21 2018 ANNUAL REPORT 3.4 Financial Performance Our profit in 2018 increased compared to the previous year. The total income increased to a level of 2016, while expenses remained stable compared to last year. Especially expenses for supervision and the service level agreement charges increased on a yearly basis while the pension expenses decreased due to a release of the ASC 715 pension liabilities by € 0.5 million. As a result, the overall net profit for 2018 stood at € 21.4 million, an increase of € 4.7 million from the year before. Operating Income In 2018 the operating income amounted to € 53.8 million, which is € 6.9 million higher than in 2017. The main reason for this increase has been the receipt of more event driven fees for transaction services, which increased by € 4.1 million. The nature of this income is and has always been volatile. The net interest income increased by € 3.2 million to € 28.6 million (12.7%). The income from financial operations (e.g. results from foreign exchange transactions and fair value changes derivatives) slightly decreased and was € 5.3 million (-6.5%) for the year. Operating Expenses Operating expenses increased by € 0.2 million, a year on year increase of 0.6%. The increase in operational expenses is almost completely offset by the release of the pension expenses for an amount of € 0.5 million (in 2017 an addition of € 2.5 million). The release is mainly the result of the slight increase in the discount rate in 2018, while the expected return on plan assets decreased. While the movement of the pension provision showed a profit of € 3 million, the other operating expenses increased compared to last year with an amount of € 3.2 million to € 25.2 million (14.1%). The increase of the supervision expenses by € 0.5 million to € 2.9 million and of the service level agreement (SLA) charges with € 0.7 million to € 2.3 million caused a significant part of the increase, while also the expenses for employees and professionals hired increased with € 0.6 million as well as the pension premium with € 0.4 million. The increase in professionals hired was caused by regulatory requirements, which also effected the software used for reporting purposes. Efficiency Ratio As a consequence of the higher operating income, MBE’s efficiency ratio (the ratio of operating expenses to operating income) decreased to 46.0% (2017: 52.5%). The efficiency ratio corrected for movements in the pension provision decreased to 46.9% (2017: 47.1%), which is close to our high in 2017 and better than industry average. We are pleased to report that there were no impairments of financial assets in 2018, unchanged from the years preceding. Income tax charge for 2018 totaled € 7.7 million (2017: € 5.6 million). This represents a tax burden of 26.4% (2017: 25.2%). The increase is mainly caused by the release of the deferred tax asset due to lower corporate income tax rates for the year 2020 onwards. Balance Sheet Finally, looking at the balance sheet, total assets at year-end amounted to € 4,231 million. This is an increase compared to the previous year (2017: € 3,704 million, 14.2%), which is the highest balance sheet in years. The increase has been mainly the result of increased central bank balances for an amount of € 1,351 million (2017: € 772 million) while on the credit side of the balance sheet the total amounts owed increased to € 3,661 million (2017: € 3,100 million). 54.6% (2017: 56.0%) of the assets consist of loans and advances to corporate customers and 11.3% (2017: 16.8%) of loans and advances to banks (excluding to central banks). The increased central bank balances were a result of higher ratios.