THE HAGUE, March 7, 2016 /PRNewswire/ --
- New long-term lending up by 22%
- More competitive lending rates for clients
- Net profit higher than in 2014 despite impairment
- Proposed dividend: 25% (EUR 57 million)
- Leverage ratio increases, partly due to hybrid capital issuance
- Growing costs due to European supervision
The Executive Board of BNG Bank is looking back with satisfaction to the year 2015. Although core clients were cautious about new investments, the amount of new lending increased. The strategic objectives in the area of return and market share were achieved. Moreover, due to an increase in net profit and the issuance of hybrid capital, the bank was able to strengthen its capital base. BNG Bank remains firmly committed to minimising the costs of social provisions for local authorities and public sector institutions.
New long-term lending up by 22%
Compared with 2014, new long-term lending rose by 22% to EUR 11.2 billion. BNG Bank's market share among local authorities, housing associations and healthcare institutions (i.e. the bank's core clients) remained high in 2015. However, the accumulation of central government policy measures is leading to great uncertainty, making the bank's core clients generally cautious about new investments. The higher credit volume mainly relates to the refinancing of existing client debt.
More competitive lending rates for clients
In the year under review BNG Bank's funding cost improved, in part because the bank was added to the list of institutions whose securities are eligible for the public sector purchase programme of the European Central Bank (ECB). In 2015 BNG Bank raised EUR 17.7 billion in long-term funding. The bank has translated the low funding costs into more competitive lending rates for its clients.
Net profit higher than in 2014 despite impairment
Net profit amounted to EUR 226 million (2014: EUR 126 million). Again, net profit was strongly influenced by the volatility in the financial markets, caused in part by the ECB's public sector purchase programme. This has led to a positive result on financial transactions of EUR 16 million. In 2014 the result on financial transactions was still strongly negative because of unrealised negative market value changes.
Net profit was negatively affected by impairments totalling EUR 72 million, EUR 63 million of which relates to unrealised impairments on a bond of the former Austrian bank Hypo Alpe Adria, now known by the name HETA. Although the bond is guaranteed by the federal state of Carinthia, the Austrian regulator takes the view that bondholders must bear part of the costs of resolution. BNG Bank is of the opinion that the federal state of Carinthia, as a guarantor, has the obligation to pay the interest and redemptions on this loan. The bank has joined a group of creditors in order to secure its interests.
Proposed dividend: 25% (EUR 57 million)
A dividend of 25% of net profit will be proposed to the shareholders. This represents a dividend of nearly EUR 57 million.
Leverage ratio increases, partly due to hybrid capital issuance
At the end of 2015 BNG Bank was designated by DNB as a bank of national systemic importance. The bank will therefore be required to maintain a systemic buffer equal to 1% of its risk-weighted assets in addition to the minimum capital requirement. This additional buffer will be phased in over the next four years. The bank already meets this requirement by a considerable margin.
An additional leverage ratio requirement also applies to other banks of systemic importance in the Netherlands, on top of the expected European minimum requirement of 3% from 2018. This additional requirement does not apply to BNG Bank because of its low risk profile. The leverage ratio has increased from 2.0% to 2.6% at year-end 2015, largely due to the issuance of EUR 424 million of hybrid capital to existing shareholders. Including the entire revaluation reserves and the retained earnings for 2015, in accordance with the definition as from 2018, the leverage ratio amounts to 2.9%. The bank believes that retained earnings for 2016 and 2017 will help it achieve the expected European minimum level of 3%.
Growing costs due to European supervision
The financial burden resulting from European supervision continues to grow. At EUR 67 million, operating expenses were the same as in 2014, but they are expected to rise in future years because of the increasing costs of supervision and the investments in staff and systems to maintain compliance with the legislation and regulations. From 2015, BNG Bank is also required to contribute to building up the European Resolution Fund. In 2015 the bank made a contribution of more than EUR 9 million. In addition, more than EUR 37 million has been paid in Dutch bank levy.
Rethinking strategy: committed partner for clients, more sustainable profile
Extensive discussions with employees, management and supervisory directors have prompted the bank to conclude that it will fully maintain its position as a banker of and for public authorities and public sector institutions. Yet the opportunities that this strategy offers can be better exploited. The bank expressly seeks to be a committed partner and to take a more proactive role towards its clients. The bank wants a more explicit sustainability profile, towards clients in particular on the themes of the national Energy Agreement and social return, towards investors with Socially Responsible Investment Bonds (SRI Bonds) and internally by making its operations more sustainable. In 2015, within the context of the Global Reporting Initiative, the bank changed over to reporting in accordance with the GRI G4 comprehensive approach. In the annual Transparency benchmark, in which the transparency of Dutch companies is compared, BNG Bank was the fourth financial institution in the Netherlands.
Outlook for 2016
The volume of new long-term lending in 2016 is expected to be in line with the previous year. Partly because of continuously low long-term interest rates and the bank's cautious interest position, the interest result in 2016 is expected to be lower than in the year under review. In the near future, the result on financial transactions will remain sensitive to political, economic and monetary developments.
In view of the persisting uncertainties, the bank does not consider it wise to make a statement regarding the expected net profit for 2016.
BNG Bank is the bank for public authorities and public sector institutions. The bank is a committed partner and makes a sustainable contribution to minimising the costs of social provisions for the public. BNG Bank-issued debt securities have been awarded the highest possible credit rating by Moody's (Aaa) and Standard & Poor's (AAA) and an AA+ rating by Fitch. This makes BNG Bank one of the world's most creditworthy banks.
BNG Bank will publish its 2015 annual report on Friday 22 April 2016.
This is an unofficial translation of the Dutch press release 'BNG Bank Halfjaarbericht 2015'. This translation is provided for convenience only. In the event of any ambiguity, the Dutch text will prevail.
CONSOLIDATED BALANCE SHEET
Amounts in millions of euros 31/12/2015 31/12/2014
ASSETS
Cash and balances with the central banks 3,175 2,241
Amounts due from banks 10,540 11,046
Financial assets at fair value through the income statement 3,715 4,247
Other financial assets 29,098 31,322
Financial assets available-for-sale 13,459 13,693
Loans and advances 89,366 90,732
Investments in associates and joint ventures 47 54
Property and equipment 16 16
Other assets 27 154
Assets classified as held for sale 68 -
TOTAL ASSETS 149,511 153,505
LIABILITIES
Amounts due to banks 2,968 2,544
Financial liabilities at fair value through the income statement 3,205 3,327
Other financial liabilities 21,844 25,357
Debt securities 110,123 110,868
Funds entrusted 6,869 7,535
Subordinated debts 31 32
Other liabilities 308 260
Total liabilities 145,348 149,923
Share capital 139 139
Share premium reserve 6 6
Hybrid capital 424 -
Revaluation reserve 320 234
Cash flow hedge reserve 251 375
Other reserves 2,797 2,702
Unappropriated profit 226 126
Equity 4,163 3,582
TOTAL EQUITY AND LIABILITIES 149,511 153,505
CONSOLIDATED INCOME STATEMENT
Amounts in millions of euros 2015 2014
- Interest income 998 1,258
- Interest expenses 548 814
Interest result 450 444
Results from associates and joint ventures 2 1
- Commission income 32 35
- Commission expenses 4 6
Commission result 28 29
Result of financial transactions 16 -187
Other results 3 4
TOTAL INCOME 499 291
- Staff costs 38 38
- Other administrative expenses 27 27
Staff costs and other administrative expenses 65 65
Depreciation 2 2
TOTAL OPERATING EXPENSES 67 67
Impairments 72 15
Contribution to Resolution Fund 9 -
Bank levy 37 30
TOTAL OTHER EXPENSES 118 45
PROFIT BEFORE TAX 314 179
Taxation -88 -53
NET PROFIT 226 126
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