Letter from the Chairman of the Management Board

Dear Shareholders (handwriting)

In the second quarter of 2011, business conditions became more challenging. Concerns over the sovereign debt position of Greece and some other eurozone economies grew, as did wider concerns about the pace and scale of global economic recovery. As a result, during the quarter we saw increased volatility in the world’s financial markets as well as a retreat from riskier assets, including the sovereign debt of some eurozone states. These effects intensified in the month of June.

Deutsche Bank’s business in the quarter was inevitably affected by these developments, particularly given our strong position in Europe. Nevertheless, we demonstrated both the resilience of our business and the value of our efforts to recalibrate and rebalance our platform. Investment banking earnings were impacted by market conditions, but this was counterbalanced by healthy year-on-year profit growth in our other businesses. We reaped substantial benefits from our recent strategic acquisitions and synergies arising from integration activities across all our core businesses. Consequently, we performed better than in the second quarter last year, despite more difficult conditions. At € 1.8 billion, pre-tax profit was up 17 % compared to the prior year quarter including € 155 million impairment relating to Greek government bonds. In our core businesses Corporate & Investment Bank (CIB) and Private Clients and Asset Management (PCAM), pre-tax profit was € 2.0 billion, up 26 % on the second quarter of 2010. Our “classic” banking business comprising PCAM and GTB contributed half of the bank’s quarterly pre-tax profit. This clearly underlines the soundness of our strategy to recalibrate and balance the platform. Our capital ratios were the strongest ever, with a Tier 1 capital ratio of 14.0 % and a Core Tier 1 ratio of 10.2 %.

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

CIB earned a pre-tax profit of € 1.3 billion. Revenues from our sales and trading activities reflected the difficult financial market conditions toward the end of the quarter, which exacerbated the normal seasonality of this business. However, this was mitigated by the breadth and diversification of our trading platform, a deep client franchise and continued momentum in our corporate finance and transaction banking business. In addition, our efforts to streamline, connect and grow CIB’s businesses across a more integrated platform are making a substantial and growing contribution to the bottom line.

Corporate Banking & Securities (CB&S) reported a pre-tax profit of € 982 million. Business volumes in “flow” trading products were impacted by lower levels of market activity and greater risk aversion, reflecting macro-economic uncertainties, notably in the eurozone. However, this was partially offset by strong performances in commodities, emerging markets debt trading and structured credit solutions. As a result, sales and trading revenues grew in comparison to the second quarter of 2010. The strength of our client franchise was further underlined during the quarter: for the seventh year running, we were ranked number 1 in Foreign Exchange in the annual Euromoney poll, and number 1 in U.S. Fixed Income by Greenwich Associates. Our Equities business was, for the fourth consecutive year, ranked number 1 Global Prime Broker by Global Custodian. Our Corporate Finance Business Division maintained its top 5 global ranking and sustained its number 1 position in Europe with our best-ever market share. For the first time ever, we ranked number 1 in Global IPOs. Revenues in Origination and Advisory amounted to € 714 million, up 32 % year-on-year, thanks in part to synergy benefits of a more integrated client effort across CIB.

Global Transaction Banking (GTB) generated a pre-tax profit of € 293 million. This represents year-on-year growth of 9 % excluding the one-off gain in the second quarter last year from the consolidation of parts of ABN AMRO’s Dutch commercial banking platform. The business benefited from the normalization of interest rates in Asia and Europe, together with the positive results of our efforts to boost fee income across all major products.

PCAM more than doubled its pre-tax profit year-on-year, to € 684 million. We are making very encouraging progress in integrating our strategic investments in this business and are simultaneously reaping the benefits of our initiatives in recent years to reposition our platform. Our commitment to leadership in our home market is also paying off, especially in the light of relative resilience of the German economy.

In Asset and Wealth Management (AWM), pre-tax profit totaled € 227 million, versus € 65 million in the second quarter of 2010. Asset Management saw high year-on-year profit growth, with revenues up by 9 %, partly due to strong performance fees, together with cost reductions. Our performance in Private Wealth Management was similarly pleasing as we grew revenues by 9 % year-on-year due to positive net new money trends and a profitable asset mix shift. We also achieved substantial year-on-year reductions in costs relating to Sal. Oppenheim, reflecting the success of last year’s reorganization efforts.

Private & Business Clients (PBC) earned a pre-tax profit of € 458 million, substantially up on the second quarter of 2010, even including a negative impact of € 132 million relating to Greek government bonds. In our Advisory Banking platform, we saw solid year-on-year profit growth in both German and international business. Revenues were boosted by our successful deposit campaign, which has raised € 6.8 billion in new deposits to date. Efficiency measures in our German business also reduced costs in Advisory Banking. PBC’s pre-tax profit included a € 229 million contribution from Postbank, reflecting further progress with our integration program, which is delivering on schedule.

We also further advanced our risk mitigation strategy. Despite higher risk in our operating environment, we reduced risk-weighted assets during the quarter. Our Tier 1 capital ratio increased from 13.4 % to 14.0 %, while we improved our Core Tier 1 ratio from 9.6 % to 10.2 %. As expected, we successfully passed the European Banking Authority (EBA) stress test. Indeed, our capital position, as measured by this test, is substantially stronger if our significant progress in capital formation in the first six months of this year is taken into account. This leaves us well-prepared for the introduction of more demanding capital requirements under Basel III.

Our half-year 2011 results represent very encouraging progress. Net income amounted to € 3.4 billion, up 14.0 % versus the first half of 2010. Pre-tax profit increased by 11 % versus the prior year to € 4.8 billion. Our core businesses CIB and PCAM achieved a pre-tax profit of € 5.5 billion, up 24 % on the first six months of 2010 and more than half-way toward our stated full-year target of € 10 billion. Our “classic” banking businesses, GTB and PCAM, contributed € 2.2 billion or 40 % to this total – clear evidence of the progress we are making in balancing our earnings mix. CIB’s deep and diversified franchise proved resilient in difficult financial markets, reflecting the success of our efforts to recalibrate and reduce risk in our sales and trading business. Furthermore, in the first six months of 2011, we realized more than half of our € 500 million target for cost and revenue synergies from closer integration across the CIB platform. PCAM’s half-year profits more than tripled versus 2010, thanks in good measure to significant progress in integrating the strategic acquisitions we made in our home market Germany, combined with focus and discipline in repositioning our existing platforms.

Our 2011 Annual General Meeting took place in Frankfurt on May 26. We were pleased to welcome 5,400 investors who attended in person. This year’s meeting included a review of the year 2010 and progress so far in 2011, together with lively debate on a wide range of topics. All resolutions put to shareholders by management were approved by large majorities.

We are striving to build this platform in the interests of you, our shareholders. Nevertheless, Deutsche Bank, like the banking sector as a whole, faces considerable near-term uncertainties - in the eurozone, in the world economy, in financial markets and in the new regulatory environment.

On launching Phase 4 of our Management Agenda in 2009, we published an ambitious target for 2011 of € 10 billion in pre-tax profits from our core businesses CIB and PCAM. This target included a pre-tax profit of € 6.4 billion from our Corporate Banking & Securities Division (CB&S). Delivery of this target is predicated on certain assumptions about the operating environment which were clearly communicated at the launch of Phase 4 and are set out in detail in our 2010 Financial Report.

During the first half of 2011, actual developments did not confirm all of these assumptions. The intensified European sovereign debt crisis led to investor uncertainty and thus to significantly lower volumes and revenues, especially in Corporate Banking & Securities. Our ambition to report income before income taxes of € 6.4 billion in this segment may now be difficult to achieve and is dependent on a swift and sustained resolution of the European sovereign debt crisis as well as a return to a significantly improved operating environment in the second half of 2011.

In this context, we see the recent agreement reached by eurozone governments, the private sector and the IMF as a positive and constructive step. Furthermore, the performance of Deutsche Bank’s “classic” banking businesses, Global Transaction Banking and PCAM, together with the successful delivery of more than half of the targeted benefits from our efficiency program in the first half of 2011, make us confident that our target of € 10 billion in pre-tax profit from core businesses in 2011 is still in sight. We remain firmly focused on delivering on the stated objectives of our Management Agenda.

Yours sincerely,

Signature of Josef Ackermann (handwriting)

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

Frankfurt am Main, July 2011

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