SNB returns to quarterly profit thanks to Swiss franc weakness

SNB Vice President Martin Schlegel. Keystone / Michael Buholzer

The Swiss National Bank (SNB) returned to a quarterly profit because of the weakness of the Swiss franc, potentially helping officials to rebuild the central bank’s depleted capital base.

The Zurich-based institution notched up a gain of CHF58.8 billion ($64 billion) in the first quarter, according to a statement on Thursday. That’s the strongest start to the year on record.

The largest part of its profit – CHF52.4 billion – was generated from the SNB’s large assets held in foreign currencies. Its gold holdings saw a valuation gain of CHF8.9 billion. Swiss franc positions yielded a loss of CHF2.4 billion, mainly because it had to pay interest on deposits of commercial banks.

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SNB Vice President Martin Schlegel – the frontrunner to succeed Thomas Jordan at the institution’s helm – said this month that officials must prioritise rebuilding capital over delivering dividends.

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 payout reserve. A strong franc tends to hurt its bottom line, while its large size balance sheet amplifies profits as well as losses.

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Economists at UBS had predicted a profit in a range of CHF50-60 billion, fuelled by the franc’s decline and the performance of SNB’s stock and gold holdings. Such a result would significantly exceed the last quarterly record of CHF39 billion, they said.

The earnings will be a likely topic at the central bank’s annual shareholder meeting on Friday in Bern. 

The SNB started last year with a profit too before swinging to a loss. What the institution earns from its operations doesn’t influence monetary policy. 

“Building up the SNB’s capital must have priority over profit distributions,” Schlegel said on April 9. “Our mandate is to ensure price stability, not to generate profits.”

The SNB’s second-quarter results are due on July 31.