Financial Businesses Results

Attributable net profit for the first six months of 2007 was CHF 8,599 million. Discontinued operations contributed CHF 265 million. Attributable net profit from continuing operations was CHF 8,334 million. This includes a post-tax gain from the sale of our 20.7% stake in Julius Baer of CHF 1,926 million (pre-tax CHF 1,950 million) and charges related to the closure of Dillon Read Capital Management (DRCM) of CHF 229 million after tax. Excluding these items attributable profit from continuing operations would have been CHF 6,637 million, up 9% from first half 2006 and income would have increased by 11% to CHF 27,033 million. Asset-based revenues showed particular strength, reflecting rising market levels as well as strong inflows into the wealth and asset management businesses. M&A and corporate finance and underwriting fees rose in buoyant capital market conditions and as a result of efforts undertaken to grow our market share globally in our equity and debt underwriting and advisory businesses. Net brokerage fees were up, reflecting brisk client activity, especially in the Asia Pacific region. They also benefited from exchange-traded derivatives income, the latter mainly driven by the acquisition of ABN AMRO's futures and options business in September 2006. Income from trading businesses was strong and driven by increased equity proprietary trading, derivatives and prime brokerage results. Fixed income activities, especially the former DRCM portfolios, experienced lower revenues driven by the challenging market conditions for US sub-prime debt. This was partially offset by increases in credit fixed income. Money markets, currencies and commodities revenues were up on rising client volumes, but partly offset by lower income in our commodities business. Revenues from interest margin products increased to the highest level ever for a six-month period, reflecting the success and growth of lending activities to wealthy private clients worldwide. They also reflected an increase in spreads for US dollar, euro and Swiss franc deposits and higher Swiss mortgage volumes. The wealth management business in the US saw the level of deposits and loan volumes rise. Income from treasury activities increased due to higher interest revenues on a larger capital base.

In first half 2007, operating expenses rose by 14%. Excluding costs related to the closure of DRCM (pre-tax CHF 384 million), costs increased by 12% compared with the same period a year earlier. Personnel expenses were up 15% (12% excluding the DRCM closure), reflecting the 13% increase in personnel across our businesses. Performance-related payments rose in line with revenues.

General and administrative expenses were up 14% in first half 2007 from the same period a year earlier. Higher business activity levels and volumes resulted in increased spending for administration, professional fees and travel. Continued investment in growth initiatives resulted in higher expenses for strategic IT projects, in particular at the Investment Bank. It also led to higher occupancy costs.