IR Releases - Archive

July 31, 2003

Deutsche Bank reports second quarter 2003 pre-tax profit of Euro 1.1 billion


  • Underlying pre-tax profit up 70 per cent to Euro 1.2 billion versus 2Q2002, up 30 per cent versus 1Q2003
  • Second consecutive quarter of underlying revenue growth – up 8 per cent to Euro 6.0 billion versus1Q2003
  • Third consecutive quarter of declining total  provision for credit losses
  • Return on Equity  and cost/income ratios show marked improvement, reflecting impact of
    strategic initiatives
  • Revenues from sales and trading products up 30 per cent versus 2Q2002 to Euro 2.7 billion
Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today released its results for the second quarter of 2003. The bank reported income before income tax expense of Euro 1.1 billion for the quarter, compared to Euro 2.2 billion for 2Q2002 and Euro 234 million for 1Q2003. The 2Q2002 figure included significant gains on sales of industrial holdings.

Net income for 2Q2003 was Euro 572 million compared with Euro 204 million in 2Q2002. Income tax expense (before tax reversal effects) was Euro 503 million in 2Q2003 (2Q2002: Euro 150 million) and includes one-off effects following changes in German tax law in May 2003.

As a result of the continued strong performance in Deutsche Bank’s core businesses, underlying pre-tax profit (see reconciliation table below) jumped 70 per cent to Euro 1.2 billion in 2Q2003 compared to 2Q2002. Compared to 1Q2003, underlying pre-tax profit increased 30 per cent.
 
Josef Ackermann, Chairman of the Group Executive Committee, said, “Our strategic initiatives have transformed Deutsche Bank over the last 15 months. As a result we have delivered two consecutive quarters of strong performance, generating Euro 2.2 billion in underlying pre-tax profit. The bank’s operating leverage continues to improve through a focus on our core businesses.”

Underlying revenues increased from Euro 5.6 billion in 1Q2003 to Euro 6.0 billion in 2Q2003. They declined 5 per cent compared to 2Q2002, reflecting the effects of the sale of non-core businesses and shifts in exchange rates.

Total provision for credit losses decreased for the third consecutive quarter, falling 5 per cent to Euro 333 million from Euro 350 million in 1Q2003, and down from a peak in autumn 2002. The bank reduced problem loans by Euro 0.9 billion in 2Q2003 to Euro 8.4 billion.

The bank’s improved key ratios are proof of the successful transformation of its business model. The underlying pre-tax return on equity grew from 9 per cent in 2Q2002 to 17 per cent in 2Q2003, while the positive operating leverage resulted in a decrease of the bank’s underlying cost/income ratio from 80 per cent in 2Q2002 to 74 per cent in 2Q2003.

The operating cost base for 2Q2003 was Euro 4.5 billion, compared to Euro 4.3 billion in 1Q2003. This increase resulted from higher severance and performance related compensation expenses – non-compensation expenses remained stable. The operating cost base was down 12 per cent compared to 2Q2002.  

Reconciliation of pre-tax profit*

       
  in Euro million
2Q03
1Q03
2Q02
 
Reported income before income taxes
1,091
234
2,223
 
Net gains/losses on securities available for sale/ industrial holdings including hedging
(45)
392
(2,045)
 
Significant equity pick ups/net write-downs
169
715
497
 
Other revenues: net gains/losses from business sold/held for sale
49
(503)
(213)
 
Restructuring activities
(27)
(2)
265
 
Goodwill impairment
-
114
-
Underlying pre-tax profit
1,237
950
726
 

Numbers may not add up due to rounding

Segmental results of Operations

The Group Division Corporate and Investment Bank (CIB) continued to demonstrate its strong global competitive position. CIB recorded income before income taxes of Euro 878 million in 2Q2003, which included a Euro 101 million cost to hedge the loan book. This compares to Euro 1.4 billion for 1Q2003 which included a gain of Euro 508 million from the disposal of a substantial part of the bank’s Global Securities Services business. The division’s income before income taxes in 2Q2002 was Euro 249 million.

Revenues from sales and trading products were Euro 2.7 billion in 2Q2003, up 30 per cent versus 2Q2002, reflecting the stability and sustainability of the sales and trading platform. An improved market environment helped boost sales and trading revenues from equities and related derivative products to Euro 0.9 billion, up by 52 per cent compared to 1Q2003, and by 61 per cent compared to 2Q2002. Sales and trading revenues from debt and related products were Euro 1.8 billion for 2Q2003, matching the 1Q2003 figure and up by 18 per cent versus 2Q2002. This solid performance once again illustrates the stability of the bank’s revenues as a result of our heavy emphasis on customer flow business.

The bank’s Group Division Private Clients and Asset Management (PCAM) reported revenues of Euro 2.0 billion in 2Q2003. Income before income taxes in 2Q2003 rose by 4 per cent compared to 1Q2003 despite severance costs following the reorganisation of the Private & Business Clients Corporate Division (PBC).

PBC reported income before income taxes of Euro 163 million in 2Q2003, an increase of Euro 36 million compared to 1Q2003. Compared to 2Q2002 (excluding gains from the sale of the insurance business) income before income taxes improved by Euro 68 million mainly due to reductions in non-interest expenses following reorganization measures and cost-saving initiatives.

The Asset and Wealth Management Corporate Division recorded income before income taxes of Euro 123 million for 2Q2003, up Euro 22 million versus 2Q2002 and down Euro 24 million versus 1Q2003 (which included a gain from the sale of the bank’s Passive Asset Management business).

Excerpts from the Interim Report can be found in the attachments on B1 – B18.

An Analyst Meeting to discuss second quarter financial results with Clemens Börsig, CFO, will take place in Frankfurt today, commencing at 3.00 p.m. CET and will be broadcasted live via the Internet.


This Investor Relations Release contains forward-looking statements. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Any statement in this Investor Relations Release that states our intentions, beliefs, expectations or predictions (and the assumptions underlying them) is a forward-looking statement. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our trading revenues; potential defaults of borrowers or trading counterparties; the implementation of our restructuring including the envisaged reduction in headcount; the reliability of our risk management policies, procedures and methods; and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of March 27, 2003 on pages 9 through 13 under the heading "Risk Factors."  Copies of this document are readily available upon request or can be downloaded from www.deutsche-bank.com/ir.






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