Triodos Bank provides values-based financial services that reach hundreds of thousands of business and personal customers across Europe, growing sustainable banking’s impact and scale. 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. Local culture, within and between countries, also affects how Triodos Bank approaches its work.
Retail activities developed further in 2021 as people and sustainable enterprises continued to choose to partner with Triodos Bank.
Triodos Bank, in all the countries where it is established, contributed to the Group’s profitability. In the Netherlands, United Kingdom and Belgium profitability was above expectations mainly due to higher income and lower impairments on financial products. In the Netherlands, considerable growth in private mortgages drove overall performance while in the United Kingdom, profitability was mainly boosted by solid margins on business loans and higher fees. Belgium benefitted from lower cost of risk throughout 2021. Triodos Bank Spain continues to suffer from lagging loan production and high operational costs which was partly mitigated by lower impairments on financial products. Triodos Bank Germany positively contributed to the Group's overall profitability on the back of business loan growth.
Notably, we added two new investment propositions in 2021. In Spain, we launched our socially responsible investment (SRI) and impact fund platform, which also drives forward our mission on the capital markets. This platform is based on an open architecture in which everyone, whatever their investment profile, can choose transparently and freely between products from various fund managers, which are aligned with our values and our impact investing ethos. In Germany, we introduced the Triodos Impact Portfolio, the first digital impact account in Germany. This managed account is unique in being the first offering of only Article 9 SFRD funds in combination with a microfinance fund.
The overall growth of the loan portfolio amounted to EUR 1,011 million (or 11%) in 2021. This includes the growth of the residential mortgage portfolio by EUR 881 million (or 32%). The increase in business loans was 2% (2020: 3%) with the largest growth in social (mainly sub-sector Healthcare) and culture sectors. Growth in cultural lending was further supported by the guarantee agreement with the European Investment Fund (signed in 2021) allowing Triodos Bank to lend up to EUR 200 million in loans to cultural sectors.
The low interest rate environment encourages customers to refinance at lower rates and to pay back their credit facilities earlier than planned. Both these trends continued in 2021 and had a downward effect on interest margins. The expected credit loss (ECL) on loans and advances to customers decreased by EUR 2 million in 2021 to EUR 49 million, influenced by the COVID-19 pandemic, which in 2020 had a significant negative effect on the macro-economic parameters used to calculate the ECL. While many clients have felt the impact of the COVID-19 pandemic, the overall impact was less than anticipated. This has to do with the overall economic impact of the crisis, the exposure of the portfolio to clients impacted by the crisis and the overall credit worthiness of our portfolio. In addition, our relationship mangement teams were able to maintain solid relations mostly through digital channels.
Competition between banks in the lending market was strong in 2021. Mainstream banks are increasingly embracing sustainability as a business opportunity and competing aggressively to take advantage of available lending opportunities. The quantitative easing of the European Central Bank and including incentives to maintain and grow the lending book was visible in the markets. Given these circumstances, the management was satisfied with the new interest rates that were secured. Focus remains on keeping healthy interest margins and improving fee income.
The Loans and funds’ investments by sector (see page Lending by Sector) section describes the relative volume of our loans and investments in the main sectors where Triodos Bank is involved.
Whilst the graphs show the important sectors of today, we are making gradual steps in new technologies. We are deliberately taking small steps in order to manage risk well and we do so with the aim to support the transitions in the social and technologic sectors. We are pleased that in 2021, we were able to commit to various projects on batteries, EV charging facilities and heat networks.
More people want to use their money consciously to deliver positive change by depositing and investing with Triodos Bank. This reflects a wider trend in society and increasing interest in sustainability in general and sustainable finance in particular. Funds entrusted, including savings, enable Triodos Bank to finance companies and organisations that benefit people, the environment and culture.
Triodos Bank’s banking entities offer a variety of sustainable financial products and services as part of its key strategic objective of offering services that allow customers to participate in the transition to sustainable finance.
The Group derived detailed retail and business customer research during 2021 using Net Promoter Score (NPS) methodology. This technique is widely used across the business sector to measure customer satisfaction.
Triodos Bank’s overall NPS on all indicators for the retail group in 2021 swings between +14 and +22 and is on average +17 (2020: +22). This is better than the average of large banks. Triodos Bank’s principles as a sustainable bank are the main reason to recommend the bank. The equivalent figure for business clients for 2021 is -9 (2020: +1). Reasons for the decrease in NPS is primarily due to the perception of costs associated with banking with Triodos Bank. The detailed results are now being used as a key performance indicator to allow Triodos Bank continuously to measure its customers’ views and gather better insights.
Continuing growth in all the countries where Triodos Bank operates is 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.
Triodos Bank expects to grow its bank balance sheet more modestly, maintaining a stable loan-to-deposit ratio and TCR. It aims to grow its fee income with particular emphasis on growing Triodos Investment Management activities.
The bank will focus on the impact, profitability and diversification of its loan portfolio. We will put extra effort into identifying loans to frontrunners in their fields, the entrepreneurs developing the sustainable industries of the future. In addition, we will get more concrete in 2022 on how to live up to the pledge to be climate neutral in 2035. Persistent low interest rates and increasing regulatory costs continue to pose a serious challenge. And yet there are significant opportunities for Triodos Bank as a frontrunner in responsible finance. With a controlled growth strategy, we aim to generate maximum impact and stable profit levels.
Funding creative, cultural and social initiatives
Triodos Bank and the European Investment Fund (EIF) have signed a guarantee agreement for the creative and cultural sector under the European Union’s Cultural and Creative Sectors guarantee facility, backed by the European Fund for Strategic Investments (EFSI), the main pillar of the Investment Plan for Europe. The guarantee facility allows Triodos Bank to provide up to EUR 200 million in loans to entrepreneurs in the creative and cultural sectors over the next two years in the EU Member States where Triodos operates, namely the Netherlands, Belgium, Spain and Germany. The geographical split will depend on demand from markets. Since the start this year we have been able to finance EUR 31 million to 76 entrepreneurs in the creative and cultural sectors.
Through the Social Entrepreneurship guarantee agreement provided under the EU Programme for Employment and Social Innovation (EaSI), Triodos Bank has until the end of 2021 been able to finance EUR 87 million to 412 social enterprises in the Netherlands, Belgium, France and Spain. This was more than expected as we originally started with the aim of EUR 65 million.