Swiss National Bank hit by $15bn Q2 loss

The Swiss National Bank (SNB) reported a substantial loss of 13.2 billion Swiss francs ($15.14 billion) in the second quarter, despite earning nearly 900 million francs in interest income from emergency loans extended to Credit Suisse and UBS (UBSG.S).

In a bid to provide crucial support to Credit Suisse and facilitate its acquisition by UBS, Switzerland’s central bank lent a significant sum of 168 billion francs in a state-backed arrangement in March. These loans, carrying interest rates up to 3 percentage points above the SNB’s policy rate, have seen more than half of the outstanding amount repaid since the onset of the financial crisis in March. As of the end of June, the remaining amount outstanding, which also includes a small portion of COVID-19 credits, stood at 66.7 billion francs, according to SNB’s statement.

The interest income from the emergency loans helped mitigate some of the losses incurred by the central bank as a result of its recent monetary policy tightening. During the second quarter, the SNB faced a loss of 1.88 billion francs on its Swiss franc positions, primarily due to the resumption of interest payments on sight deposits. Additionally, the bank incurred interest expenses through SNB bonds and repos as part of its efforts to manage liquidity and steer market interest rates towards its policy rate, which was raised to 1.75% last month.

Similar to other central banks, the SNB has been raising interest rates to address stubborn inflation. However, the actions taken by major central banks like the U.S. Federal Reserve and the European Central Bank, along with others, also played a role in contributing to the SNB’s overall loss. These actions pushed down the value of the SNB’s substantial bond portfolio during the second quarter, resulting in a loss of 8.08 billion francs on foreign currency positions of 742 billion francs, which includes investments in prominent companies like Apple (AAPL.O) and Tesla (TSLA.O).

The appreciation of the Swiss franc also had an adverse impact on the value of the SNB’s earnings from foreign investments when converted back to francs. The bank reported a loss of 3.14 billion francs on its gold holdings in the three months ending in June, as the value of its 1,040 tonnes of precious metal was affected by lower prices.

These financial results highlight the complexities and challenges faced by the SNB in navigating global economic trends and monetary policy decisions. The bank’s performance in the coming quarters will continue to be closely monitored in the context of both domestic and international economic developments.