First, higher-yielding legacy loans are maturing and being replaced by ones generating lower returns. Second, profits are falling because the spread between short-term and long-term interest rates is currently relatively narrow. Added to this is the fact that deposit-based funding is significantly less attractive than it once was. The reason?
And while our Balance of Payments showed a deficit due to capital outflows influenced by the Fed’s decision to end quantitative easing, our current account remained in surplus from strong remittances and receipts from exports and BPOs. This brought our foreign exchange reserves to nearly $ billion, sufficient to cover over 10 months’ worth of imports of goods and payment for services.