BSP back in the red as forex losses reach P34.4 billion in first half

By Lawrence Agcaoili (The Philippine Star) Updated December 17, 2010 

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is back in the red after booking a huge foreign exchange loss of P34.4 billion in the first half of the year due to the sharp appreciation of the peso against the US dollar.

Data released yesterday showed that the BSP’s forex losses from January to June this year was more than 42 times the P790-million losses it booked in the same period last year due to the volatile forex market.

The BSP thus recorded a net loss of P17.43 billion in the first six months of the year due to the huge forex losses, a complete reversal of the P3.09-billion net income booked in the same period last year.

Without the forex losses, the central bank’s earnings would have more than quadrupled to P16.93 billion in the first half of the year from P3.89 billion last year.

The BSP’s unaudited financial statement showed revenues jumped 19.7 percent to P54.57 billion from January to June this year compared to P45.57 billion in the same period last year due to the 141-percent surge in the bank’s miscellaneous income, or earnings arising from sources other than interest income such as fees, rentals and proceeds from the sale of coins or publications.

On the other hand, the BSP’s expenses retreated 9.7 percent to P37.63 billion from P41.69 billion after the bank’s interest expenses declined 5.9 percent to P30 billion from P31.89 billion.

The BSP’s assets increased 14.1 percent to P2.752 trillion in the first half of the year from P2.411 trillion in the same period last year due to the steady build-up in international reserves arising from its forex operations and receipts from investment income abroad.

Likewise, the BSP’s liabilities posted a double-digit increase of 16.3 percent to P2.592 trillion from P2.174 trillion arising from higher balances in its deposit liabilities.

The BSP explained that special depository accounts (SDA) zoomed 42.6 percent to P835.22 billion from the year-ago level of P585.55 billion as more investors decided to park their funds in the high-yielding instrument.

The central bank also added that the expansion in liabilities was also traceable to the increases posted in currency issued and the allocation of special drawing rights (SDR) of multilateral lender International Monetary Fund (IMF).

As a result, the BSP’s net worth went down 5.7 percent to P223.68 billion in the first half of the year compared to the year-ago level of P237.29 billion arising from higher growth in liabilities.

The BSP is mandated under Republic Act 7653 or the New Central Bank Act of 1993 to adhere to a market-oriented foreign exchange rate policy such that the role of central bank is principally to ensure orderly conditions in the market. It intervenes in the market when the peso appreciates or depreciates sharply to smoothen forex movement.

In 2009, the BSP’s net income surged 47 percent to P13.16 billion due mainly to the large increase in miscellaneous income accompanied by a decrease in interest expenses. Higher miscellaneous income helped offset the P9.67-billion forex losses it booked last year.

It realized forex trading gains of P530 million in 2008 from a record loss of P113.7 billion in 2007 due mainly to the strengthening of the peso against the greenback.

The central bank also incurred a net loss of P86.94 billion in 2007 due to the record forex loss amounting to P113.7 billion. This was the first time that it incurred a net loss since 1993 when it became the BSP from the old central bank.

Earlier, BSP Governor Amando M. Tetangco Jr. said the central bank books forex losses when the peso appreciates against the greenback just like what happened in 2006, 2007 and in 2009.

Tetangco pointed out that the volatility and appreciation of the peso against the dollar remains healthy and in the middle of the range allowing Filipino businessmen, including exporters, to plan more effectively.