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SNB results: SNB invested 77% of the huge Q2 increase in reserves into Euros. Peg at risk ?


The Swiss National Bank (SNB) reported a profit of 6.5 billion Swiss Franc for the first half year (H1). After a loss of 1.7 bln. francs in the first quarter (Q1), it had a 8.2 billion profit for the second quarter (Q2).

The Q2 SNB results of 8.2 bln. CHF were less than our estimate of 10.65 bln.

SNB Q2/2012 results details


Euro part increased to 60%, AAA part increasing

The gold holdings brought more profit to the SNB than we expected (details to be examined). The foreign exchange positions (incl. forex holdings and seignorage effects) saw a clearly smaller profit than our estimate; the main reason for the lower profit was that the share of euro positions has increased to 60%. AAA government bonds have increased to 85% from 82% which means that the central bank bought primarily German Bunds/Bobls/Schatz in the second quarter.

SNB Q2 currency breakdownSNB Q1 currency breakdown








SNB did not want or did not succeed in diversifying ?

We warned that a higher euro share would reduce the SNB profit. The recycling of euros into other SDR currencies (USD, GBP, JPY) did not happen that strongly as many (examples here, here, including ourselves) expected.

Effective Diversification SNB Q2/2012

Effective Diversification SNB Q2/2012 (source FT Alphaville)


The SNB increased her currency reserves by 125 bn. CHF in the second quarter (Q2), investing 77% of it in Euros, only 13% in dollar and even reduced  the share of GBP.




estimate snb diversification 2011/2012

Nomura: SNB Diversification 2011/2012, Source FT Alphaville



According to Nomura the SNB diversified 30 bln. CHF into different currencies in the second quarter, mostly into USD, JPY and other currencies (presumably AUD, SEK, NOK).




Citi’s Englander saw a range between 33%, when the SNB was able to sell all newly bought euros and 67% of EUR share, when the central bank had maintained all euros in their balance sheet.

The ones claiming “The SNB remains determined to buying your euros” were “more right”. Why the SNB just diversified just 25% of the masses of new currency reserves acquired in the second quarter remains open. It might have searched a cheap entry point for buying euros. The average EUR/USD rate of 1.25 seemed to be enough.

Sustainability of the peg strongly in question


As stated in FT Alphaville, major banks begin to doubt if the SNB is able to defend the peg, because the higher Euro share means also a higher risk.

(Citi also suggest this outcome could lead investors to question the sustainability of the floor as investors may see greater risk of severe capital losses and some desperate selling down the road)


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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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