Swiss central bank triples profits

Swiss central bank triples profits
Facade of Swiss National Bank in Zurich (Photo: Malcolm Curtis)
Switzerland's central bank, with a strategy of intervention to hold down the Swiss franc, reported on Wednesday that it almost tripled profits for the first nine months of the year, boosted by a rise of gold and currency reserves.

The figures give an insight into the scale and effects of the bank's strategy to try to keep Switzerland’s exporters and its tourist industry competitive in the face of an inflow of funds seeking safety from crises, and notably the euozone debt crisis.

The bank's consolidated profit for the January-September period soared to 16.9 billion francs ($18.2 billion), up from 5.9 billion francs a year earlier, The Swiss National Bank (SNB) said in a statement.

The bank's gold reserves had surged by 6.2 billion francs, or 24 percent, year-on-year, while foreign currency reserves shot up to a value of 10.3 billion francs from just 322 million in the first nine months of 2011.

The bank's positions in the Swiss currency meanwhile added 94.1 million francs to its profit for the first three quarters of the year, compared to the 147.5-million loss it suffered in the same period last year.

The dramatic shift is connected with the significant strengthening of the franc last year, which forced SNB, in September 2011, to set an exchange rate floor of 1.20 francs against the euro.

With the deepening of the eurozone debt crisis, the bank had to purchase massive amounts of euros to enforce the minimum exchange rate.

 As a consequence of this policy, its balance sheet has grown by 158 billion francs to 509 billion since the beginning of the year.

Investment of its foreign currencies, meanwhile, grew by 172 billion francs.

"SNB is now in the course to diversify and invest the additional volume of euros," Alexander Koch, an analyst with UniCredit Research, said, pointing out that the bank's euro reserves made up just 49 percent of its total foreign currency reserves in the third quarter down from 60.1 percent in the second quarter.

According to Koch, SNB had exchanged about 60 billion euros into other currencies, mainly dollars.

He stressed though that SNB needed to "remain active in terms of euro investments."

This was because most of the additional euros it had acquired remained "parked as deposits" mainly with Germany's Bundesbank, which would therefore likely "get further support from SNB FX reserves management in coming months," he said.

Member comments

Become a Member to leave a comment.Or login here.