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ECB 2012 net profit increases

Feb 21 2013 18:47 AFP

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Frankfurt -The European Central Bank said Thursday that its net profit rose strongly last year, not least as a result of interest earned on its portfolio of sovereign bonds from crisis-ridden countries.

The ECB said in a statement its 2012 bottom-line net profit, after subtracting increased risk provisions, amounted to €998m ($1.3bn), up from €728m a year earlier.

A substantial part of the profits came from interest income from its Securities Markets Programme or SMP - a controversial scheme for buying up the bonds of countries that are finding it difficult to drum up cash via the financial markets.

For the first time, the ECB provided a breakdown by country of the sovereign bonds it has bought up under the SMP programme.

Out of a total €208.7bn worth of bonds acquired, Italian sovereign debt accounted for nearly half or €99bn.

Spain followed in second place, accounting for €43.7bn of the bonds bought, Greece for €30.8bn, Portugal for €21.6bn and Ireland for €13.6bn.

The SMP was the brain child of the ECB's former president Jean-Claude Trichet. But the controversial scheme has essentially lain dormant since early 2012, shortly after Italy's Mario Draghi took over from Trichet as ECB chief.

And the SMP has since been replaced by a revamped bond-purchase programme called Outright Monetary Transactions or OMT, whereby countries must meet very strict conditions before the ECB agrees to buy up their debt.

The ECB said that overall net interest income rose to €2.289bn last year, up from €1.999bn a year earlier.

Of that total, the ECB earned €1.108bn from the SMP, including €555m from the holdings of Greek sovereign debt, the central bank said.

The year before SMP income had amounted to €1.003bn, of which €654m came from the bank's holdings of Greek debt.

The central bank earns income on the investment of its foreign reserve assets, its own funds portfolio, interest income on its share of the total euro banknotes in circulation, and interest income arising from bond holdings.

The overall year-end surplus stood at €2.164bn last year, up from €1.894bn in 2011.

Of this, the ECB decided to set aside €1.166bn in risk provisions, raising the total amount of risk provisions to the current ceiling of €7.529bn, it said.

The ECB said it has already distributed €575m of its net profit to the national central banks of the euro area, with the remaining €423m to be transferred next week.


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