(Adds details and background, market reaction)
ZURICH, April 27 Switzerland's central bank
posted a profit of 7.9 billion Swiss francs ($7.95 billion) in
the first quarter, it said Thursday, boosted by gains from the
huge foreign currency reserves built up during its long campaign
to weaken the Swiss franc.
The Swiss National Bank made a profit of 5.3
billion francs on its foreign currency holdings that rose to
683.18 billion francs at the end of March, a figure larger than
The bank also made a profit of 2.2 billion francs from a
valuation gain on the gold it holds, and 466.4 million francs
from negative interest rates it has charged on the sight deposit
accounts it holds for commercial banks.
The SNB is not required to make a profit, with its main
mandate to ensure price stability in Switzerland defined as
annual inflation of under 2 percent. But a portion of any profit
it does make is distributed to the Swiss government and the
country's 26 cantons.
Negative interest rates and currency interventions have been
the cornerstones of the SNB's policy to tame the franc, which it
has consistently described as "significantly overvalued".
A strong franc makes life tough for Switzerland's exporters
by making their products more expensive outside the country.
The SNB's currency interventions have led it to being named
on the U.S. Treasury's watch list of potential currency
But the SNB has also continued to intervene in the currency
markets by spending an average of 2.5 billion francs per week
this year, according to an analysis of sight deposit account
data which serve as a proxy for the SNB's market moves.
The figure is almost twice as high as for the same period in
2016, with the increased activity driven by safe-haven flows
into the franc linked to investor uncertainty around the French
The first round of elections -- which put far-right leader
Marine Le Pen, who has campaigned for France to leave the euro,
in second place behind centrist Emmanuel Macron -- strengthened
the common currency against the franc.
Despite the franc's weakening, analysts expect the SNB to
remain active in the weeks ahead given the elections in Europe.
"Although the SNB will probably be relieved with the results
of the first round in France, which has lessened the need for
huge interventions, I think the bank will continue to be active
in the currency markets until the presidential and parliamentary
elections are completed," said David Marmet, an economist at
"If it's necessary they will step up their interventions,
but they will be hoping the outcome in France will lead to the
franc staying at 1.08 or weakening even further to 1.10 versus
the euro, which would lessen the need for them to do more."
($1 = 0.9933 Swiss francs)
(Reporting by John Revill; Editing by Michael Shields)