Swiss National Bank's Q2 Windfall: CHF 25.7 Billion Profit

The Swiss National Bank (SNB) posted a net profit of CHF 25.7 billion for the second quarter, a surprise gain driven by a blend of monetary tightening and volatile foreign‑exchange markets.

Ripple Effects on Euro‑Area Liquidity

SNB’s profit could reshape liquidity conditions across the euro zone. The rise in foreign‑exchange reserves bolsters the franc against the euro, potentially easing credit costs throughout the region.

■Reserve increase: FX reserves grew 3.4 % quarter‑on‑quarter, adding CHF 1.2 billion.

■Rate differential: SNB’s policy rate held steady at 1.5 %, while the ECB’s benchmark sits at 4.0 %.

■Exchange rate: The CHF/EUR rate slipped from 0.94 to 0.92.

■Credit growth: Swiss commercial‑loan expansion slowed by 1.2 % quarter‑on‑quarter.

Re‑calibrating Policy Levers

The profit, largely attributed to foreign‑exchange interventions, has sparked a fresh debate on the SNB’s future monetary‑policy playbook. Analysts question how sustainable the windfall is and what it means for the balance between inflation targeting and FX stability.

■Inflation target: Inflation ran at 1.8 % in Q2 2024.

■FX intervention cost: Intervention cost remained modest at 0.6 %.

■Market expectations: About 60 % of forecasters see a low probability of a rate hike in the next quarter.

■Global spillovers: The profit could exert indirect pressure on ECB and Fed policy decisions.

Market participants should not treat the SNB’s profit as a one‑off windfall but as a signal of policy flexibility. While the extra earnings from FX reserves provide short‑term stability, the ongoing contraction in SME loans and the slowdown in commercial‑credit growth highlight underlying liquidity strains that require a more comprehensive, forward‑looking strategy. (Kerem Tufan, Director of Commercial Credit & Central Bank Policies)