Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) today announced, on a preliminary and unaudited basis, key elements of its fourth quarter 2008 financial performance: Fourth-quarter loss: The bank currently anticipates a loss after taxes in the region of EUR 4.8 billion for the fourth quarter 2008. This development reflects exceptional market conditions, which severely impacted results in the sales and trading businesses, most notably in Credit Trading including its proprietary trading business, Equity Derivatives and Equities Proprietary Trading. The result also reflects exposure reduction and other de-risking measures, a significant increase in provisions against certain of our monoline counterparties, and certain other exceptional gains and charges, including reorganisation charges. In Asset and Wealth Management, the bank anticipates a fourth quarter loss driven by an impairment charge on intangible assets related to DWS Scudder and substantial injections into money market funds.
For the full year 2008, the bank currently anticipates a loss after tax in the region of EUR 3.9 billion. Limited use of the fair value option on own debt: Consistent with stated policy, the bank continues to make very limited use of the fair value option on its own debt. For comparative purposes, it is noted that election of the fair value option on all of Deutsche Bank´s issued debt would have provided a pre-tax gain in excess of EUR 5.5 billion for the full year 2008. Capital strength: At the end of the fourth quarter, the bank anticipates that its BIS Tier 1 ratio will be in the region of 10%, its published target. This reflects a dividend accrual of 50 Cents per share for 2008. Further progress in balance sheet de-leveraging: Global Markets made further significant reductions to its trading and other non-derivatives assets during the fourth quarter 2008 of around EUR 300 billion, reflecting the bank’s balance sheet de-leveraging initiatives in this area. However, these reductions were more than counterbalanced by higher positive market values from derivatives, for which very limited netting is available under IFRS accounting rules.The increase in our gross mark-to-market derivatives reflect the exceptional volatility and extreme yield curve moves during the quarter. The reduction in trading and non-derivatives assets in no way compromised the bank’s lending to the German midcap sector during the quarter. The bank’s leverage ratio, according to its target definition, is currently anticipated to decrease compared to the end of the third quarter 2008. Significant reduction in key credit market exposures: The bank’s exposure to leveraged loans and loan commitments (held on a fair value basis) was reduced from EUR 11.9 billion at the end of the third quarter to below EUR 1 billion at the end of the fourth quarter 2008. Furthermore, commercial real estate loans (held on a fair value basis, net of risk reduction) declined from EUR 8.4 billion to under EUR 3 billion in the same period. Corrective measures: The Management Board decided upon a number of corrective adjustments to its platform in the quarter, some of which were implemented toward the end of the quarter, and are thus reflected in the fourth quarter results. Other measures will follow in 2009. Dr. Josef Ackermann, Chairman of the Management Board, said: “We are very disappointed at this fourth quarter result, which leads to a loss for the year. The exceptionally difficult market environment of the quarter exposed some weaknesses in our platform, and we have determined a number of measures to address these weaknesses. Implementation of these measures is already underway.
Our capital strength, which we have successfully maintained, allowed us to withstand these extremely difficult market conditions and to take necessary steps to de-risk our platform. We have substantially reduced our exposures in leveraged finance, commercial real estate and other key credit market exposures, and expect no further material negative impact from these areas. We have scaled back or exited trading strategies most affected by market turbulence. We have significantly reduced trading assets, and thus reduced balance sheet leverage.”
Deutsche Bank’s fourth-quarter and full-year 2008 results will be published as scheduled on 5 February 2009 with the Annual Press Conference and an Analyst Conference taking place on the same day in Frankfurt.
A Joint Analyst and Media Call with Dr. Josef Ackermann, Chairman of the Management Board and Stefan Krause, Chief Financial Officer will be held today at 14.30 Central European Time.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. 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.
By their very nature, forward-looking statements involve 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 management agenda, 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 26 March 2008 under the heading "Risk Factors." Copies of this document are readily available upon request or can be downloaded from www.deutsche-bank.com/ir .