Euroclear delivers a strong performance for H1 2022
AsiaNet 97167
BRUSSELS, July 25, 2022 /PRNewswire=KYODO JBN/ --
Euroclear today provides an update on its performance in the first half of
2022.
Financial summary
Euroclear delivered a strong financial performance in H1 2022, with the
underlying business continuing to perform well. Euroclear also reported higher
interest earnings due to rising interest rates on cash balances as well as
increased cash balances from frozen assets due to Russian sanctions.
Net profit increased 42% to EUR 351 million, of which EUR 277 million
resulted from the strong underlying business performance.
Euroclear Holding
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H1 2021 |
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H1 2022 |
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H1 2022 Underlying |
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Underlying vs |
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(EUR m) |
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2021 | ||||
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Operating Income |
|
|
806 |
|
998 |
|
892 |
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86 | 11 % |
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Business income |
|
|
753 |
|
807 |
|
811 |
|
58 | 8 % |
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Interest, banking & other income |
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|
53 |
|
191 |
|
81 |
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28 | 53 % |
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Operating Expenses |
|
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-476 |
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-534 |
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-529 |
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-53 | -11 % |
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Operating Profit before impairment |
|
|
330 |
|
464 |
|
363 |
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33 | 10 % |
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Impairment |
|
|
-2 |
|
-1 |
|
0 |
|
2 |
|
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Pre tax profit |
|
|
328 |
|
463 |
|
363 |
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35 | 11 % |
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Tax |
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|
-81 |
|
-112 |
|
-87 |
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-6 | -8 % |
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Net profit |
|
|
247 |
|
351 |
|
277 |
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29 | 12 % |
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Reported EPS |
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79.8 |
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111.7 |
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87.9 |
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8 |
10 % |
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Business income operating margin |
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36.8 % |
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33.8 % |
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34.8 % |
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EBITDA margin (EBITDA/oper.inc) |
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47.3 % |
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52.0 % |
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46.8 % |
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Note: H1 2021 figures (except for EPS) have been restated to include MFEX pro
forma, in order to allow for like-for-like comparison.
Operating income was up 24% year-on-year to EUR 998 million. Business income
was up 7% to EUR 807 million, reflecting the continued strong growth of
Euroclear's core business lines as it implements its strategy.
Interest, banking and other income increased by 262% to EUR 191 million as a
consequence of rising interest rates and higher cash balances from frozen
assets due to the Russian sanctions.
Operating Expenses increased to EUR 534 million, up 12% compared to H1 2021, as
Euroclear continued to invest in its technology and service offering, as well
as being impacted by inflation and costs related to managing the Russian
sanctions.
An increase of 40% in earnings per share to EUR 111.7 per share, reflected the
increase in net profit.
Implications of frozen assets due to Russian sanctions
As a result of sanctions imposed by the US, the EU and other jurisdictions, as
well as Russian countermeasures, the cash on the balance sheet has increased as
blocked coupon payments and redemptions accumulate. During the first half of
2022, Euroclear Bank's balance sheet increased by €72 billion year-on-year.
At the end of June 2022, Euroclear Bank's cash balances had increased by €72.5
billion year-on-year. As per Euroclear's standard process, the cash is invested
which results in interest income. During the first half, the interest income
earned from frozen assets held as a result of Russian sanctions was EUR 110
million.
The Board expects these interest earnings to grow materially as blocked
payments and redemptions continue to accumulate in a rising interest rate
environment.
While this is expected to have an impact on the balance sheet, it should not
result in material change in credit risk profile and therefore will not have a
meaningful impact on the group's capital ratios.
Business Performance & H1 Highlights
Euroclear's underlying business continues to perform strongly. Excluding the
impact of frozen assets due to the Russian sanctions, adjusted net profit rose
by 12% to EUR 277 million.
Adjusted operating income was up 11% to EUR 892 million. This was driven by
adjusted business income growth, up 8%. Adjusted Interest, Banking and Other
income was up 53% to EUR 81 million.
The key operating metrics, shown below, underpinned the strong business
performance during the period. Market volatility remains high, driving
transaction volumes to record levels. Equity market valuations have fallen
significantly during the period which has restricted growth in assets under
custody and fund asset under custody during the period.
|
H1 total |
% change vs H1 2021 |
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Assets under Custody |
EUR 35.5 trillion |
+1 % |
Number of Transactions |
155.5 million |
+4 % |
Turnover |
EUR 523 trillion |
+9 % |
Fund assets under custody |
EUR 2.8 trillion |
+1 % |
Collateral Highway |
EUR 1.9 trillion |
+13 % |
Euroclear continues to see very strong demand for collateral management and
lending services from a broad range of market participants. Since 2016,
structural demand has been driven by the introduction of the Uncleared Margin
Rules (UMR) under Basel III as more participants were require to adopt
collateral management services to reduce the risk of derivatives exposures. The
fifth wave of the UMR came into force last year.
In the second quarter, Euroclear launched a new ESG reporting solution for
asset managers, through the combination of MFEX by Euroclear and Greenomy, two
recent investments. In addition to illustrating the benefits of the expanded
product offering, the new service demonstrates Euroclear's increased strategic
focus on Sustainable Finance.
The integration of MFEX is progressing to plan as MFEX's established fund
distribution platforms are combined with Euroclear's post-trade expertise to
create a new end-to-end funds offering.
The group also continues to modernise its legacy technology infrastructure,
including the domestic CSDs. These investments will further strengthen the
resilience and efficiency of the group's platforms, allowing for further
digitalisation and service enhancements.
Dividend on 2021 results
The Board confirms its intention to pay its previously announced dividend of
EUR 88.5 per share (equating to a total of EUR 279 million) in the fourth
quarter of 2022. The dividend, which was delayed while the potential
implications of the sanctions on capital were evaluated and mitigated, relates
to the performance in the 2021 financial year.
Commenting on the results
Lieve Mostrey, Chief Executive Officer
"We delivered a strong performance across the business and saw an increase in
interest earnings due to higher interest rates and accumulated cash balances as
a consequence of frozen assets due to the Russian sanctions.
In a context where financial market conditions have been dynamic, we have
continued to operate safe and efficient infrastructure to support our clients.
As we look forward, we see opportunities to further enhance our client
offerings, such as through innovative data-enabled services and connecting to
global markets, while meeting our responsibilities as a financial market
infrastructure to support sustainable economic growth."
Note to editors
Euroclear group is the financial industry's trusted provider of post trade
services. Guided by its purpose, Euroclear innovates to bring safety,
efficiency and connections to financial markets for sustainable economic growth.
Euroclear provides settlement and custody of domestic and cross-border
securities for bonds, equities and derivatives, and investment funds. As a
proven, resilient capital market infrastructure, Euroclear is committed to
delivering risk-mitigation, automation and efficiency at scale for its global
client franchise.
The Euroclear group comprises Euroclear Bank, the International CSD, as well as
Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland,
Euroclear Sweden, Euroclear UK & International and MFEX by Euroclear.
Annex
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H1 2022 |
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H1 2021 |
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Variance |
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Euroclear Bank Income Statement |
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Net interest income |
|
|
203.8 |
|
48.6 |
|
155.2 |
|
Net fee and commission income |
|
|
511.1 |
|
455.4 |
|
55.7 |
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Other income |
|
|
-4.8 |
|
6.6 |
|
-11.4 |
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Total operating income |
|
|
710.1 |
|
510.6 |
|
199.5 |
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|
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|
|
|
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Administrative expenses |
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|
-314.3 |
|
-287.1 |
|
-27.1 |
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|
|
|
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Operating profit before impairment and taxation |
|
|
395.8 |
|
223.5 |
|
172.4 |
|
|
|
|
|
|
|
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Result for the period |
|
|
301.8 |
|
171.0 |
|
130.7 |
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Euroclear Bank Statement of Financial Position |
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Shareholders' equity |
|
|
2,306.6 |
|
1,976.6 |
|
330.0 |
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Debt securities issued and funds borrowed (incl.subordinated debt) |
5,029.8 |
|
6,004.5 |
|
-974.8 |
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Total assets |
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103,634.3 |
|
31,160.3 |
|
72,473.9 |
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Euroclear Investments Income Statement |
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Dividend |
|
|
0.0 |
|
270.0 |
|
-270.0 |
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Net gains/(losses) on non trading financial assets at FVPL |
|
|
-418.3 |
|
-26.4 |
|
-391.9 |
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Other income |
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|
1.9 |
|
1.5 |
|
0.3 |
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Total operating income |
|
|
-416.4 |
|
245.1 |
|
-661.6 |
|
|
|
|
|
|
|
|
|
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Administrative expenses |
|
|
-2.6 |
|
-0.5 |
|
-2.1 |
|
|
|
|
|
|
|
|
|
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Operating profit before impairment and taxation |
|
|
-419.1 |
|
244.6 |
|
-663.7 |
|
|
|
|
|
|
|
|
|
|
Result for the period |
|
|
-314.5 |
|
250.7 |
|
-565.1 |
|
|
|
|
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Euroclear Investments Statement of Financial Position |
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|
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Shareholders' equity |
|
|
474.2 |
|
770.3 |
|
-296.1 |
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Debt securities issued and funds borrowed |
|
|
1,647.7 |
|
1,646.2 |
|
1.5 |
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Total assets of which |
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|
2,122.4 |
|
2,460.7 |
|
-338.4 |
|
Loans and advances (excluding intercompany) |
|
|
54.1 |
|
416.5 |
|
-362.4 |
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Fair Value through Other Comprehensive Income |
|
|
301.2 |
|
311.2 |
|
-10.0 |
|
Intercompany loans |
|
|
902.8 |
|
1,151.6 |
|
-248.7 |
Note: The volatility in financial results for Euroclear Investments in H1 2022,
compared to H1 2021, resulted mainly from the impact of higher interest rates
on fair valuation of assets under IFRS 9 and the proceeds coming from the bond
issued by Euroclear Investments in June 2021.
Contact:
Martin Gregson
martin.gregson@euroclear.com
+32 486 084 085
Thomas Churchill
thomas.churchill@euroclear.com
+32 471 636 535
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Source: Euroclear
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