Bundesbank posts €664 million profit in 2012

The Deutsche Bundesbank posted a profit of €664 million for the financial year 2012 compared with €643 million in 2011. This was paid over in full to the Federal Government on 12 March 2013 pursuant to section 27 number 2 of the Bundesbank Act. “Despite significantly higher interest income, there was scarcely any rise in the profit owing to a further steep increase in risk provisioning,” explained Jens Weidmann, President of the Deutsche Bundesbank, on Tuesday at the Bundesbank’s annual balance sheet press conference. The Bundesbank thus increased its provisions for general risks by €6.7 billion to €14.4 billion. In 2010 and 2011, these were raised by €1.6 billion and €4.1 billion respectively. “This takes appropriate account of the risks on the Bundesbank’s balance sheet,” said Mr Weidmann. In this connection, he pointed to the further heightened risks stemming from monetary policy operations in the wake of the financial and sovereign debt crisis. The past year had seen an overall increase in counterparty credit risks stemming from refinancing loans and purchasing bonds, explained Mr Weidmann.

The financial and sovereign debt crisis also represents the most significant risk for the economy in Germany, he stated. “Only some of the confidence lost as a result of the crisis has been recovered so far,” he continued. As the year progresses, growth can be expected to become stronger, added Mr Weidmann. This would depend, however, on the absence of further shocks to confidence. Despite the difficulties in many European partner countries, the German economy was still in good shape. Many members of the general public were worried about consumer prices, and such concerns should be taken seriously. Nevertheless, stirring up fears of inflation was uncalled for. “In the short term, we in the euro area have, if anything, declining inflation risks,” declared Mr Weidmann. In the medium term, it was important to leave no doubt about European monetary policy’s stability orientation.

The most important source of the Bundesbank’s profit last year was interest income of €11.0 billion (2011: €8.6 billion). This was offset by interest expense of €2.7 billion (2011: €3.8 billion), resulting in net interest income of €8.3 billion (2011: €4.8 billion). “The steep €3.5 billion rise in net interest income is due mainly to strong balance sheet growth on account of the crisis,” explained Mr Weidmann.

Holding gains, by contrast, are not recognised as income. Holding gains arise from the valuation of balance sheet items which are subject to fluctuations in market prices, and are reported instead under the balance sheet liability item “Revaluation accounts”. Last year, this item amounted to €132.6 billion (gold €129.5 billion; foreign exchange assets €2.6 billion; securities €0.5 billion).