Billion minus also in Q3: SNB distribution to the federal government and the cantons will probably be canceled again in 2024

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The SNB suffered a record loss of 132 billion francs last year, and another loss this year is increasingly likely. According to the forecast for the third quarter, UBS expects a loss of between 5 and 10 billion francs.

Experts warn that this means distribution to the federal government and the cantons will no longer be made in 2024. After the SNB made a good start in the first quarter with a surplus of 27 billion francs, the central bank had already announced a loss of 13 million francs in the second quarter of the year. Now, with the new minus expected in the third quarter, it is likely that profit will fall below 10 billion by the end of September.

The decline in the stock market makes itself felt

UBS writes that encouraging inflation at the beginning of the quarter and US economic data raise hopes for a soft landing in the US. However, in August and September the momentum changed. Fears that central banks’ interest rates will remain high for longer dominate the picture.

As a result, bond yields around the world rose sharply, causing bonds to suffer corresponding price losses. Overall, according to UBS calculations, the SNB is likely to have lost around 5 billion francs due to the rise in bond interest rates.

While bond prices have fallen, risky assets such as stocks have also fallen significantly. In September alone, global stocks fell more than 4 percent. According to UBS, negative equity development is likely to reduce the SNB portfolio by around 4 billion.

The influence of gold and the franc

High interest rates also put pressure on the price of gold. But at the same time, the ongoing uncertain geopolitical situation has also supported the demand for safe havens. This situation limited the decline in gold prices. UBS economists expect a burden of 0.5 billion francs on the SNB.

First of all, it seems unlikely that the development of the Swiss Franc will have much of an impact. Overall, there was a slight positive contribution of around 2 billion francs from exchange rate effects, according to UBS. Additionally, recurring dividend and interest income after deducting expenses such as interest on demand deposits may marginally improve the outcome.

What will the end of the year be like?

Distribution to the federal government and the cantons is now becoming a remote possibility. For the minimum distribution, the SNB will need to make a profit of 45 to 50 billion francs (before allocation to provisions), and for the maximum distribution, 85 to 90 billion francs.

Therefore, the SNB will need to make a profit of at least 40 billion in the last quarter for distribution to be possible in 2024. But this is “extremely unlikely” given the fact that the SNB portfolio has a profit potential of 10 to 15 billion francs a year, according to UBS. Additionally, the downward trend in bonds and stocks continued at the beginning of the fourth quarter. This, together with the strengthening franc, puts further pressure on the SNB’s results. (SDA/sfa)

Source :Blick