The Swiss National Bank Enjoys Huge Profits from 2017

At the beginning of every year, you expect to hear from the biggest names in technology, retail, and more about their stellar profits from the year prior. From Apple to Nike, Louis Vuitton to Facebook, these are the big brands that most consumers sink their money into.

One of the most profitable names from 2017 came out of left-field: the Swiss National Bank. According to the Wall Street Journal, SNB’s profits for the 2017 fiscal year were greater than even those of Apple’s.

Their total reported profits? Roughly $55.25 billion USD, which is 54 billion Swiss francs. In all the years the bank has existed (which has been more than 100), the SNB has never seen such profits.

Before we get into SNB’s great year, here’s some background on the institution.

Based in Switzerland, the Swiss National Bank has an office in Zurich and its headquarters in Bern. The headquarters is an architectural marvel and certainly unlike banks in the United States by looks alone.

The Swiss National Bank has been around since the early 1900s. It deals in the Swiss Franc currency, and is currently chaired by Thomas Jordan. Like most banks, the duties of the SNB are to transfer foreign currencies, stash securities and bonds, offer cashless payment transactions through its Swiss Interbank Clearing system, and of course allow users to take and deposit money as needed.

The bank is also in charge of some of Switzerland’s gold reserves. Back in World War II, this proved to be invaluable, as the Swiss National Bank could offer funding in gold to Germany’s then-central bank Reichsbank.

There is a governing board, a Bank Council, and an annual General Meeting of Shareholders.

On the surface, the Swiss National Bank doesn’t seem all that different from any other major financial institutions across the world. So why the huge profits in 2017?

Unlike most banks, SNB has decided to delve into private shareholding. Since it has Facebook, Starbucks, and Amazon stocks (at a total investment rate of 20 percent), when those respective companies had standard banner years, so too did the bank.

Just look at how the Swiss National Bank performed in past years to see how this is working in their favor. In 2014, SNB reported 38.3 billion francs, a fair amount. In 2015, they experienced a significant loss in the first half of the year. Things weren’t much better by 2016, when earnings were down to 24.5 billion francs.

In 2017, the bank had over two times the earnings of 2016. Not only that, but its gold holdings, worth about three billion francs, have yet to be added into SNB’s 2017 earnings. That will happen in early March, when their 2017 profits may yet again grow to further impressive numbers.

Of course, this doesn’t do much of anything for SNB customers, as they won’t see more money in their own pockets. The shareholders of the bank, which are estimated to be about 2,200 people, will get a cut of the money, but it won’t be much. Each shareholder is expected to net just 15 francs.

That said, Switzerland’s administrative divisions or cantons will see significantly more money. There are 26 cantons in all, and they will each receive two billion francs. One billion of that is the standard payout amount, while the second is because of SNB’s profits success.

As a comparison, 0.9773 francs is equal to just one United States dollar.

This comes at a great time for the Switzerland bank. The euro, in 2017, was valued nine percent more than the franc.

Maxime Botteron, an economist, pondered on the success of the Swiss National Bank this past year. “A large profit makes it easier for SNB to explain why it has built up all this foreign currency reserves than if they had reported a loss,” she stated.

Another economist, Alessandro Bee, also weighed in. “The SNB’s dividend may seem quite low when compared to its profits, but the bank was not created to make a profit. It is just a nice side effect.”

It will certainly be interesting to see how the Swiss National Bank continues in 2018 and beyond. Perhaps the bank will aim to bring in even bigger profits this coming year, or maybe they’ll focus more on their traditional duties as a financial institution.

Regards,

Ethan Warrick
Editor
Wealth Authority