H1 2020 compared to H1 2019 financial results
FMO noted a net loss of €280 million for H1 2020. The net loss is mainly caused by the significant decline of fair value of FMO’s private equity portfolio (including investments in associates). The total fair value losses amounted to €255 million (H1 2019: loss of €1 million). The reduction in fair values can be seen across sectors and geographies and is the result of a global decline in emerging market equity prices. However, as FMO’s investees are still distributing dividends, FMO’s dividend income amounted to €20 million (H1 2019: €11 million).
The level of impairments on our loan portfolio amounted to €102 million (H1 2019: €15 million). The higher level of impairments is the result of a deterioration of the risk profiles of FMO’s sector portfolios in H1 2020. At this stage, the deterioration in risk profiles has not led to a significant increase in non-performing loans (NPLs). In H1 2020, the NPL ratio was 9.6%, which is in line with the year-end 2019 ratio of 9.8%.
The development of our interest and fee income remains stable in comparison with the same period last year.
While FMO’s total net loss is expected to have a negative effect on our capitalization, FMO’s capital ratio remains significantly above the combined ratio of the SREP minimum and FMO’s internal buffers. In the first half year of 2020, FMO raised additional capital by issuing a sustainability bond and performing a private placement of a bond in Swedish Crown. Supervisory guidance following the COVID-19 outbreak allows for the use of regulatory buffers to enable banks to support their clients and the economic recovery.
FMO’s total capital ratio as per 30 June 2020 included €175 million of Tier 2 capital. FMO issued a new Tier 2 note in July 2020 to replace the current Tier-2 capital. The request for replacement of current Tier 2 capital in the second half year of 2020 is subject to approval from the Dutch Central Bank, our supervisor.