BEKB/ BCBE - Solid results

Friday, 22. August 2003 07:59

In the first half of 2003, BEKB | BCBE posted solid results,
maintaining the course of high-quality growth on which it embarked in
1992. Net pre-tax earnings rose by 5.4 percent to 48.3 million francs
(previous year: 45.9 million francs). In the Bank's two core business
fields of mortgage lending and savings accounts we achieved increases
of 205 million and 646 million francs respectively, while total
client funds rose to 17,0 billion francs. Client lending is totally
refinanced by client funds. Business expenditure continued to grow at
a moderate rate in the first half of 2003 and is within the target
range. Expansion in the Canton of Solothurn was continued, business
volume rising to over 320 million francs. There was significant
demand for the Bank's registered shares. In the first half of 2003,
BEKB | BCBE won 4,000 new stockholders.

Lending operations focused particularly on small and medium-sized
loans to private individuals and SMEs in the Espace Mittelland.
BEKB | BCBE advanced 4,612 new loans to customers, about one third
more than in the previous year, totalling 969 million francs. Credit
utilization increased to 13.1 billion francs. Mortgage lending rose
by 1.8 percent to 11.6 billion francs. Mortgage interest rates are at
historically low levels, which has led to a rise in the proportion of
fixed-rate mortgages to around 63 percent. Lending procedures take
account of the fact that clients will still be able to service their
loans even if interest rates stabilise at a higher level.
BEKB | BCBE pays special attention to high-quality new businesses. We
have set a credit limit of 50 million francs for this category of
lending, of which 25.7 million net had been committed. In the first
half of 2003 the Bank committed funds to a further 43 projects in all
areas of the canton, thus supporting the creation of 226 jobs.

BEKB | BCBE has a sound funding structure. Customer deposits in the
strict sense of the term (savings deposits, fixed-rate notes and
other liabilities to clients) rose to 13.8 billion francs, evidence
of the high degree of liquidity currently held by clients. Savings
deposits enjoyed particular popularity, growing by 6.8 percent to
10.1 billion francs. Total assets at the end of the first half of
2003 reached 19.9 billion francs, 3.2 percent ahead of the figure at
the beginning of the year.

BEKB | BCBE has been well-received by residents in the Canton of
Solothurn. Business volume with our 4,500 or so clients rose to over
320 million francs. Towards the end of October 2003, in view of this
positive performance, BEKB | BCBE will establish a new office in
Balsthal in addition to its existing branches in Solothurn and
Grenchen. The mobile bank will now serve Egerkingen as well as

On the income statement: taking account of the cost of hedging
instruments, net interest income was 4.2 percent below the previous
year's strong figure. There was further expansion in investment
counselling. The number of client securities accounts rose by 4.0
percent to over 76,000 in the first half of 2003, assets under
management rising by 548 million francs to 17.0 billion. Lower
stock-exchange turnover led to a decline of 7.1 percent in earnings
from investment counselling. Profits from own-account trading, which
is kept at a low level in line with the Bank's policy, totalled 10.4
million francs: 1.2 million francs more than the previous year.

Continued cost control kept business expenditure within the target
range of 50 to 55 percent of operating income. There was a moderate
rise of 0.6 percent in business expenditure. At 12.4 million francs,
new loan provisions were below the previous year's level of 15.0
million francs. Provisions were set up for the continued development
of the IBIS® banking software from RTC, for more intensive expansion
in the Canton of Solothurn and for the Bank's joint training
commitment with the Paul Klee Foundation. A further 17.5 million
francs was added to reserves for general banking risks, this sum
being shown under extraordinary expense; and contributions totalling
10 million francs were made to pension and early-retirement funds.

In accordance with a resolution of the annual general meeting on 13
May 2003 the dividend payable to stockholders in BEKB | BCBE was
increased for the sixth year in succession. With a total of over
40,000 stockholders the BEKB | BCBE is one of the top 15 Swiss
companies in terms of the breadth of its shareholder base. Since the
positive outcome of the referendum on the change in the legal form of
BEKB | BCBE in November 1997 the price of our registered shares has
risen by over 90 percent.

BEKB | BCBE achieved good results in the first half of 2003. On a
basis comparable with other cantonal banks, pre-tax net income
reached 48.3 million francs - exceeding the previous year's figure by
5.4 percent. In terms of earnings after tax there was an increase of
4.2 percent in interim profit to 36.8 million francs (previous year:
35.4 million francs).

As we said in the spring, BEKB | BCBE is once again setting itself
the ambitious target for the next ten years of generating free cash
flow of between 800 and 1,000 million francs, our objective in terms
of shareholders' equity. The business and lending policy of
BEKB | BCBE demonstrates continuity and maintains our long-term

Berne, 22nd August 2003

The full report including tables can be downloaded from the enclosed
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Hanspeter Merz
031/666 10 13
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