Rolf-E. Breuer, spokesman of the Board of Managing Directors: "The year 2001 was a big challenge. Given the weak development on the international financial markets, Deutsche Bank successfully asserted its position. Our strict cost management had an effect. Costs remained roughly constant compared with the previous year. Overall, the bank has become leaner and more agile. At the same time, Deutsche Bank has taken forward its strategic goals and further strengthened its position on all markets which are important to us. It has thus created the potential for further growth.“
Net income was € 167 million in 2001, which includes tax expense of € 1.0 billion representing the reversal of tax benefits recorded in prior years for the effect of German tax law changes. Net income was further reduced by the € 0.2 billion cumulative effect of accounting changes. Net income in 2000 of € 13.5 billion included a benefit from those German tax law changes of € 9.3 billion. Net income (excluding the effect of tax law changes and the cumulative effect of accounting changes) would be € 1.4 billion in 2001 and € 4.2 billion in 2000.
Basic earnings per share was € 0.27 in 2001, as compared to € 22.00 in 2000. Excluding the tax rate change effects and cumulative effects of accounting changes, our basic earnings per share would have been € 2.21 in 2001 and € 6.88 in 2000.
The closing of calendar year 2001 completes the transition to U.S. GAAP as our primary basis of reporting. Our results presented under U.S. GAAP for 2001 differ significantly from those which would have been presented had we also prepared and presented financial results determined under our former basis of accounting. To facilitate comparisons with periods before our transition to U.S. GAAP, we present in tabular form later in this release the items of revenue and expense that would have been included at significantly different values or in different periods under our former basis of accounting. Had we reported our 2001 and 2000 results under our former basis of accounting, these items would in the aggregate have increased net income before income taxes and cumulative effect of accounting changes by € 1.1 billion in 2001 and decreased net income before income taxes and cumulative effect of accounting changes by € 0.2 billion in 2000.
Rolf-E. Breuer: "We are confident in the bank’s stable earning power. Therefore, the Board of Managing Directors will propose to the Supervisory Board an unchanged dividend of € 1.30 per share."
Net revenues (excluding provisions for loan losses) were € 29.6 billion in 2001, a decrease of € 4.9 billion, or 14 %, as compared to the € 34.5 billion reported in 2000.
The primary driver behind the decline in net revenues was the weakness of the financial markets in 2001 especially after the terrorist acts of September 11. The weak markets negatively affected these revenues in 2001 as compared with 2000 in several major ways:
Net interest revenues were € 8.6 billion in 2001, an increase of € 1.6 billion, or 23 %, as compared to 2000. The primary driver was an increase in net interest revenues from our trading activities.
Trading revenues (which exclude net interest revenues from trading activities) were € 6.0 billion in 2001, a decrease of € 1.6 billion, or 21 % as compared to 2000. The decrease in trading revenues was due to difficult market conditions in 2001, which led to lower transaction volume in equities trading, partially offset by the impact of the adoption of the accounting standard SFAS No. 133. Taking into account the increase in net interest revenues on trading activities in 2001, and the positive effect of SFAS No. 133, the overall contribution to net revenues from trading activities was comparable to 2000.
Commissions and fee income was € 10.7 billion in 2001, a decrease of € 1.0 billion or 8 % as compared to the € 11.7 billion reported in 2000. This decrease reflects primarily the weak market conditions in 2001 which led to decreased underwriting and advisory fees and lower brokerage fees compared to 2000. Commissions for asset management have also declined due to lower transaction volume and reduced performance based fees.
Gains from securities available for sale were € 1.5 billion in 2001, a decrease of € 2.2 billion, or 59 %, as compared to 2000, primarily reflecting decreased gross realized gains from securities sold. In 2000 approximately 60 % of our gains on sales were from the sales of shares in one of our industrial holdings. In 2001, we disposed of shares of a different industrial holdings position which accounted for approximately 90 % of our gains on sales in 2001.
Insurance premiums were € 2.7 billion in 2001, essentially unchanged compared to 2000.
Other revenues were negatively affected by the deteriorated capital market conditions, especially after the terrorist acts of September 11. In 2001, we recorded € 1.6 billion of net write-downs and valuation adjustments on our own investments as compared to € 0.2 billion in such charges in 2000.
The provision for loan losses were € 1.0 billion in 2001, an increase of € 0.5 billion, or 114%, over the € 0.5 billion recorded in 2000. The 2001 provision is composed of net new specific loan loss provisions and other inherent loss offset by net reductions of country risk provisions. Our total new specific loan loss provision amounted to € 1.0 billion in 2001 and € 0.8 billion in 2000. Most of this increase was due to less favorable economic conditions in the last quarter of 2001 which have resulted in a deterioration in credit quality. In the final quarter we saw increases in specific loan loss provisions including Enron, various Argentine exposures and in Leveraged Structured Finance.
Compensation and benefits were € 13.4 billion in 2001, a decrease of 1 % from 2000. This is our largest category of noninterest expenses. The impact of inflationary salary increases and continued selective expansion in some of our businesses as well as an increase in severance payments was offset by a decrease in bonus and other special payments as well as reductions of workforce in other areas.
Policyholder benefits and claims, which arise from our insurance activities, were € 3.0 billion, a 25 % reduction compared to 2000. This reduction reflects lower allocation for the benefit of policyholders from the annual surplus of our insurance affiliates.
Restructuring activities of € 0.3 billion were recorded in 2001 and € 0.1 billion in 2000. In the fourth quarter of 2001, we recorded a restructuring provision in connection with cost reduction initiatives in our Corporate and Investment Bank and Private Client and Asset Management Divisions. These initiatives, which will be completed during 2002, will result in a reduction of approximately 2,400 employees. The 2000 restructuring activities principally represented a plan for Deutsche Bank 24 to consolidate its branch offices and its related back office functions.
The remainder of noninterest expenses, excluding goodwill amortization, was € 9.2 billion, a € 0.5 billion increase from 2000. Contributing to this increase were, among others, costs associated with the introduction of the Euro cash, higher marketing expense and depreciation.
Income tax expense in 2001 was € 1.4 billion, as compared to income tax benefit of € 6.6 billion in 2000. The tax benefit in 2000 was primarily attributable to the reduction of deferred tax liabilities on our industrial portfolio of securities available for sale. This change plus other effects attributable to German tax law changes in 2000 and 1999 resulted in a tax benefit of € 9.3 billion in 2000. Income tax in 2001 includes a € 1.0 billion expense representing the reversal of tax benefits recorded in 2000 and 1999 as a result of the sale in 2001 of industrial holdings. The tax effect of the unrealized gains on those shareholdings was included in the tax benefit recorded in the prior years. Excluding the effect of tax rate changes and reversing effects in 2001 and 2000 the effective tax rate was 24 % and 38 %, respectively.
The cumulative effect of accounting changes in 2001, related to the adoption of an accounting standard for derivatives (SFAS No. 133), resulted in an after tax charge to income of € 0.2 billion.
Subject of the meeting is the 2001 results (for the first time acounting in accordance with US GAAP) as well as strategic issues. The Analyst Meeting will be transmitted through the internet -listen only-.