Shares of the Swiss National Bank have risen more than 50%

The Stock That’s as Safe as Switzerland.
Shares of the Swiss National Bank have risen more than 50% in the past year and are proving an attractive alternative to bank deposits and bonds.
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The Swiss National Bank’s headquarters in Bern, Switzerland.
PHOTO: GIANLUCA COLLA/BLOOMBERG NEWS
By Brian Blackstone
Updated April 26, 2017 5:40 a.m. ET
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ZURICH—Want a really, really safe asset? How about a slice of the Swiss central bank?
Shares in one of the world’s few publicly traded central banks are up more than 50% in the last year. With a small, fixed dividend and limited supply, they trade more like a bond or a piece of memorabilia than a stock. This makes the Swiss National Bank ’s SNBN 0.64% stock a quirky though potentially enticing alternative to zero-yielding bank deposits or negative-yielding bonds.
A couple of forces are at work, analysts say. For one, negative rates have increased demand for other safe assets—the existence of SNB shares wasn’t even that widely known in Switzerland—while the SNB turned in a 21.3 billion franc (around $21.5 billion) profit in the first half of 2016. Since so few shares trade, it doesn’t take much to move the price.
The central bank’s money-printing powers make it basically impossible to go bankrupt, and it is able to charge commercial banks to store money there.
Yet it isn’t a normal bank stock. The SNB’s governing board doesn’t own any shares. Its biggest single shareholder isn’t even Swiss; he is German.
Some shareholders are now clamoring for the first dividend increase in more than a century at the SNB’s annual shareholders meeting on April 28.
Under current law, the maximum dividend is 15 francs a share for a total payout of 1.5 million francs. That is a tiny slice of the SNB’s 24.5 billion franc profit last year generated by its money-printing efforts that added hundreds of billions of francs to its portfolio of foreign assets in recent years. The SNB paid 1.7 billion francs to federal and state governments, known as cantons, last year. The vast majority of the profit went to the SNB’s reserve accounts.
Even when it loses money, as it did in 2015, the central bank can always print more. The Swiss franc is among the strongest currencies in the world, meaning the SNB has a monopoly on a coveted commodity. It charges commercial banks to deposit money. In short: A nice mix for any bank.
“It makes some sense to hold SNB shares,” said Alexander Koch, an economist at Raiffeisen Schweiz and SNB shareholder. “You don’t look at them like usual equities with rights for shareholders. It’s more like a debt security obligation.”
The bank’s status as a publicly traded stock will be on display Friday when top SNB officials meet shareholders. Around 30 small shareholders, under the umbrella group Collectif AAA+, say the SNB’s dividend should be calculated at 6% of the year-end share price, not the 250-franc price that has been fixed for decades. SNB shares fetched 1,750 francs on Dec. 31, implying a dividend of 105 francs a share by that calculation. They traded at 1,718 francs around midday Wednesday, little changed on the day.
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The SNB board opposes the measure and is certain to beat it back given tight limits on voting rights for private shareholders, which own 48% of SNB shares, but only 25% of voting shares. The rest are held by Swiss cantons. The SNB’s mandate is to keep inflation under 2%, not maximize shareholder value.
The SNB declined to comment on why it opposes the shareholder initiative. Even if it passes, parliament would have to change the law since rules on the dividend are set by federal law. This underscores one downside to owning SNB shares: stockholders’ lack of influence over the bank.
One leader of the dividend movement, SNB shareholder Blaise Rossellat of Geneva, says he knows he won’t win, but wants to “shed some light” on the SNB’s practices, which have amounted to creating hundreds of billions of francs to buy foreign stocks and bonds and weaken the Swiss franc.
The SNB’s foreign reserves totaled 683 billion francs in March, and include billion-dollar stakes in Apple Inc., Microsoft Corp. and Exxon Mobil Corp.
“It only invests overseas. It doesn’t invest in Switzerland,” said Mr. Rossellat, adding the SNB’s policies have inflated asset prices abroad. “By this proposition we show the Swiss citizens that their purchasing power has been diminished.”
Other central banks have some private ownership. The Bank of Italy’s capital is owned mostly by the country’s commercial banks. Central banks in Belgium, Greece and Japan are listed on exchanges. These shares were mostly flat in the last year, though Greece’s were up some.
The Federal Reserve’s board of governors is an independent federal agency. Commercial banks hold stakes in Fed district banks, but they aren’t listed shares. The European Central Bank is owned by the central banks of the European Union. The Bank of England was privately owned before being nationalized in 1946.
The SNB’s stock traded between 1,090 francs and 2,120 francs over the past year and rallied as Swiss interest rates turned negative even out to 2050 maturities, making the minuscule dividend seem generous by comparison.
“Investors treat the share of the SNB like a bond substitute,” said UBS economist Alessandro Bee.
There is a novelty aspect too, given the small pool of shares available and the Swiss public’s deep attachment to their currency. There are 100,000 SNB shares, with about 2,200 private shareholders owning 48,000 of them at the end of last year. The largest single shareholder last year was German investor Theo Siegert, according to SNB data, whose 6,720 shares topped even those of the Swiss canton of Berne.
Mr. Siegert didn’t respond to a request for comment.
Mr. Rossellat owns just one share personally and a handful through other entities. An alternate SNB board member, Dewet Moser, owns one share. Only about 50 to 100 shares change hands each day versus millions that trade daily for big Swiss banks.
“It’s a really special share. It’s nostalgic,” said Simon Roth, spokesman for Swiss bank Pictet, which holds a small number of SNB shares as custodian for its clients.
Whatever the quirkiness of Switzerland’s hybrid setup, owning shares gives the public a direct line to central-bank policy makers once a year.
“It’s our chance as citizens to democratically have discussions with the organization,” said Mr. Rossellat.

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