ECB turns €1bn profit despite rising HQ costs
By Benjamin Fox
The European Central Bank (ECB) recorded a profit of almost €1 billion in 2012, according to the Frankfurt-based institution's annual accounts, released on Thursday (21 February).
Its year-on-year profits soared by 37 percent to €998 million, with the bulk of the money coming from interest totalling €555 million on Greek government bonds.
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Most of the ECB's income comes from interest on its foreign currency holdings and bond holdings, as well as on euro banknotes in circulation. It raked in just under €2.3 billion in interest in 2012.
Elsewhere, the bank revealed that it holds €218 billion worth of government bonds under the Securities Markets Program (SMP), launched in 2010 to bring down the cost of debt refinancing for the eurozone's crisis-hit countries.
The SMP, which earned €1.1 billion in interest for the ECB, was replaced in September 2012 by the Outright Monetary Transactions (OMT) scheme, an unlimited bond-buying program set up after ECB chief Mario Draghi promised to "do what it takes" to prop up the EU's single currency.
Nearly half of the ECB's €218 billion bond portfolio is composed of Italian debt, with a nominal value of €102.8 billion.
Spanish and Greek securities accounted for €44.3 billion and €33.9 billion, respectively, with the bonds having an average remaining maturity of 4.3 years.
The ECB stated that €575 million of the 2012 profit was shared across national central banks in January, with the remaining funds to be distributed on 25 February.
Meanwhile, all profits resulting from Greek bonds will eventually be re-directed back to Athens as part of the country's November bail-out deal agreed with eurozone finance ministers.
However, the ECB posted a €339 million hike in costs under its "assets under construction" heading, covering the costs of the bank's new headquarters.
The bank's new 45-floor building on the old site of the Grossmarkthalle, a 1920s listed-building that served as Frankfurt's wholesale food market, will eventually cost more than €1 billion - an overspend of more than €200 million since the tender was put out in 2008. The soaring costs of the building sit awkwardly at a time when the ECB has led the way in setting tough austerity policies for struggling eurozone countries.
The two-tower structure, which will house all of the bank's 2,600 staff from January 2014, will replace its rented Eurotower premises.