National bank profit more than halves

Almost a third of the SNB's assets are held in gold Keystone

The Swiss National Bank (SNB) has reported a profit for 2006 of SFr5 billion ($4 billion) – down more than 60 per cent on last year's figure of SFr12.8 billion.

As stipulated in a 2002 agreement between the government and the SNB, the profit to be distributed to the government and the cantons amounts to SFr2.5 billion.

The increase in the gold price, as in 2005, had a major impact on the SNB’s 2006 annual result. Almost a third of the SNB’s assets are held in gold.

Last year, the price of gold again rose sharply. At the end of 2006, a 1kg gold bullion bar cost SFr24,900, 15 per cent more than in 2005. This resulted in value gains of SFr4.2 billion, compared with SFr7.4 billion in 2005, on the SNB’s gold holdings.

But against gains on gold, rising interest rates in all markets led to capital losses on fixed-income investments.

Foreign currency investments earned a total of SFr800 million – significantly less than the SFr5.3 billion in 2005. Interest, dividends and gains on securities amounted to SFr1.4 billion, down from SFr2.8 billion.

Foreign currency investments make up around 40 per cent of the SNB’s total assets. They largely consist of bonds and also comprise equities and money market investments.

Price gains on the equity portfolio also declined somewhat from the previous year. Exchange rate developments resulted in value losses of SFr500 million, compared with gains of SFr2.5 billion in 2005.

Although all European investment currencies appreciated compared with the previous year, these gains were more than offset by the valuation losses resulting from the weaker US dollar and yen exchange rates.

Together with other income and expenses, the annual result came to SFr5 billion,
compared with SFr12.8 billion in 2005.

Distribution

As the SNB’s results fluctuate sharply due to market trends, the profit distributions have been fixed in advance in an agreement between the government and the bank in order to smooth the payments in the medium term.

The agreement, concluded in 2002, foresees annual distributions of SFr2.5 billion for the time being. From the 2006 annual result, SFr900 million is allocated to the provisions for currency reserves as prescribed by law.

The distributable profit remaining after this allocation amounts to SFr4.1 billion, of which SFr2.5 billion is set aside for distribution to the government and the cantons in 2006, while a legally stipulated maximum dividend of 6 per cent is earmarked for the shareholders.

The remaining SFr1.6 billion is allocated to the distribution reserve, bringing it to SFr18.1 billion, up slightly on the SFr16.5 billion in 2005.

swissinfo with agencies

In brief

The SNB is unusual among central banks in that it is listed, with shares trading on the Swiss stock exchange.

The bank is majority owned by various public bodies.

Part of the SNB’s surplus is distributed annually to the government and the cantons.

Key facts

SNB 2006 profit: SFr5 billion
SNB 2005 profit: SFr12.8 billion
SNB 2004 profit: SFr400 million
SFr2.5 billion to be distributed to the federal authorities and cantons.
SFr900 million allocated to reserves