In 2004, Deutsche Postbank AG again generated a record result. On Monday, it announced the best profit before tax in its history on the basis of the provisional figures, €624 million, an improvement of 25.6%. The Bonn-based bank considerably improved income, by 12.4% to €2,674 million. In contrast, administrative expenses increased by only 4.6% to €1,893 million. Net profit for the year improved by 19.3% to €420 million. The pre-tax return on equity increased by three percentage points to 13.7% (PY: 10.7%). The cost-income ratio narrowed by 5.3% percentage points to 70.8%. Earnings per share increased from €2.15 to €2.56. The Management Board intends to propose to the annual general meeting the distribution of a dividend of €1.25 per share, a distribution total of €205 million.

The results in detail
Income related to recognized assets (net interest income, net trading income and net income from investment securities) increased by 7.9% to €2,062 million. In the fourth quarter of 2004, Postbank generated €551 million after €516 million in the third quarter of 2004. Due to another considerable decline in the interest rate level during the year, there were certain shifts in the structure as had been expected.
The strong increase in customer deposits and loans satisfactorily counteracted the pressure on net interest income. During the year, the trend improved steadily from quarter to quarter (over the year as a whole minus 5.2% to €1,567 million). Thus the figure for the fourth quarter of €419 million was again higher than the previous quarter's figure of €404 million.
 
Net trading income rose slightly, by 8.2% to €198 million. Proprietary trading, operated at Postbank with strictly limited risk parameters, contributed €62 million in comparison to the €50 million in the previous year. The decline in net trading income to €12 million in the fourth quarter after €59 million in the third quarter is due largely to less proprietary trading activities at the end of the year, combined with a declining derivative result due to the development of interest rates.

The decline in capital market interest rates resulted in a parallel increase in the market value of the Bank’s bond portfolio. Net income from investment securities increased by €222 million to €297 million. The considerable downturn in the interest rate level in the fourth quarter resulted in a strong contribution of €120 million after €53 million in the previous quarter.

Postbank regards the development of net fee and commission income as particularly positive. It improved very strongly, by 31.1% to €612 million. This growth is the result of ongoing success in selling products with a high level of consultancy intensity and checking account business combined with the insourcing activities of the new Transaction Banking division. In the fourth quarter, net fee and commission income improved to €179 million after €169 million in the previous quarter. This was largely due to another improvement in the Retail Banking business.

The increase in the allowance for losses on loans and advances of 20.1% to €185 million is in line with the strongly expanded volume of the customer loan business. The comparatively good risk structure in our portfolio is also shown by the fact that transfers to valuation allowances in 2004 remained constant at the level of the previous year. As a result of the conservative provisioning, Postbank reversed €55 million of valuation allowances in 2004, considerably less than in the previous year (€93 million). This is due primarily to the increased net position for the allowance for losses on loans and advances in the fourth quarter of €59 million after €44 million in the previous quarter.  

In comparison to the previous year, administrative expenses increased by 4.6% to €1,893 million. Ongoing improvements in efficiency in the course of integrating Dresdner Bank and Deutsche Bank payment units are offset by assumed staff costs and non-staff operating expenses. In addition, as a result of the sales success at the branches, the intergroup remuneration to Deutsche Post AG increased from €454 million in 2003 to €496 million in the reporting year.

Other income and expenses declined from €82 million in 2003 to €28 million. The high figure in the previous year was due particularly to non-recurring effects in connection with the disposal of subsidiaries. In the fourth quarter, the net position was €18 million after €7 million in the previous quarter.

Profit before tax increased by 25.6% to the record figure of €624 million. A new record was also posted in the fourth quarter, of €175 million after €160 million in the third quarter.

After deducting the income tax expense of €203 million (with a tax rate of approximately 33%), a profit after tax of €421 million was generated, after €353 million in 2003. €1 million of this related to minority interests, so that the net profit for the year was €420 million (+19.3%).

As scheduled, total assets declined to €128.2 billion after €132.6 billion at the end of 2003. At the end of 2004, the shareholders’ equity was €4,727 million, slightly under the figure for the previous year (€4,866 million) due to distributions. The revaluation reserve improved from minus €200 million to the end of 2003 to minus €144 million at the end of the year under review. It increased by €130 million in the fourth quarter alone.

	2003	2004	Change to PY:
	EUR m	EUR m	%
Income related to recognized assets	1.911	2.062	+ 7,9
Net fee and commission income	467	612	+ 31,1
Total income	2.378	2.674	+ 12,4
Administrative activities	-1.809	-1.893	+ 4,6
Allowance for losses on loans and advances	-154	-185	+ 20,1
Other income/expenses	82	28	- 65,9
Profit before tax	497	624	+ 25,6
Income tax expense	-144	-203	+41,0
Profit from ordinary activities after tax	353	421	+ 19,3
Minority interest	-1	-1	0
Net profit for the year	352	420	+ 19,3