Swiss central bank posts record half year profit

By John Revill

ZURICH (Reuters) -The Swiss National Bank reported the biggest half-year profit in its 117-year history on Wednesday, as big gains in the first three months of the year far outstripped losses recorded in the second quarter.

The profit of 56.8 billion Swiss francs ($64.48 billion) was boosted by valuation gains, as well as dividend and interest payouts from 740 billion Swiss francs invested in bonds and stocks, including stakes in tech giants Nvidia Corporation and Apple Inc.

The profits were also boosted by the franc's weakness at the start of the year, which increased the value of the SNB's overseas earnings when converted into francs.

The central bank also made a valuation gain of 12.2 billion francs on the 1,040 tonnes of gold it holds as its price rocketed 20% this year driven by political tensions and demand from other central banks.

The half-year total includes a 2 billion franc loss in the second quarter, as falling bond prices and a rising franc dented foreign earnings.

The SNB also made a first-half loss of 4.5 billion on its Swiss franc positions, driven mainly by interest payments to commercial banks who lodge money with it overnight.

The second-quarter reversal is unlikely to be a major concern for the SNB, as making a profit is not part of the central bank's mandate, which instead focuses on price stability.

"The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets," it said.

"Strong fluctuations are therefore to be expected."

Still, the profits matter as the central bank usually makes a annual payout to the Swiss central and regional governments of up to 6 billion francs from its earnings, although no payment has been made for the last two years.

Following losses of previous years, UBS estimates the SNB would have to make a profit of at least 65 billion francs in 2024 to make a payout.

UBS economist Florian Germanier said the rising value of the franc could be a factor in the SNB's result in coming months.

"We expect the franc to strengthen as other central banks cut rates and because of geopolitical tensions adding to the safe-haven flows into the currency, which is a significant risk for the SNB's results for the rest of the year," he said.

($1 = 0.8809 Swiss francs)

(Reporting by John Revill; Editing by Miranda Murray, Clarence Fernandez and Tomasz Janowski)