Deutsche Bank Says Second Quarter 2011 Net Income EUR1.2 Billion

Deutsche Bank reported Tuesday second quarter and first half 2011 earnings, saying that net income for the quarter was EUR 1.2 billion up 67 million versus the previous year quarter. Income before income taxes was EUR 1.8 billion, up 17% versus EUR 1.5 billion in the prior year quarter. Diluted earnings per share were EUR 1.24 versus EUR 1.60 in the prior year quarter as higher net income was offset by the increased shares outstanding. Pre-tax return on average active equity for the quarter was 14%.

For the first six months of 2011, net income was EUR 3.4 billion versus EUR 2.9 billion in the first six months of 2010. Income before income taxes was EUR 4.8 billion versus EUR 4.3 billion. Diluted earnings per share were EUR 3.35 versus EUR 3.98 in the first six months of 2010. Pre-tax return on average active equity for the first six months was 19%.

Dr. Josef Ackermann, Chairman of the Management Board said, “Despite increasingly difficult market conditions, our business model has proven to be robust. Our efforts to recalibrate and rebalance our platform are paying off nicely. Whereas Corporate Banking and Securities was impacted by the adverse environment – particularly by the sovereign debt crisis in Europe – this was counterbalanced by strong performance and healthy year-on-year profit growth in our other businesses, which contributed half of the bank’s profit in the quarter.”

Group Results of Operation

Net Revenues for the quarter were EUR 8.5 billion, up EUR 1.4 billion, or 19%, versus the second quarter 2010, mainly driven by EUR 1.2 billion from the consolidation of Postbank in PCAM.

In CIB, net revenues were slightly up in the second quarter 2011 to EUR 4.9 billion versus EUR 4.7 billion in the second quarter 2010. PCAM net revenues were EUR 3.5 billion in the second quarter 2011 compared to revenues of EUR 2.3 billion in the second quarter 2010. Revenues in the second quarter 2011 were impacted by impairments of EUR 155 million on Greek government bonds.

For the first six months of 2011, net revenues were EUR 19.0 billion, compared to net revenues of EUR 16.2 billion in the first six months of 2010.

Provision for credit losses was EUR 464 million in the quarter, versus EUR 243 million in the second quarter 2010.

The increase was mainly attributable to Postbank, which contributed EUR 182 million. The Postbank provisions exclude EUR 82 million releases from loan loss allowance recorded prior to consolidation. Such releases are reported as net interest income. The remainder of the increase was mainly due to higher provisions required for our IAS 39 reclassified portfolio in CB&S.

For the first six months of 2011, provision for credit losses was EUR 837 million versus EUR 506 billion in the same period last year. The increase was mainly attributable to Postbank, which contributed EUR 388 million. The Postbank provisions exclude releases of EUR 200 million from loan loss allowances recorded prior to consolidation. Such releases are reported as net interest income. Excluding Postbank, provisions were down, mainly from a reduction of provisions for IAS 39 reclassified assets and from a portfolio sale in PBC.

Noninterest expenses were EUR 6.3 billion in the quarter, an increase of EUR 910 million, or 17%, compared to the second quarter 2010. Of the increase, EUR 712 million related to the consolidation of Postbank. Also contributing to the increase were a first time accrual for the German bank levy of EUR 62 million, as well as higher policyholder benefits and claims in Abbey Life (offset in revenues) and higher expenses for deferred compensation.

For the first six months of 2011, noninterest expenses were EUR 13.4 billion, up from EUR 11.3 billion in the first six months of 2010.

Income before income taxes was EUR 1.8 billion in the quarter, up EUR 254 million versus the previous year quarter. CIB and PCAM generated an income before income taxes of EUR 2.0 billion in total, partly offset by negative results of EUR 139 million in CI and EUR 43 million in C&A, which included the aforementioned bank levy.

For the first six months of 2011, income before income taxes was EUR 4.8 billion versus EUR 4.3 billion in the first six months of 2010.

Net income for the second quarter 2011 was EUR 1.2 billion, virtually unchanged to the second quarter 2010. Income tax expense in the second quarter 2011 was EUR 545 million. The effective tax rate of 31% in the current quarter benefited from the geographic mix of income, partly offset by the charge for the non tax deductible German bank levy. The prior year quarter’s effective tax rate was 23% and benefited from the tax exempt negative goodwill related to the commercial banking activities acquired from ABN AMRO and a favorable geographic mix of income.

For the first six months of 2011, net income was EUR 3.4 billion, versus EUR 2.9 billion in the first six months of 2010. The effective tax rate of 30% for the first six months 2011, versus 32% in the first half 2010, benefited from the partial tax exemption of net gains related to our stake in Hua Xia Bank in the first quarter 2011 and the geographic mix of income.

Tier 1 capital ratio was 14% at the end of the second quarter up from 13.4% at last quarter end. The Core Tier 1 capital ratio was 10.2% up from 9.6% at previous quarter end, both the strongest ratios ever. Risk-weighted assets decreased EUR 8 billion to EUR 320 billion at the end of the second quarter 2011.