In the second quarter 2005, Deutsche Bank turned in a very strong performance, proving the resilience of our business model and continued tight discipline of costs and capital. Once again, we achieved substantial year-on-year growth in revenues, profitability and returns to our shareholders. Over the first six months of 2005, we have delivered consistently, even in inconsistent markets. The result is an outstanding half year.

In the second quarter this year, business conditions felt the impact of persistently high oil prices, sluggish progress in the world’s mature economies, and significant global trade imbalances. A sharp deterioration of corporate credit quality in the automotive sector led to a widening of credit spreads and turbulence in credit markets, accompanied by lower issuance volumes in high yield debt.

Against this difficult background, Deutsche Bank delivered substantial and profitable growth. Revenues for the quarter were 9% higher compared to the second quarter last year. Income before income taxes rose by 22% to € 1.4 billion in the second quarter, and by 17% to € 3.2 billion for the first half year. Net income rose by 44% to € 947 million for the quarter, and by 28% to € 2.1 billion for the first half year. Before restructuring expenses, pre-tax return on average active equity was 29% in the first half year, compared to our published target of 25% for the full year 2005.

The Corporate and Investment Bank (CIB) performed strongly in all businesses. Underlying revenues rose by 8% over the second quarter last year, while underlying pre-tax profits were up by 12%. In our origination and advisory businesses, the growth momentum of recent years accelerated. Underlying revenues grew 17% over the second quarter 2004, thanks to further gains in market share, notably in the Americas. In the first half of 2005 we ranked No. 4 globally by share of fee pool, according to Dealogic.

Our Global Markets business sustained the strong levels of last year’s second quarter. For the second consecutive quarter, we ranked No. 1 globally by revenues in Sales and Trading. This remarkable result, in difficult markets, demonstrates the value of a unique business model which focuses on intellectual capital, superior value for clients, commanding positions in high-volume products and outstanding regional diversification. Underlying profits in Global Transaction Banking were up 87% over the first half of 2004, thanks to efficiency gains and strong performance by Structured Finance Services and Cash Management.

In our Private Clients and Asset Management (PCAM) business, underlying revenues were up 3%, while underlying pre-tax profits declined by 3% over the prior year quarter, reflecting continued investments in both Private and Business Clients (PBC) and Private Wealth Management (PWM), and expenses related to the ongoing reorganization of Asset Management. PBC continues to deliver solid growth in both lending and investment products.

PWM captured, as in the first quarter, net new assets of € 2 billion, reflecting the continued success of their new business strategy with our clients. AM again saw outflows, in particular in the U.K. and the U.S., although at the same time in Continental Europe we were able to gain net new assets of € 2 billion.

In early July, we announced an agreement for the sale of parts of our U.K. Asset Management business to Aberdeen Asset Management PLC. We are convinced that this move is positive for the clients involved, and takes us a significant step forward in the reorganization of our global asset management platform, with a focus on higher-value products, operational efficiency and enhanced profitability.

We are making good progress with our Business Realignment Program. More than ever before, we are collaborating across business units to broaden and deepen our offering to our clients. We are unlocking substantial revenue synergies across our Global Markets and Global Banking businesses as we serve our corporate clients with both advisory and financing expertise. We have intensified cross-selling between CIB and PCAM, with our capital markets businesses providing not only product capability, but also an important source of relationships, for our investment advisors in both PBC and PWM. We are also on schedule with the cost-efficiency measures associated with this Program.

Provision for credit losses in the second quarter was essentially unchanged from the first, at € 80 million. Problem loans declined to € 4.6 billion, their lowest level for five years, reflecting the good quality of the loan book in a benign credit environment. Our core capital ratio remained strong, at 9.1%, just above our target range of 8-9%.

On 18 May we held our Annual General Meeting in Frankfurt, to which we welcomed over five thousand investors. We re-affirmed our objective to deliver sustained and profitable growth, and to translate the fruits of this growth into superior rewards for you, our shareholders. You approved a dividend increase to € 1.70 per share for 2004, and further share buybacks covering up to 10% of outstanding share capital. Our strong performance in the first half of 2005 allows us to plan for a substantial increase in our dividend for the current year. In addition, we have resumed our share buybacks.

We are proud of what we achieved in this quarter, and in the first half of 2005. We look forward with confidence to the second half of the year. Important challenges remain, both in the global economy and in the world’s capital markets. However, if the overall environment remains stable, we are convinced we will continue to deliver profitable growth and achieve our ambitious financial target for the full year 2005.

Yours sincerely,

Josef Ackermann
Spokesman of the Board of Managing Directors and
Chairman of the Group Executive Committee 

Frankfurt am Main, July 2005