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Agence France Locale Group break even thanks to further growth in its activities in 2020

Agence France Locale
·22-min read

Agence France Locale Group break even thanks to further growth in its activities in 2020

Following the meetings of the Supervisory Board of Agence France Locale and the Board of Directors of Agence France Locale – Société Territoriale, held on March 29, 2021, AFL Group1 today published its annual report for 2020.

The results for the year ended December 31, 2020 confirm the steady growth of the local authority bank’s activities since its creation in 2015, driven by a steady flow of new memberships and increased lending activity.

With today’s publication of its annual report, AFL Group highlights the momentum driving its development, with net banking income up 24% at €13,789K, positive gross operating income of €2,515K and a net profit of €2,296K. These results are a demonstration of the robustness of the local authority bank’s model and its great capacity to support its customers.

Jacques Pélissard, Chairman of the Board of Directors of AFL-ST, and Vice-Chairman of the Supervisory Board of AFL, stressed “the pertinence of the AFL model, which, after six years of activity, has not only delivered a profit for the first time but has also played its role in financing local public investment to the full.”

For Yves Millardet, Chairman of the AFL Management Board, and Olivier Landel, Chief Executive Officer of AFL-ST, “2020, which began with an unprecedented global health crisis, did not slow the development of AFL Group, which saw its credit commitments increase by 22% to more than €4 billion and which once again welcomed a large number of new local authorities as members. Breaking even is a genuine achievement that demonstrates the sustainability of the business model forged and implemented by the local public sector six years ago. The fact that a new credit institution in France has broken even is a success worth highlighting, and one that can be credited to France’s local authorities. Lastly, AFL’s role has taken on added meaning with the heightened risks stemming from the Covid-19 crisis and its effects on economic and financial activity. AFL Group has made substantial sums available to its member local authorities in the form of loans, thereby making an active contribution to the government’s stimulus plan, focused on the ecological transition.”

In 2020, AFL Group, in its sixth year of operation, successfully continued the implementation of its 2017-2021 strategic plan on three levels:

  • The year ended on a profit thanks to the generation of revenue from the lending activity, with the sustained and diversified increase in the production of loans for member local authorities constituting a powerful lever for earnings growth;

  • Equity was further strengthened with new member local authorities, now facilitated by the broadening of the shareholder base to groupings of local authorities and local public entities since the publication on May 12, 2020 of the implementing decree of the Engagement and Proximity law of December 27, 2019.

Four new capital increases were made in 2020:

  • 59 local authorities of all categories spread across the entire country, including 3 departments and 6 non-taxing groupings, have joined AFL Group. They increased the total number of shareholders to 411 at December 31, 2020 (including 3 regions, 11 departments et 12 metropolises);

  • At December 31, 2020, AFL’s paid-up capital amounted to €168.4 million and that of AFL-ST to €176.7 million, with committed capital of €203.2 million;

  • While all categories of local authorities are represented among the AFL Group members, municipalities make up a very large percentage, nearly 75% of the paid-up capital.

In 2020, against the backdrop of the Covid-19 pandemic, AFL granted €937 million in medium- and long-term loans:

  • In addition to medium- and long-term loans, €118 million in cash lines were granted;

  • AFL’s cumulative medium- and long-term loan production since its creation amounts to €4,355 million;

  • Outstanding loans signed with member communities totaled €4,080 million at December 31, 2020.

Inaugural sustainability bond issue and fundraising in 2020

  • To formalize its overall contribution to sustainable development goals and make it better known, AFL finalized a sustainability bond mechanism in June 2020 before requesting an independent assessment of it by Vigéo,

  • On July 13, 2020, AFL carried out its inaugural sustainability bond issue in the amount of €500 million, contributing significantly to the amount of resources raised by AFL on the bond market in 2020.

  • Together, the resources raised by the AFL in 2020 represented €1,130 million, at an average margin of 32 basis points vs. the OAT yield curve and with an average maturity of 9.4 years, thereby contributing to the sound foundations of its balance sheet.

ESG approach

In 2020, AFL Group committed to a ESG approach designed to cover the full extent of its internal policies and practices.

  • Building on the provisions of the PACTE law and reflecting both clear determination on the part of its governing bodies and input from all of its stakeholders (borrowers, shareholders, partners and suppliers), AFL Group has adopted a corporate purpose aimed at reaffirming its identity in the local authority funding landscape.

  • Pursuing this approach, the AFL-ST Board of Directors, at its meeting of December 14, 2020, adopted the AFL Group’s values, intended to serve as a basis for its operation and guide its activities. They are expertise, solidarity and transparency.

Net banking income for the year was €13,789K, up 24% from €11,106K in 2019:

§ The net interest margin increased to €11,830K in the year ended 31 December 2020, vs. €10,123K in 2019, linked to the increase in outstanding loans;

  • Non-recurring revenues from the sale of loans and securities amounted to €2,192K for the period, compared with €500K in the previous year;

  • Operating expenses edged up to €9,809K from €9,320K in the year ended 31 December 2019;

  • Depreciation and amortization expense was down significantly at €1,464K over the year following the end of the depreciation of the information system set up when AFL was founded, vs. €2,289K in 2019;

  • Revenues generated by the activity, excluding non-recurring income, now cover operating expenses, and depreciation and amortization expenses in full, and enabled the generation of positive gross operating income of €323K;

  • Net income was €2,296K after taking into account the cost of risk relating to ex-ante impairments under IFRS 9. Cost of risk increased by €355K due to the increase in outstanding loans, but also as a result of the change in the weightings of macroeconomic scenarios in the wake of the pandemic and its economic and financial impacts.

The strength of AFL Group’s financial structure is underlined by its capital ratios:

  • Solvency ratio of 15.13%, compared with a regulatory minimum of 11.75%;

  • Leverage ratio (CRR2), calculated in accordance with the methodology applicable to public development banks, of 8.63%;

  • Bank leverage ratio (CRR) of 2.83%.

AFL rating as of December 31, 2020

Like its Dutch and Scandinavian counterparts, AFL Group benefits from high ratings through its credit institution. As of December 31, 2020, AFL was rated Aa3 (P-1 short term) by Moody’s Investors Service and AA- (A-1+ short term) by S&P Global Ratings Europe Limited.

AFL’s financial ratings, unchanged since December 31, 2019 and with a stable outlook, are based on the following factors:

  • AFL Group’s strong capitalization;

  • The strong support of member local authorities through the guarantee mechanism;

  • The abundant liquidity combined with efficient access to capital markets.

This dual rating contributes to AFL’s very good access to the bond and money markets, and as such to the access of member local authorities to resources under the best conditions.

AFL's rating


Standard & Poor's

Long-term rating






Short-term rating




October 29, 2020

May 27, 2020

Signing of a partnership between AFL Group and the National Agency for Territorial Cohesion (Agence Nationale de Cohésion des Territoires – ANCT)

  • Created by the law of July 22, 2019, the National Agency for Territorial Cohesion (ANCT) is tasked with acting as a “project factory” to enable local authorities to carry out their projects.

  • The partnership established between AFL Group and the ANCT at the end of 2020 aims to provide local authorities with turnkey financing solutions, particularly as part of major ANCT programs geared towards reducing inequalities between regions: “Petites villes de demain”, “France services”, “Action cœur de ville” and “Territoires d’industrie” (Small towns of tomorrow, France services, Town center action and Regions of industry).

Significant events since the balance sheet date

  • On March 23, 2021, the AFL-ST Board of Directors closed a 28th capital increase in a total nominal amount of €9,693,200, bringing its capital to €186,357,200. AFL at the same time closed its 28th capital increase in a total nominal amount of €9,400,000, bringing its capital to €177,800,000. At that time, 19 new local authorities joined AFL Group, including the Grand Est Region, the Grand Paris Grand Est (GPGE) public territorial entity, the ILEVA mixed grouping, the Combloux-Domancy intercommunal drinking water supply grouping, the City of Bagneux, and many other authorities.

  • At its meeting of March 11, 2021, the Supervisory College of the Prudential Control and Resolution Authority (ACPR) recognized AFL’s status as a public development bank. As AFL’s compliance with the leverage ratio is assessed on the basis of the consolidated situation of AFL-ST, AFL Group’s financial holding company, AFL-ST is authorized to exclude exposures resulting from loans granted to local authorities from the measurement of total exposure under the leverage ratio. For AFL Group, this is the ratio that will apply from June 2021, with a regulatory requirement of 3%.

  • The Board of Directors of AFL-ST, at its meeting of March 29, 2021, appointed Pia Imbs as Chairwoman, Jacques Pélissard, who had held this office since June 22, 2017, having stepped down after reaching the age limit. In accordance with the AFL Group companies’ Articles of Association, Pia Imbs’ appointment as a member of the Supervisory Board of AFL will be submitted to the General Meeting of Shareholders of AFL on May 6, 2021, and a Supervisory Board meeting held after that meeting will be called on to appoint her as its Vice-Chairwoman.


AFL Group considers that the various measures taken by central banks, national governments and the European Union since March 2020 allow it to forecast its results for 2021 and 2022 on the basis of realistic and cautious assumptions. However, in a persistently uncertain health and economic environment, the achievement of these forecasts may be affected by the materialization of known or unknown endogenous or exogenous factors over which AFL Group does not necessarily have control.

(i) Forecasts on the main balance sheet items 2021-2022 (in € million):



Loans and advances to customers



Liquidity reserve2



Debt securities issued



Equity capital (including the results for the financial year)



(ii) Components of results calculation, 2021-2022 projections (in €K):



Net banking income



Operating expenses



Gross operating income



Net profit



AFL Group outlook

The Covid-19 pandemic, which began ravaging the global economy and financial markets in March 2020, severely disrupted the world economy before the combined intervention of central banks. The concerted action of central banks with national governments and the European Union made it possible to return to normal as of Q3 2020, with uncertainties over the resumption of growth in the global economy since then.

Against this backdrop, AFL Group has successfully pursued its main objective of attracting new local authorities. As such, following the publication of the Engagement and Proximity law of December 27, 2019 extending the scope of entities eligible for membership of the AFL Group, and its implementing decree of May 11, 2020, the AFL-ST General Meeting of Shareholders of May 28, 2020 established the conditions allowing “non tax-raising groupings”, or of local public entities, to join AFL Group. This expansion, illustrated through the membership of six non tax-raising groupings in 2020, will continue with the establishment of conditions allowing the other groups of local authorities and local public entities to join, in accordance with the provisions provided for by the law of December 27, 2019.

AFL, a bank dedicated to local authorities, has found its true calling in this difficult environment thanks to its great resilience, shown by the continuation of all of its operational activities including continuity of access to liquidity under good conditions during the crisis.

It is reasonable to anticipate that the size and structure of AFL Group’s balance sheet will continue to grow at least at the same pace as in previous years.

AFL Group consolidated income under IFRS

2020 marked a further significant increase in results related to the lending activity, in line with AFL Group’s development trajectory and with its 2017-2021 strategic plan. Earnings growth excluding non-recurring items is reflected in revenue generation momentum coming from credit production since 2015, when the Group’s lending activity began, and is proven especially by the regular and constant increase in the value of the portfolio of loans granted to member local authorities.

AFL’s new medium- and long-term loans amounted to €936.8 million in 2020, compared with a target of €800 million. The result is that the symbolic milestone of €4.5 billion in loans granted since the Group’s creation was reached at the end of 2020. AFL’s new medium- and long-term loans represented an estimated market share of nearly 40% of the financing needs of AFL Group members in 2020.

On July 13, 2020, AFL Group, via its subsidiary AFL, carried out its inaugural sustainability bond issue in the amount of €500 million, making a significant contribution to the total of €1,130 million raised on the bond market in 2020. This sustainability bond issue, which attracted a significant number of new investors, was also a major step in AFL Group’s issuance strategy and its positioning as a public player committed to responsible market finance.

During the year, AFL Group, via its subsidiary AFL, put into production the central bank loan mobilization system (TRiCP – Data Processing of Private Claims), which provides it with a line of credit, available at any time, from the Banque de France in the amount of 70% of its outstanding medium- to long-term loans.

In 2020, AFL-ST saw its capital increase by €22.2 million to €176.7 million following four capital increases. As a result of these capital increases, the total number of local authorities holding shares in AFL Group rose to 411 at the end of 2020.

2020 NBI mainly breaks down as an interest margin of €11,830K, a 17% increase on the €10,123K reported in 2019, capital gains of €2,721K on the sale of loans net of hedging and fees, capital losses of €529K on disposal of investment securities in the management of the liquidity reserve and a revaluation loss of €272K on hedging relationships. Non-recurring transactions contributed €2,309K to AFL’s NBI in 2020, compared with €500K in 2019.

The interest margin of €11,830K is attributable to three items:

  • First, revenue on the loan portfolio, adjusted for hedging, amounted to €7,145K. Although outstanding loans grew rapidly, interest income on the loan portfolio was down in nominal terms from its 2019 level of €8,128K. This is one of the effects of the fall in interest rates, which transfers income from AFL’s assets to expenses on its liabilities, which in this case, given negative short-term interest rates, are transformed into income.

  • Second, the negative income of €4,808K linked to the liquidity reserve management, compared with negative €2,731K in 2019, reflects the cost of carrying liquidity in a negative interest rate environment. This increase in the cost of carrying liquidity, at constant return vs. 3-month Euribor, is the result of an increase in the volume of the liquidity reserve and a swift fall in 3-month Euribor in 2020.

  • Lastly, interest on debt and the cost of collateral amounted to €9,494K after hedging, compared with €4,726K in 2019. In a negative interest rate environment, the significant increase in this interest has made it AFL Group’s chief source of revenue. This very significant increase reflects the increase in the stock of AFL’s debt during the financial year and the continued decline in 3-month Euribor, against which all of AFL’s debt after swaps is indexed. The figure takes into account an increase in interest on margin calls from negative €397K in 2019 to negative €445K in 2020 and interest on short-term debt resulting from issues of negotiable debt securities under the ECP program, which amounted to €737K vs. €343K at December 31, 2019.

Net income from hedge accounting was negative €272K compared with negative €419K at December 31, 2019. This represents the sum of the fair-value differences of hedged items and their hedging. Among these differences, €578K relate to valuation differential charges on instruments classified as macro- hedges and negative €1,343K relate to valuations of instruments classified as micro-hedges. There are still unrealized differences in valuations between the hedged items and the hedging instruments, one of whose components comes from a market practice that results in the admission of a valuation mismatch between hedging instruments collateralized daily and discounted on an Eonia curve, now replaced by a €STR curve, with reference to the new monetary index, and the hedged items discounted on a Euribor curve. According to IFRS, this causes a hedge ineffectiveness to be recognized in the income statement. However, it should be noted that this corresponds to latent income. Lastly, the result of hedge accounting includes the negative valuation difference of hedging swaps in the amount of negative €493K related to the change of benchmark from EONIA to €STER. It should be noted that this valuation difference was fully offset by a cash payment received by AFL corresponding to the reduction in the remuneration of the collateral paid until the maturity of the hedged instruments, now calculated on the basis of €STR.

In the year ended December 31, 2020, general operating expenses amounted to €9,809K, vs. €9,320K in the previous year. They include €5,263K in personnel expenses, vs. €4,863K in 2019. General operating expenses also include administrative expenses, which amounted to €4,547K, vs. €4,457K in 2019. This stabilization of administrative expenses is the combined outcome of (i) the Covid-19 crisis, which considerably reduced expenditure on travel, marketing and the Group’s various communication events, and (ii) increases in IT fees linked to the start-up of the IS market, as well as higher taxes and compulsory bank contributions. It should also be noted that the 2020 accounts reflect the first very positive effects of AFL’s move to its new premises in Lyon, which has resulted in the disappearance of rental income previously reflected under IFRS 16 by a depreciation expense.

Depreciation and amortization expense amounted to €1,464K in 2020, vs. €2,289K in 2019, a decline of €825K. Factors behind this trend include the end of the amortization of the core banking information system, implemented when AFL was founded, since Q4 2019. In addition to the depreciation of the investment expenses incurred annually by AFL Group on all of its information systems, the figure includes depreciation related to the acquisition by AFL-ST of the premises housing AFL’s new headquarters and the work carried out for their refurbishment.

The year ended December 31, 2020 saw gross operating income of €2,515K, a significant increase on the December 31, 2019 figure of negative €503K.

Cost of risk relating to ex-ante impairments based on expected credit losses on financial assets subject to IFRS 9 increased in 2020, with additional provisions of €352K. The increase is attributable to the adjustment of the parameters of the macroeconomic scenarios underlying the AFL model, following the crisis generated by the Covid-19 epidemic and the increase in outstanding loans and financial assets in the liquidity reserve. However, the increase in outstanding loans only resulted in a small increase in impairment, as all loans carry low risk. For other financial assets, including the liquidity reserve, i.e. securities held and deposits made by AFL, the increase in cost of risk, although limited, is chiefly the reflection of size and maturity, as impairment is highly sensitive to asset duration.

Lastly, after the scrapping of 21K€ of intangible assets and the recognition of 156K€ in deferred tax assets linked to IFRS restatements, the 2020 financial year closed with a net profit of €2,296K, compared with a loss of €1,186K in the previous year. This result underlines the growth of AFL Group’s recurring activities, where the increase in outstanding loans to member local authorities is the main factor. These activities have now reached a level sufficient to cover all current operating expenses, and depreciation and amortization expense. Thus, in 2020, AFL’s cost/income ratio calculated on the basis of its recurring income fell below 100% for the first time, reaching 95.3% at December 31, 2020, thereby confirming that the Group has reached breakeven and that its model is sustainable.

AFL Group balance sheet and financial structure

AFL Group has a robust financial structure, with shareholders’ equity of €149.3 million at December 31, 2020, vs. €131.5 million at December 31, 2019. In view of the quality of the Group’s exposures, the Basel III solvency ratio based on the standard method (Common Equity Tier 1) stands at 15.13%, taking into account the CRR Quick Fix measures, vs. 15.78% at December 31, 2019.

The regulatory minimum of 11.75% comprises the minimum capital requirement of 8%, an additional capital requirement (Pillar 2) of 1.25% and a capital conservation buffer of 2.5%. Note that in view of the financial crisis resulting from the Covid-19 pandemic, the High Council for Financial Stability (HCSF) decided on April 1, 2020 to set the countercyclical capital buffer applicable to French exposures at 0%.

Risk-weighted assets, which reflect the quality of the AFL Group's assets, stood at €986.4 million, broken down as follows:

  • Credit risk €956.6 million

  • Operational risk €21.7 million

  • Credit valuation adjustment (CVA) risk €8.1 million

At December 31, 2020, AFL Group’s leverage ratio was 8.63% according to the method applicable to public development banks, compared with 11.98% at December 31, 2019 and well above the 3% threshold required by the regulations for June 2021.

In addition to a high level of capitalization, a very comfortable liquidity position allows AFL to continue its operational activities and withstand a liquidity shock. At December 31, 2020, the LCR ratio is 523% compared with 428% at December 31, 2019, and the NSFR ratio is 183% compared with 186% at December 31, 2019. The liquidity reserve that is available amounts to €1,587 million, that is more than a year of operational needs.

AFL Group’s liquidity situation is very comfortable and stable, as shown by the LCR and NSFR ratios, which stood at 529% and 183% respectively at December 31, 2020, vs. 432% and 186% at December 31, 2019, providing the AFL Group with significant security to pursue its operational activities.

The AFL Management Board approved the AFL annual financial statements for 2020 on March 9, 2021. The AFL Supervisory Board, which met under the chairmanship of Sacha Briand on March 29, 2021, reviewed AFL’s annual financial statements.
The Board of Directors of AFL-ST (Société Territoriale) which met under the chairmanship of Jacques Pélissard on March 29, 2021, approved the financial statements of the parent company (Société Territoriale) and the consolidated financial statements of the Group.

The audit procedures on the annual and consolidated financial statements for the period from January 1 to December 31, 2020 have been carried out by the auditors. Their reports are available at the following address:

This press release contains certain forward-looking statements. Although AFL Group believes that these statements are based on reasonable assumptions as of the date of this press release, they are inherently subject to risks and uncertainties, relating in particular to the impacts of the pandemic and the ensuing economic crisis, which may cause actual results to differ from those indicated or implied in these statements.

AFL Group’s financial information for 2020 consists of this press release and the financial report available on the website:

About Agence France Locale

“Embody responsible finance and empower local authorities to respond to the present and future needs of their inhabitants.”
“By creating the first bank that we wholly own and manage, we, the French local authorities, have taken a strong political step toward decentralization. Our institution, Agence France Locale, is not a financial institution like the others. Created by and for local authorities, it acts in a local context to strengthen our freedom, our ability to develop projects and our responsibility as public actors. Its culture of prudence prevents us from the dangers of the complexity and richness of its governance, and from abuses related to conflicts of interest. Its fundamental objective is to offer local authorities access to resources under the best conditions and with complete transparency. The principles of solidarity and equity guide us. Convinced that we will go further together, we wanted an agile institution that would appeal to all authorities, from the largest regions to the smallest towns. We see profit as a means to optimize public spending, not as an end in itself. Through AFL, we support a local environment committed to addressing social, economic and environmental challenges. The AFL strengthens our power to act, to carry out projects locally, for today and tomorrow, for the good of the people who live there. We are proud to have a bank that expresses growth as we see it, ever more responsible and sustainable. We are Agence France Locale.”

For further information see:

1 Agence France Locale Group (AFL Group) is composed of Agence France Locale (AFL), which is a credit institution, and Agence France Locale – Société Territoriale (AFL-ST), which is AFL’s financial holding company.

2 This line corresponds to part of the proceeds of the debt issued by AFL, whose purpose is to fund its liquidity reserve to meet prudential requirements and its operating needs.