Bangko Sentral ng Pilipinas Reports 71% Profit Decline in Eight Months Amid Rising Expenses

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP), the country’s central bank, has reported a significant decrease in profits for the first eight months of 2023. Compared to the same period last year, the BSP’s earnings plummeted by 71%, dropping from P78.82 billion to P22.91 billion. This decline in profit has been attributed to soaring expenses, despite a modest increase in total revenue.

The central bank’s total revenue, primarily composed of interest income from foreign investments, government securities, and treasury bonds, saw a marginal rise of 2.1%, amounting to P117.13 billion, up from P114.72 billion a year earlier. Interest earnings specifically rose by 23.1%, reaching P127.52 billion, compared to P103.57 billion in the previous year. However, this increase was offset by a net loss of P10.4 billion in miscellaneous activities, which included trading gains or losses, fees, penalties, and other operating income. This represents a reversal from last year’s gains of P11.15 billion.

The substantial surge in total expenses was a key factor in the profit decline. Expenses soared by 75.9% to P137.87 billion, up from P78.37 billion, with interest expenses alone reaching P109.67 billion, more than double the previous year’s figure of P44.47 billion. Additionally, the BSP reported a 2.7% increase in gains from foreign exchange fluctuations, amounting to P43.67 billion compared to P42.5 billion in the previous year.

In contrast, the BSP had achieved a record-high profit of P63.73 billion in 2022, significantly higher than the P33.98 billion recorded in 2021. This impressive performance was primarily driven by a substantial net gain of P67.66 billion from foreign exchange fluctuations, which was markedly higher than the P3.26 billion recorded in the preceding year.

Under the recently enacted Republic Act 11954, establishing the Maharlika Investment Fund (MIF), the BSP is mandated to contribute all its declared dividends for the first two years of the fund. Governor Eli Remolona Jr. has announced plans to remit approximately P62 billion to the national government over the next two years to support the MIF. This includes the release of P31 billion worth of dividends for MIF capital, with an equivalent amount expected to be remitted next year. Other government financial institutions, including the Land Bank of the Philippines and the Development Bank of the Philippines, have already contributed P50 billion and P25 billion, respectively, to the MIF.

The BSP’s financial performance in 2023 highlights the challenges and complexities of managing a nation’s central banking operations in a dynamic economic environment. The significant drop in profits underscores the impact of rising expenses and fluctuating income sources, reflecting the broader economic conditions affecting the Philippines.