Bundesbank posts €2.2 billion profit in 2010

The Deutsche Bundesbank posted a profit of €2.2 billion in 2010 compared with €4.1 billion in 2009. The distributable profit was paid over in full to the Federal Government on 8 March 2011 pursuant to section 27 number 2 of the Bundesbank Act. “Increased risk provisioning is the main reason for the decline in the profit", explained Professor Axel A Weber, President of the Bundesbank, at the annual press conference of the Deutsche Bundesbank.

With regard to the economy, Weber stated that “Germany’s strong cyclical recovery will continue in 2011, albeit at a somewhat slower pace. The robust activity in the world economy is still producing important demand impulses, yet the upswing is likely to continue to become broader." Thus, given the significant increase in capacity utilisation, the need for machinery and equipment is expected to rise again. Furthermore, in spite of the recent deterioration in the price climate, private consumption is also expected to increase amidst continued positive labour market developments. In Weber’s view, in particular the exceptionally high level of confidence on the part of German enterprises and households with regard to the future indicates that domestic forces of growth will play a greater role.

The most important source of the Bundesbank's profit was interest income of €6.2 billion (2009: €7.6 billion), €5.7 billion of which was denominated in euro (2009: €6.6 billion). “The continued decline in interest income is attributable to the fact that the Eurosystem’s key policy rates are still at historically low levels”, stated Dr hc Rudolf Böhmler, a member of the Bundesbank’s Executive Board, a the press conference. This was partially offset by interest expense of €2.6 billion (2009: €3.5 billion), resulting in net interest income of €3.6 billion (2009: €4.2 billion). Alongside net interest income, a key factor in the €1.9 billion decline in the Bundesbank’s annual profit was, in particular, the transfer of €1.6 billion to risk provisions. “It was necessary to increase risk provisions, particularly with regard to the marked rise in holdings of risk-bearing assets in the wake of the financial crisis”, explained Bundesbank President Weber. The Bundesbank’s higher risk provisioning is in line with the policy of the European Central Bank (ECB), which also increased its risk provisions in its annual accounts for 2010 (by €1.2 billion).

Balance sheet items which are subject to market price fluctuations are marked to market. Valuation gains arising from this are not recognised in the profit and loss account but are reported instead under the balance sheet liability item “Revaluation accounts”. The valuation gains amounted to €110.5 billion (gold €107.4 billion, foreign currency €2.7 billion, and securities €0.5 billion).

Further information appears in the Bundesbank’s 2010 Annual Report, the German version of which will be published on the website (www.bundesbank.de) at 2.00 pm today (CET).