By John Revill
ZURICH (Reuters) – The Swiss National Bank <SNBN.S> posted an annual profit of 48.9 billion Swiss francs ($50.71 billion), the central bank said on Monday, and said it would double its payout to Switzerland’s regional and central governments.
The SNB made a profit of 40.3 billion francs from its foreign currency positions in 2019, boosted by big gains from foreign currency investments bought to weaken the safe-haven franc.
It also made a 6.9 billion franc gain from its gold holdings and 2.1 billion from its Swiss franc positions, it said.
The profit was the second-largest in the bank’s 113-year history and meant the SNB can increase its payout to 4 billion francs to the Swiss federal government and to cantons.
The increase, from the usual 2 billion franc payout, came after the SNB and the Swiss finance ministry signed an agreement to increase the maximum profit distribution in case of big profits. One third of the money will go to the Swiss government and two thirds to the country’s cantons, and could head off some of the criticism of the SNB for its negative interest rates policy.
The central bank charges the world’s lowest interest rate of -0.75% on commercial bank deposits it holds over a certain threshold, a measure designed to weaken investor appetite for the franc.
During 2019 the SNB made a profit of 1.94 billion francs from negative rates, which have become increasingly unpopular among banks, insurers and pension funds that see it as a charge on their businesses.
Despite the increased 4 billion franc payout, the SNB proposed keeping its dividend for shareholders at 15 Swiss francs, the legal maximum.
“Last year was the perfect environment for the SNB to make money. Bond yields went down, which meant the value of its bonds increased, and its stock holdings increased in value due to the rise in global markets,” said UBS economist Alessandro Bee. “There was also some uncertainty, which increased the value of the SNB’s gold holdings.”
(reporting by John Revill)