Cembra Money Bank : Letter to Shareholders – H1 2022

Letter to Shareholders

Dear Shareholders

It is our pleasure to inform you about a robust business performance for Cembra

in the first six months of 2021. Our net income increased by	6% to CHF 78.7 mil-
lion, or CHF 2.68 per share, compared to the first six months	of 2020. Net reve-

nues declined by 5%, and commission and fee income declined by 3% in connection with the Covid-19 restrictions. Despite the challenging environment, the loss performance was very strong at 0.5%. As a result, return on equity came in at 14.2%, and the Tier 1 capital ratio stood at 18.8%.

In the first half of the year, we turned in an excellent result and also successfully embarked on our transformation. We grew profitably in all areas, benefiting from the rebound effect after the lifting of restrictions and also from our commercial efforts. We made significant progress in implementing our strategy and reached an important milestone with the launch of our proprietary credit card Certo!. We will continue to focus on our transformation programme aimed at boosting operational excellence and accelerating growth.

Strong business performance

The Group's total net financing receivables at 30 June 2022 amounted to CHF 6.4 billion, an increase of 4% compared with 31 December 2021. In the personal loans business, receivables increased by 2% to CHF 2.3 billion in the first six months of 2022. As a result of the lower asset base compared to the first half of last year and the continued competitive environment, interest income in the personal loans business decreased by 6% to CHF 80.7 million, with a yield of 6.8%.

Net financing receivables in auto leases and loans increased by 4% to CHF 2.9 billion in the reporting period. Interest income was stable at CHF 64.9 million, with a yield of 4.5%.

In the credit cards business, net financing receivables rose by 8% to CHF 1.1 billion. Interest income was up 6% to CHF 43.7 million, with a yield of 8.1%. Transaction volumes in the first six months increased by 18% year on year. The number of cards issued was up 4% year on year to 1,090,000 at 30 June 2022.

Swissbilling grew significantly in the buy now pay later (BNPL) business with an increase of billing volumes by 62% to CHF 191 million and fee income of CHF 6.5 million (+35%).

Cembra - Letter to Shareholders half-year 2022

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Commercial efforts and end of restrictions drive up revenues

Total net revenues increased by 6% to CHF 250.0 million. Interest income declined slightly by 1% to CHF 188.9 million as a result of the lower asset base in personal loans. Interest expense was 7% lower, coming in at CHF 12.3 million in the first half of 2022.

Commission and fee income increased by 27% to CHF 73.3 million, as Covid-19-related restrictions were lifted. Income from credit card fees increased by 42% year on year. The share of net revenues generated from commissions and fees increased to 29%, up from 25% at 30 June 2021.

Total operating expenses decreased by 2% to CHF 122.0 million. Personnel expenses were down 2% to CHF 67.1 million mainly reflecting the lower number of employees. General and administrative expenses declined by 1% to CHF 54.9 million. This resulted in a cost/income ratio of 48.8%, compared with 52.6% for the year-earlier period.

Excellent loss performance

Cembra once again recorded an excellent loss performance. Provisions for losses in the first half of 2022 significantly benefited from prudent and cautious credit risk policies applied during the pandemic, especially in the area of personal loans and auto leases and loans. Provisions for losses slightly increased by CHF 0.6 million or 4% to CHF 15.0 million, resulting in a loss rate of 0.5% for the first six months of 2022 (H1 2021: 0.5%, and 0.7% adjusted for a loan sale). The non-performing-loans (NPL) ratio amounted to 0.6% (H1 2021: 0.7%). The rate of over-30-days past due financing receivables stood at 1.6% (H1 2021: 1.8%). Cembra expects the loss rate to gradually normalise over the coming years.

Net financing receivables	Funding structure		Tier 1 capital ratio
in %	in %		in %

			25
1		4	20
17
	37		15
		36
		58	10
45			5
		3
			0
			6-2020	17.0%	6-2021	18.3%	6-2022	18.8%
Personal loans		ABS
Auto leases and loans		Senior unsecured bonds
Credit cards		AT subordinated
Other (Swissbilling)		Deposits

Cembra - Letter to Shareholders half-year 2022

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Stable funding

In the first six months of 2022, the Group's diversified funding portfolio increased by 3% to CHF 5.9 billion, with a funding mix of 56% deposits and 44% non-deposits. The weighted average duration decreased slightly to 2.3 years and the period -end funding cost amounted to 46 basis points (31 December 2021: 44 basis points).

Strong capital position

Cembra remains very well capitalised, with a strong Tier 1 capital ratio of 18.8% (31 December 2021: 18.9%). Shareholders' equity decreased by 2% to CHF 1.176 billion after Cembra paid out the dividend of CHF 113 million for the financial year 2021 in April 2022.

Strategy execution progressing well

Implementation of Cembra's key strategic initiatives - aimed at achieving operational excellence, business accelera- tion, growth and cultural transformation - were progressing well in the first six months of the year. New partnerships were signed with the retail chain SPAR and Zurich Insurance Switzerland, and the existing partnerships with Confo- rama and FNAC were strengthened. In April 2022, Cembra launched a new credit card app to strengthen its customer relationships and increase efficiency. The recent successful launch of the new credit card range Certo! was another key step in the implementation of the bank's strategy.

Further progress on sustainability confirmed

In recognition of the bank's progress in enhancing its governance, its socially responsible approach and its environmental stewardship, MSCI ESG upgraded Cembra's rating to AAA, and Sustainalytics reaffirmed Cembra's "Low ESG Risk" rating in May 2022.

Outlook

Cembra currently expects to deliver a resilient business performance in 2022, reiterating its ROE target of 13-14%. As previously announced, the credit card transition and the investments into the IT transformation will have an impact on revenues and costs. Cembra expects a continued solid loss performance for 2022 and confirms its mid-term targets.

On behalf of the Board of Directors and Management, we would like to thank our customers, shareholders and business partners for the trust they have placed in us. We would also like to express our particular gratitude to our employees, who shape the success of our Group with their expertise, dedication and engagement.

Dr Felix Weber	Holger Laubenthal
Chairman	CEO

Cembra - Letter to Shareholders half-year 2022

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Key figures

Key figures

At 31 December (in CHF millions)	H1 2022	H1 2021
Net interest income	176.7	178.0
Commission and fee income	73.3	57.9
Net revenues	250.0	235.9
Provision for losses	-15.0	-14.4
Total operating expenses	-122.0	-124.1
Net income	90.6	78.7
Total assets	7,247	7,124
Net financing receivables	6,434	6,206
Personal loans	2,338	2,303
Auto leases and loans	2,920	2,823
Credit cards	1,110	1,025
Others	66	55
Shareholders' equity	1,176	1,098
Return on equity (in %, annualised)	15.3	14.2
Net interest margin (in %, annualised)	5.5	5.6
Cost/income ratio (in %)	48.8	52.6
Tier 1 capital ratio (in %)	18.8	18.3
Employees (full-time equivalents)	916	934
Credit rating (S&P)	A-	A-
Basic earnings per share (in CHF)	3.09	2.68
Book value per share (in CHF)	39.20	36.60
Share price (in CHF)	68.20	103.70
Market capitalisation	2,046	3,111

Cembra Money Bank AG Bändliweg 20 CH-8048 Zurich [e-mail] www.cembra.ch/investors

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Cembra - Letter to Shareholders half-year 2022

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