RESTRICTED TO ESA / EH BOARDS
Euroclear FY 2020 Results
Released on 8 February 2021
1 Introductory remarks
Euroclear is successfully navigating an exceptionally uncertain environment • We are grateful for the resilience shown by colleagues across Euroclear in the face ofthe challenges posed by COVID-19
Robust operational and financial performance in 2020 • Net profit and EPS at prior year levels
Dividend maintained at record 2019 level • 2019 dividend of EUR 82.4 per share to be paid as an interim dividend inQ1 • Board signals its intention to maintain 2020 dividend at prior year level, to bepaid as an interim dividend after confirmation of first half 2021results
Welcomed new shareholders who further diversify Euroclear’s investor community and bring healthy liquidity to the shares • 9% of issued share capital transferred ownership in 2020
Simplification of our governance structure for completion in 2021
2 Agenda
2020 Highlights Lieve Mostrey
Financial Review Bernard Frenay
Business Review Frederic Hannequart
Summary & Outlook Lieve Mostrey
3 Robust operating and strategic performance, in exceptional 2020 conditions, yielded stable financial performance
• Enabled customers to transact in record levels through COVID-19 Resilience in • Total transactions worth €897 trillion (12x global GDP) exceptional market • Increased debt issuance drove custody to record €32.8 trillion conditions… • Business continuity plans activated successfully, with 95% of staff working from home since March 2020
• Diversified business model supported continued business income …combined with growth offsetting impact of lower interest income strategic progress… • Strategic progress to strengthen, grow and reshape network positions Euroclear to meet evolving customer needs
• Revenues: stable vs 2019, despite interest rate headwinds …to yield financial • Net profit and EPS: stable vs 2019 stability, despite • Strong balance sheet: adjusted CET1 ratio stable at 36% interest headwind • Ratings: stable with AA/AA+ rating for Euroclear Bank • Dividend: stable at 82.4 per share
4 Resilient operating performance supported record number of transactions in 2020, driven by financial market volatility
Resilience
Yearly netted transactions (million)
+15% 276 Monthly netted
239 transactions 230 215 196 30.0
25.0
20.0 • Record level of transactions settled in 2019 equivalent to €837 trillion: 15.0 approximately 10 x Global GDP.
2016 2017 2018 2019 2020 2020 2019 avg
• Euroclear systems supported financial markets through considerable volatility • Record 276 million transactions settled in 2020, equivalent to €897 trillion (12x estimated Global GDP) • Transactions in March +50% at height of market reaction to COVID-19 pandemic. Volumes remained higher than normal throughout 2020
5 Record Assets Under Custody Reflects Increased Debt Issuance and Strategic Progress in Growing the Network
Resilience Strategy
Assets under Custody (€ trillion) • Record level of assets under custody driven by +5% 32.8 increased issuance of debt • Government debt issued to support COVID- 31.4 19 response and recovery
28.6 • Strength and scale of network, service offering 28.2 27.7 and client franchise is attractive to investors / issuers worldwide and across asset classes • Strong Global Reach pipeline as developing markets recognise the economic benefits of
2016 2017 2018 2019 2020 becoming Euroclearable • FundsPlace offering continues to grow, reflecting industry growth and demand for Global Reach FundsPlace international distribution model +7% to €1.3 trillion +8% to €2.6 trillion Assets Under Custody Assets Under Custody
6 Heightened Client Demand for Collateral Management in Uncertain Financial Market Conditions
Resilience Strategy
Client demand to mobilise securities as collateral Collateral Highway (€ trillion) • +17% 1.5 increased in response to market volatility
1.3 • Increasing regulatory requirements and client 1.2 1.2 focus on efficiency underpins long-term growth 1.1 potential of collateral management • Breadth of collateral highway ecosystem and range of diversified collateral management services are differentiating to clients
2016 2017 2018 2019 2020
7 Strategic Focus Delivered Growth in Higher Quality Earnings, Offsetting Impact of Lower Interest Rates
Resilience Strategy Financial stability • Diversified business model and strategic focus has delivered business income growth, ahead of 2013 2017 2020 strategic plan • Continued focus on cost control while investing selectively in customer proposition and growth • Business income margin reached 32.7%, within low to mid 30% range Business Income 33% targeted in 2023 strategic plan Evolution • Business income margin increase 22% largely offset impact of lower interest rate environment in 2020
Business Investments in regulatory Mid-range of Income 26% infrastructure & cyber strategic plan Margin security elevated cost base
Cost evolution
(1) Excludes Interest and Bankingincome. 8 Financial Review Robust Financial Performance in 2020
€ 1280m Business Income €862m Operating Expenses €137 Earnings Per Share +12% vs FY 2019 -5% vs FY 2019 +0% vs FY 2019
Euroclear Holding
FY 2019 FY 2020 vs
(€ m) 2019
Operating Income 1435 1430 -6 0% Business income 1145 1280 135 11.8% Interests,banking & other inc. 290 150 -140 -48%
Operating Expenses -820 -862 -42 -5.1%
Share of results 1 0 -1 Operating Profit before impairment 616 568 -48 -8%
Impairment -2 -2 0 Pre tax profit 614 566 -47 -8% Tax -183 -135 49 27% Net profit 431 432 1 0% EPS 136.9 137.2 0%
Business income operating margin 28.4% 32.7%
EBITDA margin (EBITDA/op.inc) 49.4% 46.6%
10 Diversified Model Delivered Business Income Growth
2020 Business Income Business Lines Track Record (€ m)
Business Lines 12% growth in 2020
Grow (Global Reach), 12% 1400 1,280
Grow 1,145 12 3% (Collateral 1200 1,079 152 Highway), 13% 5% 10 8 11% 147 154 1000 140 10% Strengthen 139 (Europe / 126 Funds), 75% 800 Market Drivers 13%
600 5% Transaction 963 volumes, 30% 400 805 849 Fixed Income nominal 200 value, Equities 48% value, 0 22% 2018 2019 2020
Stregthen (Europe/Funds) Grow & Reshape (Global Reach) Grow & Reshape (Collateral Highway) Grow & Reshape (Information Serv.)
11 Cuts to USD Interest Rates Substantially Reduced Net Interest Income, in line with Sensitivity Guidance
• Interest rate cuts, especially in USD, in response to COVID-19 Deposits Currency Split materially reduced Interest, Banking & OtherIncome
Others, EUR, 26% • Interest rates in Eurozone remain negative 18% • Rates: Interest income cyclical in nature and highly correlatedwith interest rates GBP, 8% • Volumes: Balances flat compared to 2019 • Financial impact of rate cuts was in line with sensitivityguidance
USD, 48%
Interest, Banking & Other Income (€ m) Interest Rate Evolution (average)
2.28% 290 1.90% 256 -48% 1.10% 184 163 150 0.51% 0.60% 0.75% 0.40% 0.29% 0.54% 0.23%
2016 2017 2018 2019 2020 -0.38% -0.40% -0.40% -0.43% -0.50% 2016 2017 2018 2019 2020 Average Deposits 18.1 17.1 20.1 20.6 20.6 USD (FED) EUR (ECB) GBP (BOE) (€ bn) 12 Continued Focus on Cost Control and Strategic Investments, Despite Exceptional 2020 Circumstances
Operating Expenses (€m)
862 • Operating expenses of €862m, up 5% vs 2019 814 820
187 166 168 • Exceptional circumstances throughout 2020 resulted in one-off costs
• Continued to invest in strategic initiatives to adapt technology capabilities and deliver product enhancements to support future growth
662 663 690 • Cost discipline remains a strong focus
2018 -14 2019 -11 2020 -15
Net Capitalisation Running Investments
13 Business Income Operating Margin Growth Illustrates Effective Delivery of Strategic Plans
Business Income Operating Margin1
32.7% • Business income operating margin is
28.4% primary KPI to measure strategic delivery as it neutralises effect of interest rates 24.6% 23.8% • Increased by 4.3 percentage points in 22.1% 2020 to 32.7% • Increased over 10 percentage points since 2017
• EBITDA of €667m, down 6% due to impact of lower interest income, resulting in 47% EBITDA margin2
2016 2017 2018 2019 2020
1. Business Income Operating Margin is calculated as the difference between Business Income and the Operating Expenses, divided by the Business Income 2. EBITDA margin is calculated as the EBITDA divided by the Operating Income
14 Balance Sheet remains Strong with Good Liquidity
Euroclear Holding Balance Sheet (€m) 2020 2019 • Financial Assets approaching €10bn at group level Cash and balances with central banks 4,029 1,883 mainly driven by reinvestments by the Bank of the Loans and advances 10,787 13,735 2020 debt proceeds and client balances in securities. Financial Assets 9,932 10,311 • Shareholders' equity up to €4,796 on accumulated Goodwill and intangible assets 1,020 1,002 profit, before 2019 and 2020 expected dividend Other assets 638 638 payments. Total assets / Liabilities 26,406 27,569 • Capital ratios remain robust, even with increased volumes and higher dividend payout ratio, supporting Deposits from central banks 302 826 Euroclear’s low risk profile. Deposits from banks and customers 14,780 15,589 Debt securities issued and funds borrowed 5,744 6,107 Shareholders' equity 4,796 4,230 Other Liabilities 784 817
Group capital ratios & Risk Weighted Assets (RWAs)*
15
* Estimated figures Shareholder Returns Remain at Record Levels, Despite Challenging Market Conditions
Earnings per share Return on equity1 €/share %
136.9 137.2
102.3
83.7 84.6
2016 2017 2018 2019 2020 2
1. Return on Equity is calculated as the net profit of the year divided by the average shareholder equity, as reported in the year-end financial statements 2. 2020 shareholder equity is adjusted for dividend related to 2019 results (EUR 259 MM not yet paid, without the adjustment ROE reached 9.6% 16 Dividend per Share and NAV per Share Held Stable With Record 2019 Levels
Dividend per share1 NAV per share2 €/share €/share
3
1. Dividend guidance for 2019 and 2020 not yet paid.2019 dividend is expected to be paid before end Q1 2021. 2. Net Assets Value per share is calculated as the reported equity at year end divided by the number of shares. 3. 2020 figures have been adjusted for 2019 dividend (EUR 259 MM not yet paid), without the adjustment 2020 NAV reached EUR 1,524 17 Business Review Unique Position and Strategy Proven Effective in 2020
Cost &process Exchanges efficiency Investment banks Open model, as Central liquidity and collateral Counterparty hub at the centre Clearing of the global financial Regulated as Custodians market ecosystem systemically important market Issuers infrastructure Global collateral and Risk reduction liquidity optimisation Venue neutral and Central Securities open architecture Depositories Central banks
Business Strategy aims to Strengthen, Grow and Reshape the Euroclear Network
19 Strengthening our Network in Europe
Eurobonds and Domestic European Securities Business Income
• Well placed to support Europe’s post-COVID-19 recovery and 974 objective to develop a Pan-European Capital Markets Union 859 795 795 814 • In 2020, robust Euroclear infrastructure supported increased transaction volumes as well as increased debt issuance
• Supporting Brexit transition with progress in providing CSD services for Ireland and international positioning of UK CSD
• Ongoing investment in core infrastructure for risk reduction and settlement efficiency across Euroclear (I)CSDs
2016 2017 2018 2019 2020
FundsPlace Revenue Mix / Outlook
• C. 75% of Business Income • FundsPlace supports sustained growth of funds industry with efficient distribution of funds to global investor base • Expect Growth Through-the-Cycle Slightly Above European GDP Levels • Fund Assets under Custody up 8% to €2.6 trillion
• International ETF structure continues to grow
• Further expansion of the international ETF issuance model to include ETCs and ETNs 20 Growing our Network Globally
Collateral Highway Business Income (Growth)
• Heightened demand for outsourced collateral management 306 286 services, driven by: (a) Regulatory requirements; (b) Industry 264 focus on efficiency 244 204 • Collateral Outstanding +17% in 2020 to record €1.6 trillion
• Further developed service offering for new client segments, including buyside firms
Global Reach • Growing appetite from developing market economies to access international investor base 2016 2017 2018 2019 2020 • Launched Monetary Bills in collaboration with UAE Central Bank and Bloomberg Revenue Mix / Outlook
• Expansion of Asia presence with launch of new asset classes: • C. 25% of Business Income
• Origami bonds in Japan • Expect High Single Digit Growth Through-the-Cycle • Yulan bonds in China
• China Construction Bank joined common depository network
• Partnered with Turkey to create Euroclearable link
21 Reshaping our Network
Data and Innovation
• Grasp opportunities beyond Euroclear’s traditional processing role
Connect financial market participants within the Euroclear network
Provide data insights to support pre-trade decision making
Connection Data insights Technology
• EasyWay web interface client growth of 26% in • Reference data products gaining 2020 to 1100 active clients increasing client traction and revenues growth • Taskize community grown to +400 active clients in 50 countries, enabling efficient inter-company • Launch of Euroclear LiquidityDrive as part workflow of ongoing investment in post-trade data analytics offering • Supporting issuers’ investor relations programmes through Euroclear InvestorInsight shareholder • Exploring efficacy of cloud, AI and DLT identification and analytics service technologies in range of pilot projects with industry partners 22 RESTRICTED TO ESA / EH BOARDS Euroclear’s Corporate Responsibility Agenda Provides Solid Foundation to Support Industry ESG Initiatives
Our DNA as a Responsible Company Financial markets’ increasing • Diversity & Inclusion focus on ESG creates opportunities • Mental & Physical Wellbeing • Training & Development • Position in global ecosystem makes Euroclear a natural partner • Track record in supporting global • Carbon neutral since 2012 standards through ‘Euroclearability’ • Environmental footprint • ‘Euroclearability’ reduces borrowing reduction goals costs for emerging economies • Climate Risk Action Plans • Exploring ESG opportunities through industry collaboration
• Long-term community partner for local / international projects • Extra €1 million donation to support efforts for Covid-19
23 Close Management of Risk Profile Creates More Capital Headroom to Support Further Growth
1 2 Strong ratings support systemically important role Strong Capital Position (2020)
• Strong ICAAP framework set at 99.98% confidence level € 897tn Connecting €-equivalent 2,000 S&P transactions financial • Capital above ICAAP threshold processed institutions AA
€ 33tn Connected to assets held in 50+ Fitch custody financial markets AA+
Low Group Leverage Net Debt / EBITDA Debt issued with the sole 2019 purpose to meet recovery 2020 regulatory requirement 1.2x 1.1x CET1 ratio
Total capital ratio Euroclear
Combination of high credit rating, low risk profile and solid capital ratio are critical to resilient and sustainable performance
24 1. Ratings for Euroclear Bank 2. Estimated figures Summary & Outlook Euroclear Stands Ready to Partner with Financial Markets to Address New Challenges and Opportunities
Sourcing investment Connecting issuers / for economic investors to global recovery ecosystem
European Capital Embracing digital Markets Union technology
Business resilence & ESG security
26 Delivering Our Strategy: On Track to Reach Mid 30% Business Income Operating Margin by 2023
Investment Expect to Further Delivery of Strategic requirements led to Improve Plan Evidenced Margin Compression Operating Margin 2013 2017 2020 2023
Now expect to trend towards mid thirties, at top end Business Income 33% of 2023 target Evolution range Business Income Margin expansion 22%
Business Investments in regulatory Income 26% infrastructure & cyber Mid-range of Margin security elevated cost base strategic plan
Cost evolution
(1) Excludes Interest and Bankingincome. 27 Robust 2020 Performance Reinforces Strategic Trajectory; Expect to Continue to Enhance Quality of Earnings
2020 (2019) 2023 target 2020 comment
Maintain historic Above secular Business income €1,280m (€ 1,145m) growth trajectory trend
On track to reach Business Income Low to mid thirties Operating margin1 32.7% (28.4% ) mid thirties range
2% average Sustained Operating 6.7% (5%) leverage through-the-cycle investment
Interest, Banking Driven by balances Impacted by €150m (€290m ) and Other Income and interest rates interest rate cuts
Maintain AA/ Rating AA / AA+ AA / AA+ AA+ Rating maintained
28 1. Excludes Interest and Banking income. Appendix Reported and Adjusted EPS Reconciliation EBITDA retreatments
(in €m) 2016 2017 2018 2019 2020
Net Profit 298 236 322.1 430.8 431.9
Adjustments License Termination -28.0 - - - - DTA - 33.6 - - - Adjusted Net Profit 270 269.6 322.1 430.8 431.9
Avg. Number of Shares 3.2 3.2 3.1 3.1 3.1
Adjusted EPS 84 84.6 102.3 136.9 137.2
Euroclear Holding
(€ m) FY 2017 FY 2018 FY 2019 FY 2020 vs 2019
Operating profit before Impairment 408 514 616 568 -8%
Depreciation, amortisation & other provisions 38 64 70 75 7%
Net financial charges** 7 19 24 24 1%
EBITDA 453 596 709 667 -6% 0 0 0 0 EBITDA margin (EBITDA/op.inc) 37% 45% 49% 47%
** Net financial charges recorded at Euroclear Holding level 30 Euroclear Investments – Summary Income Statement (in IFRS)
(€ m) 2020 201 Y-o-Y 9 Net Operating income 25 436 -94%
Net Interest Income 4 4 -11% Other Income 21 1 4143%n.a. Gains/Loss on non trading financial assets -1 215 -100n.a.% Div idendIncome 1 216 -100n.a.%
Operating expenses -1 -1 -49%
Share of results 0 0 0%
Operating profit before Impairment* 24 435 -94%
Impairment 0 0 n.a. Tax -1 -55 99%
Net Profit 23 380 -94%
31 Euroclear Investments – Summary Balance Sheet (in IFRS)
€ million end of year balance 2020 2019 %
Loans & Advances 146.1 129.0 13% Financial assets 312.4 246.6 27% Non-trading financial assets 1,103.5 1,103.9 0% Current & Deferred income taxassets 0.0 0.0 n.a. Other Assets & Accruals 0.1 0.4 -65% Property Plant & Equipment 0.1 0.2 -42% Participations in group companies 581.2 637.2 -9%
Total Assets 2,144 2,117 1%
Long Term Debt 1,303.0 1,301.8 0% Intercompany Borrow ings 0.0 0.0 n.a. Financial Liabilities held for trading 0.0 0.0 n.a. Income & deferred tax liabilities 49.7 49.0 1% Other liabilities & Accruals 0.7 0.2 247% Shareholders' Equity 790.1 766.3 3%
Total Liabilities 2,144 2,117 1%
32 Euroclear Bank - Summary Income Statement (in BEGAAP)
(€ m) 2020 2019 Y-o-Y
Net Operating income 944 1,025 -8%
Operating expenses -580 -541 -7%
Share of results 0 0 n.a.
Operating profit before Impairment 364 484 -25%
Provisions 0 0 n.a. Impairment 0 0 n.a. Tax -94 -142 -34%
Net Profit 270 342 -21%
33 Euroclear Bank – Summary Balance Sheet (in BEGAAP)
€ million 2020 2019 % end of year balance
Loans and advances to banks and customers 14,243 15,210 -6% Financial Assets 8,282 8,932 -7% Goodwill and (in)tangible assets 10 6 72% Other assets/accrued income 164 176 -7%
Total Assets 22,700 24,325 -7%
Deposits by banks and customers accounts 15,262 16,452 -7% Debt instruments issued 4,947 5,309 -7% Other liabilities/provisions 263 376 -30% Subordinated liabilities 306 306 0% Shareholders' equity 1,922 1,882 2%
Total Liabilities 22,700 24,325 -7%
34 Disclaimer
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