The ProCredit group completes a challenging 2020 financial year with significant portfolio growth and a robust financial result

  • Growth in customer loans of 9.5% and in customer deposits of 13.0% in 2020 underlines the group’s strong positioning as a reliable partner for SMEs
  • Portfolio growth mainly driven by investment loans and green loans
  • Cost-income ratio at 68.0% continued to improve; overall, cost of risk below original expectations
  • Consolidated result of EUR 41.4 million corresponds to a return on equity of 5.3% and demonstrates the solidity of the business model
  • Impact Report highlights the central role of ESG in the group’s positive results and presents the considerable progress the ProCredit group has made in the area of sustainability
  • Portfolio growth around 10% and further improvement in cost-income ratio and return on equity expected for 2021, subject to the recovery of the global economy
  • Dividend proposal of EUR 0.18 per share, with the intention to propose distribution of a further dividend of EUR 0.35 in Q4 2021

Frankfurt am Main, 25 March 2021 – For the ProCredit group, which is mainly active in South Eastern and Eastern Europe, the past financial year was a successful one overall, despite the challenges posed by the COVID-19 pandemic. The advantages of the group’s business model focused on sustainability, with long-term customer relationships at its core, clearly came to the fore in a crisis-filled 2020. Growth in the customer loan portfolio of EUR 457 million or 9.5% was at the upper end of the most recent target corridor of 8-10% (2019: EUR 448 million or 10.3%). The cost-income ratio was further improved by 2.5 percentage points to 68.0% (2019: 70.5%) and reflects the improvement in cost efficiency. The robust consolidated result of EUR 41.4 million corresponds to a return on equity of 5.3% (2019: EUR 54.3 million / 6.9%). The publication of the Annual Report 2020 was again supplemented with the annual Impact Report, further highlighting the ProCredit group’s sustainability goals and the progress made.

Business continues to develop positively despite difficult conditions

The significant portfolio growth in the 2020 financial year is primarily attributable to long-term investment loans. The ProCredit banks were able to support precisely those resilient small and medium-sized enterprises (SMEs) that were able to grow their business operations even in 2020 by expanding their machinery or through building projects. In addition, further growth was recorded in the area of green loans. The ProCredit group’s green loan portfolio grew by 23.8% in 2020, significantly faster than the overall loan portfolio. At year-end, green loans accounted for 18.7% of the total portfolio. These loans were also primarily investment loans, used for example for renewable energy solutions and energy-efficient machinery upgrades.

Customer deposits increased by EUR 565 million (13.0%) in the financial year (2019: EUR 538 million; 14.2%), thus outpacing loan portfolio growth. Deposits from business clients developed particularly positively, and the retail client segment also showed very encouraging trends, underscoring ProCredit’s growing position as a direct bank for private clients.

Portfolio quality remained nearly constant at a solid level in 2020. As of 31 December 2020 the share of credit-impaired loans in the total loan portfolio was 2.6%, roughly the same as the previous year (31.12.2019: 2.5%); however, introducing the new EBA guidelines on reporting credit-impaired loans (EBA/GL/2016/07) by itself led to an increase in this indicator by 37 basis points. As of 31 December 2020, only less than 2% of the loan portfolio remained in moratorium.

Cost of risk in 2020 below original expectation

The consolidated result includes an increase to EUR 28.6 million in loss allowances compared to the previous year (2019: release of EUR 3.3 million in loss allowances). The cost of risk was 57 basis points, which was lower than the initially expressed expectation of around 75 basis points. ProCredit’s Management views the sound risk management of the group and its clearly focused business model based on sustainable client relationships with SMEs to be significant factors in keeping the rise in expenses for loss allowances within an acceptable range, and this facilitated the achievement of a consolidated result for 2020 that reflects  solidity considering the difficult economic environment.

Income before loss allowances growing in line with the loan portfolio

The net interest income of the ProCredit group improved by EUR 7.0 million, climbing to EUR 201.6 million in 2020 due to the significant loan portfolio growth. The reduction of base interest rates in almost all the markets where the ProCredit group operates was more than offset by portfolio growth and an increase in low-interest deposits.

The decline in net fee and commission income by EUR 4.6 million to EUR 47.4 million was mainly attributable to the lower volume of domestic and international transfers during the COVID-19 pandemic.

Operating expenses decreased substantially, falling EUR 4.3 million to EUR 171.4 million. In addition to lower marketing and travel expenses, among other items, the previous year’s operating expenses had also included one-off effects from write-downs.

It was thus possible to significantly improve the cost-income ratio by 2.5 pp to 68.0%, which is below the “around 70%” forecast from the beginning of the year. Profit before tax and loss allowances increased by EUR 7.7 million or 10.5%, highlighting the further structural improvements in the group’s financial performance. 

Capitalisation remains solid

As expected, the Common Equity Tier 1 capital ratio (CET1 fully loaded) was above 13% on 31 December 2020 and stood at 13.3%. In calculating the Common Equity Tier 1 ratio, one-third of the consolidated result for 2019 and one-third of the consolidated result for the first half 2020 continue to be deducted for dividend purposes. The consolidated result for the second half of 2020 has not yet been recognised in Tier 1 capital as of 31 December 2020. The solid and comfortable capitalisation of the ProCredit group is also reflected in the leverage ratio, which at 9.3% is well above the average for the banking sector.

ProCredit's Management is satisfied with the past financial year, which was challenging in many respects: “Especially in years of crisis, the importance of sustainable business practices becomes apparent. We feel that last year’s good results provide further validation of our business approach. In our Impact Report this year, we have also placed particular emphasis on showing how our comprehensive commitment to ESG goals underpins long-term value creation for all ProCredit stakeholders.

As the “Hausbank” for SMEs, we are committed to supporting our clients even in difficult times. Our strong growth figures this year confirm that we are embracing this role. The fact that we work with carefully selected business clients and do not have significant consumer loan portfolios has allowed us to efficiently manage and assess credit risks even during this challenging year. We are also encouraged to know that our customers can play a key role in the recovery of the economies where we operate.

Since all of our retail banking is already done through digital channels, we were able to skip the phase in the pandemic when we would have had to make a costly transition to contact-free branch operations. As a result, our immediate focus since the beginning of the pandemic has been on risk management and supporting SME clients through this challenging period. As we did in the last financial crisis from 2008 to 2010, we have again been able to generate a solid return on equity in a turbulent year for the global economy.”

Fourth annual Impact Report highlights good progress in the area of sustainability

On 25 March 2021, ProCredit also published its fourth annual Impact Report, titled “Why Responsible Banking Matters to Us”, which was prepared in accordance with GRI Standards (Core option). It describes the considerable extent to which our fundamental commitment to ESG goals shapes ProCredit’s identity and positively impacts group operations and group results. Within the publication, the group also reports on various non-financial indicators and presents its sustainability goals and notable progress in the context of the UN Sustainable Development Goals.

The group’s lending business aims to generate steady, long-term value for its customers and thus make a positive contribution to local economies. The focus is on serving as the “Hausbank” for SMEs. Furthermore, the green loan portfolio is becoming increasingly important in this respect; in particular, the renewable energy sector saw a significant increase of around EUR 100 million in 2020.

Important milestones were also achieved internally in the area of sustainability. In the past year, the group was able to reduce its carbon footprint by over 46% and has thus come significantly closer to its medium-term goal of climate neutrality. ProCredit achieves progress in this area through its own climate measures, such as investing in energy-efficient building technologies, switching to electric car fleets and establishing its own renewable energy sources.

Positive business development expected for 2021

Uncertainty regarding the further development and future impact of the COVID-19 pandemic remains high at the present time. Assuming the global economy recovers in 2021 as projected, the Management expects loan portfolio growth of approximately 10% in the 2021 financial year, with the green loan portfolio growing at a much faster pace. The medium-term target of a 20% share of green loans in the overall portfolio is thus to be passed as early as 2021. Cost of risk is expected to remain elevated in 2021 but should be slightly below the 2020 level of 57 basis points. The cost-income ratio is expected to further improve to between 65% and 68%. Under these conditions, an improved return on equity of between 6.0% and 7.5% is expected. Taking into account the planned dividend distributions, a Common Equity Tier 1 ratio (CET1 fully loaded) of approximately 13% and a leverage ratio of approximately 9% are expected at year-end 2021.

Dividend proposal for the financial year 2020 published

The Management Board of the General Partner of ProCredit Holding AG & Co. KGaA decided on 22 March 2021 to propose the distribution of a dividend totalling EUR 10.6 million or EUR 0.18 per share at the Annual General Meeting of ProCredit Holding scheduled for 27 May 2021. The proposed dividend corresponds to 20 basis points of the ProCredit group’s Common Equity Tier 1 capital ratio and thus to the maximum level of the European Central Bank’s recommendation for dividend payments valid until 30 September 2021. The Supervisory Board of ProCredit Holding has approved this proposal.

In agreement with the Supervisory Board, the Management Board also intends to propose a further dividend distribution of EUR 0.35 per share no later than 31 December 2021 at an Extraordinary General Meeting which may be convened for this purpose, provided that neither the German Federal Financial Supervisory Authority nor the European Central Bank has issued any communication which precludes such a proposal.

In the event that the second planned dividend is also paid out, the total distribution would correspond to one third of the cumulative consolidated results of the financial years 2019 and 2020 and thus conform to the dividend policy of ProCredit Holding. No dividend was distributed to shareholders relating to the financial year 2019 due to the then prevailing recommendations of the regulatory authorities.

Given the ProCredit group’s clearly focused business model, its close customer relationships and conservative risk strategy, the Management continues to view the group’s medium-term development positively and endorses the medium-term goals of 10% loan portfolio growth, a cost-income ratio below 60% and a return on equity ratio around 10%.

The ProCredit group Annual Report 2020, the non-financial Impact Report 2020 and the Disclosure Report 2020 are available as of today in the Investor Relations section of the ProCredit Holding website at https://procredit-holding.com/investor-relations/reports-and-publications/