Forex loss slashes Swiss central bank's H1 profit

Reuters

* Swiss central bank reported H1 net profit of 1.2 bln Sfr
    * Foreign exchange losses weighed on earnings
    * Bank earned 970 mln Sfr from negative interest rates

 (Adds detail, economist comment)
    ZURICH, July 31 (Reuters) - Net profits at Switzerland's
central bank plunged to 1.2 billion Swiss francs ($1.2 billion)
for the first half of 2017, according to figures released on
Monday, as big foreign exchange losses weighed on earnings from
its foreign investments.
    Exchange-related losses of 11.8 billion francs almost wiped
out the earnings from bonds and shares it holds, bringing
profits down from 21.3 billion francs a year earlier.
    The Swiss National Bank  - whose aim is to maintain
price stability, not make a profit - has been buying foreign
currencies in large amounts to check upward pressure on the
franc, which is sought by investors during economic uncertainty.
    The institution's foreign currency investments have
ballooned to 728 billion francs - 12 percent larger than the
entire Swiss economy.
    The Swiss currency was on track for its biggest monthly drop
in six years against the euro as some hedge funds sold the
currency after it broke through major technical levels last
week. [nL5N1KJ3VS]
    But this development has been countered by the weakness of
the dollar, which reduces the Swiss franc value of its U.S.
investments - with 35 percent of the SNB's holding in dollars.
    "Exchange rate gains on the euro did not offset losses
recorded on other investment currencies, particularly the U.S.
dollar," the SNB said on Monday.
    Alessandro Bee, an analyst at UBS, has estimated that every
one percent rise in the franc versus the dollar costs the SNB
around 2.5 billion francs. In contrast, the bank gains around 3
billion francs for every 1 percent depreciation versus the euro.
    "The huge size of the SNB's balance sheet means it is very
sensitive to currency fluctuations," said Bee, who expects the
franc to weaken to 1.14 versus the euro by the end of 2017.
    The bank made a valuation gain of 300 million francs from
its gold holdings and 970 million francs from the negative
interest rates it charges on banks, a cornerstone of its
campaign to weaken the Swiss franc.

    ($1 = 0.9681 Swiss francs)

 (Reporting by John Revill)
 ((John.Revill@thomsonreuters.com; +41 58306 7022; Reuters
Messaging: john.revill.thomsonreuters.com@reuters.net))

Keywords: SNB RESULTS/ (UPDATE 1)

Referenced Symbols:SNBN

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