Letter from the Chairman of the Management Board

Dear Shareholders (handwriting)
Dr. Josef Ackermann, Chairman of the Management Board and the Group Executive Committee (photo)

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

In the second quarter of 2010, the global economy continued to gain momentum. Growth was driven, in particular, by the emerging market economies in Asia and Latin America, which are enjoying a perceptible recovery in global trade and robust domestic demand. The U.S. economy is experiencing moderate growth with persistently high unemployment, while in the eurozone fiscal consolidation efforts are hampering the macroeconomic recovery. The situation on the international financial markets is still affected by uncertainty: concerns surrounding public finances in a number of eurozone countries have triggered a debate about the stability of the currency and led to increased volatility on the financial markets. It is still very difficult to project the impact that the planned regulatory reforms will have on financial market players.

Against this backdrop, Deutsche Bank has generated a solid pre-tax profit of € 1.5 billion, despite absorbing specific charges and mark-downs of € 507 million, which were partially offset by € 309 million of specific gains. Net income was € 1.2 billion, which is equivalent to diluted earnings per share of € 1.75. Our return on equity, as per our target definition, was 13 %. The Tier 1 capital ratio increased slightly to 11.3 %, and well above our target of 10 % even after the impact of the acquisition of parts of the commercial banking activities from ABN AMRO in the Netherlands, which was completed in April. Our leverage ratio – the ratio of total assets to equity – remained unchanged at 23, which is below our target of 25. The provision for credit losses at € 243 million improved again slightly on the previous quarter.

Deutsche Bank followed the overall industry trends with weaker profitability in investment banking, which was driven by investor concerns and heightened volatility. That said, our leading franchise continues to gain market share while keeping strict risk and balance sheet discipline. Performance within Private Clients and Asset Management and in Global Transaction Banking was very solid and partially showed markedly improved profitability. Private & Business Clients delivered the best quarterly result since the onset of the financial crisis. This demonstrates the strength of our diversified business portfolio.

In Corporate Banking & Securities, we achieved a pre-tax profit of € 779 million in a challenging market environment, despite net charges of € 346 million. Credit product trading suffered as a result of the significant decline in many investors’ risk appetite, which was linked to concerns about the public finances of some eurozone countries. At the same time, however, we achieved good results in money market trading and commodities trading. In our foreign exchange business, we achieved the best results ever in a second quarter. The credit quality also continued to improve and this was reflected in lower loan loss provisions. In Corporate Finance, we consolidated our position among the top 5 global investment banks. Deutsche Bank is also among the leading five investment banks in the U.S. and the Asian growth region. In Europe, we ranked as best bank on generated fee income according to Dealogic. Recently, we were ranked “Best Global Investment Bank” by Euromoney magazine.

Our Corporate Division Global Transaction Banking delivered a strong result of € 478 million. The first time inclusion of parts of ABN AMRO’s commercial banking activities in the Netherlands contributed € 215 million to pre-tax profit. The revenue base also benefited from strong demand for trade financing products in Germany and Asia Pacific. This offset negative effects from persistently low interest rate levels.

The Corporate Division Asset and Wealth Management achieved a pre-tax profit of € 45 million. Excluding adverse effects from the alignment of Sal. Oppenheim Group, pre-tax profit in Asset and Wealth Management was € 133 million. We will continue to work hard on the renaissance of Sal. Oppenheim.

Private & Business Clients recorded income before income taxes of € 233 million which is the best quarterly result since the onset of the financial crisis. This gratifying improvement was underpinned by stable to positive margin and volume developments in loan and deposit products, and stable risk provisions compared with the preceding quarter. The businesses outside of Germany, in Spain and Italy, for instance, accounted for approximately one third of the total revenues in this division. During the reporting period, we also benefited from a dividend payment on our stake in Chinese Hua Xia Bank.

The current economic momentum is likely to continue over the remainder of the year. Nevertheless, it remains susceptible to setbacks: Cyclical risks remain, particularly in the U.S., which is suffering from persistently high unemployment. In Europe, government measures are dampening growth. Worries about industrialized countries sliding back into recession are subsiding. Planned regulatory reforms on the financial markets are gradually beginning to take shape. The final outcome will likely depend on the results of impact studies conducted in coming months. Also, governments are expected to decide by year-end on potential further burdens for the financial industry in the form of bank levies.

Deutsche Bank is well prepared for the many challenges – and opportunities – ahead. We will continue to consistently implement our client-focussed strategy, which is characterized by risk discipline, capital efficiency and earnings diversification, and aiming to create sustainable value for you – our shareholders.

In a meeting on June 15, Deutsche Bank’s Supervisory Board approved the request by Michael Cohrs, Co-Head of Corporate and Investment Bank and Head of Global Banking, to retire from the Management Board and the service of the bank at the end of September 2010. I am very sorry to see Michael Cohrs leave us; he led the Corporate Finance and Global Transaction Banking businesses into the world’s premier leagues. His responsibilities are assumed by Anshu Jain, Head of Global Markets, who has become the sole Head of Corporate and Investment Bank. This integration within CIB underlines our determination to create added value for our clients and shareholders.

Yours sincerely,

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

Frankfurt am Main, July 2010