Solid profits in the first quarter have set the Swiss National Bank on track to make up for the record loss it suffered last year, but shareholders are still unlikely to see a dividend for 2023.
(Bloomberg) — Solid profits in the first quarter have set the Swiss National Bank on track to make up for the record loss it suffered last year, but shareholders are still unlikely to see a dividend for 2023.
The SNB reported a quarterly profit of 26.9 billion francs ($30 billion), according to a statement Thursday. The largest part of this, 24.2 billion francs, stems from its foreign-currency hoard, as global bond and equity markets recovered from turmoil last year. It also saw a 4.3 billion-franc profit on its gold holdings.
The central bank’s earnings are heavily influenced by developments in markets, so a positive quarter is primarily a snapshot and can still turn into an annual loss. Last year the SNB saw the worst loss in its history with a shortfall of 132.5 billion francs, forcing it to omit the regular payout to shareholders, the Swiss government and cantons.
The profit on the SNB’s foreign-currency positions is primarily down to price gains on bonds — 8.5 billion francs — and equities — 14.7 billion francs. Interest and dividend on those holdings also brought in 3.4 billion francs. All that made up for exchange-related losses of 2 billion francs.
Results are on the upper end of estimates by UBS economists Alessandro Bee and Florian Germanier, who had predicted a first-quarter profit between 17.5 billion and 27.5 billion francs.
Shareholder Meeting
Still, according to the analysts it’s unlikely that the SNB can resume paying a dividend even in 2024, as to pass the threshold for a payout, the institution would need to post an annual profit of 45 to 50 billion francs this year.
“Our estimate of the profit potential for the SNB portfolio per year is 10 to 15 billion — the first quarter therefore represents a a significant outlier to the upside,” Bee and Germanier wrote in a note published Monday.
As of the end of March, the institution held 743 billion francs worth of foreign-currency reserves, accrued as a result of decade-long purchases to weaken the franc, and down from 910 billion a year earlier. While the balance sheet is shrinking, the SNB remains more exposed to swings in markets than other central banks.
The hoard is set to be a topic on the central bank’s annual shareholder meeting, scheduled for Friday in Bern. Activists urge the SNB to regard climate goals when investing the reserves and have announced protests after officials have refused to schedule three motions they entered.
Earnings from the SNB’s operations don’t influence monetary policy. Second-quarter results are due on July 31.
(Updates with breakdown of FX profit in fourth paragraph)
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