National Bank unveils record profit

The price of gold rose 36% last year Keystone

The Swiss National Bank has made its highest annual surplus ever – SFr12.8 billion ($10.8 billion) - thanks to a sharp rise in the gold price and in the dollar.

In a statement on Friday, the SNB said SFr2.5 billion of that amount would be distributed to the federal authorities and cantons.

The result compares with a profit of SFr400 million in 2004.

“The 2005 annual result was extremely positive due to an extraordinary accumulation of favourable market trends,” the statement said.

But the bank struck a cautionary note, saying the 2005 results should not be seen as indicating a trend.

“The extraordinarily high annual result for 2005 follows directly from the steep rise in the gold price and the US dollar, and does not in any way reflect the medium- or long-term return potential of the National Bank.”

Gold gains

Roughly one quarter of the bank’s assets are held in gold. Last year the gold price rose 36 per cent, resulting in valuation gains of SFr7.4 billion.

At the same time, foreign currency investments – accounting for half the SNB’s total assets – yielded SFr5.3 billion.

The bank said that the distribution of profit was fixed in advance to smooth the flow of payments.

Under an agreement with the federal authorities, the bank makes annual distributions of SFr2.5 billion to the federation and cantons, while a dividend of up to six per cent is earmarked for shareholders.

The remaining distributable profit is held in reserves.

The national bank’s profit is a matter of great interest in Switzerland, where a Social-Democrat backed initiative is pressing for all SNB profits to be earmarked for old-age pension provisions.

The initiative is due to come before voters in the autumn.

swissinfo with agencies

Key facts

SNB 2005 profit: SFr12.8 billion
SNB 2004 profit: SFr400 million
SFr2.5 billion to be distributed to the federal authorities and cantons.
SFr9.5 billion allocated to reserves

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 federation and cantons.