HISTORICALLY LOW RATES
2016 began with highly volatile equity markets, due mainly to concerns regarding the Chinese economy. Moreover, the US economy had a disappointing start due to the harsh winter weather, the strong Dollar and particularly weak investments in the shale oil sector following continually falling oil prices. In June, the United Kingdom voted to leave the European Union, a decision that took markets by surprise. Interest rates, meanwhile, reached new lows, although the Chinese economy gradually showed signs of stabilization, and confidence indicators improved in the second half of the year. A new shockwave hit the markets when Donald Trump was elected President of the United States in November: interest rates rose and equity prices soared in the developed markets. Whilst the constitutional referendum in Italy led to the resignation of prime minister Renzi, optimism in the financial markets was unaffected.
Our financial results for 2016 were characterized by pressure on margins resulting from persistent negative short-term interest rates, changes to our commercial offering, lower transactional activity and higher banking taxes for deposits.
Income for 2016 totaled 436 million euro, down from 492 million euro last year (pro forma IFRS - 12 months Bank Degroof/12 months Petercam for 2015), reflecting the partial carve-out of the long-term equity portfolio with the merger of Bank Degroof and Petercam, and lower transaction income partially compensated by strong treasury results. Operating expenses remained under control. In 2016 the Bank recorded a stable gross operating profit before tax and exceptional items of 122 million euro, compared to 125 million euro in 2015. After exceptional elements, such as the cost of the merger and the partial demerger of the equity portfolio in 2015 and taxes, the net profit for 2016 was 58 million euro.
MORE THAN 52 BILLION EURO ASSETS UNDER MANAGEMENT
At 31 December 2016, assets under management totaled 52.3 billion euro, compared to 50 billion euro at the end of 2015. This increase was due to market effects and the inflow of new capital resulting from the distribution of our funds to third party holders. Credits used by clients by Bank Degroof Petercam totaled 1.7 billion euro against a balance sheet total of 7.7 billion euro and cash deposits of 6.2 billion euro. The CET1 regulatory ratio of 17.1% comfortably exceeds regulatory requirements, demonstrating our strong liquidity position and capital base. At human resources level, staff numbers decreased slightly compared with 2015.
We are very satisfied with the progress of our integration project, and extremely grateful for the efforts and intrapreneurial spirit of our staff. In 2016 over 1 100 employees (full-time equivalent) in Belgium and Luxembourg moved into renovated office spaces. Our dealing rooms in Brussels, Amsterdam and Luxembourg were integrated into a state of the art platform connecting 100 brokers, sales traders and financial analysts.
We also harmonized our entire commercial offering as well as our client and regulatory reporting. We successfully migrated our private banking portfolios and funds onto unified IT systems. Finally, we defined the future structure of our fund range and consolidated all of our legal entities.
Responsible investment continued to constitute a main priority in 2016, and we expanded our offering with socially responsible investment mandates, impact investing and numerous initiatives by the Degroof Petercam Foundation. We remain convinced of the importance to contribute to society by promoting genuine humane finance and sustainable investment and to actively engage in corporate social initiatives.
Looking ahead, confidence indicators suggest a favorable economic momentum, principally a stabilizing of monetary policy in the United States, with a return of low level inflation. There are of course uncertainties. Will exchange rates remain stable? Is the American industrial revival robust enough to continue? How qualitative is the Chinese financial sector? Europe may in turn be subject to political shocks, although the euro has already proven its resilience and we are seeing positive economic activity, including in the south.
MARKET LEADER FOR THE BENEFIT OF OUR CLIENTS
Against this backdrop, we embark on 2017 with a clear commitment to maintain, strengthen and expand our leading market position to better serve our clients. We are convinced that our strong and distinctive business model, reinforced by the excellence of our staff, will empower our clients to achieve their ambitions, now and in the future.
In closing, we would like to thank our clients for their vote of confidence in entrusting us with their assets. We welcome all new colleagues who joined us in 2016, and thank every one of our staff for their strong commitment – whether directly dedicated to our clients or behind the scenes. Finally, we would like to thank our board members and family shareholders for their unwavering support.
Philippe Masset CEO
Alain Philippson Chairman of the board of directors