The Swiss National Bank (SNB) reported a Q3 profit of 1.7 billion francs for 2021, defying previous loss forecasts. This turnaround was primarily driven by a surge in gold holdings and earnings from foreign currency positions. The bank's gold assets saw an appreciation of 1.1 billion francs, while earnings from foreign currency positions contributed an additional seven billion francs.
However, these gains were offset by a 6.1 billion franc loss on the SNB's Swiss franc positions, largely attributed to interest on Swiss banks' current account balances. UBS analysts have cautioned the federal government and cantons not to anticipate SNB profit distributions unless a Q4 profit exceeding 40 billion francs is achieved.
This positive outcome follows the SNB's Q3 loss of 12.04 billion francs ($13.36 billion) in 2022, which was prompted by losses in gold holdings, foreign currency investments, and Swiss franc positions. Persistent worries over high global interest rates had led to a downturn in bond and equity prices, causing a 9.16 billion franc loss from foreign currency positions.
Falling global gold prices also contributed to a 132 million franc valuation loss on the bank's 1,040 metric tons of gold during the same period. Swiss franc positions resulted in a further 2.66 billion franc loss, largely due to rising costs from accumulating interest payments for overnight lodgings at commercial banks.
To mitigate these costs, the SNB announced an interest reduction after paying 5.4 billion francs in interest during the first nine months of 2022. This strategic move appears to have played a role in the bank's return to profitability in Q3 of 2021.
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