Deutsche Postbank AG started well into the year 2006. In the first quarter, the Postbank Group, which now also includes BHW and the 850 branches acquired, generated profit before tax of €208 million, 20.2% more than in the comparative period of the previous year (the comparative figures for the first quarter of 2005 are pro-forma data in which BHW and Branches are included on a calculatory basis). Against the first quarter of 2005, the cost-income ratio improved by 4.3 percentage points to 71.7%. Pre-tax return on equity improved by 1.5 percentage points to 15.9%, thus considerably exceeding the 15% target for the previous Postbank Group for 2006. In the first quarter of 2006, the new Group gained 245,000 customers, after 250,000 in the same period of the previous year. The total number of active customers thus increased to 14.6 million.

A key factor for the positive development was the strict cost efficiency, also across the new Group. This enabled Postbank to process the tangibly extended business volume while holding administrative expenses stable.

Balance-sheet related revenues (i.e. the total of net interest income, net income from investment securities and net trading income) improved by 8.1%. Net interest income moved up 4.3% auf €512 million. This demonstrates the ongoing successful of the customer business, as the interest situation is largely unchanged to the previous year. Net income from investment securities increased slightly by 7.7% to €70 million while net trading income surged by 59.5% to €59 million in comparison to the relatively low level of the first quarter of 2005.

In the first quarter of 2006, net fee and commission income improved by 3.2% to €356 million. Across the larger Postbank Group, the share of net fee and commission income in total income increased considerably to 35.7%, in a like-on-like comparison by 25.4% year-on-year.

The allowance for losses on loans and advances increased by 9.9% to €78 million. Again the increase was lower than the extension of the loan portfolio.

Particularly striking is the fact that administrative expenses were kept stable at the level of the previous year. With a move of 0.3%, the ratio was virtually unchanged with an absolute figure of €715 million. Here initial cost synergies from the BHW integration of €5 million were generated. If one offsets this against the integration expenses included in the €715 million, this even results in a slight decline of the cost basis – despite the considerable upturn in the customer business.

At €4 million net other operating expenses and income were €15 million down on the figure of the equivalent quarter in the previous year.

Increase across all segments
Retail Banking, which now also includes BHW and the Branches, continued its positive development. In the first quarter of 2006, there was a considerable year-on-year improvement of 21.7% to €213 million. Corporate Banking also continued its positive development, with a strong upturn of 21.9% to €39 million. In Transaction Banking growth of 20.0% to €6 million was generated. The Financial Markets segment increased its profits before tax by 10.3% to €32 million. In the Others segment, the pre-tax loss widened by €4 million to minus €82 million.

Against December 31, 2005 total assets increased by €42.7 billion to €182.9 billion. Compared with the pro forma balance sheet as of December 31, 2005, total assets rose slightly by €2.6 billion. The headcount (on a FTE basis) increased from 9,235 (old Postbank Group) to 22,593 as of March 31, 2006. This also shows the special significance for the Postbank Group of the acquisition of BHW and the branches.

BHW sales with expanded product range
Since the beginning of 2006, the product range of the roughly 4,200 BHW advisors is being gradually extended to include Postbank products such as the check account, credit cards as well as savings and fund products. The technical conditions for BHW advisers being able to access Postbank customers are to be created by the summer. A pilot project which grants some 20 BHW advisers access to Postbank customers was recently initiated. During the course of summer 2006, the entire BHW sales is to receive this access, with the particular focus of offering home savings and home financing products, consumer loans and investment products. This is the most important step on the way of obtaining extensive income synergies with BHW over the next few years.

Branch integration advancing well
Postbank is systematically aligning its branches to increase income per customer on a sustained basis and to intensify further customer loyalty. The way of doing this is a move away from the product orientation to holistic customer advise. Furthermore, a quality campaign has been started in the branches to improve sales and operating flows.

In pilot projects, the Bonn-based bank is testing an expansion of its product range. Currently in examination are hire-purchase loans for lower rated customers, with a risk-adjusted interest-rate premium. Furthermore, the “Quartalsparen” product was launched with great success. In addition to a basic level of interest, it offers attractive supplementary interest for the balance that remains on the savings account for the whole quarter. Of course, for the FIFA WM 2006^TM the successful “Postbank Bonus Volltreffer” product is being offered, linking attractive bonus interest to the success of the German national soccer team.

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