The bank suffered a net loss of $1,492 million and $3,002 million for the three and six months ended June 30, 2023, respectively, primarily because interest earned on deposits exceeded interest earned on investments. Interest expense on deposits increased from 0.25% in the first quarter of 2022 to 4.75% as of 30 June 2023 due to the increase in the Bank’s policy rate. Over time the Bank will return to net income. The net loss does not affect the Bank’s ability to carry out its order.
Interest income depends on market conditions, their impact on the interest-bearing assets held on the Bank’s balance sheet and the size and composition of those assets. The Bank receives interest on its investments in Canadian government securities, SPRAs (if any) and assets resulting from large-scale asset purchase programs. For the second quarter and first six months of 2023, interest income decreased $154 million (or 13%) and $252 million (or 11%), respectively, compared to the same periods in 2022. This decrease was due to the Bank’s lower interest income average holdings of interest-bearing investments during the period.
Interest expense consists primarily of interest accrued on deposits held by the Bank. For the second quarter and first six months of 2023, interest expense increased $1,497 million and $3,436 million, respectively, compared to the same periods in 2022, as a result of increases in the Bank’s policy rate. The increase was partially offset by lower average deposit volumes over the period and a decrease in the Canadian government’s interest rate on deposits to 0% since May 2022.
Operating expenses for the second quarter and first six months of 2023 decreased 8% and 6%, respectively, compared to the same periods in 2022. This primarily reflects a decrease in costs for personnel and for banknote research, production and processing.
- Personnel expenses decreased by $7 million (or 7%) and $13 million (or 7%) for the second quarter and first six months of 2023, respectively, compared to the same periods in 2022, reflecting the is due to the following changes:
- Payroll costs increased $13 million (or 10%) in the first six months of 2023 as vacancies were filled to fulfill the bank’s core functions, including the new retail payments oversight mandate, and as progress achieved in strategic initiatives. The annual compensation adjustment also contributed to this increase.
- Benefits and other personnel expenses decreased $26 million (or 36%) in the first six months of 2023, primarily due to a decrease in expenses related to the bank’s defined benefit plans. This decrease was due to an increase in the discount rates used in the calculation.
- Research, production and processing costs for banknotes decreased by US$5 million (or 31%) and US$15 million for the second quarter and first six months of 2023 compared to the same periods in 2022 (or 52%) driven back by lower volumes of banknotes printed. The timing of banknote production varies from year to year and depends on the annual production schedule and market demand.
- Technology and telecom costs decreased $3 million (or 11%) in the second quarter of 2023 but increased a total of $2 million (or 4%). The turnover during the period was due to the bank’s focus on digital transformation and strengthening its information technology systems.
Other total losses for the six months ended 30 June 2023 were US$39 million. It represents revaluation losses of $51 million on the Bank’s defined benefit plans due to decreases in discount rates offset by an increase in the fair value of plan assets. It also consists of a US$12 million increase in the fair value of the Bank’s investment in the Bank for International Settlements.
Total loss for the six months ended June 30, 2023 was US$3,041 million, primarily due to the net loss of US$3,002 million incurred during the period.
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