SNB announces profit of CHF 26.9 billion in the first quarter

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According to the announcement made on Thursday, overall profit for the period January-March 2023 is CHF 26.9 billion. Most of this, with 24.2 billion, came from foreign exchange positions.

The SNB has built up large foreign exchange reserves in recent years to prevent the Swiss franc from getting too strong. It was still worth over CHF 740 billion at the end of March, although it was able to significantly reduce them recently.

First of all, price gains in foreign stocks held by SNB made a big difference at 14.7 billion, but price gains in the bond portfolio were also significant, at 8.5 billion.

In addition, there was 2.5 billion interest income and 0.9 billion dividend income. On the other hand, the Swiss franc, which strengthened somewhat in the first quarter, reduced its FX positions by 2.0 billion.

In addition to its FX positions, SNB also benefited from higher valuation gains of CHF 4.3 billion in gold holdings, which were unchanged in volume. A kilo of gold at the end of March costs CHF 58,122, almost 8 percent more than at the end of 2022.

Unlike the last few years, the SNB has lost CHF 1.6 billion on Swiss franc positions, mainly due to the banks’ interest on demand deposit accounts with the SNB. Since the SNB key interest rate has been positive since last September, the SNB had to pay interest on bank deposits while it received money from banks during the negative interest phase.

As always, the SNB stressed that its outcome largely depends on the development of the gold, foreign exchange and capital markets. Therefore, strong fluctuations are the rule, and interim to annual results are only possible to a limited extent.

The outcome of the SNB could swing either way due to the high dependency on financial markets. For example, in 2022, the SNB had to report a huge loss of CHF 132.5 billion due to the bear market in the financial markets. In previous years, it had made relatively high profits.

Due to SNB’s massive loss last year, no dividends were paid or distributed to the Confederation or the cantons. After the first quarter, it is not yet possible to say whether anything will change for the current year as the annual result is decisive.

This is highly unlikely, according to UBS economists. Despite a good start, it will be difficult for the SNB to generate a profit in 2024 that will enable its distribution to the federal government and cantons, according to a recently published analysis. Because first, a balance sheet loss of about 40 billion would have to be repaid, and then provision for foreign exchange reserves would have to be made.

UBS assumes that the SNB will need annual profits of CHF 45 to 50 billion for minimum distribution to the Confederation and cantons.

(SDA)

Source :Blick