May 3, 2017 / 1:34 PM / 3 months ago

Irish central bank profits set record high on bond sales

3 Min Read

DUBLIN, May 3 (Reuters) - Bond sales linked to the resolution of Ireland's banking crisis helped the country's central bank to a record profit of 2.3 billion euros last year, 1.8 billion of which has been paid to the state to help cut the national debt.

The surplus income paid each year to the state has risen as a result of the government debt the central bank acquired during the financial crisis, related chiefly to the liquidation in 2013 of the collapsed Anglo Irish Bank.

The value of the bonds have risen in line with the higher prices attracted by Irish government debt. That has led to large capital gains over the last three years, when the bonds were sold more quickly than expected.

The central bank recorded a profit of 2.2 billion euros in 2015, when it returned 1.8 billion euros to the state. Profits will revert to more modest levels over the medium term as the effect of the bond sales diminish, it said.

Ireland pledged to slowly feed the new bonds worth 25 billion euros into the market via the central bank as part of an agreement with the European Central Bank (ECB) to stretch out the liquidation costs and ease the state's debt burden.

The central bank has until 2033 to sell the bonds. It had cut the holdings by book value to 19.6 billion euros at the end of 2016.

The bonds' market value stood at 30.3 billion euros, meaning there is currently an unrealised gain of 10.7 billion euros, the central bank said.

The ECB wants Ireland to offload the debt as quickly as possible and reiterated last month that a more ambitious sales schedule would further mitigate "persisting serious monetary financing concerns".

It acknowledged that last year's disposals were a step in that direction and the central bank has sold another 1 billion euros of the bonds this year.

Announcing the profit, central bank Governor Philip Lane said that while Ireland's domestic economy continues to improve, external risks remain significant.

"These include risks relating to the effects of Brexit, but also the risks associated with any increase in global protectionism and/or elevated levels of risk aversion in international financial markets," he said. (Reporting by Padraic Halpin, editing by Larry King)

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