NXP Semiconductors N.V. (NASDAQ:NXPI)

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NXP Semiconductors N.V., effective income tax rate (EITR) reconciliation

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Statutory income tax rate in the Netherlands	25.00%	25.00%	25.00%	25.00%	25.00%
Rate differential between the local statutory rates and the statutory rate of the Netherlands	-1.90%	2,175.00%	5.50%	0.80%	-4.50%
Net change in valuation allowance	-0.90%	3,500.00%	20.20%	0.40%	1.10%
Non-deductible expenses/losses	2.50%	6,100.00%	17.80%	2.70%	2.20%
Sale of non-deductible goodwill	0.00%	0.00%	0.00%	0.00%	3.80%
Netherlands tax incentives	-3.20%	-4,800.00%	-23.20%	-10.60%	-7.50%
Foreign tax incentives	-7.50%	-11,700.00%	-40.50%	-3.70%	-4.70%
Changes in estimates of prior years’ income taxes	-1.00%	-1,300.00%	-1.20%	-3.50%	-0.30%
Sale of non-deductible goodwill	0.00%	1,000.00%	0.00%	0.00%	0.00%
Withholding taxes	-0.40%	-3,100.00%	1.80%	0.00%	0.00%
Other differences	-0.10%	-200.00%	1.50%	-3.70%	-42.90%
Effective tax rate	12.50%	-8,300.00%	6.90%	7.40%	-27.80%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

The effective income tax rate exhibits significant volatility between 2017 and 2021, consistently deviating from the stable statutory income tax rate of 25.00% maintained in the Netherlands. The effective rate transitioned from a substantial tax benefit in 2017 to low positive rates in 2018 and 2019, followed by an extreme statistical anomaly in 2020 and a return to a low positive rate in 2021.

Statutory and Effective Rate Divergence: While the statutory benchmark remained unchanged at 25.00%, the effective tax rate fluctuated between -27.80% in 2017 and 12.50% in 2021. This gap indicates that various tax adjustments and incentives substantially reduced the actual tax burden relative to the legal statutory rate.
Impact of Tax Incentives: Both Netherlands and foreign tax incentives acted as consistent downward pressures on the effective tax rate. Foreign tax incentives showed a particularly sharp increase in impact during 2019, reaching -40.50%, which contributed to the compression of the effective tax rate to 6.90% that year.
Analysis of Non-Deductible Items: Non-deductible expenses and losses generally provided a modest upward adjustment to the tax rate, though a significant spike to 17.80% was observed in 2019. The sale of non-deductible goodwill created a temporary increase in the tax burden in 2017.
Observation of Extreme Volatility: The data for the 2020 period shows extreme divergence, with an effective tax rate of -8,300.00%. This is accompanied by proportionally massive swings in valuation allowances, non-deductible expenses, and foreign tax incentives, suggesting a period of extraordinary accounting adjustments or a nominal pre-tax income base that amplified the percentage impact of tax items.
Other Adjustments: Other differences played a pivotal role in 2017, where a value of -42.90% served as the primary driver for the negative effective tax rate of -27.80%. In subsequent years, these "other" factors became less influential, trending toward zero by 2021.

Overall, the tax profile is characterized by a heavy reliance on tax incentives to offset the statutory rate, resulting in an effective tax burden that is significantly lower than the 25.00% statutory requirement in most observed years.

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NXP Semiconductors N.V., components of deferred tax assets and liabilities

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Operating loss and tax credit carry forwards	317)	480)	499)	598)	621)
Disallowed interest and tax incentive carry forwards	19)	69)	103)	117)	156)
Other accrued liabilities	147)	107)	111)	83)	100)
Pensions	104)	121)	95)	83)	93)
Other non-current liabilities	60)	58)	53)	—)	—)
Share-based compensation	9)	13)	15)	18)	25)
Restructuring liabilities	6)	15)	5)	12)	16)
Receivables	89)	55)	64)	83)	71)
Inventories	5)	8)	4)	2)	3)
Other current assets/liabilities	—)	—)	—)	2)	2)
Deferred tax assets	756)	926)	949)	998)	1,087)
Valuation allowance	(161)	(227)	(190)	(145)	(140)
Deferred tax assets, net of valuation allowance	595)	699)	759)	853)	947)
Identified intangible assets, net	(20)	(116)	(520)	(828)	(1,161)
Undistributed earnings of foreign subsidiaries	(38)	(54)	(99)	(96)	(109)
Property, plant and equipment, net	(7)	(15)	(34)	(47)	(54)
Goodwill	(83)	(66)	(43)	(39)	—)
Other current and non-current assets	(63)	(56)	(52)	—)	—)
Deferred tax liabilities	(211)	(307)	(748)	(1,010)	(1,324)
Net deferred tax position	384)	392)	11)	(157)	(377)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

The net deferred tax position transitioned from a significant liability of 377 million USD in 2017 to a net asset position of 384 million USD by 2021. This reversal is characterized by a simultaneous reduction in both gross deferred tax assets and deferred tax liabilities, although the decrease in liabilities was far more pronounced.

Deferred Tax Assets Analysis: Gross deferred tax assets exhibited a steady decline from 1,087 million USD in 2017 to 756 million USD in 2021. This contraction was primarily driven by the utilization or expiration of operating loss and tax credit carry forwards, which decreased from 621 million USD to 317 million USD. Additionally, disallowed interest and tax incentive carry forwards saw a sharp reduction, falling from 156 million USD in 2017 to 19 million USD in 2021. Other components, such as share-based compensation and restructuring liabilities, also trended downward over the period.
Deferred Tax Liabilities Analysis: Total deferred tax liabilities decreased drastically from 1,324 million USD in 2017 to 211 million USD in 2021. The primary driver of this reduction was the decline in liabilities associated with identified intangible assets, which dropped from 1,161 million USD to 20 million USD. This suggests a significant amortization of intangible assets over the five-year window. Other reductions were noted in undistributed earnings of foreign subsidiaries and property, plant, and equipment. Conversely, liabilities related to goodwill increased steadily from 39 million USD in 2018 to 83 million USD in 2021.
Valuation Allowance and Net Position: The valuation allowance fluctuated, reaching a peak of 227 million USD in 2020 before decreasing to 161 million USD in 2021. Despite the decline in gross deferred tax assets, the more aggressive reduction in deferred tax liabilities resulted in a positive net deferred tax position starting in 2019. The net position moved from a liability of 157 million USD in 2018 to a net asset of 11 million USD in 2019, eventually stabilizing near 384 million USD by the end of 2021.

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NXP Semiconductors N.V., deferred tax assets and liabilities, classification

US$ in millions

		Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
	Deferred tax assets (within other non-current assets)	441)	477)	293)	293)	324)
	Deferred tax liabilities (within non-current liabilities)	57)	85)	282)	450)	701)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

The financial data indicates a fundamental shift in the deferred tax position over the five-year period ending December 31, 2021. The organization transitioned from a significant net deferred tax liability position to a net deferred tax asset position, reflecting substantial changes in temporary tax differences.

Deferred Tax Liabilities Trend: A consistent and aggressive downward trend is observed in deferred tax liabilities. Starting at 701 million US dollars in 2017, the balance decreased every consecutive year, falling to 450 million in 2018, 282 million in 2019, 85 million in 2020, and finally reaching 57 million by the end of 2021. This represents a total reduction of approximately 92% over the period analyzed.
Deferred Tax Assets Trend: Deferred tax assets exhibited more volatility but ended the period at a higher level than the baseline. The balance remained relatively stable between 2018 and 2019 at 293 million US dollars before experiencing a sharp increase to 477 million in 2020. A slight contraction followed in 2021, with the balance settling at 441 million US dollars.
Net Deferred Tax Position Analysis: The net tax position underwent a complete reversal. In 2017, the company held a net deferred tax liability of 377 million US dollars. By 2019, the assets and liabilities reached a near-equilibrium point. By 2020 and 2021, the position shifted to a net deferred tax asset, totaling 392 million and 384 million US dollars, respectively. This transition suggests a systemic reduction in future taxable obligations and an increase in future tax benefits.

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NXP Semiconductors N.V., Financial Data: Reported vs. Adjusted

NXP Semiconductors N.V., adjustments to financial statements

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Adjustment to Total Assets
Total assets (as reported)	20,864)	19,847)	20,016)	21,530)	24,049)
Less: Noncurrent deferred tax assets, net	441)	477)	293)	293)	324)
Total assets (adjusted)	20,423)	19,370)	19,723)	21,237)	23,725)
Adjustment to Total Liabilities
Total liabilities (as reported)	14,094)	10,696)	10,361)	10,840)	10,333)
Less: Noncurrent deferred tax liabilities, net	57)	85)	282)	450)	701)
Total liabilities (adjusted)	14,037)	10,611)	10,079)	10,390)	9,632)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	6,528)	8,944)	9,441)	10,505)	13,527)
Less: Net deferred tax assets (liabilities)	384)	392)	11)	(157)	(377)
Stockholders’ equity (adjusted)	6,144)	8,552)	9,430)	10,662)	13,904)
Adjustment to Net Income Attributable To Stockholders
Net income attributable to stockholders (as reported)	1,871)	52)	243)	2,208)	2,215)
Add: Deferred income tax expense (benefit)	(20)	(349)	(175)	(211)	(797)
Net income attributable to stockholders (adjusted)	1,851)	(297)	68)	1,997)	1,418)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

An analysis of the financial position from 2017 to 2021 reveals a general contraction in the balance sheet, characterized by a steady decline in total assets and stockholders' equity, punctuated by a significant increase in liabilities in the final year of the period.

Asset and Liability Trends: Reported total assets exhibited a downward trend from 2017 through 2020, decreasing from 24,049 million USD to 19,847 million USD, before rebounding to 20,864 million USD in 2021. Adjusted total assets followed a nearly identical trajectory, consistently remaining lower than reported values, indicating a persistent presence of deferred tax assets. Total liabilities remained relatively stable between 2017 and 2020 but experienced a sharp increase in 2021, rising to 14,094 million USD, which represents a significant escalation in the leverage profile.
Stockholders' Equity Erosion: A consistent downward trend is observed in stockholders' equity. Reported equity fell from 13,527 million USD in 2017 to 6,528 million USD in 2021, a reduction of approximately 51.7%. The adjusted equity figures mirror this decline, although the gap between reported and adjusted equity narrowed over time, suggesting changes in the composition of deferred tax accounts relative to total equity.
Net Income Volatility and Tax Impact: Net income attributable to stockholders showed extreme volatility during the period. While reported net income remained positive throughout the five years, the adjusted net income provides a more critical view of performance. Specifically, in 2020, while the reported net income was 52 million USD, the adjusted net income was negative 297 million USD. This discrepancy indicates that deferred tax adjustments significantly masked operational losses during that fiscal year. A strong recovery was observed in 2021, with both reported and adjusted net income converging near 1,850 million USD, suggesting a reduction in the impact of deferred tax items on the bottom line.
Deferred Tax Adjustment Analysis: The divergence between reported and adjusted figures highlights the material impact of deferred taxes on the financial statements. The most pronounced divergence occurred in the net income figures between 2019 and 2020, where the removal of deferred tax effects shifted the results from a marginal profit to a substantial loss. In terms of the balance sheet, the adjusted total liabilities were consistently lower than the reported liabilities until 2021, where the two figures converged, indicating a reduction in the deferred tax liability component.

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NXP Semiconductors N.V., Financial Ratios: Reported vs. Adjusted

NXP Semiconductors N.V., adjusted financial ratios

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net Profit Margin
Reported net profit margin	16.91%	0.60%	2.74%	23.47%	23.93%
Adjusted net profit margin	16.73%	-3.45%	0.77%	21.23%	15.32%
Total Asset Turnover
Reported total asset turnover	0.53	0.43	0.44	0.44	0.38
Adjusted total asset turnover	0.54	0.44	0.45	0.44	0.39
Financial Leverage
Reported financial leverage	3.20	2.22	2.12	2.05	1.78
Adjusted financial leverage	3.32	2.26	2.09	1.99	1.71
Return on Equity (ROE)
Reported ROE	28.66%	0.58%	2.57%	21.02%	16.37%
Adjusted ROE	30.13%	-3.47%	0.72%	18.73%	10.20%
Return on Assets (ROA)
Reported ROA	8.97%	0.26%	1.21%	10.26%	9.21%
Adjusted ROA	9.06%	-1.53%	0.34%	9.40%	5.98%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

The removal of deferred taxes reveals a significant divergence between reported and adjusted financial performance, particularly between 2017 and 2020. While reported figures often suggest a baseline of positive profitability, the adjusted metrics uncover a more volatile trend and a period of actual net losses during the 2020 fiscal year.

Profitability Margins: A substantial disparity is observed in the net profit margin during the early part of the analyzed period. In 2017, the reported margin of 23.93% was significantly higher than the adjusted margin of 15.32%, suggesting a heavy influence of deferred tax benefits. The most critical divergence occurred in 2020, where the reported net profit margin remained slightly positive at 0.60%, whereas the adjusted margin fell to -3.45%, indicating that reported profitability was entirely dependent on tax accounting adjustments.
Returns on Equity and Assets: The Return on Equity (ROE) and Return on Assets (ROA) exhibit extreme volatility. Reported ROE dropped from 21.02% in 2018 to 0.58% in 2020, but the adjusted ROE reveals a more severe contraction, reaching -3.47% in 2020. Similarly, the adjusted ROA turned negative in 2020 (-1.53%) despite a positive reported ROA of 0.26%. By 2021, both reported and adjusted returns recovered sharply, with adjusted ROE (30.13%) slightly exceeding reported ROE (28.66%), indicating a shift in the impact of tax adjustments.
Asset Utilization and Leverage: Total asset turnover shows minimal variance between reported and adjusted figures, remaining relatively stable between 0.38 and 0.54 over the five-year period. This suggests that deferred tax adjustments have negligible impact on the interpretation of operational efficiency. In contrast, financial leverage shows a consistent upward trajectory, rising from 1.78 (reported) in 2017 to 3.20 in 2021. The adjusted leverage followed a similar trend, peaking at 3.32 in 2021, indicating a steady increase in the company's reliance on debt relative to equity.

Overall, the adjusted ratios provide a more conservative view of the company's financial health, highlighting that deferred tax assets played a critical role in sustaining reported positive margins and returns during the 2019 and 2020 downturns.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to stockholders	1,871)	52)	243)	2,208)	2,215)
Revenue	11,063)	8,612)	8,877)	9,407)	9,256)
Profitability Ratio
Net profit margin¹	16.91%	0.60%	2.74%	23.47%	23.93%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to stockholders	1,851)	(297)	68)	1,997)	1,418)
Revenue	11,063)	8,612)	8,877)	9,407)	9,256)
Profitability Ratio
Adjusted net profit margin²	16.73%	-3.45%	0.77%	21.23%	15.32%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

2021 Calculations

¹ Net profit margin = 100 × Net income attributable to stockholders ÷ Revenue
= 100 × 1,871 ÷ 11,063 = 16.91%

² Adjusted net profit margin = 100 × Adjusted net income attributable to stockholders ÷ Revenue
= 100 × 1,851 ÷ 11,063 = 16.73%

The financial performance between 2017 and 2021 is characterized by a period of stability followed by a severe contraction and a subsequent strong recovery. A significant divergence between reported and adjusted figures is evident, particularly during the trough of the cycle in 2019 and 2020.

Adjusted Net Profit Margin Trends: The adjusted net profit margin experienced an initial increase from 15.32% in 2017 to 21.23% in 2018. This was followed by a sharp decline, falling to 0.77% in 2019 and reaching a negative peak of -3.45% in 2020. A robust recovery occurred by the end of 2021, with the margin returning to 16.73%.
Reported vs. Adjusted Net Income Variance: A notable disparity exists between reported and adjusted net income. In 2017, reported net income was significantly higher than the adjusted figure. This trend reversed in 2018, where adjusted net income exceeded reported net income. The most critical variance occurred in 2020, where the reported net income remained positive at 52 million US$, while the adjusted net income dropped to a loss of 297 million US$. By 2021, the two figures converged, with reported and adjusted net incomes reaching 1,871 million US$ and 1,851 million US$, respectively.
Profitability Volatility: The data indicates a high degree of volatility in profitability. The reported net profit margin fell from 23.93% in 2017 to a low of 0.60% in 2020 before rebounding to 16.91% in 2021. The adjusted figures mirrored this volatility but exhibited more extreme swings, particularly the shift into negative territory during 2020, suggesting that non-GAAP adjustments had a magnifying effect on the perceived losses during the downturn.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Revenue	11,063)	8,612)	8,877)	9,407)	9,256)
Total assets	20,864)	19,847)	20,016)	21,530)	24,049)
Activity Ratio
Total asset turnover¹	0.53	0.43	0.44	0.44	0.38
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenue	11,063)	8,612)	8,877)	9,407)	9,256)
Adjusted total assets	20,423)	19,370)	19,723)	21,237)	23,725)
Activity Ratio
Adjusted total asset turnover²	0.54	0.44	0.45	0.44	0.39

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

2021 Calculations

¹ Total asset turnover = Revenue ÷ Total assets
= 11,063 ÷ 20,864 = 0.53

² Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 11,063 ÷ 20,423 = 0.54

An analysis of asset utilization metrics from 2017 to 2021 reveals a general trend of increasing operational efficiency occurring alongside a contraction in the total asset base. While the overall volume of assets decreased over the majority of the period, the ability to generate revenue from those assets improved steadily.

Asset Base Trajectory: Reported total assets experienced a downward trend for the first four years, declining from US$ 24,049 million in 2017 to a low of US$ 19,847 million in 2020, before increasing to US$ 20,864 million in 2021. Adjusted total assets mirrored this movement, starting at US$ 23,725 million in 2017 and reaching US$ 20,423 million by the end of 2021. This suggests a period of asset reduction or optimization preceding a slight expansion in the final year.
Adjusted Total Asset Turnover Trends: The adjusted total asset turnover ratio demonstrated consistent growth, rising from 0.39 in 2017 to 0.54 in 2021. The growth was gradual between 2017 and 2020, remaining within the 0.39 to 0.45 range. However, a significant acceleration in efficiency was observed between 2020 and 2021, where the ratio increased from 0.44 to 0.54, indicating a substantial improvement in the productivity of the company's assets.
Comparison of Reported and Adjusted Metrics: A high degree of correlation is observed between reported and adjusted figures. The adjusted total asset turnover remained marginally higher than the reported total asset turnover across all five years, consistently maintaining a lead of approximately 0.01. This indicates that the adjustments applied to the asset base consistently result in a slightly more favorable representation of asset efficiency compared to reported figures.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Total assets	20,864)	19,847)	20,016)	21,530)	24,049)
Stockholders’ equity	6,528)	8,944)	9,441)	10,505)	13,527)
Solvency Ratio
Financial leverage¹	3.20	2.22	2.12	2.05	1.78
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	20,423)	19,370)	19,723)	21,237)	23,725)
Adjusted stockholders’ equity	6,144)	8,552)	9,430)	10,662)	13,904)
Solvency Ratio
Adjusted financial leverage²	3.32	2.26	2.09	1.99	1.71

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

2021 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 20,864 ÷ 6,528 = 3.20

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 20,423 ÷ 6,144 = 3.32

A comprehensive review of the financial position from 2017 to 2021 reveals a consistent increase in financial leverage, driven primarily by a significant and steady decline in stockholders' equity. While the asset base remained relatively stable after an initial contraction, the reduction in equity has led to a higher reliance on debt or other liabilities relative to equity.

Asset Base Trends: Total assets experienced a downward trend from 2017 through 2020, with reported assets decreasing from 24,049 million USD to 19,847 million USD. A slight recovery occurred in 2021, with assets rising to 20,864 million USD. The adjusted total assets followed a near-identical trajectory, indicating that the adjustments made to the asset base were consistent and minimal in impact over the period.
Equity Erosion: A persistent decline in stockholders' equity is observed throughout the five-year period. Reported stockholders' equity fell from 13,527 million USD in 2017 to 6,528 million USD in 2021. Adjusted stockholders' equity mirrored this contraction, starting at 13,904 million USD and ending at 6,144 million USD. This represents a reduction of more than 50% of the equity base over the analyzed timeframe.
Financial Leverage Progression: The financial leverage ratio exhibited a steady upward trajectory, accelerating sharply in the final year. Reported financial leverage rose from 1.78 in 2017 to 3.20 in 2021. Adjusted financial leverage showed a similar pattern, increasing from 1.71 in 2017 to 2.26 in 2020, before jumping significantly to 3.32 in 2021.
Comparative Analysis of Adjusted vs. Reported Metrics: The variance between reported and adjusted financial leverage remained narrow for the first four years. However, by 2021, the adjusted financial leverage (3.32) diverged more noticeably from the reported leverage (3.20). This indicates that the adjustments to assets and equity had a more pronounced effect on the leverage ratio as the equity base diminished.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to stockholders	1,871)	52)	243)	2,208)	2,215)
Stockholders’ equity	6,528)	8,944)	9,441)	10,505)	13,527)
Profitability Ratio
ROE¹	28.66%	0.58%	2.57%	21.02%	16.37%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to stockholders	1,851)	(297)	68)	1,997)	1,418)
Adjusted stockholders’ equity	6,144)	8,552)	9,430)	10,662)	13,904)
Profitability Ratio
Adjusted ROE²	30.13%	-3.47%	0.72%	18.73%	10.20%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

2021 Calculations

¹ ROE = 100 × Net income attributable to stockholders ÷ Stockholders’ equity
= 100 × 1,871 ÷ 6,528 = 28.66%

² Adjusted ROE = 100 × Adjusted net income attributable to stockholders ÷ Adjusted stockholders’ equity
= 100 × 1,851 ÷ 6,144 = 30.13%

The financial performance from 2017 to 2021 is characterized by significant volatility in net income and a consistent contraction of the stockholders' equity base. While reported figures remained positive throughout the period, adjusted figures reveal a deeper volatility, including a period of negative adjusted profitability in 2020.

Net Income Variance: A substantial divergence exists between reported and adjusted net income. From 2017 to 2020, reported net income consistently exceeded adjusted net income, with the most pronounced gap occurring in 2020, where reported income was 52 million US dollars while adjusted income fell to negative 297 million US dollars. By 2021, this gap narrowed significantly, with reported and adjusted figures nearly converging at 1,871 million and 1,851 million US dollars, respectively.
Equity Base Contraction: There is a clear and steady downward trend in stockholders' equity. Reported equity decreased from 13,527 million US dollars in 2017 to 6,528 million US dollars in 2021. Adjusted equity followed a similar trajectory, declining from 13,904 million US dollars to 6,144 million US dollars over the same period. This reduction in the equity denominator has a mathematical amplifying effect on return ratios.
Adjusted Return on Equity (ROE) Dynamics: The adjusted ROE experienced extreme fluctuations, mirroring the volatility of adjusted net income. After rising from 10.20% in 2017 to 18.73% in 2018, the ratio collapsed to 0.72% in 2019 and became negative at -3.47% in 2020. However, 2021 marked a sharp recovery to 30.13%. This peak is the result of a dual effect: the restoration of strong adjusted net income combined with a significantly reduced adjusted equity base compared to 2017 levels.
Comparative Analysis of Reported vs. Adjusted ROE: Reported ROE generally remained higher than adjusted ROE between 2017 and 2020, suggesting that non-adjusted items provided a positive lift to the reported bottom line. This trend reversed in 2021, where the adjusted ROE of 30.13% surpassed the reported ROE of 28.66%, indicating that adjustments to income and equity in the final year of the period resulted in a more favorable performance metric than the reported figures.

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	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to stockholders	1,871)	52)	243)	2,208)	2,215)
Total assets	20,864)	19,847)	20,016)	21,530)	24,049)
Profitability Ratio
ROA¹	8.97%	0.26%	1.21%	10.26%	9.21%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to stockholders	1,851)	(297)	68)	1,997)	1,418)
Adjusted total assets	20,423)	19,370)	19,723)	21,237)	23,725)
Profitability Ratio
Adjusted ROA²	9.06%	-1.53%	0.34%	9.40%	5.98%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).

2021 Calculations

¹ ROA = 100 × Net income attributable to stockholders ÷ Total assets
= 100 × 1,871 ÷ 20,864 = 8.97%

² Adjusted ROA = 100 × Adjusted net income attributable to stockholders ÷ Adjusted total assets
= 100 × 1,851 ÷ 20,423 = 9.06%

The financial performance from 2017 to 2021 is characterized by significant volatility in profitability, featuring a sharp contraction between 2019 and 2020 followed by a robust recovery in 2021. While the asset base remained relatively stable, the fluctuations in net income led to dramatic swings in both reported and adjusted Return on Assets (ROA).

Net Income Analysis: Reported net income remained stable between 2017 and 2018 before experiencing a severe decline to 243 million in 2019 and a further drop to 52 million in 2020. Adjusted net income exhibited more extreme variance, peaking at 1,997 million in 2018 before falling to a negative value of 297 million in 2020. A strong rebound occurred in 2021, with adjusted net income returning to 1,851 million.
Asset Base Trends: Total assets showed a general downward trend from 2017 to 2020, decreasing from 24,049 million to 19,847 million. This contraction stabilized in 2020 and saw a slight increase to 20,864 million by the end of 2021. Adjusted total assets mirrored this pattern, declining from 23,725 million in 2017 to a low of 19,370 million in 2020 before rising to 20,423 million in 2021.
Return on Assets (ROA) Dynamics: The Reported ROA peaked at 10.26% in 2018, plummeted to 0.26% by 2020, and recovered to 8.97% in 2021. The Adjusted ROA displayed even greater volatility; after reaching 9.40% in 2018, it fell into negative territory in 2020 at -1.53%. By 2021, the Adjusted ROA recovered to 9.06%, surpassing the Reported ROA for the first time since 2017.
Comparative Analysis of Adjusted vs. Reported Metrics: The discrepancy between reported and adjusted figures was most pronounced during the 2019-2020 downturn. The adjusted metrics amplified the negative trend, as seen in the shift from a positive reported ROA to a negative adjusted ROA in 2020. This indicates that the adjustments removed specific items that otherwise buffered the reported net income during the period of lowest performance.

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