Its holdings of foreign exchange and gold helped the Swiss National Bank (SNB) book a 26.9 billion Swiss franc ($29.4 billion) profit in the first quarter, the central bank reported in its first quarter interim results Thursday.

While it profited from its foreign currency holdings, the SNB booked a loss on its holdings of Swiss francs, which it attributed to renumerating balances on sight deposits following its exiting its negative interest rate policy.

The profit from its currency holdings marks a turnaround from the previous year when the SNB had a record loss of 132 billion francs ($142 billion). That was almost completely due to losses on its foreign currency positions amounting to around 131 billion francs. 

Foreign Exchange Turnaround 

In the first quarter, profit from the SNB's foreign currency positions was 24.2 billion francs, although it lost 1.6 billion on its Swiss franc holdings. Its gold holdings which remained unchanged in volume gained 4.3 billion francs in value. 

The SNB cautioned that its profit is highly dependent on movements in gold, foreign exchange, and capital markets, which can undergo sharp movements. Therefore «only provisional conclusions are possible as regards the annual result.»

Profit Payout

It's unclear if the SNB used that language to dampen speculation that an annual profit would lead to a payout of its profits to the government. In 2022, the SNB's annual loss meant it was unable to make dividend payments to SNB shareholders including the Confederation and the cantons. 

In a report from economists at The SNB Observatory in January following the SNB's annual report, they concluded the central bank's decision not to use its provisions for foreign investments to absorb its losses indicated that while able to make a profit distribution, it instead chose not to.

In an analysis last week, UBS economists assumed a profit potential of 10 to 15 billion francs for the SNB this year, and that the first quarter profit is likely an outlier. For a minimum distribution to the federal government and cantons, the central bank will have to generate a profit of 45 to 50 billion francs, and for a maximum distribution of 85 to 90 billion francs, making a distribution unlikely.