The Bangko Sentral ng Pilipinas (BSP) posted a net income of P94.58 billion as of end-September, up 61.89 percent compared to same period last year of P58.42 billion due to revenues and gains from foreign exchange (FX) rate fluctuations.
Based on the central bank’s latest statement of income and expense, the BSP reported FX gains of P65.64 billion in the first nine months, a huge increase from last year’s P7.05 billion.
Generally, BSP’s FX gains are realized gains from fluctuations in FX rates arising from foreign currency-denominated transactions of the BSP. Since June this year, when the peso first entered a rapid pace of depreciation from P54 to P59 by Sept. 29, the BSP has been actively selling US dollars at the spot market to smoothen exchange rate pressures.
As of end-September, the BSP revenues totalled P121.21 billion, 8.1 percent down compared with P131.87 billion same time in 2021. Revenues mostly come from interest income which are from international reserves and domestic securities, as well as miscellaneous income.
Interest income from trading gains, fees, penalties and other operating income, rose by 31.91 percent to P114.53 billion from P86.82 billion. The miscellaneous income continued to decline to P6.69 billion, down by 85 percent year-on-year from P45.05 billion.
The central bank expenditures for the first nine months went up by 14.6 percent to P92.24 billion from P80.47 billion. Expenses include banknotes production and coin minting cost, as well as taxes and licenses fees.
Interest expenses dropped 18.39 percent to P53.29 billion from P45.01 billion, while “other” expenses totalled P38.95 billion as of end-September versus P35.47 billion same time in 2021.
In the first three quarters of 2022, BSP’s total assets stood at P7.338 trillion. It was 8.1 percent lower versus end-September 2021’s P7.984 trillion.
Bulk of these assets are BSP’s international reserves which have been depleted due to BSP’s defense of the peso against the strong US dollar. The country’s dollar stock has fallen to the $93 billion level, way below the end-2021 reserves of $108 billion.
Meantime, as of end-September, BSP liabilities stood at P7.228 trillion. This was lower by 7.7 percent compared to same period last year of P7.831 trillion. BSP liabilities are deposits such as the term deposit facility and the overnight deposit facility, and currency issues.
Based on the latest report, the BSP’s net worth P109.64 billion was 28.48 percent lower from last year’s P153.30 billion due to reduced surplus and capital reserves.
The BSP’s surplus or reserves also incurred a huge loss of 42.26 percent to P59.64 billion as against P103.30 billion same time in 2021. As explained by the central bank, the surplus is mainly composed of BSP’s unrestricted retained earnings as well as capital reserves or the funds set aside for various contingencies. It also includes unrealized gains or losses on its investments in government securities, stocks and other securities, said the BSP.
The BSP’s capital remains at P50 billion. Its amended law or Republic Act 11211 (“An Act Amending Republic Act No. 7653, Otherwise Known as the ‘New Central Bank Act’, and for Other Purposes”) increased the BSP’s capitalization to P200 billion from P50 billion. This will be funded solely from the declared dividends of the central bank.
However, in March 2020 and in August 2021, the BSP remitted a combined P36 billion to the government as dividends despite that under its charter, it is no longer mandated to remit dividends to the government. These funds are additional funding for the anti-pandemic programs.
The BSP’s annual dividends could be again siphoned off by the proposed Maharlika Wealth Fund. The current version of the proposed bill is that BSP will surrender 100 percent of its dividends to the wealth fund.
Before the pandemic, raising BSP’s capitalization was a priority as this would ensure BSP’s capital health. Section 2 of the amended BSP charter specified that declared dividends will be deposited in a special account in the BSP’s general fund and will be “earmarked for the payment of the BSP’s increase in capitalization (and) such payment will be released and disbursed immediately and will continue until the increase in capitalization has been fully paid.”
To increase its P50 billion capitalization to P200 billion, the BSP has to raise the additional P150 billion on its own. But this will only come from its declared dividends.