Deutsche Bank today released its results for the first quarter of 2004. The bank reported income before income tax expense of Euro 1.6 billion for the quarter compared to Euro 234 million in 1Q 2003. Deutsche Bank posted a net income for the quarter of Euro 941 million versus a net loss of Euro 219 million in 1Q 2003.
Adjusted return on average active equity (post-tax) was 15.1 per cent for 1Q 2004, compared to 5.2 per cent for the full year 2003. Income tax expense was Euro 597 million versus Euro 423 million in 1Q 2003 (excluding the reversal of 1999/2000 credits for tax rate changes in German tax laws), reflecting an effective tax rate of 38 per cent.
Deutsche Bank demonstrated sustained year-on-year improvement in operating strength. Underlying pre-tax profit climbed 45 per cent to Euro 1.4 billion in 1Q 2004 compared to Euro 950 million in 1Q 2003 (see reconciliation table).
Josef Ackermann, Chairman of the Group Executive Committee, said: 'I am pleased to report significant growth in returns to our shareholders. We achieved an underlying pre-tax return on equity of 22 per cent compared to 13 per cent in the first quarter of last year, making good progress towards our objective of 25 per cent. I remain confident that with continued stability and positive development in the global economy and the world´s financial markets, we will maintain this progress and deliver on the challenging goals we have set ourselves.'
Total revenues increased 23 per cent to Euro 6.2 billion in 1Q 2004 versus Euro 5.0 billion in 1Q 2003. This improvement reflects good performance in sales & trading and origination within the Corporate and Investment Bank and in Private Clients and Asset Management.
The operating cost base of Euro 4.4 billion in 1Q 2004 versus Euro 4.3 billion in 1Q 2003 reflects bonus accruals consistent with strong business performance. Non-compensation operating cost base was Euro 110 million lower despite higher business volumes. The underlying cost income ratio improved to 74 per cent in 1Q 2004 from 77 per cent in 1Q 2003, the reported cost income ratio to 73 per cent from 88 per cent.
Reflecting the overall improved credit quality of Deutsche Bank´s corporate loan book and the continued success of workouts for problem loans, total provision for credit losses (including provisions for off-balance sheet positions) was down 60 per cent to Euro 141 million. Loans were Euro 149 billion at the end of 1Q 2004, down Euro 23 billion or 13 per cent compared to the end of 1Q 2003. Problem loans were reduced to Euro 6.3 billion, down 33 per cent compared to 1Q 2003.
Capital discipline yielded significant results in the first quarter 2004 with progress both in returns to shareholders and in capital strength. Improved earnings allowed Deutsche Bank to maintain the momentum of its share buyback program with the repurchase of 12 million shares during the quarter. Since the start of the second buyback program the bank has repurchased 29.1 million shares or five per cent of capital. At the same time the BIS core capital ratio rose further to 10.1 per cent at the end of 1Q 2004.
Segmental Results and Highlights
The Corporate and Investment Bank (CIB) again capitalised on its global leadership position. CIB recorded income before income tax expense of Euro 1.2 billion in 1Q 2004. This compares to Euro 1.4 billion in 1Q 2003, which included a Euro 508 million net gain on the sale of a significant part of the bank´s Global Securities Services business. As a result underlying pre-tax profit increased 22 per cent year-on-year. This improvement was driven by sustained strength in sales & trading as well as origination.
Fixed income benefited from Deutsche Bank´s leading franchise in high value, high growth segments such as derivatives and securitised products, from market share gains in flow products, and from cross-selling of fixed income products to PCAM clients. Equity sales & trading and origination made substantial progress both in Europe and North America in an improved environment for