Status: 07.01.2022 2:40 p.m.
The Swiss Confederation and the cantons can look forward to a distribution in the billions from the Swiss National Bank. It achieved a whopping CHF 26 billion in profit in 2021. How did she do it?
The Swiss National Bank (SNB) made another billion plus in 2021: According to preliminary figures, it achieved a profit of around 26 billion francs last year. It owes most of this to the increase in the value of the reserves it holds in other currencies.
The SNB’s result generally depends on the performance of its investment portfolio and its foreign exchange reserves, which are worth several hundred billion Swiss francs. This also includes stocks and bonds from abroad as well as gold. According to the SNB, the share portfolios of the foreign exchange reserves are mainly made up of shares in medium-sized and large-cap companies from industrialized countries as well as shares from emerging countries.
Annual balances fluctuate greatly
In previous years, for example, the bank had made significant profits with Apple, Microsoft and Amazon shares. The bank’s profits are therefore predominantly valuation profits on the financial markets, which is also an explanation for the range of fluctuations in profit development. For example, a massive loss was incurred in the fourth quarter of the past financial year, because in the first nine months of this year the SNB’s plus was more than 44 billion.
According to the information, almost CHF 26 billion of the profits now reported for the year as a whole are accounted for by “foreign currency positions”. On the other hand, there was a valuation loss of 0.1 billion Swiss francs for the gold holdings. The SNB reported a profit of a good billion francs for the “franc positions”. These are mainly negative interest rates levied by the SNB.
The fact that the profits and losses of the Swiss National Bank result primarily from the performance of its portfolio result in strong fluctuations for the individual annual balance sheets: In 2020, the SNB profit amounted to CHF 21 billion. In 2019 it was more than twice as much at 49 billion francs. In 2018, however, there was a loss of 15 billion francs, while in 2017 an increase of 54 billion francs was reported.
Billions go to the federal government and the cantons
The SNB is a listed stock corporation which, like other companies, has to submit a quarterly report on its business. According to its own information, around half of the National Bank’s share capital is in the hands of the cantons and cantonal banks as well as other public corporations or institutions.
The remaining part is held by private individuals. According to the 2020 annual report, there were almost 2,400 private investors as of December 31, 2020. With a share of just over five percent, the Düsseldorf investor Theo Siegert was the largest private shareholder at the time. Today, the SNB share has risen by around two percent to over 5600 francs. A year ago, the paper had cost around 1,000 francs less.
The SNB will pay shareholders a dividend of CHF 15 per share for the past year, the maximum amount stipulated by law. A profit distribution totaling six billion francs will also be made to the Confederation and the cantons. This also corresponds to the maximum payout permitted by law. One third of the amount will go to the federal government and two thirds to the cantons, according to the bank.
After these payments, the distribution reserve is still a good 102 billion francs. The SNB’s distribution reserve is a kind of reserve or insurance against fluctuations and the risk of loss in the financial markets.
Room for maneuver through foreign exchange holdings
According to its own statements, however, the National Bank is not pursuing the goal of maximizing profit. Monetary and currency policy, ensuring price stability and the stability of the Swiss financial system, as stated in the federal law on the Swiss National Bank, have priority. That is why the liquidity and security of the systems are crucial.
With the high foreign exchange holdings, the SNB is buying room for maneuver in terms of monetary policy. If the SNB wants a low Swiss franc rate, for example to support Swiss exports, it can take action on the foreign exchange market and lower the rate through sales. The final annual financial statements are to be published on March 7, 2022.