FMO generated a record net profit of EUR 255 million for the full year, translating into a return on shareholders’ equity of 9.1%. The results follow from robust performance of our loan portfolio, strong results from our equity investments, and limited value adjustments.
Interest income in 2017 amounts to EUR 200 million (2016: EUR 217 million). Although the loan portfolio performed well, interest income remained below levels in 2016, mainly because of a decrease in the size of our portfolio following a weaker US dollar. Income from equity investments amounted to EUR 191 million (2016: EUR 56 million). The strong results reflect the favorable economic context, and include two large exits from investments in respectively Asia and Eastern Europe.
Due to hiring additional staff and higher advisory costs our operating expenses increased to a total of EUR 99 million (2016: EUR 86 million).
The quality of the loan and equity portfolio remained solid throughout 2017. Non-performing loans decreased to 5.6% (Dec 2016: 7.5%), as 2017 did not bring any country shocks with material impact on the portfolio quality. The share of non-performing loans further improved mostly because of write offs on a number of non-performing loans. Additional value adjustments on loans and impairments of equity invested amounted to EUR 62 million (2016: EUR 1 million). Value adjustments included a net release of EUR 31 million of the group-specific provision, which is mainly explained by a net improvement of country ratings and amendments of assumptions regarding the expected loss given default in the portfolio.
Total assets amount to EUR 8.3 billion per December 2017, down from EUR 8.6 billion in 2016. The decrease mainly follows from the development of the loan and equity portfolio, which decreased by EUR 0.6 billion to EUR 5.8 billion at year end 2017. Growth of the portfolio as a result of new business was more than offset by weakening of the US dollar, in which the majority of our assets is denominated. Capital market operations in 2017 supported net cash needs resulting from investment and market operations. In May 2017, FMO issued its fourth sustainability bond, a 6-year EUR 500 million transaction. Over 50 investors were involved, highlighting the interest in green bonds and FMO’s strong reputation in the green investment community. FMO has disbursed EUR 1.5 billion to eligible projects in the period November 2012 – December 2017. For more information on eligible projects, please refer to the Sustainability Bond Newsletter.
Shareholders’ equity increased by EUR 56 million to EUR 2.8 billion by the end of 2017, with net profit over 2017 partially offset by a decrease of the available for sale reserve, which is mostly explained by currency revaluations and recycling of exit results through the Profit & Loss account.
The Common Equity Tier I ratio (CET 1 ratio) increased from 22.7% in 2016 to 24.6% by the end of 2017. The increase of the CET 1 ratio is in similar fashion mainly explained by inclusion of the net profit of the first half of 2017, and a lower asset base following the weaker US dollar.
For more information on financial performance, risk management, solvency, liquidity, and use of financial instruments, please refer to our annual accounts.