SNB reports half-year profit as strong stocks offset franc gains

Lucrative holdings: the Swiss National Bank in Bern. Keystone / Anthony Anex

The Swiss National Bank (SNB) made a solid six-month profit on rising equities and gold prices, replenishing its capital base and keeping hopes alive that the central bank could resume payouts to the government. 

Switzerland’s central bank notched up a gain of CHF56.8 billion ($64.5 billion) for the first half of the year, it said on Wednesday. That’s slightly below the first-quarter result, as the persistent strength of the franc ate into earnings in the April-June period.

The appreciated Swiss currency dealt a blow to proceeds from SNB’s large assets held in foreign currencies. Still, at CHF49.3 billion, those stocks and bonds continued to yield the largest part of the profit.

Gold holdings earned a valuation gain of CHF12.2 billion, while franc positions accrued a loss of CHF4.5 billion, mainly because the institution had to pay interest on deposits of commercial banks.

With second-quarter results essentially not impacting the strongest first three months on record, the SNB remains on track to possibly distribute earnings for this year. But as its bottom line is strongly determined by market developments, this is still far from certain.

+ Read more: should the SNB give more cash back to the state?

The central bank cancelled its annual payout to Switzerland’s government and cantons for two years in a row after a record loss in 2022 emptied its reserve. A key reason for the shortfall was the much maligned size of its balance sheet, which amplifies profits as well as losses.

Economists at UBS, who predicted a profit in a range of CHF50-60 billion, say the SNB will need to earn at least CHF65 billion for the whole year to make a distribution.

In a report published last week, they also pointed out that the Swiss central bank leads global counterparts in lowering interest rates, which risks hurting its bottom line in the second half.

If the European Central Bank and the Federal Reserve follow the SNB’s easing push in that period, this could see the franc “substantially” appreciate, economists Florian Germanier and Alessandro Bee said. That would deal a further blow to the central bank’s earnings, they said.

The central bank’s earnings don’t influence its monetary policy. Nine-month results are due on October 31.