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SNB Expects 2012 Profit on Investments, Gold Price

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Swiss National Bank Expects 2012 Profit of 6 Billion Francs
The SNB amassed record foreign-currency reserves as it defends a franc cap introduced in September 2011 to ward off investors seeking a haven from Europe’s sovereign-debt crisis. Photographer: Gianluca Colla/Bloomberg

Jan. 17 (Bloomberg) -- The Swiss National Bank expects a 2012 full-year profit of about 6 billion francs ($6.4 billion) after the central bank benefited from foreign-currency investments and rising gold prices.

Foreign-currency holdings contributed 4.7 billion francs and valuation gains on its gold holdings added 1.4 billion francs, the Zurich-based SNB said today, citing an initial estimate. The bank will distribute 1 billion francs to cantons and the Swiss federation.

While the SNB said consolidated profit would be higher because of a contribution from the so-called stabilization fund, that still compares with consolidated profit of 13.5 billion francs in 2011. The fund’s contribution has never caused a “massive change” to results, said Walter Meier, the central bank’s spokesman.

The SNB amassed record foreign-currency reserves as it defends a franc cap introduced in September 2011 to ward off investors seeking a haven from Europe’s sovereign-debt crisis. Holdings stood at 427.2 billion francs at the end of December, up 68 percent from 254.2 billion francs a year earlier.

‘High Volatility’

“The SNB posted the second strong annual result in a row, which almost make up for the FX-related loss of 21 billion francs in 2010,” Alexander Koch, an economist at UniCredit in Munich, said in an e-mail. “Due to a huge amount of currency reserves, SNB earnings will remain susceptible to high volatility. On the other hand, the FX assets will also continue to deliver higher regular income.”

The central bank had a consolidated loss in the fourth quarter, Meier said by phone from Zurich, without elaborating. Nine-month consolidated profit was 16.9 billion francs.

The yen, which made up 9 percent of the SNB’s currency reserves at the end of September, declined more than 12 percent against the franc in the fourth quarter, while gold for immediate delivery slipped 5.5 percent to $1,675.35 an ounce. Gold prices still climbed for a 12th consecutive year, the longest run of gains in at least nine decades. The SNB held 48.7 billion francs of gold at the end of 2011.

The SNB is a joint-stock company in which public shareholders including cantons and regional banks have a stake of about 55 percent. Private individuals hold the remainder.

The franc was declined after the announcement, trading at 1.24353 against the euro at 10:22 a.m. in Zurich. Against the dollar, it traded at 93.23 centimes.

The SNB said it will publish the detailed full-year report with definitive figures on March 7.

To contact the reporter on this story: Zoe Schneeweiss in Zurich at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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