OeNB more than doubles operating profit in 2015(, Wien)
One-off effects boost income from equity shares and participating interests
“Despite the generally difficult economic conditions and the persistently low interest rate level in particular, the Oesterreichische Nationalbank (OeNB) – again – posted a remarkable operating profit in 2015,” President Claus J. Raidl pointed out at the beginning of the press conference at which the OeNB presented its 2015 annual report and financial statements following its General Meeting. At EUR 1,171 million, the operating profit before writedowns and transfers was EUR 360 million higher than in 2014. This increase was primarily attributable to a significant rise in income from equity shares and participating interests to EUR 635 million (2014: EUR 280 million), which was mostly the result of one-off effects:
- The lion’s share of income from equity shares and participating interests stemmed from the simultaneous capitalization of the dividend claim on Münze Österreich AG (MÜNZE) for 2015 in the amount of EUR 564 million (2014: income from participating interests in MÜNZE: EUR 252.5 million, of which simultaneous capitalization of dividend claim: EUR 184.8 million). This amount comprises some EUR 393 million that resulted from the 2016 amendment to the Coinage Act as well as EUR 83 million from the transfer of MÜNZE’s shares in Casinos Austria AG (CASAG) to Österreichische Bundes- und Industriebeteiligungen GmbH (ÖBIB) in line with the applicable legal framework.
- Another EUR 40 million are attributable to the profit distribution by BLM Betriebs-Liegenschafts-Management GmbH, which in 2015 sold the last apartment buildings with OeNB staff apartments in its ownership for some EUR 8 million.
- Other revenues include the regular dividend paid by MÜNZE in the amount of EUR 89 million, the interim profit distribution by the ECB of EUR 23 million, the distribution of ECB profit for 2014 of some EUR 4 million as well as EUR 4.5 million in income from other equity shares.
Following the allocation of EUR 350 million to risk provisions and writedowns on foreign currency assets and securities totaling EUR 69 million, the operating profit for 2015 comes to EUR 753 million. This equals an increase by 121% compared to 2014.
“The central government receives EUR 696 million (2014: EUR 315 million) of the OeNB’s operating profit after writedowns and transfers – EUR 188 million in corporate income tax and EUR 508 million as its statutory 90% share of profit,” OeNB Governor Ewald Nowotny continued to explain. “This means that since 2006, the central government has received a total of EUR 2.8 billion from the OeNB if one adds up its share of profit of EUR 2.0 billion and corporate income tax of EUR 0.8 billion.” Given the monetary and economic environment, however, the OeNB’s medium-term profit outlook is rather subdued.
Reflecting the very low interest rate level, net interest income in 2015 was down on the previous year – for the third consecutive year – at EUR 634 million, some EUR 144 million or 18.5% below the figure for 2014 (EUR 778 million).
From 2006 to 2015, the OeNB earmarked a EUR 3.5 billion for risk provisions, with total provisions for financial risks (including loss-absorbing capital) running to EUR 7.1 billion as at December 31, 2015.
The profit for the year 2015 came to EUR 56 million. By resolution of today’s General Meeting, EUR 1.2 million of this amount will be appropriated to pay the maximum 10% dividend 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 for the funding of research projects and EUR 6 million for the Anniversary Fund reserve. The remaining EUR 39 million will be transferred to the profit-smoothing reserve.
Staff costs (current employees) increased slightly to EUR 142 million in 2015 (2014: EUR 139 million), taking into account the raise in basic salaries and allowances taking effect on April 1, 2015. While the OeNB’s expenses for salaries decreased marginally (2015: EUR 117 million; 2014: EUR 118 million), expenses for severance payments and contributions to severance funds went up by EUR 3.4 million to EUR 5.7 million (2014: EUR 2.3 million). A small increase of EUR 0.3 million was also recorded in expenses for compulsory social security contributions as well as compulsory contributions and charges related to wages and salaries, which totaled EUR 20.6 million in 2015.
Administrative expenses edged up in 2015 and came to EUR 85 million (2014: EUR 84 million), remaining fairly stable since 2012.
The OeNB’s net currency position dropped from EUR 18.5 billion in 2014 to EUR 14.3 billion in 2015, owing to risk-reducing hedging transactions in the amount of –EUR 5.1 billion among other factors. Gold and gold receivables accounted for EUR 8.8 billion of the net currency position.
Extensive monetary policy measures in 2015 and early 2016
“Sluggish economic growth and the low level of inflation once more presented major challenges for monetary policymakers in 2015,” Governor Nowotny explained at the press conference. “To address the increased risk of persistently low inflation and weak economic growth, the Eurosystem adopted new nonstandard monetary policy measures: Next to continuing its policy of generous long-term liquidity provision, the ECB further reduced key interest rates and expanded its asset purchase programs.”
Current data suggest that annual inflation in 2016 again will remain significantly below the Eurosystem’s price stability target range of below, but close to, 2%. At the same time, economic recovery in 2016 will remain modest owing to subdued demand from emerging economies; though growth will accelerate, it is expected to fall short of long-term average GDP growth – both in the euro area and in Austria. As OeNB Governor Nowotny stated, “That is why the Governing Council of the ECB decided to further ease its monetary policy stance, lowering euro area interest rates once more in March 2016. The rate on main refinancing operations was cut to 0%, while the deposit facility rate was reduced by 10 basis points to –0.40%; the Eurosystem’s asset purchase programs were expanded and extended to March 2017. Also, the Governing Council of the ECB decided to launch a new series of targeted longer-term refinancing operations with a maturity of four years (TLTRO II).”
Bank profitability challenged by difficult environment
Austrian banks are facing a number of challenges: the impact of the low interest rate environment, persistently subdued economic growth, weak credit quality (in particular in Central, Eastern and Southeastern Europe – CESEE) and their cost structures (high branch density) in the domestic market. Banks have already started to adjust their business models to the new environment. In 2015, the domestic banking sector generated a consolidated net profit in the amount of EUR 5.2 billion. This represented a EUR 4.6 billion increase against the previous year (2014: EUR 623.1 million) owing to a lower need for credit risk provisions and impairments of goodwill and other intangible assets (see the OeNB’s press release of April 13, 2016, for more details).
Supervisory policy strengthens financial stability
As regards macroprudential supervision in Austria, some important steps were implemented in 2015: Following an OeNB proposal, the Financial Market Stability Board (FMSB) recommended the activation of the systemic risk buffer (SRB) for selected Austrian banks. Also, the OeNB supports the creation of a legal basis for macroprudential supervisory instruments to reduce the risks of credit-driven real estate bubbles in the future.
The Single Supervisory Mechanism (SSM), which had become operational in November 2014, made important progress toward harmonizing supervisory methods in its first year: Joint Supervisory Teams were set up, cooperation with the national supervisory authorities was successfully initiated and the Supervisory Review and Evaluation Process (SREP) was for the first time conducted according to a common methodology. Moreover, on January 1, 2016, the Single Resolution Mechanism became fully operational. To complete banking union, a common European Deposit Insurance Scheme (EDIS) is to be established; first, however, the necessary legal basis has to be created at the European level.
OeNB repatriates gold holdings: 15 tons transported back to Vienna in 2015; by 2020, 140 tons are to be stored in Austria
Following a regular review of its gold strategy and storage policy, the OeNB adopted a new gold storage policy in 2015: By 2020 at the latest, half of the OeNB’s gold holdings are to be stored in Austria. In late 2015, the OeNB already repatriated the first 15 tons of its gold for storage in its own vaults. Once the repatriation has been completed, approximately 140 tons of gold will be held in Austria. The 140 tons remaining in storage abroad will be divided between the United Kingdom (an estimated 84 tons) and Switzerland (56 tons). At end-2015, 23% of the OeNB’s gold holdings (280 tons in total) were being stored in Austria, 75% in the United Kingdom and 2% in Switzerland.
Optimization project paves way for sustainable cost efficiency at the OeNB
In mid-2015, the OeNB’s internal optimization and reorganization project OPAL was brought to conclusion according to schedule, paving the way for a sustainable reduction of cost, a streamlining of tasks, efficiency gains in process management and an optimized organizational structure. Specific measures comprise, inter alia, cost savings to be accomplished in cash processing as well as IT and telephony, and the scheduled closures of the Southern Austria Branch Office in Graz, the Northern Austria Branch Office in Linz and the New York Representative Office. Cumulated savings are scheduled to amount to EUR 96 million by 2020 based on these measures, and from 2020, the OeNB aims at annual cost savings of at least EUR 20 million. Reductions in staff costs and administrative expenses as suggested by OPAL will be realized from 2016 onward. Although numerous cost-cutting measures have been scheduled, the OeNB will be able to render its full range of services in continuously high quality, remaining an attractive employer for highly qualified experts.
“Just a few days ago, the OeNB completed yet another important reform step,” Governor Nowotny announced. “On April 1, 2016, a set of measures to reform social benefits for OeNB employees that had previously been agreed with the staff council entered into force.”
OeNB marks its 200th anniversary in June 2016
The OeNB was originally founded as the “privilegirte oesterreichische National-Bank” on June 1, 1816, which makes it one of the oldest central banks in the world. “To mark the OeNB’s bicentennial we have prepared a range of activities,” President Raidl commented. “Already at the beginning of the year, the OeNB presented a commemorative coin and a special-issue anniversary stamp as well as two historic anniversary volumes. In addition, the OeNB’s Money Museum recently opened a special exhibition: ‘Guardian of the currency. 200 years Oesterreichische Nationalbank.’ Today and tomorrow, the OeNB is hosting the annual conference of the European Association for Banking and Financial History. Finally, on June 2, 2016, the OeNB will observe its 200-year anniversary with a ceremony at Vienna City Hall; we expect numerous high-level speakers and guests, given that the Governing Council of the ECB will hold its monetary policy meeting in Vienna that same day. In September, a conference organized jointly by the Bank for International Settlements (BIS) and the OeNB will conclude the series of anniversary events.”
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 2015.
For more details about the financial statements for 2015 and about the activities of the OeNB in 2015, see the OeNB’s Annual Report 2015. As the OeNB’s Sustainability Report, the Annual Report also contains the Intellectual Capital Report 2015 and the Environmental Statement 2015.