IR Releases - Archive

November 1, 2001

Deutsche Bank's third quarter 2001 IAS results underline competitive strength / Additional cost containment measures to be implemented


  • 3Q2001 results hold up well despite difficult environment
  • Underlying pre-tax profit of EUR 0.9 bn only EUR 0.1 bn below run-rate
  • Revenues 5 % below underlying trend
  • Trading profit at very high level reflects world-class product portfolio
  • Global crisis results in additional write-downs in Corporate Investments
  • Costs down by 8 % vs. 2Q2001
  • Additional cost containment measures leading to further 4,500 headcount reduction

 

Group financial results in 3Q2001

Despite a difficult business environment, Deutsche Bank's 3Q2001 revenues of EUR 6.1 bn almost equalled the EUR 6.2 bn in 3Q2000. Net income after tax was EUR 303 mn. Diluted earnings per share (excluding goodwill amortization) were EUR 0.77 (3Q2000: EUR 1.17).

Trading profit (including IAS 39 gain of EUR 457 mn) rose 50 % to EUR 2,347 mn. Excluding IAS 39, trading profit increased 19 % over 3Q2000, an outstanding result given the difficult market conditions. This result is attributed to trading in debt securities (up 45% over 3Q2000) as well as trading in OTC derivatives/swaps (up 95 %) and foreign exchange trading (up 49 %).

Weak markets and the restraint shown by our private clients in their securities orders depressed net commission income which came in with EUR 2,445 mn 12 % lower than in 3Q2000. However, commission income remained the biggest revenue source. Net interest income of EUR 1,624 mn remained stable compared with 3Q2000, but increased slightly (2 %) over 2Q2001. The relatively low risk provisioning of EUR 132 mn (after some releases of general value adjustments) reflects the high quality of our assets.

The capital market conditions and falling share-prices led to corresponding changes in the value of our investments which are reflected in the negative 3Q results of EUR 408 mn in net income from investment and in the increased negative balance of other income and expenses.

The results from our cost containment program are encouraging. Compared with 2Q2001 operating expenses of EUR 5,047 mn were reduced by 8 %.

The annualized Return on Equity after tax (excluding goodwill amortization) for the reported quarter was 7.4 % compared with 13.2 % in 3Q2000.


Cost management

As mentioned above, our cost containment program is well under way. We have delivered ahead of schedule on our initial headcount reduction goal and have targeted significant additional savings:

  • We have communicated in February this year 2,600 headcount reductions as part of our organizational realignment. Of this, 1,900 reductions have already been realized.
  • Over and above this achievment, additional cost cutting measures have been targeted in DB Services which will reduce headcount by 1,200.
  • The reengineering of PCAM's business model will drive synergies and economies of scale resulting in an additional headcount reduction of 3,300 in this Group Division. We anticipate achieving this reduction without any redundancies.

These identified additional measures - leading to a further 4,500 reduction headcount - bring our total targeted net headcount reduction to 7,100 to be completed in the next 24 months. Finally, we are working on further concrete steps, the outcome and objectives of which will be communicated as soon as they have been finalized.

 

Development in Group Divisions

Group Corporate and Investment Bank (CIB)

CIB delivered strong financial results in 3Q2001 despite increasingly difficult market conditions. CIB again proved its competitive strength as one of the leading global investment banks. It strengthened its market position, underlined by market share gains and top awards received:

  • Corporate Banking and Securities
  • In Global Markets, we have continued to consolidate our position as the leading fixed income firm worldwide. We were voted World's Best Bank for Capital Raising in 2001 and rank in this poll No. 1 in issuance of international bonds, Euro denominated straight eurobonds and FRN's , EMTN's and ECP (EUROMONEY September). During the 3rd quarter, we led a number of landmark transactions, including deals for Deutsche Telekom, Hewlett Packard, the Republic of Brazil, and National Grid. Our interest rate and Credit derivatives businesses, our money market/repo and our US businesses all performed particularly strongly.
  • In Global Equities, market conditions have continued to be difficult. Nevertheless, we have gained market share in many markets and moved into the Top 10 rankings of Research in the US (AART Institutional Investor), as well as making significant progress in Japan.
  • In Corporate Finance our M&A market share has almost tripled, both worldwide and in the US, and our focus on the large cap. sector and on realising the benefits of integrating lending and advisory activities, is showing real results. In Europe, our position has improved to No. 6 and in the important US market we now rank No. 7. We now rank No. 8 globally in M&A, compared to No. 12 a year ago (Thomson Financial SDC). In High Yield and Leveraged Finance, where until 11 September new issue volumes had been strong, we have also gained market share and strengthened our existing franchise both in Europe and in the US.

Global Transaction Banking (GTB)

In GTB we received in August two EUROMONEY awards for Excellence in Global Cash Management and for Transaction Services in Western Europe. We are also now No. 1 arranger of Global Trade Finance. These accolades underline the strength of our franchise in Transaction Banking.

 

Conditions following 11 September will obviously be challenging for all market participants. Nevertheless, we are committed to playing our part in restoring stability to world financial markets and to providing continuous, high quality advice and execution. In the few weeks following the World Trade Center attacks, Deutsche Bank was the most active underwriter in international bond markets, lead managing no less than 51 transactions.


Group Private Clients and Asset Management (PCAM)

In volatile market conditions PCAM revenues have held up well, and the first phase of cost containment has begun to show results. Profits, however, were affected by adverse market conditions and the funding of strategic growth initiatives. The integration of Scudder will represent a quantum leap forward in scale, profitability, global positioning and breadth of offering. Deeper cuts in the expense base, and targeted cost-efficiency, will result from a reengineering of PCAM's business model along the value chain, driving synergies, and economies of scale, in production, distribution and infrastructure. PCAM will be one of Europe's leading asset gatherers vis-à-vis the European retirement provision opportunity, in particular with the affluent segment.

In order to achieve cost-efficiency in PCAM's organic business, three initiatives are underway:

  • First, the senior management structure of PCAM has been streamlined.
  • Second, the business model has been reconfigured along functional lines. Until now the three Divisions - Personal Banking, Private Banking and Asset Management - had separate management structures, separate salesforces and distribution channels, and separate back office infrastructures. In the future, a Product Group will be responsible for delivering all PCAM's products and services through the distribution channels of Personal Banking and Private Banking, and through Asset Management, whether manufactured within PCAM or "bought in" from either CIB or third parties. Additionally, a Client Group will be responsible for distributing all these products and services across PCAM's individual client base. A single Infrastructure Group will provide an integrated back office function, including a single technology platform.
  • Third, disposal of non-core and non-performing business units is under way (i.e. the agreed sale of Deutscher Herold).

We will continue to report three business P&Ls to the market: Personal Banking, Private Banking, and Asset Management.


Corporate Investments (CI)

CI was affected by deteriorating capital markets conditions, especially after the terrorist acts of September 11. Accordingly, we sustained write-downs on our real estate and private equity portfolios, and recorded, in P/L, impairments on certain industrial holdings. This segment's results also reflect a loss on the sale of NDB.com.

For further detail on the third quarter performance of CIB, PCAM and CI please refer to the segmental reporting of the Interim Report.

Financial Targets

Although the tense general economic environment and the politically unstable world situation makes it particularly difficult at this time to give an outlook, the Board does not see any necessity to revise Deutsche Bank's communicated financial targets through 2003. On the Group level our target is to grow Earnings per Share over the years 2000 - 2003 at a compound annual growth rate by more than 15 %. The target for annual post-tax Return on Equity is an average of more than 15 % through 2003. Both targets are excluding capital gains from industrial holdings. Also the financial targets set for CIB and PCAM remain unchanged. Our long-term commitment, to grow the asset gathering side of the DB Group's business, remains absolute.


Live-Broadcast of the Conference Call

In order to discuss the financial results we invite you to follow a conference call with our CFO Dr. Clemens Börsig on


Thursday, 1 November 2001
2.00 - 3.00 p.m. (CET).

 



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