Triodos Bank’s Executive Board provides a perspective on the wider world it operates in, its impact and activity in 2016 and its prospects for the future.
Sustainable Savings and Lending
Growing impact through sustainable finance
Triodos Bank wants to maintain or establish itself as the leading bank for the sustainable sectors where it works. Increased lending means more impact, both for sustainable businesses and households, via green mortgages. Lending continued to grow and diversify in most branches during the year.
The German branch’s loan book grew for a third year, by 19.5% (2015: 15.7%) or EUR 41.0 million. New business was more diversified with loans to an elderly care home and a Solar PV project in particular. The branch also created new relationships with associations active in education and sustainable buildings to further deepen relationships in those sectors.
Despite market turbulence in the aftermath of the EU referendum the UK branch continued to lend to a diverse range of sectors, including healthcare, organic food and community ownership, delivering its biggest ever year of gross new lending. As a result net lending in GBP has grown by 14.4%. However due to a weakening of the pound against the euro the total value of loans in the UK declined by 2.0% in 2016. Business lending included financing its largest ground mounted solar project to date and its first ground source heat pump installations. The innovative finance initiative ‘Warmer Homes and Greener Communities’ was also launched, with a pool available of GBP 15 million to lend to the social housing sector to deliver environmental and social benefits.
In Belgium the loan portfolio grew above target, in both business lending and mortgages. The loan portfolio did not diversify as planned and this remains an area of attention, with the sector distribution of loans similar to those in 2015. The loan to deposit ratio, an important measure of the health of the bank overall, continued to be very high and was 80% at the year end (2015: 77%). The Belgian loan portfolio grew by 14% to 1.324 million (2015: EUR 1,159 million). An office in Ghent, which opened in 2015, focused primarily on savings, investments and community building. Because of the proximity to local sustainable entrepreneurs, it also moved into lending during 2016.
The gross volume of loans paid out in Spain was EUR 354 million, almost double that in 2015. Net growth was EUR 143 million, a threefold increase compared to 2015. However, the low interest rate environment meant these loans were less profitable than before and increased the number of early loan repayments. Diversifying the loan portfolio was a priority in Spain in 2016 across sectors, and was delivered via sustainable mortgages and loans to municipalities in particular. A pilot began during the year to provide personal loans for responsible consumption of products and services such as hybrid cards or health treatment.
In The Netherlands lending grew by 7% in line with targets (2015: 38%). A new proposition for small business borrowing clients was launched during the year in The Netherlands, as well as the first media campaign to focus solely on businesses. Loans to sustainable businesses were up by 10% or EUR 70 million, including some significant repayments. Sustainable mortgages, which incentivize people to live in more environmentally friendly homes increased by 33% or EUR 133 million (2015: 46%).
Overall loan loss provisions decreased from 0.16% of the average loan book in 2015 to 0.10% in 2016, reflecting Triodos Bank’s high quality loan portfolio. This is much lower than the banking industry average in Europe. It sends a strong signal about the strength of loans to the real economy and the value of strong relationships with clients, as well as a long-term focus on projects and businesses with impact.
Triodos Bank’s branches aim to deliver a better balance between deposits and loans, managing growth in the former and focusing on increasing the latter. This ratio decreased marginally in 2016, to 71% from 72% in 2015 and continues to be a difficult challenge.
Large numbers of people are attracted to the idea of using their money consciously and are, therefore, willing to open a new account with Triodos Bank. This awareness is thanks largely to the strength of the Triodos Bank brand and its solid reputation in all countries. Savings grew at a significant rate in all Triodos Bank branches during the year.
With an increase of new personal customers of 7%, and business retail customers of more than 14%, the Dutch branch increased its funds entrusted by EUR 431 million (2015: EUR 397 million). The branch was serving over 300,000 customers at the year’s end.
Despite implementing a new banking system in the first half of the year, and introducing new fees on current accounts and bank transfers in the second, the Spanish branch is now home to more than 223,000 customers, increasing by an average of 2,000 each month and by almost 10% in total.
The UK branch was ahead of its target for the year in deposits, including business current accounts. Savings (excluding business current account) increased by 7.5% and GBP £58 million (2015: GBP £72 million).
The Belgian branch continued to attract new savings customers throughout the year despite low interest rates and little marketing. Growth was bolstered by negative press around mainstream banks in the Belgian market. Savings increased by 10% (2015: 10%).
The German branch delivered a new online sales approach during the year making opening an account quicker and helping to increase the number of new personal customers. While its primary focus is on growing the loan portfolio, funds entrusted grew by 16% in Germany (2015: 25%). The branch now serves more than 13,000 customers.