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Frankfurt am Main, 8th of August 2008

Financial markets crisis a burden on first half-year earnings 2008

• Private and corporate clients business stable
• Negative trading results due to value corrections
• Further reduction of cost levels – Expenditure reduced by 13 per cent
• Successful market launch of new growth initiatives – Further increase in customer volume

The ongoing crisis hitting international finance markets has left its traces at Dresdner Bank in the first half of 2008. While the operating profit in the corporate sector Private & Corporate Clients amounted to €339 million in the first half of the fiscal year, the figure for Investment Banking showed  minus €1,292 million. This is primarily a consequence of value adjustments of almost €1.4 billion, for instance, in the ABS account book and for Monoliner Exposure. The operating profit of Dresdner Bank subsequently fell from €1,097 million in the same period of the previous year to a figure of minus €964 million in the first half of 2008. Total operating expenses fell considerably by 12.8 per cent to €2,303 million.

“The difficulties in the global capital market environment also had a negative influence on Dresdner Bank’s results”, reports Herbert Walter, Chairman of the Board of Managing Directors of Dresdner Bank. “In the private and medium-sized business segment, many of our customers are playing it safe. In the investment banking sector, we have continued our policy of reducing critical assets.” Herbert Walter adds: “We maintain a strong operational discipline in both our credit policies and in terms of cost control. In addition to this, Dresdner Bank also maintains a stable balance and liquidity situation.”

Net interest and current income and net fee and commission income reflect customer attitudes

The total operating income of Dresdner Bank amounted to €1,415 million, following €3,793 million in the same period of the previous year. This detrimental effect was predominantly due to the net trading income. Due to value adjustments in the first half of 2008, these fell from €640 million in the previous year’s period to a figure of minus €1,146 million. Further, the current defensive attitude of customers with regard to securities transactions led to a drop in net fee and commission income of almost 23 per cent to €1,162 million. Net interest and current income remained at the previous year’s one-time-effect adjusted high level of €1,399 million.

Private & Corporate Clients with high yields

In the Private & Corporate Clients segment, the total operating income was influenced by the cautious attitude of investors in the first six months of the year. The results fell by 8 per cent, to €1,716 million. The Private & Corporate Clients segment continued to show an appreciable yield with a return on risk-adjusted capital (RoRAC) after tax of 25.2 per cent.

Another increase in the Private & Corporate Clients segment was seen in customer volume: this figure rose in mid-2008 to 6.52 million – 300,000 above the previous year’s level. A positive development in new business was also registered in consumer loans and mortgage lending: in the first half of 2008, this rose, in comparison with the previous year’s figures, by 21 per cent, to €2,147 million. In a half-year comparison of the deposits sector, Dresdner Bank recorded an increase in customer deposits of 13 per cent, to €68 billion.

At the same time, the growth initiatives launched in the second quarter got off to a successful start:

The new product line, dresdner bank direct24 registered approximately 230,000 users in the first weeks after its launch, one third of whom were new customers. The considerable influx of new customer assets is a cause for particular satisfaction: With “direct 24”, Dresdner Bank has successfully secured around €1 billion of customer assets which would otherwise have been deposited with competitors.

The campaign for small and medium sized enterprises (SME, “Mittelstand”) is also showing positive effects: for instance, new Dresdner Bank products made an additional credit volume of €700 million available to SMEs in Germany. Further growth in this customer segment has also been registered. Earnings from Corporate Banking rose by 6 per cent in the second quarter.

Earnings fell in the Capital Markets segment, Global Banking remained stable

At Dresdner Kleinwort, the development of earnings in the first half of 2008 was influenced by the capital markets crisis. Total operating income from investment banking amounted to minus €254 million. The Credit Derivatives Division within Capital Markets was particularly hard hit by the crisis on the financial markets: income showed a figure of minus €846 million as a consequence of value adjustments. In comparison, the Global Banking Division achieved an income of €643 million. Total assets and risk-weighted assets in investment banking were reduced and margins rose. The operational cost base of the corporate division fell considerably – credit risks range at a low level.

Costs are decreasing, the capital base is stable

As already seen in the first quarter, Dresdner Bank again reveals an ongoing operational discipline throughout the second quarter. The decrease in total operating expenses of almost 13 per cent is not only a consequence of lower service-dependent commissions, when com­pared with the same period of the previous year, but is also due to the reduction of the cost base. On the whole, total staff costs fell by €324 million to €1,369 million. At the same time, non-staff operating costs decreased by €48 million to €897 million.

In the case of loan impairment allowances, Dresdner Bank registered a moderate net increase of €76 million in the first half of 2008. This reflects the consistently excellent quality of the loan portfolio.

As of 30 June 2008, Dresdner Bank has reduced its total assets to €480 billion. The core capital ratio according to Basel II lies above the targeted bandwidth with a figure of 9.3 per cent.

Note:
The figures shown in this press release refer only to the Dresdner Bank sub-group in accordance with IFRS. The figures for the Dresdner bank sub-group according to IFRS are not identical to those published by Allianz for the banking segment, in which all Allianz banking activities are summarised.

Note for editorial offices:
The presentation can be downloaded at:
http://www.dresdner-bank.com/_downloads/presentation.pdf

The interim report (in German) can be downloaded at:
http://www.dresdner-bank.de/zwischenbericht

(in € million)

1 Jan,–30 June

1 Jan,–30 June,

Change

2008

2007

€ million

percent

Net interest and current income

1,399

1,646

–247

–15.0

Net fee and commission income

1,162

1,507

–345

–22.9

Net trading income

–1,146

640

–1,786

Other operating income

–

–

Operating income

1,415

3,793

–2,378

–62.7

Administrative expenses

2,266

2,638

–372

–14.1

Other operating expenses

37

3

34

>100.0

Operating expenses

2,303

2,641

–338

–12.8

Loan loss provisions

76

55

21

38.2

Operating result

–964

1,097

–2,061

Result from investment securities

103

163

–60

–36.8

Restructuring charges

–15

12

–27

Income before taxes

–846

1,248

–2,094

Taxes

152

164

–12

–7.3

Income after taxes

–998

1,084

–2,082

Income attributable to minority interests

31

34

–3

–8.8

Net income for the period

–1,029

1,050

–2,079

Ratios

Cost-income-ratio

162.8%

69.6%

Return on risk-adjusted capital (Rorac)

–32.2%

26.6%

Core capital ratio1)

9.3%

9.1%2)

Total capital ratio1)

14.4%

13.8%2)

Risk-weighted assets 1)

104.8

123.12)

–18.3

–14.9%

Employees (FTEs)

25,362

26,3092)

–947

–3.6%

1)  2008 acc. Basel II; 2007 acc. Basel I.
2)  As of 31 Dec 2007.

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