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Deutsche Bank’s performance in the first quarter 2006 was truly outstanding. This was the most profitable first quarter in Deutsche Bank’s history, significantly better even than the very strong result in the same quarter of 2005. The world’s capital markets performed strongly; levels of corporate activity, above all in Europe, remained high, with positive momentum in Germany; and demand for investment management solutions was robust. In this environment, all our core businesses performed exceptionally. We reaped full benefits from our strategic positioning, our focused investments in growth businesses and markets, and from the success of our business realignment initiatives which are now almost complete.
Revenues of Deutsche Bank Group for the quarter were € 8.0 billion, up 21% versus the first quarter 2005. Pre-tax profit was € 2.6 billion, up 46%, while net income rose 55% to € 1.7 billion. Pre-tax return on average active equity, per target definition, was 40%, significantly above 33% in the first quarter 2005, even with a higher equity base. Diluted 
earnings per share rose by 58% to € 3.30.
The Corporate and Investment Bank (CIB) recorded its best-ever quarter, with underlying pre-tax profits rising 33% to € 2.1 billion. Our Sales & Trading businesses turned in an outstanding result, with best-ever revenues in both debt and equity. We reaped the benefits of synergies from the integration of all our trading platforms, and from our commitment to higher-value solutions for our clients, including credit products and derivatives. Revenues from Sales & Trading Equities grew 90%, reflecting growth in all major regions and most core businesses. We also took good advantage of selective opportunities in proprietary trading, but once again without compromising our strict discipline in market risk. Our Corporate Finance business leveraged our pre-eminent European franchise in strong markets, winning highly competitive mandates for a large number of the region’s highest-profile transactions and building a strong deal pipeline. Our transaction banking business, after a highly successful 2005, continued to record substantial profit growth, contributing further to the diversification and quality of CIB’s earnings.
In Private Clients and Asset Management (PCAM) underlying pre-tax profit rose 37% to € 558 million, driven above all by the strength of our investment management business lines. We captured net inflows of € 12 billion, which helped increase our total invested assets to € 885 billion, laying a firm basis for future revenue growth. Our Asset and Wealth Management segment grew underlying pre-tax profits by 46%, reflecting continued progress with our reorganisation of Asset Management in recent months, and the benefits of our investments in Private Wealth Management. Private & Business Clients produced the best quarterly profits ever, boosted by strong growth in both investment services and consumer finance, while our latest investment projects in China and India proceeded according to plan.
We maintained our vigorous commitment to cost, risk and capital discipline. The underlying cost/income ratio improved by two percentage points to 68% versus the first quarter 2005. We were also able to grow revenues without significant rises in risk positions, while problem loans, both in absolute terms and as a proportion of our loan book, fell to their lowest levels for more than five years. By the end of the quarter, we had repurchased 28.3 million shares within the 4th buyback program, or 52% of the total repurchase capacity authorised under that program. Our capital position remained strong, with the Tier 1 capital ratio rising to 8.8%, close to the top of our target range of 8−9%. We will ask our shareholders at the upcoming Annual General Meeting for authorization of a new buyback program.
We moved decisively to address issues related to the temporary closure of one of our real estate funds in Germany, which was widely covered by the media. On receipt of the report of independent valuation experts, we swiftly re-opened the fund and offered prompt and fair compensation to any investors who had experienced losses from the revaluation, having made provision for the cost of this compensation already in 2005. In the meantime the actual price for the funds is higher again than before the temporary close. At all stages, we successfully and equitably balanced the interests of our clients with those of our shareholders.
In early April we communicated several senior management changes. Rolf-E. Breuer announced his decision to stand down as Chairman of the Supervisory Board. Rolf-E. Breuer’s career at Deutsche Bank spans 50 years, during which he served both as Spokesman of the Management Board and Supervisory Board Chairman. His contribution has been exceptional, and on behalf of all my colleagues, I wish to express sincere gratitude for his long and most distinguished service of our bank. The Supervisory Board proposed, for election at the Annual General Meeting, Clemens Boersig, our Chief Financial and Risk Officer, as Rolf-E. Breuer’s successor. It also appointed two additional Management Board members: Hugo Banziger as new Chief Risk Officer, and Anthony Di Iorio, as new Chief Financial Officer. Both elections reflect the strength in depth of our international management team, and our continued commitment to a strong and independent Controlling and Risk Management.
In the current operating environment, Deutsche Bank is very well positioned for continued success. The Business Realignment Program strengthens our growth prospects. In all key regions of the world, our strategy of focused investments in our core businesses is paying rich rewards. Our U.S. platform continues to flourish in a strong domestic economy and robust market. Our investments in key emerging markets – Asia, the Middle East, Russia and Latin America – continue to prosper in dynamic local environments. Our strength in Europe positions us well for the growing momentum of the European capital markets.
Last but not least, as the leading bank in Germany, we reap, more than any of our competitors, the benefits of improved business confidence of our domestic and international clients in our home market.
All of us at Deutsche Bank feel very proud of these outstanding quarterly results. My colleagues and I remain absolutely committed to sustaining, and building on our profitable growth strategy and continuing to deliver superior value to you, our shareholders.
We also look forward to welcoming many of you at our Annual General Meeting on 1st of June in the Frankfurt Festhalle.
Yours sincerely,
