The profit of State Bank of Pakistan for Financial Year 2018 witnessed a significant decline of 26 percent compared to last year’s profit and decreased to Rs 175.673 billion from Rs. 238.064 billion in FY17, registering a whopping decrease of Rs 62.391 billion.
The decline is primarily attributed to an exchange loss of Rs 72.278 billion during the year as compared to an exchange gain of Rs. 24.569 million during the previous year, registering a substantial decline of Rs 96.847 billion.
During the period, Rupee depreciated sharply against the Dollar and it hit the profit of the central bank. The exchange losses recorded on the FCY assets and liabilities of the bank. The major part of the foreign currency assets of the Bank are USD denominated whereas the foreign currency liability exposure is mainly SDR denominated.
Accordingly, the movement in the PKR/SDR and PKR/USD exchange rates directly affects the exchange account. The PKR depreciated against USD by Rs 16.643 and SDR by Rs 25.095; accordingly, the depreciation against USD resulted in exchange gain of Rs 49.854 billion, while the depreciation against SDR resulted in an exchange loss of Rs 124.305 billion. The remaining net exchange gain of Rs 2.173 billion is due depreciation of against other reserve currencies
The decrease was, however, partly offset by an increase of Rs. 50.263 billion in the net interest income. The lending to the Federal Government remained the major source of SBP’s profit followed by earnings on the OMO injections. The growth in expenses also witnessed a 15 percent increase during the year.
The interest/markup income increased by Rs 60.736 billion to Rs. 321.607 billion, registering an increase over 23 percent.
The borrowings by the Government from SBP during FY18 remained the major sources of income for the bank. The discount income earned on lending to the Federal Government increased by 22 percent and interest earned on lending to commercial banks through OMO injections increased by 17 percent due to larger volumes of reverse repurchases during the year.
The income on FCY (Foreign Currency) assets registered 27 percent increase during the year. Although, foreign exchange reserves reduced significantly, the return on the reserves increased due to hike in the international interest rates.
The interest earned on Export Finance Facility (EFF) and other related refinance facilities increased to Rs 10.232 billion in FY18 from Rs 6.400 billion in FY17 primarily due to increase in the outstanding loans to banks under various refinance schemes.
The bank incurs an interest/markup expense on FCY and domestic liabilities. FCY liabilities include deposits of international organizations and central banks, International Monetary Fund liabilities and currency swap arrangements. The domestic liabilities include repurchase transactions and Sukuk purchased under Bai Muajjal agreement. The interest/markup expense witnessed a rise of Rs 10.474 billion primarily due to a rise in the interest rate and deprecation of PKR against SDR and CNY on IMF and CNY related liabilities respectively.
The overall general and administrative expenses increased to Rs 27.704 million in FY18 from Rs 22.942 million in FY17, thus registering an increase of Rs 4.762 million.
The note printing charges, agency commission paid to agent commercial banks for undertaking government banking business on behalf of the Bank and General administrative and other expenses are the major expense heads.