Euroclear reports 8% Y/Y rise in net profit for 2021
Provider of post trade services for the financial industry Euroclear today posted its financial results for the full year of 2021.
Net profit for the year to December 31, 2021 was up 8% year-on-year to EUR 467 million, excluding MFEX. Including MFEX, 2021 net profit increased to EUR 463 million.
Euroclear saw sustained growth in business income, up 15% year-on-year to EUR 1467 million, offset the impact of lower interest rates on total operating income. Euroclear continues to invest strongly in technology systems and human capital, with operating expenses up 7% to EUR 919 million.
The group maintains a strong capital position and low risk profile, which are critical as a financial market infrastructure and create headroom for further growth.
The company continues to report strong operating metrics across its business lines. It has two key operating metrics to drive business income: (i) amount of assets under custody and (ii) the number of transactions processed.
Assets under custody grew by 15% to reach EUR 37.6 trillion at year end. About half of the group’s business income comes from fixed income fees which, in contrast to equities, are charged on the nominal value of the securities. Since the nominal value is not impacted by market valuations, this provides a robust, subscription-like foundation for the group’s business model.
The second key driver of business income is the volume of transactions processed by the group. In 2021, Euroclear processed 295 million netted transactions, which is worth a euro equivalent of approximately EUR 992 trillion.
As planned, Euroclear’s growth business lines continue to grow more quickly than the core business. Euroclear’s Collateral Highway grew 27% to mobilise a record average daily outstanding of EUR 1.9 trillion last year, benefitting from Euroclear’s key role in providing triparty solutions as clients implement new uncleared margin rules for derivatives under Basel frameworks.
Euroclear’s Global & Emerging Markets business grew assets under custody by 15% to EUR 1.5 trillion. And fund assets under custody were also up 23% to reach EUR 3.2 trillion, before inclusion of MFEX business.
Combining MFEX’s well established fund distribution platforms with Euroclear’s post-trade expertise will create a new end-to-end funds offering for Euroclear’s clients. The funds market is highly attractive and the company believes that the purchase of MFEX will deliver meaningful long-term value for its shareholders.
The integration of MFEX is progressing well. Euroclear expects to deliver revenue and cost synergies of at least EUR 25 million after the integration has been completed, and it is expected to be accretive to group profits from 2023.
In Euroclear’s core business, it has completed the successful migration of Issuer CSD services for Ireland from Euroclear UK & Ireland to Euroclear Bank. This migration, which provided long-term certainty to the €100 billion Irish securities market in light of the UK’s decision to leave the EU, was a unique, innovative and complex project involving stakeholders from the entire market.