Group results

2Q08 vs 2Q07:

Total operating income declined to CHF 4,021 million from CHF 16,014 million.

First half 2008 vs first half 2007:

Total operating income declined to CHF 69 million from CHF 29,500 million.

Net interest income and net trading income

2Q08 vs 2Q07:

Net interest income increased to CHF 1,236 million from CHF 829 million.

Net trading income declined to negative CHF 3,543 million compared with positive CHF 4,374 million.

First half 2008 vs first half 2007:

Net interest income rose to CHF 2,915 million from CHF 2,137 million.

Net trading income declined to negative CHF 15,186 million, compared with positive CHF 9,041 million.

As well as income from interest margin-based activities (loans and deposits), net interest income includes income earned as a result of trading activities (for example, coupon and dividend income). The dividend income component of interest income is volatile from period-to-period, depending on the composition of the trading portfolio. In order to provide a better explanation of the movements in net interest income and net trading income, an analysis of the total according to the business activities that give rise to the income is shown below.

Net income from trading businesses

2Q08 vs 2Q07:

Net income from trading businesses dropped to negative CHF 3,935 million from positive CHF 3,359 million. Income was impacted by the losses mentioned above. See Note 3 to the financial statements of this report, the discussion of revenues of the FICC area of the Investment Bank and the discussion of risk concentrations of this report for further details on these losses.

As a result of the tightening of UBS's credit spread in second quarter 2008, the Investment Bank recorded a loss on own credit of CHF 122 million in net trading income. This is a partial reversal from gains recorded in fourth quarter 2007 and first quarter 2008, as UBS's credit spread widened during these periods.

During second quarter 2008, UBS significantly reduced its exposure to the US residential real estate market and other risk concentrations. The sale of US residential mortgage-backed securities (RMBSs) to a fund managed by BlackRock, as announced in May 2008, marked a significant step in this ongoing risk reduction exercise. UBS will continue to manage its remaining exposure to the US real estate market through a separate work-out portfolio unit. In view of the significant reductions in risk exposures in second quarter 2008, however, UBS may determine not to place a subset of this portfolio into a new, wholly-owned entity, as originally envisaged.

FICC trading results were significantly impacted by the losses and writedowns mentioned above. Rates revenues increased, driven by increased revenues in derivatives swaps and options in Europe. Credit revenues were impacted by positions in proprietary strategies and adverse market conditions.

Equities trading revenues were down in the context of difficult trading conditions. While cash equities posted increased revenues, both derivatives and equity-linked suffered from adverse trading conditions. Proprietary trading revenues increased from the same period last year.

First half 2008 vs first half 2007:

Net income from trading businesses dropped to negative CHF 19,697 million from positive CHF 7,633 million. Losses and writedowns on risk positions were most pronounced in first quarter 2008.

As a result of the widening of UBS's own credit spread that occurred in first half 2008, the Investment Bank recorded gains on own credit of CHF 1,981 million in net trading income. These gains will reverse if credit spreads tighten again, as occured in second quarter 2008.

Net income from interest margin businesses

2Q08 vs 2Q07:

At CHF 1,526 million, net income from interest margin businesses was down by 1% from CHF 1,546 million. Higher loan and savings volumes at Wealth Management International & Switzerland were offset by lower income from mortgages, which saw margin pressure and an increase of client rate for savings accounts in first quarter 2008 at Business Banking Switzerland.

First half 2008 vs first half 2007:

Net income from interest margin businesses was up by 3% to CHF 3,107 million from CHF 3,012 million.

Net income from treasury activities and other

2Q08 vs 2Q07:

Net income from treasury activities and other was CHF 102 million, down from CHF 298 million. This difference was primarily due to a lower return achieved on the lower equity base and negative contributions from the management of the currency risk at Group level.

First half 2008 vs first half 2007:

Net income from treasury activities and other was CHF 4,318 million, up from CHF 533 million. This increase was primarily due to a gain of CHF 3,860 million in first quarter 2008 resulting from the accounting treatment of mandatory convertible notes (MCN) issued on 5 March 2008.

Net fee and commission income

2Q08 vs 2Q07:

Net fee and commission income was CHF 6,221 million, down by 21% from CHF 7,846 million. Income declined in all major fee categories, as outlined below:

First half 2008 vs first half 2007:

Net fee and commission income was CHF 12,436 million, down by 18% from CHF 15,110 million. Income declined in all major fee categories, as outlined below:

Other income

2Q08 vs 2Q07:

Other income was CHF 125 million, a decrease from CHF 2,951 million. The main driver for this variation was the sale of the stake in Julius Baer completed in second quarter 2007.

First half 2008 vs first half 2007:

Other income was CHF 233 million, a decrease from CHF 3,197 million. The main driver for this variation was the sale of the stake in Julius Baer completed in first half 2007.