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Gold helps drive Swiss central bank to first-quarter profit

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04/28/2016 | 09:11 am
ZURICH (Reuters) - Switzerland's central bank posted a first-quarter profit of 5.7 billion Swiss francs (4.03 billion pounds) on Thursday as the global low interest rate environment and rocky financial markets gave a boost to its bond and gold holdings.

A 4.1 billion gain on gold and 6.2 billion on bonds and other interest-bearing instruments helped offset exchange rate losses that resulted from the Swiss franc's appreciation against the dollar.

While the franc weakened against the euro through March 31 this year <EURCHF=>, it strengthened more against the dollar <CHF=>, impacting the SNB's sizeable dollar holdings.

"The appreciation of the Swiss franc resulted in total exchange rate losses of 6.9 billion francs," the SNB said in a statement.

SNB profits are not part of its monetary policy mandate but the annual payments have sometimes meant the difference between a budget surplus and a budget deficit for some cantons, which along with the federal government are the central bank's main shareholders.

If shareholders accept the SNB's proposal for a 1 billion franc payout to the government and a 15 franc-per-share dividend at the central bank's annual general meeting on Friday, the SNB will have 1.9 billion francs left in reserves.

The currency impact marks a 34 billion improvement from the same quarter last year.

In the first quarter of 2015, the Swiss National Bank posted its biggest ever quarterly loss, of 30 billion francs, after the removal of an exchange rate cap sent the Swiss franc soaring against the euro that January.

A stronger franc led the central bank to exchange rate losses of 41.1 billion francs that quarter that were only slightly offset by gains in equities and bonds.

The SNB cut losses in ensuing quarters to close the year with a 23.3 billion franc loss.

(Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields and John Stonestreet)

Reuters 2017
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