Consolidated Results of Operations


The global economic environment during the second quarter 2012 deteriorated again and conditions became even more challenging than in the previous quarter as ongoing worries about economic performance and the sovereign debt crisis continued. This led to an industry wide decline in volumes across many products. In this environment we continued our prudent approach to risk taking and capital management without jeopardizing our client facing activities. In this context all businesses delivered solid results.

2012 to 2011 Three Months Comparison

The Group’s net revenues in the second quarter 2012 were € 8.0 billion compared to € 8.5 billion in the second quarter 2011, a decrease of 6 %, however benefiting from foreign exchange rate movements. Revenues in Corporate Banking and Securities (CB&S) were € 3.5 billion, down € 451 million, or 11 %, versus € 4.0 billion in the second quarter 2011. The decline in revenues was primarily driven by Sales & Trading (debt and other products) due to deliberately lower levels of risk incurred to correspond with subdued trading flow volumes, and by Origination (equity) as a consequence of the current market conditions as well as strong IPO activity in the prior year’s quarter. Private & Business Clients (PBC) revenues were € 2.4 billion in the current quarter, down € 138 million, or 5 %, versus € 2.6 billion in the second quarter 2011. The majority of the decrease was attributable to lower revenues in Postbank which reflect the non-recurrence of positive effects recorded in the second quarter 2011 and an ongoing low interest rate environment. These effects were partly compensated by impairments on Greek government bonds booked in the second quarter 2011. Generally lower market levels and increased market volatility led to decreased Advisory/brokerage revenues as retail clients continue to show a reluctance to invest. Asset and Wealth Management (AWM) revenues declined by € 85 million, or 9 %, to € 891 million, impacted by significant positive effects from the realignment of Sal. Oppenheim in 2011 as well as low asset flows resulting from negative market impacts. Slightly offsetting the revenue decline, Global Transaction Banking (GTB) revenues increased to € 972 million, up € 87 million or 10 % from the second quarter 2011 reflecting continued strong business momentum despite the low interest rate environment.

Provision for credit losses was € 419 million in the quarter, a decrease of 10 %, from € 464 million in the second quarter 2011. This decrease was mainly attributable to lower provisions recorded at Postbank and was slightly offset by higher provisions for credit losses recorded in GTB and CB&S.

Noninterest expenses were € 6.6 billion in the quarter, up € 345 million compared to the second quarter 2011. Compensation related costs as well as general and administrative expenses were negatively impacted by foreign exchange rate movements. Compensation related costs were almost unchanged versus the prior year’s quarter. Lower performance-related compensation was offset by higher severance payments, an increased deferred compensation from prior years and higher salaries. The increase of general and administrative expenses of € 399 million included effects from foreign exchange rate movements as well as higher litigation related expenses and operational losses, IT costs and professional service fees.

Income before income taxes was € 960 million in the second quarter 2012 versus € 1.8 billion in the second quarter 2011. The decrease of € 818 million, or 46 %, reflects the aforementioned revenue declines in a more difficult market environment as well as increased general and administrative expenses.

Net income for the second quarter was € 661 million compared to € 1.2 billion in the second quarter 2011. Income tax expense was € 299 million in the second quarter versus € 545 million in the respective 2011 comparison period. The effective tax rate was unchanged at 31 %. Diluted earnings per share were € 0.68, versus € 1.24 in the second quarter 2011.

2012 to 2011 Six Months Comparison

Net revenues in the first six months of 2012 were € 17.2 billion compared to € 19.0 billion in the first six months of 2011, however benefiting from foreign exchange rate movements. Revenues in CB&S were € 8.7 billion, down € 1.1 billion, or 11 %, versus € 9.8 billion in the 2011 comparison period. This is mainly a result of lower revenues from Sales and Trading (debt and other products) due to a less favourable macroeconomic environment, continued risk discipline and lower client activity. Revenues in Private & Business Clients (PBC) were € 4.9 billion in the first half of 2012, down € 709 million, or 13 %, compared to € 5.6 billion in the first half of 2011. This decrease was primarily driven by lower revenues in Postbank which reflect the aforementioned effects, a € 263 million positive impact in the first quarter 2011 related to our stake in Hua Xia Bank, partly offset by lower impairments on Greek government bonds. Revenues in AWM declined € 204 million, or 10 %, to € 1.8 billion, versus € 2.0 billion in the 2011 comparison period, mainly due to the aforementioned positive effects from the realignment of Sal. Oppenheim in 2011 as well as low retail client investment activity and the impact of decreased market levels on asset flows. In contrast, revenues in GTB improved by € 201 million, or 12 %, to € 1.9 billion, reflecting strong results despite the low interest rate environment.

Provision for credit losses was € 733 million in the first six months 2012, a favourable development of € 104 million, or 12 %, from € 837 million in the first half of 2011. This includes € 156 million lower provisions recorded at Postbank, partly offset by higher provisions in CIB.

Noninterest expenses were € 13.6 billion in the first six months 2012, an increase of € 265 million, or 2 %, compared to the first six months of 2011. Compensation related costs as well as general and administrative expenses were negatively impacted by foreign exchange rate movements. Compensation related costs decreased by € 595 million versus the first half of 2011 mainly as a result of lower performance related compensation, based on lower operating results, and a reduced deferred compensation charge for employees eligible for career retirement. General and administrative expenses increased by € 846 million, mainly due to the reasons mentioned in the three months comparison.

Income before income taxes was € 2.8 billion in the first six months of 2012, a decline of € 2.0 billion, or 41 %, versus € 4.8 billion in the first half of 2011, mainly driven by the aforementioned decreases in revenues.

Net income in the first six months of 2012 was € 2.1 billion, compared to € 3.4 billion in the 2011 comparison period. The effective tax rate in the first six months of 2012 was 27 % versus 30 % in the first half of 2011. Diluted earnings per share were € 2.12, versus € 3.35 in the first half of 2011.

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Deutsche Bank Interim Report as of June 30, 2012

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