Habib Bank AG Zurich Interim report 2020 Habib Bank AG Zurich Table of contents Group key figures 2 Letter to shareholders 3 Corporate Governance 4 Management report 11 Consolidated interim financial statements of the Group Balance sheet 15 Income statement 16 Notes to the consolidated financial statements 18 Addresses 19 GROUP 1 Habib Bank AG Zurich Group key figures in CHF million Change in % to Balance sheet 30.06.19 31.12.19 30.06.20 31.12.19 Total assets 10'709 11'163 11'121 -0.4% Equity 1'128 1'196 1'215 1.5% Advances customers 3'449 3'545 3'360 -5.2% Customers deposits 8'166 8'584 8'395 -2.2% Changes in % to Income statement First half 2019 Second half 2019 First half 2020 First half 2019 Total income 1 193.2 214.5 296.3 53.4% Operating expenses -110.7 -116.3 -109.9 -0.7% Operating result 73.8 92.5 169.0 129.2% Group profit 51.3 40.2 36.5 -28.8% Change in % to Key figures and ratios 30.06.19 31.12.19 30.06.20 31.12.19 Number of offices 391 432 439 1.6% Number of employees 5'607 5'698 5'945 4.3% Return on equity (ROE) 2 9.0% 7.8% 6.1% Equity ratio 10.5% 10.7% 10.9% Cost / income ratio 57.3% 55.7% 37.1% Capital ratio 19.3% 19.7% 18.5% Liquidity coverage ratio 123.0% 122.0% 124.5% Leverage ratio 9.1% 9.4% 10.3% 1 Including "Gross result from interest operations", "Result from comission business and services", "Result from trading activities and the fair value option" and "Other result from ordinary activities" 2 Annualised Group profit as percentage of equity of average at year end Customers deposits, in CHF million Equity, in CHF million Group profit, in CHF million 60 10000 1500 51.3 8'584 8'395 8'166 1'196 1'215 1'128 50 8000 1200 40.2 40 36.5 6000 900 30 4000 600 20 2000 300 10 0 0 0 30.06.19 31.12.19 30.06.20 30.06.19 31.12.19 30.06.20 1st half 19 2nd half 19 1st half 20 Purely for ease of reading, the masculine form used in this document is intended to refer to both genders. This consolidated financial reporting is published in English only. Due to rounding, the numbers presented in this report may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. GROUP 2 Habib Bank AG Zurich Letter to shareholders The economic impact of the Covid-19 pandemic on our customers has been the main reason for the change in our financial performance during the first half of 2020. The resultant decrease in trade finance activity and transaction volumes contributed to the notable reduction in Group profit compared with the same period last year. Our bank has always been there for its customers in times of crisis, and we remain committed to supporting them during this unprecedented time. We do so from a position of strength, with robust levels of capital, fund- ing and liquidity. To ensure uninterrupted service, while prioritising the safety of our colleagues and clients we have encouraged the use of our online/mobile banking applications and ensured that our service centres are equipped to address the changing needs of our customers. Governments and regulators across our network have initiated a variety of market-support measures, including interest rate cuts and financial relief packages to support their local economies. We aim to press forward with our strategic initiatives in the Financial Institutions business, Wealth Management and Islamic Banking offering with the aim of delivering a stronger business that is better equipped to help our customers prosper in the recovery to come. Dr. Andreas Länzlinger Muhammad H. Habib Mohamedali R. Habib Chairman of the Board of Directors President Group CEO GROUP 3 Habib Bank AG Zurich Corporate Governance Corporate governance Principles Board of Directors Habib Bank AG Zurich is committed to responsible, value- The Board of Directors has ultimate oversight over Habib oriented management and control. Habib Bank AG Zurich Bank AG Zurich and its subsidiaries. Under the leadership complies with all relevant Swiss legal and regulatory require- of its Chairman, it decides on the strategy of the Group ments in terms of corporate governance. The governance based on the recommendations of General Management. It documents of Habib Bank AG Zurich constitute our primary is responsible for the overall direction, management, control guidelines regarding corporate governance and are based and financial reporting of the Group as well as for supervising on Article 716b of the Swiss Code of Obligations and the compliance with applicable laws, rules and regulations. Articles of Association of Habib Bank AG Zurich. The Board of Directors consists of five or more members, which are individually elected at the Annual General Meeting and is made up of non-executive and independent directors, all of whom have extensive experience in their respective fields of competence. Members of the Board of Directors Name Board of Directors Audit Committee Risk & Control Committee Dr. Andreas Länzlinger Chairman Member Urs W. Seiler Vice-Chairman Member Member Roland Müller-Ineichen Member Chairman Ursula Suter Member Chairwoman Dr. Stephan Philipp Thaler Member Member Dr. Andreas Länzlinger Professional history and education Swiss, born 1959 Andreas Länzlinger was elected to the Board of Directors of Habib Bank AG Zurich at the 2008 Annual General Meeting. He has been Chairman of the Board of Directors since 2013. Chairman of the Board of Directors Member of the Risk & Control Prior to and since joining the Board of Directors of Habib Bank AG Zurich, Andreas Länzlinger Committee has regularly represented and advised a number of Swiss banks in civil, criminal and regulatory matters, including in matters relating to FINMA supervision. He has conducted internal investi- gations, some under the indirect supervision of FINMA, at various Swiss financial institutions. His experience includes representing clients before foreign authorities (mainly in regulatory or criminal matters, with a focus on US authorities including the DOJ, SEC, Fed and FDIC). He has advised corporate clients in matters of compliance and corporate governance and holds various teaching engagements in this field. Andreas Länzlinger completed his studies in Law from the Uni- versity of Zurich in 1983 and was admitted to the Zurich Bar in 1986. He received his Doctorate in Law (Dr. iur.) from the University of Zurich in 1992. GROUP 4 Habib Bank AG Zurich Urs W. Seiler Professional history and education Swiss, born 1949 Urs Seiler was elected to the Board of Directors of Habib Bank AG Zurich at the 2012 Annual General Meeting and was appointed Vice-Chairman of the Board in April 2015. He became a mem- Vice-Chairman of the Board ber of the Audit Committee and member of the Risk and Control Committee in 2013. of Directors Member of the Audit Committee From 2002 to 2012 Urs Seiler was a founding partner of Bugmann, Stocker, Seiler Capital Partners Member of the Risk & Control AG (based in Zurich), a company providing advisory services in the areas of capital markets, fi- Committee nance, general management consulting, real estate and corporate restructuring, including the take- over of directorships. He was Chairman of the Board of Directors of PBS Private Bank Switzerland Ltd. (he stepped down from this function in 2002). He was a member of the Board at the Republic New York Corporate (New York) and a member of the Executive Committee of the Republic Bank of New York (Switzerland) from 1998 to 1999. Prior to that, he spent 15 years at UBS AG, hol- ding various top executive and senior management positions, including: Executive Vice President International, Chairman Emerging Markets (Europe, Africa, Middle East), and a member of the Group Management Board (he stepped down from this function in 1998). From 1970 to 1984 he worked for Credit Suisse (Zurich), serving as Vice-President in the foreign exchange division. He began his career at Bank of Nova Scotia (Toronto). His banking career has also included teaching as a lecturer at the Swiss Finance Institute in Zurich from 1986 to 1991. Urs Seiler completed his studies as a Swiss Certified Banking Expert in 1968. Roland Müller-Ineichen Professional history and education Swiss, born 1960 Roland Müller-Ineichen was elected to the Board of Directors of Habib Bank AG Zurich at the 2018 Annual General Meeting and was appointed as Chairman of the Audit Committee. Member of the Board of Directors Chairman of the Audit Committee Since 2009 Roland Müller-Ineichen has served as an independent director on the board of directors of multiple Swiss and foreign companies and has developed and further enhanced his thorough un- derstanding of corporate governance and the strategic and operating challenges of today’s banking industry. Prior to that, he worked for 12 years as lead partner in charge of financial and regula- tory audits of national and international banks, securities dealers and fund management compa- nies in the audit department of KPMG in Zurich. He joined KPMG Fides Peat in 1995 as Senior Manager and became a partner of KPMG Switzerland in 1998 and of KPMG Europe in 2006. Before joining KPMG, he progressed through various senior audit and executive management roles at Switzerland-based financial institutions. His experience in the financial and banking services industry provides the Board of Directors with valuable strategic, financial and banking business insights and comprehensive corporate governance and accounting expertise.