ECB profits swell to €1.2bn on QE windfall

Ker-ching.

The European Central Bank notched up a €111m rise in profits last year on the back of rising interest income earned from its swelling balance sheet.

In its latest set of annual financial results, the central bank said its total profits hit €1.19bn last year, as it earned a bumper €1.04bn in interest on the assets it has bought up as part of its stimulus measures since March 2015.

Net interest income on securities held for monetary policy purposes was up from €0.89bn in 2015, said the ECB, which also earned €370m in interest for its foreign reserves.

The figures reveal that the central bank’s landmark stimulus measures have been good for its bottom line, amid some concerns that the ECB risks making losses from a shift that will now allow it to buy negative yielding bonds below its deposit rate (currently at -0.4 per cent).

Of its total net profits, 88 per cent came from its QE programme at €1.04bn.

The overall size of the ECB’s balance sheet now stands at €349bn from €257bn the year prior – swelling by more than a third in the year.

The ECB distributes its net profits among its 19 national central banks dotted across the continent. It has snapped up around €1.5tn in government, corporate, and covered bonds over the last 23 months and plans on continuing its stimulus measures until at least December.

Writedowns last year more than doubled to €148m from €64m on the back of a fall in the market value of its dollar-denominated securities.

Late last year, the ECB announced that it would be tweaking its QE rules, allowing it to buy up government bonds that trade at a yield below -0.4 per cent in a bid give it more flexibility to its a monthly €80bn target (read more here).

Latest data from national central banks shows the German Bundesbank has made the most of the tweak, snapping up short-dated bonds – known as ‘schatz’.