BSP earnings leap 28% to all-time high P22.8 B

Higher revenues and a sharp drop in expenditures on lower interest payments resulted in a 28 percent rise in the earnings of the Bangko Sentral ng Pilipinas (BSP), reading an all-time high of P22.8 billion last year from the previous record of P17.8 billion in 2016.

“Net income was composed primarily of higher income on international reserves, recording of demonetization income and supported by lower interest expenses,” the central bank said in its 2017 annual report.

Based on its unaudited income statement, the BSP said revenues went up eight percent to P75.6 billion from P70 billion due mainly to the increase in miscellaneous income and interest income on international reserves and domestic securities.

Miscellaneous income includes fees, rentals and proceeds from sale of coins or publications.

On the other hand, expenditures declined six percent to P66.9 billion last year from P71.2 billion in 2016 due mainly to the drop in interest expense on overnight deposit facilities and reverse repurchase agreements.

The BSP has been incurring lower interest expense after it shifted to the interest rate corridor (IRC) framework in June 2016 that led to the migration from the special deposit account (SDA) to overnight deposit facilities and the term deposit auction facility (TDF).

Gains on foreign exchange rate fluctuations fell 19 percent to P15.48 billion last year from P19.12 billion in 2016 as authorities allowed the gradual depreciation of the peso against the US dollar.

The gains were realized from servicing of matured foreign exchange obligations as well as the maturity of derivatives instruments.

This also represents realized gains arising from foreign currency-denominated transactions of the BSP, including rollover or re-investments of matured foreign exchange investments with foreign financial institutions and foreign exchange -denominated government securities.

The BSP books gains or losses from fluctuations in foreign exchange rates on matured, sold, paid and/or exchanged or settled foreign exchange assets and liabilities. Its participation in the foreign exchange market is limited to temper sharp fluctuations in the exchange rate.

On such occasions of excessive movements, the BSP enters the market mainly to maintain order and stability. When warranted, it also stands ready to provide some liquidity and ensure that legitimate demands for foreign currency are satisfied.

Total assets of the BSP composed mainly of international reserves inched up 2.4 percent to P4.67 billion last year from P4.56 billion in 2016, while liabilities consisting of deposits and currency issues increased 1.8 percent to P4.58 billion from P4.5 billion.