BSP books profit on FX gains

The central bank’s bleeding was arrested temporarily in the second quarter of the year as fluctuations in the foreign exchange market boosted the value of dollar-denominated assets.

Data from the Bangko Sentral ng Pilipinas (BSP) showed despite the second-quarter profit, the regulator’s finances were still in the red at the end of June.

In the April to March period, the BSP posted a net income of P1.04 billion, a reversal from a loss of P3.79 billion in the same three months last year.

The second-quarter profit was also an improvement from the first quarter’s P3.18- billion net loss.

Total revenues for the second quarter of 2015 amounted to P16.1 billion, higher than the P15.3 billion posted in the previous quarter, as interest income increased by 15.2 percent from the previous quarter’s aggregate level.

Net income from branches likewise improved by 341.6 percent or P6 billion quarter on quarter.

Total expenditures amounted to P18.5 billion, P1.2 billion higher than the level posted last quarter.

The increase in expenditures was due mainly to higher interest expense on national government deposits and other expenses.

Were it not for foreign exchange valuation gains, the BSP would have posted a net loss of P2.45 billion in the second quarter.

A surging dollar provided the BSP with a valuation gain of P3.49 billion during the three-month period.

Since 2010, the BSP’s losses have totaled P224.47 billion.

The bleeding peaked in 2012, when the BSP lost P95.38 billion, the highest annual loss in the central bank’s history.

These losses were caused mainly by the buildup in the amount of cash stashed in SDAs, one of the main tools the BSP uses to siphon cash from the economy.

The BSP’s main task is to protect consumers’ purchasing power by keeping prices stable.

Rates on SDAs are adjusted by monetary authorities depending on their assessment of domestic liquidity conditions.

Rates are raised to encourage banks to keep more cash idle in BSP vaults, while rate reductions are done to push more money out into the economy.

As a result, the BSP’s expenses rise when more money is parked in SDAs.

The BSP also adjusts rates on overnight borrowing and lending rates, currently at 4 and 6 percent, respectively.

These rates are the cost of overnight loans between the BSP and local banks.