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Frankfurt am Main, February 5, 2004

Deutsche Bank reports 2003 pre-tax profit of Euro 2.8 billion

4Q2003 pre-tax profit of Euro 676 million versus Euro 237 million in 4Q2002

Proposed dividend increase of 15 per cent to Euro 1.50 per share

  • Net income of Euro 1.4 billion in 2003 versus Euro 0.4 billion in 2002; basic earnings per share up 281 per cent to Euro 2.44
  • Underlying pre-tax profit in 2003 of Euro 3.6 billion, up 163 per cent
  • Underlying revenues of Euro 21.9 billion, down four per cent - up nine per cent when adjusted for FX effects and the first time impact of consolidations and deconsolidations
  • Operating cost base down 11 per cent to Euro 17.3 billion
  • Substantial improvement in credit quality during 2003 - problem loans reduced by 39 per cent; provisions for credit losses down 50 per cent
  • Risk-weighted assets down nine per cent and Tier 1 capital ratio increased to 10 per cent

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today released its results for the fourth quarter and full year 2003. The bank reported income before income tax of Euro 2.8 billion for 2003 compared to Euro 3.5 billion for 2002. Income before tax for 4Q2003 was Euro 676 million compared to Euro 237 million in 4Q2002.

Net income for 2003 more than tripled to Euro 1.4 billion compared with Euro 0.4 billion in 2002. The income tax expense was Euro 1.3 billion (2002: Euro 0.4 billion), excluding the reversal of 1999/2000 credits for tax rate changes. The increase in net income translates to a jump in earnings per share of 281 per cent to Euro 2.44.

The income before income taxes in 2003 masks a significant improvement in underlying pre-tax profit (see reconciliation table). In 2002, reported pre-tax profit of Euro 3.5 billion was boosted by non-underlying net gains of Euro 2.2 billion (gains on the sale of industrial holdings and businesses, net of charges for non-core assets). Reported pre-tax profit of Euro 2.8 billion in 2003 included net charges of Euro 800 million from non-underlying items. Underlying pre-tax profit for 2003 was Euro 3.6 billion, up 163 per cent from 2002. Underlying pre-tax profit for 4Q2003 was Euro 662 million, up from Euro 147 million in 4Q2002.

Josef Ackermann, Chairman of the Group Executive Committee, said, “These results demon-strate the continuing success of our transformation strategy. Deutsche Bank has reached new levels of operating strength; in terms of profitability, capital strength, and significantly lower risk. In a very challenging economic environment, we maintained the momentum of our business and cost reductions and made very strong progress in de-risking the bank.

Our recommended dividend increase of 15 per cent to Euro 1.50 per share reflects our confidence that we will continue to meet aggressive growth targets in the next phase of our strategic agenda.”

Underlying revenues in 2003 were Euro 21.9 billion, nominally down four per cent compared to 2002 (Euro 22.8 billion). These figures partially reflect the strengthening of the euro, which impacts Deutsche Bank’s substantial dollar-based revenues, and the non-recurrence of revenues from businesses sold over the past year. Adjusted for these two effects, which amounted to Euro 2.7 billion, Deutsche Bank’s underlying revenues in 2003, on a like-for-like basis, were nine per cent higher than in 2002.

The operating cost base in 2003 was Euro 17.3 billion, down Euro 2.2 billion, or 11 per cent, compared to 2002 (Euro 19.4 billion). In 2003, the bank benefited from its disciplined and ongoing cost containment programme, as well as from a decline in dollar-based costs and the deconsolidation of businesses. The underlying cost/income ratio declined from 85 per cent in 2002 to 79 per cent in 2003. The operating cost base, excluding severance payments of Euro 0.7 billion, was Euro 16.6 billion in 2003.

Loans were Euro 148 billion at the end of 2003, down Euro 23 billion, or 14 per cent, compared to 2002 (Euro 172 billion). Problem loans were reduced by nearly 40 per cent to Euro 6.6 billion, from Euro 10.8 billion in 2002. This reflects strict loan exposure management policies and effective workout procedures. Nevertheless, Deutsche Bank has been sensitive to the needs of clients in Germany, faced by weak economic conditions. Within our loan portfolio, German loans now account for 57 per cent of the total compared to 43 per cent in 2001.

Provisions for credit losses (including off balance sheet exposures) were Euro 1.1 billion in 2003 – a reduction of Euro 1 billion, or 50 per cent, from 2002 (Euro 2.1 billion). This reflects improvements in the quality of the loan book and a more favourable economic environment.

Deutsche Bank’s BIS core capital ratio rose to 10.0 per cent at the end of 2003 – back to its strongest ever level and 40 basis points higher than at the end of 2002 (9.6 per cent). The bank’s capital ratio is strong and comfortably above our target range of 8-9 per cent. This was achieved despite the impact of our share buyback programme, and changes in accounting treatment which negatively affected our Tier 1 capital. Deutsche Bank completed its first buyback programme of 62 million shares, or 10 per cent of total shares on issue, and has already bought back 17 million out of a permitted total of 58 million shares in the second buyback programme.

Risk-weighted assets were Euro 216 billion at the end of 2003 – down by nine per cent in 2002, and down by nearly 30 per cent since 2001.

“Our transformation strategy provides a solid foundation for continued growth. We have set aggressive but realistic targets for phase two of our management agenda, and the strong competitive platform, combined with good revenue momentum, makes us confident we can achieve our goal of 25 per cent pre-tax return on equity,” said Ackermann.

The focus of the bank’s strategic initiatives is on boosting revenues. For example, the bank’s Corporate and Investment Bank division will continue to invest in high margin businesses and develop specific industry groups in the US. The bank’s Private and Business Clients unit will in-crease customer penetration by improving cross-selling ratios. Private Wealth Management has selectively hired senior relationship managers and upgraded its product mix.

“The year 2004 has started very well, and we are confident that, if the world’s economies and financial markets continue to develop positively, our growth objectives are achievable,” Ackermann said.

Reconciliation of pre-tax profit

In Euro million
Reported income before income taxes
Net gains/losses on securities available for sale/industrial holdings including hedging
Significant equity pick ups/net gains/losses from investments
Other revenues: net gains/losses from businesses sold/held for sale
Net gains/losses on the sale of premises
Restructuring activities
Goodwill impairment
Change in measurement of other inherent loss allowance
Underlying pre-tax profit

(1) Includes net gains/losses from significant equity method investments and other significant investments.
Numbers may not add up due to rounding

Segmental Results and Highlights

The Corporate and Investment Bank (CIB) recorded income before income taxes of Euro 3.5 billion in 2003 compared with Euro 0.8 billion in 2002. This improvement was driven by a reduction in non-interest expenses and lower provision for credit losses.

Revenues from sales and trading equity and debt products were Euro 9.2 billion in 2003, up 14 per cent (or 27 per cent when adjusted for FX effects) versus 2002. Measured by revenues, Deutsche Bank is the global leader in securities sales and trading, despite its value at risk being one of the lowest in the industry.

Sales and trading revenues from equities and related products climbed to Euro 3.1 billion, up 25 per cent (or 38 per cent when adjusted for FX effects) compared to 2002, reflecting increased market activity and improved market sentiment. Sales and trading revenues from all debt and related products were Euro 6.1 billion in 2003, up 9 per cent (or 22 per cent when adjusted for FX effects) versus 2002.

Global Markets maintained its leadership position in structured businesses such as interest rate and credit derivatives, and securitisations. It also is fast becoming a top-tier player in the US bond market, complimenting its leadership in Europe.

Global Equities’ high margin businesses had an outstanding year - the convertible bond business had its best year ever and Equity Derivatives continued its strong performance. Its cash business maintained the number one position in terms of market share in Europe.

Global Corporate Finance showed improved performance in Equity Origination and Debt Origina-tion, and its debt trading business had a record year. Equity Capital Markets and Debt Finance continue as clear leaders in Europe while the Mergers and Acquisition business maintained its first place ranking in Germany.

Following the sale of its Global Securities Services business in the first quarter, Global Transac-tion Banking continued to strengthen its franchise in an aggressively consolidating industry, cementing its leadership in Cash Management, Trade Finance and Trust & Securities Services.

Private Clients and Asset Management (PCAM) reported income before income taxes of Euro 1.2 billion (2002: Euro 1.2 billion). Underlying pre-tax profit, excluding gains from the disposal of businesses and restructuring activities, was Euro 1.1 billion in 2003 compared to Euro 0.9 billion in 2002. The 2003 figures included material severance payments. However, excluding such charges in both years, underlying pre-tax profit increased 40 per cent to Euro 1.5 billion (2002: Euro 1.1 billion). With stable underlying revenues of Euro 8.2 billion, PCAM has established itself as a leading business in its fields of activity.

Within PCAM, the pre-tax profit of Asset and Wealth Management has increased to Euro 0.7 billion (2002: euro 0.4 billion). This reflects the success of the Scudder and RREEF acquisitions, the continued success of DWS, and progress in improving the Private Wealth Management platform.

Towards the end of the year, Asset Management closed the sale of a Euro 1.0 billion Global Real Estate Opportunity Fund, consolidating PCAM’s position as the world’s largest third-party real estate management company, and continuing Deutsche Bank’s transition from an investor in real estate to an asset manager. The fund’s owners include  leading institutional investors and private client investors.

Private and Business Clients reported income before income taxes of Euro 0.5 billion (2002: Euro 0.8 billion). Underlying pre-tax profit before severance was Euro 0.8 billion (2002: Euro 0.6 billion, excluding the gain from the disposal of the bank’s insurance activities and excluding restructuring activities). This development demonstrates the steady progress in increasing the profitability of this business. PBC created a leaner more efficient network and made steady progress towards its goal of achieving Euro 1.0 billion pre-tax profit per year.

Corporate Investments (CI) continued the bank’s strategy of reducing exposure to all alternative assets classes. Towards the end of the year, Corporate Investment’s private equity and real estate assets were reduced from Euro 4.1 billion to Euro 2.9 billion, with the largest reduction coming from the sale of many bank-owned and occupied buildings in Europe.


Underlying pre-tax profit: Management uses underlying pre-tax profit and related measures to assess the performance of the Group and its businesses because they provide a more useful indication of financial performance and period-to-period trends. Each of these measures is reconciled to reported results in the table above and in the attached Financial Data Supplement.

‘Underlying revenues’ is defined as reported revenues adjusted for the revenue items described in the table above, and reflects insurance revenues net of policyholder benefits and claims.

‘Operating cost base’ is defined as reported noninterest expenses adjusted for the expense items in the table above, for policyholder benefits and claims (which are reclassified to ‘underlying revenues’), and for provisions for off-balance sheet credit loses.

Foreign currency translation adjustments: Foreign currency adjustments were calculated by applying 2003 average currency translation rates to the 2002 non-Euro currency base amounts, and comparing that number to the actual 2003 Euro result.

These figures are preliminary and unaudited. The Annual Report 2003 and Form 20-F will be published on 25 March 2004.


Financial Data Supplement

An Analyst Meeting to discuss the financial results 2003 with Josef Ackermann, Chairman of the Group Executive Committee and Clemens Börsig, CFO, will be broadcasted live via the Internet, commencing at 2.00 p.m. CET.

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

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