Turbulence on the capital markets exerted considerable pressure on Postbank's result in 2008. For the first time in its more recent history, the Bank concluded the fiscal year with a loss from ordinary activities after tax amounting to €821 million. The greatest share of these negative results amounted to -€710 million and was incurred in the fourth quarter. The result before tax amounted to -€974 million in comparison to a positive figure of €992 million the previous year. These results are due primarily to impact from the financial market crisis as well as one-time losses such as the announced complete and active reduction of the equity portfolio. In response to the intensified financial market crisis, Postbank already adopted a plan of action in fall 2008 to optimize its earnings quality as well as its risk profile. Among other things, this plan stipulates a reduction of the Bank's equity exposure.

At the same time, Postbank was able to consolidate its market position in operating customer business further. The development of new business proceeded in a positive manner in all key product categories. Postbank recognizes this as confirmation of the stability of its business model. Dr. Wolfgang Klein, Chairman of the Board of Management, told journalists in Frankfurt on Thursday, “The fact that we were able to achieve a good result within this difficult environment substantiates Postbank's strength and resilience.” “Already in the past year, we considerably improved the Bank's risk profile by means of the targeted measures in our action plan. In additional steps, we are working resolutely to reduce further the Bank's susceptibility to negative developments on the capital market.”

Klein pointed out that further significant losses due to the decline on equity markets had already been avoided as a result.

Market share gained in customer business

Postbank further improved its excellent market position in customer business throughout all of its divisions. Klein commented: “We have preserved our customers' confidence in Postbank's quality and reliability. We are on the right path, and our customers recognize that.”

Within its core private-client business, Postbank was able to further expand its position as Germany's leading retail bank despite the financial market crisis. It gained market share with regard to nearly all of its core products. Within the scope of its “Next Step” strategy program, Postbank is concentrating increasingly on its regular customers, with whom it achieves roughly three-fourths of its value added. Headquartered in Bonn, the Bank expanded the number of regular customers from 4.6 million to 4.9 million in 2008. Overall, Postbank was able to attract 780,000 new customers in the past year. At the conclusion of 2008, the total number of active customers was 14.1 million.

The net number of private checking accounts increased in 2008 by about 100,000 to a total of just under five million. In the tough competition for savings deposits as well, Postbank considerably increased its market share. Savings volumes including call money accounts increased by 12% or a good €5 billion to €49.1 billion. “These results show that we still enjoy the ongoing confidence of our customers,” Klein emphasized.

Development of business regarding loans and advances is similar. Despite an overall shrinking market, Postbank increased its volume by 6.9% to €72.7 billion in the area of mortgage lending. Postbank thus underpinned its position as the leading German homes savings finance provider.

In 2008, Postbank even achieved a new-business record regarding its consumer-credit business, expanding its loan portfolio by approximately 30% to €3.0 billion. Thus, it increased its market share in this segment by almost 30% to 2.3%.

A growing volume and higher margins also led to an encouraging operating profit in the Corporate Banking business. For 10% of the corporate clients which currently number about 30,000, it is Postbank's objective is to rank among the top five bank connections by 2010. Postbank achieved one sub-ordinate goal considerably earlier than it had planned: Already in 2008, the SME credit volume reached the €5 billion, two years ahead of schedule. Klein commented: “This shows that Postbank is available as a reliable lender for SMEs even in difficult times.“

Action plan to increase earnings quality

With unremitting intensity, Postbank is pursuing its three-point action plan to increase earnings quality. One objective is to expand its strong liquidity position further. In this respect, Postbank benefits from its strong customer business and the related deposits. Furthermore, as one of the providers of home savings finance, Postbank is able to issue mortgage bonds, which it already did successfully in the past year and will continue this year following its successful start at the beginning of February. Thus, to a large extent, Postbank is not dependent upon the money market and capital market.

In addition, Postbank is rigorously reducing its capital market portfolios. Due to what has become a balanced ratio between customer deposits and lending, compared with its status in September 2008 Postbank will reduce its investment securities by 2013 by between 35% and 45%. In the fourth quarter of 2008, the complete reduction of the equity portfolio (“hidden encumbrances”) comprised an initial contribution toward this effort. With regard to new investments, the Bank is focusing even more strongly than before on government and mortgage bonds.

Furthermore, it is Postbank's objective to strengthen its core capital and to reduce volatility. In alliance with its majority shareholder Deutsche Post, Postbank has strengthened its equity base considerably by means of a capital increase. At the same time, capital ratio volatility also was reduced considerably by means of a comprehensive realization of hidden encumbrances affecting net income. On December 31, 2008, the Tier 1 ratio was 7.4% compared to 6.9% at the end of 2007 and 5.5% on September 30, 2008.

Development in 2009

In 2009, Postbank anticipates that developments on the markets will be characterized considerably by the global financial crisis as well as concerns regarding an extended recession, at least within the first half-year. However, the trend is likely to continue toward a gradual normalization on the money markets once government measures gradually begin to impact.

“If one considers that other banks have nearly double the unit costs in retail banking than we do, then we can be very confident in this respect,” said Klein. The cost structure bears a direct correlation to market share and will have an even stronger link in the future. For this reason, we will not rest on the laurels of what we have achieved so far.”

In this environment, Postbank will focus its business model even more strongly on business with private clients, business customers and corporate clients. Based on the continued favorable operating development – with steady streams of income from customer business and a solid refinancing potential – Postbank will proceed in resolutely expanding its customer business and reducing risks and portfolios which are induced by the capital market. In the medium term and in a sustainable manner, it is pursuing a return on equity amounting to between 13% and 15%.

All discclosures are based on preliminary figures.