Swiss central bank posts loss of $2.27 bln as franc weighs

(Reuters)-31/07/2024

The Swiss National Bank (SNBN.S), opens new tab swung to a loss of 2 billion Swiss francs ($2.27 billion) in the second quarter, the central bank said on Wednesday, as the rising value of the Swiss franc reduced gains from foreign currency investments.

The result compared with a first-quarter profit of 58.8 billion francs, and came despite valuation gains in the SNB’s gold and equity portfolios.

During the quarter, the SNB made a 3.26-billion-franc gain from the increased value of the 1,040 tonnes of gold it holds, as global political tension boosted the price of the precious metal.

Foreign currency positions – the 740 billion francs of stocks and bonds the SNB has bought – reported a loss of 3.10 billion, however, as the franc’s higher value and lower bond prices wiped out gains from increases in global equity markets.

The SNB also lost 2.06 billion francs on its Swiss franc positions, mainly from paying interest on sight deposits to commercial banks.

The second quarter loss is unlikely to be a major concern for the SNB, as making a profit is not part of the central bank’s mandate, which instead focuses on price stability.

“The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets,” it said.

“Strong fluctuations are therefore to be expected.”

UBS economist Florian Germanier said the rising value of the franc could be a factor in the SNB’s result in coming months.

“We expect the franc to strengthen as other central banks cut rates and because of geopolitical tensions adding to the safe haven flows into the currency, which is a significant risk for the SNB’s results for the rest of the year,” he said.