Comments post Swiss National Bank change in exchange rate policy
Last Thursday the Swiss National Bank (SNB) decided to end the policy it initiated in 2011 of capping the Swiss franc at 1.20 to the Euro. Following some market speculation about the impact of the stronger Swiss Franc on our profitability, we want to remind investors of what we have announced externally in prior quarters regarding the currency sensitivities of our earnings, and update the market on our trading results in the period following the announcement.
As disclosed in our 3Q 2014 announcement last October and as published on our website, the sensitivities of our 9M14 pre-tax profit to 10% moves in the USD/CHF and EUR/CHF stood at CHF 439 million and CHF 180 million respectively. We would point out that the average USD/CHF exchange rate in 2014 was 0.92 (Source: Bloomberg) and the average EUR/CHF rate in 2014 was 1.21 (Source: Bloomberg) i.e. based on current exchange rates the USD/CHF is 5% and the EUR/CHF 20% below the averages in 2014. Our currency sensitivities have remained broadly unchanged since the end of 3Q 2014. The actual sensitivities to moves in the USD/CHF and EUR/CHF in 2015 will depend on the average USD/CHF and EUR/CHF exchange rates experienced in 2015 against the averages in 2014, as well as any offsetting management actions.
In terms of capital, our policy is to hedge the capital allocated to our non-Swiss based activities. Accordingly, this currency volatility has not materially impacted our capital ratios.
Furthermore Credit Suisse has recorded positive trading results over the period following the SNB announcement, not having suffered any material trading losses relating to the foreign exchange volatility.