St.Galler Kantonalbank Strategy and year end results February PDF Free Download

1 St.Galler Katoalbak Strategy ad year ed results 2009 February 2010

2 Ageda Portrait Strategy Status Catoal bak ad Govermet guaratee Profile St. Galler Katoalbak Geeral priciples Implemetatio of strategy Credit portfolio Cliet assets Balace sheet Results 31/12/2009 Outlook

3 What is a Catoal Bak? (1/2) Most of the 24 Catoal Baks were fouded i the secod half of the 19th cetury Progressive idustrializatio of the Swiss ecoomy (amog other thigs railway expasio) - credit for the traditioal sectors trade ad agriculture - was scarce Newly fouded Catoal Baks provided bakig services ad therewith fostered the developmet of regioal ecoomy (retail, SME) Today the Catoal Baks offer a exteded rage of services ad products, the stregth of the catoal baks are regioal positioig ad customer focus o retail ad SME cliets the mai part of their busiess is geerated i their catoal home markets their market share i retail ad SME is about oe third they accout for approximately 25% of total assets of all Swiss-domiciled baks

4 What is a Catoal Bak? (2/2) The catoal baks are differet from cato to cato, regardig structure, size or busiess policy The defiitio of each Catoal Bak is based o Federal law: stipulates two mai characteristics the Bak must have its legal basis i catoal law the cato must ow more tha oe-third of the capital ad votig rights Catoal law e.g. cato of Sait Gall Cato of Sait Gall is required by law to retai at least 51% of the share capital Govermet of the Cato of Sait Gall as majority shareholder has the right to appoit oe member of the Board of Directors No special catoal directive assiged to SGKB

5 Govermet guaratee of St.Galler Katoalbak Priciple: As per law (Art. 6 Catoal Bak Act), the cato of St. Galle is liable for all liabilities udertake by the St. Galler Katoalbak (the paret bak beig SGKB) if the bak's ow fuds are ot sufficiet. The govermet guaratee covers: Customer deposits Bods Medium term bods Fixed term deposits The followig are ot covered uder the govermet guaratee: Share capital Subordiated loas Cost of govermet guaratee: 0.3-0.8% of required equity (2009: 0.8% or CHF 6.3 millio)

6 Ageda Portrait Strategy Status Catoal bak ad Govermet guaratee Profile St. Galler Katoalbak Geeral priciples Implemetatio of strategy Credit portfolio Cliet assets Balace sheet Results 31/12/2009 Outlook

7 SGKB Group - Profile Portrait SGKB was fouded i 1868 1/3 market share i cato of Sait Gall, 37 braches Total assets CHF 24 billio Total cliet assets CHF 41 billio Approx. 1 270 employees Ratig Aa1 Moody s Listed o the SWX sice April 2, 2001 Market capitalisatio CHF 2.6 billio Share owership structure Number of shareholders: 30 866 Registered shares owed by employees 1.8% Uregistered shares 8.1% Registered shares owed by corporatios 9.8% Registered shares owed by idividuals 25.5% Registered shares owed by the cato of Sait Gall 54.8% Domicile of share owership Uregistered shares 8.1% Rest foreig coutries 0.7% Europe 1.9% Rest Switzerlad 16.3% Cato Sait Gall 73.0% (icl. mai shareholder)

8 A versatile Bak Group Paret compay St.Galler Katoalbak The full service bak offers a etire rage of fiacial products ad services to its cliets i the catos of Sait Gall ad Appezell Ausserrhode. Subsidiaries Hyposwiss Private Bak Ltd. (Zurich) ad Hyposwiss Private Bak Geeva Ltd. Ivestmet activities for private cliets of high et worth i Switzerlad ad i fast-growig key markets. Subsidiary St.Galler Katoalbak Deutschlad AG (Muich) Ivestmet activities for private cliets of high et worth i Germay. Balaced Balaced Busiess Busiess Model Model

9 SGKB Group - Geographic markets Key Markets Lati America Easter Europe Germay Switzerlad et al. Muich Key Markets Lati America Portugal et al. Key Markets Frace, Beelux UK Spai / Portugal Switzerlad et al. Geeva Zurich Sait Gall Portugal

Orgaisatio structure of SGKB Group Board of directors Iteral Audit Paret compay Exteded maagemet board Maagemet board Chairma of maagemet board SGKB = Chairma of board of directors of subsidiaries Subsidiaries Board of directors Hyposwiss Holdig Board of directors SGKB Deutschlad Maagemet board Hyposwiss Holdig Board of directors Hyposwiss Zurich Board of directors Hyposwiss Geeva 10 RCB Private Bakig Service Ceter Fiace & Riskmaagemet Maagemet board Hyposwiss Zurich Maagemet board Hyposwiss Geeva Maagemet board SGKB Deutschlad

Ageda Portrait Strategy Status Catoal bak ad Govermet guaratee Profile St. Galler Katoalbak Geeral priciples Implemetatio of strategy Credit portfolio Cliet asstes Balace sheet Results 31/12/2009 Outlook 11

Log-term strategic objective Strategic thoughts Risk Risk miimizatio miimizatio Diversificatio Diversificatio of of reveue reveue sources sources Reductio Reductio of of depedecy depedecy o o ecoomic ecoomic developmet developmet i i home home market market Growth Growth Ivestmet Ivestmet busiess busiess with with higher higher market market growth growth Geographic Geographic expasio expasio outside outside cato cato of of St.Galle St.Galle Differetiatio Differetiatio Ivestmet Ivestmet advisory advisory busiess busiess with with more more potetial potetial for for differetiatio differetiatio ad ad iovatio iovatio Balaced Balaced Busiess Busiess Model Model 12

Balaced busiess mix Operatig icome (total CHF 523.9 millio) Cliet assets* (total CHF 41.0 billio) 23% 43% 26% 31% 18% 16% 43% Retail- ad Commercial Bakig SGKB Private Bakig Hyposwiss (ZH/GE/SGKB Germay) Corporate Ceter Iterest icome i % of operatig icome (total CHF 317.9 millio) Gross Assets (total CHF 59.5 billio) Cliet assets (total CHF 41.09 billio) Other operatig icome 39% Iterest icome Cliet assets Loas to customers 31% Istitutioal cliets (Pesio fuds) 21% 13 61% 69% Private cliets 79% * Cliet assets = Assets uder maagemet, Due to cliets i savigs ad deposits, Other due to cliets, Medium term bods

Two brad strategy i Private Bakig Oshore strategy O- ad offshore strategy Zürich Gef Portugal Local high et worth idividuals Active ivestmet advice for private cliets of high et worth i Easter Switzerlad via paret compay Oshore private bakig i Germay via subsidiary i Muich Traditioal private bakig with boutique approach Icrease market coverage i Switzerlad Above average growth i strategic key markets (South America ad Easter Europe) 14 Commo Commo values: values: traditio, traditio, reliability reliability ad ad quality quality

Uique Sellig Propositio (USP) Values: security, reliability, credibility, local achorig ad proximity. I the future supplemeted with: dyamism, ope-midedess ad agility. Boutique: customer orieted, etrepreeurship, high employee ad service quality Security: fiacial stregth, traditio, "Swissess" Cogitio: "Our bak Key performace features: comprehesive offerig, best value for moey Key performace features: iovatio, performace, best-iclass through ope architecture 15

SGKB Group - Core competecies Sustaiable value creatio 5 Core competecies Growth Customer care/ care/ acquisitio Ivestmet maagemet Productivity Process maagemet Risk optimisatio Credit Credit risk risk maagemet ALM ALM 16

Ageda Portrait Strategy Status Catoal bak ad Govermet guaratee Profile St. Galler Katoalbak Geeral priciples Implemetatio of strategy Credit portfolio Cliet assets Balace sheet Results 31/12/2009 Outlook 17

Swiss Private Bakig Chaged eviromet Pressure o bak secrecy - - Developmets i tax law Double tax agreemet OECD stadard (article 26) US: Extedig QI regime, law agaist tax haves EU: Tighteig savigs taxatios, target automatic exchage of iformatio Iteratioal icreasig crimializatio of tax fraud ad tax evasio Tax amesty Tred to tax compliace aalogue as moey lauderig rules Barriers to market etry - Developmets i regulatory law No free market access Icreasig duty to fulfil regulatory requiremets, ot oly i Switzerlad but also i home coutries of the cliets Cosumer protectio 18 Establish Establish a subsidiary subsidiary i i Muich Muich Switzerlad Switzerlad as as a fiacial fiacial cetre cetre still still a a importat importat locatio locatio for for private private bakig bakig

Good reasos for offshore private bakig i Switzerlad Bakig secrecy: ot the most importat criteria for the decisio which offshore bak* 3.69 3.50 3.47 3.27 3.11 3.07 2.61 Political stability Legal framework Ceter of competece Discretio image/ reputatio Geographic reach Cultural fit/ laguage Article 26 of the OECD Model Tax Covetio o Icome ad Capital is also applicable for the other fiacial cetres Reaso for tax evasio is ot the bakig secrecy i Switzerlad, the problem is based i the tax systems of the offshore cliets coutries. 19 *Source: R. Berger, Regaiig mometum i wealth maagemet, 2009, p. 17

Positioig of Hyposwiss Success factors of Fiacial cetre Switzerlad Strategic cosequeces for Hyposwiss Service quality ad performace Top quality i service ad advice ad ivestmets i first class ivestmet kow how (Ivestmet Cetre) Ë Quality maagemet Discretio ad privacy Buildig ad maitaiig lastig idividual customer relatioships as core competece Ë Protectio of privacy Political ad ecoomical stability Focus o strategic key markets i Lati America ad Easter Europe Ë Focus o strategic key markets 20 Image, Reputatio State of the Art Compliace & Risk Maagemet Ë Sustaiable success factor

Ivestmet advisory Group-wide Ivestmet Ceter Ivestmet Ceter Chief Ivestmet Officer Ivestmet strategy Asset allocatio Product maagemet Maagemet of discretioary madates Recommedatios Support relatioship maagers 21 Core-satellite -approach Ope Ope architecture architecture Best Best i i class class Differetiatio Differetiatio i i ivestmet ivestmet strategy strategy

Discretioary madate - Good performace 2009 Referece Currecy CHF 30% Madates (gross) Bechmark Rel. Performace 25% 22.6% 25.10% 20% 19.1% 18.95% 15% 14.4% 14.09% 10% 10.0% 9.27% 5% 5.0% 4.51% 0% 0.49% 0.77% 0.35% 0.19% 22-5% Iterest orieted Icome orieted Balaced Growth Capital orieted -2.46%

Ivestmet fuds Good performace Performace 2009 Ivestmet fuds of SGKB Group Fods (31.12.08-31.12.09) Hyposwiss Daube Tiger (EUR) Hyposwiss Schweiz (CHF) Hyposwiss Multi Asset Strategy (EUR) SGKB Multi Fokus Fods (CHF) SGKB Multi Spectra Fods (CHF) Performace 35.58% 24.34% 15.13% 13.16% 34.19% Bechmark 22.86% 23.18% 13.93% 14.09% 26.64% Outperformace 12.72% 1.16% 1.20% -0.93% 7.55% Peer group 15.94% 22.17% 16.22% 12.78% 28.00% Differece to peer group 19.64% 2.17% -1.09% 0.38% 6.19% Quartile 1 1 3 3 1 23

More flexibility i discretioary madate rage Size of portfolio CHF > 3 000 000 INDIVIDUAL > 1 000 000 PREMIUM (sigle stocks) > 300 000 STANDARD (sigle stocks ad fuds) > 150 000 BASIC (cost efficiet solutios with idexed product) 24 > 25 000 NEW Discretioary madate from CHF 25 000

Costs Structural adjustmets Hyposwiss Zurich Outsourcig of three departmets of Hyposwiss Zurich to paret compay SGKB i St. Galle Securities admiistratio Paymet trasactios Tradig Hyposwiss Geeva Outsourcig cliet documetatio Optimizig structures Cost Cost savigs savigs ~ 2.0 2.0 Mio. Mio. CHF CHF p.a. p.a. Cost Cost savigs savigs ~ 2.6 2.6 Mio. Mio. CHF CHF p.a. p.a. 25

Collaboratio of Hyposwiss Zurich ad Geeva Zurich Growth iitiatives Marketig / brad awareess Ivestmet maagemet Cotrollig Geeva 26 Idetical strategy of both subsidiaries Istitutioalized collaboratio (oshore bakig Switzerlad / strategic key markets) Operatioal idepedet subsidiaries Simplificatio of maagemet structure Hyposwiss Holdig

Key elemets of Hyposwiss Holdig Idepedece of subsidiaries remai Maagemet structure simplifies collaboratio Board of directors Holdig = Board of directors Hyposwiss Zürich = Board of directors Hyposwiss Geeva Maagemet board Holdig = S. Peyer (CEO), D. Mc Adams (deputy CEO), T. Stucki (CIO) Shared fuctios: Corporate developmet (strategy, fiacial plaig, budgetig) Marketig / commuicatio (brad maagemet) Ivestmet Maagemet (CIO with group wide fuctio) Cotrollig (maagemet iformatio systems) Holdig does ot have ay persoel resources 27

Strategic priorities Superior Superior market market service service Operatioal Operatioal excellece excellece Growth Growth Competece - Professioal competece - Social competece Cliet iteractio - Commuicatio skills - Itegrated solutios Customer book maagemet Cost maagemet Icrease efficiecy Six Sigma Approach Cost structure Private Bakig Risk maagemet Cross Border Busiess Compliace Cosultat quality ( kow you customer, risk profile, documetatio) Germay Easter Europe, Lati America PB Paret compay Istitutioal ivestors (pesio fuds) Idepedet fiacial advisors (evv) Ivestmet Performace 28 Secures Secures SGKB SGKB Group's Group's sustaied sustaied growth growth

Credit portfolio geographical distributio Loas to customers Total CHF 17.9 b 7% 4% 12% Catos Sait Gall ad Appezell Ausserhode Neighbourig catos (AI, GR, GL, SZ, ZH, TG) Other catos 77% Foreig cliets 30 Focusig Focusig Busiess Busiess o o cato cato Sait Sait Gall Gall Figures paret compay per December 31, 2009

Credit risk maagemet - Credit portfolio collaterals Collateral character of loas to customers (Total CHF 17.9 b) Loa-to-value ratios Mortgage collateral Other collateral Without collateral 90% 2% 8% 70% 60% 50% 57.9% 56.7% 47.4% 59.9% 57.9% 40% Collateral of mortgage loas (Total CHF 15.7 b) 30% 20% Residetial real estate 81% 10% Office ad busiess buildigs Trade ad idustry 10% 6% 0% Residetial real estate Office ad busiess buildigs Trade ad idustry Others Total mortgages Other 2% 31 Without collateral 1% Figures paret compay per December 31, 2009

Credit portfolio Broad diversificatio Loas to customers (Total CHF 17.9 b) Corporate Busiess (SME) (CHF 5.4 b) largest classes 4% 3% real estate tradig 12% 40% fiace ad isurace 7% 63% 30% services costructio 6% 6% metal products 3% chemical,rubber,plastics 3% others 23% Private Perso Segmet Busiess Segmet Public Corporatio Segmet Credit Workout 32 Figures paret compay per December 31, 2009

Credit risk maagemet - Good diversificatio Share of 10 largest borrowers Distributio of credit portfolio by size 20'000 18'000 17'858 40% 35% 35.7% 16'000 14'000 30% CHF millio 12'000 10'000 8'000 25% 20% 15% 21.0% 23.2% 12.9% 6'000 4'000 2'000 5.5% 977 10% 5% 7.2% 0 0% Total loas to customers Thereof 10 biggest borrowers* 87.1% < 10 millio 33 0.0-0.5 millio 0.5-1.0 millio 1.0-5.0 millio 5.0-10.0 millio > 10.0 millio * Limits without public corporatio segmet Figures paret compay per December 31, 2009

Credit risk maagemet stable developmet 800 700 1.00% 0.97% 1.0% 600 CHF millio 500 400 300 200 0.90% 692 692 631 513 508 96.0% * 94.9% * 451 92.8% * 0.9% 0.8% 100 0 179 183 180 172 174 167 68 65 81 2007_YE 2008_YE 2009_YE 0.7% 34 * Impaired loas Estimated proceeds from liquidatio Impaired loas, et Provisios for credit risk No performig loas Provisios for credit risk i % of total loas to customers (right scale) Provisios for credit risk i % of impaired loas, et

Developmet of the property markets House prices I real terms (prices idexed to year 1997 = 100) Switzerlad Germay US (OFHEO) US (Case-Shiller) Market expectatios for Case-Shiller Japa UK 35 Source: SNB

Origi of cliet assets Total CHF 41 b Retail ad Commercial Bakig 12'842 SGKB Group Istitutioal Bakig 8'782 Private Bakig Private Bakig 19'356 2009_YE Switzerlad 69.4% Switzerlad 40.9% Germay 8.1% Germay 14.0% Other Wester Europe 8.0% Other Wester Europe 15.4% Easter Europe 5.9% Easter Europe 12.2% Middle- ad South America 4.7% Middle- ad South America 9.7% 37 North America 1.9% North America 3.9% Others 2.0% Others 3.9%

Asset allocatio of cliet assets Istitutioal RCB Private Bakig Bakig (CHF 12.8 b) (CHF 19.4 b) (CHF 8.8 b) 19.9% 11.5% 10.4% 33.0% 49.8% 12.7% 17.3% 6.8% 5.2% 25.2% 0.2% 9.7% 2.8% 9.3% 8.3% 4.0% 22.4% 7.3% 18.9% 25.3% 38 Bods Shares Structured products Fuds Fiduciary deposits Savig deposits Other assets* * * Other due to customers o sight ad term deposits, third party assets with other baks

Strog equity base 25'000 20'000 20'236 14.5% 13.9% 22'577 23'504 15.0% 14.5% 14.0% CHF millio 15'000 10'000 11'495 12.9% 11'040 11'136 12.5% 13.2% 13.0% 5'000 1'740 1'619 1'557 1'744 1'556 1'505 1'796 1'612 1'582-2007_YE 2008_YE 2009_YE 40 13.5% 13.0% 12.5% BIS-Ratio 12.0% 11.5% Balace sheet total Equity Eligible core capital (Tier 1) SA-CH BIS ratio tier 1 group Risk-weighted assets SA-CH Eligible ow meas SA-CH BIS ratio tier 2 group Computatio of BIS-Ratios sice 2008 accordig to FINMA circular 08/22; before accordig to Basle I

Equity ad divided policy BIS-Ratio 16% 14% 12% 10% 8% 12.9% 12.5% 13.2% 13.0% 14.4% FINMA stadard capital requiremets 120% Acquisitio policy Strategic: Private Bakig Opportuistic: Retail Bakig Equity policy 60% surplus above FINMA miimum stadards (=80% surplus) equals 14.4 Tier 1 Ratio Divided policy Attractive divided yield 50-70% distributio 6% 4% 2008_YE 2009_YE target Preset gap of equity target surplus should be compesated through retaied earigs BIS ratio tier 1 group BIS ratio tier 2 group Expected icrease i capital requiremets by FINMA ca be fulfilled at all times 41 Computatio of BIS-Ratios sice 2008 accordig to FINMA circular 08/22; before accordig to Basle I

Shareholder orieted divided policy 3.0 100% 2.5 2.85 2.78 2.58 90% 80% 2.0 2.17 73% 2.14 64% 65% 66% 70% 60% CHF b 1.5 1.0 40% 1.03 43% 1.17 1.45 40% 43% 50% 0.5 3.9% 3.9% 3.2% 3.3% 5.9% 5.2% 5.2% 4.3% 0.0 2002 2003 2004 2005 2006* 2007 2008 2009** 42 40% 30% 20% 10% 0% Market capitalisatio (i CHF b) Divided yield Pay-out Ratio * Repaymet of the par value per share **Request o AGM

Soud balace sheet 100% CHF 24 b Due from baks 10.6% 100% CHF 24 b Due to baks 0.7% 80% 60% Due from customers Mortgage loas 11.0% 67.7% 80% 60% Due to customers i savigs ad deposits Other due to customers Medium-term otes 37.6% 29.0% 4.0% 40% 20% Fiacial ivestmets / No-cosolidated participatios Fixed assets icl. Itagibles 7.3% 1.2% 40% 20% Debt ad loa secured by mortages Valuatio adjustmets ad provisios Other liabilities 18.6% 0.8% 1.7% 0% 2009_YE Other Assets 2.2% 0% 2009_YE Equity 7.6% 160% 150% Loa to Deposit ratio 140% 130% 120% 110% 112% 43 100% 2007_HY2007_YE2008_HY2008_YE2009_HY2009_YE I II I II I II 2007 2008 2009

Maturity structure SGKB Group Maturity Structure of Curret Assets, Fiacial Ivestmets ad Liabilities i CHF 000s O demad At Call Curret Assets Due withi 3 moths Due withi 3 to 12 moths Due withi 12 moths to 5 years Due after 5 Immobilized Total Liquid fuds 191'701 - - - - - - 191'701 Receivables from moey market istrumets 524-6'500 10'959 - - - 17'983 Due from baks 473'454 27'503 1'787'719 203'236 - - - 2'491'912 Due from cliets 66'338 213'966 873'363 419'429 777'936 245'236-2'596'269 Mortgage loas 172'923 1'354'719 656'403 1'597'120 9'394'298 2'732'830-15'908'293 Securities ad precius metals tradig portfolios 6'016-500 117 1'187 2'076-9'897 Fiacial ivestmets 18'796-117'985 292'804 1'107'728 153'108 2'233 1'692'654 Total 929'753 1'596'188 3'442'470 2'523'665 11'281'149 3'133'250 2'233 22'908'708 Liabilities Due to moey market istrumets 1'317 - - - - - - 1'317 Due to baks 57'557-69'783 41'413-0 - 168'754 Due to cliets i savigs ad deposits - 7'868'224 6'009 20'893 112'785 832'358-8'840'269 Other due to cliets 4'522'439 681'858 980'604 184'917 218'000 226'000-6'813'818 Medium-term otes - - 82'407 346'633 465'358 36'180-930'578 Debt ad loas secured by mortgages - - 444'070 370'495 1'906'127 1'642'615-4'363'307 Total 4'581'314 8'550'082 1'582'873 964'351 2'702'270 2'737'153-21'118'043 44

Fiacial ivestmets Sector allocatio Total fiacial ivestmets CHF 1.7 b Held-to-maturity debt 1.1% 0.1% 22.5% Others Govermet ad Cato bods - Other Coutries Held-to-maturity loas secured by mortgages Shares Properties for resale 35.1% 63.7% 20.7% 38.9% Govermet ad Cato bods - Switzerlad Baks 17.9% 2009_YE 45 Top - Ratigs Securities eligible for repurchase trasactios Broad diversificatio Fiacial ivestmets equal 7.2% of balace sheet

Overview 2009 (1/2) Extraordiary, difficult market eviromet positive ifluece o iterest icome (+4.3%) egative ifluece o et fee ad commissio icome (-18.4%) Gross profit icreases by 0.8% slightly lower operatig icome -0.2% lower admiistrative expeses -1.0% Operatig profit icreases by 7.0% Net profit of CHF 168.1 Mio. slightly dow o last year (-1.7%) a soud result i view of difficult market coditios New Gross Assets of CHF 1.0 b (+ 1.8%) Net New Loas CHF 559.8 millio (+3.1%) Net New Moey CHF 458.3 millio (+1.2%) 47

Overview 2009 (2/2) Strog growth of loas to customers i the core busiess (+3.1%) Mortgage loas CHF +850 millio +5.6% Retail customers CHF +511 millio +5.2% Commercial cliets CHF +288 millio +5.6% Private Bakig CHF -123 millio -7.4% (Deleveragig) Good quality of the credit portfolio ad uchaged, cotiuig policy of gratig loas Moderate value adjustmets, provisios ad losses with CHF 12.6 millio Growth of cliet assets at CHF 3.3 b or 8.8% to a record level of CHF 41 b Net New Moey PB CHF 8 millio +0.0% Net New Moey RCB CHF 523 millio +1.4% Market performace CHF 2 776 millio +7.4% O May 18, subsidiary bak opeed i Muich 48

Icrease of operatig profit +7.0% CHF millio 2009_YE r 2008_YE r 2007_YE Operatig icome 524-0.2 % 525-5.5 % 556 Admiistrative expeses -273-1.0 % -276 3.7 % -266 Gross profit 251 0.8 % 249-14.0 % 290 Depreciatio -42-24.7 % -55 38.8 % -40 Valuatio adjustmets, provisios ad losses -13 25.4 % -10 - -4 Operatig profit 197 7.0 % 184-25.3 % 246 Extraordiary amouts, et 9-65.4 % 26-6.9 % 28 Profit before taxes 206-1.9 % 210-23.4 % 274 Taxes -38-2.6 % -39-18.0 % -47 Group et profit 168-1.7 % 171-24.5 % 227 49

Icome statemet Divisioal accouts CHF millio Retail- ad commercial cliets Private Bakig Corporate Ceter SGKB Group 2009 2008 2009 2008 2009 2008 2009 2008 YE YE YE YE YE YE YE YE Net iterest icome* 178 210 35 53 105 42 318 305 Net fee ad commissio icome 36 41 119 150-2 -3 153 188 Net tradig icome 13 14 23 19 4-5 39 28 Net other icome 0 3 0 2 13-1 13 4 Operatig icome 228 269 177 224 120 32 524 525 Admiistrative expeses -127-127 -120-101 -26-48 -273-276 Gross profit 101 142 57 122 93-16 251 249 Operatig profit 100 153 38 101 58-70 197 184 Group et profit 86 133 36 85 46-47 168 171 50 * Fuds trasfer pricig method is used therefore results from term trasformatio ad results from iterest hedgig is booked i Corporate Ceter

Fuds trasfer pricig method Iterest rate 6.0 % 4.5 % 3.0 % 1.5 % Loas to customers Iterest Curve Customer fuds Loa iterest margi cotributio Term trasformatio cotributio Deposit iterest margi cotributio Iterest margi 1 year 3 years 5 years Maturity 51

Additioal expeses through strategic iitiatives CHF millio 2009_YE Hyposwiss Geeva & SGKB DE 2009_YE adjusted 2008_YE adjusted* r Operatig icome 524 24 500 497 0.6 % Admiistrative expeses -273-32 -241-236 2.4 % Gross profit 251-8 259 261-1.0 % Depreciatio -42-21 -20-39 -48.2 % Valuatio adjustmets, provisios ad losses -13-14 2-2 - Operatig profit 197-43 240 221 8.9 % Extraordiary amouts, et 9 0 9 4 - Taxes -38 3-41 -38-3.5 % Group et profit 168-40 208 186 13.9 % Gross assets (icl. loas) 59'484 2'447 57'037 53'821 6.0 % Loas to customers 18'505 143 18'361 17'718 3.6 % 52 Cliet assets 40'980 2'304 38'675 36'103 7.1 % * IT-Project, Hyposwiss Geeva are adjusted

Iterest icome compesates commissio icome 53 CHF millio 600 500 400 300 200 100 0 8 31 128-5.5% 4-0.2% 13 28 39 128 100 84 60 53 305 305 318 2007_YE 2008_YE 2009_YE Other icome Tradig icome Net fee ad commissio icome - portfolio-related Net fee ad commissio icome - trasactio-related Net iterest icome Operatig icome -0.2% Iterest icome +4.3% Strog icrease i cliet assets ad liabilities volumes Low ad steeper iterest curve Net fee ad commissio icome (-18.4%) although recovery of stock market Shifts of cliet assets Lower margi products Decrease of trasactio volume Trasactio-related icome -11.7% Portfolio-related icome -21.6% Tradig Busiess +38.9% Nostro Madate with profit of CHF 3.5 Mio. (last year -4.8 Mio.)

Admiistrative expeses - Costs uder cotrol CHF millio 300 250 200 150 100 50 0 Strict cost cotrol Early measures take to make savigs o projects ad ordiary admiistrative expeses I 2009 o cost for ew IT platform - sice project completed i 2008 Strategic iitiatives Hyposwiss Geeva icluded for 12 moths i admiistrative expeses itegrated (prior year oly 10 moths) Iitial ivestmets for subsidiary bak i Muich 54 +3.7% -1.0% 112 113 103 154 163 170 2007_YE 2008_YE 2009_YE Persoel expeses Other operatig expeses

Developmet of cost/icome-ratio Operatig icome 600-5.5% 500 28-0.2% 24 CHF millio 400 300 556 200 497 500 100 0 2007_YE 2008_YE 2009_YE Admiistrative expeses CHF millio 300 250 200 150 100 50 0 23 243 236 241 Impact IT-Project +3.7% 18-1.0% 22 Impact admiistrative expeses Hyposwiss Geeva (sice Mar 1, 2008) Impact SGKB Deutschlad AG 8 24 2007_YE 2008_YE 2009_YE Cost/icome-ratio icl. depreciatio o fixed assets 60% 55% 50% 45% cost/icome-ratio 55.6% 50.8% 55.2% 55 40% 2007_YE 2008_YE 2009_YE

Loas to customers: pleasat growth rates i home market 18'750 18'500 Retail customers +511.1 Mio. +5.2% Commercial cliets +287.5 Mio. +5.6% Other -116.2 Mio. -8.2% 3.8% 0.3% 61-183 -1.0% CHF millio 18'250 682 18'505 18'000 17'945 56 17'750 Dec 31, 2008 Loas to customers Group RCB PB SGKB Hyposwiss / SGKB Germay Dec 31, 2009 Loas to customers Group All %-umbers relate to the chage i the correspodig prior year market segmet amouts

Cliet assets New record level Retail customers +406.7 Mio. +4.6% Commercial cliets -0.7 Mio. -0.0% Other +116.9 Mio. +27.8% 41'250 40'750 Istitutioal cliets +227.0 Mio. +3.0% Idividuals +223.0 Mio. +2.8% 7.4% 40'250 CHF millio 39'750 39'250 38'750 1.2% -1.2% 2'776 40'980 38'250 1.4% 450-442 37'750 37'250 37'673 Dec 31, 2008 Cliet assets 523 RCB PB SGKB Hyposwiss / SGKB Germay Market performace icl. iterests ad divideds (icl. cosolid.) Dec 31, 2009 Cliet assets 57 NNM PB CHF 458 millio = PB SGKB + Hyposwiss + SGKB Germay + cosolidatio effect (CHF -73 millios) All %-umbers relate to the chage i the correspodig prior year market segmet amouts

Group Private Bakig - Top Lie Spread 27'000 140 24'000 119 117 120 CHF millio 21'000 18'000 15'000 12'000 9'000 6'000 3'000 0 92 92 88 25'491 25'571 28'138 66 21 18 8 16% 13% 15% 100 80 60 40 20 0 bp 2007_YE 2008_YE 2009_YE Cliet assets Private Bakig 58 Discretioary madates i % of cliet assets Top lie spread (right scale) overall Top lie spread (right scale) idividuals Top lie spread (right scale) Istitutioal Busiess Top lie spread = Operatig Icome / average cliet assets

Strategic challeges Challeges Profitability Profitability of of ivestmet ivestmet busiess busiess Iterest Iterest rate rate risks risks Offshore Offshore private private bakig bakig Credit Credit risks risks Cliet assets Margi Balace sheet structure Iterest curve Bakig secrecy Regulatory law Recessio Expectatios Expectatios of of cliets cliets Losig cofidece ad trust 60 Regulatio Regulatio Amout of regulatio Costs of regulatio

Good positioig of SGKB Group Iterests 4 CHF Libor 3M CHF Swap 5Y 3 2 1 0 Dez Dec 07 Ju 08 Dez Dec 08 Ju 09 Dec Dez 09 Stock market Icrease of yield curve secod half of 2010 Flatteig of the yield curve util 2013 Ë short term reductio i iterest icome SGKB SGKB profits profits of of balaced busiess model model Iterest rate hedgig 61 SMI DJI 100 80 Nikkei FTSE 60 40 Dez Dec 07 Ju 08 Dez Dec 08 Ju 09 Dec Dez 09 Value icrease i assets Normalizatio of the ivestmet behaviour (activities, product mix) Ë Icrease of fee ad commissio icome

SGKB Group - Fiacial targets Growth of loas to customers 3% Cliet assets* (Net New Moey) Cost/Icome-Ratio Retur o Equity (RoE) before taxes 5% 50% 15% 62 * Cliet assets = AuM ad customer fuds without double coutig

Share SGKB - Developmet of share price 700 600 Par value reductio July 23, 2007 CHF 30.00 500 +200.2% 400 300 200 100 +10.2% -42.3% Vol 0 302001 2002 2003 2004 2005 2006 2007 2008 2009 Tradig Volume volume SGKN (i 1000) 25 20 63 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 SGKB 2009 SPI Baks +33.12% SPI +23.18% SGKB +20.64% SGKB SPI SPI Baks as per February 9, 2010

Outlook 2010: Slightly below last year Because of the ecoomic situatio, earigs forecast is curretly difficult. Ucertaity regardig: timig ad extet of ecoomic recovery timig of the likely icrease of iterest rates Ë SGKB expects a group et profit slightly below last year Priorities for the comig moths Superior market service: Service quality ad performace Operatioal Excellece: Cost maagemet Risk maagemet Growth: Germay, Geeva, Key markets (Lati America ad Easter Europe), Istitutioal ivestors, idepedet fiacial advisors 64

Disclaimer 65 Cautio regardig forward-lookig statemets This commuicatio cotais statemets that costitute "forward-lookig statemets", icludig, but ot limited to, statemets relatig to the implemetatio of strategic iitiatives, such as the expasio i private bakig, ad other statemets relatig to our future busiess developmet ad ecoomic performace. While these forward-lookig statemets represet our judgmets ad future expectatios cocerig the developmet of our busiess, a umber of risks, ucertaities ad other importat factors could cause actual developmets ad results to differ materially from our expectatios. These factors iclude, but are ot limited to, (1) geeral market, macro-ecoomic, govermetal ad regulatory treds, (2) movemets i local ad iteratioal securities markets, currecy exchage rates ad iterest rates, (3) competitive pressures, (4) techological developmets, (5) chages i the fiacial positio or creditworthiess of our customers, obligors ad couterparties ad developmets i the markets i which they operate, (6) federal ad local legislative developmets, (7) maagemet chages ad chages to our Busiess Group structure. St.Galler Katoalbak is ot uder ay obligatio to (ad expressly disclaims ay such obligatios to) update or alter its forward-lookig statemets whether as a result of ew iformatio, future evets, or otherwise.

Cotact St. Galler Katoalbak St. Leohardstrasse 25 9001 St. Galle Switzerlad www.sgkb.ch Ivestor Relatios: Dr. Corelia Gut-Villa corelia.gut@sgkb.ch Tel. +41 (0)71 231 36 92 66

St.Galler Kantonalbank Strategy and year end results February 2010