Exactly three months ago, the Swiss National Bank issued a report which everyone was eagerly anticipating: its interim results for the quarter ended March 31 in which it laid out just how much it had loss after it took on an “artificially strong” Swiss Franc market back in September 2011… and admitted defeat when on January 15 in a shocking statement, it announced it would remove the EURCHF 1.20 peg despite reiterating just days earlier the peg was rock solid. The result: a record loss of CHF 29.3 billion ($32 billion).
Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions – a whopping 7% of Swiss GDP – meaning that in Q2 the SNB lost another €20 billion even though the CHF crosses barely registered any of the mammoth moves experienced in the first quarter, suggesting that the SNB was hit by the double whammy of its own currency devaluation in Q1, followed by the launch of ECB's QE which crushed the EUR in Q2, and which happens to be the currency in which the bulk of SNB FX holdings are denominated.
Amusingly, the FX loss was despite a CHF530 gain resulting from negative deposit rates charged on sight deposit account balances since January 22, 2015 when Switzerland went full-NIRP.
This is how tthe SNB described its loss:
The Swiss National Bank (SNB) is reporting a loss of CHF 50.1 billion for the first half of 2015.
The loss on foreign currency positions amounted to CHF 47.2 billion. A valuation loss of CHF 3.2 billion was recorded on gold holdings.
The SNB's financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional conclusions are possible as regards the annual result.
Loss on foreign currency positions
The negative result on foreign currency positions amounted to CHF 47.2 billion in total.
On 15 January 2015, the SNB decided to discontinue the minimum exchange rate of CHF 1.20 per euro with immediate effect. The subsequent appreciation of the Swiss franc led to exchange rate-related losses on all investment currencies. For the first half of 2015, these amounted to a total of CHF 52.2 billion.
Interest income provided a positive contribution, at CHF 3.5 billion, as did dividend income, at CHF 1.2 billion. Movements in bond prices differed from those in share prices. A loss of CHF 3.9 billion was recorded on interest-bearing paper and instruments. By contrast, equity securities and instruments benefited from the favourable stock market environment and contributed CHF 4.1 billion to the net result.
