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SNB Predicts Profit of CHF 26 Billion for 2021

SNB Predicts Profit of CHF 26 Billion for 2021

12 January 2022

The Swiss National Bank predicts a profit of CHF 26 billion for 2021, made mostly from ever-growing holdings in foreign currency. The SNB’s policy is also causing the country’s trade surplus.

Profit from Holdings

              The Swiss National Bank is predicting a profit of CHF 26 billion for 2021, that would be mainly made from its ever-growing foreign currency holdings accumulated due to interventions on the exchange rate market. The bank is likely to distribute out of its profit CHF 6 billion to cantons and confederations as prevised in the profit-sharing agreement, which was adjusted with higher sums last year. Also, the  SNB plans to issue a CHF 15 dividend per share as it set aside CHF 8.7 billion for currency reserves. The final financial result should be announced in March, but surely it will be beat the profit of 2020 – CHF 20.9 billion.

Slower H2

              The SNB’s performance was very good in the first half of the year, with profit hitting CHF 43.5 billion. In the second half of 2021 though the balance sheet slowed a bit. The weaker performance of the SNB was due to the appreciation of the Swiss franc exchange rate versus other currencies. It is worth to notice that the SNB’s goal is not to made profit, but to keep inflation at a bay and support overall the Swiss economy.

Country’s Trade Surplus

              The SNB’s policy including record low interest rates and intervention on the foreign exchange rate market to stop CHF from getting too strong has also impact on the country’s economy. It triggered a huge spike of the Switzerland’s trade surplus. This is underpinning gains in the CHF exchange rate, which could be hard to stop even with the SNB’s interventions. The SNB’s started making interventions around a decade ago and since then the surplus has risen six-fold, meaning over CHF 6 billion flow to the country’s economy each month. To offset these flows there is required an enormous intervention that set further above the country’s foreign currencies holdings. This year they can hit above one trillion francs. Meanwhile the inflation is hardly changing since the interventions began, meaning the SNB is not getting the result it wanted to achieve. But the effects on trade surplus are still observed, as it has doubled since December 2020 and additionally the EUR/CHF exchange rate dropped from its peak of March 2021 to a six-year low level in December last year. The decrease of exchange rate EUR/CHF might mean the SNB will come back to heavy interventions again, which again will set trade surplus higher, additionally also helping exporters and adding downward pressure to EUR/CHF.

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