After the publication of preliminary results 2001 on 31 January 2002, Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today released its Annual Report for the financial year 2001. The full report is available on the http://www.db.com/ir
Additional information on Deutsche Bank will be made available to the SEC and the public when we file our Annual Report Form 20-F on or about 27 March 2002.
Attached to this release are the following tables from the Annual Report, all relating to Deutsche Bank Group (page references in brackets to Annual Report):
“We have used the difficult year 2001 to make our bank even stronger”, Rolf-E. Breuer writes in the Annual Report. “We feel well equipped for the current 2002 financial year, which promises to be another difficult one. We are facing the risks in our business with healthy caution, but at the same time we are preparing for the new upswing and the ongoing consolidation of our industry”, says Breuer. “We look forward into the year 2002 with confidence.”
Despite the overall difficult economic situation, which deteriorated further after the terrorist acts of September 11 in the United States, signs of an upturn in the United States are now becoming more visible. We believe this development will also take hold in Europe and Germany. For the second half of 2002, we expect growth in the economy, which we anticipate should accelerate further in the upcoming year. The financial markets, we believe, will positively react to this development, allowing us to increase our revenues. However, our forecasts for Eastern Europe and the emerging markets in Asia and South America are somewhat more cautious. Japan, too, will probably recover only slowly from its recession.
We expect the recovery of the markets in the second half of 2002 to have positive effects on the revenues of our three Group Divisions: Corporate and Investment Bank (CIB), Private Clients and Asset Management (PCAM) and Corporate Investments (CI).
As to the credit risk situation, we do not yet see a recovery. We must continue to carefully and attentively manage and assess our credit exposure.
U.S. GAAP Net Income
The Net Income reported in 2000 (€ 13.5 bn) and 2001 (€ 0.2 bn) are strongly influenced by the treatment under U.S. GAAP of the reduction in the German corporate income tax rates and the elimination of taxes on gains from the sale of shareholdings in corporations.
These tax rate changes resulted in a tax benefit being reflected in our year 2000 U.S. GAAP Income Statement of € 9.3 bn, which increased the U.S. GAAP net income we reported in 2000. Approximately € 6.2 bn of this tax benefit represents the reversal of income taxes previously accrued on the unrealized gains on our industrial shareholdings. U.S. GAAP requires us to record tax expense totalling € 6.2 billion reversed in 2000 (and an additional € 0.7 bn reversed in 1999) in subsequent years when the shareholdings giving rise to those benefits are sold. As a result, Deutsche Bank reported tax expense of almost € 1.0 bn in 2001 on industrial shareholdings sold during the year, even though we incurred no tax liability as a result of those sales.
Net Income for 2001 also reflects a charge of € 0.2 billion representing the cumulative effect for years prior to 2001 of implementing the U.S. GAAP standard on accounting for derivatives that took effect in 2001.
Net Income adjusted for the effect of the tax law change and the prior years’ effect of the change in accounting for derivatives is € 1.4 bn in 2001 (or € 2.21 basic earnings per share), and € 4.2 bn in 2000 (or € 6.88 basic earnings per share). The corresponding return on active equity is 4.4% in 2001 and 16.5% in 2000.
The following sections highlight two selected changes in our accounting or reporting practices for the year 2001. We recommend you read the Annual Report in its entirety for a full understanding of our results.
Trading revenues do not include the following items that are part of the revenue and expense streams our trading businesses generate:
We believe, therefore, that you should include the above mentioned items to assess the performance of our trading operations. For this purpose, we use a measure we call “trading performance”.
The components of net trading related interest are shown in the first table on page B6; the composition of trading performance (trading revenues and net trading related interest) is explained in the second table on page B6.
For a more detailed discussion please see Annual Report, pages 67-69.
Changes in non-accrual practice and chargeoff methodology for loans:
Our problem loans are comprised of non-accrual loans, loans ninety days past due and still accruing, troubled debt restructurings and potential problem loans. As we have previously disclosed in connection with our New York Stock Exchange listing on 3 October 2001 and the conversion to U.S. GAAP, we began in 2001 to apply the non-accrual practice of our entities regulated in the United States to our entities regulated outside the United States as well. This did not increase the overall level of problem loans but did increase non-accrual loans with a similar decrease in potential problem loans and loans ninety days past due and still accruing.
The change in our non-accrual practice did not significantly impact interest revenues as we continue to recognize interest payments received currently on a cash basis.
The components of our problems loans are shown in the third table on page B6.
As we have previously disclosed in connection with our New York Stock Exchange listing on 3 October 2001 and the conversion to U.S. GAAP, we began to develop a methodology in 2001 to bring our worldwide chargeoff practices more into line with industry practices in the United States and had anticipated that the timing of our chargeoffs would accelerate. In 2001, entities regulated outside the United States began to implement this change, which resulted in a higher level of chargeoffs relative to that which would have occurred under the prior practice. Our percentage of total chargeoffs to average loans for the year 2001 was 0.71% compared to 0.39% for 2000 and 0.31% for 1999. The full implementation of this change may continue to affect the timing of chargeoffs in future years.
For a more detailed discussion please see Annual Report, pages 177-179.
Corporate Governance Report
In March 2001 Deutsche Bank was the first DAX 30 company to implement Corporate Governance Principles after their approval by the Board of Managing Directors and the Supervisory Board. These guidelines specifically tailored to Deutsche Bank regulate the relations with our shareholders, the tasks and duties of the Board of Managing Directors and the Supervisory Board, the structure and disclosure of the performance-based compensation of these two bodies and the demands on reporting and transparency.
In addition to the Annual Report Deutsche Bank now publishes for the first time a comprehensive Corporate Governance Report 2001 (Internet: www.deutsche-bank.com/ir under “Group Information/Corporate Governance”).
Further documents available on the internet
In addition to the Annual Report and the Corporate Governance Report, the following documents can be viewed at or downloaded from the above-mentioned internet site (under “Group Information/Documentation”):