BSP income up 421% on forex, high interest rate

The central bank income grew a whopping 421 percent to R17.55 billion as of end-April from only R3.37 billion during same time last year on higher interest rate and foreign exchange (forex) fluctuations.

Based on the latest Bangko Sentral ng Pilipinas (BSP) unaudited statement of income and expense, the central bank’s end-April revenues rose by 30.2 percent to R25.64 billion from R19.69 billion due to the rise in interest income on international reserves and domestic securities.

Interest income went up to R22.96 billion from R17.84 billion at the same time in 2017. Miscellaneous income also increased to R2.67 billion.

The improvement in net income was also supported by foreign exchange rate fluctuations which saw a gain of R8.84 billion during the period, more than the previous year’s R5.22 billion.

The BSP also carefully managed expenditures, which dropped by 21.4 percent to R16.92 billion versus endApril 2017’s R 21.54 billion mainly because of lower interest expenses, taxes and licenses. Interest expense amounted to R8.49 billion from R13.08 billion last year.

During the period, the BSP has total assets – mostly composed of international reserves — of R4.68 trillion which is 0.85 percent more year-on-year. Total liabilities which are deposits and currency issues barely changed at R4.85 trillion during the period.

The BSP’s net worth stood at R98.50 billion, up 58.64 percent from R62.09 billion.

In June, with Congress approving House Bill No. 7742 that will finally amend the BSP charter, this will increase the central bank’s capital from R50 billion to R200 billion.

BSP Governor Nestor A. Espenilla Jr. has urged Congress to approve amendments within the year. Proposals to amend the charter have been pending for almost two decades.

Besides increasing the BSP capital, the amendments include provisions for the legal protection of BSP personnel in the course of performance of official duties and the restoration of the independent institution’s tax exemptions.

Before 2016, the BSP has been in the red for six years or from 2010 and its net worth has fallen from R171.37 billion in 2010 to R70.71 billion in 2017 due to the costs of fulfilling its mandate of price and financial stability. Its surplus reserves have also been eroded, from R164.42 billion in 2010 to R20.71 billion last year, and in 2013, 2014 and 2015, it had a negative net worth.

By law, the BSP remits 75 percnet of its gains to the government, a higher amount compared to other government-owned and controlled corporations which only remit 50 percent of their net income. Since the BSP was established as the new central bank in 1993, it has deposited almost R160 billion in dividends and taxes to the state.