BSP profit vaults to record P29.5 billion in first half of 2018

MANILA, Philippines — Higher revenues, lower interest expense, and record gains from foreign exchange fluctuations resulted in a more than four-fold jump in the earnings of the Bangko Sentral ng Pilipinas (BSP) to an all-time high of P29.5 billion in the first half from P6.6 billion in the same period last year.

Data showed revenues went up by 13.6 percent to P37.08 billion from January to June compared to P32.65 billon in the same period last year.

The increase was traced to the 30.8 percent rise in interest income on international reserves and domestic securities to P35.88 billion from P27.49 billion.

On the other hand, the expenses of the BSP fell nearly 18 percent to P29.12 billion from P35.4 billion due mainly to lower interest expenses and taxes and licenses.

The BSP recorded a net income before gains on foreign exchange fluctuations, income tax expense, and capital reserves amounting to P7.95 billion in the first semester, reversing the P2.75 billion net loss booked in the same period last year.

Gains on foreign exchange fluctuations more than doubled to P21.51 billion in the first semester from a year-ago level of P9.31 billion. 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 peso remains one of the worst performing currency in the region depreciating close to seven percent since the start of the year to hit a fresh 12-year low after breaching the 53 to $1 level.

The local currency has been weakening due to strong demand for US dollar to finance importation of capital equipment and raw materials to support the expanding economy resulting in wider trade and current account deficits.

Funds also continued to flow out of the Philippines to seek higher yield amid the normalization path being undertaken by the US Federal Reserve as well as the geopolitical tensions in different parts of the globe.

The BSP books gains or losses from fluctuations in foreign exchange rates on matured, sold, paid and exchanged or settled foreign exchange assets and liabilities.

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.

The BSP booked an all-time high net income of P23.51 billion last year, 34.3 percent higher than the P17.51 billion recorded in 2016. It gained P15.48 billion from foreign exchange fluctuations.