Letter from the Chairman of the Management Board

Dear Shareholders (handwriting)

For Deutsche Bank, 2010 was a crucial year. It was a year of investments and changes, and one in which we clearly strengthened our competitive position. In many ways, the bank is now stronger than before the financial crisis and exceptionally well positioned for renewed growth.

Last year, the global economy showed increasing signs of recovery. The worst is behind us – but we are not out of the woods yet. Growth momentum came primarily from the emerging markets in Asia and Latin America. By contrast, recovery in most of the industrial countries has been slower. The U.S. economy is still weighed down by the need for real estate market corrections and high levels of indebtedness. The eurozone is marked by significant imbalances: while some of Europe’s ‘peripheral’ states face economic and structural problems, our home market, Germany, saw strong economic growth of 3.6 %.

Dr. Josef Ackermann (photo)

Dr. Josef Ackermann

Chairman of the Management Board
and the Group Executive Committee

Against this background, the bank’s total net revenues in 2010 came to € 28.6 billion. These are among the highest revenues we have ever recorded. At € 4 billion, our reported income before income taxes was impacted by special items. Excluding the one-time charges from our three acquisitions – Postbank, parts of ABN AMRO, and Sal. Oppenheim/BHF-BANK – our income before income taxes would have been € 6.5 billion, compared with € 5.2 billion in 2009. Adjusted for further specific investments and one-time items such as write-downs, our pre-tax profit for 2010 would have been more than € 7 billion.

For our Group Divisions Corporate & Investment Bank (CIB) and
Private Clients and Asset Management (PCAM), combined income before income taxes – adjusted for acquisition effects – was around € 7.2 billion. That puts us well within sight of our € 10 billion target for our operating business units for 2011.

CIB recorded income before income taxes of € 6.0 billion. This is the division’s second best performance in the history of the bank.

Corporate Banking & Securities (CB&S) which forms part of our investment banking, generated pre-tax profits of € 5.1 billion last year. The dedicated client focus and clear progress in the division’s integration process contributed to this outstanding performance. This performance is all the more impressive considering that it was achieved with significantly reduced risks, at a time when the sovereign debt crisis was weighing on the financial markets and limiting the corporate sector’s appetite for capital-raising and M&A activities.

As expected, revenues in our Rates and Money Market trading normalized. In Debt trading, we are ranked first among the best bond houses in Europe, and we are number two worldwide. Furthermore, among the world’s top three bond houses, we are the only bank that was able to capture market share. Our Foreign Exchange trading continued to perform very strongly at the same high level as in 2009. We were the number one globally in this business for the sixth consecutive year. We generated higher revenues in our Credit trading and Commodities businesses; and in Equities trading we maintained the momentum gained from the recalibration of our equity derivatives operations.

In our Origination and Advisory business, we can also report a number of major successes. For the first time, we achieved our long-term strategic objective of being among the world’s top five banks in this business, too. In the past year, no other bank has gained greater market share in this area than Deutsche Bank.

In our M&A business, we nearly doubled our market share and now hold fifth place – based on fees – in the global rankings.

In our Global Transaction Banking Corporate Division, continued low interest rates had a negative impact on results. Income before income taxes came to € 905 million and was also impacted by specific items. In Cash Management, we consolidated our leading position in euro clearing and stabilized our position among the top U.S. dollar clearing houses.

In 2010, PCAM maintained its positive momentum from 2009 and generated income before income taxes of € 1 billion.

Income before income taxes in Asset and Wealth Management was € 100 million, after net charges of € 368 million relating to Sal. Oppenheim/BHF-BANK. The business division benefited primarily from increased performance fees and volume-based commissions as well as a favourable market environment. Especially in times of uncertainty, customers appreciate the secure, reliable and competent service Deutsche Bank provides. If the market environment continues to recover, our Asset and Wealth Management division will be able to increase its results significantly.

Our Private & Business Clients (PBC) Corporate Division nearly doubled its income before income taxes on the year to € 890 million. The efficiency measures we launched in 2009 had a positive effect in this area. The good results were, primarily underpinned by the improved credit environment, higher margins and growth in brokerage commission revenues as well as, for the first time, the contribution from Postbank.

Another key element of our success is our risk and capital management. Even after the consolidation of Sal. Oppenheim, ABN AMRO and Postbank, we recorded a Tier 1 ratio of 12.3 % and a core Tier 1 ratio of 8.7 % at the end of 2010. By means of the biggest capital increase in the bank’s history, we secured the funding needed for the Postbank takeover and strengthened our capital base ahead of the stricter requirements under the Basel III regulatory framework. As things stand today, we expect to meet the Basel III solvency ratios, due to be phased in by 2019, as early as 2013. To this end, we will maintain our disciplined capital management, pay an appropriate dividend and implement our growth initiatives.

Our dividend proposal also serves to meet this objective. With the approval of the Supervisory Board, the Management Board will propose a dividend of € 0.75 per share for the 2010 financial year. While this is the same amount as last year on a per-share basis, it relates to a 50 % greater capital base.

The fact that we were able to carry out the biggest capital increase in the bank’s history, and that it went so smoothly, is clear evidence of investors’ confidence in Deutsche Bank’s future performance. On behalf of the entire bank, I would like to take this opportunity to express once again my thanks to you all for your trust and support. We will do everything possible to live up to the expectations that our shareholders have for their investment.

Today, our bank is more respected than ever across the globe. The top positions we hold in terms of reputation and brand strength open up new opportunities for the future. We are firmly committed to our corporate social responsibility. In 2010, we dedicated nearly € 100 million to supporting projects around the world relating to education, sustainability, community development and art. We regard these investments in society as investments in our own future.

The year 2010 once again demonstrated the strengths of our business model with its diversified business structure. We have received numerous awards in recognition of our top performance in many product categories. The prestigious magazine International Financing Review (IFR) recently named us “Bank of the Year” – which, after 2003 and 2005, marks the third time that Deutsche Bank has been awarded the industry’s most coveted prize. We are extremely proud of this achievement.

2011 will be the year in which we aim to fully leverage the strong, forward-looking market position built up in 2010 as we carried out Phase 4 of our Management Agenda. We are aware, of course, that uncertainties still remain for the economy and the financial markets, which is the environment in which we and our clients do business. Our priorities are clear:

First, our investment bank has demonstrated that it can consistently deliver outstanding results – and that it can do so with a more conservative risk profile.

Second, our successful acquisitions in Germany and Europe have strengthened our retail banking and asset management businesses. We are set to profit from a more balanced revenue mix, lower revenue volatility as well as improved liquidity and more broadly based refinancing opportunities. With the acquisition of the renowned private bank Sal. Oppenheim, we extended our leading position in the market for wealth management in Germany.

Another step in our strategy to consistently strengthen our “stable” businesses was the acquisition of Postbank. It will help us turn retail banking into a strong second pillar alongside investment banking. Deutsche Bank and Postbank are an ideal match as they attract different client groups. Although Postbank is now part of Deutsche Bank Group, it will remain the strong, independent brand it has always been for its clients.

Third, in Asia, we are well on track with our plan to double revenues and profits this year based on 2008 levels. Fourth and finally, we expect the integration of our investment bank and the consolidation of Postbank to generate considerable synergies and we envisage significant efficiency gains from the reinvigoration of our performance culture.

Deutsche Bank is very well positioned for the future. Naturally, my colleagues and I are well aware that we will face many challenges and uncertainties this year, too. However, barring unforeseen obstacles, we will be able to reach our target by drawing on last year’s hard work and the momentum gained from our accomplishments. We look forward to continuing to serve the interests of our shareholders, our clients, our employees and the communities in which we operate in 2011 and beyond.

Yours sincerely,

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

Frankfurt am Main, March 2011

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