Brussels (ots/PRNewswire) - Continued strategic progress while
navigating an exceptional operating environment
Results for the Year Ending 31 December 2022
Record performance in an exceptional operating environment
* Euroclear delivered a record business and financial performance
2022, demonstrating its resilience against a challenging
* In 2022, both equity and fixed-income valuations declined for the
first time since 1969, with high levels of volatility, lower
equity volumes, and lower funds market performance.
* High levels of inflation led to rising interest rates across
international markets and increased expense levels.
New strategic vision with ambitious targets to grow stakeholder value
* Euroclear defined its corporate purpose as: "We innovate to bring
safety, efficiency, and connections to financial markets for
sustainable economic growth."
* Set out a long-term vision to become a digital and data-enabled
financial market infrastructure: an open, shared platform
providing services to all market players.
* Launched a new strategy with core client focus, while further
developing ESG, data and digital capabilities, as well as
expanding global business.
* Strategy is expected to further diversify the business model and
generate value for clients, employees, shareholders, and society.
Strong underlying business and financial performance
* Business income (which is the income generated by fees) grew by
to EUR 1,607 million reflecting the resilience of the
subscription-like model. Rising interest rates enhanced revenues
generated through interest income, adding to the resilience of
model. Excluding earnings related to Russia sanctions, interest
income rose by 289% to EUR 348 million.
* Total operating income grew by 21% underlying to EUR 1,955
* Underlying operating expenses increased by 15% to EUR 1,133
million, reflecting inflationary pressures and increased
investment to both implement the strategy and increase further
Implications of sanctions related to Russian invasion of Ukraine
* Resulted in market-wide application of international sanctions
related to Russia, and as a financial market infrastructure
Euroclear complied with those sanctions.
* Co-operating with clients and other involved stakeholders to
address market challenges that Russian countermeasures continue
* Despite a material growth in Euroclear Bank's balance sheet and
additional interest income, normal business operations have been
* Euroclear remains prudent in its management of the sanctions and
their implications. Russia sanction-related earnings are
segregated from underlying performance and are not distributed
while uncertainties persist.
Growing shareholder returns through underlying business performance
* Underlying EPS increased by 30% to EUR 191.7 per share,
growth in net profit after adjusting for results related to the
implementation of international sanctions.
* Proposed dividend per share of EUR 115.5, increased by 31%,
maintaining the payout ratio at 60% of the underlying earnings,
line with last year.
Euroclear delivered a record financial performance in 2022. The
underlying results benefited from continued delivery on the group's
strategy and its diversified, resilient business model.
The group also reported higher interest earnings due to rising
interest rates on cash balances. Cash balances increased materially
as a consequence of the international sanctions on Russia.
Full year 2022 net profit increased 162% to EUR 1,201 million, of
which EUR 603 million resulted from the underlying business
(€ m) FY 2021 FY 2022 Russian
FY 2022 Underlying vs
Operating income 1,615 2,769 814
1,955 340 21 %
Business income 1,525 1,600 -7
1,607 82 5 %
Interest, banking & other 90 1,170 821
348 259 289 %
Operating expenses -988 -1,152 -20
-1,133 -145 -15 %
Operating profit before 627 1,617 795
823 195 31 %
Impairment -16 -12 -1
Pre tax profit 611 1,605 794
811 199 33 %
Tax -153 -405 -197
-207 -55 -36 %
Net profit 458 1,201 597
603 145 32 %
EPS 147.0 381.4
Business income operating 35.2 % 28.0 %
EBITDA margin 45.6 % 62.3 %
Note: 2021 figures (except for EPS) have been restated to include
MFEX pro forma, in order to
allow like-for-like comparison.
Year-to-date operating income was up 71% year-on-year to EUR 2,769
million, of which EUR 1,955 million related to the underlying
An increase of 159% in earnings per share to EUR 381.4 per share,
reflected the increase in net profit. On an underlying basis,
earnings per share grew to EUR 191.7.
The group maintains a strong capital position and a low-risk profile,
which are critical as a financial market infrastructure and create
headroom for further growth.
2022 Operating Environment
In 2022 financial markets experienced negative returns from both
equities and fixed income for the first time in over 50 years. Equity
markets were characterised by higher levels of volatility and lower
traded volumes. The funds industry was also affected by the fall in
value of the underlying assets.
The fragile external context, already impacted by the pandemic over
the previous two years, was further impacted by rising geopolitical
tensions. Most notably, the invasion of Ukraine by Russia led to a
raft of international sanctions being imposed on capital market
entities and individuals.
Inflation increased across international economies, with central
banks responding by raising interest rates throughout the year.
The consequence of the operating environment is shown below in the
group's key operating metrics.
% change vs FY 2021
Assets under Custody EUR 35.6 trillion
Number of transactions 304 million
Turnover (Value of transactions processed) EUR 1,066 trillion
Fund assets under custody EUR 2.8 trillion
Collateral Highway EUR 1.8 trillion
Progressing on our new strategic vision to grow stakeholder value
In 2022, management and the Board defined Euroclear's corporate
purpose, an ambitious long-term vision and a five-year business
strategy. Euroclear's purpose to innovate to bring safety,
efficiency, and connections to financial markets for sustainable
economic growth, combined with its culture and values, underpins the
long-term aspiration to become a digital and data-enabled financial
To realise this vision, Euroclear will continue to build an open,
shared platform providing a catalogue of services to all market
stakeholders and complemented by third parties. Euroclear's aim is to
evolve the current market model to provide efficiencies that deliver
more client value, building on previous successes in collateral and
Through its strategy, the group will continue to focus on meeting the
evolving needs of all financial market participants from issuers to
investors. In addition, Euroclear will increase its focus on ESG,
data-driven and digital innovations and expanding its global reach.
The strategy will be enabled by Euroclear's people and its
technology, with increased investments ongoing to extend the group's
capabilities, with a particular focus on strengthening and
modernising the group's technology.
In addition, greater emphasis is placed on M&A to accelerate the
strategy and to provide enhanced capabilities to the group's service
offering. Several steps have been taken through the course of 2022 to
rollout the M&A strategy, including the investments in Greenomy,
Impact Cubed, Fnality and Goji as well as the ongoing integration of
MFEX. The Goji acquisition is novel, as it is the first time
Euroclear will be operating in the digitalisation of private assets
space, in effect a new asset class in its books.
The integration of MFEX remains on track despite the challenging
external context for the funds industry given lower equity,
fixed-income and fund valuations. The combination of MFEX with the
existing Euroclear funds business, and alternative investments
through Goji, provides a compelling vision for a comprehensive
end-to-end funds offering.
Ambitious metrics have been outlined to measure the implementation of
the strategy over the next five years. The strategy is expected to
further diversify the business model and generate value for clients,
employees, shareholders, and society, in line with Euroclear's
Underlying Business Performance
Excluding the impact of the Russian sanctions, Euroclear's underlying
business continues to perform strongly. Adjusted net profit rose by
32% to EUR 603 million.
Business income was up 5% to EUR 1,607 million, reflecting continued
growth of Euroclear's business lines.
The diversification of our business provided a hedge against market
volatility. The impact of lower equity markets is mitigated by the
group's diversified and subscription-like business model.
Approximately three quarters of the group's business income is
decoupled from financial market valuations.
In addition, interest, banking and other income increased by 289% to
EUR 348 million on an underlying basis, benefitting from rising
Underlying operating expenses increased to EUR 1,133 million, up 15%
compared to the prior year, partly due to inflation on costs but also
as Euroclear continued to invest in its technology and service
offering. As well as enhancing Euroclear's client proposition and
resilience, the investments in Euroclear's technology are expected to
increase efficiency through standardisation and modernisation.
Inflationary pressures on costs, as well as the broader impact of the
macro-economic environment, are monitored at the level of each of
operating entity. Only Euroclear Bank benefits directly from the
compensating effect of higher interest rates.
Euroclear continues to expect expenditure to remain above its
"through-the-cycle" target of 4-6% p.a. in 2023, due to accelerating
investment in both its strategy and the resilience of the business,
coupled with continued inflationary pressures on the cost base.
However, profitability is expected to rise as inflation headwinds are
more than offset by higher net interest income from subsequent rate
Implications of Russian sanctions
Russia's invasion of Ukraine resulted in market-wide application of
international sanctions, which had a material impact on Euroclear's
financial market infrastructure.
As a regulated entity with a critical role in the operation of global
financial markets, Euroclear takes its responsibility of complying
with sanctions very seriously. Well established processes are in
place which have allowed the group to implement the sanctions while
maintaining the normal course of business.
There is, however, additional complexity because the package of
sanctions is wide-ranging and, moreover, Russia does not recognise
the international sanctions and has implemented its own economic
countermeasures. Euroclear maintains regular dialogue with clients
and other impacted stakeholders in managing the market issues and
implication of Russian countermeasures.
The international sanctions and Russian countermeasures resulted in a
loss of activities from sanctioned clients and Russian securities
which impacted business income. It is more than offset by increased
The cash on the balance sheet has increased as blocked coupon
payments and redemptions accumulate. At the end of December 2022,
Euroclear Bank's balance sheet increased by EUR 99 billion
year-on-year to a total of EUR 124 billion.
As per Euroclear's standard process, which is the same for any
client's long cash balances, the cash balances arising from the
sanctions are invested to minimise credit risk. Over 2022, interest
arising on cash balances from Russia-sanctioned assets was EUR 821
Future earnings linked to the sanctions will continue to depend on
the prevailing interest rate environment and the evolution of the
sanctions. The Board expects interest income to continue to grow as
blocked payments and redemptions continue to accumulate, albeit at a
slower pace during 2023.
As previously outlined, while the Russian sanctions materially impact
the balance sheet, the impact on the group's capital ratios is not
expected to be significant. Euroclear maintains a strong capital
The nature of the activities undertaken as a financial market
infrastructure has led various parties to contest the sanctions and
countermeasures, as well as their application, with legal proceedings
ongoing in both the European Union and Russia. While not presently
considered a material risk and having limited financial impact, the
probability has increased that financial impacts arise, which may
result in a possible post balance sheet event. As such, the Board
considers it necessary to separate the sanction-related earnings from
the underlying financial results when assessing the company's
performance and resources.
The Board recognises that the unexpected profit should be managed
prudently, in line with its corporate purpose and considering its
responsibilities towards stakeholders and society, as well as a more
uncertain risk environment. Euroclear continues to act in a
transparent manner with all authorities involved. The Board will
continue to act cautiously by not distributing any profits related to
the Russian sanctions until the situation becomes clearer.
Responsibility to our people and society
The newly articulated corporate purpose and strategy recognises
Euroclear's responsibilities to its communities and society.
Management and the Board would like to thank colleagues for the way
in which they responded to the challenges of the past year, while
also adapting to a new hybrid way of working.
Having established a group sustainability office in 2021, this year
Euroclear set out a pathway to reach its net zero science-based
targets. This includes setting near term 2030 goals to cut absolute
Scope 1 and 2 greenhouse gas emissions by 55%, from a 2019 base year.
The Board considers the core of the group's performance to be the
underlying business performance and shareholder returns are assessed
on this basis.
Underlying EPS increased by 30% to 191.7 per share, reflecting growth
in net profit after adjusting for results related to the
implementation of international sanctions.
The Board signals its intention to pay dividend per share to EUR
115.5 in the third quarter. This represents an increase of 31% and
maintains the payout ratio at 60% of the underlying earnings, in line
with last year.
Commenting on the results
Lieve Mostrey, Chief Executive Officer, Euroclear
"Throughout 2022, Euroclear has continued to innovate to bring
safety, efficiency and connections to the financial markets for
sustainable economic growth.
I would like to extend my gratitude to our people, together with our
clients and partners, for their continued efforts in navigating the
extraordinary circumstances that we faced last year. Our business has
once again demonstrated its robust model, internal structures and
processes, and agility when facing new challenges.
Looking forward, I am encouraged by the progress already made in
implementing our new business strategy, which gives us confidence as
we strive towards our long-term aim to become a digital and
data-enabled financial market infrastructure."
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