The Swiss National Bank (SNB), Switzerland’s central bank, has a narrow role: to ensure price stability, which means managing inflation. Sometimes in the course of this task it generates a profit. For the year ended 31 December 2024, the SNB made a profit of CHF 80 billion, of which CHF 3 billion will be paid to federal and cantonal governments.
For many years, the SNB reliably paid a share of its profits to the government. The government, particularly those at a cantonal level, had become used to a regular annual revenue boost by the SNB. However, in 2022, that changed. The SNB made a significant loss. In 2022, the SNB lost CHF 132 billion. With this loss the distributions stopped, much to the chagrin of those managing government finances.
Central banks largely manage price stability by influencing interest rates and by buying and selling assets in the open market. Buying assets in a foreign currency requires the bank to first buy foreign currency, and in the process put Swiss francs out into the market. This weakens the relative value of the franc. Doing the opposite strengthens it. The relative strength of the franc feeds into inflation because Switzerland imports much of what it consumes.
Whether the SNB makes a profit or not is down to what is left on its balance sheet at the end of the year after all its buying and selling of assets, combined with the market on the prices of those assets, which are determined by the vagaries of the market.
Most of the assets held by the SNB (bonds and equities mainly) are denominated in foreign currencies. Whether it makes a profit is largely determined by how foreign currencies move relative to the Swiss franc, and to a lesser extent the price of gold, which it owns alongside bonds and equities. If foreign currencies strengthen relative to the franc then there will be a profit. If the price of gold climbs that will add to profit. If the opposite happens, the bank will end up with losses.
In 2022, the Euro, Pound and Yen lost significant value relative to the Swiss franc, which hit the value of the SNB’s foreign denominated assets hard, costing it CHF 130 billion. In 2023, currencies moved less, leaving the SNB with a small loss of CHF 3 billion.
In 2024, the negative balance sheet impact of a weakening Euro was more than offset by a strengthening US dollar, delivering a positive return of CHF 67 billion. A rising gold price added a further CHF 21 billion. Losses of close to CHF 8 billion elsewhere left the SNB with a net profit of CHF 80 billion for the year.
Given the volatile nature of the bank’s profit and loss, most of this year’s gain will be transferred to reserves. Of the total remaining, CHF 15 per share (the maximum allowed) will be paid to shareholders, and CHF 3 billion will be paid out to the federal and cantonal governments.
Unlike most central banks the SNB is not owned by the government. It is listed and anyone can buy its shares (SNBN). At the current price of CHF 3,650 per share, the proposed dividend of CHF 15 doesn’t represent much of a yield.
More on this:
SNB article (in French) – Take a 5 minute French test now
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