Swiss National Bank expects profit of CHF21 billion for 2020

Swiss National Bank in Bern Keystone / Peter Klaunzer

The Swiss National Bank (SNB) expects to post an annual profit of CHF21 billion ($23 billion) for 2020, it said on Friday. Rising stock prices had boosted the value of its huge foreign currency investments.

The SNB made a profit of CHF13 billion from its foreign currency positions and saw a valuation gain of CHF7 billion from the 1,040 tonnes of gold it holds, according to preliminary figures announced in a statementExternal link.

The SNB’s profit was lower than the CHF48.9 billion it posted for 2019, as a weakening dollar reduced the level of profits when translated into francs.

However, the profit means the SNB can distribute CHF4 billion to the Swiss government and cantons, the same level as last year. It also proposed a dividend of CHF15 per share, the legal maximum.

The distribution of profits is regulated by a convention drawn up between the finance ministry and the SNB. For the period 2016-2020, the convention states, at least CHF1 billion must be paid to cantons and the government when reserves are positive.

Reducing value of franc

Making a profit is not part of the SNB’s mandate, which targets price stability while supporting the overall Swiss economy. 

As part of this goal the central bank has been waging a long campaign to reduce the value of the franc, which is sought by investors in times of geopolitical uncertainty but whose strength weighs on the export-reliant economy. 

Profits have increased drastically since 2008, something also explained by the increased activity of the SNB in currency and international markets.

The value of Switzerland’s foreign currency and gold positions rose during the coronavirus pandemic last year as investors sought safe havens like gold and stock markets were boosted by low interest rates.

The Swiss central bank was forced to step into currency markets last year to stop the franc appreciating as investors flocked to safety amid pandemic fears. This triggered a stern response from the outgoing Trump administration in the US: it is officially labelled as an exchange-rate manipulator. The SNB has shrugged off being put on the naughty step.

Through its intervention programme, the SNB reportedly holds around CHF770 billion in foreign currency. The central bank’s foreign equity portfolio alone, worth CHF150 billion, makes it the eighth-largest single investor in companies globally.