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Euroclear continues momentum with strong first half year results
BRUSSELS, July 19, 2024 /PRNewswire/ — Results for the first half year ended 30 June 2024
Highlights
Euroclear achieves strong results driven by solid operating and interest income
- Underlying operating income increased by 5% to reach a record €1.45 billion.
- Business income increased by 3% to €865 million1, reflecting continued solid performance of Euroclear’s core business as settlement and safe keeping activities reached new record levels.
- H1 2024 underlying interest income increased by 9% to €586 million in the context of a sustained high interest rates environment and gradual policy rate cuts.
Pace of cost growth is slowing progressively
- After a step-up in investment in digital capabilities, workforce and IT infrastructure in 2023, the growth of underlying operating expenses slowed to 5% in H1 2024. Euroclear remains focused on cost mitigation while making the necessary investments in its strategy, including the improvement of operational resilience, the modernisation of CSDs’ core platforms and the reinforcement of non-IT resources.
Growing shareholder returns and strong capital position
- Underlying earnings per share increased by 7% to €191.4, in line with continued increase in net profit.
- On 19 July 2024, Euroclear paid the previously announced dividend relating to the 2023 underlying business results of €210 per share, representing an 82% increase compared to the prior year dividend.
- Euroclear’s group underlying capitalisation remains very strong and comfortably above capital requirements with an underlying Common Equity Tier 1 capital ratio above 50%2.
Euroclear acquires strategic stake in Inversis
- Euroclear today announced it has acquired a stake of 49% in Inversis, a Spanish provider of global investment technology solutions and outsourced financial services, with a committed plan to full ownership by end 2027.
- The acquisition aligns with Euroclear’s long-term growth objectives and strengthens Euroclear’s presence in Spain.
- The full press release is available in the press section of Euroclear’s website.
Russian sanctioned assets
- In July 2024, Euroclear will make a first payment of €1.55 billion to the European Fund for Ukraine following the recent implementation of the EU regulation on the windfall contribution. This adds to the €836 million of corporate taxes to be paid to the Belgian State on the profits related to the Russian assets in H1 2024.
- The impacts of Russian sanctions are detailed at the end of this press release.
|
Euroclear Holding |
||||||||||||||
|
(€ m) |
H1 23 |
Russian |
H1 23 |
H1 24  |
Russian |
H1 24 |
Underlying |
|||||||
|
Operating income |
3,107 |
1,730 |
1,377 |
3,095 |
1,644 |
1,451 |
75 |
5 % |
||||||
|
Business income |
827 |
-11 |
838 |
852 |
-13 |
865 |
27 |
3 % |
||||||
|
Interest, banking & other |
2,280 |
1,742 |
539 |
3,963 |
3,376 |
586 |
48 |
9 % |
||||||
|
Windfall contribution |
-1,719 |
-1,719 |
0 |
0 |
||||||||||
|
Operating expenses |
-649 |
-21 |
-628 |
-705 |
-48 |
-657 |
-29 |
-5 % |
||||||
|
Operating profit before |
2,458 |
1,710 |
748 |
2,390 |
1,596 |
794 |
46 |
6 % |
||||||
|
Impairment |
0 |
0 |
0 |
-3 |
0 |
-3 |
-3 |
|||||||
|
Pre tax profit |
2,458 |
1,710 |
749 |
2,387 |
1,596 |
791 |
42 |
6 % |
||||||
|
Tax |
-614 |
-427 |
-187 |
-1,024 |
-836 |
-189 |
-2 |
-1 % |
||||||
|
Net profit |
1,844 |
1,282 |
562 |
1,363 |
760 |
602 |
41 |
7 % |
||||||
|
EPS |
585.9 |
178.5 |
432.9 |
191.4 |
||||||||||
|
Business income |
21.5 % |
25.1 % |
24.0 % |
|||||||||||
|
EBITDA margin |
80.9 % |
58.3 % |
58.7 % |
|||||||||||
Valerie Urbain, Chief Executive Officer of Euroclear, commented:
“This is my first set of results as CEO of Euroclear and I am proud to announce continued strong results as clients entrusted us with record levels of safekeeping and settlement volumes. Our commitment to client satisfaction, operational excellence and innovation has driven this excellent performance.
With an ambitious strategy and a committed team, Euroclear aims to extend its position as a European leader with a global footprint. Already in 2024, we have taken steps to further support the financing of the real economy by making capital markets more integrated, liquid, and efficient. Not only have we connected global investors to the world’s tenth largest economy, South Korea, but we have also put in place a renewed focus on contributing to Europe’s strategic autonomy and Capital Markets Union. Such efforts are of critical importance given the pressing need to finance the green and digital transition around the globe.
In addition to delivering a robust underlying business performance, Euroclear continues to diligently implement the international sanctions on Russian assets. Euroclear is also complying with its important obligations to put the windfall contribution into effect and will soon make a first payment of €1.55 billion to the European Fund for Ukraine.”
Business performance
The key operating metrics (end of period unless stated otherwise) demonstrate an excellent business performance during the period.
|
H1 2023 |
H1 2024 |
YoY evolution |
3-year CAGR |
|
|
Assets under custody |
€36.8 trillion |
€39.6 trillion |
+8 % |
+4 % |
|
Number of transactions |
152 million |
165 million |
+8 % |
+3 % |
|
Turnover |
€546 trillion |
€565 trillion |
+3 % |
+6 % |
|
Fund assets under |
€3 trillion |
€3.3 trillion |
+12 % |
+6 % |
|
Collateral Highway |
€1.68 trillion |
€1.87 trillion |
+12 % |
+3 % |
|
Underlying cash deposits |
€25.4 billion |
€22.5 billion |
-12 % |
+3 % |
Assets under custody reached a new record at €39.6 trillion, growing for the seventh quarter in a row, thanks to solid stock exchange performances coupled with robust results in fixed income.
Settlement volumes have also reached new record levels driven by sustained activity throughout 2024.
Funds depot is boosted by the success of ETFs, combined with the higher stock valuations, and reaches an all-time record level of €3.3 trillion.
Collateral Highway outstanding continues to recover following a strong decline in 2023 due to the Liability Driven Investment (LDI) crisis in the United Kingdom.
Q2 strategic milestones
Leveraging Euroclear’s network to ease capital flows
As a financial market infrastructure, Euroclear aims to bring markets together through its open, flexible architecture and connect local issuers with international investors. In the first half, Euroclear Bank has successfully opened the market’s first omnibus account for Korean Treasury Bonds (KTB) and Monetary Stabilisation Bonds (MSB), making South Korean local government debt Euroclearable.
Euroclear has also been working with the Liquidity and Sustainability Facility (LSF) to create a repo solution for African Sovereign Eurobonds to sit within our triparty platform. The triparty basket could provide a new avenue for international investment in Africa, creating market efficiencies and increasing liquidity.
Data and innovation milestones
Euroclear aspires to become a digital and data-enabled financial market infrastructure. By building an open platform providing a variety of services to all market participants, Euroclear continues to evolve its core service offering, while developing new services – particularly in the data, sustainability and innovation space.
We continued to make progress against this ambition in Q2 as Euroclear and Mosaic Smart Data joined forces to launch a new initiative to transform data into valuable insights. Mosaic Smart Data has launched a new data intelligence service, Smart Markets, powered by Euroclear’s fixed income data, including government and corporate bonds. This service will transform Euroclear’s data into insights that participants can easily interpret and use to detect market movements, enhance trading models and build informed strategies.
The second quarter of 2024 was marked by another achievement in developing Euroclear’s innovation blueprint. Euroclear has collaborated with ARTEX Global Markets, an innovator in the art investment space to make art public via equity shares. With this first issuance of single equity shares, via Euroclear Bank as issuer CSD, Euroclear expands the range of asset classes available under its international model, building on the success of Eurobonds or ETFs.
Senior management and shareholder updates
A new, expanded Executive Committee
To accelerate strategy execution, Euroclear redesigned the structure and composition of its top management team). This new Executive Committee composed of eight members will ensure that all the group’s constituents are represented in all key strategic decisions and will have a stronger focus on business operations, people and clients – both Europe and Internationally.
As recently announced, Sébastien Danloy will join this expanded Executive Committee in mid-September as Euroclear’s new Chief Business Officer (appointment subject to regulatory approval) to lead the business initiatives. Joining Euroclear from BNP Paribas Securities Services, Sébastien brings over 25 years’ experience within the banking, asset management and securities services industry.
Euroclear also announced the appointment of Guillaume Eliet as successor to Paul Hurd in the role of Chief Risk Officer. Guillaume will lead the group’s Risk function, a core responsibility of a financial market infrastructure, which is embedded in Euroclear’s corporate purpose. Guillaume joined Euroclear in 2017 as the Head of Regulatory, Compliance & Public Affairs, before taking the reins as CEO of Euroclear ESES CSDs in 2021. Guillaume will join the Euroclear Board as Executive Director and the Executive Committee.
NZ Super Fund increases stake in Euroclear
Last year, several high-quality, long-term investors decided to join Euroclear’s group of shareholders. Their commitment is a confirmation of the strategic course and long-term potential of the company. After having acquired 4.99% of Euroclear’s shares in September 2023, NZ Super Fund, New Zealand’s sovereign wealth fund, recently increased its stake to 8.7%. With this investment, NZ Super Fund becomes the fourth largest individual shareholder of Euroclear and has been invited to propose a non-executive director (subject to the National Bank of Belgium’s and shareholders’ approvals), and will be the sixth non-executive shareholder’s representative on Euroclear’s Board. This increased investment further evidences the transition of Euroclear’s shareholder base from its traditional “user-owned” model to include a greater proportion of long-term institutional investors.
Russian sanctions
Financial impacts of the Russian assets in H1 2024
- The Russian sanctions continue to have a significant impact on Euroclear’s earnings. €3.4 billion of the €4 billion interest income generated relate to Russian sanctioned assets.
- Applicable to CBR assets dating from 15 February 2024 onwards, the newly introduced EU windfall contribution after tax amounts to €1.7 billion. Euroclear will make a first payment of €1.55 billion3 to the European Fund for Ukraine.
- The remainder of the profits related to sanctioned assets are being put aside as an important buffer against current and future risks.
- The sanctions and Russian countermeasures resulted in direct costs of €48 million and a loss of business income of €13 million.
|
Russian |
|
|
|||
|
Operating income |
1,644 |
604 |
1,040 |
||
|
Business income |
-13 |
0 |
-13 |
||
|
Interest, banking & other income |
3,376 |
2,323 |
1,053 |
||
|
Windfall contribution provision |
-1,719 |
-1,719 |
|||
|
of which contribution payable in July |
1,547 |
-1,547 |
|||
|
of which delayed contribution |
-172 |
-172 |
|||
|
Operating expenses |
-48 |
-11 |
-37 |
||
|
Operating profit before Impairment |
1,596 |
593 |
1,003 |
||
|
Tax |
-836 |
-584 |
-252 |
||
|
Net profit |
760 |
9 |
751 |
Update on Russian sanctions and countermeasures
Russia’s invasion of Ukraine in February 2022 resulted in market-wide application of international sanctions. Euroclear considers the application of international sanctions as a key obligation. Therefore, well established processes are in place which have allowed the group to implement the sanctions while maintaining our normal course of business.
As a result of the sanctions, blocked coupon payments and redemptions owed to sanctioned entities continue to accumulate on Euroclear Bank’s balance sheet. At the end of June 2024, Euroclear Bank’s balance sheet totalled €207 billion, of which €173 billion relate to sanctioned Russian assets.
In line with Euroclear’s risk appetite and policies and as expected by the EU Capital Requirements Regulation, Euroclear’s cash balances are re-invested to minimise risk and capital requirements. In the first semester of 2024, interest arising on cash balances from Russian-sanctioned assets was approximately €3.4 billion. Such interest earnings are driven by the prevailing interest rates and the amount of cash balances that Euroclear is required to invest. Subject to Belgian corporate tax, these earnings generated €836 million tax revenue for the Belgian State. As such, future earnings will be influenced by the evolving interest rate environment.
Effective 15 February 2024, the EU Council adopted a Regulation (Council Regulation (EU) 2024/576 of 12 February 2024 amending Regulation (EU) 833/2014) providing for an obligation for Central Securities Depositories (CSDs) holding reserves and assets of the Central Bank of Russia with a total value of more than €1 million to apply specific rules in relation to the cash balances accumulating due to restrictive measures. These CSDs, such as Euroclear Bank, should account for and manage such extraordinary cash balances separately from their other activities, should keep separate the net profit generated and should not dispose of these ensuing net profits (e.g. in the form of dividends to shareholders).
In May 2024, the European Commission has adopted a new regulation about a windfall contribution applicable to CSDs holding Russian Central Bank assets with a total value of more than €1 million4. The profits generated by the reinvestment of these sanctioned amounts dating from 15 February 2024 onwards are required to be contributed to the European Fund for Ukraine.
Euroclear will comply with the EU regulation on the windfall contribution and make a first payment of approx. €1.55 billion to the European Fund for Ukraine in July 2024.
Euroclear continues to act prudently and is further strengthening its capital by retaining the remainder of the Russian sanction related profits as a buffer against current and future risks. Euroclear is focused on minimising potential legal, financial, and operational risks that may arise for itself and its clients, while complying with its obligations.
Various parties in Russia contest the consequences of the application of sanctions, with a significant number of legal proceedings ongoing, almost exclusively in Russian courts. The impact of the lawsuits on Euroclear is uncertain and Euroclear has received a number of unfavourable rulings since Russia does not recognise the international sanctions. Euroclear will continue to defend itself against all legal claims.
Annexes
Euroclear Bank and Euroclear Investments are the two group issuing entities. The summary income statements and financial positions at Q1 2024 for both entities are shown below.
|
Figures in Million of EUR |
Q2 2024 |
Q2 2023 |
Variance |
|||||||||
|
Euroclear Bank Income Statement (BE GAAP) |
||||||||||||
|
Net interest income * |
2,238.8 |
2,261.5 |
-22.6 |
|||||||||
|
Net fee and commission income |
556.7 |
550.0 |
6.7 |
|||||||||
|
Other income |
-5.4 |
17.0 |
-22.4 |
|||||||||
|
Total operating income |
2,790.2 |
2,828.5 |
-38.3 |
|||||||||
|
Administrative expenses |
-476.8 |
-404.7 |
-72.1 |
|||||||||
|
Operating profit before impairment and taxation |
2,313.3 |
2,423.8 |
-110.4 |
|||||||||
|
Result for the period |
1,297.6 |
1,814.1 |
-516.4 |
|||||||||
|
Euroclear Bank Statement of Financial Position |
||||||||||||
|
Shareholders’ equity |
7,333.4 |
4,416.2 |
2,917.2 |
|||||||||
|
Debt securities issued and funds borrowed |
4,775.8 |
5,822.7 |
-1,046.8 |
|||||||||
|
Total assets |
207,397.4 |
150,376.0 |
57,021.5 |
|||||||||
|
Euroclear Investments Income Statement (BE GAAP) |
Q2 2024 |
Q2 2023 |
Variance |
|||||||||
|
Dividend |
706.7 |
395.5 |
311.3 |
|||||||||
|
Net gains/(losses) on financial assets & liabilities |
4.1 |
5.5 |
-1.4 |
|||||||||
|
Other income |
-0.1 |
-0.2 |
0.1 |
|||||||||
|
Total operating income |
710.8 |
400.7 |
310.1 |
|||||||||
|
Administrative expenses |
-1.1 |
-0.5 |
-0.6 |
|||||||||
|
Operating profit before impairment and taxation |
709.7 |
400.2 |
309.5 |
|||||||||
|
Result for the period |
708.7 |
399.0 |
309.7 |
|||||||||
|
Euroclear Investments Statement of Financial Position |
||||||||||||
|
Shareholders’ equity |
738.4 |
693.4 |
45.1 |
|||||||||
|
Debt securities issued and funds borrowed |
1,649.8 |
1,651.7 |
-1.9 |
|||||||||
|
Total assets |
2,388.9 |
2,345.7 |
43.3 |
|||||||||
|
(*) Total net interest income offset by the impact of the windfall contribution under Belgian presentation. |
||||||||||||
About Euroclear
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 and Irish CSD, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & International.
Media Contact:
Thomas Churchill, thomas.churchill@euroclear.com, +32 471 63 65 35
Pascal Brabant, pascal.brabant@euroclear.com, +32 475 78 36 62
1 When excluding an exceptional billing adjustment, underlying business income would have increased by 4% compared to last year.
2 Post deduction of dividend relating to 2023, including H1 2024 profit and based on estimated underlying RWA of around EUR 7.7bn
3 After retention of a 10% share of the windfall contribution to comply with capital and risk management requirements
4 European Commission Statement of 21 May 2024: Use of proceeds from immobilised Russian assets for Ukraine (europa.eu)
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