Investment Bank

The cost / income ratio in first quarter 2007 was 71.3%, up slightly from 70.8% in the same period a year earlier. Revenue rises were partly offset by increased personnel costs ­related to higher staff levels and the amortization of intangible assets from the acquisition of Pactual and ABN AMRO's ­futures and options business.

The compensation ratio in first quarter 2007 was 54.2%, up 0.6% from the same period a year earlier. Performance-related compensation rose in line with revenues. The compensation ratio, however, was distorted by the negative impact from DRCM's losses.

Investment Bank Value at Risk (VaR) continued the upward trend seen at the end of 2006 and was generally more volatile than in previous quarters. Average VaR (10-day, 99% confidence, 5 years of historical data) increased to CHF 517 million from CHF 391 million in fourth quarter 2006, while the range (the difference between maximum and minimum VaR) increased to CHF 258 million from CHF 162 million.

As reported for fourth quarter 2006, the integration of Pactual from 1 December 2006 has resulted in an increase in average VaR for the Investment Bank. In first quarter, the inclusion of Pactual for the full period had a more pronounced impact.

The gross lending portfolio at the Investment Bank rose by CHF 21 billion to CHF 155 billion, as a result of continued expansion of our prime brokerage area, which, among other activities, provides financing on a collateralized basis to hedge funds.

The return on allocated regulatory capital was 30.9% in first quarter 2007, down from 36.1% a year ago, driven by a rise in risk-weighted assets, mainly reflecting higher counterparty risk on the over-the-counter derivatives portfolio and an increase of drawn and undrawn credit facilities for corporate clients. Goodwill and excess intangible assets rose compared with last year due to the acquisitions of Pactual and ABN AMRO's futures and options business.