Swiss National Bank Results 2016 and Comments

The increasing volatility of SNB Earnings

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 vice verse

SNB Results Longterm 2016

- Click to enlarge

Interim results of the Swiss National Bank for 2016

The Swiss National Bank (SNB) reports a profit of CHF 24.5 billion for the year 2016 (2015: loss of CHF 23.3 billion).

The profit on foreign currency positions amounted to CHF 19.4 billion. A valuation gain of CHF 3.9 billion was recorded on gold holdings. The profit on Swiss franc positions was CHF 1.6 billion.

For the financial year just ended, the SNB has set the allocation to the provisions for currency reserves at CHF 4.6 billion. After taking into account the distribution reserve of CHF 1.9 billion, net profit comes to CHF 21.7 billion. This will allow a dividend payment of CHF 15 per share, which corresponds to the legally stipulated maximum amount, as well as a profit distribution to the Confederation and the cantons of CHF 1 billion. The Confederation and the cantons are also entitled to a supplementary distribution of a maximum of CHF 1 billion if the distribution reserve after appropriation of profit exceeds CHF 20 billion. The net profit for 2016 allows a supplementary distribution of CHF 0.7 billion. One-third of the total distribution is allocated to the Confederation and two-thirds to the cantons. After these payments, the distribution reserve will amount to CHF 20 billion.

SNB profit of 24.5 bn. CHF in 2016, after a 23.3 bn. loss in 2015

Source: snb.ch - Click to enlarge

Profit on foreign currency positions

The profit on foreign currency positions was CHF 19.4 billion (2015: loss of CHF 19.9 billion).

Interest income amounted to CHF 8.3 billion and dividend income to CHF 3.0 billion. Price gains of CHF 1.1 billion were recorded on interest-bearing paper and instruments. Equity securities and instruments benefited from the favourable stock market environment and contributed CHF 8.6 billion to the net result. Overall, exchange rate-related losses amounted to CHF 1.7 billion.

SNB Result for Swiss Franc Positions, 2016

Source: snb.ch - Click to enlarge

Valuation gain on gold holdings

At CHF 37,885 per kilogram, the price of gold was 11% higher than at the end of 2015 (CHF 34,103). This gave rise to a valuation gain of CHF 3.9 billion on the unchanged holdings of 1,040 tonnes of gold (2015: loss of CHF 4.2 billion).

Percentage of gold to balance sheet

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

Balance Sheet

The balance sheet has expanded by over 106 bn. francs by 16.62%

Balance sheet as at 31 December 2016

Source: snb.ch - Click to enlarge

While the SNB supports foreign stock markets and foreign companies, it does not invest in Swiss stocks.

Profit on Swiss franc positions

The profit on Swiss franc positions, which amounted to CHF 1.6 billion (2015: CHF 1.2 billion), essentially comprised CHF 1.5 billion arising from the negative interest on sight deposit account balances which has been charged for the first full calendar year since its introduction on 22 January 2015.

Negative Interest rates

Furthermore, the SNB harms the Swiss economy, when it reduces the profits of Swiss banks by negative interest rates. But with this measure she maintains her own profitability.

SNB Results for Swiss Franc Positions, 2016

Source: snb.ch - Click to enlarge

SNB Liabilities

Sight deposits is the biggest part of SNB interventions

Banknotes in circulation: +5.2 bn francs to 78 bn. CHF
The old form of a printing press, today a less important form of central bank interventions.

SNB Liabilities and Sight Deposits, 2016

Source: snb.ch - Click to enlarge