LONDON, March 6: The European Bank for Reconstruction and Development said on Thursday that net earnings fell heavily last year and warned it would face a difficult 2008 because of choppy world financial markets.

The EBRD also dismissed talk of a possible merger with the Luxembourg-based European Investment Bank.

Net profits dived by 21 per cent to 1.9 billion euros ($2.9bn) last year, said the EBRD, whose president Jean Lemierre announced last month that he would step down in July.

“The EBRD’s net profit was 1.9 billion euros in 2007 compared with 2.4 billion euros in 2006, with the decline mainly reflecting lower gains from the sale of equity investments,” the EBRD said in a results statement.

The record profits in 2006 were largely because of a particularly large one-off equity sale, it added.

Total investments soared by 14 per cent to 5.6 billion euros in 2007, while the number of new projects rose to 353, an all-time high point.

“The global financial market turbulence that emerged in 2007 had a relatively limited effect on the EBRD region,” said the bank’s head of finance, Manfred Schepers.

However, he added: “Continuing market volatility and the threat of further economic weakness could affect 2008 revenues and reduce the value of the EBRD’s equity investments in 2008.

“The prevailing economic uncertainty could lead to some reluctance to invest on the part of international private sector banks and investors.”

As the countries it helps catch up with richer European Union countries, the EBRD’s relevance has increasingly come into question.

It recently completed its work in the Czech Republic and is expected to leave a further six countries, which have also become EU members, by 2010.

Meanwhile on Thursday, Lemierre dismissed reported calls for the EBRD to merge with the European Investment Bank (EIB).

“A merger with EIB is not on the agenda,” Lemierre told reporters at a press conference unveiling the results.

“I have a very strong view that the bank has a clear mission. It shouldn’t be distracted to implement its mission. When it is accomplished we’ll have choices.”

A consultation process to find Lemierre’s successor will take place in the coming months amid the run-up to the bank’s annual conference in Kiev in May. EU finance ministers backed German Deputy Finance Minister Thomas Mirow on Tuesday to take over the EBRD’s presidency.—AFP