How deep does the National Bank go into the red?

The National Bank published a billion-dollar loss for the 2023 financial year on Wednesday. However, shareholders may receive a small dividend.

The annual figures that the National Bank will publish after trading hours on Wednesday will be very poor. Interest costs are rising much faster than interest income. The loss for 2023 will most likely be a multiple of the loss for 2022, which amounted to 580 million euros. In recent weeks, many European central banks have already published billions in losses.

The National Bank is seeing its interest costs rise sharply, because due to the interest rate increases of the European Central Bank (ECB), it has to pay much more interest on the cash surpluses that the Belgian banks park with it. These cash surpluses amount to more than 200 billion euros. Interest income mainly includes the proceeds from fixed-rate bonds. The return on that portfolio gradually increases as maturing low-yield bonds are replaced by new ones with higher yields.

Despite the enormous loss, the National Bank will probably pay a gross dividend of 1.50 euros, just like last year. It promises a minimum dividend of 1.50 euros if that dividend is covered by reserves. That condition seems to have been met, because the reserves still amount to more than 6 billion after last year’s loss.

A higher dividend is unlikely because the reserves are less than the sum of the expected loss and the financial risks. We also look forward to an update on the expected loss estimate.

Governor Pierre Wunsch said last year that a capital injection by the state is not necessary, although the expected loss is greater than the sum of the capital and reserves. The National Bank also has 13.7 billion euros in unrealized capital gains on gold and foreign currencies. Activist Jaak Van Der Gucht says that these capital gains are equity. The National Bank disputes this and emphasizes that these capital gains are neither equity nor debt.