MNI POLICY: "No reason to be pessimistic" - Bundesbank chief

By Luke Heighton

     FRANKFURT (MNI) - German economic growth is expected to continue, Deutsche

Bundesbank President Jens Weidmann will say Wednesday, with "no reason to be

overly pessimistic about the outlook" despite the recent loss of momentum at

home, in the euro area and across the world.

     Weidmann and Executive Board member Johannes Beermann will take part in a

press conference at 11am CET in Frankfurt following the release of the Bank's

Annual Report for 2018.

     Weidmann will say he believes that economic growth continues to be

supported by favourable financing terms, rising employment levels and increasing

wages, and will single out the ECB's decision to cease net asset purchases at

the end of 2018 as the most significant monetary policy decision of last year,

marking "the first step on the long road towards monetary policy normalisation".

     Here are key points from the report:

     --The Bundesbank posted a profit of E2.5 billion for the 2018 financial

year, compared with E2.0 billion the previous year.

     -- Income from interest grew by E1.0 billion to E6.2 billion in 2018 and

were the main source of the profit. This increase was chiefly driven by the fact

that income from negative interest rates on deposits was up by E0.6 billion to

E3.8 billion.

     -- Interest expenditure edged up from E0.2 billion to E1.2 billion, and net

interest income rose by E0.7 billion to E4.9 billion.

     -- The Bank's total assets grew by E114 billion last year, bringing them to

a new record of just over E1.8 trillion. "The Bundesbank's total assets have

thus risen by more than E1 trillion, or around 140%, over the last four years,"

commented Johannes Beermann, the Executive Board member responsible for

accounting and controlling.

     --The stock of euro securities was up by E60 billion to E572 billion, and

TARGET2 claims on the European Central Bank (ECB) climbed by E59 billion to E966

billion.

     --The Bank's liabilities from monetary policy fell by E37 billion to E573

billion. By contrast, the euro balances of resident and non-resident depositors,

in particular, were by up E87 billion to E409 billion.

     -- The Bundesbank stepped up its provisions for general risk for the third

consecutive year, adding E1.475 billion to bring the total to E17.9 billion.

"General risk provisions are traditionally used to hedge against exchange rate

risk, but, due to the non-standard monetary policy measures, also against

default and interest rate risk," Weidmann will say.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$E$$$,M$X$$$,M$$EC$]