Corporate Center

Corporate Center recorded a pre-tax loss from continuing operations of CHF 193 million in first quarter 2007, compared with a loss of CHF 318 million in fourth quarter 2006.

Operating income

Total operating income was CHF 79 million in first quarter 2007, up CHF 52 million from CHF 27 million in fourth quarter 2006, as an increase in income was only partially offset by higher credit loss expenses.

The credit loss expense or recovery booked in Corporate Center represents the difference between the adjusted expected credit loss charged to the business units and the actual credit loss expense or recovery recognized in the UBS financial statements. In first quarter 2007, UBS recorded a recovery of CHF 1 million, compared with a recovery of CHF 21 million in fourth quarter 2006. In both quarters, credit loss expense was lower than the adjusted expected credit loss / recovery recorded in the business units, resulting in a credit loss expense in Corporate Center of CHF 51 million in first quarter 2007 and CHF 37 million in fourth quarter 2006.

The increase in total operating income in first quarter 2007 was due to rising income from the higher equity base, and gains from certain interest rate swaps and cash flow hedges compared with losses in fourth quarter 2006. This was partially offset by lower mark-to-market gains on USD foreign exchange options used to hedge the currency exposure arising from future earnings.

Operating expenses

Total operating expenses were CHF 272 million in first quarter 2007, down by 73 million from CHF 345 million in fourth quarter 2006. Personnel expenses were CHF 320 million, down 5% from CHF 336 million in fourth quarter 2006, mainly as the prior quarter included accelerated amortization of share-based compensation for good leavers. The integration of Perot staff into ITI did not have an impact on personnel expense levels, as contractor costs are also recorded as personnel expense. General and administrative expenses decreased 8% to CHF 304 million in first quarter 2007 from fourth quarter 2006, mostly reflecting lower ­advertising and sponsoring costs. Other businesses were charged CHF 539 million for services provided by Corporate Center in first quarter 2007, compared with CHF 521 million in fourth quarter 2006. This was predominantly due to ­higher IT infrastructure charges. Depreciation decreased by CHF 11 million from CHF 198 million to CHF 187 million, mainly on Corporate Real Estate and internally developed software. This was partially offset by additional hardware depreciation for data centers in ITI.