The European Central Bank’s earnings decreased in 2013, but net profit was up as the Bank ended its re-stocking of risk provisions in the past year, according to the bank’s annual accounts report released Thursday.
Net income and earnings came in at E1.44 billion, to be distributed to the national central banks according to their capital shares. This compared to earnings of E2.15 billion in 2012 and profits of E995 million in 2012. The difference is the result of a negligible addition of E400,000 to risk provisions for exchange rate, interest rate, credit and gold price risks, compared to E1.17 billion in 2013.
The non-existent risk provision came as the ECB reached a planned ceiling of E7.53 billion in stocking up its risk provisions – a restocking launched three years ago – rather than a clear signal that the Eurozone crisis has eased.
Net interest income fell to E2.005 billion from E2.289 billion in 2012, due largely to less profit from the expiring SMP bond-buying programme and in seignorage due to lower interest rates.
“The financial result for 2013 reflects the monetary policy stance as well as our commitment to an efficient use of resources and prudent financial management, at a time of increasing responsibilities and tasks entrusted to the ECB,” ECB President Mario Draghi said in a statement.
The net interest income included E961.9 million (2012: E1.108 billion) from securities owned under the ECB’s Securities Markets Programme (SMP) – including E437 million (2012: E555 million) in profits from the ECB’s holdings of Greek government bonds – as well as an additional E204.2 million (2012: E209.4 million) from the covered bond purchase programme.
Including a breakdown of its remaining SMP holdings – E185.7 billion at end 2013 – the ECB said its nominal holdings include E89.7 billion in Italian bonds, E38.8 billion in Spanish debt, E27.7 billion in Greek bonds, E19.8 billion in Portuguese bonds and E9.7 billion in Irish debt.
While the value of banknotes in circulation increased, seignorage income also fell to E406 million from E633 million in 2012 as the ECB’s average main refinancing operation rate fell to 0.55% on average in 2013 from 0.88% in 2012.
Net realised gains from financial operations also fell to E52 million from E319 million in 2012 due to less price gains on its US dollar portfolio. Writedowns were also higher at E115 million, compared to E4 million in 2012, due to a decrease in the market value of its dollar portfolio.
Total liabilities fell to E174.175 billion from E207.292 billion in 2012. The biggest drop came from a decline in liabilities to non-euro residents denominated in euro to E24.766 billion from E50.888 billion.
Staff costs amounted to E287 million, up from E242 million in 2012, though this does not include the costs of some 1,000 employees to be added for the Single Supervisory Mechanism, which should formally start later this year.