Bank Negara Malaysia Annual Report 2013 Slight dip in central bank’s net profit for 2013

by **Cals** Thu 20 Mar 2014, 18:53

Bank Negara Malaysia Annual Report 2013 Slight dip in central bank’s net profit for 2013

Business & Markets 2014

Written by Yen Ne Foo of theedgemalaysia.com

Thursday, 20 March 2014 10:40

KUALA LUMPUR: Bank Negara Malaysia (BNM) has posted a slightly lower net profit of RM5.46 billion for the 2013 financial year ended Dec 31 (FY13) against RM5.6 billion in FY12.

Its total income also fell to RM6.75 billion in FY13 from RM6.91 billion in FY12. The total income comprised revenue from foreign reserves management, which includes interest and dividends, non-treasury income and realised capital gains or losses.

The central bank disclosed in its 2013 annual report that it maintained RM1.5 billion as the amount payable to the federal government despite the lower net profit. The bulk of the net profit (RM3.9 billion) was transferred to its risk reserve, while the remaining RM56.25 million was transferred to its general reserve fund.

RAM Holdings Bhd group chief economist Yeah Kim Leng said the decline in BNM’s total income and net profit for FY13 still puts Malaysia at a “comfortable” level and is not worrying as the central bank still made a profit.

“As an economist, my concern is whether the central bank had incurred losses by injecting excess liquidity into the economy. This is especially so for what we call ‘negative carry’ where BNM invests in securities that result in losses,” he said.

He said the decline in net profit was not major and was probably a result of BNM’s monetary policy.

“Perhaps the investments which BNM had made did not yield enough income. The small decrease in BNM’s net profit in FY13 suggests that despite its realisation operation, it was still able to make a profit.

“A realisation operation typically involves the central bank purchasing back government bonds or accepting more deposits from institutions such as commercial banks, though this will incur more interest,” he explained.

According to BNM’s 2013 annual report, the currency in circulation was increased to RM73 billion in FY13 from RM67.1 billion in FY12.

Total deposits from financial institutions, federal government and others, such as national institutions, government agencies and public authorities, have also gone up to RM208.7 billion in FY13 from RM199.6 billion in FY12.

Only deposits from financial institutions increased to RM198 billion, while deposits from the federal government and others saw a reduction to RM7.1 billion and RM14.7 billion respectively.

Risk reserves saw a dramatic almost threefold hike to RM39.9 billion in FY13 from close to RM13.9 billion in FY12.

Overall, BNM’s total assets remained flat in FY13 at RM474.1 billion, while its total liabilities decreased marginally by 0.05% to RM419.7 billion in FY13 from RM445.7 billion in FY12.

Yeah viewed the lack of significant changes in Malaysia’s total assets and total liabilities as a good sign.

“When you compare our balance sheet with that of other countries such as the United States and the European Central Bank, you will find that other countries have increased the size of their balance sheet.

“If you look at our [Malaysia’s balance sheet], it hasn’t changed much [in FY13]. This means that we are managing prudently without injecting excessive liquidity into the economy,” he said.

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This article first appeared in The Edge Financial Daily, on March 20, 2014.