Ladies and gentlemen, welcome to the Banque Cantonale Vaudoise 2025 Half-Year Results Conference Call and live webcast. I am Sandra, the call's operator. I would like to remind you that all participants have been listened on remote and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing via the relevant field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Pascal Kiener, CEO. Please go ahead, sir. Thank you very much. Good afternoon, everybody. Welcome to our H1 Results Conference. Let me go directly on page four with the three key messages, which I believe are the main points of this first half 2025. We have a growth in all activities in all client segments, showing that the Vaud environment or the Swiss economy is still doing quite well. Stable revenue, I think this is the main point showing once again the good mix of revenues at BCV. We are the Cantonal Bank with the most diversified revenue stream coming from interest revenue, commission, and trading revenues. The third point is basically due to this good diversification of our revenues and a good grip on cost, we could achieve a CHF 250 million net profit, which is slightly less than last year, 3% less. On the other hand, you remember 2023 and 2024 were two record years. This is the third record of BCV story at a semester. Nevertheless, I think a very good result given the current interest rate environment. Page five, I'm not going to mention. Page six, you see the different main line of business. Mortgage up, commercial credit also 7%, deposits up, assets under management also being the market performance as well as some net new money. The minus CHF 185 million in new money, this is basically one large corporate which decided to withdraw some money temporarily for treasury purposes. This is not a big issue at all. Page seven, I'm not going to comment. Maybe one point. We still have a very good rating, financial rating, as you know, as well as ESG rating. You can see the number from yourself. Don't have any specific comment on this slide. Now let's go into different business lines. Retail banking is doing quite well, as usual, with mortgage loan up. You saw for the overall bank is 2%, but for the retail banking part, it's 3%, which is good. That would mean something like 6% on an annual basis. I think, as you know, there are mergers between Credit Suisse and UBS, and this is also a consequence of that. Some customers are coming to us due to this merger. Customer deposit the same, so this is also very good. The revenue and the operating profits, I mean, it's going up, but here you have the effects of some transfer pricing. If you want some more information, you can ask Thomas later in the Q&A session to understand exactly here the dynamics. Corporate banking. Again, here I have to comment the different business line within this unit. SME slightly up, but basically quite stable. The COVID-19 British loans, 85% or a bit more are paid off. It means that at least for the first semester, the SME in Vaud Canton were doing quite well. There were also cash fish since the deposit went up 1%. Big results estate firm, very stable. Nothing to comment here. Large corporate, there is always a kind of a seasonal volatility, so nothing special also to comment on this side. Trade finance, we are slightly up, but at a moderate level. You remember that we decided some years ago to decrease our volume, our exposure due to the geopolitical situation. We had to withdraw from Ukraine and Russian business, which were quite a good part of the trade finance. We still operate at a very moderate level, but we are slightly up during this semester compared to last year. The credit risks are still low. Now we don't know exactly what's going on. Maybe we can talk about that later with the current U.S. tariff that went in force on 1st of August. For the time being, we don't see anything. I don't expect any trouble in H2 2025 since it is new. 2026 may be a more question mark. We don't exactly know. The negotiations are still going on. It's very difficult to assess seriously what it means. You should also not dramatically tell us the situation. We're talking about roughly, on average, 20% of the company who exports to the U.S. This is not a big big number, which means that there might be some difficulty, but that will be very, very limited on certain industries, on certain corporates. I'm not worried for the economy as a whole due to this bad situation. Wealth management, the markets were quite positive in the first half. You see that in the number here. Nothing especially to comment here. Trading, due to this trend and some other issue, the volatility was quite high in the markets, especially in the Forex markets. Of course, we could take advantage of that. The second good reason for the increase is basically the structured product business, also due to volatility in the market. We were able to define some products for specific customers, and you see here the impact. Quite a good year or good first semester for trading units. Over to Thomas for the financial part. Okay. Hello, everybody. I'll be very brief on the first chart, 14. The key point, you know, is to see total income and see operating net profit down by 3%. I just give more insight on what might surprise you on stable taxes. As a matter of fact, in 2024, we had some other income, which was on a sale of participation in a parking, which had no taxes on that line. Just to make sure that we ensure you that we may still make our algebra correctly. On page 15, you see these three sources of income. We have the interest income, which is down 8%. I always like to look on the historic of the S&P interest rates. I mean, it's just amazing to remember that the first half, 2024, S&P went down from 175 to 175 basis points. This is really now far away. We went down from 50 to 0 basis points over the first half. You can see that the environment has dramatically changed. If you just multiply the liquidity holding S&P and the short leg, you have already a strong interest income effect. That's what's going on. Even though we do a good job on volumes with regard to mortgage volumes, which have evolved over the whole period from S1 24 to S1 25, nevertheless, it's an 8 down by 22 million. Pascal mentioned that obviously the environment was favorable for commission on wealth management, be it on valuations or on transactions, and trading outcome as well. I did see a little game for you with regard to what we aren't really in the interest income business. From an economic point of view, being a net income before balance sheet management plus the balance sheet management. I can answer to your questions. You see that this still is part of the game that we do this arbitrage to have interest in supplementary interest income. On page 16, the key point of that page is on the bottom of the page with loan impairment charges, which are basically negative. I mean, they are reversals. That's why they are positive. It makes a point, right? I mean, our economic environment is positive. We might have a marginal increase in the SME default rates. I'm talking about marginal. At the same time, we have companies which were in impairment and which are back to the normal loans because they took the U-turn. It's a positive development and positive market so far. On page 17, other operating expenses. I mean, to just repeat one more time, we still had in the first half of 2024, for the first three months, the setup where IT hosting was with Kyndryl ex-IBM. Now, the first half of 2025, they fully integrated. That explains why we have the swap or the switch from increased protocols and lower other operating expenses as we don't pay any fees anymore for an IT provider with that regard. There are also, with that regard, we had a slight increase or half year against half year in depreciation, which is the peak. That's the point I want to make. On page 18, headcounts evolved quite stably. With assets, you can see that the loans and mortgage loans evolved positively. Pascal hinted it out. We continue to build up our financial investments, which are only HQLA for HCR. Instead of having the money with BNS, we have here our AA, AAA bond portfolio. With regard to liabilities, you see the steady inflow in customer deposits. As someone of you has pointed out, they have increased in quality. We manage our NSFR, and we manage our long-term financing. We continue to issue BCV senior bonds. We've continued finance over the Funds Print Central, and our needs were covered. Compared to a market which was more in transition with regard to funding spreads, the market has stabilized, and the Funds Print Central does record issues in size. Assets under management, obviously, we had positive stake for market performance of CHF 1.5 billion, and we had net new money in all business areas. Nothing special here. On the capital ratios, obviously, here this is a beautiful impact, which we pre-announced basically. We prepared you that you would see a 1% increase. You see how prudent is our communication, right? It's a 1.4% increase due to Basel II. I remind you that we don't, we're not hit by input floors or output floors, given the prudent parameterization of our models. The IRB scalar factor, which so far kind of provided prudence, caution was taken out. We are in the lucky middle. HCR is behaving nicely. NSFR as well, which in here precisely, as you see that we structurally, by purpose, seek to increase the lengths of our borrowing. You can see the effect here. Also, with regard basically, I forgot to mention to liabilities that we reduced a borrowing from banks, as obviously you have seen. Thank you very much. Good. Going forward, let's talk two seconds about the economy. First point, I think if you look at the Swiss economy, the fundamentals are very good, are still very strong. The very low payment rates and inflation under control. Basically, we have a steady population growth and an inflow coming from other countries. I'm quite very comfortable with that. Also, those Swiss and Vaud economies have proven their resilience during past crises, being COVID-19, the strong Swiss franc, the 2008 financial crisis, euro crisis. Now, having said that, it's clear that the announcement of those U.S. tariffs at the level of 39%, in addition to a decrease in the dollar of 10%, is going to be quite tough for the corporate exporting goods towards the U.S. Now, it's too early to be very, very clear about that. We understand the trend. It's clear that growth will be affected. It's also clear that those industries that are of concern, basically, there are going to be some difficulties, probably some companies going bust, why not, and some unemployment. My point is that it is quite limited. There is still a negotiation going on for the whole, but also especially for the pharmaceutical industry. It's quite difficult to assess. Now, having said that, I'm quite convinced that there will be some problems if the tariff remains like that, but those will be marginal to certain sectors, certain companies. I don't expect a recession in Switzerland due to that. I mean, there might be other effects in the world economy. If we talk about this aspect of U.S. tariff, probably this is going to decrease growth by 0.3, 0.4%. This is why you see those numbers: 2025, 2026, estimate. Those are my numbers. I'm not the official number you can get from different economic departments in Switzerland. We see, I'm quite confident the economy is quite resilient. We are assessing that, but as I said, it's too early because they were introduced on August 1. We are talking to those companies where we believe the situation might be more difficult. For the time being, I have no, no alert, no bad sign. We'll see. You see, all those companies are small SMEs. They have a way to go around. They will try at least. Since it is only, let's say, 15 to 20% of their exports volume, they might also go to other markets. We'll see. I'm quite confident that it will not affect BCV in a very significant way. Real estate is still doing well. This is a key business for us. As you know, pricing is still going slightly up. Basically, with the demographics going up and the interest rates going down, it's clear that the market will continue to be quite dynamic in terms of volume as well as price. You see also the vacancy rates going down for the fourth year consecutively. Okay, that's it for me. I hand over to the Q&A session. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume of the webcast while asking a question. Webcast viewers may submit their questions in writing by the relative field. Anyone who has a question may press star and one at this time. Our first question comes from Stefan Stallmann from Autonomous Research. Please go ahead. Good afternoon, gentlemen. Thank you very much for hosting the presentation. I would like to start with a couple of questions on the topic du jour. In particular, the tariff issue and maybe the dollar exchange rate. You have about CHF 6 billion of SME exposure. I guess the tariff trouble basically started in April. You've probably done some preliminary screening, and your comments kind of hinted at that, identifying the counterparties that may be affected. Can you give us a rough sense of how much of this SME portfolio could be in an elevated risk category with respect to these tariff developments and maybe also with respect to the strengthening of the Swiss franc against the dollar? Related to this, could you maybe remind me how the potential is for you to book precautionary reserves and provisions under Swiss GAAP on performing loans, similar to the stage one and stage two provisions under IFRS? The second question relates to the dollar. Could you maybe give us a rough indication how much of your loans and deposits are actually dollar denominated? That would be great. Thank you. Okay. Let's start with the first part. Yes, of course, we started a bit earlier. During this first assessment, we were talking about 10% to 15% tariffs. Basically, this was, I would say, not peanuts, but it was very low, especially knowing the fact that those companies, I mean, you see, Switzerland, for the last 40 years, has seen the same story. We have high salary costs, high labor costs, and we have a very strong Swiss franc. The dollar or euro went down year after year compared to the Swiss franc. That means those companies, to survive, had to focus on high-margin products, very niche products, highly technical, highly sophisticated. Otherwise, they could not get the price and survive. Given 10%, 15% tariff, that was, in a way, no issue. 39% is a bit more. The story is a bit more complicated. I cannot give you more than that today because it's so different from companies to companies. Some of them have already decided, "We stop exporting in the U.S. We will turn over to other markets." Okay, fine. Others are trying to find a way to export in a different way. It's very difficult. I could even go further saying that for the company themselves, for the corporate, this is not clear exactly what the future will be. Can you imagine for a bank trying to consolidate all those informations? It's quite difficult. We're not talking big numbers. I do not expect, especially in H2, this year, to have any relevant impact. 2026, maybe, but it's almost impossible to answer quantitatively. I would say there's something wrong. This is why. I'm confident. I don't see any major issue. Maybe we might have more risk costs than usual. That's possible. It will not affect, let's say, our results in a tremendous way. I don't see that. We are probably more risky every year. You do the trade finance business, which is more risky, where you have no provision for five years, and suddenly, you have a case. This is why it's difficult to assess. The corporate board is not that big. It's mostly mortgage. You are also to know that we also have some mortgage with those SMEs, on their properties, etc. I'm not really worried about that. I don't want to be overoptimistic, but for the time being, I cannot see a huge problem or even an average problem for this issue. Let's put it like that. Now, given your second question on provisioning, what we do, I mean, I give the word to Thomas, you know that better than myself, but we cannot say now we expect that we have a problem maybe in six months and we put provision. We do that with the expected loss. I give the word to Thomas. Yeah, I said that. Actually, that works through over the loss-closed class, right, expected loss, and so forth, the risk-grade assets, right, which is based on PD and LGDs. Obviously, if you see that there's more tension on a company, a single A might become a triple B or a double B. This will have an impact on risk-grade assets. As a matter of fact, we do provisioning of expected losses in the sense that the really, really non-compromised, they are expected losses of 12 months horizon. Those which are high risk but not default, they are provisioned on lifetime cycle. Obviously, those which are on default are, obviously, on the fully lifetime expected loss. It will work through on that page, which you actually, when I look at your comments from this morning, you have been looking at with regard to provisions of compromised and non-compromised loss. You have this question on the dollar. I don't think this is the Swiss franc, which is strong versus the dollar. This is the dollar, which is weak because if you look at the exchange rate, Swiss franc euro, it's quite stable. Don't forget that Switzerland, the main partner is not the U.S. It's the eurozone. That will be a stabilizing factor. From that, I don't know exactly the number you're looking for, but perhaps the question was the exposure in dollar. Is it correct? That's a rough sense of how many of your loans and deposits are dollars. Maybe more to get a sense of the translation. Deposit is very low, and loan, this is mostly trade finance. You can make up. Yeah, not all trade finance is in dollar. I'll be careful. When it's dollar, it's trade finance. Exactly. We don't have any credit for, I mean, we don't have any loans in the corporate business outside Switzerland. Nothing. Zero. Excellent, okay, only trade finance. Exactly. As you know, which is a kind of a slow, fast-moving business. You can stop very, very quickly, and those are transactions. Here, I don't expect any, except a kind of a slowdown of the international trade due to those tariffs. That's clear. Otherwise, I don't expect any, let's say, problem in our trade finance business in terms of cost of risk due to the tariffs. Stefan. Okay, thank you very much. I would like to take your opportunity that with regard to your comments of this morning, right? I know you're a very big reader of our Balance three report, but I think you've just one quote, which is the increase in compromised loans as private banking, you missed one number. If you look at the table eights, right, in the Balance report, it's less than you indicated in your comment. Just look carefully at the table eights of 2024 and 2025. Okay, thank you very much. I don't want to take more time of the other people. If you have more questions, you just call Gregory Duong, okay? Sounds good. Thank you. Okay. Fine. Greg gives me a hint, I mean, with regard to your eye that do we do kind of a forfeitary lump sum provisioning. I mean, also in this context, just remember we don't play with general banking risk reserves, right? We always show our real result as it comes out, and we apply systematic expected loss as just explained before. That's all. As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Aldano Keiraati from ZKB. Please go ahead. Good afternoon, everybody. I have one question regarding the competition among banks. How do you perceive the competition in 2025, and how do you anticipate the development of the margins for loans? What are your expectations going forward for the net interest margin? Okay. I mean, competition, you see, is quite different from business to business. Let's take retail and mortgage, which is probably your question. I mean, competition is tough, but this is not new. There is one player less, so it means, in a way, the competition is reduced. On the other hand, you have all those online platforms. You have other non-banks providers like in insurance. In the mortgage business, the competition will continue to be tough, but not tougher as yesterday or two years ago. This is tough competition. This is a commodity. If you take commercial loans, that's another story because here, clearly, for those SME, those small firms, they don't have a huge choice. Either you go to UBS, you go to the local cantonal bank, to ZKB, St. Gallen, Geneva, or Vaud, or maybe to Raiffeisen for maybe smaller companies. That's it. This is not easy. Here, the competition, I would say, will be reduced. Also, you see, the mortgage market is quite transparent. The prices are quite transparent. If you look at the SME business, the risk assessment is different from one provider to another one, and the prices are not transparent at all. Now, if we go further, if we talk about wealth management, here, the competition is quite tough. Credit Suisse has a good position, and UBS is trying to defend this position. Again, there is one player less. That's quite a statement. If you take, for example, the asset management, so the pension fund business, here, we have an opportunity to increase our market share. It takes time because those pension funds need time to decide, which is normal. If you look at the structure of almost all pension funds, they had an asset manager being Swisscanto or ZKB, being UBS, Credit Suisse, Pictet, BCV, depending on the canton. The share of wallet UBS, Credit Suisse will be reduced. I'm convinced about that. That means the other player will be able to take over that share, being Swisscanto, being Pictet or Lombard Odier, or BCV, especially in the canton Vaud. I'm not sure you can say that the competition is tougher than before. I think we have to differentiate between segments. Now that's the point of competition. Interest margin, you see, what's going to play a role is not really the competition. It's basically the level of interest rate. Zero is not very good for banks, as you know. How long that inflation will last? Maybe the interest will go negative. We don't know. Look at the numbers during the negative rate period some years ago, and you will see. There will be continued pressure on the interest margin. I'm convinced about that. We can compensate part of that with volume increase, but just part of that. You can assume that the net income, basically, will be less, interest will go down, corrected by the volume. The volume will not compensate the effect of interest rates. Probably going forward, exactly the same mechanic, same dynamic as we saw some years ago. Net interest rate will go down. On the other hand, the commission business should go up. The total of that is difficult to assess right now. Thank you very much. Thank you. Let's take that. No further questions from the phone. Back over to you for the written questions. Yeah. We have questions on the webcast. It's coming from Mr. Bleschner from Finance and Wirtschaft. The first question is, although the operating expenses remained stable, the cost income ratio increased to 55.6%. Could you explain why? The second question is, we saw in the first half of the year a smaller growth of 2% in mortgage loans. Is that due to a restrictive credit lending, or is it due to a stronger market position of UBS in the market in the mortgage loans? The third question is, how far an abolition of the intuitive letter of value would affect BCV? Let's start with the first question. I think the revenue went down. This is a basic calculation. I assume the numbers are correct. I think the revenue is stable. Revenue went down. The revenue is stable. Huh? Revenue is stable. No, they went down $3 million or $2 million. Thank you. Thomas, answer the question. I just looked at the number, but something is stable, and there is a slight increase in total operating costs. Right, on a slight decrease in revenue. A slight decrease in revenue. That's a big decrease. Okay. Now, second question. I don't know the strategy of UBS, but last year, UBS basically decreased or was less aggressive in the market fitness. I'm not saying they are aggressive today, but they had a strategy because they had some not liquidity problems. They had to be able to give back some money to the SMB. Basically, I can say I cannot say that. Basically, I would say UBS was very cautious in terms of taking new exposure, not from a risk point of view, but from a funding point of view. That's the first point. Second point, we had a very, let's say, very good growth last year in the different business, and especially in the real estate fund business. Due to, let's say, the financing situation for banks in Switzerland, which was quite difficult last year, it's going much better this year. We decided to be very cautious also from a funding point of view this year. That explains the difference between the 2%. I think last year, it was probably 4%. Okay. Now, 2%, which would be a 4% on an annual basis. If you look at the retail business, we are rather at a 3. It's a very good growth, and I'm not strategically targeting more than 4% every year. Now, the question to the market position. I don't think they have a stronger market position. I think they have decided maybe not to continue to be very cautious from a funding point of view. I think they have secured their funding. They have finished their paying back UBS. I don't know all the details. This is what I can imagine. They are back to the market, which is good. For the next question. Of course, this will have an effect, but we cannot disclose any number. You see, it will take time because people will not do that overnight. It depends what's going to happen. We don't know. I think this is a very, let's say, open question in Switzerland whether it's a yes or a no. I don't know. Of course, if it happens, then people or some will pay back their loans. This is clear. If you look at the last 20 years, probably all new loans, mortgages were issued at 80% value. I don't think that all those people that got a mortgage in the last 10 years, they have the money to pay back so easily. I don't I'm not worried about that. It will have a small impact. It will have a small impact. It's clear. Very marginal over time. Over time, yes. Gentlemen, we have a follow-up question from Mr. Stallman from Autonomous Research. Please go ahead. Yes, thank you very much. I thought I'd take the opportunity if we still had some time. I wanted to follow up on your comment on the net interest margin where you expect maybe a bit more pressure. Your major competitor, UBS, is actually providing a sensitivity that says if rates go down another 100 basis points, so into negative territory, net interest income in their business would actually rise quite substantially as a result of basically flawed loan rates, if I understand this well. Do you see something similar happening in your business, or is it a very peculiar situation at UBS? No, we agree. We agree. We have the same appreciation. I don't know the magnitude, but in relative terms. For us, the lying on the zero line is the worst-case scenario. Given, I mean, the monetary policy of the SNB with regard to this has two components, right? One is the negative interest rates. The second is using these exemption levels, right? Basically, when you get into negative rates, you basically get subsidized with regard you have with SNB. There's that element, which then actually is revenue generating. If that flooring of loans also helps you, is it still reasonable to expect that the net interest margin contracts? Is that taking that into account? What do you mean by the flooring of loans? The flooring. If I understand it correctly, UBS thinks that rates going negative will benefit their net interest income because the loan rates, the reference rate, and the loan documents are floored at zero, so they cannot drop below zero. They are worried about that. That's an additional component. You can add to my argument, which I just gave you. There's an additional effect as a matter of things. Analytically speaking, from a pure market perspective, our mortgage rates would have, in particular, the short mortgages would have a substantially higher marginal commercial margin. Yet the overall net interest margin could still go down? The overall interest. Okay. Let me be a bit confused. I put it one more time systematically. I just took it systematically, right? If coming from zero, yeah, the short-term interest rates in particular, or up to one to two years, go into negative grounds, right? You have two interesting elements, right? First of all, put it that way. Mortgage rates from zero to two years would almost not change. That's how Swiss banks behaved in the past, and we think that will go on, which analytically speaking means a significantly higher commercial margin. Secondly, we will make money as what we call arbitrage or being filling up the exemption level, putting billions as the SNB at zero and taking that money in, being paid for taking it in. Here, I mean, to answer also, I mean, zero is the worst case for us, okay, for Swiss banks in business. Not only for Banque Cantonale Vaudoise. It's the worst case. For the next six months, probably that's going to remain at zero. They were just introduced at the end of June. You don't see the full impact during the first half. From that point of view, probably there will be pressure on net interest income in the coming months. Going negative, I think we share the appreciation of UBS. Thomas explained, by the exact order of magnitude, I don't know. I would prefer negative interest rates for us than zero. Zero is the worst-case scenario. Depending on the situation, how long will the SNB remain at this level? I don't know. If you look at the forward, etc., probably in September, they will remain that. In December, depending on the economy, they might go 25 basis points down. We don't know. Let's assume the zero will stay for a couple of months. For us, it's not very good. That's the message. Okay. That makes sense. I understand that. Maybe a last one, if I may. That's on net commission income, where most of your net commission income is coming from securities and investment transactions. One of the metrics that I look at over time is how the income from securities and investment transactions relates to assets under management. That number, that margin, has been coming down for a long time. Over the last two years, it has actually gone up. I'm wondering if that is just a random combination of inputs or whether you have actually changed anything in the way that you run your business. Is there a different business mix on the assets under management side? Is there different pricing? Is there different client behavior that makes the margins go up structurally? We are a very careful reader. We actually realigned somehow the setup of the investment funds for our clients. We simplified them, which meant that we balanced part of funds in existing funds. There has been a peak in transaction volumes, and I think that's what you found. If you look also, we have a new Head of Private Banking. He joined Banque Cantonale Vaudoise, I think, two years ago. He was coming from Credit Suisse, and he had some ideas to, let's say, change the way we were doing things. This is a positive impact. I see. As long as you don't sell any particularly fancy FX deposits, I'm very happy about that. We don't do product pushing. We don't do that. We have a really open architecture, and probably we are one of the most open architecture banks in Switzerland. We don't do those kinds of things. No, don't worry. Excellent. Thank you very much for your extra time on this. Thank you. Bye-bye. Bye. Okay, wonderful. I think we are done. Gentlemen, so far, there are no further questions from the phone. Back over to you for any closing remarks. Okay. Thank you to all for attending this conference. Thank you very much. See you probably in February 2026. Bye-bye. Have a nice day. Ladies and gentlemen, the conference is now over. Thank you for choosing Callus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.