Balance Sheet & Capital Management

UBS’s total assets were CHF 2,177 billion on 30 June 2006, up marginally from CHF 2,173 billion on 31 March 2006. Asset growth was driven by increases in the trading portfolio (up CHF 59 billion), positive replacement values (up CHF 18 billion) and loans to customers (up CHF 13 billion). This was largely offset by a drop in collateral trading (down CHF 99 billion). Currency fluctuations in second quarter 2006 cut underlying balance sheet growth by CHF 77 billion.

Lending and borrowing

Loans to customers totaled CHF 281 billion on 30 June 2006, up from CHF 268 billion on 31 March 2006. The gross lending portfolio in the Investment Bank rose in second quarter, mainly reflecting increased short-term interbank exposure and the reclassification of previously reported positions. To a lesser extent, it was also due to rising commercial lending in global syndicated finance. Lending to US mortgage originators fell slightly in the period.

Higher lending activity was recorded in the Global Wealth Management amp; Business Banking Business Group, driven by growth in the Swiss mortgage business and collateralized lending in the international wealth management business, partly offset by the US dollar’s fall against the Swiss franc.

UBS’s borrowing position rose CHF 55 billion, mainly driven by a shift from repos to uncollateralized borrowing related to the funding of DRCM’s assets after its launch in June and from the prime brokerage business in Europe.

Repo and securities borrowing / lending

Cash collateral on securities borrowed and reverse repurchase agreements stood at CHF 718 billion on 30 June 2006, down CHF 99 billion from 31 March 2006. This drop stems largely from the fixed income matched book (a portfolio comprised of assets and liabilities with equal maturities and equal value, so that market risks cancel out), as the business controlled volume growth and realized additional netting opportunities. Additionally, equity financing activities decreased, reflecting the end of the European dividend season in May.

Trading portfolio / derivative instruments

Between 31 March 2006 and 30 June 2006, trading assets increased CHF 59 billion to CHF 751 billion. Trading assets inventory in debt instruments rose by CHF 69 billion, mainly due to higher positions in government, corporate and asset-backed securities. In precious metals, they were up CHF 3 billion, and in traded loans they increased by CHF 2 billion. Equity instruments dropped by CHF 14 billion on declining equity markets.

The replacement value of derivative instruments increased by CHF 18 billion to CHF 316 billion due to movements in interest rates and currencies.