Other fee income and risk management revenues improved by almost 100 million francs to result in a net charge of 171 million francs. This net charge was mainly attributable to losses from a tightening of credit spreads during the quarter, which affected hedges taken out on our investment grade loans.
Equities had a disappointing quarter with revenues down 20% on Q2. Commissions from cash trading rose slightly, but the improvement was offset by lower trading revenues. We saw lower revenues too in derivatives, prime brokerage and prop trading.
We have recently lost some market share in equities, however we’ve made some new appointments and made some key hires which gives us every confidence that we can regain market share in the coming quarters.
Overall, the Investment Bank reported another improved result, though still a pre–tax loss. This quarter, it was 1.4 billion francs compared with a loss of 1.8 billion francs in Q2. Adjusting the reported figures for disclosed economic own credit produces a small profit of 66 million francs versus a similarly adjusted loss of 0.6 billion francs in the prior quarter.
Operating expenses rose 7% quarter-on-quarter on a reported basis, largely as a result of the significant increase in personnel expenses, driven by higher accruals for performance related compensation and to a lesser extent, salary increases. G&A expenses however fell 17% to 571 million francs.
Now, turning briefly back to the Group balance sheet and capital management. Our tier 1 capital ratio at the end of Q3 was 15.0%. The increase on Q2 being largely attributable to a 37 billion francs reduction in risk-weighted assets.
Some 30 billion francs or so of the reduction came in the credit risk framework and 6 billion francs or so in the market risk framework. Almost all of the latter reduction and some of the former came from improved application of credit valuation adjustments.
Of the 30 billion francs reduction in credit risk-weighted assets, approximately 7 billion francs was due to the downgrading of certain student loan auction rate certificates to below the BB minus rating. This triggered a full deduction of these exposures from capital equivalent to 1.6 billion Swiss francs, half of which was charged to tier 1 capital.
On this next slide, you’ll see our usual chart that traces the movement in regulatory capital ratios from quarter end to quarter end. Tier 1 capital fell by 1 billion francs or so to 31.6 billion francs at the end of September.
The IFRS loss for the quarter was more than reversed to take into account P&L items such as the losses on own credit that do not impact capital. We then deduct 1.4 billion francs for the cost of the prepayment of the coupons on the MCNs held by the Swiss government which we made in August. Then, there was the impact of the downgrading of some of the student loan ARCs that I just mentioned as well as the sale of Pactual.
And so to sum up, we’ve now made really good progress in de-risking the balance sheet. Though we have still some way to go to exit all of our legacy risk positions, our primary focus is now on generating greater levels of revenue and hence profitability. In future, we expect our capital ratios to benefit from the retention of earnings rather than predominantly from risk reduction.
I do want to finish on a positive note because I think that properly reflects the new mood of the firm. Morale is high and confidence is coming back. We’ve hired some outstanding people into the firm, whose presence is already making a difference.
Bob McCann having chosen to come to work for us is a testament to how we’re able to attract industry leaders to our ranks. The tide has turned and you should expect further improvement from us, particularly in 2010.
That concludes my presentation on the third quarter results. We look forward to seeing many of you in a fortnight’s time at our Investor Day here in Zurich. And now we have some time for Q&A, so with that I’d like to open the call for some questions and hand over to the conference operator.
Question–and–Answer Session
Operator
The first question is from Mr. Jon Peace, Nomura. Please go ahead, sir.
Jon Peace – Nomura
Yes. Good morning. A couple of questions please. The first one just on the fixed income trading number. You used to give us an underlying figure which was 1.5 billion francs to 2 billion francs in Q1 and 1 billion francs in Q2. I know quite a lot has gone on with your accounting, so I just wondered if you could give us a kind of like-for-like trend so we can understand what the underlying momentum is that – on that business year-to-date?
The second question is just back to the Wealth Management business. Thank you for your guidance about revenue is likely to improve in Q4. I just wondered if you could kind of decompose that into net new money and margin and where we might expect to see those trends. Thanks very much?
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