Banque Cantonale Vaudoise

Okay. Good morning, everybody. Pascal Tiner, CEO of VCV speaking. Let me jump directly on page four to comment what I consider are the key messages of our H1 results. Basically, VCV is doing quite well with the continued growth in all business sectors. Revenue are slightly up despite the negative or the low interest rate environment due to our business model, which is quite diversified, the most diversified type of revenues of all continental banks due to private banking and asset management. And then in this uncertainty world and also in this environment of, let's say, very low interest rates, we try to master and to control very tightly our cost and you see that the overall cost, meaning the patent cost or patent expense as well as amortization, are up only 1%. Basically, this results in a net profit of 5% compared to last year, 225 million Swiss francs.

Then I go directly on page six.

You see the different... Business, volume, mortgage, order loans, deposits, so everything is up. In terms of deposits, you have to add the two elements, side deposit and other kind of deposits. In aggregate, this is plus 3%. Okay. In terms of rating, being financial or extra financial, ESG rating, so financial rating, Moody's and S&P are confirmed there. their rating, which is okay. We didn't expect anything else, but I think it's good to say that. And in terms of ESG rating, you see that the notation, the ratings of BCV are quite good. Very often on the second highest rating for the different agencies and almost everywhere the best continental bank or among the best in terms of extra energy rating. This is basically the result of a long-term focus on government issue durability. This hasn't started in the last three, four years, but we started before 2010. Basically, it's written in the continental law about BCV that we should care about durability on such issues. Now, back to business. Retail banking, you see that the volumes are up, which is a normal growth. We have a target of roughly 4% for the mortgage business on a yearly basis. 2% we are on track. And customer deposit, this is good. We were surprised by this number. I was expecting a bit less, but this is good. And in terms of revenue-making profit, this is due to the international pricing model. You know, the time being, the The savings, I mean, the zero interest rates, basically, is already favorable for the recent banking. Basically, the profit goes to the corporate center. Okay. Corporate banking, here we have always two different shapes, different segments. You have the small-middle enterprise. Focus is Canton Vaud. 2% loan up and they put stable. The point I would like to make here is the COVID-19 bridge loans. I hope you're all familiar with what it was. It was a facility offered by the Swiss banking system of banks to cooperate in Switzerland where the banks would provide the liquidity but the risk would be taken by the Swiss Confederation. So this started during the COVID crisis and a couple of years later, what can we say? We can say that 93% are paid back, 83% by the customer, and 8% by the guarantee cooperative, which is basically the extension of the Swiss Confederation. Now, why am I mentioning that? Because if you assume that the rest, the 7% between 1993 and 100% would also be completely lost, not for BCV, for banks, but for the Swiss corporation, that would add up to 8 plus 7, 15%. When the program was developed a couple of years ago, we assumed 20 to 25% loss that means basically that the Swiss economy and the Vaud I think those numbers are the number for Vaud but they should be very similar in other countries the Swiss economy is doing quite well has been doing well in the last 5 to 6 years because all those companies were able to pay back their loan 85% at least probably more I don't expect that the 93% to 100% or the 7% the rest 7% would all be We lost probably 5% out of 7, but not more than that. So that shows that the economy is doing not too badly. Real estate is up. Large corporates, this is always up and down, depending on pricing and depending also on the window dressing at the end of June. Trade finance, maybe one comment here. You know the geopolitical issues. and here we still we are still very cautious presence in this area even more after the geopolitical troubles in the Middle East so we don't expect to grow this business in the next two to three years unless suddenly the US Iran war is solved which I don't believe and the same for the war between Russia and Ukraine, which also don't believe that it will be solved in the next, let's say, one to two years. And in terms of credit risk, again, this is the same story as for the COVID bridge loan. The economy is quite resilient. We are very limited number of new provision of new credit risk for the SME business in or the corporate business in the Swiss overall. Wealth management, again, those are aggregate figures. Here you have the Pratt Banking of the model company. You have also the institutional asset management business of the model company. You have Piguet-Gallon, which is our small subsidiaries focused on Pratt Banking, and also Gérifon, which is a kind of fund administration company. So those numbers are already all up, but we should give more detail that we don't want to give to be able to assess exactly what's going on at each level. Anyway, trading slightly up, I mean, 35, 36, I mean, this is more or less the same. Again, I repeat, this is a client-induced trading, customer-induced trading, There is no prop trading here. This is mostly Forex. And also, there is strong extension in the structured product volume. This is clear that our rating, S&P and Moody's rating, helped quite a lot in terms of being able to sell structured products to customers, being retail customers or private-ranking customers or external asset managers or other small banks. Okay, first of all, in a way, the business part. And over to Thomas for the final shot present.

Okay, hello everybody. Let me be very short. Well, on page 13, you see that basically the total income of 14 million allowed operating costs to go up 12 because of careful cost management from cost management to come back to that point. and nothing particular to signal with net profit up plus 10, 5%. On page 14, different sources of income which Pascal already described quite well and we only had reverses on loan impairments as we had in S125. In page 15, again, the full transparency to understand net interest income where you see that the the economic net interest income is 350 million plus 2 million and the balance sheet management is up 1 to 10 million which is basically the arbitrage which you know and we also know that this net income from BSM creates charges on the accounting interest income and generates income on the trading line. So taking it this correct way, the income which is then really can be allocated to a trading activity without a BSM is up 1 million to 55 million from 54. As mentioned, operating expenses in the broader sense, meaning including depreciation, amortization, is, we could say, almost stable. Personal costs evolve with salary increases. Other operating expenses are slightly up with operating costs of infrastructure and software licensing, software IT maintenance expenses. And as explained last year to you, we see now the amortization going slightly down. nothing to settle on the headcount which is stable at the mother company and the subsidiaries total assets while the mortgage loans and other loans have been described by Pascal you see that we continue to invest into financial investments with the HQLA as liquidity reserve on page 19 liabilities The customer deposits are up 1.1 billion. Actually, it's important to note that this is a net increase. There is one, one big actor which actually has been drawing a lot of deposits. So it's even more pleasant to see that net interest income is, that is interest, net customer deposits are up 1.1 billion. um well we the final thing over be it over the Swiss Fund or our own bonds and we work really well um so we increase here by 0.7 million um it says 0.7 billion 700 million and uh well you know the um accounting game of first um first half year which with the equity only reflecting well half-year resides in full-year dividend payments. Well, we see on the management, so we are at 142 billion, which two-thirds of the increase is market performance, so we are quite happy to see that at the end of the year, because remember, in the middle of March, April, this was not sure, but there was a good effort and good resides in net new money in different areas from individuals, SMEs, institutions, so we saw so all overall good market development, good work at the front level. Well, the capital ratios, they are detailed on page 21, and as already mentioned, we had strong increases in mortgages and so obviously this costs risk-weighed assets and so we had a slight decrease on the CET1 ratio. Nothing particular on the leverage ratio. LCRs on the page 22 and NSCFR on the page 23 continue to evolve at a reasonable and comfortable level. So this is safe. That's all I want to say. Looking forward to your questions.

Okay, let me finish this presentation by going on page, looking for the number on page 25. Basically, how do you see Bikinobi going forward? We're still quite, let's say, not optimistic, but would be excited too much but we don't expect any recession or growth below 1% maybe very close to 1% this year and probably slightly better next year so basically the Swiss economies are resilient they've proven in the past for the last 20 years that they went through all those crises without too much damage now it's clear everything depends a bit on the on the U.S. trade policy. We don't know exactly where we are. We are at 39. It went down to 15. So I'm a bit lost here. I cannot really follow exactly what's going on. I think there's still some negotiation going on. And, of course, depending on the geopolitical situation, the Swiss francs might increase. And this is not very good for exporters, of course. And one of the main business is real estate. So the mortgage business, basically, it carries on like that for a while. It is the same story as the year previous, or two years ago, three years ago. Basically, we have an ongoing growth of population, driven mostly by immigration, which means something like between 1% and 1.5% increase, and we cannot build enough flats or houses and basically the result is the vacancy rate going down. You see the number 087 and we expect this dynamic to carry on for the next two to three years because I don't expect anything different in terms of immigration given the employment rate in Switzerland and given the situation of our main neighbor. Okay, that's it, and we are ready to answer your questions. Thank you.

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Yes, good afternoon. Thank you very much for the event and for taking my questions. I have two, please. The first one is on the wealth management deposits, which showed very good momentum, up about 10%. Is there anything particular to highlight? Is there anything driving this? Have you offered particularly good rates? Or is it coming with net new money inflows? Or is it a change in investment behavior? Are clients moving into more cash and less securities? I would be grateful if I could add a bit of color on these wealth management deposit flows. and also the risk-weighted assets. They are now up about 5%, almost 5% year-on-year compared to mid-2025. Is that something that is reasonable to expect to continue, or is there anything that would make you think that maybe risk-weighted asset growth will be slower than this 5% in the last 12 months? Thank you.

Okay, also in the first question, wealth management, I mean there are different elements. I think one element, maybe one of the main drivers is basically the growth in the asset management business. You know that there is one competitor which is Credit Suisse. So pension funds in Switzerland, especially in the French part of Switzerland, used to have three to four banks being Credit Suisse, UBS, Bicte, Oromba and BCV and basically the UBS and Credit Suisse are together now so that means that those special funds tried to diversify their banks and we were able to capture part of that and this is an ongoing process because it's not like private clients that after the merger with Credit Suisse or the Credit Suisse UBS would decide very quickly to reallocate their wealth or their funds. In pension funds, this is different. It takes time. You have board members that need to take care of the whole thing. So this is going on. In terms of client land, this is done. We were able to capture some new customers some new funds from this merger two years ago, but that's done today. But for the pension fund, this is still ongoing, and we expect for the future to take advantage of this merger a bit more. That's for the wealth management.

Okay, Stéphane, with regard to your risk-weighted assets question, I mean, there are two elements which have been driving risk-weighted assets if you take a 12-month period. One being, of course, the continuous growth in particular mortgages. And secondly, we have an indirect cost of financing mortgages is that the , right? Basically, the last decade, every five years, needs to increase its capital. and this happened in the second half of 25 and created additional negative impact of CET1 of about 0.2%. So, which means basically that the whisper as it grows over the last 12 months period is above of what you should expect with regard to the mortgage growth over the years to come. Does that answer your question?

Thank you, that's very helpful. Thank you very much.

Okay.

Thank you. We have a question from the telephone line from Andreas Venditti from Vontobel. Your line is now unmuted. Please go ahead.

Yes, thank you very much for taking my questions. Maybe firstly on the cost side, the insourcing of the IT we had some impact you know on the cost on the depreciation line and on the GNA is that process now over so is this what we saw in the first half now a normal run rate or shall we still expect some impact from this movement then maybe on in general in you know the various businesses in the Canton of Vaud you mentioned one impact on the positive growth from this UBS crisis situation maybe you could comment a bit on the behavior of your competitor what you see in the market and what's going on there in terms of competition and maybe you mentioned yourself you should give a bit more details on the wealth management segment because it's so diverse. Maybe you could just highlight a few points there. Thank you.

Okay. So IT. No, I think the bulk of this integration of our IT activities, this is done. Don't expect much more here. This is done. Your second question was the competitive situation. You know, it's always a secret to talk about the amount of competitors. But you see, I mean, the situation has changed for every canton, if it's another. You had two large banks, the cantonal banks, and half Asian. Today, there is one competitor less. And the behavior and the competitive situation depends not on UBS and... For the time being, they're quite aggressive in the markets. They want to rebuild market share, which I could, in a way, understand. So it's tough, especially in the mortgage business. In the wealth management business, there are a bit more competitors, like we say, Lombard in Lausanne. But maybe for us, the main competitor is UBS. And they are stronger than before, since they are a bit bigger. Okay, I cannot comment any longer. I mean, we try to, I mean, we try, we keep our market share. We want to grow with the market in the credit business, in the mortgage business. You see, in the mortgage business, we have more than 30% market share, so it's quite difficult to get much more. In the retail business, probably we are between 45% to 50% market share, so also it's difficult to grow faster than the markets. And in the SME business, in the credit SME business, there is no official number, but we have some estimation, internal estimation, showing that we are within 40% to 50% market share. So basically, again, it's difficult to grow much faster than the market. Okay, and the last question was giving more information. No, look, we don't want to give more because it would be very, very complex. What I can tell you is that all entities, I mean, Piguet-Gallon, the model company, Jerry Fondé, all doing quite well. Where we are a bit more this year than, let's say, last year is basically this institutional asset management. where we could gain some new money of pension funds that diversify their portfolio. They split their assets among three to four banks, and here we could take advantage of the merger UBS . Thank you.

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Good afternoon. I have a question regarding, again, the topic of net new money and deposits. So if we exclude the increase in deposits and the cash from the net new money. Is it a good normal growth rate for the core asset management business or how do you see the move there going forward?

Oh, you're right. It's a normal growth. Nothing special.

So, actually, the quite good net new money was mainly driven by the effects that you mentioned before on the wealth management extra deposits.

Yeah, the bulk is that. I mean, there are some other small things. The main part is what I mentioned, exactly.

Perfect. Many thanks.

Thank you. Thank you. At this time, we currently have no further questions, so I'll hand it back to the management team for any further remarks.

I'd like to thank you all very much for attending this conference and Q&A session. We'll see you probably in February next year. Bye-bye. Thank you.

Bye-bye.

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