The Swiss National Bank (SNB) is a unique institution in many ways. Its primary objective is to ensure price stability, not to generate profits. Shareholders—mainly the cantons—have limited influence, and the rights of private shareholders are particularly restricted.

Nevertheless, the public takes an avid interest in how the SNB manages its finances because surplus earnings are distributed to the federal government (one-third) and the cantons (two-thirds). Historically, billions have been transferred annually to the public sector.

However, in 2023, the federal government, cantons, and shareholders received nothing. The maximum dividend sum, a symbolic 1.5 million Swiss francs, was not distributed.

Thanks to Gold, the Deficit Isn’t Larger

In the first quarter of 2024, the SNB reported a record profit of around 59 billion Swiss francs. The second quarter was less favorable, as indicated by the press release on Wednesday.

The SNB recorded a loss of 2 billion Swiss francs. There was a valuation gain of 3.3 billion Swiss francs on the gold holdings. However, the foreign exchange reserves incurred a loss of 3.1 billion Swiss francs, and the franc positions resulted in an additional loss of 2 billion Swiss francs.

UBS Point Forecast

This outcome aligned with UBS's forecast. The large bank makes these predictions based on developments in the stock markets, interest rates, and the gold price. This time, it had anticipated a quarterly result for the SNB ranging from minus 7 billion to plus 3 billion Swiss francs.

Whether the conditions for a payout will be met by the end of the year remains uncertain. First, last year's balance sheet loss of 53 billion Swiss francs must be covered, and second, the SNB makes significant annual provisions for foreign exchange reserves. According to UBS, the SNB would need to generate at least 65 billion Swiss francs in profit in 2024 for any payout to occur.

Half-Year Results Should Not Be Extrapolated to the Full Year

With a profit of 56.8 billion Swiss francs, the first half of the year still looks promising. However, it is doubtful whether the favorable conditions that led to the record result in the first quarter (booming stock markets and a weak franc) will dominate in the second half of 2024.

The result for the second quarter is likely closer to 'normalcy,' if such a term can even be used given the wide fluctuations in the SNB's market-driven results. The federal government, cantons, and private shareholders should cautiously prepare for the possibility of receiving nothing in 2024 as well.