We are part of a troubled system. As such our customers are not immune from the impact of a major economic downturn. While our balance sheet has continued to grow, by 23% in 2011, our provisions for doubtful debts have also increased.
As in 2010, half of the provisions in 2011 relate to biomass projects. This forms a small proportion of our overall loan portfolio (1.2%). Risks relating to biomass projects are reassessed on a regular basis and provisions adapted accordingly.
We have supported a diversified renewable energy sector by financing a limited number of innovative biomass projects that have higher sustainability qualities than their peers, such as not using crops. These projects appear to have struggled with technology which is not mature enough, and a supply chain of biomass that is too narrow; weaknesses that meant some projects were less resilient in the volatile market conditions created by the economic crisis. Most projects are still ongoing and are monitored closely. New projects can only be financed if they meet very strict technology and biomass supply requirements, and have stronger financial management. No new biomass projects were financed in 2011.
At the same time we have a solid reputation, and an excellent track record financing wind and solar energy projects. In 2011, the Ampere Fund – which invests in sizeable renewable energy projects in Western Europe – closed its investment period successfully, for example.
We do not want to become a renewable energy bank only, despite the opportunities we see in an expanding market. Instead we are working to find innovative ways to partner with like-minded institutions to finance renewable projects, acting as a lead investor and capitalizing on our expertise.
A fine balance
We have worked hard in 2011 to maintain a healthy balance between deposits and loans. A 76% ratio of loans to deposits in 2011 is strong evidence we are getting the balance right. While many mainstream banks’ lending has clogged up, Triodos Bank has delivered excellent growth in lending of 33%.
In Europe, growth of lending and deposits was particularly marked in Spain, up by 23% and 58% respectively. Our new office in Germany continued to develop, lending successfully in particular. Lending growth was also notable in the UK. Customers grew substantially in Belgium, The Netherlands, and Spain. More details of our successes, and challenges, are available under Results, later in this report.
Growing capital base
Triodos Bank has always had a strong capital position. To maintain it, we raised new capital in Spain, The Netherlands and Belgium both by making depository receipts available throughout the year and through targeted campaigns.
This strategy proved to be very successful. We raised EUR 75 million in net new capital from the retail market, ending the year with a strong BIS ratio of 14.4% (2010: 14.7%) despite the strong growth of our lending activity.