Swiss National Bank rebounds from 2022 record loss

The Swiss National Bank is on track to make up for the record loss it suffered last year. © Keystone / Anthony Anex

Solid profits in the first quarter set the Swiss National Bank (SNB) on track to make up for the record loss it suffered last year, but shareholders are still unlikely to see a dividend for two more years.

The SNB reported a quarterly profit of CHF26.9 billion ($30 billion), according to a statement Thursday. The largest part of this, CHF24.2 billion, stems from its foreign-currency hoard, as global bond and equity markets recovered from turmoil last year. It also saw a 4.3 billion-franc profit on its gold holdings.

The central bank’s earnings are heavily influenced by developments in markets, so a positive quarter is primarily a snapshot and can still turn into an annual loss. Last year the SNB saw the worst loss in its history with a shortfall of CHF132.5 billion, forcing it to omit the regular payout to shareholders, the Swiss government and cantons.

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The profit on the SNB’s foreign-currency positions is primarily down to price gains on bonds — CHF8.5 billion — and equities — CHF14.7 billion. Interest and dividend on those holdings also brought in CHF3.4 billion. All that made up for exchange-related losses of CHF2 billion.

Results are on the upper end of estimates by UBS economists Alessandro Bee and Florian Germanier, who had predicted a first-quarter profit between CHF17.5 billion and CHF27.5 billion. 

Shareholder Meeting

Still, according to the analysts it’s unlikely that the SNB can resume paying a dividend even in 2024, as to pass the threshold for a payout, the institution would need to post an annual profit of CHF45 to 50 billion this year.

“Our estimate of the profit potential for the SNB portfolio per year is 10 to 15 billion — the first quarter therefore represents a a significant outlier to the upside,” Bee and Germanier wrote in a note published Monday.

As of the end of March, the institution held CHF743 billion worth of foreign-currency reserves, accrued as a result of decade-long purchases to weaken the franc, and down from CHF910 billion a year earlier. While the balance sheet is shrinking, the SNB remains more exposed to swings in markets than other central banks.

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The hoard is set to be a topic on the central bank’s annual shareholder meeting, scheduled for Friday in Bern. Activists urge the SNB to regard climate goals when investing the reserves and have announced protests after officials have refused to schedule three motions they entered. 

Earnings from the SNB’s operations don’t influence monetary policy. Second-quarter results are due on July 31