BNB's loss exceeded 3 billion euros in 2023


The continued rise in rates accentuated the loss of the National Bank of Belgium last year. It expects to lose another 6.1 billion in five years.

The financial situation of the Belgian central bank remains poor. In 2023, the National Bank of Belgium (BNB) made a loss of 3.37 billion eurosshe announced this Wednesday in a press release, against a loss of 580 million euros in 2022. The institution expects to still suffer high losses within five years.

3.1

Billions of Euro's

The heavy loss of the BNB caused its reserves to melt to 3.1 billion euros.

The historic loss suffered by the BNB last year significantly dented its reserves. In one year, these went from 6.5 to 3.1 billion euros. As in 2023, the national bank will therefore limit itself to distributing the first dividend provided for by the organic law which governs it, namely 1.5 euros per share, taken from reserves. No second dividend will be paidtaking into account losses and the minimum level of reserves.

BNB's poor results are due to the sharp rise in interest rates over the last few months. In 2023, the deposit facility rate of the European Central Bank (ECB) increased from 2% to 4%. From then on, the deposits of commercial banks with the ECB had to be highly remunerated by it. In practice, each national bank in the euro zone must pay interest on deposits of banks in its country.

Assets yield little

The BNB therefore had to pay significant sums last year because Belgian financial institutions do not convert all the high deposits of their customers – the outstanding savings accounts amount to 270 billion euros – into loans. These excess liquidity thus ends up at the BNB window, which must apply the deposit rate set by the ECB.

“If the base scenario were to materialize, this would result in a cumulative loss of 6.1 billion euros over five years.”

The National Bank of Belgium

On the asset side, the BNB had acquired, as part of the ECB's securities purchase program, many bonds, mainly government bonds, with very low interest rates, which will not mature for years. The National Bank has therefore had to pay increasingly higher interest while it will only receive low coupons for several more exercises.

As a result, the BNB's net interest income in 2023 is -4.615 billion euros, which largely explains the negative net result of the institution. The situation is not expected to improve for several yearswarns the national bank.

Return to profitability hoped for in 2029

In a scenario based on the current level of rates and their estimated future evolution based on market expectations, “the bank's results remain under pressure”, she warns. “If this scenario were to materialize, which is surrounded by great uncertaintywith unchanged balance sheet composition, this would result in a cumulative loss amounting to 6.1 billion euros over a five-year horizon.”

“The bank would not record substantial losses after this five-year period and would return to profitability.”

The National Bank of Belgium

But the prospect of a reduction in key rates during this year allows the institution to cautiously see the end of the tunnel, probably in five years. “The bank, in this scenario and under unchanged circumstances, would nevertheless not record substantial losses beyond this time horizon (from 2029, Editor's note), and would return to profitability.”

In 2022, the BNB issued a warning about its future results, which caused its stock price to plunge. The bank's stock fell nearly 60% over the year. In 2023, given the unfavorable development of interest rates, the stock found itself under pressure again and lost again almost 20%.

Since the beginning of this year, in a context of still high rates, BNB action shows a further drop, of almost 10%.

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