Although one of the functions of the Banco de la República is not to generate profits per se, at the end of the first quarter of the year the monetary authority registered a balance in the red of $2.05 trillion.
(Read: Interest Rate Hike Hasn’t Hit Credit Rhythm Yet).
The figure contrasts radically with a gain that in the third month of last year had been $232,770 million.
According to the figures reported by the Issuer, in March of this year revenues reached $960,546 millionwhile a year ago the amount of this indicator was $893,901 million, which shows an increase of 7.4% between the two periods.
On the other hand, the expenditures registered by the Colombian central bank reached $3.01 billion, a strong difference with what was registered a year ago, when these were $661,131 millionwhich shows that the growth until the third month of 2021 compared to the same month of 2022 of 355%.
For its part, the equity of the Colombian central bank, according to the figures presented by the Issuer with a cutoff date of March, was $91.8 billion, compared to $92.6 billion, which represents a negative figure of 0.8%. .
The 2020, with result to show
It should be noted that at the end of 2021 the Banco de la República closed with a profit of $632,000 milliona lower result compared to 2020, when profits amounted to $7.48 billion.
However, just as it happened in 2021 with the profits of 2020, most of which were transferred to the Government, a few weeks ago it was approved to transfer to the National Government the sum of $556,000 million of last year’s profit.
Based on the Bank’s legal framework, the remainder of the profits it obtains, once the net investment in goods for cultural activity has been deducted and the statutory reserves appropriated, will belong to the Nation.
According to Sergio Olarte, chief economist at Scotiabank Colpatria, international reserves, which are the Bank’s most important source of income, “they generated losses due to a very important increase in interest rates around the world, which means that the safe and liquid investments that Banco la República has with its international reserves are devalued”.
(Besides: Issuer raises rate to 6%; expects GDP to grow 5% this year).
It should be noted that apart from controlling inflation as a mechanism to protect the purchasing power of the country and its citizens, the Issuer also has among its functions that of managing Colombia’s international reserves, as well as maintaining exchange stability.
This, apart from other types of technical and operational financial functions, the production of coins and banknotes, as well as its work to promote culture, among others.
Camilo Pérez, manager of Economic Research at Banco de Bogotá, recalls that with the drop in rates, a phenomenon that occurred in 2020, stock prices roseso there was a strong appreciation of the asset and therefore a large totally atypical or rather conjunctural profit was generated.
But Olarte comments that the bad accounting result due to the portfolio impairment it also means that if the Bank loses money throughout the year “the General Budget of the Nation has to come in to replace these losses; just as when last year Banco la República gave nearly $8 billion to the national government (corresponding to 2020 profits), now, when Banco la República loses due to keeping its international reserves in safe and liquid places, the Budget General of the Nation also has to go in to pay those debts.”
In any case, Diego Restrepo, professor of Finance at the Eafit University of Medellín, also comments that the Colombian central bank maintains international reserves to intervene in the foreign exchange market, its monetary policy and facilitating the access of the Government and the private sector to the international markets of capital, factors that together with those already mentioned in the last, also contribute to the economic growth of the country.
The Eafit scholar also points out that “No bank has the objective of making losses, but notes that the assets it manages have short-term fluctuations that do not depend on the strategies carried out by the Issuer, but on the global macroeconomic behavior and in this sense, the devaluation of international reserves is not something to what you can anticipate to avoid losses”.
(Keep reading: This is how the rise in rates of the Banco de la República affects your pocket).
A trend that continues
The analysts consulted agree that in the short term the situation of the poor accounting result of the Colombian Issuer can be maintained and what could change this trend would be that “definitely interest rates or international paper that recover in terms of their profitability , unfortunately this year it seems that it is not that way, because the world as a whole is raising its interest rates and that causes these papers to lose value, however they are papers that in the case of those held by the Bank of the Republic, are very well ranked and with very important liquidity, which is the mandate of the Banco de la República to manage international reserves, it has to invest in very safe things and that sometimes comes at the cost of low or even negative profitability ” .
Camilo Pérez, from Banco de Bogotá, considers that in order to modify the Issuer’s loss trend, it would be necessary for the panorama to change at the international level and for interest rates to drop so that the securities are valued, “something that does not seem feasible at the moment” , assures the analyst.
BRIEFCASE
