion by the end of the year (end of 2020: EUR 9.2 billion). The remainder was partly invested in highly liquid debt securities (EUR 166 million) or to increase our cash position (EUR 1.3 billion).
The provision for expected credit losses (ECL) shows a limited decrease of EUR 2.5 million to EUR 51.5 million per end of December 2021. The calculation of ECL stages 1 and 2 for potential future credit losses (not yet incurred) are particularly sensitive to forward-looking macro-economic parameters (e.g. gross domestic product, unemployment rate). In 2021, the global economic outlook stabilised, but is still uncertain due to the ongoing COVID-19 infection waves and potential further mutations of the virus which could lead to significant disruptions in value chains. The bank is closely monitoring the development of forward-looking macro-economic parameters and applies adjustments to its internal ECL model at least monthly. The provision of ECL stages 1 and 2 decreased by EUR 6.3 million over the last 12 months to EUR 13.6 million per end of December 2021. However, the releases recorded in stages 1 and 2 were partly offset by increases in stage 3. The ECL stage 3 provision increased by EUR 3.9 million to EUR 38.0 million in 2021.
Triodos Bank benefits from high credit quality and a geographically well diversified loan portfolio. The bank will continue to stay prudent by keeping the above-mentioned overall ECL provision. The risk profile of our loan portfolio implies that any improvement in the forward-looking macro-economic parameters, perhaps because of better-than-expected post-COVID-19 economic conditions, might result in a reduction of the bank’s overall ECL provision. Further details can be found in the following paragraphs on our financial results.
EUR 10.2 billion
Loans to projects across Europe benefitting people and planet
The asset side was further impacted by Triodos Bank's decision to structurally change the way of working and apply a hybrid corporate office strategy. All co-workers have the opportunity to continue working with a split model from home and/or office. This is providing additional flexibility in our new work environment. In the Netherlands, Triodos Bank decided to concentrate all corporate activities at a single new office (De Reehorst in Driebergen) and sold the old head office building (Nieuweroordweg in Zeist). This will allow Triodos Bank to realise further cost savings, improving the overall shape of the bank. With the sale of the building a one-off gain of EUR 0.1 million is recorded in our 2021 P&L.
Assets committed to the triple bottom line (TBL) and the real economy
Triodos Bank is a values-based bank. We lend and invest in the real economy because that is where we can have a positive impact on people’s lives and safeguard the environment. We apply the Global Alliance for Banking on Values (GABV) scorecard using indicators like ‘assets committed to TBL’ and ‘assets committed to real economy’ to monitor and qualify impact. For more information and the complete GABV scorecard see section Understanding impact (see page 58) and Appendix IV– Global Alliance for Banking on Values scorecard (see page Appendix IV – Global Alliance for Banking on Values scorecard – quantitative evidence of our impact).
Real-economy assets in a values-based bank should be relatively high. In 2021, this was 70% (2020: 75%). Triodos Bank targets a ratio of loans (in the real economy) to deposits of 75% to 85% to make sure it always has enough money available (i.e. liquidity) to support its clients in case of disruptions in the market. The total loan portfolio, as a percentage of the total amount of funds entrusted, was 77% in 2021 (2020: 78%).
Triodos Bank has 70% (2020: 74%) of its total assets committed to triple bottom line. This figure provides the best indication of a bank’s commitment to sustainability. Triple bottom line assets refer to assets not only focused on economic benefits, but also on positive social and environmental benefits.
An increased cash position, due to additional funding in 2021, explains the lower real economy and TBL ratios in 2021 compared to previous years.
In a year marked with COVID-19, Triodos Bank reports a sound net profit of EUR 50.8 million after tax for the year 2021, which is EUR 23.6 million higher than the same period last year.
Our total income, EUR 341.9 million in 2021 (2020: EUR 305.1 million), has recovered over the last 12 months and is above pre-COVID-19 levels due to sustainable lending growth and higher funds under management.
The underlying interest result records an increase of EUR 23.3 million to EUR 221.5 million in 2021 (2020: EUR 198.2 million), supported by conscious lending growth in sustainable sectors in Europe driving our ambitious net-zero target in 2035. The bank's interest result was further supported by the one-off benefit from TLTRO. Triodos Bank has met the lending growth criteria under the TLTRO program and is therefore entitled to the interest discount of 0.5%. The total net interest discount amounts to EUR 6.9 million (2020: EUR 1.0 million). However, the bank’s overall net interest margin continues to be under pressure due to the very low interest rate environment in Europe and negative interest rates to be paid for excess liquidity from funds entrusted.
The bank’s commission result improved by 9% to EUR 116.0 million in 2021 (2020: EUR 106.1 million) due to additional fees for payment solutions and management fees for investment fund solutions. As both our underlying interest and commission results grew in 2021, the overall contribution share of 34% for commissions remained stable this year. The bank continues to focus on realising healthy interest margins and improving fee income from investment fund and payment solutions.
The bank’s total operating expenses increased by EUR 29.8 million to EUR 275.2 million in 2021 (2020: EUR 245.4 million), mainly due to additional employee expenses for compliance and anti-money laundering (AML) topics, and an additional deposit guarantee scheme (DGS) contribution. The expenses without additional compliance and regulatory costs are improving due to the structural cost savings program and higher cost discipline applied across the group. In future periods the bank will continue to focus on realising cost synergies while coping with regulatory cost increases.
In 2021, the bank reports a cost-income-ratio (CIR) of 80% (2020: 80%).
Our loan business remains resilient. The cumulated ECL expenses decreased significantly over the last 12 months and resulted in a net release (gain) of EUR 0.5 million in 2021. In particular, more favourable macro-economic forward-looking parameters led to a release in ECL stages 1 and 2, partially offset by an increase in ECL stage 3 covering defaulted loans. In 2020, ECL expenses were significantly impacted by the COVID-19 pandemic in the first quarter of 2020, which at that time resulted in a sharp drop of forward-looking parameters (e.g. GDP growth in Europe) and therefore triggered a material increase of the ECL provision in stages 1 and 2 in 2020.
Total ECL expenses on loans in 2021 compared to the average loan book over 2021 resulted in clearly improved risk cost ratio (2021: 0 bps; 2020: 27 bps). The annual incurred loss rate in ECL stage 3 amounts to 6 bps for 2021 (2020: 12 bps). Both factors underpin the high credit quality in Triodos Bank’s loan portfolio, which focuses on balancing impact, risk and return for each single loan engagement.
Considering the achieved net result for the year 2021 and the development of external market circumstances, Triodos Bank proposes a dividend amount of EUR 1.8 per share. This dividend proposal is equivalent to a pay-out ratio of 50%, which is in line with Triodos Bank's internal dividend policy. The remaining profit will be attributed to the retained earnings of the bank, ensuring a sound capital base for future growth.
For the years 2020 and 2019, the dividend amount was calculated in line with the ECB’s temporary ‘dividend distribution rules’ and paid out to shareholders on 28 May 2021.
Earnings per share, calculated using the average number of outstanding shares during the financial year, were EUR 3.56 (2020: EUR 1.91), a 87% increase.
The prudential capital of Triodos Bank consists of Common Equity Tier 1 (CET-1) and subordinated debt capital (Tier 2).
The bank’s Total Capital Ratio (TCR) increased from 18.8% in December 2020 to 21.3% in December 2021. This significant increase of the TCR in 2021 was primarily driven by a slight increase of CET-1, by EUR 41 million in 2021, and the issuance of EUR 250 million eligible Tier 2 capital in November 2021.
The minimum Total Capital Ratio for Triodos Bank is 13.0% in 2021 based on the overall capital requirements.
The CET-1 capital increased by 4% over the last 12 months to EUR 1.1 billion per end of December 2021 (2020: EUR 1.1 billion). This increase in 2021 was mainly driven by retained earnings after the AGM profit resolution in May 2021. Triodos Bank’s mid-term strategy aims for a CET-1 ratio of at least 15.5% in the current regulatory context.
Tier 2 capital increased by EUR 249 million over the last 12 months to EUR 255 million per end of December 2021 (2020: EUR 6 million). This was primarily attributable to the bank’s successful issue in November 2021 of a EUR 250 million subordinated green bond that qualifies as eligible Tier 2 capital.
The bank’s overall liquidity position remains robust with an LCR of 229% per end of December 2021 (2020: 232%). The regulatory minimum LCR is 100%.
Triodos Bank will continue to work on improving its profitability while maintaining a solid equity base, capital ratios and a substantial liquidity surplus. The bank recognises that this risk-averse strategy imposes some constraints on its return on equity.
The number of individual Depository Receipt holders decreased from 43,614 to 43,521 in 2021.
The Issue Price at the last date of trading, 5 January 2020, was EUR 84. At the end of 2021, the net asset value for each Depository Receipt was EUR 88. For tax purposes, considering the impact of the current illiquidity of the Depository Receipts, Triodos Bank applied a 30% reduction. This reduction on the last trading price of the DR for non-tradability as per 31 December 2021 resulted in a price of EUR 59. This was communicated on 21 December 2021. It should be noted that this discount is for tax purposes only and does not represent an indication about the price of the DRs for the future listing on an MTF.
On 21 December 2021 Triodos announced the decision to pursue a listing of our Depository Receipts on a Multilateral Trading Facility (MTF), which is a community-based trading platform. Triodos Bank will take all necessary steps to prepare for an MTF listing, including obtaining all relevant approvals. The choice of a community based MTF solution with variable pricing is seen as the best fit for Triodos Bank to replace the currently suspended trading system for Depository Receipts of ordinary shares. A listing on an MTF provides a route to improving tradability for our investors based on variable pricing, instead of pricing based on net asset value. An MTF listing also enables Triodos Bank to pursue its mission in line with its values and remain firmly anchored in governance and legal structure.
Further, on 21 December 2021, Triodos Bank announced a buyback programme of Depository Receipts of EUR 14.4 million, equivalent to the remaining room to purchase DRs in the so-called market making buffer. This will include a solidarity arrangement of EUR 3 million. Triodos Bank will continue its pursuit of additional intermediate solutions to help mitigate some of the consequences of the suspended trading for the DR holders, in line with applicable rules and regulations. The buyback programme will be launched in May 2022 with a fixed price of EUR 59 per DR. It should be noted that this buyback price does not represent an indication about the price of the DRs for the future listing on an MTF.
Fitch Ratings (Fitch) announced on 4 February 2022 it has affirmed Triodos Bank’s Long-Term Issuer Default rating at ‘BBB’ and Viability Rating at ‘bbb’. The outlook is stable. Fitch’s rating analysis was done as part of the regular annual review process.
According to Fitch, Triodos Bank’s ratings reflect its established niche franchise in the sustainable banking segment and a sound record of execution on its strategy. The bank's adequate asset quality and healthy funding and liquidity profile support the ratings.
The independent rating report for Triodos was issued by Fitch Ratings on 4 February 2022 (see website here).
Placement of first green bond
In November 2021, Triodos successfully placed its first subordinated green bond on the capital market, with a notional amount of EUR 250 million, tenor of 10.25 year and coupon of 2.25%. This green bond was rated separately by Fitch as BB+. The bond provides Triodos Bank with an additional source of capital and the proceeds are being used to fund lending in renewable energy, green buildings, and environmentally sustainable management of living natural resources and land use – to support our mission and ensure we increase our impact. For the green bond a sustainability report will be prepared and published in April 2022.
As announced in 2019, Triodos Bank decided not to continue the activities of the agency in France. Consequently, a provision for restructuring was included in the financial result of 2019, which has been utilised in 2020 and 2021 to dismantle the activities and in December 2021 the closure was finalised, resulting in a small release of the remaining provision amounting to EUR 0.2 million.
Triodos Bank aims to modernise its local footprint in Spain. An in-depth analysis of the Spanish central office, including its commercial offices, has been conducted to consider changing customer needs and improved service offerings, and propose a more integrated and efficient organisational set-up.