Monetary policy SNB likely to post slight loss in second quarter

The Swiss National Bank (SNB) is likely to have posted a small loss in the second quarter of 2024. However, a profit of over CHF 50 billion is still expected for the semester as a whole.

UBS economists estimate a result for the SNB of between minus CHF 7 billion and plus CHF 3 billion for the period from April to June, which would correspond to an average loss of around CHF 2 billion. After a profit of almost 59 billion in the first quarter of 2024, this should result in a plus of 50 to 60 billion for the semester as a whole.

According to the UBS calculation on Wednesday, the SNB benefited from rising equity markets and a higher gold price in the second quarter. On the other hand, the stronger franc and slightly higher long-term interest rates weighed on the result.

In detail, the SNB is likely to have generated a profit of more than CHF 4 billion on its equity portfolio of almost CHF 200 billion. For the SNB's gold holdings, economists estimate the gain at around CHF 4 billion.

Currency movements, on the other hand, are expected to result in a total loss of CHF 5 to 10 billion. And the slight rise in yields on government bonds in the quarter under review will probably have reduced the SNB's result by around CHF 5 billion. However, this will be offset by recurring income from interest and dividends estimated at around CHF 4 billion.

The SNB will present its quarterly and half-yearly figures next week (31.7.).

Distribution remains uncertain

Despite the half-yearly profit of over CHF 50 billion, a distribution to the Confederation and cantons in the coming year remains uncertain, according to UBS economists. According to the analysis, the SNB must first pay off last year's balance sheet loss of CHF 53 billion and make allocations to the provision for currency reserves.

If the SNB were to adhere to the rule laid down in 2020 of a minimum allocation of 10 percent of the current CHF 115 billion, it would have to generate a profit of at least CHF 65 billion for the year as a whole in order to make a minimum distribution. For a maximum distribution, the 2024 profit would even have to exceed 105 billion.

In principle, the results of the first half of the year should not be projected for the rest of the year, as the result is heavily dependent on financial market developments. According to UBS, global equities rose by 11 percent in the first half of the year, which is well above the longer-term annual average of just over 6 percent.

In addition, around half of the half-year gain came from the weaker Swiss franc. Depending on the development of the global situation - politically or economically - the franc could also gain significantly again with its safe haven status, which according to UBS represents a "considerable risk" for the SNB result in the coming quarters.

SDA