The Swiss National Bank (SNB) recorded a remarkable profit of 59 billion francs in the first quarter, mainly due to the weakening of the franc. This resulted in a record-high profit, but it may not result in a profit distribution to the state at the end of the year. The SNB’s assets are mainly foreign currency investments, so a weaker franc increases profits when converted back to francs. However, the SNB also lost money on bonds due to increased yields on American government bonds.
While the quarterly profit was impressive, the real impact will be determined by the SNB’s annual results. The SNB would need to generate a profit of 65 billion francs for the year in order for any distribution to be possible. Given the uncertainties in financial markets, with the potential for the franc to appreciate again over the course of the year, it is unlikely that the SNB will reach the necessary profit levels for a distribution to the federal government and cantons.
Financial politicians are advised not to budget for SNB distributions as there is potential for savings in other areas such as public administration wages which saw a substantial increase compared to national average. The unpredictable nature of financial markets and SNB balance sheet size mean that even small price corrections can have major consequences for profits. Therefore, it is best to remain cautious about future profit distributions possibilities.
