Swiss National Bank posts record 9-month profit on currency gains

ZURICH (Reuters) - Switzerland's central bank posted a record profit of 28.7 billion Swiss francs (24 billion pounds) in the first nine months of 2016, driven by gains on its huge foreign currency holdings and earnings on negative interest rates. The Swiss National Bank made a gain of 20.3 billion francs on foreign currency investments that rose to 666.2 billion francs -- slightly larger than the entire Swiss economy -- as it sought to weaken the local currency. Those investments were up 12 percent compared with the figure at the end of 2015. Earnings on cash parked with the central bank by commercial banks - at a sight deposit rate of -0.75 percent - rose to 1.1 billion francs from 843 million, it said on Monday. The SNB is not required to make a profit, with its main mandate to ensure price stability in Switzerland. But any profit it does make is distributed to the Swiss government and the country's 26 cantons. The SNB has been charging 0.75 percent on sight deposits above a certain threshold to reduce the attractiveness of storing cash in Switzerland. Chairman Thomas Jordan said a week ago that the franc remained significantly overvalued, and the bank could cut interest rates further if necessary. The SNB has sought to weaken the franc since it scrapped the currency's cap against the euro in January 2015, with FX purchases and negative rates cornerstones of that policy. A strong franc hurts Switzerland's exporters by making their products more expensive abroad. The central bank's profit also included a valuation gain of 7.5 billion francs from its gold holdings. (Reporting by John Revill; editing by John Stonestreet)