Half-yearly Report

Interest operations showed a very pleasing performance in the first half of the year with growth of 6.6 percent to CHF 563 million. Interest rates remain at an historically low level, which adversely impacted income on the deposit-taking side. In the mortgage business, we continue to attach importance to selective growth. Thanks to our firm anchoring in the Greater Zurich area and intensive marketing effort, the volume of mortgages grew 2.4 percent to CHF 63.5 billion. In the retail and corporate customer segments, we enjoy a market penetration in excess of 50 percent.

The commission and fee business, along with trading operations, was hit by the uncertainty among investors in recent months. Thanks to the intensification of advisory and customer support services, we nevertheless succeeded in making progress in various customer segments. At CHF 273 million (+0.3 percent), the commission and fee business delivered a solid performance. Conservative products as well as investments in cash and precious metals proved highly popular with investors.

The acquisition of net new money proved challenging. It was no longer possible to achieve the strong inflows of funds due to customers seen during the last two years. Net new money nevertheless came to CHF 2.4 billion.

In view of the high level of reticence among customers and uncertainties on the markets, trading operations failed to match our high expectations with a result of CHF 151 million (-28.3 percent). A cautious approach to costs remains a high priority for us. Operating expenses were virtually unchanged at CHF 610 million (+1.3 percent). Headcount grew to 5,039 employees (end of 2010: 4,972 employees). As for other operating expenses, strict adherence to plans proved effective and the figure of CHF 184 million was unchanged. The first half of the year produced a gross profit of CHF 401 million (-7.4 percent).

We are convinced that Zürcher Kantonalbank is well equipped for the future. Provided the situation in the eurozone does not deteriorate dramatically and the financial markets adopt a stable trajectory, we expect another good result for the full year. We are deeply grateful for the trust shown by our customers, who have remained loyal to us even in turbulent times.

Capital adequacy disclosures

The new Capital Adequacy Ordinance (CAO) based on Basel II came into force in Switzerland on 1 January 2007. This publication therefore provides the required information about Zürcher Kantonalbank's risk position and capital adequacy.