ZURICH (Reuters) - The Swiss National Bank (SNB) will sell back to UBS
The sale of the so-called Stabilisation Fund brings to an end a five-year period during which the SNB has turned the assets into profitable investments and marks a shift in the central bank's focus back to managing its gold and foreign currencies.
The central bank posted a first-half consolidated loss of 7.3 billion Swiss francs ($7.8 billion), after sharp falls in gold prices knocked 13.2 billion francs off the value of the SNB's unchanged holdings of the precious metal.
Analysts have slashed their 2013 gold price forecasts and expect the yellow metal to remain weak in 2014, a Reuters poll showed.
But the SNB registered a profit on its foreign currency holdings amounting to 5.8 billion Swiss francs ($6.2 billion) in the first six months of the year, as the safe-haven unit weakened against both the dollar and euro.
The Stabilisation Fund contributed 316 million francs ($339.4 million) to the central bank's consolidated result.
The SNB took on some $39 billion in UBS assets in the fund as part of a government bailout of the bank in 2008. Under the terms of the rescue deal, UBS had the right to repurchase the fund after the SNB's loan to finance the fund has been paid in full.
UBS will have to pay the SNB $1 billion plus half of the fund's net asset value in excess of this amount. The fund's equity amounted to $5.5 billion at the end of 2012.
A favorable exchange rate, of both the dollar and euro against the franc, helped the central bank reap earnings of 2.3 billion francs in the first half, while movements in bond and equity prices were mixed, the SNB said.
The dollar has appreciated 3.4 percent and the euro 1.9 percent against the franc since the start of the year, offsetting losses against the yen and sterling, the bank said.
The SNB set a cap of 1.20 francs to the euro nearly two years ago to help stave off recession and the threat of deflation. To defend the cap, the SNB injected hundreds of billions of francs into markets in 2011 and 2012.
Investors watch the SNB's results closely for any changes to its vast foreign-currency reserves, which have risen 6 billion francs to 438.2 billion so far this year.
The bank had made no change to its currency allocation by the end of June, keeping euro-denominated assets at 48 percent of its portfolio and dollars at 27 percent, the same level reported at the end of the first quarter.
The International Monetary Fund said in May the SNB should use any weakness in the franc to unwind its large foreign currency reserves.
(Editing by David Holmes)
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