Basler Kantonalbank : Half-yearly Report 2022 – Abridged Version

Half-yearly Report 2022 -

Abridged Version

About us

Since its foundation in 1899, the parent company BKB has been deeply rooted in the Basel region. It positions itself for its private clients as the bank of Basel for Basel; but as a universal bank it is active for its corporate and institutional clients throughout Northwestern Switzerland. BKB is majority- owned by the Canton of Basel-Stadt and has a state guarantee that is compensated to the Canton. The owner strategy sets the strategic guidelines and requires above- average equity capitalisation and liquidity, which is why BKB is one of the safest banks in the country with an AA+ rating from S&P. Moreover, sustainability has become the linchpin in both operations and core business with a view to making a positive long-term contribution to the economy, environment and society. Fourteen per cent of the equity is listed as participation certificates on the SIX Exchange, offering an attractive investment opportunity.

With the acquisition of Bank Cler in 2000, the Group employs almost 1,500 people and is present in all major cities throughout Switzerland: with 13 branches in Basel, 13 in the rest of German-speaking Switzerland, 10 in French-speaking Switzerland and three in Ticino. Thanks to digital services, corporate and private clients are not only advised personally, but can also perform the most important banking services independently of time and place. With Zak, Bank Cler offers the first real bank on the smartphone, which is already being used by around 50,000 clients. With this and the newly designed headquarters on Aeschenplatz, which is both a bank and a restaurant, Bank Cler is positioning itself as a 'fresh' universal bank for a younger target segment.

Client assets come to around CHF 51 billion and Group BKB is one of the ten largest banks in Switzerland with total assets of CHF 54.7 billion.

2 Introduction BKB Half-yearly Report 2022 - Abridged Version

Contents

1. Fact & Figures
2. Business developement over the first half of 2022

1. Strategy 2022+ launched
2. Sustainability further embedded

1. Information for investors
2. Group BKB - Half-yearly financial statements
3. Group BKB - At a glance
4. Consolidated balance sheet
5. Consolidated income statement
6. Consolidated statement of changes in equity
7. Parent Company BKB - Half-yearly financial statements
8. Parent company BKB - At a glance
9. Balance sheet
10. Income statement
11. Statement of changes in equity

3 Introduction BKB Half-yearly Report 2022 - Abridged Version

Facts & Figures

Group figures as at 30.6.2022

56.3 %

cost/income ratio

down from 59.4 % within one year

target value by 2025: max. 55 %

1.1 %

RWA efficiency

unchanged since end of 2021 target value by 2025: min. 1.0 %

CHF 62.0 million

group net profit

+14.9 % within one year

18.1 %

total capital ratio

up from 17.0 % within one year target value by 2025:

min. 16 %

5.4 %

return on equity

up from 5.3 % since end of 2021 target value by 2025: min. 6 %

122.9 %

net stable funding ratio

slightly lower than at end of 2021

target value by 2025: min. 110 %

4 Introduction BKB Half-yearly Report 2022 - Abridged Version

Business development over the first half of 2022

Corporate success sustainably strengthened

The new strategy, which is even more consistently geared towards sustainability, is taking effect and showing results: In the first half of 2022, Basler Kantonalbank (BKB) further improved its operating performance in a challenging busi­ ness environment and significantly increased its group net profit by 14.9 %.

The new strategy, which is even more consistently geared to­ wards sustainability, is taking effect and showing results: In the first half of 2022, Basler Kantonalbank (BKB) further im­ proved its operating performance in a challenging business environment and significantly increased its group net profit by 14.9 %.

Inflation, fears of recession, war in Ukraine, interest rate turn­ around: In the first half of the year, the underlying conditions changed substantially. Nevertheless, Group BKB managed to develop along the defined strategic priorities and exceeded the business performance of the previous year. It has in­ creased its income, mainly through the expanded offering of sustainable products and services, increased its productivity and maintained its high balance sheet quality.

Seven aspects testify to the consistent implementation of Strategy 2022+:

#1: Successful growth in client business

Thanks to continuous, risk-conscious growth in client loans and securities financing as well as favourable refinancing, the interest result increased significantly by 5.8 % to CHF 194.4 million. Income from commission and service activities also developed positively (up 7.3 % to CHF 70.7 million). Firstly, this is because other commission income improved due to the economic recovery after the coronavirus pandemic. Secondly, the 360-degree support of clients with a focus on medium- and long-term goals has generated new money inflows even in turbulent stock market times. Strong interest and commis­ sion income offset the decline in trading income (by 33.2 % to CHF 28.9 million), which was expected due to the consistent implementation of the strategy. As part of Strategy 2022+, trading focuses on the strengths in securities financing, client trading and the issuing business (bonds, structured products). The bottom line is that operating income of CHF 298.6 million is again slightly above the level of the already very good previ­ ous year (CHF 297.4 million).

#2: Increased productivity and profitability

The focus on client business and the optimisation of the Group infrastructure are having an effect. Both payroll ex­ penses and general and administrative expenses fell, so that operating expenses were reduced significantly by 4.9 % to CHF 167.5 million. The fact that costs could be reduced while business volume grew at the same time is evidence of in­ creased productivity within the Group. The cost/income ratio was thus improved again by 3.1 percentage points to 56.3 %. As a result, the business performance increased by 9.9 % to CHF 117.3 million. The further optimisation of client process­ es in terms of simplicity, self-service, automation and digitali­ sation are important levers for the future. A milestone will be reached with the introduction of the new E- and M-Banking in spring 2023.

#3: Growth financed from within

As at 30 June 2022, reserves for general banking risks in the amount of CHF 48.2 million were formed. With this and the ex­ isting capital cushion, the Group is continuously increasing its strategic scope. Despite this further substantial increase in re­ serves, the group net profit increased significantly by 14.9 % to CHF 62.0 million compared to the previous year.

#4: High balance sheet quality and stability

The Group aligns its balance sheet with stability and manages growth in a risk-oriented manner. Total assets grew by CHF

1.2 billion or 2.3 % to CHF 54.7 billion. Mortgage-backed loans increased in step with the market by 1.7 % to CHF 30.3 billion. In general, attention was paid to high portfolio quality in terms of credit growth. Together with the increased profitability, this led to a further increase in the total capital ratio to 18.1 % (comparative half-year 2021: 17.0 %), with both the parent company BKB at 20.3 % and Bank Cler at 17.6 % being signifi­ cantly above the minimum requirement (12.0 %).

#5: Pioneer in sustainability for corporate clients

BKB accompanies its corporate clients into a sustainable fu­ ture with an attractive investment and financing offering on a partnership basis. The Swiss Triple Impact (STI) programme, which BKB and four other founding partners brought to the Basel region at the beginning of the year, helps SME clients define measurable sustainability goals and develop a plan of action. The first clients are currently working their way through the programme and are thus making their business model more future-proof. In addition, BKB supports its corpo­ rate clients with dedicated financing instruments: green, so­ cial and sustainability loans or sustainability-linked loans. In total, BKB clients have already raised funds totalling more than CHF 780 million. At the end of June, BKB assisted the Canton of Basel-Stadt in launching Switzerland's first social bond in the amount of CHF 110 million with the aim of pro­ moting social housing and making a contribution to improving equal opportunities in Basel.

5 Business development BKB Half-yearly Report 2022 - Abridged Version