Swiss National Bank profits cut in half by Covid

The value of Switzerland’s foreign currency and gold positions rose during the pandemic as investors sought safe havens. Keystone / Martin Ruetschi

The Swiss National Bank (SNB) recorded a profit of CHF20.9 billion (almost $23 billion) in 2020, less than half of the CHF48.9 billion it made in 2019.  

Some CHF6 billion of the profits will be distributed to the Swiss government and cantons, compared to CHF4 billion last year. The distribution of profits is regulated by an agreement 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. 

The bank also proposed a dividend of CHF15 per share, the legal maximum, which remains stable.  

Pandemic effect 

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

The SNB’s profits made on foreign currency positions came to CHF13.3 billion, compared with CHF40.3 billion the previous year. And as of December 31, 2020, with the price of a kilogram of gold standing at CHF53,603, compared with CHF47,222 a year earlier, the SNB’s gold stock – which remained unchanged at 1,040 tonnes – had generated a gain of CHF6.6 billion in 2020. 

Making a profit is not part of the SNB’s mandate, which is to aim at 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.  

This balancing act led to foreign exchange losses of CHF37.7 billion last year, as the Swiss central bank was forced to step into currency markets 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, which officially labelled Switzerland an exchange-rate manipulator. The SNB has shrugged off being put on the naughty step.