Postbank: Best quarter in the history of the company

With a considerable upturn in profit before tax to 289 million euros, Deutsche Postbank AG published its figures for the first half of 2004. For the first time since the IPO on 23 June, the Bonn-based bank presented figures on the development of business. Wulf von Schimmelmann, Chairman of the Postbank Board of Management, stated to journalists in Frankfurt am Main: "We were able to successfully deploy the momentum and the increased visibility from our IPO. At Postbank the growth trend is intact. The second quarter of 2004 was the most successful quarter in the history of our company."

Von Schimmelmann indicated his satisfaction with the performance of the Postbank share price: "In a weak market environment, our share held its ground well. It outperformed not only the DAX (up 3.75percent), but also a peer group of nine European retail banks (up 3.55percent). With the successful IPO, we established the basis for the pleasing development of our share in comparison to the market as a whole, which will reflect our stable and low-risk business model and our successes in the further and rigorous extension of our customer business."

In the second quarter, Postbank again strongly improved its pre-tax return on equity to 13.5percent. The cost/income ratio was similarly positive. On a year-on-year basis the figure improved by 5.9 percentage points to 70.9percent.

From today's perspective, Schimmelmann expects the profit before tax figure for the whole of 2004 to be at least 15percent higher than in the previous year. For 2006, Postbank is targeting a return on equity before taxes of 15percent. The target for the cost/income ratio is under 65percent.

Dirk Berensmann, Postbank board member responsible for IT/Operations underlined that the new Transaction Banking division has been able to celebrate a completely successful start. Taking over payment processing for Dresdner Bank as of 1 May and Deutsche Bank as of 1 July has worked smoothly. For the first time, Berensmann also gave figures for this area: Transaction Banking was profitable from the outset. In the second quarter of 2004, Postbank generated 43 million euros income which was offset by 41 million euros administrative expenses. Berensmann indicated that he was confident of being able to expand the business further: "Our offer has met with pleasing interest on the market. Today we have made so much progress that we can enter into concrete negotiations with further interested parties. From our side at least, there are no reservations, even beyond the classical three pillars of the German market. Here I do not see any obstacles that cannot be surmounted."

Market position extended

Postbank again extended its market leadership position as the largest private bank in Germany. In the second quarter of 2004, Postbank gained 190,000 new customers (up 9percent). 134,000 new checking accounts were opened (up 12percent). Postbank also posted strong growth in the deposits business. At the beginning of June, deposits exceeded the 40 billion euros mark for the first time.

Postbank also continued its positive development on the loan side. It generated 1.6 billion new construction loans, double the figure of the previous year. In the consumer loan business, it recently launched the DSL private loan as an installment loan especially for third-party distribution.

Overview of the first half year 2004

Postbank considerably increased its profit before tax figure to the record of 289 million euros (up 42percent). In the second quarter alone, the figure improved by 2.1percent to 146 million euros. After tax, the result was 187 million euros after 121 million euros in the equivalent period of the previous year.

In the first six months, total income increased by 2.5percent year-on-year. Profits gained momentum during the year, so that the second quarter of 2004 posted an increase of 3.4percent against the first three months of this year.

On-balance sheet income (net interest income, net trading income and net income from investment securities) remained virtually stable in comparison to the first six months of the previous year. However, with the interest level being considerably lower than in the previous year, the income structure changed as had been scheduled.

Net interest income declined by 15.0percent to 744 million euros. This was largely offset by increases in the net trading income (up 47 million euros) and net income from investment securities (up 80 million euros). In comparison to the first three months of 2004, the slight upturn in interest rates was already evident in net interest income (up 4.4percent). Against the first half of 2003, net fee and commission income increased by 15.3percent to 264 million euros.

The allowance for losses on loans and advances increased by 17.1percent year-on-year, parallel to customer loan volumes. Against the first quarter of 2004, the allowance remained unchanged.

In the first six months of 2004, administrative expenses were further reduced. However, in comparison to the first quarter of 2004, administrative expenses increased by 3.9percent as a result of assuming payments for third parties.

In the first half of 2004, the net other income and expenses position was 3 million euros, after minus 11 million euros in the first half of 2003.
As of June 30, 2004, total assets at Postbank totaled just under 140 billion euros. This is roughly 5.6percent more than at the end of the previous year.

At just under 46 billion euros, loans and advances to customers are approximately 2.7 billion euros up on the year-end figure. In line with Postbank strategy, public sector loans were down slightly (minus 0.6 billion euros), while other loans and advances increased by approximately 1 billion euros.

Both loans and advances to other banks and trading assets were down in comparison to December 31, 2003, by 4.0 billion euros and 1.5 billion euros respectively. As of June 30, 2004, investment securities increased by 11.2 billion euros. This temporary increase corresponds largely to the increased money and capital market liabilities.

Amounts due to customers increased by 1.5 billion euros to 75.5 billion euros. The trend with savings deposits was again positive. They increased by approximately 1.1 billion euros.

While deposits from other banks were extended by 14.5 billion euros as against the end of 2003, there was a continued scheduled reduction of securitised liabilities. They were 7.3 billion euros lower.

Total group assets were approximately 0.5 billion euros lower than at the end of 2003. This was primarily due to the dividend distribution in the first quarter of 2004. The negative value of the revaluation reserve increased, by 133 million euros, primarily as a result of the slight increase in the level of interest rates, in particular as a result of changes in the bond portfolios. The equity position was increased by the full group profits of 187 million euros.