BNG Bank Annual Report 2019 BNG Bank...آ BNG Bank Annual Report 2019. CONTENTS 2 Contents...
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Transcript of BNG Bank Annual Report 2019 BNG Bank...آ BNG Bank Annual Report 2019. CONTENTS 2 Contents...
BNG Bank Annual Report 2019
Selected financial data 5
1 Profile 9
1.1 Mission and Strategy 10
1.2 Business model 13
1.3 Relevant topics 15
1.4 Creating value 17
1.5 In contact with stakeholders 19
1.6 Developments in the environment 21
2 Our contribution in 2019 and outlook 24
2.1 Financial results 27
2.2 Local authorities 31
2.3 Housing associations 35
2.4 Healthcare sector 38
2.5 Education 41
2.6 Energy and infrastructure 43
2.7 BNG Sustainability Fund 45
2.8 Impact credit portfolio 46
2.9 Funding 47
2.10 Outlook for 2020 49
3 Governance and internal business operations 53
3.1 Structure 54
3.2 Organisation and management 56
3.3 Employees 59
3.4 Remuneration policy 64
3.5 Compliance 65
3.6 Risk management 68
3.7 Sustainable operations 76
3.8 Corporate Governance Statement 78
4 Report of the Supervisory Board 80
4.1 Foreword 81
4.2 Composition of the Supervisory Board and Committees 83
4.3 Activities Supervisory Board 87
4.4 Activities Supervisory Board-committees 91
5 Supplementary information 95
5.1 Connectivity information 96
5.2 Reporting principles 100
5.3 Glossary 104
6 Financial statements 108
6.1 Consolidated financial statements 110
Consolidated balance sheet 111
Consolidated income statement 112
Consolidated statement of comprehensive income 113
Consolidated cash flow statement 114
Consolidated statement of changes in equity 116
Accounting principles for the consolidated financial statements 117
Notes to the consolidated financial statements 141
Hedging of risks with derivatives 174
Fair value of financial instruments 181
Risk section 190
6.2 Company financial statements 236
Company balance sheet 237
Company income statement 238
Company statement of comprehensive income 239
Company cash flow statement 240
Company statement in changes of equity 242
Accounting principles for the company financial statements 243
Notes to the company financial statements 244
6.3 Other information 269
Independent auditor’s report 270
Assurance report of the independent auditor 284
Stipulations of the articles of association concerning profit
Objectives as defined in the Articles of Association 289
Selected financial data 2019 2018 2017 2016 2015 (Amounts in millions of euros)
Balance sheet total1 149,689 137,509 140,025 154,000 149,511
Loans and advances 89,163 85,738 86,008 87,576 89,366
- of which granted to or guaranteed by public authorities 80,341 77,733 77,727 79,304 80,159
Shareholders' equity 4,154 4,257 4,220 3,753 3,739
Hybrid capital 733 733 733 733 424
Equity per share (in euros) 75 76 76 67 67
Leverage ratio 3.6% 3.8% 3.5% 3.0% 2.6%
Common Equity Tier 1 ratio 32% 32% 30% 26% 23%
Tier 1 ratio 38% 38% 37% 32% 27%
Net profit 163 337 393 369 226
Net profit available to shareholders 142 318 318 365 226
Profit available to shareholders per share (in euros) 2.55 5.70 6.73 6.62 4.06
Proposed dividend 71 159 141 91 57
Dividend as a percentage of the consolidated net profit
available to shareholders 50% 50% 38% 25% 25%
Dividend per share (in euros) 1.27 2.85 2.53 1.64 1.02
Number of staff (in FTEs) at year-end 309 302 303 292 2
Sickness absence 3.5% 3.3% 3.0% 3 3.4% 2.9%
Funding raised by means of SRI bonds 1,934 1,190 1,383 1,560 650
CO2 emissions (total, in tonnes) 4 377 453 515 540 511
Per FTE (in tonnes) 1.2 1.5 1.7 1.9 1.8
1 Equity excluding hybrid capital.
2 Starting in 2016, the FTE of positions for which a 40-hour working week has been agreed is determined on the basis of a 36-hour working
week, resulting in over 1.1 FTE. The number of FTEs consequently increases by more than 7.
3 The methodology used to measure sickness absence was changed in 2017. The figures for 2017 onwards are not directly comparable with
those of previous years. Please see the Reporting principles section for the details.
4 The conversion factors for the calculation of CO2 emissions have changed. The emissions for 2016 have been recalculated on the same basis.
The figures for 2016 to 2018 inclusive are not directly comparable with those of previous years. Please see the Reporting principles section for
The past year was a challenging year for BNG Bank. The credit requirement and the turnover achieved were at unprecedented levels. The rising credit requirement occurred across all sectors (local authorities, housing, healthcare, education, and energy and infrastructure). Clients use our financing to achieve their social objectives, such as more and affordable social housing, public facilities in municipalities, building and increasing the sustainability of healthcare and educational institutions and producing renewable energy. In this way, BNG Bank fulfils its mission to support the public sector with financing at attractive terms. After all, price certainly matters, particularly to the public sector. At the same time, BNG Bank is not immune to the low-interest environment; this puts pressure on the interest rate margin and on return on equity. Moreover, our operating expenses are increasing due to investments in digitalisation and costs resulting from supervision and regulations, including the gatekeeper function. We also had to recognise two significant individual provisions. All these factors combined led to lower net profit. BNG Bank is and remains a well-capitalised bank.
Focused on social impact in the Netherlands BNG Bank's loans for all maturities, at attractive terms, are its main instrument for creating social impact. The volume of new long-term lending was EUR 14.0 billion. Relative to year- end 2018, the long-term loan portfolio increased by EUR 2.6 billion to EUR 84.2 billion.
Through this financing, we contribute to low costs for municipalities, housing associations, healthcare and education, and projects in the fields of energy and infrastructure. This is how BNG Bank contributes to the social impact that our clients create. Increasing sustainability and the energy transition are key themes for our clients. This is confirmed by the materiality analysis that we performed in 2019. In connection with the Climate Agreement, we had the CO2 impact of our loan portfolio measured for the first time in 2019. The results serve as a starting point for establishing an action plan to reduce the CO2 impact of our loan portfolio.
Raising funding throughout the world A total of EUR 17.8 billion in long-term funding was raised with international investors to cover lending. This included six benchmark loans – in euros and US dollars – ranging in size from 500 million to 3.0 billion. BNG Bank has EUR 6.2 billion outstanding in sustainable bonds.
Financial results The return on equity was 3.6%, lower than the target of 3.7%. Net profit amounted to EUR 163 million. The main reasons for the decrease in net profit compared with 2018 are a lower result on financial transactions and higher write-downs for credit losses. The result on financial transactions was EUR 37 million positive. The write-downs for credit losses amounted to EUR 153 million negative. This historically high amount is among others the result of the reduced creditworthiness a counterparty that provides services to municipalities. At EUR 435 million, the interest result remained virtually the same as in 2018.
The solvency ratios remained stable compared with year-end 2018; the Tier 1 ratio was 38% at year-end 2019. This is comfortably above the target of 24% set by BNG Bank.
In line with its dividend policy, BNG Bank proposes to pay out EUR 71 million to shareholders. This equals 50% of the net profit after deduction of the dividend distribution to providers of hybrid capital. The dividend amounts to EUR 1.27 per share.
Outlook There is more competition owing to the current interest rate environment and this is healthy. BNG Bank will continue to focus on the public sector and on achieving social impact. We focus on continually improving client and credit processes. We will therefore continue to invest in digitalisation, risk management and compliance with supervision and regulations.
Providing financing at low prices to our core clients remains our main instrument. Those low prices require an excellent risk profile (triple A ratings) to enable us to raise funding at competitive rates. To maintain the risk profile and hence the low prices in the years ahead, it is necessary for BNG Bank to continue to manage the volume of loans that involve the bank's risk capital (to a maximum of 10% of the loan portfolio). This requires us to make choices.
We also continue to invest in our employees. The employee satisfaction survey carried out in 2019 showed that employees take pride in the bank's social engagement and stability, as well as in the professionalism with which it operates. We will provide better support – in line with their feedback – for career development and mobility.
We do not consider it wise t