OeNB records solid operating profit in difficult economic environment

Central government receives EUR 230 million in profit share and taxes

“In 2016, the OeNB again posted a solid operating profit of EUR 268 million – and it did so despite the difficult economic and market conditions,” President Claus J. Raidl underlined at the press conference at which the Oesterreichische Nationalbank (OeNB) presented its 2016 annual report and financial statements following its General Meeting. At the same time, the operating profit turned out to be much smaller than the 2015 result of EUR 753 million, which had included one-off effects of over EUR 500 million.

The central government receives EUR 230 million of the OeNB’s operating profit – EUR 67 million in corporate income tax and EUR 163 million as its statutory share of profit of 90%. “This means that since 2007, the central government has collected a total of EUR 2.9 billion from the OeNB if one adds up its share of profit of EUR 2.1 billion and corporate income tax of EUR 0.8 billion,” President Raidl continued to explain.

OeNB Governor Ewald Nowotny added that “given the prevailing low level of interest rates, the OeNB’s net interest income went up only marginally, to EUR 650 million, although the OeNB had expanded its balance sheet under the Eurosystem’s public sector purchase program (PSPP).” The low interest environment is expected to weigh on net interest income also in the years to come.

In light of increased interest rate risks, the OeNB transferred EUR 150 million to its risk provisions in 2016. These interest rate risks essentially arise from the Eurosystem’s ongoing securities purchase programs and longer-term refinancing operations. While the purchase programs will generate only low interest income in the coming years, the interest expense on credit institutions’ balances on central bank accounts could rise, thus cutting into the OeNB’s net interest income. Risk provisions totaled EUR 3.7 billion at year-end 2016.

The OeNB’s net currency position increased by EUR 5.7 billion, to EUR 20 billion, with gold and gold receivables accounting for EUR 9.9 billion thereof. Unrealized valuation gains on gold equaled EUR 1.1 billion, which did not enter the profit and loss account.

The profit for the year 2016 came to EUR 18 million. By resolution of today’s General Meeting, EUR 1.2 million of this amount will be appropriated to pay the maximum dividend (10%) on the OeNB’s capital stock of EUR 12 million to the central government, which holds 100% of the OeNB’s shares. Another EUR 10 million will be allocated to the OeNB Anniversary Fund for the Promotion of Scientific Research and Teaching, and the remaining EUR 6.9 million will be transferred to the profit-smoothing reserve.

At EUR 157 million, staff costs increased by EUR 15 million in 2016 against the previous year, which is above all attributable to exogenous factors (lower discount rate for calculating personnel provisions, recognition of previous service credit in line with a ruling of the Court of Justice of the European Union (CJEU). Expenses for retirement rose by EUR 20 million, to EUR 142 million, which is again mostly due to the above-mentioned exogenous factors that triggered higher transfers to provisions.

Coming to EUR 84 million in 2016, administrative expenses have remained largely unchanged for several years.

Monetary and financial market policy challenged by difficult environment

2016 presented the OeNB with new challenges in fulfilling its core tasks. In the face of subdued economic growth and very low inflation rates, the Eurosystem’s monetary policy remained accommodative, providing further monetary policy easing with comprehensive asset purchases.

Efficient supervision under the Single Supervisory Mechanism comprising the ECB and national supervisory authorities – in the case of Austria, the FMA and the OeNB – has helped strengthen financial stability in Austria and given fresh impetus for necessary reforms in the domestic banking sector.

The new EUR 50 banknote, i.e. the fourth banknote of the Europa series, will enter into circulation in the euro area in early April 2017. The Austrian public and businesses will benefit from both enhanced and new security features. After all, cash still accounts for a very high share in overall payment transactions in Austria according to recent survey evidence.

The OeNB made good progress in implementing the revised gold storage policy it adopted in 2015, having returned some 30 tons of gold to Vienna by end 2016. By 2020 at the latest, the gold held in storage in Austria will total around 140 tons.

Finally, the OeNB marked its 200th anniversary in 2016. Several products, including a EUR 2 commemorative coin, a special stamp, two bicentennial publications, a feature-length documentary as well as a special exhibition at the OeNB’s Money Museum pay a lasting tribute to this occasion.

At the end of the press conference President Raidl and Governor Nowotny, on behalf of the General Council and the Governing Board, expressed their gratitude to the entire OeNB staff for their extraordinary commitment to safeguarding price stability and financial stability in Austria and the euro area in 2016.

For more details about the financial statements for 2016 and about the activities of the OeNB in 2016, see the OeNB’s Annual Report 2016. As the OeNB’s Sustainability Report, the Annual Report also contains the Intellectual Capital Report 2016 and the Environmental Statement 2016. The English version will be available by the end of April 2017.