Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With Euro 992 billion in assets and 63,427 employees, Deutsche Bank offers unparalleled financial services in 73 countries throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.

• Net income of EUR 1.2 billion, up 29% 
• Total revenues of EUR 6.8 billion, up 15%
• Pre-tax return on equity, per target definition, of 29% for the second quarter, 35% for the first six months of 2006
• Diluted earnings per share of EUR 2.17 for the second quarter, EUR 5.57 for the first six months of 2006
• Substantial year-on-year profit growth in both Corporate and Investment Bank (CIB) and Private Clients and Asset Management (PCAM)

FRANKFURT AM MAIN, 1 August 2006 – Deutsche Bank (XETRA: DBKGn. DE/
NYSE: DB) reported income before income taxes of EUR 1.9 billion for the second quarter 2006, up 32% versus the second quarter 2005. Net income was EUR 1.2 billion, up 29%. Reported pre-tax return on average active equity was 29%, compared to 23% in the prior year quarter. Pre-tax return on average active equity per the bank’s target definition, which excludes restructuring charges and substantial gains on the sale of industrial holdings, was 29%, compared to 25% for the prior year quarter. Diluted earnings per share were up 14% to EUR 2.17.

For the first six months, income before income taxes was EUR 4.5 billion, up 40% versus the first six months of 2005. Net income was EUR 2.9 billion, up 43%, while pre-tax return on average active equity, per target definition, was 35%, compared to 29% for the first six months of 2005. Diluted earnings per share were EUR 5.57, up 37%.

Dr. Josef Ackermann, Chairman of the Management Board, said: “We proved our ability to deliver in challenging conditions in the second quarter. Despite volatile markets in May and June, Deutsche Bank turned in a quarter which was significantly ahead of the same period in 2005, and as a result, an outstanding first half year.” 

He added: “We have built leading franchises in those areas where we compete. We remain committed to growth by organic investment and by focused incremental acquisitions. In both developed and emerging markets across the world, we are well-placed in areas of long-term strategic potential.” 

Group Highlights

Net revenues for the quarter were EUR 6.8 billion, up 15% versus the second quarter 2005. Revenues in the Corporate and Investment Bank (CIB) rose 27% to EUR 4.5 billion. Revenues in Sales and Trading (Debt and other products) were the best ever for a second quarter, rising 46% to EUR 2.4 billion, against a backdrop of better markets in credit trading and strong customer activity in the foreign exchange, money markets and rates businesses. Revenues in Sales and Trading (Equity) rose 23% to EUR 743 million, with growth in derivatives, cash and prime services. In challenging equity markets, CIB’s equity proprietary trading unit gave up some of the gains recorded in the first quarter, resulting in a second-quarter trading loss, but nevertheless remained solidly positive for the first six months of 2006. Revenues in Origination and Advisory rose 33% to EUR 732 million, driven primarily by record revenues in Origination, with high-yield debt issuance recovering strongly from the challenging conditions of the second quarter 2005. 

Revenues in Private Clients and Asset Management (PCAM) rose 15% to EUR 2.3 billion, mainly reflecting substantial performance fees in the real estate Asset Management business, while revenues in both Private Wealth Management and Private and Business Clients also grew year-on-year. 

For the first six months, Group net revenues were EUR 14.8 billion, up 18% versus the first six months of 2005.

Provision for credit losses, which includes provisions for both loan losses and off-balance sheet positions (the latter reported in noninterest expense), was EUR 78 million for the quarter, slightly down from the second quarter 2005. Provision for credit losses in PCAM grew in line with business growth in consumer lending, while provision for credit losses in CIB continued to benefit from successful workouts. Problem loans at the end of the quarter were EUR 3.5 billion, down from EUR 3.6 billion at the end of the first quarter 2006, the lowest level for more than five years. 

Noninterest expenses for the quarter were EUR 4.8 billion, compared to EUR 4.4 billion in the second quarter 2005. The reported cost/income ratio was 71%, down from 75% in the second quarter 2005, while restructuring charges were EUR 57 million, down from EUR 116 million. The operating cost base, which excludes restructuring charges and other items, was EUR 4.8 billion in the second quarter, up 12% versus the second quarter 2005. Compensation costs rose by 17% to EUR 3.1 billion, reflecting higher performance-related compensation, and resulting in an underlying compensation ratio of 46%, up from 45% in the second quarter of 2005 but stable compared to the first quarter 2006. Non-compensation operating costs were EUR 1.7 billion, up by 4% versus the second quarter 2005, reflecting business investments including marketing and promotional expenses. For the first six months, noninterest expenses were EUR 10.2 billion, up 12% versus 2005, while the operating cost base was EUR 10.1 billion, up 15%, with both increases reflecting higher bonus accruals consistent with improved operating performance. The underlying cost/income ratio for the first six months improved to 69%, down from 72% in the first six month of 2005.

Income before income taxes for the quarter was EUR 1.9 billion, up 32% versus the second quarter 2005. Reported pre-tax return on average active equity was 29%, up from 23% in the prior year period. Per the bank’s target definition (which excludes restructuring charges of EUR 57 million in the current quarter and EUR 116 million in the second quarter 2005), pre-tax return on average active equity was 29%, compared to 25% in the prior year period. For the first six months, pre-tax return on average active equity, per target definition, was 35% versus 29% in 2005.

Net income for the quarter was EUR 1.2 billion, up 29% from EUR 947 million in the second quarter 2005. The effective tax rate was 34%, compared to 33% for the second quarter 2005. Diluted earnings per share for the quarter were EUR 2.17, up 14% versus the second quarter 2005. For the first six months, net income was EUR 2.9 billion, up 43% versus 2005, while diluted earnings per share were EUR 5.57, up 37%.

The BIS Tier 1 ratio was 8.7%, compared to 8.8% at the end of the first quarter, and comfortably within the bank’s target range of between 8 and 9%. Deutsche Bank reaffirmed its capital management strategy of maintaining core capital strength, funding business growth, and generating attractive returns for shareholders. The bank grew its risk position by EUR 6 billion to EUR 263 billion during the quarter, while also repurchasing 12.3 million shares, at an average price of EUR 91.03 per share. At the Annual General Meeting on 1 June, shareholders approved a new buyback program, authorizing the repurchase of up to a further 10% of outstanding shares, which was started on 2 June 2006, replacing the previous program.