Currency positions, gold, capital markets helped build profits, but SNB cautions: strong fluctuations are part of markets
ZURICH, SWITZERLAND – The SNB, Swiss National Bank, had a CHF16.9 billion consolidated profit, before allocation to the provisions for currency reserves as of the end of September, it said Wednesday 31 October. This compares to CHF5.8b a year earlier.
By law, the central bank is required to set aside provisions to be able to maintain currency reserves “at the level necessary
for monetary policy”, and this amount will be determined only towards the end of the year.
The SNB has been saying since August 2011 it is determined to take whatever steps are necessary to keep a cap on the Swiss franc against one of the main currencies, the euro, and currency reserves play a critical role in this policy.
While the profits look substantial at this point, the SNB cautions that these are markets where huge fluctuations can change positions quickly. Events such as storm Sandy and the US presidential election can make financial waves that impact global markets.
The profit breakdown: “The net result from the SNB’s foreign currency positions amounted to CHF 10.3 billion for the first three quarters of the year. A valuation gain of CHF 6.2 billion was recorded on gold holdings, and a net gain of CHF 94 million was achieved on Swiss franc positions.
The balance sheet increased by CHF158b in the first nine months of the year, to CHF509b. “Foreign currency investments alone advanced by CHF172 billion. Their increase is due to foreign currency purchases made to enforce the minimum exchange rate against the euro and the net result on foreign currency positions.”
In addition to the aggregate income on foreign currency positions of CHF10.3b, the bank had:
- interest and dividend income, CHF 4.9 billion
- price gains of CHF 2.6 billion on bonds and interest rate instruments due to lower interest rates
- shares that “benefited from a favourable stock market environment and rose by CHF 3.2 billion”
- exchange rate related losses of approximately CHF 0.4 billion.