The MeDirect banking group said on Monday it made a loss after tax of €50.1 million for the six months ended June 30, compared to a profit after tax of €6.9 million for the first six months of 2019.
It blamed the loss on the effects of COVID-19 and said that if this one-off impact was excluded, the group would have recorded a profit after tax of approximately €1.7 million.
"The group remains well capitalised and liquid and as a systemically important bank, it is supervised by the European Central Bank," it said in a statement to the media.
It said that over the past six months it continued to implement its retail digital transformation to deliver long-term profitable growth as a more diversified panEuropean retail and digital challenger bank.
Its client base grew by 8% in the first six months of 2020, from 66,500 to
72,100. Client assets reached €3.7 billion as at end June 2020, up 9% from €3.4 billion as at 31 December 2019.
Arnaud Denis, Chief Executive Officer of MeDirect Group said: “The group is implementing new digital solutions to provide customers with straightforward services and a seamless banking experience. The successful launch of the Group’s new mobile application in Malta in early May and in Belgium in July was one of the key milestones of this transformation.”
Throughout the first half of 2020, the group continued to diversify its balance sheet and it said it is on track to meet its target of a €1 billion Dutch government-backed mortgage portfolio by December 2020.
During the peak of the COVID-19 outbreak, MeDirect Belgium was the first issuer to securitise a portfolio of Dutch residential mortgages with a third party investor through a Residential Mortgage-Backed Security (RMBS). As a result of the transaction, MeDirect Belgium raised €350 million of long-term lower cost funding and diversified its funding sources.
The group continued to de-risk its historical pan-European international corporate lending business as part of the strategic transformation.
"MeDirect Malta’s local corporate banking business in Malta, accounting for less than 10% of the group’s corporate lending, remains sound and profitable. MeDirect Malta has become an accredited financial intermediary under the Malta Development Bank’s COVID-19 Guarantee Scheme and has launched its MeAssist product in early May 2020 in order to enhance access to bank financing for its clients."
The group’s balance sheet increased by 23% to €3.8 billion during the first six months of 2020, from €3.1 billion as at December 31, 2019. This was principally driven by the €463 million increase in the Dutch government-backed mortgage portfolio.
The total customer deposits grew by 8% to €2.6 billion as at 30 June 2020 from €2.4 billion as at 31 December 2019.
The group carried out a comprehensive review of all lending portfolios and individually assessed borrowers on a loan-by-loan basis within its international corporate lending portfolio to identify problem exposures.
The review resulted in the recognition of impairment provisions of €55.7 million for the first six months of 2020, capturing expected credit losses.
MeDirect Group’s CET1 and Tier 1 capital ratios were 13.4% and its total capital ratio was 15.7% as at 30 June 2020. Despite the reported loss coming from the COVID-19 impact the Group’s Tier 1 capital ratio remains well above the Total SREP Capital Requirements, with Tier 1 capital surplus of circa 440 basis points above this requirement.
The group said its liquidity reserves remain strong at €666.8 million as at 30 June 2020.