Basler Kantonalbank : Half-yearly Report 2021 – Abridged Version

Half-yearly Report 2021 - Abridged Version

Contents

02 In brief - Key figures for the Group BKB

03 Business development over the first half of 2021

1. Group BKB - Half-yearly financial statements
2. Group BKB - At a glance
3. Group BKB - Balance sheet as at 30.6.2021
4. Group BKB - Income statement for the first half of 2021
5. Group BKB - Statement of changes in equity

1. Parent Company BKB - Half-yearly financial statements
2. Parent Company BKB - At a glance
3. Parent Company BKB - Balance sheet as at 30.6.2021
4. Parent Company BKB - Income statement for the first half of 2021
5. Parent Company BKB - Statement of changes in equity

Contents

1 BKB Half-yearly Report 2021 - Abridged Version

In brief - Key figures for the Group BKB

+6.1%

+39.3%

Group net profit

Strategic transformation and customer focus bear fruit: Very pleasing half-yearly results (CHF

54.0 million) for Group BKB (first half of 2020: CHF 50.9 million).

Volume of sustainable investment solutions

In the investment business, the sustainability ap­ proach has further established itself as the stan­ dard. Thanks to the attractive performance over the first half of the year 2021, a further CHF 425.7 million has flowed into sustainable investments throughout the Group.

+5.1%+2.0%

Commission and services business

Pleasing increase from CHF 62.7 million (first half of 2020) to CHF 65.9 million.

Volume of mortgages

Despite rigorous risk management, it was possi­ ble to achieve slight growth to CHF 30.0 billion.

17.0%6.5%

Total capital ratio

The capital ratio remains clearly above the mini­ mum requirement (12.0%).

Leverage ratio

Group BKB has an above-average capital base.

In brief - Key figures for the Group BKB

2 BKB Half-yearly Report 2021 - Abridged Version

Business development over the first half of 2021

Very pleasing half-yearly results for Group BKB

Group BKB looks back on a successful first half of 2021. The Group continued to make a contribution to mitigating the economic consequences of the Covid pandemic and simultaneously benefited from the economic recovery. In addition, the Group was able to drive forward its strategic transformation and to achieve growth and boost efficiency in all of its earnings pillars, while maintaining a high level of stability. Increasing income and decreasing costs have significantly im­ proved the Group's profitability.

In the first half of 2021, the business performance stood at CHF 106.8 million, up 69% on the first six months of the previous year, which had been negatively impacted by the Covid pandemic (CHF 63.2 million), and also clearly higher than in the first six months of 2019 (CHF 74.7 million). With these developments, Group BKB underscores the fact that its customer-oriented growth strategy is taking effect and the efficiency of its service delivery is being increased. With a clear focus on sustainability, the Group is, furthermore, future-proofing its business model.

Commitment to mitigating the economic, social and cultural consequences of the pandemic

Group BKB is providing close support for its clients throughout the Covid crisis. In the first half of 2021, the Group once again contributed to mitigating the economic impact of the pandemic in the form of bridging loans and giving new impetus to cultural and social life with solidarity campaigns. In addition, parent company BKB is supporting Basel's gastronomy sector with more than CHF 750,000 distributed in the form of 7,665 gift cards. And with the announced "Kultur, fertig, los!" campaign, BKB is help­ ing out 20 Basel-based cultural institutions with a total of CHF 100,000. Basil Heeb, Chair of BKB's Management Board, is confi­ dent overall: "As shown by the survey we took among the region's SMEs in May, consumption and business are recovering more quickly than we even dared hope a year ago. This means that the financial situation has already stabilised once more for many businesses. Nevertheless, some start-ups and SMEs are still reliant on bridging loans, as the long lean period has left deep scars, especially for small business and young companies."

Successful development of the Group in terms of growth, profitability and stability

In line with the strategy, the Group saw targeted growth with existing clients, as well as in new business areas. Total assets in­ creased by 2.2% to CHF 55.7 billion over the first half of the year. The expansion of the securities financing business contributed to this development, with growth of around CHF 3.2 billion on the assets side. At the same time, the stability of the trading busi­ ness was reinforced, which is reflected in a correspondingly smaller volume (down CHF 2.0 billion to CHF 0.8 billion). In the mortgage business, we were able to increase the volume by 2.0% or CHF 0.6 billion to CHF 30.0 billion.

Broad-based earnings growth

Group BKB has grown across all of its earnings pillars: Gross interest income increased by 3.5% to CHF 183.0 million. Due to the economic recovery, it was not necessary (in contrast to the previous year) to recognise any value adjustments for loans, so that net interest income rose 9.0% to CHF 183.8 million. The commission and services business saw an earnings rise of 5.1% to CHF

65.9 million. The investment business made a particularly strong contribution to this development. Buoyed by the large inflow in­ to investment solutions and asset management mandates, custody account volume increased by CHF 2.2 billion or 11.1% to CHF 22.4 billion over the first six months. At CHF 43.2 million, the trading profit made an above-average contribution to the Group's revenues. At CHF 297.4 million in the first six months, the operating income was not only up 16.9% on the previous-year value of CHF 254.4 million, which was dampened by the pandemic, but at its highest level since 2017.

Synergies and increased efficiency bring about higher profitability

Consistent bundling of expertise within the Group has continued to take effect. In conjunction with a high level of cost discipline and progress made with digitalisation and automation, general and administrative expenses have been lowered by 8.1% to CHF

69.2 million since the start of the year. Despite a higher level of compensation for the State guarantee to the parent company, operating expenses are down 1.1% on the previous year at CHF 5.1 million. This increase in efficiency is reflected in a fall in the cost-income ratio to 59.4% (previous year: 67.8%) and an increase in the business performance to CHF 106.8 million.

No change in the high level of security and stability

Thanks to the successful first half of the year, it was possible to allocate a total of CHF 50.3 million to the reserves for general bank risks for the two banks as at 30.6.2021. This means that the total capital ratio stands at 18.8% for the parent company BKB and at 17.7% for Bank Cler and is, thus, significantly higher than the regulatory minimum requirement of 12.0%. This underlines the Group's high level of stability and security. Net profit for the half-year stands at CHF 54.0 million, up 6.1% over the previous year (CHF 50.9 million).

Business development over the first half of 2021

3 BKB Half-yearly Report 2021 - Abridged Version

Sustainable investments break the CHF 1.5 billion mark

In the investment business, the sustainability approach has further established itself as the standard. Thanks to the attractive performance, among other factors, a further CHF 426 million has flowed into sustainable investments over the first half of 2021. This corresponds to growth of 39.3%, making a total more than CHF 1.5 billion. BKB is taking numerous measures to boost its credibility as a Group geared towards sustainability. For example, parent company BKB is one of the first banks in Switzerland to join the "Partnership for Carbon Accounting Financials" (PCAF). With this step, the bank commits to improving the transparency of its climate risks and to disclosing the CO2 emissions of its credit transactions in accordance with a standardised approach. In addition, the parent company will already achieve the operating net zero objective before the end of this year thanks to a forest climate protection project in the region. For this reason, BKB has received an award for its commitment in the field of sustain­ ability from an independent body. According to the balance sheet and the Financial Times, the parent company BKB is, in the meantime, one of the most exemplary banks in Switzerland with regard to operating sustainability.

Outlook: Consistent continuation of transformation

The market environment remains challenging and the economic and financial consequences of the Covid crisis are still virtually impossible to assess. For the coming months, Basler Kantonalbank and Bank Cler have one central aim: no matter how things develop, they will remain right at their clients' side and closely support them by providing liquidity, creating the best possible fi­ nancial security or pointing out attractive investment options. Alongside this, the Group will continue its strategy already in place of focusing on earnings growth and increasing efficiency, not only with the necessary consistency, but also with an eye to the risks involved.

The year 2021 sees the end of the current strategy period, in which the Group has successfully undergone its own transforma­ tion that is today providing it with a robust business model and stable earnings pillars. Great progress has been made with the work on Strategy 2022+. Information on the Group's new strategy period will be provided in the third quarter of 2021.

Business development over the first half of 2021

4 BKB Half-yearly Report 2021 - Abridged Version