BKS Bank : Half-year Financial Report 2023

Half-Year Financial Report 2023

Table of Contents

Table of Contents

BKS Bank at a Glance 3

Highlights of the HY1 2023 4

Preface by the Chairwoman of the Management Board 6

Group Management Report 9

Economic Environment 10

Financial Position 11

Result of Operations 13

Segment Report 16

Consolidated Own Funds 18

Risk Management 19

Outlook 20

Consolidated Financial Statements pursuant to IFRS 23

Statement of Comprehensive Income for the Period 1 January to 30 June 2023 24 Consolidated Balance Sheet for the Period ended 30 June 2023 26 Consolidated Statement of Changes in Equity 27

Consolidated Statement of Cash Flows 29

Notes to the Consolidated Financial Statements of BKS Bank 30

Management's Responsibility for the Financial Statements 49

Financial Calendar 2023 50

Forward-looking statements

This half-year financial report contains statements and forecasts that refer to the future development of the BKS Bank Group. The forecasts are our estimates based on the information at our disposal on the copy deadline 23 August 2023. Should the assumptions regarding such forward-looking statements prove incorrect or should risks materialize to an extent not anticipated, the actual results may vary from those currently expected. This half-year financial report does not constitute a recommendation to buy or sell shares of BKS Bank AG.

Disclaimer

This half-year financial report is an unaudited translation from the German into English for the convenience of readers. As auditing is not mandatory for this interim report, it has not been audited or reviewed by an auditor.

Any minimal deviations of the values in the tables and charts are due to rounding differences.

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BKS Bank at a Glance

BKS Bank at a Glance

Income Statement in €m

HY1/2022

HY1/2023 ± in %

Net interest income	69.6	120.7	73.4
Impairment charges	-13.4	-28.8	>100
Net fee and commission income	35.4	31.5	-10.9
General administrative expenses	-65.7	-80.3	22.2
Profit for the period before tax	33.2	89.6	>100
Profit for the period after tax	31.2	82.1	>100
Balance sheet in €m	31/12/2022	30/06/2023
Total assets	10,533.0	10,511.3	-0.2
Receivables from customers	7,175.3	7,243.2	0.9
Primary deposits	7,872.1	7,809.3	-0.8
• thereof savings deposits	1,258.9	1,092.0	-13.3
• thereof securitised liabilities incl. subordinated debt capital	1,048.3	1,056.2	0.7
Shareholders' equity	1,543.8	1,665.0	7.8
Customer funds under management	19,397.2	20,014.1	3.2
• thereof on custody accounts	11,525.1	12,204.8	5.9
Own funds pursuant to CRR in €m	31/12/2022	30/06/2023
Total risk exposure amount	6,213.5	6,387.8	2.8
Own funds	1,058.1	1,136.9	7.4
• thereof common equity tier 1 (CET1) capital	778.3	853.1	9.6
• thereof total tier 1 capital (CET1-AT1)	843.4	918.3	8.9
Common equity tier 1 ratio	12.5	13.4	0.9
Tier 1 capital ratio (in %)	13.6	14.4	0.8
Total capital ratio (in %)	17.0	17.8	0.8
Performance ratios	30/06/2022	30/06/2023
Return on equity after tax	5.6	9.7	4.1
Return on assets after tax	0.8	1.5	0.7
Cost/income ratio (expenses/income coefficient)	55.9	40.3	-15.6
Risk/earnings ratio (credit risk/net interest income)	19.2	23.8	4.6
Non-performing loan ratio (NPL ratio)	2.1	2.3	0.2
Leverage ratio	7.0	8.7	1.7
Liquidity coverage ratio (LCR)	185.9	197.0	11.1
Net stable funding ratio (NSFR)	117.5	122.4	4.9

Resources

31.12.2022

30/06/2023

Average number of staff	986	991
Number of branches	64	64
BKS Bank's Shares	31.12.2022	30/06/2023
Number of no-par ordinary shares (ISIN AT0000624705)	42,942,900	45,805,760
High ordinary share in €	15.9	14.4
Low ordinary share in €	13.2	13.0
Close ordinary share in €	14.0	13.1
Market capitalisation in €m	601.2	600.1

1. The accounting policy for investment property was changed in the financial year 2022. The figures for the preceding year were adjusted pursuant to IAS 8. The changes implemented are described in the Annual Report 2022 in chapter "Changes to accounting policy for investment property" starting as of page 156.

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Highlights HY1 2023

Highlights of the HY1 2023

Capital increase completed successfully

In May 2023, we completed our capital increase, placing 2,862,860 newly issued shares. The capital increase gives us the scope needed to address key strategic goals - including digitization and sustainability - more ambitiously.

Member of the VÖNIX

Sustainability Index

We are proud to be part of one of the world's first sustainability indices. BKS Bank's ordinary shares were included in the VÖNIX Sustainability Index of the Vienna Stock Exchange for a seventh time in a row.

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Highlights in HY1 2023

Sustainability Award

of the Vienna Stock Exchange

Our many years of activity and engagement for sustainability were recognized by the Vienna Stock Exchange. BKS Bank was conferred the Sustainability Award of the Vienna Stock Exchange for a third consecutive year.

EMAS recertification

BKS Bank is very pleased to have completed the EMAS recertification. The ambitious environmental management system ensures the continued improvement of environmental protection in our operations. This certification brings us one step closer to our sustainability goals.

Gold standard for sustainable buildings

The portfolio of Taxonomy-compliant properties we own is continuously expanding and we achieved a major milestone in HY1 2023. The ÖGNI certification "DGNB Gold Standard" was conferred to our project "BKS-Lebenswert". In this project, we built 26 rental apartments, some 1,600 m2

of commercial space and a BKS Bank branch in Eisenstadt.

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Preface by the Chairwoman of the Management Board

Dear Readers,

The past six months have been very demanding. The challenge was to reach responsible decisions and define a path for future growth in a setting of a faltering economy. I am pleased to say we did very well on both counts.

One milestone was the successful placement of new issues during our capital increase in May. The capital increase is of great strategic importance to our company. The fresh capital will help fund future growth, investments in the digital transformation and safeguard our independence. A principal goal is to serve our customers, employees and business partners, and remain a reliable and competent banking partner for the next one hundred years. To achieve this goal, we have embarked a several ambitious projects. Our focus today and for the future is on the key topics of digitization and sustainability

In this context, I was particularly pleased to welcome a new member to the Management Board in June: Dietmar Böckmann will be responsible for the digital transformation.

The key success factors of a bank include being able to offer customers a modern digital range of services and products, as well as stable and resilient core banking systems, and a high degree of automation for simple processes. The appointment of a member to the Management Board with specific responsibility for this area was the logical next step and shows how important it is to us.

Sustainability strategy with additional priorities

We are also very much engaged in sustainability activities. We plan to continue in our pioneering role for the Austrian banking industry. The focus will be on both the ecological and the social aspects. This summer's extreme weather events show how important climate mitigation measures are. For this reason, we have defined a clear exit scenario from transactions involving coal, oil and natural gas. We are also working on science- based climate goals to better steer our course to decarbonization. This year we have already issued two green bonds whose proceeds will be used to finance a project to generate renewable energy.

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Preface by the Chairwoman of the Management Board

For us, meeting our social responsibility to society is just as important as reducing global warming. No one should feel left behind by the changes in our society or be excluded or discriminated. We work to foster social inclusion and prosperity through our retirement and investment products and by providing funding for the construction of affordable housing.

Expansion outside of Austria

We have been operating in Serbia with a newly established leasing company since April 2023. Having successfully gained a foothold in the markets of Slovenia, Croatia and Slovakia, we believe the entry into the Serbian market was a major step and the right way to continue our gradual expansion into foreign markets.

Significant increase in earnings in HY1 Over the past months, the ECB has hiked interest rates several times in a setting of persistently high inflation. In this challenging market environment, we succeeded in closing the first half of 2023 with significant earnings growth. Net profit after tax for the period was EUR 82.1 million.

Receivables from customers have increased by 0.9% to EUR 7.2 billion since year-end. At EUR 7.8 billion, primary deposits stayed at a high level.

Recognition of engagement for sustainability

BKS Bank received the Vienna Stock Exchange's VÖNIX Sustainability Award in the category "Financials" for a third consecutive year.

This award is recognition of our many years of activity and engagement for sustainability. We believe it will take a joint effort by all companies and civil society to cope with the challenges of climate change. We are also proud of our successful EMAS recertification and our sustained membership in the VÖNIX Austrian sustainability index. EMAS is an ambitious environmental management system. Our aspiration is to continue to act as a multiplier for social responsibility.

Shortly before the copy deadline, a landmark ruling was handed down by Austria's Supreme Court (Oberster Gerichtshof) in favour of BTV in the legal dispute with UniCredit Bank Austria (UCBA). The decision ruled against all points of the legal action filed by UCBA. Immediately afterwards, UCBA withdrew an identical legal action against BKS Bank due to the lacking prospects of success.

Finally, I would like to thank our shareholders who participated in the capital increase in April 2023. In the first year after our 100th anniversary, it is very pleasing to see that our responsible business philosophy is appreciated by our shareholders.

Cordially,

Herta Stockbauer, Chairwoman of the Management Board

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8

Group Management Report

Economic Environment 10

Assets, Equity and Liabilities 11

Result of Operations 13

Segment Report 16

Consolidated Own Funds 18

Risk Management 19

Outlook 20

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Group Management Report

Economic Environment

Economy remains sluggish

The economy in the euro area expanded slightly by 0.3% in the second quarter of 2023 after stagnating in the first quarter.

However, the trends differed from country to country. While economic performance in France and Spain surprised on the upside with gains of 0.5% and 0.4%, respectively, Italian GDP contracted by -0.3%. Germany's economy is also rather weak. The former "locomotive of Europe" has been in a technical recession since the fourth quarter of 2022. The contraction in the preceding quarter has been revised upwards from -0.3% to -0.1%, while the German economy stagnated in the second quarter of 2023.

The situation in Austria is different. Austria's domestic economy contracted by -0.4% quarter on quarter. However, economic activity in the first quarter was better than initially expected. The indicators were revised upwards from -0.3% to 0.1%. Therefore, Austria is not (yet) in recession. The key economic sectors of industry and construction are increasingly weakening, and consumption of private households is also declining.

A look at the major international economies shows that the US economy is very robust. Although the US Federal Reserve took drastic measures by raising interest rates by a total of 5.25 percentage points in eleven rate hikes over the past 17 months, the US economy has yet to show any signs of fatigue. The US economy grew by an annualized 2.4% in the second quarter of 2023, following growth of 2.0% in the preceding quarter.

By contrast, China's economic output clearly lost momentum in the past quarter. Growth slowed from 2.2% to

0.8%. It seems as if the boom phase following the coronavirus pandemic is over.

Fighting inflation: central banks keep tightening interest rates

Central banks slowed the pace of interest rate hikes markedly, but the next adjustment took place in July. The ECB increased key lending rates by 0.25 percentage points. The key lending rate for the main refinancing operations is currently 4.25%. This was the ninth rate hike within a year. Another rate hike in September is not unlikely at present, as core inflation remains stubbornly high. In the US, the Fed raised the key lending rate by a further 0.25% points at the end of July. The US federal funds rate is currently within a bandwidth of 5.25% to 5.5%, thus reaching the highest level in 22 years.

Capital markets continue rally in Q2 The upwards movements on capital markets continued in the second quarter. The month of June performed particularly well. Global stock markets in euro posted gains of around 12.6% as at 30 June 2023. The performance of European stocks was slightly lower in euro at 11.8%. Austrian stocks lagged behind at around 5.3%. A significant recovery seen in US stocks. The broad S&P 500 index rose by around 16.9% in USD in the first half of the year. Nasdaq 100 stocks, which had come under heavy pressure the year before, recovered strongly gaining some 39.4%.

Bond markets recorded a positive development in the first half of 2023, even though only minor gains were seen in the second quarter.

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