UBS AG
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Annual Reporting 2005  
Annual Review Financial Report Handbook
     
Introduction
Presentation of Financial Information
Performance Indicators
Financial Businesses
Industrial Holdings
Balance Sheet and Cash Flows
Accounting Standards and Policies
Financial Statements
Notes to the Financial Statements
UBS AG (Parent Bank)
Additional Disclosure Required under SEC Regulations
 

D – Information Required by Industry Guide 3
D – Information Required by Industry Guide 3

Selected Statistical Information

The tables below set forth selected statistical information regarding the Group’s banking operations extracted from the Financial Statements. Unless otherwise indicated, average balances for the years ended 31 December 2005, 31 December 2004 and 31 December 2003 are calculated from monthly data. The distinction between domestic and foreign is generally based on the booking location. For loans, this method is not significantly different from an analysis based on the domicile of the borrower.

Average Balances and Interest Rates

The following table sets forth average interest-earning assets and average interest-bearing liabilities, along with the average rates, for the years ended 31 December 2005, 2004 and 2003.

31.12.05

31.12.04

31.12.03

CHF million, except where indicated

Average

balance

Interest

Average

rate (%)

Average

balance

Interest

Average

rate (%)

Average

balance

Interest

Average

rate (%)

Assets

Due from banks

Domestic

15,467

270

1.7

12,463

154

1.2

11,417

158

1.4

Foreign

25,497

1,334

5.2

23,843

397

1.7

21,317

1,064

5.0

Cash collateral on securities borrowed and

reverse repurchase agreements

Domestic

33,012

1,079

3.3

17,969

457

2.5

6,576

200

3.0

Foreign

787,389

22,562

2.9

710,065

10,549

1.5

582,066

10,948

1.9

Trading portfolio assets

Domestic

15,545

457

2.9

10,122

336

3.3

7,990

219

2.7

Foreign taxable

580,763

23,630

4.1

513,922

18,914

3.7

421,413

18,151

4.3

Foreign non-taxable

3,390

58

1.7

2,309

27

1.2

1,668

21

1.3

Foreign total

584,153

23,688

4.1

516,231

18,941

3.7

423,081

18,172

4.3

Financial assets designated at fair value

Domestic

616

0

196

0

0

0

Foreign

691

26

3.8

0

0

0

0

Loans

Domestic

174,299

5,424

3.1

168,456

5,308

3.2

165,397

6,357

3.8

Foreign

81,264

3,241

4.0

60,145

1,813

3.0

51,459

1,805

3.5

Financial investments

Domestic

1,036

3

0.3

1,132

17

1.5

1,988

27

1.4

Foreign taxable

3,546

83

2.3

3,000

21

0.7

2,880

30

1.0

Foreign non-taxable

0

0

0.0

0

0

0.0

Foreign total

3,546

83

2.3

3,000

21

0.7

2,880

30

1.0

Total interest-earning assets

1,722,515

58,167

3.4

1,523,622

37,993

2.5

1,274,171

38,980

3.1

Net interest on swaps

1,119

1,235

1,065

Interest income and average

interest-earning assets

1,722,515

59,286

3.4

1,523,622

39,228

2.6

1,274,171

40,045

3.1

Non-interest-earning assets

Positive replacement values

319,698

246,952

249,155

Fixed assets

9,308

8,808

12,874

Other

55,125

53,087

29,750

Total average assets

2,106,646

1,832,469

1,565,950

31.12.05

31.12.04

31.12.03

CHF million, except where indicated

Average
balance

Interest

Average
rate (%)

Average

balance

Interest

Average

rate (%)

Average

balance

Interest

Average

rate (%)

Liabilities and Equity

Due to banks

Domestic

35,713

897

2.5

31,129

385

1.2

28,719

116

0.4

Foreign

92,431

3,321

3.6

96,335

1,582

1.6

74,695

1,747

2.3

Cash collateral on securities

lent and repurchase agreements

Domestic

40,772

881

2.2

33,846

489

1.4

23,287

295

1.3

Foreign

661,722

19,745

3.0

614,295

9,525

1.6

515,665

9,328

1.8

Trading portfolio liabilities

Domestic

3,632

145

4.0

3,717

180

4.8

3,252

156

4.8

Foreign

173,394

10,591

6.1

161,286

7,813

4.8

127,104

9,769

7.7

Financial liabilities designated at fair value

Domestic

638

5

0.8

85

1

1.2

0

0

Foreign

86,688

2,385

2.8

49,234

1,167

2.4

22,445

751

3.3

Due to customers

Domestic demand deposits

67,987

292

0.4

67,005

167

0.2

55,496

100

0.2

Domestic savings deposits

86,373

404

0.5

84,112

414

0.5

81,963

527

0.6

Domestic time deposits

24,245

386

1.6

19,052

250

1.3

21,125

357

1.7

Domestic total

178,605

1,082

0.6

170,169

831

0.5

158,584

984

0.6

Foreign 1

236,228

5,760

2.4

192,992

2,677

1.4

161,738

2,149

1.3

Short-term debt

Domestic

1,584

20

1.3

246

0

64

0

0.0

Foreign

96,767

2,905

3.0

79,902

1,338

1.7

73,193

1,015

1.4

Long-term debt

Domestic

4,250

117

2.8

10,358

168

1.6

6,413

188

2.9

Foreign

43,035

1,904

4.4

28,259

1,328

4.7

30,805

1,286

4.2

Total interest-bearing liabilities

1,655,459

49,758

3.0

1,471,853

27,484

1.9

1,225,964

27,784

2.3

Non-interest-bearing liabilities

Negative replacement values

335,992

260,629

254,819

Other

70,292

60,482

46,025

Total liabilities

2,061,743

1,792,964

1,526,808

Equity attributable to UBS shareholders

44,903

39,505

39,142

Total average liabilities and equity

2,106,646

1,832,469

1,565,950

attributable to UBS shareholders

Net interest income

9,528

11,744

12,261

Net yield on interest-earning assets

0.6

0.8

1.0

1 Due to customers in foreign offices consists mainly of time deposits.

The percentage of total average interest-earning assets attributable to foreign activities was 86% for 2005 (86% for 2004 and 85% for 2003). The percentage of total average interest-bearing liabilities attributable to foreign activities was 84% for 2005 (83% for 2004 and 82% for 2003). All assets and liabilities are translated into CHF at uniform month-end rates. Interest income and expense are translated at monthly average rates.

Average rates earned and paid on assets and liabilities can change from period to period based on the changes in interest rates in general, but are also affected by changes in the currency mix included in the assets and liabilities. This is especially true for foreign assets and liabilities. Tax-exempt income is not recorded on a tax-equivalent basis. For all three years presented, tax-exempt income is considered to be insignificant and the impact from such income is therefore negligible.

Analysis of Changes in Interest Income and Expense

2005 compared with 2004

2004 compared with 2003

Increase / (decrease)
due to changes in

Increase / (decrease)
due to changes in

CHF million

Average volume

Average rate

Net change

Average volume

Average rate

Net change

Interest income from interest-earning assets

Due from banks

Domestic

36

80

116

15

(19)

(4)

Foreign

28

909

937

126

(793)

(667)

Cash collateral on securities borrowed and reverse repurchase agreements

Domestic

376

246

622

342

(85)

257

Foreign

1,160

10,853

12,013

2,432

(2,831)

(399)

Trading portfolio assets

Domestic

179

(58)

121

58

59

117

Foreign taxable

2,473

2,243

4,716

3,978

(3,215)

763

Foreign non-taxable

13

18

31

8

(2)

6

Foreign total

2,486

2,261

4,747

3,986

(3,217)

769

Financial assets designated at fair value

Domestic

0

0

0

0

0

0

Foreign

26

0

26

0

0

0

Loans

Domestic

187

(71)

116

116

(1,165)

(1,049)

Foreign

634

794

1,428

304

(296)

8

Financial investments

Domestic

(1)

(13)

(14)

(12)

2

(10)

Foreign taxable

4

58

62

1

(10)

(9)

Foreign non-taxable

0

0

0

0

0

0

Foreign total

4

58

62

1

(10)

(9)

Interest income

Domestic

777

184

961

519

(1,208)

(689)

Foreign

4,338

14,875

19,213

6,849

(7,147)

(298)

Total interest income from interest-earning assets

5,115

15,059

20,174

7,368

(8,355)

(987)

Net interest on swaps

(116)

170

Total interest income

20,058

(817)

Interest expense on interest-bearing liabilities

Due to banks

Domestic

55

457

512

10

259

269

Foreign

(62)

1,801

1,739

498

(663)

(165)

Cash collateral on securities lent and repurchase agreements

Domestic

97

295

392

137

57

194

Foreign

759

9,461

10,220

1,775

(1,578)

197

Trading portfolio liabilities

Domestic

(4)

(31)

(35)

22

2

24

Foreign

581

2,197

2,778

2,632

(4,588)

(1,956)

Financial liabilities designated at fair value

Domestic

7

(3)

4

0

1

1

Foreign

899

319

1,218

884

(468)

416

Due to customers

Domestic demand deposits

2

123

125

23

44

67

Domestic savings deposits

11

(21)

(10)

13

(126)

(113)

Domestic time deposits

68

68

136

(35)

(72)

(107)

Domestic total

81

170

251

1

(154)

(153)

Foreign

605

2,478

3,083

406

122

528

Short-term debt

Domestic

20

0

20

0

0

0

Foreign

287

1,280

1,567

94

229

323

Long-term debt

Domestic

(98)

47

(51)

114

(134)

(20)

Foreign

694

(118)

576

(107)

149

42

Interest expense

Domestic

158

935

1,093

284

31

315

Foreign

3,763

17,418

21,181

6,182

(6,797)

(615)

Total interest expense

3,921

18,353

22,274

6,466

(6,766)

(300)

Deposits

The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2005, 2004 and 2003. The geographic allocation is based on the location of the office or branch where the deposit is made. Deposits by foreign depositors in domestic offices were CHF 54,968 million, CHF 49,699 million and CHF 49,857 million at 31 December 2005, 31 December 2004 and 31 December 2003, respectively.

31.12.05

31.12.04

31.12.03

CHF million, except where indicated

Average
deposit

Average
rate (%)

Average
deposit

Average
rate (%)

Average
deposit

Average
rate (%)

Banks

Domestic offices

Demand deposits

8,491

0.1

7,770

0.1

3,836

0.0

Time deposits

6,976

3.3

4,693

1.7

7,581

0.6

Total domestic offices

15,467

1.5

12,463

0.7

11,417

0.4

Foreign offices

Interest-bearing deposits 1

25,497

3.6

23,843

1.6

21,317

2.4

Total due to banks

40,964

2.8

36,306

1.3

32,734

1.7

Customer accounts

Domestic offices

Demand deposits

67,987

0.4

67,005

0.2

55,496

0.2

Savings deposits

86,373

0.5

84,112

0.5

81,963

0.6

Time deposits

24,245

1.6

19,052

1.3

21,125

1.7

Total domestic offices

178,605

0.6

170,169

0.5

158,584

0.6

Foreign offices

Interest-bearing deposits 1

236,228

2.4

192,992

1.4

161,738

1.3

Total due to customers

414,833

1.6

363,161

1.0

320,322

1.0

1 Mainly time deposits.

At 31 December 2005, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:

CHF million

Domestics

Foreign

Within 3 months

26,427

179,430

3 to 6 months

1,588

3,779

6 to 12 months

823

2,745

1 to 5 years

581

1,606

Over 5 years

296

60

Total time deposits

29,715

187,620

Money market paper issued

Due to banks

Repurchase agreements 1

CHF million, except where indicated

31.12.05

31.12.04

31.12.03

31.12.05

31.12.04

31.12.03

31.12.05

31.12.04

31.12.03

Period-end balance

102,662

79,442

58,115

90,651

84,351

90,615

667,317

557,892

500,592

Average balance

98,351

80,148

73,257

87,180

91,158

70,680

628,362

587,988

498,679

Maximum month-end balance

112,217

94,366

92,605

101,178

115,880

96,694

719,208

637,594

593,738

Average interest rate during the period (%)

3.0

1.7

1.4

3.3

1.6

2.8

3.0

1.5

1.8

Average interest rate at period-end (%)

4.0

2.1

1.3

3.0

2.0

1.5

2.6

2.0

1.3

1 For the purpose of this disclosure, balances are presented on a gross basis.

Contractual Maturities of Investments in Debt Instruments 1,2

Within 1 year

1–5 years

5–10 years

Over 10 years

CHF million, except percentages

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

31 December 2005

Swiss national government and agencies

0

0.00

2

4.36

0

0.00

1

4.00

Swiss local governments

0

0.00

0

0.00

0

0.00

0

0.00

US Treasury and agencies

0

0.00

42

5.51

10

5.77

12

6.03

Foreign governments and official institutions

38

1.91

2

1.90

5

5.64

2

6.17

Corporate debt securities

13

3.20

239

4.25

66

5.38

103

5.66

Mortgage-backed securities

0

0.00

0

0.00

14

3.92

129

4.80

Other debt securities

0

0.00

0

0.00

0

0.00

0

0.00

Total fair value

51

285

95

247

Within 1 year

1–5 years

5–10 years

Over 10 years

CHF million, except percentages

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

31 December 2004

Swiss national government and agencies

1

5.50

2

4.29

6

3.80

1

4.00

Swiss local governments

10

3.97

10

4.14

0

0.00

0

0.00

Foreign governments and official institutions

36

2.13

4

1.25

0

0.00

0

0.00

Corporate debt securities

57

2.74

50

2.92

0

0.00

33

0.00

Mortgage-backed securities

3

2.50

0

0.00

5

3.21

64

4.36

Other debt securities

0

0.00

0

0.00

0

0.00

0

0.00

Total fair value

107

66

11

98

Within 1 year

1–5 years

5–10 years

Over 10 years

CHF million, except percentages

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

Amount

Yield (%)

31 December 2003

Swiss national government and agencies

3

6.61

4

2.92

6

3.80

1

4.00

Swiss local governments

5

3.90

20

2.01

0

0.00

0

0.00

Foreign governments and official institutions

45

1.89

9

1.49

0

0.00

0

0.00

Corporate debt securities

81

1.09

68

3.53

7

7.38

0

0.00

Mortgage-backed securities

0

0.00

0

0.00

0

0.00

0

0.00

Other debt securities

4

0.00

8

0.00

0

0.00

0

0.00

Total fair value

138

109

13

1

1 Money market paper has a contractual maturity of less than one year.  2 Average yields are calculated on an amortized cost basis for all years presented.

Due from Banks and Loans (gross)

Loans are widely dispersed over industry sectors both within and outside Switzerland. With the exception of private households (foreign and domestic), banks and financial institutions outside Switzerland, and real estate and rentals in Switzerland, there is no material concentration of loans. For further discussion of the loan portfolio, see the Handbook 2005/2006. The following table illustrates the diversification of the loan portfolio among industry sectors at 31 December 2005, 2004, 2003, 2002 and 2001. The industry categories presented are consistent with the classification of loans for reporting to the Swiss Federal Banking Commission and Swiss National Bank.

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Domestic 1

Banks

1,407

1,406

619

1,029

1,533

Construction

1,816

1,943

2,175

2,838

3,499

Financial institutions

4,213

4,332

4,009

4,301

5,673

Hotels and restaurants

2,044

2,269

2,440

2,655

2,950

Manufacturing 2

5,038

5,485

6,478

7,237

8,686

Private households

111,549

105,160

102,180

95,295

93,746

Public authorities

5,494

5,460

5,251

5,529

5,222

Real estate and rentals

11,792

11,466

12,449

13,573

14,992

Retail and wholesale

4,808

4,908

6,062

7,172

8,674

Services 3

9,300

9,110

9,493

10,237

12,161

Other 4

1,004

591

1,014

1,722

1,860

Total domestic

158,465

152,130

152,170

151,588

158,996

Foreign 1

Banks

32,282

34,269

31,405

31,882

26,728

Chemicals

2,716

366

245

519

1,080

Construction

295

122

84

153

266

Electricity, gas and water supply

1,637

745

249

1,105

977

Financial institutions

52,365

35,459

23,493

18,378

14,458

Manufacturing 5

3,899

2,758

2,421

2,300

4,258

Mining

2,694

1,695

1,114

868

1,313

Private households

38,280

30,237

21,195

33,063

25,619

Public authorities

1,501

1,228

1,224

2,628

6,454

Real estate and rentals

2,707

940

473

616

10,227

Retail and wholesale

1,257

1,102

1,880

1,367

1,732

Services

5,596

8,002

7,983

1,654

4,786

Transport, storage and communication

1,419

762

3,658

676

2,117

Other 6

156

318

432

2,314

2,956

Total foreign

146,804

118,003

95,856

97,523

102,971

Total gross

305,269

270,133

248,026

249,111

261,967

1 Includes Due from banks and Loans from Industrial Holdings of CHF 728 million at 31 December 2005, CHF 909 million at 31 December 2004 and CHF 220 million at 31 December 2003.  2 Includes chemicals, food and beverages.  3 Includes transportation, communication, health and social work, education and other social and personal service activities.  4 Includes mining and electricity, gas and water supply.  5 Includes food and beverages.  6 Includes hotels and restaurants.

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Mortgages

Domestic

130,880

124,496

122,069

116,359

116,628

Foreign

15,619

12,185

7,073

11,510

9,583

Total gross mortgages

146,499

136,681

129,142

127,869

126,211

Mortgages

Residential

127,990

117,731

109,980

108,779

101,969

Commercial

18,509

18,950

19,162

19,090

24,242

Total gross mortgages

146,499

136,681

129,142

127,869

126,211

Due from Banks and Loan Maturities (gross)

The following table discloses loans by maturity at 31 December 2005. The determination of maturities is based on contract terms. Information on interest rate sensitivities can be found in Note 28 to the Financial Statements.

CHF million

Within 1 year

1 to 5 years

Over 5 years

Total

Domestic

Banks

1,101

294

12

1,407

Mortgages

51,060

65,686

14,134

130,880

Other loans

19,372

5,318

1,488

26,178

Total domestic

71,533

71,298

15,634

158,465

Foreign

Banks

30,542

1,523

217

32,282

Mortgages

13,956

1,381

282

15,619

Other loans

88,568

8,155

2,180

98,903

Total foreign

133,066

11,059

2,679

146,804

Total gross 1

204,599

82,357

18,313

305,269

At 31 December 2005, the total amounts of Due from banks and loans due after one year granted at fixed and floating rates are as follows:

CHF million

1 to 5 years

Over 5 years

Total

Fixed-rate loans

79,139

16,923

96,062

Adjustable or floating-rate loans

3,218

1,390

4,608

Total

82,357

18,313

100,670

1 Includes Due from banks from Industrial Holdings of CHF 728 million at 31 December 2005.

Impaired and Non-performing Loans

A loan (included in Due from banks or Loans) is classified as non-performing: 1) when the payment of interest, principal or fees is overdue by more than 90 days and there is no firm evidence that they will be made good by later payments or the liquidation of collateral; 2) when insolvency proceedings have commenced; or 3) when obligations have been restructured on concessionary terms.

The gross interest income that would have been recorded on non-performing loans was CHF 81 million for domestic loans and CHF 8 million for foreign loans for the year ended 31 December 2005, CHF 107 million for domestic loans and CHF 17 million for foreign loans for the year ended 31 December 2004, CHF 171 million for domestic loans and CHF 23 million for foreign loans for the year ended 31 December 2003, CHF 148 million for domestic loans and CHF 53 million for foreign loans for the year ended 31 December 2002 and CHF 336 million for all non-performing loans for the year ended 31 December 2001.

The amount of interest income that was included in net income for those loans was CHF 72 million for domestic loans and CHF 9 million for foreign loans for the year ended 31 December 2005, CHF 106 million for domestic loans and CHF 8 million for foreign loans for the year ended 31 December 2004, CHF 163 million for domestic loans and CHF 8 million for foreign loans for the year ended 31 December 2003, CHF 152 million for domestic loans and CHF 22 million for foreign loans for the year ended 31 December 2002 and CHF 201 million for all non-performing loans for the year ended 31 December 2001. The table below provides an analysis of the Group’s non-performing loans. For further information see the Handbook 2005/2006.

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Non-performing loans:

Domestic

2,106

2,772

4,012

4,609

6,531

Foreign

257

783

746

1,170

1,882

Total non-performing loans

2,363

3,555

4,758

5,779

8,413

UBS does not, as a matter of policy, typically restructure loans to accrue interest at rates different from the original contractual terms or reduce the principal amount of loans. Instead, specific loan allowances are established as necessary. Unrecognized interest related to restructured loans was not material to the results of operations in 2005, 2004, 2003, 2002 or 2001. In addition to the non-performing loans shown above, the Group had CHF 1,071 million, CHF 1,144 million, CHF 2,241 million, CHF 3,875 million and CHF 5,990 million in “other impaired loans” for the years ended 31 December 2005, 2004, 2003, 2002 and 2001, respectively. For the years ended 31 December 2003, 2002 and 2001, these are loans that are current or less than 90 days in arrears with respect to payment of principal or interest; and for the years ended 31December2005 and 2004, these are loans not considered “non-performing” in accordance with Swiss regulatory guidelines, but where the Group’s credit officers have expressed doubts as to the ability of the borrowers to repay the loans. As at 31 December 2005 and 31 December 2004, specific allowances of CHF 200 million and CHF 241 million, respectively, had been established against these loans.

Cross-Border Outstandings

Cross-border outstandings consist of general banking products such as loans (including unutilized commitments) and deposits with third parties, credit equivalents of over-the-counter (OTC) derivatives and repurchase agreements, and the market value of the inventory of securities. Outstandings are monitored and reported on an ongoing basis by the credit risk management and control organization with a dedicated country risk information system. With the exception of the 32 most developed economies, these exposures are rigorously limited. The following analysis excludes Due from banks and Loans from Industrial Holdings.

Claims that are secured by third-party guarantees are recorded against the guarantor’s country of domicile. Outstandings that are secured by collateral are recorded against the country where the asset could be liquidated. This follows the “Guidelines for the Management of Country Risk”, which are applicable to all banks that are supervised by the Swiss Federal Banking Commission.

The following tables list those countries for which cross-border outstandings exceeded 0.75% of total assets at 31 December 2005, 2004 and 2003. At 31 December 2005, there were no outstandings that exceeded 0.75% of total assets in any country currently facing liquidity problems that the Group expects would materially affect the country’s ability to service its obligations.

For more information on cross-border exposure, see the Handbook 2005/2006.

31.12.05

CHF million

Banks

Private Sector

Public Sector

Total

% of total assets

United States

6,878

140,905

23,855

171,638

8.3

Germany

17,037

10,202

1,338

28,577

1.4

Japan

2,670

8,975

11,015

22,660

1.1

United Kingdom

6,515

13,351

624

20,490

1.0

Italy

3,432

3,012

11,370

17,814

0.9

31.12.04

CHF million

Banks

Private Sector

Public Sector

Total

% of total assets

United States

8,733

114,202

9,150

132,085

7.6

Germany

18,666

5,977

7,351

31,994

1.8

Italy

4,588

2,699

16,803

24,090

1.4

Japan

1,366

10,409

9,472

21,247

1.2

United Kingdom

8,321

11,929

328

20,578

1.2

France

5,559

6,835

2,776

15,170

0.9

31.12.03

CHF million

Banks

Private Sector

Public Sector

Total

% of total assets

United States

10,125

108,461

8,138

126,724

8.2

Italy

4,747

2,233

18,289

25,269

1.6

Germany

17,499

5,884

1,270

24,654

1.6

United Kingdom

8,340

11,344

550

20,234

1.3

France

4,841

5,604

4,271

14,716

0.9

Japan

1,630

7,845

4,001

13,477

0.9

Summary of Movements in Allowances and Provisions for Credit Losses

The following table provides an analysis of movements in allowances and provisions for credit losses. The following analysis includes Due from banks from Industrial Holdings. UBS writes off loans against allowances only on final settlement of bankruptcy proceedings, the sale of the underlying assets and / or in case of debt forgiveness. Under Swiss law, a creditor can continue to collect from a debtor who has emerged from bankruptcy, unless the debt has been forgiven through a formal agreement.

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Balance at beginning of year

2,802

3,775

5,015

7,992

10,581

Domestic

Write-offs

Banks

0

0

0

0

0

Construction

(16)

(49)

(73)

(148)

(248)

Financial institutions

(14)

(24)

(37)

(103)

(51)

Hotels and restaurants

(26)

(101)

(57)

(48)

(52)

Manufacturing 1

(39)

(77)

(121)

(275)

(109)

Private households

(131)

(208)

(262)

(536)

(1,297)

Public authorities

0

0

(18)

0

0

Real estate and rentals

(56)

(109)

(206)

(357)

(317)

Retail and wholesale

(25)

(68)

(67)

(101)

(115)

Services 2

(35)

(83)

(111)

(155)

(93)

Other 3

(4)

(9)

(43)

(49)

(46)

Total domestic write-offs

(346)

(728)

(995)

(1,772)

(2,328)

Foreign

Write-offs

Banks

(164)

(21)

(17)

(49)

(24)

Chemicals

0

(1)

0

0

(2)

Construction

0

(3)

0

0

(10)

Electricity, gas and water supply

0

0

0

(36)

(63)

Financial institutions

(50)

(34)

(112)

(228)

(74)

Manufacturing 4

(8)

(23)

(77)

(70)

(119)

Mining

(23)

(8)

(15)

(1)

(304)

Private households

(21)

(8)

(11)

(65)

(5)

Public authorities

(22)

(2)

0

(1)

0

Real estate and rentals

(3)

0

(1)

(2)

(1)

Retail and wholesale

(9)

0

(76)

(10)

0

Services

0

(7)

(25)

(39)

(30)

Transport, storage and communication

0

0

(24)

(74)

0

Other 5

(5)

(21)

(83)

(189)

(48)

Total foreign write-offs

(305)

(128)

(441)

(764)

(680)

Total write-offs

(651)

(856)

(1,436)

(2,536)

(3,008)

1 Includes chemicals, food and beverages.  2 Includes transportation, communication, health and social work, education and other social and personal service activities.  3 Includes mining and electricity, gas and water supply.  4 Includes food and beverages.  5 Includes hotels and restaurants.

Summary of Movements in Allowances and Provisions for Credit Losses

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Recoveries

Domestic

53

54

49

43

58

Foreign

10

5

38

27

23

Total recoveries

63

59

87

70

81

Net write-offs

(588)

(797)

(1,349)

(2,466)

(2,927)

Increase / (decrease) in credit loss allowance and provision

(298)

(216)

102

115

498

Collective loan loss provisions

(76)

(25)

Other adjustments 1

(64)

65

7

(626)

(160)

Balance at end of year

1,776

2,802

3,775

5,015

7,992

1 See table below for details

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Net foreign exchange

50

2

(57)

(269)

44

Subsidiaries sold and other adjustments

(114)

63

64

(357)

(204)

Total adjustments

(64)

65

7

(626)

(160)

Allocation of the Allowances and Provisions for Credit Losses

The following table provides an analysis of the allocation of the allowances and provisions for credit loss by industry sector and geographic location at 31 December 2005, 2004, 2003, 2002 and 2001. For a description of procedures with respect to allowances and provisions for credit losses, see the Handbook 2005/2006. The following analysis includes Due from banks from Industrial Holdings.

CHF million

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Domestic

Banks

10

10

10

10

34

Construction

91

112

158

265

467

Financial institutions

75

82

137

89

262

Hotels and restaurants

49

98

214

286

346

Manufacturing 1

174

224

327

458

722

Private households

262

333

511

750

1,082

Public authorities

8

9

9

39

37

Real estate and rentals

168

250

383

577

1,067

Retail and wholesale

330

363

201

315

395

Services 2

196

222

549

470

448

Other 3

61

188

150

225

165

Total domestic

1,425

1,891

2,649

3,484

5,025

Foreign

Banks 4

35

246

256

24

39

Chemicals

5

4

5

5

5

Construction

2

1

0

6

0

Electricity, gas and water supply

15

15

0

96

88

Financial institutions

8

140

168

153

420

Manufacturing 5

57

112

359

314

653

Mining

1

14

19

148

169

Private households

30

48

48

58

103

Public authorities

72

66

69

0

0

Real estate and rentals

3

5

7

6

9

Retail and wholesale

1

95

51

13

0

Services

27

32

32

262

414

Transport, storage and communication

0

1

195

144

45

Other 6

8

(75)

(345)

(394)

25

Total foreign

265

704

864

835

1,970

Collective loan loss provisions 7

86

207

262

696

1,006

Total allowances and provisions for credit losses 8

1,776

2,802

3,775

5,015

8,001

1 Includes chemicals, food and beverages.  2 Includes transportation, communication, health and social work, education and other social and personal service activities.  3 Includes mining and electricity, gas and water supply.  4 Counterparty allowances and provisions only. Country provisions with banking counterparties amounting to CHF 37 million are disclosed under Collective loan loss provisions for 2005 and CHF 17 million for 2004.  5 Includes food and beverages.  6 Includes hotels and restaurants.  7 The 2005, 2004, 2003, 2002 and 2001 amounts include CHF 48 million, CHF 161 million, CHF 262 million, CHF 696 million and CHF 1,006 million, respectively, of country provisions.  8 The 2005, 2004, 2003, 2002 and 2001 amounts include CHF 109 million, CHF 214 million, CHF 290 million, CHF 366 million and CHF 305 million, respectively, of provisions for unused commitments and contingent claims.

Due from Banks and Loans by Industry Sector (gross)

The following table presents the percentage of loans in each industry sector and geographic location to total loans. This table can be read in conjunction with the preceding table showing the breakdown of the allowances and provisions for credit losses by industry sector to evaluate the credit risks in each of the categories.

in %

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Domestic 1

Banks

0.5

0.5

0.2

0.4

0.6

Construction

0.6

0.7

0.9

1.1

1.3

Financial institutions

1.4

1.6

1.6

1.7

2.2

Hotels and restaurants

0.7

0.8

1.0

1.1

1.1

Manufacturing 2

1.6

2.0

2.6

2.9

3.3

Private households

36.5

39.0

41.2

38.3

35.8

Public authorities

1.8

2.0

2.1

2.2

2.0

Real estate and rentals

3.9

4.3

5.0

5.4

5.7

Retail and wholesale

1.6

1.8

2.4

2.9

3.3

Services 3

3.0

3.4

3.8

4.1

4.7

Other 4

0.3

0.2

0.6

0.8

0.7

Total domestic

51.9

56.3

61.4

60.9

60.7

Foreign 1

Banks

10.6

12.7

12.7

12.8

10.2

Chemicals

0.9

0.1

0.1

0.2

0.4

Construction

0.1

0.1

0.0

0.1

0.1

Electricity, gas and water supply

0.5

0.3

0.1

0.4

0.4

Financial institutions

17.1

13.1

9.5

7.4

5.5

Manufacturing 5

1.3

1.0

1.0

0.9

1.6

Mining

0.9

0.6

0.4

0.3

0.5

Private households

12.5

11.2

8.5

13.3

9.8

Public authorities

0.5

0.5

0.5

1.1

2.5

Real estate and rentals

0.9

0.3

0.2

0.2

3.9

Retail and wholesale

0.4

0.4

0.8

0.5

0.7

Services

1.8

3.0

3.2

0.7

1.8

Transport, storage and communication

0.5

0.3

1.5

0.3

0.8

Other 6

0.1

0.1

0.1

0.9

1.1

Total foreign

48.1

43.7

38.6

39.1

39.3

Total gross

100.0

100.0

100.0

100.0

100.0

1 Includes Due from banks and Loans from Industrial Holdings in the amount of CHF 728 million for 2005, CHF 909 million for 2004 and CHF 220 million for 2003.  2 Includes chemicals, food and beverages.  3 Includes transportation, communication, health and social work, education and other social and personal service activities.  4 Includes mining and electricity, gas and water supply.   5 Includes food and beverages.  6 Includes hotels and restaurants.

Loss History Statistics

The following is a summary of the Group’s loan loss history (relating to Due from banks and loans).

CHF million, except where indicated

31.12.05

31.12.04

31.12.03

31.12.02

31.12.01

Gross loans

305,269 1

270,133 1

248,026 1

249,111

261,967

Impaired loans

3,434

4,699

6,999

9,654

14,403

Non-performing loans

2,363

3,555

4,758

5,779

8,413

Allowances and provisions for credit losses 2

1,776

2,802

3,775

5,015

8,001

Net write-offs

588

797

1,349

2,466

2,927

Credit loss (expense) / recovery

375

241

(102)

(115)

(498)

Ratios

Impaired loans as a percentage of gross loans

1.1

1.7

2.8

3.9

5.5

Non-performing loans as a percentage of gross loans

0.8

1.3

1.9

2.3

3.2

Allowances and provisions for credit losses as a percentage of:

Gross loans

0.6

1.0

1.5

2.0

3.1

Impaired loans

51.7

59.6

53.9

52.7

55.6

Non-performing loans

75.2

78.8

79.3

86.8

95.1

Allocated allowances as a percentage of impaired loans 3

46.4

51.6

46.8

44.8

46.1

Allocated allowances as a percentage of non-performing loans 4

59.0

61.4

55.1

56.0

60.8

Net write-offs as a percentage of:

Gross loans

0.2

0.3

0.5

1.0

1.1

Average loans outstanding during the period

0.2

0.3

0.5

1.0

2.2

Allowances and provisions for credit losses

33.1

28.5

35.7

49.2

36.6

Allowances and provisions for credit losses as a multiple of net write-offs

3.02

3.51

2.80

2.03

2.73

1 Includes Due from banks and Loans from Industrial Holdings in the amount of CHF 728 million for 2005, CHF 909 million for 2004 and CHF 220 million for 2003.  2 Includes collective loan loss provisions.  3 Allowances relating to impaired loans only.  4 Allowances relating to non-performing loans only.

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