Monetary policy SNB likely to make billions in profit in the third quarter

The Swiss National Bank (SNB) is likely to have made a substantial profit in the third quarter of 2024. A distribution to the Confederation and the cantons is therefore becoming more likely again.

UBS economists are forecasting a profit of CHF 5 to 10 billion for the period from July to September. The profit after nine months should therefore be between CHF 60 and 65 billion, according to the study published on Monday.

According to the UBS calculation, the SNB benefited in the third quarter from well performing bond and equity markets and a higher gold price. On the other hand, the stronger franc had a negative impact.

The bond market in particular boomed, which is likely to have flushed around 15 billion into the SNB's coffers. In addition, a profit of more than CHF 7 billion was probably made on its equity portfolio of almost CHF 180 billion and just under CHF 5 billion on its gold holdings of around CHF 70 billion. In addition, recurring income of around 3 billion from dividends and interest was generated.

On the other hand, a total loss of 20 to 25 billion francs is expected from currency movements. According to the experts, the Swiss franc has appreciated by over 6 percent against the dollar alone.

The SNB will present its quarterly figures next Thursday (31.10.).

Distribution more likely

The UBS economists also believe that the good quarterly results make a distribution to the Confederation and the cantons more likely. After all, the SNB has already achieved a profit of just under 57 billion in the first half of the year. If the profit exceeds 65 billion at the end of the year, the finance minister and the finance directors of the cantons should be happy to receive a windfall.

The chances are also good because the positive trend on the financial markets continued in October. According to UBS calculations, the profit at the end of October should be around 70 billion francs - which would result in a profit distribution of 2 billion.

At least if the profit were also this high at the end of the year. However, this is not set in stone. Due to the upcoming US elections and geopolitical uncertainties, volatile markets are to be expected in the coming weeks.

Less likely in the long term

And in the longer term, distributions are less likely anyway, the report continues. This is because the performance on the markets in the current year has been exceptionally good. Over the year as a whole, high-risk and low-risk investments have performed well so far, and currency developments have also played into the SNB's hands, particularly at the start of the year.

According to the study, distributions are also becoming less likely due to the current provisioning rules. According to this, allocations of around 12 billion to the provisions for currency reserves must be expected for 2025. If the SNB wants to maintain distributions in the future, the UBS economists conclude that an adjustment to this regulation is unavoidable.

SDA