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SNB to Report CHF21 Billion of Profit for 2020

SNB to Report CHF21 Billion of Profit for 2020

19 January 2021

                The Swiss National Bank (SNB) has informed that its expected profit for 2020 is at CHF21 billion, due to rising stock prices that triggered higher value of its investments in foreign currencies.

SNB To Post Profits for 2020

                The Swiss National Bank is expected to post the profit for the whole year 2020 of CHF21 billion (around 23 billion US dollars as per average exchange rate). The profit of CHF13 billion was made on foreign currency investments, that the SNB conducted last year in huge numbers due to very good exchange rate of Swiss franc. Additionally, CHF7 billion was gained due to better valuation of gold holdings. The SNB has 1,040 tonnes of gold. The profit of CHF21 billion for 2020 is lower than the one for 2019 of CHF48.9 billion as weaker exchange rate of dollar reduced gains of denominated in USD investments when transferred into francs. Still such profit means the SNB will be able to distribute CHF4 billion to the Swiss federal government and cantons, as it did in previous year. The distribution of profit of the SNB is regulated by a convention made between the bank and the Swiss finance ministry – for years 2016-2020 minimum of CHF1 billion must be paid to cantons and the government if reserves are positive. Meanwhile, the proposed dividend is CHF15 per share, the maximum allowed by law.

Strong Swiss Franc Triggers Profits

                The SNB do not have a goal of making profits. Its main target is to ensure inflation is at desired level, that guarantees prices stability, and also acting as a support for the Swiss economy. The bank has been recently very much focused on keeping the CHF exchange rate from getting too strong. The overvalued CHF hurts Swiss export and overall economy. In time of the pandemic, investors decided to buy Swiss francs more often than before, which triggers its good exchange rate. Swiss franc is considered one of main safe haven assets. The SNB made a lot of interventions on foreign currency market last year in a response to big demand for CHF. New investments in foreign currencies, also in stock denominated in other currencies, gained value over time, and thus new profits. The same situation was with the SNB gold positions which value increased during the COVID-19 pandemic. These are the factors that supported profits. Since 2008 the SNB’s profits has rose drastically, which is explained by experts by the increasing number of interventions made by the bank.

SNB’s Interventionism

                Last year, the Swiss central bank stepped up on the currency market in a bid to stop the overvaluation of CHF. According to reports, is may hold as much as CHF770 billion worth of foreign currencies acquired via its intervention programme. Its portfolio of only foreign stock is worth around CHF150 million, which means the Swiss main bank is on the eight position on the list of the biggest single investors in company shares globally. The heavy interventions on foreign exchange rate market have drawn some problems for the country, as it was put at the end of last year on US Treasury’s list of currency manipulators. However, the SNB’s policymakers refuse to acknowledge such label, and pledge to keep on making interventions.

ExchangeMarket.ch
ExchangeMarket.ch