Business conditions in the second quarter 2004 were very challenging. This impacted our revenues. But due to the enhanced operating strength of our platform after the transformation, we turned in a solid result. This allowed us to close the first half of 2004 with substantial growth in profitability, and returns to our shareholders.

Our net income (before tax reversal) for the quarter was € 749 million – a rise of 27% compared to the second quarter of 2003. Taken together with our first quarter earnings, this brought net income (before tax reversal) for the first six months of 2004 to € 1.7 billion, compared to € 399 million in the first half of 2003.

Diluted earnings per share rose by 25% to € 1.16 in the second quarter, and by 396% to € 2.83 in the first half of 2004. Pre-tax return on average active equity for the second quarter rose from 15% last year to 18%, and, for the first six months, rose from 9% to 21%.

The economic environment was impacted by rising interest rates, a cooling of growth rates in some major economies and upward pressure on oil prices amid concerns over security and political stability. We experienced lower levels of activity in the world’s capital markets, both debt and equity, while convertible bond markets were particularly difficult.

In the Corporate and Investment Bank (CIB), revenues were substantially lower in convertibles trading, reflecting difficult market conditions. However, the other customer-driven sales and trading businesses performed well. Our emphasis on providing clients with high-value structured products, and intellectual leadership has yielded substantial results. Revenues in our origination and advisory businesses were the best for six quarters.

In Private Clients and Asset Management (PCAM), we continued to reap the benefits of the reengineering efforts of the last two years, with profitability significantly ahead of 2003. Private and Business Clients continued to deliver on a demanding target, with half-year underlying pre-tax profits of € 499 million.

We maintained our discipline in credit risk management. This, together with an overall improved credit environment, resulted in a further increase in the quality of our loan book, sustained progress on problem loans and consequently a further reduction in our provision for credit losses.

We continue to demonstrate our commitment to strong management of capital. We delivered both return on, and return of, shareholders’ equity. At our Annual General Meeting in June, I reported on the progress of our second share buyback program, now complete, which saw us repurchase 58.2 million shares, of which 38 million were for cancellation. At the same time our core capital ratio, at 9.4%, remains comfortably above the upper end of our target range of 8% to 9%. We also received your approval for a dividend increase of 15% to € 1.50 per share and further share buybacks. We will pursue your interests with further buyback activity.

We continue to operate in an uncertain environment. The pace and momentum of the global economic recovery, interest rates, and political factors in a U.S. presidential election year, will all have a critical bearing on the business climate. Nevertheless, we have proven our ability to deliver sustained and resilient growth in earnings, and in returns to shareholders. We have published clear, ambitious objectives, and despite the current challenging conditions, we remain absolutely focused on meeting these objectives. To achieve this we will rely on the efficiency of our platform, the strength of our franchise, and the growth potential of our core businesses.

You will all be aware that legal proceedings in the Mannesmann case have concluded with the exoneration of all defendants. From the beginning of these proceedings, I have been very touched and heartened by the expressions of support which I received – from my colleagues throughout Deutsche Bank, from clients, from public figures in all parts of the world, and from shareholders. Please accept my most sincere thanks for your support.

Yours sincerely,

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

Frankfurt am Main, July 2004