The first quarter of 2004 was highly successful for Deutsche Bank. We are now reaping the benefits of the transformation of our business platform over the past two years, and we are well placed to sustain our good momentum.

We have significantly improved our profitability. Pre-tax profits in the first quarter were EUR 1.6 billion, compared to EUR 234 million in the same period last year. Net income was EUR 941 million, an improvement of EUR 1.2 billion over the first quarter 2003. This is our best-ever result since converting to U.S. GAAP, and reflects two decisive factors: the increased operating strength of our business, and significantly lower exposure to charges on alternative investments. Our risk management strategy also made a key contribution. Provisions for credit losses declined for the sixth consecutive quarter.

Our revenue momentum is strong. In the first quarter, we reported total revenues of EUR 6.2 billion, up 23% on the same period in 2003. Revenue growth was particularly encouraging in Corporate Banking & Securities, above all in the key areas of sales & trading and origination. We are well-positioned to take advantage of further profitable growth opportunities in key regions of the world. We delivered strong growth in Asia-Pacific, with record performances in some business areas. We made substantial gains in the all-important North American market. This momentum shows clearly that we are well on the way to deliver on ‘phase two’ of our strategic agenda.

Cost discipline remains tight. Our cost-income ratio for the quarter was 73%, compared to 82% for the full year 2003. We made further progress in reducing non-compensation costs. An increase in compensation costs reflected higher accruals for incentive-driven remuneration, as a result of our strong business performance.

All our businesses contributed significantly to the first quarter’s record profits. The Corporate and Investment Bank (CIB) continued to strengthen its position, and delivered strong profit growth, adjusting for a one-time gain on the disposal of parts of our custody business last year. Private Clients and Asset Management (PCAM) grew income before taxes by 51% compared to the same period of 2003. In Germany, I was particularly pleased by the turnaround in Private and Business Clients achieved over the past two years; this business has been transformed into a highly profitable and successful platform. The profitability of Corporate Investments (CI) also improved significantly, reflecting our success in reducing our exposure to alternative assets.

Asset quality continues to improve substantially. In the first quarter this year, the provision for credit losses fell to € 141 million – 25% lower than the fourth quarter, and 60% lower than the first quarter last year. Problem loans continue to decline, and our coverage ratio remains strong.

Above all, I am pleased to report a significant growth in returns to you, our shareholders. Adjusted return on average active equity (post-tax) in the first quarter of 2004 was 15.1%, compared to 5.2% for the financial year 2003. Our strong earnings allowed us to accelerate the momentum of our share buyback program, with the repurchase of 12 million shares, or 2% of our capital, during the quarter. At the same time, our capital strength remains outstanding, with a core capital ratio of 10.1%.

We have delivered very strong results. We have built a platform which is well-positioned to deliver sustained, profitable growth. We remain confident that, with continued stability and positive development in the global economy and the world’s financial markets, we will maintain this good progress, and deliver on the challenging goals we have set ourselves.

Yours sincerely,

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

Frankfurt am Main, March 2004