Euroclear continues to deliver strong results in 2024
BRUSSELS, Feb. 5, 2025 /CNW/ -- Results for the year ending 31 December 2024
Financial highlights
Euroclear's underlying[1] business income and interest earnings reached record levels in 2024
Underlying operating income increased by 5% to reach €2,899 million.
Underlying business income is up by 5% to €1,748 million, driven by strong settlement and safekeeping activities, with assets under custody reaching €40.7 trillion as of end December 2024.
Underlying business income for Q4 2024 increased by 7% compared to Q4 2023, driven by strong performance in Eurobonds, European Assets, Global Emerging Markets and Funds.
Despite a decreasing trend in interest earnings in the second half of 2024 due to interest rate changes, underlying interest income increased by 3% year-on-year to €1,152 million.
Cost and margin evolution
Euroclear reported several one-off events in Q4 2024, resulting in a total impact of €117 million. These include an initial dotation and the 2024 contribution to the newly created Euroclear Foundation (see below), the impact of the initial consolidation of Goji and Quantessence within the Euroclear Holding figures, a voluntary retirement incentive plan and a voluntary early retirement plan and the related tax impact.
When excluding the above-mentioned events, underlying adjusted operating expenses increased by 3% year-on-year to €1,333 million, in line with the continued focus on cost mitigation and our 2-3% organic cost growth target.
Q4 2024 underlying adjusted operating expenses increased by 5% versus Q4 2023, also reflecting exceptional HR and IT-related elements amounting to approx. €10 million.
Adjusted business income operating margin for the full year 2024 improved as a result by 1.5 percentage points to 23.7%, in line with our focus to create positive operating leverage.
Net profit and EPS evolution
Underlying net profit increased by 6% to a record level of €1,038 million.
When excluding the above-mentioned one-off cost events, resulting adjusted underlying net profit increased by 5% to €1,155 million.
Underlying adjusted Earnings Per Share increased by 5% to €367, reflecting the continued increase in net profit.
Capital position and dividend proposal
Euroclear group retains a very strong capital position, comfortably above regulatory requirements with an underlying Common Equity Tier 1 capital ratio slightly above 60%[2].
The Board proposes to pay a dividend per share of €220 by the end of Q2 2025. This represents an increase of 5% and maintains the pay-out ratio at around 60% of the adjusted underlying earnings.
The impacts of the Russian sanctions are detailed in the last section of this press release.
Valerie Urbain, Chief Executive Officer of Euroclear, commented:
"2024 was a year of record financial performance, underpinned by our increasingly diversified business model and driven by strong business income and sustained interest income. Our strategy and new management structure puts clients at the centre of our plans, and we continue to make progress against our key objectives. In 2024, we grew our funds business and European presence through the announced acquisition of Inversis in Spain. We also continue to support market adoption of digital assets by attracting new issuances on our D-SI platform while participating in important projects with industry partners to drive innovation across European post-trade.
Our core activities continue to thrive. We have reached record levels in settlement and safekeeping activities, with assets under custody closing the year over the €40 trillion mark. The outstanding of Euroclear's Collateral Highway is now close to €2 trillion, while the funds depot also hit a new high of 3.6 trillion."
Business performance
The key operating metrics (end of period unless stated otherwise) demonstrate an excellent business performance during the period.FY 2023
FY 2024
YoY evolution
3-year CAGR
Assets under custody
€37.7 trillion
€40.7 trillion
+8 %
+3 %
Number of transactions
299 million
331 million
+10 %
+4 %
Turnover
€1,072 trillion
€1,162 trillion
+8 %
+5 %
Fund assets under custody
€3.1 trillion
€3.6 trillion
+16 %
+4 %
Collateral Highway
€1.67 trillion
€1.9 trillion
+15 %
+1 %
Underlying cash deposits (full year average)
€23.7 billion
€22.8 billion
-4 %
+3 %
Euroclear's assets under custody reached a record €40.7 trillion, growing for the ninth quarter in a row, thanks to solid stock exchange performances and robust results in fixed income.
Settlement volumes hit a new high due to sustained activity throughout the year.
Boosted by the ETF activity, combined with the rise in equity markets, fund assets under custody reached the record level of €3.6 trillion.
The Collateral Highway's outstanding continues to increase and is now close to its prior peak level.
Business milestones
Advancing the funds business
Over the past years, Euroclear's funds offering has evolved rapidly thanks to acquisitions such as MFEX in 2021 and Goji in 2023. In 2024, major clients in Asia, Europe and the US, including Banque et Caisse d'Epargne de l'Etat Luxembourg (Spuerkeess), Blackrock, China Construction Bank (Asia), DBS Bank or ODDO BHF have selected Euroclear FundsPlace for the onboarding of their investment funds. Euroclear provides them with a one-stop-shop solution for fund distribution and execution services via its extensive network, allowing their clients to have access to more than 250,000 funds.
In 2024, Euroclear acquired a strategic stake in IZNES, a pan-European funds marketplace based on blockchain technology. This partnership complements Euroclear's funds services in the French market and beyond as it continues to play an active role in the development of innovative funds distribution models.
In July 2024, Euroclear announced the acquisition of a 49% stake in Inversis, a leading provider of global investment technology solutions and outsourced financial services with the intention to become the full owner of the Spanish company by end 2027. By acquiring Inversis, Euroclear aims to accelerate the delivery of its funds strategy and increase its pan-European coverage thanks to Inversis' significant presence on the Spanish market.
In Asia, Euroclear acquired a strategic stake in Marketnode, a Singapore-based digital market infrastructure operator. By joining forces with Marketnode, Euroclear aims to participate in the setup of a key market infrastructure in Asia-Pacific designed to simplify the management of fund flows and reduce settlement times by using DLT technology.
Reshaping traditional financial services
Euroclear has an important role to play in bridging the gap between digital asset securities and the conventional financial landscape. In 2024, Euroclear made significant progress to become a digital, data-enabled Financial Market Infrastructure by welcoming the Digital Native Note (DNN) issued by the Asian Infrastructure Investment Bank on its Digital Securities Issuance (D-SI) platform. This marks the first of such digital issuance in USD for Euroclear and the first by an Asia-based issuer on its platform.
Euroclear is also actively engaged in exploring the full potential of digital assets and participates in various DLT projects with market partners. Alongside Digital Asset and The World Gold Council, it successfully completed a groundbreaking pilot to tokenise gold, Gilts and Eurobonds for collateral management. With the support of Paris Europlace, Euroclear worked with a group of French banks around its D-SI platform and Banque de France's DL3S platform for Central Bank Digital Currency (CBDC) to issue the first Digitally Native Note (DNN) under French law and settled it in CBDC.
Streamlined management structure
Following the appointment of Valérie Urbain as CEO of the group, Euroclear redesigned the structure and composition of its top management team to accelerate strategy execution. A new, expanded Executive Committee composed of eight members ensures the representation of all the group's constituents in all key strategic decisions and a stronger focus on clients, business operations and people – both in Europe and internationally.
Launch of the Euroclear Foundation to amplify social impact
Euroclear aims to make a significant positive social impact in the locations where it operates. By establishing the Euroclear Foundation, Euroclear will seek to improve lives and support the next generation by working to eliminate pressing social and environmental issues.
The Euroclear Foundation builds on the company's existing initiatives aimed at increasing its social impact. These include a group-wide volunteering programme, long-term community partnerships and a Matching Gift programme to match employee donations.
Russian sanctions impacts
Financial impacts of the Russian assets
Following the implementation of the EU windfall contribution regulation, Euroclear provisioned €4 billion as windfall contribution in 2024.
After retention of a 10% share of the windfall contribution to comply with capital and risk management requirements, Euroclear made a first payment for H1 2024 of approx. €1.55 billion to the European Fund for Ukraine in July 2024. A second payment for H2 2024 is expected to take place in March 2025 and should amount to approx. €2 billion.
Interest earnings related to Russian assets, which are subject to Belgian corporate tax, generated €1.7 billion tax revenue.
The sanctions and Russian countermeasures resulted in direct costs of €94 million and a loss of business income of €27 million.
Gradual rate cuts have led to a gradual decline in interest income related to the Central Bank of Russia's assets in 2024 with the outlook for future interest earnings likely to continue to decline though dependent on future policymaking decisions.
Update on Russian sanctions and countermeasures
Russia's invasion of Ukraine in February 2022 resulted in market-wide application of international sanctions. Euroclear considers the application of international sanctions as a key obligation. Therefore, well established processes are in place which have allowed the group to implement the sanctions while maintaining our normal course of business.
As a result of the sanctions, blocked coupon payments and redemptions owed to sanctioned entities continue to accumulate on Euroclear Bank's balance sheet. At the end of December 2024, Euroclear Bank's balance sheet totalled €212 billion, of which €183 billion relate to sanctioned Russian assets.
In line with Euroclear's risk appetite and policies and as expected by the EU Capital Requirements Regulation, Euroclear's cash balances are re-invested to minimise risk and capital requirements. In 2024, interest arising on cash balances from Russian-sanctioned assets was approximately €6.9 billion. Such interest earnings are driven by the prevailing interest rates and the amount of cash balances that Euroclear is required to invest. Subject to Belgian corporate tax, these earnings generated €1.7 billion tax revenue for the Belgian State. As such, future earnings will be influenced by the evolving interest rate environment.
Effective 15 February 2024, the EU Council adopted a Regulation requiring Central Securities Depositories (CSDs) holding reserves and assets of the Central Bank of Russia with a total value of more than €1 million to apply specific rules in relation to the cash balances accumulating due to restrictive measures. These CSDs, such as Euroclear Bank, should account for and manage such extraordinary cash balances separately from their other activities, should keep separate the net profit generated and should not dispose of these ensuing net profits (e.g. in the form of dividends to shareholders).
In May 2024, the European Commission has adopted a new regulation about a windfall contribution applicable to CSDs holding Russian Central Bank assets with a total value of more than €1 million. The profits generated by the reinvestment of these sanctioned amounts dating from 15 February 2024 onwards are required to be contributed to the European Fund for Ukraine. After retention of a 10% share of the windfall contribution to comply with capital and risk management requirements, Euroclear made a first payment of approx. €1.55 billion to the European Fund for Ukraine in July 2024. A second payment is expected to take place in March 2025 and should amount to approx. €2 billion.
Issued on 16 December 2024, the 15th EU sanctions package against Russia included a loss recovery mechanism which allows for the release of cash balances held by European CSDs under certain conditions. This derogation will enable CSDs to request competent authorities to unfreeze cash balances and use them to meet their legal obligations with their clients.
Euroclear continues to act prudently and to strengthen its capital by retaining the remainder of the Russian sanction related profits as a buffer against current and future risks. Euroclear is focused on minimising potential legal, financial, and operational risks that may arise for itself and its clients, while complying with its obligations.
As a direct consequence of the sanctions and countermeasures, Euroclear faces multiple proceedings in Russian courts. Since Russia considers international sanctions against public order, Russian claimants initiated legal proceedings aiming mainly to access assets blocked in Euroclear Bank's books, by claiming an equivalent amount in Russian Ruble and enforcing their claim in Russia. Despite all legal actions taken by Euroclear and the considerable resources mobilised, the probability of unfavourable rulings in Russian courts is high since Russia does not recognise the international sanctions.
Euroclear Bank and Euroclear Holding are the two group issuing entities. The full year 2024 summary income statements and financial positions for both entities are shown below.
The drop in FY2024 figures compared to FY2023 reflects the booking of the windfall contribution related to the Central Bank of Russia's (CBR) assets dating from 15 February 2024.
The evolution of FY2024 figures compared to FY2023 reflects the increase in intragroup dividend.
About Euroclear
Euroclear group is the financial industry's trusted provider of post trade services. Guided by its purpose, Euroclear innovates to bring safety, efficiency, and connections to financial markets for sustainable economic growth. Euroclear provides settlement and custody of domestic and cross-border securities for bonds, equities and derivatives, and investment funds. As a proven, resilient capital market infrastructure, Euroclear is committed to delivering risk-mitigation, automation, and efficiency at scale for its global client franchise. The Euroclear group comprises Euroclear Bank, the International and Irish CSD, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & International.
[1] Excluding Russian assets impacts.
[2] Post deduction of dividend relating to 2023 earnings, including 2024 underlying profit and based on estimated underlying RWA of around €7.5 billion. Taking into account a 60% dividend pay-out on the 2024 adjusted underlying profit, the CET1 ratio is 51%.
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