Page 101 - economic report 2019

The core of the Andorran financial system consists of a total of five groups: Andbank, MoraBanc,
Crèdit Andorrà, BancSabadell d’Andorra and Vall Banc.

According to official GDP data published by the Government, Financial, real estate, professional
and technical activities saw a 2.0% increase in GVA in 2019, after two years of negative growth.

The Andorran financial system is tackling the final part of adapting to international standards,
especially in terms of banking regulations deriving from the Monetary Agreement, although
adaptation to fiscal transparency and international mutual assistance in criminal matters and
to combat money laundering and terrorism financing is constant. The balance is quite positive
because Andorran banking has managed to transform the challenge into an opportunity to
internationalise its banking model and approach digital transformation and its capacity to deal
with competitors through wholly digital banking.

In this clearly complex context of transformation and standardisation, the financial sector has
shown some size adjustment. The number of employees for the whole of the financial sector has
fallen 5.1% to 1,777 workers. In 2019, average wages for this sector, which are the highest of all
the sectors in the Andorran economy, were also adjusted, -6.2% in comparison with the previous
year. This decline can be largely explained by early retirements of workers with higher-than-
average remuneration. As for the network of businesses and establishments, on 31 December
there were 181 establishments, three more than the previous year, while the number of bank
branches fell from 40 to 39.

If we consider just the five Andorran banks, in 2019 the number of employees throughout the
Andorran banking system was 2,563, and approximately 53% of them worked in Andorra, i.e. 99
1,359 employees.

The Andorran banks ended 2019 with improvements in the main indicators, such as profits, assets
under management, lending, profitability and the solvency ratio. On 31 December, the whole
Andorran banking system reached a total of 49,713 million euros in assets under management,
a figure that represents an increase of 11% compared with 2018, and which has doubled in the
last decade. Equally, Andorran banks saw major
In 2019, the profits of Andorran banks growth in aggregate profits, up 12.4% against
grew and their solvency ratio and the previous year, to 112 million euros. The
profitability improved. banks have managed to transform the business,
to restore growth in profits on a consolidated
basis, despite the economic situation of low
interest rates, the continual adaptation to international banking standards which include
requirements for further provisions, and the major technological investments made in recent years.

Another important detail that demonstrates the soundness of the Andorran banking system is
the return on equity (ROE), at 7.70%, higher than the last year (7.31%) and much higher than
the average of the European banks (5.8% according to data from the Central European Bank
for the third quarter of 2019). The data show, moreover, that the Andorran banking system has The Andorran economy: developments in the main sectors | XII. Services
maintained good levels of capitalisation, with high liquidity and solvency ratios. The CET1 solvency
ratio (phase-in) – calculated for comparative purposes – was 17.48% on 31 December 2019, also
higher than the average for European banks, which was 14.8% according to the ECB. 2019 was the
first year that the entities presented the solvency ratio under the European Basel III criteria, after
the Law on solvency, liquidity and the prudential supervision of banking entities and investment
firms came into force in January 2019. Moreover, in 2019 all the banks in the Andorran market
maintained their international ratings, demonstrating stakeholder confidence in the sector, thanks
to continued strong results.