Risk Management and Control

UBS realized a net recovery of CHF 14 million in second quarter 2007, compared with net recoveries of CHF 1 million in first quarter 2007 and CHF 38 million in second quarter 2006. As indicated in previous quarters, we continue to see a general, progressive downward trend in net credit loss recoveries, which is to be expected given the continued reduction in the level of impaired loans. Global Wealth Management & Business Banking reported a net recovery of CHF 11 million in second quarter 2007, after net recoveries of CHF 21 million in first quarter 2007 and CHF 37 million in second quarter 2006. The Investment Bank posted a net recovery of CHF 3 million in second quarter 2007, after a net credit loss expense of CHF 20 million in first quarter 2007 and a net recovery of CHF 1 million in second quarter 2006.

Our gross lending portfolio was CHF 393 billion on 30 June 2007, up from CHF 371 billion on 31 March 2007. In Global Wealth Management & Business Banking, the gross lending portfolio was CHF 242 billion, up from CHF 233 billion on 31 March 2007, mainly due to higher secured lending by our international wealth management units. The gross lending portfolio at the Investment Bank rose by CHF 13 billion to CHF 150 billion, as a result of the expansion of various businesses, in particular secured lending in the prime brokerage area.

The ratio of the impaired lending portfolio to the total gross lending portfolio continued to improve. It was 0.6% in second quarter 2007, down from 0.7% in first quarter 2007. The level of the impaired lending portfolio was CHF 2,330 million in second quarter, down 6% from CHF 2,478 million last quarter.