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Argenta performed well in 2019 and will continue to invest heavily in the future in 2020
26 March 2020
In 2019 Argenta once again posted a strong financial performance, with attractive growth in all segments, a net profit of EUR 174.1 million, a return on equity of 6.5%, a cost/income ratio of 64.1% and excellent capital ratios and liquidity buffers despite the challenging low interest rate environment.
The results are also the fruit of a long-term strategy consistently applied, with which bank-insurer Argenta seeks to create sustainable value for all its stakeholders. Its success is demonstrated not only by the financial results, but also the impressive customer satisfaction score (NPS 44), the growth in number of customers, the growth in app users (+ 12% yoy) and the high employee commitment score.
The consistent investments in digitization enabled Argenta to switch extra quickly during the current crisis. In this way, half of the head office employees have been working from home since March 9 and all since 16 March. Since 16 March, branches have also been helping their customers by appointment, by mail or by telephone. In addition, Argenta is keeping its customers regularly updated about the impact of Coronavirus. Argenta is also constantly sensitising its customers to use the digital channels as much as possible for daily and other transactions.
Argenta branch managers are gearing up to handle questions from 27 March from Belgian borrowers with repayment problems due to the Coronavirus crisis. The arrangements for this are currently being worked out at sector level.
Thanks in part to its sustainable long-term vision,
Argenta strengthens its position through the financial results in 2019
Despite the persistently low interest rate environment and the cost of major investments, Argenta Bank- en Verzekeringsgroep was able in 2019 to maintain its consolidated net profit and return at the same level as in 2018.
Production of home loans for Belgian and Dutch families rose by 18% to EUR 5.9 billion. In Belgium house purchases increased ahead of the abolition of certain tax advantages (‘housing bonus’) in Flanders at the end of 2019. The funds raised via current and savings accounts also increased, to EUR 5.4 billion and EUR 27.8 billion respectively. Savings account balances remain at a historical high despite the low interest rate of 0.11 %.
The net profit at group level in IFRS amounts to EUR 174.1 million, which is stable compared to the net profit of EUR 174.4 million in 2018. Despite the low interest rate environment, net interest income increased by EUR 6.7 million owing to further growth in the mortgage portfolio and more favourable financing on the capital markets. Investment fund sales increased significantly in the favourable investment climate and reinforced by marketing campaigns. These funds will support non-interest income in the future. The return on equity in 2019 was 6.5 %.
Regulatory core equity of (CET1 ratio CRR scope) grew in 2019 by 6 % from EUR 2,082 million to EUR 2,201 million. The CET1 ratio (CRR scope, Danish Compromise) has risen from 23.0 % to 24.4 % (Basel III) thus remaining well above the SREP requirement of 9.75 %. IFRS equity amounts to EUR 2,863 million.
In 2019, Argenta again invested heavily in IT, digitization and consultancy, which increased both investment and operating costs. Despite this, the cost-income ratio remains under control at 64.1 %.
As a result of changes in the market value of hedging instruments, results were impacted by one-off timing effects. Excluding these, ROE improved to 6.9% and the cost-income ratio to 62.6%.
Argenta continues to grow in its own strength. At the same time it is looking to collaborate with other financial institutions to keep costs under control. A recent example is Jofico, the joint venture for managing ATMs that was founded in 2019.
The IFRS net profit of Argenta Spaarbank amounted to EUR 117.5 million, which is EUR 12.5 million lower than in 2018. The Bank Pool's liquidity and capital ratios remain excellent and among the strongest in Europe. In 2019, rating agency Standard & Poor's maintained Argenta's A- rating with stable outlook.
Argenta Assuranties achieved a net profit of EUR 51.3 million (BGAAP), following on an exceptionally strong result of EUR 52.5 million in 2018. This is a solid result, with the insurer remaining an important and stable contributor to group profit.
Marc Lauwers, CEO: “Argenta's core capital ratio is 24.4% percent. The fact of holding a large amount of capital means that our return on equity is relatively low. With the many investments in IT, digital channels, people, regulations and compliance, costs have risen sharply in recent years, but they are under control. Argenta aims for a cost/income ratio of maximum 65 percent, which is more than respectable in the given circumstances. ”
Geert Ameloot, CFO: "2019 was a difficult year for the financial sector. On the one hand, returns on assets decreased, in our case mainly those on home loans. On the other hand, Argenta finances itself primarily through our customers’ savings, remunerated at the legally determined rate of 0.11% which is above the market rate. In 2019, the resulting reduction in net interest margin was offset by growth in the loan portfolio. 2020 will also present the inevitable challenges from the impact of the Covid-19 virus on financial markets and the economy, but Argenta is well-armed owing to its conservative policy and particularly strong solvency, supplemented by a strong focus on cost control”.
For the full press release, we refer to the pdf below.