The Swiss National Bank (SNB) today will hold its annual meeting – an event in plush surroundings that draws a loyal crowd of mostly elderly shareholders. Today, they expect a few more observers than usual in the Swiss capital. After all, the stock price of the central bank has shot through the roof, appreciating more than 300 percent within a 12-month period. It is now worth a paltry 7,500 Swiss francs.

The share capital of the SNB is 25 million francs and is being held in its majority by regional governments. If an eager investor was trying to find one word on the stock in the goals and responsibilities section of the institution’s website will find not a single word about its security. And the directors mostly avoid saying anything either – because the duties of the bank are monetary policy, keeping the franc at a reasonable level and – primarily – to maintain price stability.

False Hopes

Analysts are mostly scathing about what they perceive as speculative investing (much like with Bitcoin trading) and in expectation of massive losses for the buyers. The increase of the share price hasn’t, or shouldn’t have, anything to do with hopes for a huge annual dividend payment. The SNB is limited to paying a maximum 15 francs per share. It seems equally unlikely that anybody would spend 7,500 francs for a security in the vague hope that the bank will suddenly decide to pay out a much higher dividend. It can't and won't.

Of course, the bank has had a record profit of 54 billion francs in 2017. Most of the money however will be put into the currency reserves and a much smaller part is being paid out to the federal government and the country’s regions.

The other possible explanation for the rapid rise is that shareholders believe the bank one day will buy back their shares at a premium. An optimistic scenario for the central bank, which has other worries altogether.

Jean Studer, the President of the Bank Council, on Friday took the opportunity to comment on the shares in recognition of the spectacular increase in value.