UBS AG
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Relazioni 2006  
Retrospettiva Financial Report Handbook
     
Introduction
Presentation of Financial Information
UBS
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 2006, 31 December 2005 and 31 December 2004 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 2006, 2005 and 2004.

31.12.06

31.12.05

31.12.04

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

10,800

587

5.4

15,467

270

1.7

12,463

154

1.2

Foreign

29,814

1,490

5.0

25,497

1,334

5.2

23,843

397

1.7

Cash collateral on securities borrowed and reverse repurchase agreements

Domestic

27,147

1,333

4.9

33,012

1,079

3.3

17,969

457

2.5

Foreign

926,575

38,393

4.1

776,972

22,283

2.9

701,817

10,242

1.5

Trading portfolio assets

Domestic

17,976

651

3.6

15,545

457

2.9

10,122

336

3.3

Foreign taxable

707,432

31,433

4.4

580,763

23,619

4.1

513,922

18,908

3.7

Foreign non-taxable

4,438

127

2.9

3,390

58

1.7

2,309

27

1.2

Foreign total

711,870

31,560

4.4

584,153

23,677

4.1

516,231

18,935

3.7

Financial assets designated at fair value

Domestic

42

0

616

0

196

0

Foreign

2,325

70

3.0

691

26

3.8

0

0

Loans

Domestic

181,186

5,784

3.2

174,299

5,424

3.1

168,456

5,308

3.2

Foreign

106,491

6,284

5.9

91,290

3,531

3.9

68,393

2,126

3.1

Financial investments available-for-sale

Domestic

4,126

28

0.7

1,036

3

0.3

1,132

17

1.5

Foreign taxable

3,171

100

3.2

3,546

83

2.3

3,000

21

0.7

Foreign non-taxable

0

0

0

0

0

0

Foreign total

3,171

100

3.2

3,546

83

2.3

3,000

21

0.7

Total interest-earning assets

2,021,523

86,280

4.3

1,722,124

58,167

3.4

1,523,622

37,993

2.5

Net interest on swaps

1,121

1,119

1,235

Interest income and average interest-earning assets

2,021,523

87,401

4.3

1,722,124

59,286

3.4

1,523,622

39,228

2.6

Non-interest-earning assets

Positive replacement values

320,596

319,698

246,952

Fixed assets

7,445

9,308

8,808

Other

66,362

55,178

53,140

Total average assets

2,415,926

2,106,308

1,832,522

Liabilities and Equity

Due to banks

Domestic

46,544

1,583

3.4

35,713

897

2.5

31,129

385

1.2

Foreign

108,885

5,261

4.8

92,431

3,321

3.6

96,335

1,582

1.6

Cash collateral on securities lent and repurchase agreements

Domestic

46,224

1,589

3.4

40,772

881

2.2

33,846

489

1.4

Foreign

751,617

32,432

4.3

647,998

19,599

3.0

606,623

9,417

1.6

Trading portfolio liabilities

Domestic

4,408

283

6.4

3,632

145

4.0

3,717

180

4.8

Foreign

202,263

14,250

7.0

173,394

10,591

6.1

161,286

7,813

4.8

Financial liabilities designated at fair value

Domestic

1,864

58

3.1

638

5

0.8

85

1

1.2

Foreign

127,458

4,699

3.7

86,688

2,385

2.8

49,234

1,167

2.4

Due to customers

Domestic demand deposits

70,981

534

0.8

67,987

292

0.4

67,005

167

0.2

Domestic savings deposits

86,631

392

0.5

86,373

404

0.5

84,112

414

0.5

Domestic time deposits

28,876

639

2.2

24,245

386

1.6

19,052

250

1.3

Domestic total

186,488

1,565

0.8

178,605

1,082

0.6

170,169

831

0.5

Foreign 1

315,917

11,500

3.6

249,561

5,906

2.4

200,664

2,785

1.4

Short-term debt

Domestic

1,973

115

5.8

1,584

20

1.3

246

0

Foreign

110,418

4,939

4.4

96,767

2,905

3.0

79,902

1,338

1.7

Long-term debt

Domestic

3,957

82

2.1

4,250

117

2.8

10,358

168

1.6

Foreign

57,899

2,524

4.4

43,035

1,904

4.4

28,259

1,328

4.7

Total interest-bearing liabilities

1,965,915

80,880

4.1

1,655,068

49,758

3.0

1,471,853

27,484

1.9

Non-interest-bearing liabilities

Negative replacement values

320,766

335,992

260,629

Other

76,270

70,654

60,844

Total liabilities

2,362,951

2,061,714

1,793,326

Total equity

52,975

44,594

39,196

Total average liabilities and equity

2,415,926

2,106,308

1,832,522

Net interest income

6,521

9,528

11,744

Net yield on interest-earning assets

0.3

0.6

0.8

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 88% for 2006 (86% for 2005 and 86% for 2004). The percentage of total average interest-bearing liabilities attributable to foreign activities was 85% for 2006 (84% for 2005 and 83% for 2004). 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

The following tables allocate, by categories of interest-earning assets and interest-bearing liabilities, the changes in interest income and expense due to changes in volume and interest rates for the year ended 31 December 2006 compared with the year ended 31 December 2005, and for the year ended 31 December 2005 compared with the year ­ended 31 December 2004. Volume and rate variances have been calculated on movements in average balances and changes in interest rates. Changes due to a combination of volume and rates have been allocated proportionally. Refer to page 245 of Industry Guide 3 for a discussion of the treatment of impaired, non-performing and restructured loans.

2006 compared with 2005

2005 compared with 2004

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

(79)

396

317

36

80

116

Foreign

224

(68)

156

28

909

937

Cash collateral on securities borrowed and reverse repurchase agreements

Domestic

(194)

448

254

376

246

622

Foreign

4,338

11,772

16,110

1,127

10,914

12,041

Trading portfolio assets

Domestic

70

124

194

179

(58)

121

Foreign taxable

5,193

2,621

7,814

2,473

2,238

4,711

Foreign non-taxable

18

51

69

13

18

31

Foreign total

5,211

2,672

7,883

2,486

2,256

4,742

Financial assets designated at fair value

Domestic

0

0

0

0

0

0

Foreign

62

(18)

44

26

0

26

Loans

Domestic

213

147

360

187

(71)

116

Foreign

593

2,160

2,753

710

695

1,405

Financial investments

Domestic

9

16

25

(1)

(13)

(14)

Foreign taxable

(9)

26

17

4

58

62

Foreign non-taxable

0

0

0

0

0

0

Foreign total

(9)

26

17

4

58

62

Interest income

Domestic

19

1,131

1,150

777

184

961

Foreign

10,419

16,544

26,963

4,381

14,832

19,213

Total interest income from interest-earning assets

10,438

17,675

28,113

5,158

15,016

20,174

Net interest on swaps

2

(116)

Total interest income

28,115

20,058

Interest expense on interest-bearing liabilities

Due to banks

Domestic

271

415

686

55

457

512

Foreign

592

1,348

1,940

(62)

1,801

1,739

Cash collateral on securities lent and repurchase agreements

Domestic

120

588

708

97

295

392

Foreign

3,109

9,724

12,833

662

9,520

10,182

Trading portfolio liabilities

Domestic

31

107

138

(4)

(31)

(35)

Foreign

1,761

1,898

3,659

581

2,197

2,778

Financial liabilities designated at fair value

Domestic

10

43

53

7

(3)

4

Foreign

1,142

1,172

2,314

899

319

1,218

Due to customers

Domestic demand deposits

12

230

242

2

123

125

Domestic savings deposits

1

(13)

(12)

11

(21)

(10)

Domestic time deposits

74

179

253

68

68

136

Domestic total

87

396

483

81

170

251

Foreign

1,593

4,001

5,594

685

2,436

3,121

Short-term debt

Domestic

5

90

95

20

0

20

Foreign

410

1,624

2,034

287

1,280

1,567

Long-term debt

Domestic

(8)

(27)

(35)

(98)

47

(51)

Foreign

654

(34)

620

694

(118)

576

Interest expense

Domestic

516

1,612

2,128

158

935

1,093

Foreign

9,261

19,733

28,994

3,746

17,435

21,181

Total interest expense

9,777

21,345

31,122

3,904

18,370

22,274

Deposits

The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2006, 2005 and 2004. 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 78,234 million, CHF 54,968 million and CHF 49,699 million at 31 December 2006, 31 December 2005 and 31 December 2004, respectively.

31.12.06

31.12.05

31.12.04

CHF million, except where indicated

Average deposit

Average rate (%)

Average deposit

Average rate (%)

Average deposit

Average rate (%)

Banks

Domestic offices

Demand deposits

2,024

0.2

8,491

0.1

7,770

0.1

Time deposits

8,776

4.5

6,976

3.3

4,693

1.7

Total domestic offices

10,800

3.7

15,467

1.5

12,463

0.7

Foreign offices

Interest-bearing deposits 1

29,814

4.8

25,497

3.6

23,843

1.6

Total due to banks

40,614

4.5

40,964

2.8

36,306

1.3

Customer accounts

Domestic offices

Demand deposits

70,981

0.8

67,987

0.4

67,005

0.2

Savings deposits

86,631

0.5

86,373

0.5

84,112

0.5

Time deposits

28,876

2.2

24,245

1.6

19,052

1.3

Total domestic offices

186,488

0.8

178,605

0.6

170,169

0.5

Foreign offices

Interest-bearing deposits 1

315,917

3.6

249,561

2.4

200,664

1.4

Total due to customers

502,405

2.6

428,166

1.6

370,833

1.0

1 Mainly time deposits.

At 31 December 2006, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:

CHF million

Domestic

Foreign

Within 3 months

45,236

256,610

3 to 6 months

5,676

4,253

6 to 12 months

2,764

2,224

1 to 5 years

310

5,134

Over 5 years

254

90

Total time deposits

54,240

268,311

Short-term Borrowings

The following table presents the period-end, average and maximum month-end outstanding amounts for short-term borrowings, along with the average rates and period-end rates at and for the years ended 31 December 2006, 2005 and 2004.

Money market paper issued

Due to banks

Repurchase agreements 1

CHF million, except where indicated

31.12.06

31.12.05

31.12.04

31.12.06

31.12.05

31.12.04

31.12.06

31.12.05

31.12.04

Period-end balance

119,584

102,662

79,442

153,231

90,651

84,351

754,623

667,317

557,892

Average balance

112,391

98,351

80,148

114,815

114,701

91,158

717,542

628,362

587,988

Maximum month-end balance

123,108

112,217

94,366

153,231

101,178

115,880

777,010

719,208

637,594

Average interest rate during the period (%)

4.5

3.0

1.7

4.4

3.3

1.6

4.4

3.0

1.5

Average interest rate at period-end (%)

4.0

4.0

2.1

4.1

3.0

2.0

5.0

2.6

2.0

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

Contractual Maturities of Investments in Debt Instruments1,2

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 2006

Swiss national government and agencies

2

2.22

0

0.00

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

0

0.00

0

0.00

0

0.00

Foreign governments and official institutions

38

1.48

2

1.89

57

4.47

0

0.00

Corporate debt securities

26

7.00

0

0.00

2

0.00

0

0.00

Mortgage-backed securities

0

0.00

0

0.00

10

4.48

150

5.10

Other debt instruments

0

0.00

233

9.28

0

0.00

0

0.00

Total fair value

66

235

69

151

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 instruments

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 instruments

0

0.00

0

0.00

0

0.00

0

0.00

Total fair value

107

66

11

98

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

Due from Banks and Loans (gross)

The Group's lending portfolio is widely diversified across ­industry sectors with no significant concentrations of credit risk. CHF 152.9 billion (42% of the total) consists of loans to thousands of private households, predominantly in ­Switzerland, and mostly secured by mortgages, financial collateral or other assets. Exposure to Banks and Financial institutions amounted to CHF 138 billion (38% of the ­total). This i­ncludes cash posted as collateral by UBS against negative replacement values on derivatives or other positions, which, from a risk perspective, is not considered lending but is a key component of the measurement of counterparty risk taken in connection with the underlying products. ­Exposure to banks includes money market deposits with highly rated ­institutions. Excluding financial institutions, the largest ­industry sector exposure is CHF 25 billion (7% of the total) to the Services sector. For further discussion of the lending portfolio, see the Risk Management chapter of the Handbook 2006/2007. The following ­table illustrates diversification of the lending portfolio among industry sectors at 31 December 2006, 2005, 2004, 2003 and 2002. The industry categories presented are consistent with the classification of loans for reporting to the Swiss Federal ­Banking Commission and Swiss National Bank. The table ­below does not include loans designated at fair value.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Domestic

Banks 1

561

1,407

1,406

619

1,029

Construction

1,535

1,816

1,943

2,175

2,838

Financial institutions

5,542

4,213

4,332

4,009

4,301

Hotels and restaurants

1,957

2,044

2,269

2,440

2,655

Manufacturing 2

4,439

5,038

5,485

6,478

7,237

Private households

117,852

111,549

105,160

102,180

95,295

Public authorities

4,972

5,494

5,460

5,251

5,529

Real estate and rentals

11,356

11,792

11,466

12,449

13,573

Retail and wholesale

4,569

4,808

4,908

6,062

7,172

Services 3

9,159

9,300

9,110

9,493

10,237

Other 4

1,127

1,004

591

1,014

1,722

Total domestic

163,069

158,465

152,130

152,170

151,588

Foreign

Banks 1

49,895

32,282

34,269

31,405

31,882

Chemicals

1,296

2,716

366

245

519

Construction

483

295

122

84

153

Electricity, gas and water supply

892

1,637

745

249

1,105

Financial institutions

82,064

62,306

45,095

30,906

18,378

Manufacturing 5

2,964

3,899

2,758

2,421

2,300

Mining

2,756

2,694

1,695

1,114

868

Private households

35,029

38,280

30,237

21,195

33,063

Public authorities

2,038

1,501

1,228

1,224

2,628

Real estate and rentals

4,238

2,707

940

473

616

Retail and wholesale

1,750

1,257

1,102

1,880

1,367

Services

16,231

5,596

8,002

7,983

1,654

Transport, storage and communication

1,038

1,419

762

3,658

676

Other 6

460

156

318

432

2,314

Total foreign

201,134

156,745

127,639

103,269

97,523

Total gross

364,203

315,210

279,769

255,439

249,111

1  Includes Due from banks and Loans from Industrial Holdings of CHF 93 million at 31 December 2006, 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.

The following table analyzes the Group's mortgage portfolio by geographic origin of the client and type of mortgage at 31 December 2006, 2005, 2004, 2003 and 2002. Mortgages are included in the industry categories mentioned on the previous page.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Mortgages

Domestic

134,468

130,880

124,496

122,069

116,359

Foreign

10,069

15,619

12,185

7,073

11,510

Total gross mortgages

144,537

146,499

136,681

129,142

127,869

Mortgages

Residential

124,548

127,990

117,731

109,980

108,779

Commercial

19,989

18,509

18,950

19,162

19,090

Total gross mortgages

144,537

146,499

136,681

129,142

127,869

Due from Banks and Loan Maturities (gross)

CHF million

Within 1 year

1 to 5 years

Over 5 years

Total

Domestic

Banks

558

3

0

561

Mortgages

54,752

60,051

19,665

134,468

Other loans

21,068

5,493

1,479

28,040

Total domestic

76,378

65,547

21,144

163,069

Foreign

Banks

47,391

2,323

181

49,895

Mortgages

8,451

1,219

399

10,069

Other loans

125,334

13,150

2,686

141,170

Total foreign

181,176

16,692

3,266

201,134

Total gross1

257,554

82,239

24,410

364,203

1  Includes Due from banks from Industrial Holdings of CHF 93 million at 31 December 2006.

At 31 December 2006, the total amount 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

75,549

22,918

98,467

Adjustable or floating-rate loans

6,690

1,492

8,182

Total

82,239

24,410

106,649

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; or 2) when insolvency proceedings have commenced; or 3) when obligations have been restructured on concessionary terms.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Gross interest income that would have been recorded on non-performing loans:

Domestic

50

81

107

171

148

Foreign

10

8

17

23

53

Interest income included in net profit for non-performing loans:

Domestic

56

72

106

163

152

Foreign

8

9

8

8

22

The table below provides an analysis of the Group's non-performing loans. For further information, see the Risk Management chapter of the Handbook 2006 / 2007.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Non-performing loans:

Domestic

1,744

2,106

2,772

4,012

4,609

Foreign

174

257

783

746

1,170

Total non-performing loans

1,918

2,363

3,555

4,758

5,779

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 2006, 2005, 2004, 2003 or 2002.

In addition to the non-performing loans shown above, the Group had CHF 710 million, CHF 1,071 million, CHF 1,144 million, CHF 2,241 million and CHF 3,875 million in "other impaired loans" for the years ended 31 December 2006, 2005, 2004, 2003 and 2002, respectively.

Other impaired loans are loans where the Group's credit officers have expressed doubts as to the ability of the borrowers to repay the loans. For the years ended 31 December 2006, 2005 and 2004, they are loans not considered "non-performing" in accordance with Swiss regulatory guidelines, and for the years ended 31 December 2003 and 2002, they are loans that were current or less than 90 days in arrears with respect to payment of principal or interest. As of 31 December 2006, 31 December 2005 and 31 December 2004, specific allowances of CHF 106 million, CHF 200 million, CHF 241 million, respectively, had been established against these loans.

Cross-border Outstandings

Cross-border outstandings consist of general banking products such as loans and deposits with third parties, credit equivalents of over-the-counter (OTC) derivatives and securities financing, and the market value of the inventory of debt securities. Outstandings are monitored and reported on an ongoing basis by the credit risk 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. Prior periods have been adjusted to conform to the current year's presentation.

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 2006, 2005 and 2004. At 31 December 2006, 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 2006 / 2007.

31.12.06

CHF million

Banks

Private sector

Public sector

Total

% of total assets

United States

7,692

208,200

22,574

238,466

10.0

Japan

2,283

8,263

30,158

40,704

1.7

United Kingdom

11,149

16,098

559

27,806

1.2

Germany

15,240

8,080

1,574

24,894

1.0

31.12.05

CHF million

Banks

Private sector

Public sector

Total

% of total assets

United States

6,700

133,561

23,297

163,558

7.9

Germany

16,985

4,525

1,265

22,775

1.1

Japan

2,044

7,582

10,824

20,450

1.0

United Kingdom

6,384

11,423

555

18,362

0.9

Italy

3,343

2,509

11,324

17,176

0.8

31.12.04

CHF million

Banks

Private sector

Public sector

Total

% of total assets

United States

8,550

109,131

8,859

126,540

7.3

Germany

18,478

2,882

7,348

28,708

1.7

Italy

4,362

2,207

16,803

23,372

1.3

United Kingdom

8,131

10,760

259

19,150

1.1

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 due to 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

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Balance at beginning of year

1,776

2,802

3,775

5,015

7,992

Domestic

Write-offs

Banks

0

0

0

0

0

Construction

(14)

(16)

(49)

(73)

(148)

Financial institutions

(11)

(14)

(24)

(37)

(103)

Hotels and restaurants

(16)

(26)

(101)

(57)

(48)

Manufacturing 1

(40)

(39)

(77)

(121)

(275)

Private households

(89)

(131)

(208)

(262)

(536)

Public authorities

0

0

0

(18)

0

Real estate and rentals

(44)

(56)

(109)

(206)

(357)

Retail and wholesale

(20)

(25)

(68)

(67)

(101)

Services 2

(47)

(35)

(83)

(111)

(155)

Other 3

(2)

(4)

(9)

(43)

(49)

Total domestic write-offs

(283)

(346)

(728)

(995)

(1,772)

Foreign

Write-offs

Banks

(3)

(164)

(21)

(17)

(49)

Chemicals

0

0

(1)

0

0

Construction

0

0

(3)

0

0

Electricity, gas and water supply

0

0

0

0

(36)

Financial institutions

0

(50)

(34)

(112)

(228)

Manufacturing 4

(11)

(8)

(23)

(77)

(70)

Mining

(1)

(23)

(8)

(15)

(1)

Private households

(7)

(21)

(8)

(11)

(65)

Public authorities

(58)

(22)

(2)

0

(1)

Real estate and rentals

0

(3)

0

(1)

(2)

Retail and wholesale

0

(9)

0

(76)

(10)

Services

0

0

(7)

(25)

(39)

Transport, storage and communication

0

0

0

(24)

(74)

Other 5

0

(5)

(21)

(83)

(189)

Total foreign write-offs

(80)

(305)

(128)

(441)

(764)

Total write-offs

(363)

(651)

(856)

(1,436)

(2,536)

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.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Recoveries

Domestic

51

53

54

49

43

Foreign

11

10

5

38

27

Total recoveries

62

63

59

87

70

Net write-offs

(301)

(588)

(797)

(1,349)

(2,466)

Increase / (decrease) in credit loss allowance and provision

(108)

(298)

(216)

102

115

Collective loan loss provisions

(48)

(76)

(25)

Other adjustments 1

13

(64)

65

7

(626)

Balance at end of year

1,332

1,776

2,802

3,775

5,015

1 See the table below for details.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Net foreign exchange

10

50

2

(57)

(269)

Subsidiaries sold and other adjustments

3

(114)

63

64

(357)

Total adjustments

13

(64)

65

7

(626)

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 2006, 2005, 2004, 2003 and 2002. For a description of procedures with respect to allowances and provisions for credit losses, see the Handbook 2006 / 2007. The following analysis includes Due from banks from Industrial Holdings.

CHF million

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Domestic

Banks

10

10

10

10

10

Construction

72

91

112

158

265

Financial institutions

61

75

82

137

89

Hotels and restaurants

27

49

98

214

286

Manufacturing 1

155

174

224

327

458

Private households

187

262

333

511

750

Public authorities

3

8

9

9

39

Real estate and rentals

99

168

250

383

577

Retail and wholesale

311

330

363

201

315

Services 2

113

196

222

549

470

Other 3

107

61

188

150

225

Total domestic

1,145

1,425

1,891

2,649

3,484

Foreign

Banks 4

20

35

246

256

24

Chemicals

4

5

4

5

5

Construction

2

2

1

0

6

Electricity, gas and water supply

8

16

15

0

96

Financial institutions

9

8

140

168

153

Manufacturing 5

37

57

112

359

314

Mining

0

1

14

19

148

Private households

26

30

48

48

58

Public authorities

21

72

66

69

0

Real estate and rentals

4

3

5

7

6

Retail and wholesale

4

1

95

51

13

Services

7

27

32

32

262

Transport, storage and communication

1

0

1

195

144

Other 6

6

8

(75)

(345)

(394)

Total foreign

149

265

704

864

835

Collective loan loss provisions 7

38

86

207

262

696

Total allowances and provisions for credit losses8

1,332

1,776

2,802

3,775

5,015

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, electricity, gas and water supply. 4  Counterparty allowances and provisions only. Country provisions with banking counterparties amounting to CHF 0 million, CHF 37 million and CHF 17 million are disclosed under Collective loan loss provisions for 2006, 2005 and 2004, respectively. 5  Includes food and beverages. 6  Includes hotels and restaurants. 7  The 2006, 2005, 2004, 2003 and 2002 amounts include CHF 0 miilion, CHF 48 million, CHF 161 million, CHF 262 million and CHF 696 million , respectively, of country provisions. 8  The 2006, 2005, 2004, 2003 and 2002 amounts include CHF 76 million, CHF 109 million, CHF 214 million, CHF 290 million and CHF 366 million , respectively, of provisions for unused commitments and contingent liabilities.

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 sectors to evaluate the credit risks in each of the categories. The table below does not include loans designated at fair value.

in %

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Domestic

Banks 1

0.2

0.5

0.5

0.2

0.4

Construction

0.4

0.6

0.7

0.8

1.1

Financial institutions

1.5

1.3

1.5

1.6

1.7

Hotels and restaurants

0.5

0.7

0.8

1.0

1.1

Manufacturing 2

1.2

1.6

2.0

2.5

2.9

Private households

32.4

35.4

37.6

40.0

38.3

Public authorities

1.4

1.7

2.0

2.1

2.2

Real estate and rentals

3.1

3.7

4.1

4.9

5.4

Retail and wholesale

1.3

1.5

1.7

2.4

2.9

Services 3

2.5

3.0

3.3

3.7

4.1

Other 4

0.3

0.3

0.2

0.4

0.8

Total domestic

44.8

50.3

54.4

59.6

60.9

Foreign

Banks 1

13.7

10.2

12.3

12.3

12.8

Chemicals

0.4

0.9

0.1

0.1

0.2

Construction

0.1

0.1

0.0

0.0

0.1

Electricity, gas and water supply

0.2

0.5

0.3

0.1

0.4

Financial institutions

22.5

19.8

16.1

12.1

7.4

Manufacturing 5

0.8

1.2

1.0

1.0

0.9

Mining

0.8

0.9

0.6

0.4

0.3

Private households

9.6

12.1

10.8

8.3

13.3

Public authorities

0.6

0.5

0.4

0.5

1.1

Real estate and rentals

1.2

0.9

0.3

0.2

0.2

Retail and wholesale

0.5

0.4

0.4

0.7

0.5

Services

4.4

1.8

2.9

3.1

0.7

Transport, storage and communication

0.3

0.4

0.3

1.4

0.3

Other 6

0.1

0.0

0.1

0.2

0.9

Total foreign

55.2

49.7

45.6

40.4

39.1

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 93 for 2006, 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). The table below does not include loans designated at fair value.

CHF million, except where indicated

31.12.06

31.12.05

31.12.04

31.12.03

31.12.02

Gross loans 1

364,203

315,210

279,769

255,439

249,111

Impaired loans

2,628

3,434

4,699

6,999

9,654

Non-performing loans

1,918

2,363

3,555

4,758

5,779

Allowances and provisions for credit losses 2

1,332

1,776

2,802

3,775

5,015

Net write-offs

301

588

797

1,349

2,466

Credit loss (expense) / recovery

156

375

241

(102)

(115)

Ratios

Impaired loans as a percentage of gross loans

0.7

1.1

1.7

2.8

3.9

Non-performing loans as a percentage of gross loans

0.5

0.8

1.3

1.9

2.3

Allowances and provisions for credit losses as a percentage of:

Gross loans

0.4

0.6

1.0

1.5

2.0

Impaired loans

50.7

51.7

59.6

53.9

52.7

Non-performing loans

69.4

75.2

78.8

79.3

86.8

Allocated allowances as a percentage of impaired loans 3

46.3

46.4

51.6

46.8

44.8

Allocated allowances as a percentage of non-performing loans 4

58.0

59.0

61.4

55.1

56.0

Net write-offs as a percentage of:

Gross loans

0.1

0.2

0.3

0.5

1.0

Average loans outstanding during the period

0.1

0.2

0.3

0.5

1.0

Allowances and provisions for credit losses

22.6

33.1

28.5

35.7

49.2

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

4.43

3.02

3.51

2.80

2.03

1  Includes Due from banks and Loans from Industrial Holdings in the amount of CHF 93 million 2006, 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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