The share of the National Bank of Belgium (NBB) was suspended on the Brussels stock exchange for most of the day on Wednesday. After the management announced that it expects this and the coming years to lose, the share went down by more than a quarter. Bad news for small investors, but also for the government, which owns half of the shares.
Kristof Simoens and Pascal Dendooven
Yesterday at 18:34
On Tuesday evening, the most astute investors already felt the downpour. The NBB share had fallen by 6 percent after ominous reports from the Netherlands. The Dutch Central Bank (DNB) warned that it expects a total loss of 9 billion euros in the period 2023-2026 “due to the interest rate hikes of the ECB”. When the listing of the NBB share in Brussels was suspended on Wednesday morning, investors knew what time it was. In the afternoon, the NBB confirmed that it too will close the current financial year with a loss and that this loss would increase in the coming years. The NBB did not provide concrete figures.
It’s the ECB, stupid!
The first loss in more than 70 years hits hard. In 2021, the National Bank still made a profit of 355 million euros and in the previous years even more than 600 million. During the pandemic, central banks flooded the market with cheap money. The central banks have earned well from this: ordinary banks that parked the excess money with the central banks paid 0.50 percent penalty interest on it. Since the European Central Bank (ECB) raised interest rates in September to combat inflation, the NBB has had to reimburse those same banks. The ECB’s deposit rate is now at 0.75 percent, but is likely to rise further.
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Bad news for budget
The profit warning is initially bad news for the government, which controls half of the shares. In March it was already said that the government will receive only 162 million from the National Bank this year; last year it was 325 million. That will not be the case in the coming years.
Individual investors are also at risk of losing money. Its dividend is largely dependent on the proceeds of a so-called ‘statutory portfolio’, an investment portfolio of more than 7 billion, which mainly comprises bonds and shares of the Bank for International Settlements. However, this portfolio may also be affected by developments in the interest rate market. The NBB says it is not yet able to indicate the impact on the dividend. The reaction was therefore not delayed on the stock market: the share went on sale and plunged 27.49 percent. Unseen!