The State Bank of Pakistan's massive profit during FY18 has turned into a loss in FY19 following substantial exchange loss due to PKR depreciation against the USD and the SDR. Reportedly, for the first time in its history, the SBP has suffered a consolidated loss.
The Annual Performance Review has revealed that the SBP has incurred a net loss of Rs 1.043 billion (consolidated) in FY19 as compared to a profit of Rs 175.673 billion in FY18.
The decline has been primarily attributed to exchange loss of Rs 506.131 billion during the last fiscal year as compared to exchange loss of Rs 72.280 billion in previous year, the SBP reported.
The Board of Directors of the State Bank of Pakistan on October 12, 2019 has approved the Annual Performance Review on the working of the SBP and its subsidiaries and the financial statements for the year ended June 30, 2019. Accordingly, the SBP has released Annual Performance Review on Wednesday. This review includes financial statements of the bank and its subsidiaries and the auditor's report.
According to performance review the decrease in profit was partly offset by increase of Rs 254.351 billion in the net interest income. While, the lending to the federal government remained the major source of SBP's profit followed by earnings on the Open Market Operations (OMO) injections.
The exchange gains/losses mainly arise on Foreign Currency assets and liabilities of the State Bank. Major part of the foreign currency assets of the Bank are USD denominated whereas the foreign currency liability exposure is mainly SDR and USD denominated.
Accordingly, the report said that the movement in the PKR/SDR and PKR/USD exchange rates directly affects the exchange account and the State Bank incurred a net exchange loss of Rs 506.131 billion during FY19 against the exchange loss of Rs 72.280 billion during FY18.
The PKR depreciated against USD by Rs 38.56 and SDR by Rs 80.82; accordingly, the net exchange loss increased significantly during the year.
The borrowings by the government from SBP during FY19 remained the major sources of income of the Bank during the year and the interest/markup income increased by Rs 331.471 billion to Rs 646.009 billion, registering an increase of over 105 percent.
The interest earned on refinance facilities to priority sectors increased to Rs 11.945 billion in FY19 up from Rs 10.232 billion in FY18 primarily due to increase in lending to banks under various refinance schemes.
The income on FCY assets registered 6 percent increase during the year. Although, foreign exchange reserves reduced significantly during the year; however, the return on the reserves increased due to hike in the international interest rates.
The interest/markup expense witnessed a rise of Rs 78.922 billion primarily due to increase in expense on repurchase transactions by Rs 46.830 billion. Further, FCY deposits increased during the year which resulted in additional expense of Rs 23.141 billion.
The overall expenses also witnessed a growth of 5 percent during the year. The note printing charges and General administrative and other expenses are the major expense heads that witnessed growth while agency commission paid to agent commercial banks for undertaking government banking business on behalf of the Bank witnessed slight decrease during the year.
The Bank earns commission income on management of public debt, market treasury bills, prize bonds, national saving schemes and government securities as well as issuing drafts and payment orders.
The commission income increased by 1 percent to Rs 4.136 billion largely due to increase in commission on market treasury bills. While, The SBP holds equity investment in banks and financial institutions under section 17 6(A) of SBP Act 1956 and dividends earned on these investments was Rs 390 million.
The other operating income increased to Rs 4.347 billion in FY19 from loss of Rs 775 million in last year. The increase is primarily attributed to increase in income on penalties levied on banks and financial institutions and gain on re-measurement of securities classified as "fair value through profit or loss."
The total expenditure during the year was Rs 50.467 billion as against Rs 48.050 billion in FY18, registering an increase of 5 percent over the previous year's expenditure. The increase was due to 22 percent increase in banknote printing charges whereas agency commission expenses decreased by 3 percent.
The bank note printing charges increased from Rs 9.362 billion in FY18 to Rs 11.419 billion in FY19, registering an increase of 22 percent mainly due to larger volumes of printing.
The Agency commission paid to National Bank of Pakistan and Bank of Punjab decreased by 3 percent during the year to Rs 10.643 billion as against Rs 10.945 billion in FY18. The decrease is attributable to automation of tax collection through alternative delivery channels during the year.
With an increase of Rs 203 million, the overall general and administrative expenses were Rs 27.909 billion in FY19 compared to Rs 27.706 billion in FY18, thus registering.
The total assets of the SBP stood at Rs 11.467 trillion as at June 30, 2019 as compared to Rs 7.733 trillion on June 30, 2018, registering an increase of Rs 3.734 trillion primarily due to increase in government borrowings from the central Bank.
The increase in total assets is also contributed by the increase in value of gold and increase in loans and advances to banks and financial institutions to promote the economic activities in the priority sectors.
The total liabilities of the bank stood at Rs 10.761 trillion as at June 30, 2019 as compared to Rs 7.198 trillion as at June 30, 2018, registering an increase of Rs 3,563 billion. This rise was led by increase in currency in circulation, bank deposits, payable under bilateral currency swap agreement and payable to the IMF.
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