Wealth Management US

In third quarter 2007, pre-tax profit was CHF 181 million, up 12% from CHF 161 million in second quarter 2007. In US dollar terms, pre-tax profit increased 14% to a record USD 151 million. The improvement was due to lower general and administrative expenses, reflecting a significant decline in legal and litigation expenses.

Operating income

Total operating income in third quarter 2007 was CHF 1,678 million, down 1% from CHF 1,693 million in second quarter 2007. In US dollar terms, operating income rose 1%. The increase in US dollar terms reflected higher recurring income, which benefited from a further rise in fees from managed accounts, investment advisory, and non-proprietary funds, and improvements in net interest income on account deposits. This was partly offset by a decline in non-recurring income, driven by falling transactional revenue and lower performance fees on alternative investments.

Operating expenses

In third quarter 2007, total operating expenses were CHF 1,497 million, down 2% from CHF 1,532 million in second quarter 2007. In US dollar terms, operating expenses were down 1% in comparison with second quarter 2007.

Personnel expenses were CHF 1,146 million in third quarter 2007, up 1% from CHF 1,137 million in second quarter 2007. In US dollar terms, personnel expenses rose 2% from second quarter 2007. This is a result of increased financial advisor compensation related to higher compensable revenue, and a rise in salary costs from continued investment spending for strategic growth and service initiatives, including the hiring of related staff. Additionally, employee levels were reduced in the IT area, increasing severance costs.

Non-personnel expenses, which include general and administrative, depreciation and amortization expenses, and services provided to and received from other business units, fell 11% to CHF 351 million in third quarter 2007 from CHF 395 million in second quarter 2007. This was mostly driven by a decline in legal and litigation costs. In US dollar terms, non-personnel expenses decreased 10% from second quarter 2007.

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