In the first quarter of 2008, financial market conditions were the most difficult in recent memory. Conditions in credit markets, and liquidity in the financial system, were both very tight. The outlook for the wider economy worsened, above all in the U.S., and equity markets weakened across the world. In the month of March, pressure on the banking sector was more intense than at any time since the current credit downturn began. Inevitably, this left its mark on Deutsche Bank’s results. Nevertheless, relative to the environment and the industry, this is a solid performance.

We reported a net loss of € 141 million, or 27 cents per share, on a pre-tax loss of € 254 million for the quarter. This result was significantly impacted by mark-downs on our positions in areas directly affected by market conditions. We continued to apply accounting principles consistently with prior quarters, and consequently our result reflected a very modest net benefit of € 77 million from changes in the carrying value of certain of our debt liabilities, driven by movements in credit spreads in the quarter. Applying the fair value option in line with common industry practice would have contributed € 2.0 billion to our pre-tax profits.

The impact of market conditions was felt primarily in our investment banking business. Corporate Banking & Securities reported a pre-tax loss of € 1.6 billion, principally reflecting mark-downs of € 2.7 billion on leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities, together with significantly lower revenues in other areas, particularly credit trading. On the other hand, ‘flow’ businesses – foreign exchange, money markets and interest rate trading – performed very strongly, as did commodities trading and prime services, both strategic growth areas. In foreign exchange, according to the benchmark Euromoney Global FX Survey, we ranked no. 1 for the fourth year running, increasing our market share to nearly 22 % – a leadership position never achieved by any bank before now. In Corporate Finance, revenues from M&A advisory and equity issuance were down year-on-year, reflecting significantly lower levels of market activity.

Our ‘stable’ businesses held up well. Global Transaction Banking (GTB) produced pre-tax profits of € 250 million in the quarter, up 17 % versus the first quarter 2007, despite a weak U.S. dollar and lower interest rates in the U.S. The introduction of the Single Euro Payments Area (SEPA) at the end of January allows GTB to further strengthen Deutsche Bank’s position as a strong European-based service provider of payment services.

In Private Clients and Asset Management (PCAM), pre-tax profits were € 492 million, up 2 % versus the first quarter of 2007. Within PCAM, the Asset and Wealth Management business produced pre-tax profits of € 188 million, unchanged versus the prior year quarter. In Asset Management, profits were affected by lower fees resulting from declining values in equity markets, and by more difficult conditions in commercial real estate markets. On the other hand, Private Wealth Management delivered significant profit growth versus the first quarter of 2007 as the investments and net money inflows of earlier years delivered results. Private & Business Clients produced pre-tax profits of € 304 million, up 4 %, with record quarterly revenues. Strong revenues from insurance-related products, notably pension products in Germany (Riester), counterbalanced a decline in brokerage revenues, and our investments, both in Germany and in growth markets such as Poland, made an improved contribution to the bottom line. PCAM also attracted € 11 billion in net new assets during the quarter, despite a difficult investment climate.

Taken together, GTB and PCAM produced pre-tax profits of € 742 million, up 7 % versus the first quarter of 2007, despite much more challenging market conditions. This performance clearly vindicates our strategy of diversifying our revenue mix by further building up ‘stable’ businesses. We also benefited from gains on the sales of certain industrial holdings during the quarter which contributed to a pre-tax profit of € 679 million in Corporate Investments.

In this difficult market environment, a sound capital base is critically important. Our Tier 1 core capital ratio, now reported under Basel II, was 9.2 % at the end of the quarter. We remain determined to maintain our capital strength. Our funding base is strong and well-diversified, and we continued to enjoy good access to liquidity, at relatively favorable prices, during the quarter.

Looking forward, the near-term outlook is highly uncertain. Credit and liquidity remain very tight. Investors continue to be cautious. The U.S. housing market is still weak. Inflationary pressures have intensified in both mature and developing economies. This, coupled with slowing economic momentum, will likely affect business activity in the wider economy. Recently, however, we have seen some encouraging developments. In April, financial markets have shown signs of stabilizing, and valuations of some asset classes are attracting growing interest from investors. The banking industry, central bankers and governments have signaled their determination to take action to address the situation. Nonetheless, significant challenges and uncertainties still exist.

Deutsche Bank’s position is clear. Faced with lower revenues in some areas, we remain rigorous in controlling costs and monitoring investment spending. We are redeploying both human and capital resources toward growth businesses and regions. We have moved swiftly and decisively to consolidate our capital strength. We have further bolstered our funding base, and made good progress on our 2008 funding plan. We continue to reduce our risk exposures in critical areas, including leveraged finance and commercial real estate. Our exposure to subprime remains relatively modest.

The fundamental trends shaping our operating environment are unchanged, and Deutsche Bank is well-positioned to emerge stronger than ever from this crisis. The capital markets will be of ever greater importance in financing economic activity, especially as pressure on capital forces banks to restrict traditional lending activities, and this gives us scope for growth in investment banking. Around the world, wealth continues to be created, private individuals continue to plan for their retirement, and new, demanding investors emerge, creating opportunities for us as a major global asset gatherer. The world’s economy continues to become more globally integrated, and that makes our worldwide network, with a presence in 76 countries, an ever more valuable competitive asset.

We re-affirm our strategy and our business model. We have already benefited from synergies among our core businesses, and we have the potential to unlock more value from these synergies. Our integrated ‘one bank’ approach has proven its worth and is essential to our success, and our ability to create value for our shareholders. We have captured market share in some important areas. We are equally determined to meet near-term challenges, and to take advantage of longer-term opportunities. We remain vigilant in the face of the current difficult conditions, but we are also confident in the strength of our platform.

Finally, I look forward to seeing many of you at our Annual General Meeting on 29th May in the Festhalle in Frankfurt.

Yours sincerely,

Josef Ackermann
Chairman of the Management Board and the Group Executive Committee

Frankfurt am Main, April 2008