Consolidated Results of Operations


The business environment during the first quarter 2012 was more stable compared to the extreme market volatility which characterized the second half of 2011. However, conditions in the global economy remained challenging. While equity markets improved and credit spreads tightened during the quarter, there was continued caution in the world’s financial markets and among investors. Our first quarter results reflect these factors. In addition, we took a prudent approach to risk taking and capital management without jeopardizing our client facing activities.

In the Corporate & Investment Bank (CIB), net revenues were down 8 % in the first quarter 2012 to € 6.2 billion versus € 6.7 billion in the first quarter 2011. Against the backdrop of a far less favorable environment compared to the prior year quarter, this is a strong result which reflects good performance across most businesses, despite continued risk discipline and lower client activity than in the prior year. Private Clients and Asset Management (PCAM) net revenues were € 3.4 billion in the first quarter 2012 compared to revenues of € 4.1 billion in the first quarter 2011 which was positively impacted by € 263 million related to our stake in Hua Xia Bank for which equity method accounting was applied for the first time. The remaining decrease was mainly attributable to lower operating revenues in Postbank driven by the impact of de-risking activities and also reflecting a low interest rate environment, as well as lower releases of loan loss allowances recorded prior to consolidation (which are shown as interest income). Further, retail client investment activity remained muted, primarily in Germany, and continued low market levels as well as ongoing uncertainties during the quarter adversely impacted the funds business. Overall, the Group’s net revenues in the first quarter 2012 were € 9.2 billion, after a € 257 million impairment charge related to our exposure in Actavis recorded in Corporate Investments, which is a decrease of € 1.3 billion, or 12 %, versus the first quarter 2011.

Provision for credit losses was € 314 million in the quarter, a decrease of 16 %, from € 373 million in the first quarter 2011. The decrease was mainly attributable to lower provisions recorded at Postbank and the positive performance of our retail portfolio as well as the successful sales of non-performing loans, partly offset by higher provision for credit losses in CIB, being in line with our expectation. The provision for credit losses excludes releases from Postbank related loan loss allowances recorded prior to consolidation of € 36 million which are included in net interest income.

Noninterest expenses were € 7.0 billion in the quarter, essentially unchanged compared to the first quarter 2011. Compensation related costs decreased by € 622 million as a result of lower performance related compensation, based on lower operating performance and a reduced deferred compensation charge for employees eligible for career retirement. These effects were offset by litigation related charges (approximately € 210 million) and increased policyholder benefits and claims in Abbey Life, both in Corporate Banking & Securities (CB&S). The first quarter 2012 also included an accrual of € 73 million for the German bank levy in Consolidation & Adjustments (C&A) which did not occur in the prior year quarter. In addition, there was a negative impact of € 40 million related to a buyback offer for a specific closed-end fund in Private & Business Clients (PBC).

Income before income taxes was € 1.9 billion in the quarter, down € 1.1 billion versus the first quarter 2011. The result reflects the specific items mentioned before (Actavis and Hua Xia Bank) as well as weaker conditions in the first quarter 2012, as compared to the strong start in 2011, which are characterized by continued caution of financial markets participants.

Net income for the first quarter 2012 was € 1.4 billion compared to € 2.1 billion in the first quarter 2011. Diluted earnings per share were € 1.44 in the first quarter 2012, versus € 2.13 in the first quarter 2011. Income tax expense was € 478 million in the first quarter 2012. The effective tax rate of 25.4 % in the current quarter mainly benefited from share-based payments related tax effects. Income tax expense in the first quarter 2011 was € 891 million. The effective tax rate of 29.5 % in the first quarter 2011 benefited from the partial tax exemption of net gains related to our stake in Hua Xia Bank.

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Deutsche Bank Interim Report as of September 30, 2011

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