Net profit increased to EUR 156 million (1H 2016: EUR 57 million). The increase in profit is predominantly driven by two private equity exits in Asia and Eastern Europe, lower value adjustments on our loan portfolio and lower impairments on our private equity portfolio.
Total value adjustments and impairments decreased by EUR 35 million to EUR 3 million. Non-performing loans (NPL) increased to 8.4% (YE 2016: 7.5%), while the coverage ratio decreased from 56% (YE 2016) to 51% reflecting a lower average risk profile in our NPL portfolio.
The increase in Core Tier 1 ratio to 23.7% (YE 2016: 22.7%) provides a solid solvency position in anticipation of the expected impact of anticipated Basel IV regulation.
For more information, please see our half-year report.
In renewable energy, Climate Fund Managers achieved a financial closing for Climate Investor One, a new FMO initiated global climate fund of USD 412 million. The fund catalyses institutional investors from a broad spectrum seeking commercial, social and environmental returns into renewable energy in emerging markets.
We set up another unique partnership to address climate change with YES bank (private sector bank in India), DEG (the Development Bank of Germany) and Proparco (the Development Bank of France), by signing a charter championing green finance in India at the Yes bank & FMO Green Finance Symposium. FMO also invested through its own sustainability bonds in a Green Bond issued by Yes bank that will be used to finance green infrastructure.
With the closing of two new transactions in Guatemala and one in El Salvador, we finalize a series of SME/Green credit lines to five different banks of the Promerica Group, a long-term partner of FMO. We also designed a capacity development project to support the banks in developing a green product offering, to train staff and to provide technical expert support.
In the Agriculture, Food & Water sector, we have provided a USD 25 million loan to Ukraine’s agribusiness group Astarta to finance its green capital expenditure program. The program is aimed at improving resource efficiency of the group’s sugar business as well as reducing its environmental impact.
Promoting inclusive development, FMO is reaching out to smallholders via its Farmer Finance program. We have extended a USD 4 million loan to Babban Gona, a Nigerian social enterprise, supporting job-creation and providing a path out of poverty for smallholders. In the Philippines, we have invested in Agronomika Finance Corporation in partnership with Kennemer Foods International, and IDH, the Sustainable Trade initiative. With this facility, smallholder coconut farmers increase their income by gaining access to finance for intercropping cocoa into their farms. Both investments come from MASSIF, the financial inclusion fund that FMO manages on behalf of the Dutch government.
In July FMO and Finnfund, (the Finnish development finance company), together with owner and developer DESA, mutually agreed to end their existing contractual relations of the Agua Zarca hydropower project in Honduras. This exit from the project is aimed at reducing international and local tensions in the area.
Starting October 15, 2017, Fatoumata Bouare will join FMO as the new Chief Risk & Finance Officer (CRFO). Ms. Bouare joins FMO from the Bank of Africa Group where she held the position of Director, Risk Management Head.
In order to generate greater transparency by creating an opportunity for stakeholders to provide input to FMO's investment decisions, full “ex-ante” (before contracting) disclosure of higher risk transactions started in 2017. This means that FMO discloses information about investments before contracting, for a minimum period of 30 days.
FMO updated the corporate strategy towards 2025 to align with the Sustainable Development Goals (SDGs), and to increase focus and impact of activities. The strategy sets out to increase impact in the investment portfolio, deepen relationships with clients and stakeholders, and enhance ability to deliver quality at speed. To deepen our relationships with clients and stakeholders, we will focus on three sectors where we can have the biggest impact: Financial Institutions, Energy and Agribusiness. We discontinue our debt offering to non-focus sectors.
We expect that the operating environment in the second half of 2017 will be volatile. Although growth perspective for emerging markets are positive, the effects of the political, regulatory and economic environment on global trade and foreign investments are uncertain. We nevertheless expect to meet our targets, which are set for 2017.
Jürgen Rigterink, FMO’s CEO: “The first half of the year of 2017 can best be described as dynamic. In this light, our organization is even more actively engaging with its many stakeholders
In the Netherlands, we have started to leverage our experience and infrastructure to help Dutch businesses in financing their international activities in emerging markets.
We have engaged with our local stakeholder community and NGOs through direct dialogue and now publically disclose our higher risk transactions for input from external stakeholders before they are final. Across our activities and markets, we learn to become even more sensitive of the environment in which we are active.
We have advanced in making FMO fit for the future, through amending our strategy and bringing more focus to our activities. We set ourselves the 2025 ambition to be the ‘preferred partner to invest in local prosperity”.
This press release should be read in conjunction with the interim Report 2017, which will be published on 29 August 2017 on www.fmo.nl/reports. All figures in this document are not audited and not reviewed.