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(Bloomberg) -- The Swiss National Bank expects to have racked up a record 54 billion-franc ($55 billion) profit in 2017, in large part because of the drop in the franc against the euro.

Earnings at the central bank led by Thomas Jordan got a boost from holdings of foreign currency, which contributed 49 billion francs. The overall result dwarfs even the SNB’s 2014 earnings of 38 billion francs. The valuation gain on gold holdings amounted to 3 billion francs, the SNB said in an initial estimate on Tuesday.

The strong result is a consequence of the franc’s 8.4 percent drop against the euro last year, the biggest annual decline since the common currency was created two decades ago. That boosted the value of the SNB’s foreign exchange reserves, which it built up as it intervened to weaken the franc. Reserves totaled some 744 billion francs at the end of December.

The large profit “eases monetary policy making with such a big balance sheet, since they’ve been able to boost their equity capital through retained earnings,” said Alessandro Bee, an economist at UBS Group AG in Zurich. “Of course the fly in the ointment is that with such a profit, more people will be clamoring for the SNB to make a bigger payout.”

Maximum Dividend

The SNB is listed on the Zurich stock exchange, with the largest proportion of shares held by public institutions, including cantonal governments and cantonal banks. There are also some 2,000 private investors, who receive a dividend but whose voting rights are extremely limited. That dividend will be 15 francs per share, the legal maximum, the SNB said on Tuesday. The payout to the federal government and the cantons will be at least 2 billion francs.

While there’s no requirement for the central bank to be profitable, past annual losses have incited criticism from politicians, and in 2013 it scrapped its government payout.

Due to the size of its balance sheet, the SNB’s earnings are subject to big swings. As Governing Board Member Andrea Maechler noted in a speech last March, the bank can’t hedge its foreign-exchange exposure because it would jeopardize its monetary policy objectives.

The final result is due to be published on March 5.

(Updates with foreign-currency reserves in third paragraph.)

--With assistance from Piotr Skolimowski and Scott Hamilton

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Paul Gordon

©2018 Bloomberg L.P.

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