On 28 March 2024, the Ordinary Meeting of Shareholders approved the Bank of Italy's Annual Accounts for 2023. The balance sheet shrank by €223 billion from last year to €1,253 billion. On the asset side, assets held for monetary policy purposes declined in both the refinancing operations for credit institutions component and, to a lesser extent, the securities component. On the liability side, there was a decline mainly in the Bank's negative TARGET balance and in deposits held by credit institutions.
The primary goal of the Eurosystem is to maintain price stability, not to generate a profit. Monetary policy decisions are taken to fulfil this mandate, even though this could temporarily lead to a reduction in the financial results of the individual central banks.
This is what occurred in 2023, which registered a financial result of €-7,125 million, compared with €5,860 million in 2022. The decrease was caused, in particular, by the reduction in net interest income, which in 2023 became negative by €4,782 million (-€11,363 million compared with 2022), and in the net result of pooling of monetary income, which was negative by €1,139 million (€-3,519 million). In both cases, the deterioration was due mainly to the higher cost of financial liabilities in euros (such as credit institutions' deposits), caused by key interest rate hikes. This was not offset by corresponding higher yields on longer-term assets (particularly securities held for monetary policy purposes), which are less sensitive to changes in policy rates.
To weather the potential materialization of risks, in recent years the Bank of Italy has put aside considerable financial resources to building up its financial buffers, which were partly used to cover the loss for 2023. Since risks fell as a result of the balance sheet reduction and will further diminish in the coming years, and since, based on current monetary policy decisions and market expectations for interest rates, the return to positive gross profitability is expected as early as 2025, the general risk provision was released for €5,600 million (falling from €35,214 million to €29,614 million). Financial buffer levels continue to ensure that risk coverage remains adequate from a medium-term perspective.
Taking into account, also, the positive contribution from the carryforward of the tax loss for financial year, which will enable the Bank to pay lower taxes in the future (in the amount of €2,340 million, compared with a tax burden of €1,304 million in 2022), the year 2023 closes with a net profit of €815 million (€2,056 million in 2022).
The dividend to the shareholders is €200 million, while the remainder (€615 million) is allocated to the State. Under the current dividend policy, the shareholders will therefore receive a total of €340 million, equal to the amount paid last year, thanks to the partial release of €140 million from the special item for stabilizing dividends, created by resolution of the Ordinary Meeting of Shareholders of 31 March 2017. This item has therefore been reduced from €280 million to €140 million, which remains available for any future use.
