Forex gains boost BSP’s 9-month profit to P95 billion

MANILA, Philippines — The gains from foreign exchange transactions boosted the nine-month profit of the Bangko Sentral ng Pilipinas (BSP) to P94.58 billion, 62 percent higher than the P58.42 billion recorded in the same period last year.

Preliminary data showed the central bank booked a net gain of P65.64 billion from foreign exchange rate fluctuations from January to September, more than nine times the P7.05 billion recorded in the same period last year.

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. It participates in the foreign exchange market is limited to temper sharp fluctuations in the exchange rate.

The peso has depreciated by 15.7 percent to hit an all-time low of 59 to $1 in October from the end-2021 level of 50.999 to $1. Just like other currencies, the peso continues to weaken against the greenback due to the hawkish US Federal Reserve, the impact of Russia’s invasion of Ukraine on global oil and commodity prices, and soaring interest rates in the country.

With the series of rate hikes by the BSP and its active intervention in the foreign exchange market, the local currency has rebounded strongly back to the 55 to $1 level over the past few weeks.

Total revenues of the BSP, mostly comprised of interest income on foreign investments, government securities and treasury bonds, declined by 8.1 percent to P121.21 billion during the nine-month period from a year-ago level of P131.87 billion.

Interest earnings jumped by 31.9 percent to P114.53 billion from P86.82 billion.

However, this was offset by the 85.1 percent plunge in miscellaneous income to P6.69 billion from P45.05 billion. These include trading gains or losses, fees, penalties and other operating income, among others.

On the other hand, the total expenses increased by 14.6 percent P92.24 billion from P80.47 billion as interest expenses grew by 18.4 percent to P53.29 billion from P45.01 billion while other expenses inched up by 9.8 percent to P38.95 billion from P35.47 billion.

The BSP booked a double-digit 11.2 percent increase in earnings to P34.72 billion last year from P31.22 billion in 2020 on the back of higher revenues from trading gains and operating income.

The central bank’s total revenues jumped by 39.2 percent to P165.89 billion last year from P119.19 billion in 2020, while expenditures surged by 33 percent to P109.33 billion from P82.12 billion.

Instead of using funds from the Government Service Insurance System and Social Security System as well as the country’s gross international reserves managed by the BSP, Finance Secretary Benjamin Diokno said the source of the Maharlika Wealth Fund is being revised to require the central bank to contribute 100 percent of its annual dividends for the first two years.