NBR, record-high 1.1bn-euro profit in raging recession

The central bank profited from placements with banks, but also from selling euros at 4 RON, above the purchasing price of years 2006-2007.

The National Bank last year generated a record-high gross income worth 4.6bn RON (around 1.1bn euros), from which it covered previous 2.8bn RON losses, and transferred 1.5bn RON to the state budget as taxes, stated Florin Georgescu, NBR prime deputy-governor.

Mugur Stet, NBR spokesperson, said he could not make any comments until he knew the profit components.

NBR Governor Mugur Isarescu last November stated the NBR derived “huge gains” from forex market interventions, selling euros to banks at rates of above 4 RON/euro, which it had bought during previous years at prices below this level.

“The profit was not generated from reserve management, but from these operations. And we now have the average (purchasing i.e.) rate at below 4 RON for a euro. Any foreign currency sale means a huge gain,” said Isarescu.

“It would be unfortunate for the central bank to focus on generating profit, to turn this into an objective. The NBR has other objectives, it is not a commercial bank. It is a big mistake to look if the central bank is generating profit or losses because securing macroeconomic stability is ‘priceless’. The problem is not that the NBR’s profit is so big, but we must see how we can make the private sector make bigger profits. We must support the economy, so that it may generate profit. The Federal Reserve also got record high profit through loans to banks,” comments Lucian Anghel, chief-economist with BCR.

The NBR’s position as net lender to banks also helped it obtain the record profit, as it granted loans worth billions of RON at interest rates of 14% in the first half of 2009, and paid 6% at most for attracted deposits and RON minimum compulsory reserves.

In December alone, the NBR granted banks loans worth 24bn RON at 12% per annum and attracted deposits worth 990m RON at 4% per year.