By John Revill
ZURICH (Reuters) – The Swiss National Bank plans to pay out 2 billion Swiss francs ($2.05 billion) — and possibly more — to Switzerland’s federal and cantonal governments after swinging to a big 2019 profit, it said on Thursday.
The SNB expects an annual profit of 49 billion Swiss francs ($50.29 billion), helped by gains on foreign securities it bought to weaken the Swiss franc.
That is slightly less than 51.5 billion francs reported at the nine-month mark as valuations of gold holdings and profit on foreign currency positions slipped in the final quarter.
The profit, after a 2018 loss of 15 billion francs, means the SNB will pay out the maximum agreed amounts to governments for last year. It will discuss possible additional payments with the finance ministry.
“The high level of the distribution reserve would allow the SNB to make a limited increase beyond the agreed amounts … to the Confederation and the cantons for the financial years 2019 and 2020,” the central bank said.
SNB profits swing significantly as Chairman Thomas Jordan seeks to curb the Swiss franc’s strength against the euro, which lost nearly 2% from October to the close of 2019.
Last year’s profit from FX positions was around 40 billion francs, down from 42.7 billion francs at end-September, while the valuation gain on gold was 6.9 billion francs, down from 7.3 billion after nine months, preliminary figures showed. Definitive numbers will be published on March 2.
The SNB, a rare central bank whose shares are listed, proposed an unchanged dividend of 15 francs per share.
Switzerland’s influential labor union federation called for using part of the SNB’s profit to help shore up the public pension system.
The SNB, whose mandate targets price stability and supporting the Swiss economy, does not aim make a profit. It has waged a long campaign to reduce the value of the franc, which is sought by investors in times of uncertainty but whose strength weighs on Switzerland’s export-reliant economy.
The profit reflects valuation gains, dividends and interest payments from the massive cache of stocks and shares it has bought to manage the franc.
“It has been an extraordinary year on the financial markets, which is why the SNB has made such a big profit from its equity holdings, while interest rates have declined further, which has increased the value of the bonds it holds,” said Adriel Jost, an economist at consultancy Wellershoff & Partners.
($1 = 0.9743 Swiss francs)
(Additonal reporting by Silke Koltrowitz, John Miller and Stephanie Nebehay; Editing by Catherine Evans)