BSP profit plunges 64 percent to P19.8 billion in 1st half

MANILA, Philippines — The earnings of the Bangko Sentral ng Pilipinas (BSP) plunged by 63.6 percent to P19.86 billion in the first half from P54.62 billion in the same period last year as expenses soared.

Preliminary data showed the total revenues of the central bank, mostly comprised of interest income on foreign investments, government securities and treasury bonds, rose by only 6.7 percent to P90.63 billion in the first half from P84.96 billion a year ago.

Interest earnings jumped by 31.8 percent to P93.41 billion from P70.89 billion, while miscellaneous activities, such as trading gains or losses, fees, penalties and other operating income, among others yielded a net loss of P2.78 billion in the first half and reversed the P14.07 billion gains booked in the same period last year.

However, the total expenses of the BSP soared by 78.3 percent P102.58 billion from P57.53 billion, driven by the 172-percent jump in interest expenses to P80.15 billion from P29.51 billion. Other expenses fell by 20 percent to P22.43 billion from P28.02 billion.

On the other hand, the BSP booked a net gain of P31.81 billion from foreign exchange fluctuations in the first semester, almost 17 percent higher than last year’s P27.21 billion.

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 to temper the sharp fluctuations in the exchange rate.

The peso has strengthened back to the 53 to $1 handle after slumping to an all-time low of 59 to $1 in October last year due to the aggressive rate hikes delivered by the BSP, as well as the central bank’s active participation in the foreign exchange market.

The local currency almost touched the 57 to $1 level late last month and early this month due to further rate hikes delivered by the US Federal Reserve, as well as the decision of Fitch Ratings to downgrade the credit rating of the US to AA+ from AAA.

The peso has depreciated by 1.9 percent to close at 56.815 to $1 last Friday from the end-2022 level of 55.755 to $1.

The profit of the BSP reached a record-high level of P63.73 billion in 2022, 1.9 times the P33.98 billion booked in 2021. This, after it tallied a net gain of P67.66 billion from foreign exchange fluctuations last year, 20.7 times the P3.26 billion recorded the previous year.

Under Republic Act 11954 or an act establishing the Maharlika Investment Fund signed by President Marcos in July, the BSP is mandated to contribute 100 percent of its total declared dividends as computed under RA 7653 or the New Central Bank Act in the first two years of the fund.

In the succeeding years after the first two years of 100 percent dividend payout to the national government, the BSP will have to remit 50 percent of its declared dividends to the MIF while the remaining 50 percent will go to the national coffer until the increase in the BSP capitalization to P200 billion from P50 billion has been fully paid.

In an interview with CNN Philippines early last month, BSP Governor Eli Remolona Jr. said the central bank is set to remit about P62 billion to the national government over the next two years to bankroll the MIF.

The BSP chief has signed a memorandum order for the release of P31 billion worth of dividends to the government to be used as MIF capital and is set to remit the same amount next year.

So far, government financial institutions led by the Land Bank of the Philippines chaired by Finance Secretary Benjamin Diokno contributed P50 billion to the MIF, while Development Bank of the Philippines chipped in P25 billion.