Letter from the Chairmen of the Management Board

Dear Shareholders,

2012 was a very important year for Deutsche Bank. During this year, we developed a strategy to position Deutsche Bank as a long-term winner in the post-crisis era. As we mobilized this strategy, we took some tough but determined decisions in order to set Deutsche Bank on the right course for the future. Some of these decisions had a substantial impact on our financial performance for 2012.

Our first priority, on assuming our responsibilities in June, was to develop a strategy for a changed environment. After intense consultation with all our stakeholder groups, our “Strategy 2015+” was positively received when launched in September. This strategy recognizes that we operate in an environment of tighter regulation, higher public scrutiny, more rigorous capital requirements, pressure on margins and business volumes, and historically low interest rates.

Strategy 2015+ identifies five critical levers of delivery: capital, costs, competencies in our core businesses, clients, and culture. In 2012 we made significant progress on all these dimensions and laid solid foundations for further momentum in 2013.

Jürgen Fitschen and Anshu Jain, Co-Chairmen of the Management Board (photo)

Jürgen Fitschen and Anshu Jain

Co-Chairmen of the Management Board

Strengthening our capital base is paramount in the more demanding Basel 3 capital framework. During 2012, we succeeded in raising our Basel 3 pro-forma core Tier 1 capital ratio from below 6 % to 7.8 % – the fastest rate of organic capital formation of any of our major peers and well ahead of our published yearend target of 7.2 %. This success was driven in good measure by a substantial reduction in total capital demand. Since June, we have reduced pro-forma Basel 3 risk-weighted asset equivalents by € 80 billion, primarily by selling or hedging assets, but also by improving our risk models and processes in consultation with our regulators. Of this, our newly-formed Non-Core Operations Unit (NCOU) contributed € 29 billion. Taken together, our capital strategy created the equivalent of a capital increase of over € 7 billion, by organic means. This success enables us to raise our capital targets for the first quarter 2013: we have raised our target Basel 3 core Tier 1 capital ratio to 8.5 %, up from 8 %, and our capital demand reduction target, in pro-forma Basel 3 risk-weighted asset equivalents, from € 90 billion to € 100 billion plus.

Cost efficiency is also central to our strategy. Our Operational Excellence Program aims to save € 4.5 billion in operating expenses by the end of 2015. To achieve this we will invest € 4 billion over the next three years. Excellence in infrastructure is very important to us. We aim to build first-class infrastructure functions, working as equal partners with our business divisions, eliminating duplication and unnecessary complexity to reach the highest levels of efficiency. By the end of 2012 we achieved savings of some € 400 million, with investments of some € 500 million, both in line with original targets.

Our core businesses also made significant progress. Private & Business Clients (PBC) successfully met the combined challenges of near-zero interest rates, difficult economic conditions in peripheral Eurozone markets, and the large and complex task of Postbank integration. PBC delivered robust underlying profitability, gained market share in the lending business in Germany, and our international business was very resilient.

Underlying profitability in Corporate Banking & Securities (CB&S) was very robust – reflecting, in part, the resilience of our worldleading franchise. We were global No. 1 in fixed income for a remarkable third year running, gained market share in equities and delivered record market shares in Corporate Finance, which maintained its world top-5 position. CB&S delivered this success despite significant challenges in 2012: pressure on both margins and business volumes; volatility and uncertainties in the Eurozone; tightening regulation, and internal reconfiguration.

Asset & Wealth Management (AWM) faced substantial organizational challenges: a complex “five-way“ business integration and sustained money outflows in Asset Management in the wake of the strategic review conducted in 2011 and early 2012. The new, integrated management team laid the foundations for future improvements in performance, with the introduction of an integrated Global Client Group and a unified investment platform. Greater efficiencies are well underway, and headcount has been reduced by some 10 % since June; but we fully recognize the time required to realize the full financial benefits from the ongoing work.

Global Transaction Banking (GTB) turned in a strong performance in its core business. The business has responded to an environment of very low interest rates by growing fee income over 30 % since 2007. Year-on-year revenue growth was particularly strong in the U.S. and Asian markets. GTB’s financial performance was nevertheless impacted by costs related to turnaround measures in its commercial banking platform in the Netherlands, which are proceeding on schedule.

Group net income for the year was € 0.3 billion, after pre-tax profits of € 0.8 billion. This result reflected some decisions we took on specific and in some cases historic issues as we set the long-term strategic course for Deutsche Bank. The NCOU reported a pretax loss of € 2.9 billion, but the reductions it achieved in capital consumption meant that overall, the new unit contributed capital formation of some € 2 billion. Also in the Core Bank, we recognized impairments on goodwill and other intangible assets, predominantly related to historic acquisitions, of € 1.5 billion and took charges related to significant litigation items of € 1.4 billion. Adjusting for these items, profitability in the Core Bank was € 6.5 billion even after absorbing an additional € 1.4 billion of specific charges. The solid underlying performance of the core bank reflects the dedication, focus and hard work of Deutsche Bank’s staff, and we are very grateful for their efforts in 2012.

We believe we serve shareholders best by putting clients first, and we demonstrated that commitment in 2012. We helped 300,000 private clients move into a new home. We helped 60,000 small businesses start up or develop. We helped 180 corporate and institutional clients gain access to the capital markets for the first time. We provided € 56 billion of international trade finance, and we helped 8,000 corporations and institutions mitigate currency risks. For clients in Germany, we committed to € 10 billion of new loan volume by 2015. Just recently, we announced our commitment to place our German branch network at the service our “Mittelstand” clients, which will anchor and improve our services to that very important sector.

Placing Deutsche Bank at the forefront of cultural change is a key element of Strategy 2015+. During 2012, we continued to strengthen our control environment, tightening our systems and processes and enhancing our monitoring capabilities. We appointed an independent compensation review panel, composed of distinguished leaders from industry, finance and the public sector, whose recommendations influenced the 2012 compensation process. We also aligned our performance standards around cultural priorities, ensuring that we motivate and reward our employees not only for what they achieve, but how they achieve it. Under our personal direction, members of the Management Board and the Group Executive Committee are leading initiatives to reinforce absolute integrity in our client dealings, operational discipline and teamwork across functional boundaries. We are under no illusions: deep cultural change will take a number of years. The resolution of issues from past years, which impacted our reputation in 2012, will persist into 2013. However, we are totally committed to this process.

Looking ahead into 2013, we see signs of stabilization after the turbulence of 2011 and early 2012. In the Eurozone, strong leadership by Germany and the European Central Bank’s determination to support the single currency has contributed important stability. In the U.S., private debt is coming down and both the housing and labor markets are strengthening. Political uncertainties still exist: a decisive solution to the U.S. debt ceiling is still outstanding, while the recent elections in Italy and the situation in Cyprus are a reminder of political uncertainties in Europe; nonetheless, for both financial markets and for our clients, prospects of greater stability in the global economy are encouraging.

In the past five years, the financial industry has seen significant changes to regulation. Much of this has been both necessary and helpful – Basel 3, in particular, has contributed positively to a more robust financial system. Nonetheless, we remain concerned that regulation which challenges the universal banking model, or which distorts the global regulatory “level playing field” in a way that disadvantages European banks, may have unintended and harmful consequences for our clients and for Europe’s competitiveness and growth prospects as the global economy recovers.

We aspire to be the world’s leading client-centric global universal bank. We are convinced that this model serves our clients most effectively, offering them an integrated range of products and services wherever in the world they need us. In Germany, notably in the very important “Mittelstand” segment, Deutsche Bank’s combination of global reach and intensive local presence offers unique advantages for our clients. This well-diversified business model also enables us to support the all-important supply of credit to the economy at reasonable cost. We remain convinced that the universal banking model, competing on equal terms with our peers from other regions of the world, is in the interests of our clients, the financial system and Europe’s economy.

Strategy 2015+ aims to position Deutsche Bank as a winner in a changed environment. Developments over the past year reinforce our conviction that this strategy is the right course, and we will continue to devote ourselves to the interests of our clients, shareholders, employees and the wider society in which we operate.

We thank you for your support.

Your sincerely,

Jürgen Fitschen, Co-Chairman of the Management Board (signature)

Jürgen Fitschen
Co-Chairman of the Management Board

Anshu Jain, Co-Chairman of the Management Board (signature)

Anshu Jain
Co-Chairman of the Management Board

Frankfurt am Main, April 2013

Annual Press Conference
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