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Swiss National Bank Results 2015 and Comments

from the official release

The Swiss National Bank (SNB) is reporting a loss of CHF 23.3 billion for the year 2015 (2014: profit of CHF 38.3 billion).

The loss on foreign currency positions amounted to CHF 19.9 billion. A valuation loss of CHF 4.2 billion was recorded on gold holdings. The profit on Swiss franc positions was CHF 1.2 billion.

For the financial year just ended, the SNB has set the allocation to the provisions for currency reserves at CHF 1.4 billion. Taken together, the annual loss and allocation to provisions totalling CHF 24.6 billion are less than the distribution reserve, which amounts to CHF 27.5 billion. Thus, despite the annual loss, the resulting net profit will allow a dividend payment to shareholders of CHF 1.5 million as well as the ordinary profit distribution of CHF 1 billion to the Confederation and the cantons. The distribution reserve after appropriation of profit will amount to CHF 1.9 billion.

 

The increasing volatility of SNB Results

Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.

But the SNB may lose 50 billion in one year and win 60 billion in the next year or the opposite.

SNB Results Longterm 2015

- Click to enlarge

 

Loss on foreign currency positions

Overall, the loss on foreign currency positions was CHF 19.9 billion (2014: profit of CHF 34.5 billion).

The appreciation of the Swiss franc resulted in total exchange rate losses of CHF 26.4 billion. Interest income amounted to CHF 7.8 billion and dividend income to CHF 2.2 billion, however. Movements in bond prices differed from those in share prices. A loss of CHF 5.1 billion was recorded on interest-bearing paper and instruments. By contrast, equity securities and instruments contributed CHF 1.6 billion to the net result.

 

Profit BalanceSheet Profit in %
Total Profit on foreign currencies -19.9 640 -3.11%
Interest income 7.8 640 1.22%
Dividend income 2.2 640 0.34%
Bonds -5.1 640 -0.80%
Price changes in Equities 1.6 640 0.25%
Exchange Rate Losses -26.4 640 -4.13%

SNB loss in 23.3 bn. CHF in 2015, after a profit of 38.3 bn. in 2014

Source: snb.ch - Click to enlarge

Valuation loss on gold holdings

At CHF 34,103 per kilogram, the price of gold was 11% lower than at the end of 2014 (CHF 38,105). This gave rise to a valuation loss of CHF 4.2 billion on the unchanged holdings of 1,040 tonnes of gold (2014: valuation gain of CHF 4.1 billion).

 

Profit Balance Sheet Profit in %
Total Profit on Gold 35.4 640 5.55%

Percentage of gold to balance sheet

Even if the gold price is rising, its parts of the balance sheets is falling.

2015 2014
Gold 35.5 39.60
Balance sheet 640 561
% of gold 5.55% 7.06%

Balance Sheet

The balance sheet has expanded by over 79 bn francs by 14.08%

2015 2014 Change in%
balance sheet in CHF 640.1 561.20 14.06%
Swiss GDP in CHF 645 643 0.31%
% of GDP 99.24% 87.28%
Balance sheet as at 31 December 2015
While the SNB supports foreign stock markets and foreign companies, it does not invest in Swiss stocks.

2015 2014
% CHF securities 0.0130% 0.0509%

Profit on Swiss franc positions

The profit on Swiss franc positions, which totalled CHF 1,245.0 million (2014: CHF 276.6 million), essentially comprised CHF 1,163.9 million of negative interest charged on sight deposits since 22 January 2015, interest income of CHF 66.5 million and price gains of CHF 24.4 million.

Negative Interest rates

Furthermore the SNB harms the Swiss economy, when it reduces the profits of Swiss banks by negative interest rates. With this measure it maintains its own profitability.

2015 2014 Change in%
Negative Interest rates 1.16 1 16.00%
SNB balance sheet 640.1 561.2
in % of balance sheet 0.18% 0.18%

One essential part of SNB profits are negative interest rates

Source: snb.ch - Click to enlarge

SNB Liabilities

Sight deposits is the biggest part of SNB interventions

2015 2014 Change in%
Total Sight Deposits 438.8 354.5 23.78%
Balance Sheet 640.1 561.2 14.06%
% of balance sheet 68.55% 63.17%

Banknotes in circulation: +5.28 bn francs.
The old form of printing press, today a less important form of central bank interventions.

Liabilities track the SNB interventions

Liabilities track the SNB interventions

Source: snb.ch - Click to enlarge

Provisions for currency reserves

The allocation to provisions for currency reserves amounted to CHF 1.4 billion. The figure is lower than in the previous year (CHF 2.0 billion) because the average period for the calculation of the allocation upon which the 2015 financial year is based includes several years with low nominal GDP growth rates. At 1.2%, average nominal GDP growth was therefore lower than in the relevant previous period (1.8%). For the 2015 financial year, as in the preceding years, the basis for calculating the allocation was twice the average nominal GDP growth rate for the previous five years.

Full story here
George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com 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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