Euroclear achieves a solid performance in the first half of 2022

BRUSSELS, July 25, 2022 /PRNewswire/ — Euroclear today provides an update on its performance for the first half of 2022.

Financial summary

Euroclear delivered a solid financial performance in the first half of 2022, with the underlying business continuing to perform well. Euroclear also recorded higher interest income due to higher interest rates on cash balances as well as increased cash balances from assets frozen due to Russian sanctions.

Net profit increased by 42% to reach 351 million euroswhose 277 million euros results from the strong underlying business performance.


Euroclear Holding















S1 2021


S1 2022


S1 2022
Underlying


Underlying vs.


(€m)






2021














Operating result



806


998


892


86

11%


business income



753


807


811


58

8%


Interest, bank income and other income



53


191


81


28

53%














Functionnary costs



-476


-534


-529


-53

-11%














Operating profit before impairment



330


464


363


33

ten %


impairment



-2


-1


0


2



pre-tax profit



328


463


363


35

11%


Tax



-81


-112


-87


-6

-8%


net profit



247


351


277


29

12%














EPS reported



79.8


111.7


87.9


8

ten %














Operating margin from earned income



36.8%


33.8%


34.8%

















EBITDA margin (EBITDA/oper.inc)



47.3%


52.0%


46.8%
















To note: H1 2021 figures (excluding EPS) have been restated to include MFEX pro forma, to allow a like-for-like comparison.

Operating income increased 24% year-on-year to 998 million euros. Business income increased by 7% to reach 807 million eurosreflecting the continued strong growth of Euroclear’s core businesses as part of the implementation of its strategy.

Interest, banking and other income increased by 262% for €191 million due to rising interest rates and increased cash balances from assets frozen due to Russian sanctions.

Operating expenses increased to €534 millionup 12% compared to the first half of 2021, as Euroclear continued to invest in its technology and service offering, while being impacted by inflation and costs related to the management of Russian sanctions.

A 40% increase in earnings per share at €111.7 per share, reflects the increase in net earnings.

Implications of assets frozen due to Russian sanctions

Due to sanctions imposed by the US, EU and other jurisdictions, as well as Russian countermeasures, liquidity 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 increased by €72 billion year-on-year. In accordance with the standard Euroclear process, the cash is invested, which generates interest income. During the first half of the year, interest income generated by frozen assets held due to Russian sanctions was 110 million euros.

The Board of Directors expects this interest income to increase significantly as blocked payments and redemptions continue to accumulate in a rising interest rate environment.

Although this should have an impact on the balance sheet, it should not lead to a significant change in the credit risk profile and therefore will not have a significant impact on the group’s capital ratios.

Company performance and first half highlights

Euroclear’s underlying business continues to show strong performance. Excluding the impact of assets frozen due to Russian sanctions, adjusted net income increased by 12% to 277 million euros.

Adjusted operating income was up 11% at 892 million euros. This increase is attributable to growth in adjusted business income, up 8%. Adjusted interest, banking and other income increased 53% to 81 million euros.

Key operating metrics, presented below, supported the strong business performance during the period. Market volatility remains high, pushing trading volumes to record highs. Equity market valuations fell significantly during the period, which limited the growth of assets on deposit and funds on deposit during the period.


Sum S1

% change vs H1 2021




Assets in custody

€35.5 trillion

+1%

Number of transactions

155.5 million

+4%

Turnover

€523 billion

+9%

Fund assets in custody

€2.8 trillion

+1%

collateral highway

1,900 billion euros

+13%

Euroclear continues to see very strong demand for collateral management and lending services from a wide range of market participants. Since 2016, structural demand has been boosted by the introduction of Uncompensated Margin (UMR) rules under Basel III, as more participants have had to adopt collateral management services to reduce risk exposure to derivatives. The fifth wave of the UMR came into effect 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. As well as 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 on schedule as MFEX’s established fund distribution platforms are combined with Euroclear’s post-trade expertise to create a new end-to-end fund offering.

The group also continues to modernize its legacy technology infrastructure, including national CSDs. These investments will further strengthen the resilience and efficiency of the group’s platforms, enabling further digitization and service improvements.

Dividend on 2021 results

The Board of Directors confirms its intention to pay the previously announced dividend of 88.5 euro per share (i.e. a total of 279 million euros) in the fourth quarter of 2022. The dividend, which has been deferred while the potential implications of the capital sanctions have been assessed and mitigated, relates to performance in fiscal year 2021.

Commenting on the results

Lieve Mostrey, President and CEO

“We delivered strong performance across the business and saw increased interest income due to higher interest rates and accumulated cash balances due to asset freezes due to Russian sanctions.

In a context where financial market conditions were dynamic, we continued to operate secure and efficient infrastructures to support our clients.

As we look to the future, we see opportunities to further improve our customer offerings, for example through innovative data-driven services and connecting to global markets, while fulfilling our responsibilities as an infrastructure financial markets to support sustainable economic growth. »

Note to Editors

The Euroclear group is the financial industry’s trusted provider of post-trade services. Guided by its purpose, Euroclear innovates to bring security, efficiency and connections to financial markets for sustainable economic growth.

Euroclear provides domestic and cross-border securities settlement and custody for bonds, equities and derivatives, as well as investment funds. As a proven and resilient capital market infrastructure, Euroclear is committed to delivering risk mitigation, automation and efficiency at scale for its global client base.

The Euroclear group includes 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





S1 2022


S1 2021


Variance










Euroclear Bank income statement









Net interest income



203.8


48.6


155.2


Net fee and commission income



511.1


455.4


55.7


Other income



-4.8


6.6


-11.4











Total operating result



710.1


510.6


199.5











Administrative expenses



-314.3


-287.1


-27.1











Operating income before depreciation and tax



395.8


223.5


172.4











Result for the period



301.8


171.0


130.7










Euroclear Bank Statement of Financial Position


















Equity



2,306.6


1,976.6


330.0


Debt securities issued and funds borrowed (including subordinated debt)

5,029.8


6,004.5


-974.8


Total assets



103,634.3


31,160.3


72,473.9



















Euroclear Investments income statement


















Dividend



0.0


270.0


-270.0


Net gains/(losses) on non-trading financial assets at FVPL



-418.3


-26.4


-391.9


Other income



1.9


1.5


0.3


Total operating result



-416.4


245.1


-661.6











Administrative expenses



-2.6


-0.5


-2.1











Operating income before depreciation and tax



-419.1


244.6


-663.7











Result for the period



-314.5


250.7


-565.1










Statement of financial position of Euroclear Investments


















Equity



474.2


770.3


-296.1


Debt securities issued and funds borrowed



1,647.7


1,646.2


1.5


Total assets of which



2,122.4


2,460.7


-338.4


Loans and advances (excluding interco)



54.1


416.5


-362.4


Fair value through other comprehensive income
(FVOCI) financial assets



301.2


311.2


-10.0


Business-to-business loans



902.8


1,151.6


-248.7










To note: The volatility of the financial results of Euroclear Investments in the first half of 2022, compared to the first half of 2021, mainly results from the impact of the increase in interest rates on the fair valuation of assets according to IFRS 9 and the proceeds from the bond issued by Euroclear Investments in June 2021.

Contact:

Martin Gregson
[email protected]
+32 486 084 085

Thomas Churchill
[email protected]
+32 471 636 535

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SOURCEEuroclear

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