group annual report 2001 - postbank€¦ · other €bn – 2.27 2.47 home savings contracts...

Group Annual Report 2001

Deu

tsch

e Po

stba

nk A

G G

roup

Ann

ual R

epor

t 200

1

678

102

001

5407 SEA Post_GB0 6sUms. engl 24.06.2002 14:44 Uhr Seite 1 (2,1)

1999 2000 2001

Payment transactions

Private checking accounts million 3.56 3.63 3.75

Corporate checking accounts million 0.39 0.37 0.37

Demand deposits €bn 13.93 15.52 15.83

Online banking million 0.66 0.81 1.02

Telephone banking million 1.24 1.49 1.79

ec cards million 1.67 1.91 2.16

Postbank cards million 3.01 2.89 2.83

Credit cards million 0.41 0.45 0.55

Deposit business

Savings accounts million 19.14 18.87 18.15

of which SparCard million 0.53 0.93 1.39

Savings volume €bn 34.00 30.97 32.41

of which Sparen 3000 plus €bn 24.31 20.43 20.45

Investment funds

Customer accounts million 0.31 0.51 0.62

Fund volume €bn 2.89 3.50 3.37

Direct brokerage

Accounts million – 0.28 0.28

Lending business

Overdrafts €bn 0.48 0.61 0.86

Loans to private customers €bn 0.43 0.59 0.74

Loans to corporate customers €bn 0.80 3.91 4.99

Mortgage lending €bn 1.27 12.42 13.32

Loans to banks €bn – 10.73 12.09

Other €bn – 2.27 2.47

Home savings

Contracts thousand 52.09 73.80 90.60

Volume €bn 0.82 1.01 1.01

Insurance

Life policies thousand 19.04 47.11 80.45

Accident policies thousand 7.16 29.85 59.56

Postbank Group employees thousand 11.78 10.76 10.43

Postbank Group profit before tax €bn 91.01 234.14 343.23

Total assets €bn 59.97 133.99 139.82

Postbank in figures


Postbank would like to tell the exciting

so this Annual Report 2001 contains a

stages in the development of money, f

modern-day incarnation. The story star

such as cowrie shells, the stone discs fr

which resemble millstones, raffia textil

parts of Central Africa, and Nigerian co

produced for colonial trade in Birmingh

And at the end of the tale, we reach p

cards, “cyber money“ for Internet shop

Although the production, form and cha

changed over time, its fascination for p

cultures has remained the same.

The long journeyfrom the cowrie shell to the euro

For many Europeans, the introduction of the euro on January 1, 2002 was

a new and radical experience. The replacement of the Deutsche Mark

and the eleven other national currencies was an event unparalleled in

its magnitude and its consequences - but the process itself is a recurring

feature in the history of money. Currency has evolved over time in the

same way as humankind itself.

Even many thousands of years ago, goods were being bartered for other

goods. At first these were “natural currencies“ such as livestock and

foodstuffs, but these were later superseded by portable objects with

unlimited durability, which could be easily measured and divided: spices,

tea or coffee, tobacco, hides, metals and minerals.

Natural currencies always had an obvious “material value“ across

cultures and tribal borders. However, the advent of cross-border trade

saw the rise of the abstract trade item and measure of value known

as “money“ – primarily in the form it has kept until today, namely coins

and notes.


Postbank would like to tell the exciting story of money in greater detail,

so this Annual Report 2001 contains an illustrated history of various

stages in the development of money, from ancient times through to its

modern-day incarnation. The story starts with early forms of money

such as cowrie shells, the stone discs from the Micronesian island of Yap

which resemble millstones, raffia textiles used as currency in various

parts of Central Africa, and Nigerian copper manillas, which were also

produced for colonial trade in Birmingham, England in the 18th century.

And at the end of the tale, we reach plastic money in the form of credit

cards, “cyber money“ for Internet shopping – and finally the euro.

Although the production, form and characteristics of money may have

changed over time, its fascination for people across all eras and all

cultures has remained the same.


Annual Report 2001

Contents

2 Postbank 2001

32 Management Board

34 Report of the

Supervisory Board

38 Group Management

Report

66 Consolidated Financial

Statements

68 Consolidated Income

Statement

69 Consolidated Balance

Sheet

71 Consolidated Cash Flow

Statement

73 Notes

146 Auditors’ Report

148 Annexes

5407 SEA Post GB0 11-33 engl 24.06.2002 11:18 Uhr Seite 1

Letter from the Chairman


>>Postbank 2001 3

Dear Readers,

2001 was a year in which Postbank made further progress on its way to the top. Despite a

difficult year for the banking industry that saw bitter setbacks for many of our competitors,

we were able to record encouraging growth in earnings compared with 2000. After three

years of systematic reorientation, we have again improved our position as one of the leading

players in our market.

This progress is highlighted by our excellent performance in 2001: profit before tax rose by

47 percent to €344 million, and our return on equity climbed from 5.9 to 8.0 percent. We

again improved our cost/income ratio by around three percentage points.

The improvements we have made in terms of profitability and efficiency are not just evident

in our financial performance. We successfully launched key new products in 2001, significantly

revived our mortgage lending business and recorded double-digit year-on-year growth in our

installment loan business. We strengthened our selling power by installing 2,000 financial

services advisors in our over-the-counter sales network. Finally, the acquisition of US company

PB Capital allowed us to significantly expand the potential of our specialized corporate

banking business.

To further accelerate the pace of our growth, we started implementing the new strategy for

our private customers in early 2002. Our new philosophy of “easy, low-cost banking” will

help us focus even more closely on our customers. At the same time, we are pushing forward

the development of our specialized corporate banking business, and the move to Frankfurt

represents another milestone for our Financial Markets division.

On behalf of the entire Management Board, I would like to extend my thanks to our cus-

tomers and staff. Our success would not have been possible without the confidence of our

customers and the commitment of all employees, and we are convinced that this will also

give us an outstanding starting position for the current year.

Prof Dr Wulf von Schimmelmann

Chairman of the Management Board


Cowrie shells: the first global currency

For centuries, the shell of the cowrie snail was a “natural coin”, in circulation throughout

Asia, Africa and Oceania. Up until today, no other currency seems to have spread across so

many different cultures. The cowrie shell is non-perishable, portable and easy to count, and

its natural form makes it forgery-proof, all of which made it the perfect measure of value.

But the cowrie shell was more than just money; it was also used as jewelry and as a talis-

man. Cowrie shells were first in circulation in China around 3,500 years ago. From there,

the currency spread to India and later to Africa, where Europeans also used it in trade with

native inhabitants. In 1923, the monetary policy interests of Africa’s colonial governments

led them to ban the cowrie currency, but it was still used up until the 1960s as payment for

smaller amounts.

>>Postbank 2001 5

5407 SE Post GB0 11-33 engl 24.06.2002 11:40 Uhr Seite 4

Restructuring our private customer business

Thanks to a broad, transparent product range, our modern, customer-oriented sales structures

and an attractive price/performance ratio, Postbank has established itself as one of the

leading German retail banks. Our stated goal is to reinforce this high-quality combination

while further expanding our position on the market. Postbank is well positioned to achieve

this goal, as demonstrated by the successes of the last three years, and good progress was

made during the year under review despite the difficult overall market situation.

We intend to continue pursuing the growth path of recent years generating stronger earn-

ings growth and expanding our customer base. With this in mind, we launched our new pri-

vate customer strategy at the start of 2002. In comparison with the market as a whole our

10 million private customers are a highly attractive customer base with a unique potential

for investment and credit products.

We aim to leverage new target groups and forge closer links with our existing customers by

offering a focused, easily understandable and low-cost range of financial products. The

highly standardized and structured nature of our product range allows us to reduce the

complexity of banking transactions and to offer products at particularly favorable terms

which means nothing else than “easy, low-cost banking“.

We are already anticipating additional income of around €20 million in the current fiscal

year as a result of the successful implementation of the new strategy and, in the final

analysis, extra income of €100 million per year.

Easy, low-cost banking:a strong case for our private customers


>>Postbank 2001 7

>> The market is ready for “easy, low-cost banking”

Around 60 percent of the population considers banking transactions to be complicated. 49 percent are generally

indifferent toward various banking concepts. Our new private customer strategy should appeal to both of these

customer groups, and this is precisely the aim of our new positioning – in future, the concept will apply to all

banking transactions with Postbank to a greater extent than before: “easy, low-cost banking”.

Our market research has shown that our new concept of “easy, low-cost banking” appeals to a large proportion

of bank customers. These are customers who are generally older and wealthier, with more money invested in

securities, and who use Postbank’s retail outlets less frequently. This makes them a particularly attractive cus-

tomer group.

But we also want to use our new approach to win over the large number of customers who until now have

been undecided on the variety of available banking concepts. To this end, we will make our existing low-price

strategy even more competitive in order to lend our new positioning credibility. Customers should see Postbank

as a complete financial services provider with an easily understandable product range focused on their actual

needs.

Future target group strategy

Postbank’s new target group strategy is characterized by its new “easy, low-cost banking”

concept. In future, we will concentrate to an even greater extent on three customer groups

that are particularly attractive in terms of their requirements and the potential they present:

– Affluent principal bank customers

– Senior customers

– Online customers

>> Targeted offers for attractive customer groups

The potential of aff luent pr inc ipal bank customers includes around 1.4 million customers who until

now have only held a checking account with Postbank. Around 600,000 of these customers have a regular

monthly cash inflow of more than €3,000, and thus represent considerable cross-selling potential. In future,

we will serve these customers individually also by means of our new customer retention program.

We have around 4.8 million senior customers – customers who are well established. This group already

represents half of Postbank’s total customer base. Senior customers account for more than 71 percent of our

savings volume, and contrary to popular belief, they are relatively flexible and open to change. In order to attract

more of these customers to Postbank, we will target our marketing activities more toward the over-50s and

offer them special products.

Finally, we will focus more strongly on our onl ine customers. This group, which currently includes around

1.3 million customers, boasts above-average income and profitability but is less active online than the equiva-

lent customer groups of our competitors. In order to further improve customer retention in this segment,

Postbank is taking appropriate measures to significantly increase the use of its online facilities. These include

more favorable conditions for online transactions, and the availability of a wider range of investment funds

through Postbank easytrade.


8 >

Postbank easytrade: our brand name for securities trading

In future, we want to create synergies by better leveraging the potential offered by Postbank

and Postbank easytrade’s customer base as part of our new private customer strategy. In

concrete terms: our direct brokerage subsidiary will become the Postbank Group’s brand

name for securities trading. This also means, for example, that Postbank easytrade will man-

age the brokerage accounts of our investment fund companies in future, with securities

settlement and all information concerning securities trading concentrated in Postbank easy-

trade. At the same time, marketing activities will be transferred to Postbank where we will

also create a new Securities business department bringing together our expertise in this

area. This will allow us to bundle our resources and competencies more effectively, and will

also demonstrate to our customers that Postbank can be a single source of standard bank-

ing products and securities transactions. The aim is a significant increase in our cross-selling

ratio, with the slogan “one customer, one checking account, one brokerage account”.

Following its launch in 2000, Postbank easytrade successfully established itself on the direct

brokerage market in the year under review. In the meantime, around 300,000 customers have

opened brokerage accounts through Postbank easytrade.

>> Specialist for employee stock option programs

Our direct broker Postbank easytrade made a name for itself last year by implementing Fraport AG’s employee

stock option program. Working in close cooperation with Fraport AG, Postbank largely automated all of the processes

in the program, including lending and employee communication, thereby laying the groundwork for quick and

smooth implementation. All in all, 7,200 of the company’s employees subscribed for shares through Postbank

easytrade, representing a participation rate of 56 percent. In carrying out this program, Postbank easytrade

again demonstrated that it is a specialist for the implementation of employee stock option programs. Postbank

easytrade previously provided support for Deutsche Post’s employee stock option program in November 2000,

involving over 160,000 employees, which was implemented as part of its IPO.


Katanga crosses: raw material with high purchasing power

Katanga crosses, named after the province in Central Africa where they originated, were

copper ingots shaped roughly like a St. Andrew’s cross. In pre-colonial times, they were a

universal currency, spreading from Central Africa along the trading routes as far as the

western and southern coasts of the continent, becoming an accepted currency for long-

distance trade in the process. But the widespread usage and long life of Katanga crosses is

not the only interesting thing about them: their purchasing power also increased the further

away from their native areas of Katanga and Zambia they traveled. For example, if you were

buying an ivory tooth from the Ndembu Lunda people in north-west Zambia, you could

expect to pay 100 Katanga crosses. But the same tooth from the Kuba, who lived further

away from where the crosses were made, would cost you a mere five Katanga crosses.


>10

Using the relatively calm situation at the capital markets in 2001, Postbank has also sys-

tematically implemented its multi-channel strategy for securities trading. Since mid-2001

Postbank easytrade’s customers have been able to place orders not only using the Internet,

telephone and WAP-enabled mobile phone but also in Deutsche Post’s Center outlets, which

number more than 600. The Center outlets can transmit buy and sell orders for stocks,

fixed-income securities, warrants and investment funds listed on domestic stock exchanges,

as well as giving information on the customer’s portfolio status and current market prices.

The range of investment funds which can be ordered through Postbank easytrade has also

been expanded dramatically. Following the signature of the latest sales contracts with

Schroder Fonds in February 2002, Postbank easytrade’s customers can now choose from

a total of 960 investment funds offered by practically all large fund companies.

Fiscal year 2001: continued success in the market

Last year, Postbank was able to harness the momentum achieved in 2000, continuing to

successfully develop its private customer business despite overall economic weakness. All

of our core products experienced growth in the year under review. In the area of checking

accounts alone, we recorded a net gain of more than 100,000 customers, meaning that we

were able to increase the number of checking accounts for the second year in succession.

There was also encouraging growth in checking account usage and the number of ec cards

and credit cards issued.

The DAX Sparbuch product, which we introduced in May 2001, also experienced record

growth. This index-linked savings plan, combining security with a high yield, boasted more

than 40,000 accounts by the end of the year with a deposit volume of €251 million. This

was another factor allowing us to buck the downward savings trend recorded in 2000.

Finally, Postbank was able to improve its position in securities despite the general weakness

of the market for equities and investment funds. We climbed from seventh to fifth in the

league table of new business by German banks, increasing our market share from 1.5 per-

cent to 2.4 percent in the process.


>>Postbank 2001 11

Private retirement provision: Postbank’s Riester pension product certified

Last year, the second phase of the German pension reform was adopted, and on January 1,

2002 the Altersvermögensgesetz (German Retirement Efforts Act) came into force. These two

developments have had far-reaching consequences for the product ranges of banks which

are active in the area of private retirement provision. The core aspect of the pension reform is

the possibility of state subsidies for private pension plans. However, the only individuals in a

position to benefit from these state subsidies are investors using a bank or insurance product

which complies with the corresponding statutory requirements. Last May, PB Versicherung,

Postbank’s insurance company, became one of the first insurance companies to introduce a

pension product which fulfills all the criteria for state subsidies.

Although statutory regulations meant that PB Rentenkonto contracts did not come into force

until January 1, 2002, PB Versicherung signed more than 10,000 contracts during the first two

weeks of a trial period in September 2001. This figure had risen to more than 100,000 by the

end of last year. In addition, we had replied to well over two million requests for information

about Postbank’s supplementary pension product by the end of 2001. PB Versicherung’s pen-

sion product was given a further boost with its official certification by the Bundesaufsichtsamt

für das Versicherungswesen (German Federal Insurance Supervisory Office) in December 2001.

PB Rentenkonto is thus certified as meeting all the statutory requirements and standards

necessary to be recognized as a supplementary pension product eligible for state subsidies.

>> Postbank excellently positioned for the Riester pension

The Riester pension offers substantial potential for Postbank. This is demonstrated by our recent market research:

half of the consumers questioned said that they planned to take out a private retirement provision product by

mid-2002, with a further 21 percent intending to do so by the end of the year. Our survey also showed that a

quarter of the population will use banks as their sales channel for Riester pension products. This year, Postbank

intends to leverage this potential on a large scale, continuing the success it achieved last year with its eligible

pension product.

We have a good basis upon which to work toward this aim. Already with their previous products Postbank and

Deutsche Post – traditionally the most important channels for paying out pensions – had established themselves

as expert partners for retirement provision. With regard to the new pension products, we are concentrating

above all on the aspect of trustworthiness. In order to find their way through the maze of products, which have

to fulfill strict criteria in order to qualify for state subsidies, consumers require the reliability of a major partner.

PB Rentenkonto’s strong performance in terms of cost and service has been backed up by studies carried out by

independent financial analysts. PB Rentenkonto achieved outstanding results in a comparison by Morgen & Morgen

of 27 providers, and was also awarded first place among the 15 pension products examined by FSS online, on

the grounds of its low cost.


>12

Online banking: focusing on market leadership

The number of customers using Postbank’s online banking services, already above average in

comparison with the competition, increased further in the year under review. Including the

customers of Postbank easytrade, the number of online customers rose to around 1.3 mil-

lion in 2001 – over 400,000 more than in the previous year. The number of online checking

accounts broke the one million barrier for the first time in February 2002. A further 280,000

brokerage accounts are held by Postbank easytrade customers. We plan to increase our cur-

rent market share of nine percent to 13 percent by 2005, becoming the market leader in

this segment. In the course of this development, the number of online checking and broker-

age accounts will increase to 3.5 million.

Encouraging upward trend in the lending business

Although the German market for private mortgage lending stagnated overall in the past

year, Postbank was able to record significant growth in private customer loans, with new

business increasing by more than 20 percent to €1.9 billion. Personal and consumer loans

experienced even stronger growth, with new business rising by just under 23 percent to

€415 million. The number of private loan accounts increased by around 18 percent in 2001.

>> Online offensive launched

In order to achieve our ambitious goals in the area of online banking, we will in future offer all of our products

online as part of our multi-channel strategy. Customers will then have the choice of conducting their banking

transactions in one of Deutsche Post’s 13,000 retail outlets, by telephone, or on the Internet. All of these ways of

accessing Postbank are identical in terms of performance, speed, and simplicity.

Postbank will accelerate its online offensive through strategic alliances. For example, we have concluded an

agreement with AOL Deutschland, which makes Postbank the “favored partner” of the AOL Finance channel. In

contrast to all previous AOL partners, Postbank will be present in large sections of the Finance channel, rather

than only in specific areas. This gives AOL users in Germany, who number over two million, access to high-quality

information on banking and brokerage. The cooperation also includes a partner website with exclusive special

offers for AOL members, and a customized banner campaign for Postbank.

We are optimistic that we will be able to increase the proportion of online accounts from 25 percent of the four

million checking accounts currently held with Postbank to 70 percent by 2005. At the same time, we intend to

increase the percentage of credit transfers carried out online from the current 20 percent to 50 percent.


>>Postbank 2001 13

One of our aims for the current year is to achieve further growth in this area, for example

through radical changes to the pricing policy for private installment loans. Postbank offers

particularly attractive conditions on the Internet, where we are one of the best-value

lenders on the market. This sales channel-specific pricing policy, combined with a clear

increase in our advertising presence, has provided considerable impetus for our business in

this area. The Internet sales channel has increased its contribution to overall sales more

than tenfold, and recorded a higher sales contribution than over-the-counter sales for the

first time in December 2001.

Postbank operates its mortgage lending business for its partners primarily through the

decentralized offices of DSL Bank, which is active on the market as an independent business

department of Postbank. As “the banking partner for financial service providers”, DSL Bank

focuses on partnerships with market multiplier potential. This sales strategy has proved

itself, and is being further expanded. DSL Bank will increase its acquisition and advisory

capacities considerably this year, thus further improving service for its customers, the finan-

cial service providers. Currently, Postbank and DSL Bank have a total mortgage portfolio of

over €13 billion.

Postbank’s retail outlets: mastering the logistics of the euro conversion

Despite the continued dynamic development of the individual access channels to Postbank, the

retail outlet remains the most important point of contact to our customers. Deutsche Post’s

close-knit retail outlet network gives our customers access to Postbank at 13,000 points of

sale – six days a week. This unparalleled offering allows us to have contact with two to three

million customers every day. We were able to demonstrate the unique position and sales

strength of the retail outlets in the course of the euro conversion. Between early September

and the end of December 2001, euro notes and coins with a total value of around €2.8 billion

were delivered to the retail outlets. In the two weeks from December 17 to 31, 2001, around

3.5 million euro coin starter kits were distributed to private customers via the retail outlets,

and a further 300,000 coin starter kits and 600,000 banknote starter kits were distributed to

340,000 business customers from January 1, 2002. On New Year’s Day, more than 3,200

employees in approximately 600 Deutsche Post retail outlets were involved in offering cus-

tomers a facility for exchanging deutschmarks for euro notes and coins. In the first two weeks

of 2002 alone, the volume of counter payments and cash conversion in the retail outlets

totaled around €4.2 billion.


Jewelry: a true status symbol

In former times, the lack of raw materials meant that Oceanian societies had no currency

based on processed metals, such as the coins used in Europe. The alternative, made from

shells, teeth or feathers, was regularly used for a variety of purposes – as a barter object, and

therefore for payment, in ritual ceremonies, and often also as an important status symbol.

For example, the bride price was often paid using jewelry. As the actual material value of the

money was essentially identical – such as in the case of shells – the various denominations

generally depended on the amount of work which had gone into producing them. For

example, a four-sided braid combined with a shell bracelet was very valuable. Since jewelry

was primarily used for extremely specific purposes, it is also known as “special purpose

money”. A characteristic of the societies which used jewelry was that they often also used

other types of currency for payment purposes.


>>Postbank 2001 15

Looking back, the retail outlets can take credit for the smooth and straightforward handling

of the historic currency conversion. The introduction of the euro allowed them to demonstrate

their high level of service competence and reliable customer orientation. In short, together

we proved to be an efficient team.

Continued qualitative increase in retail outlets’ advisory services

Meeting the challenges of offering “easy, low-cost banking” will also affect the advisory

services in the retail outlets. In future, we intend to give local advisors the means to conduct

structured consultation offering the same high quality nationwide at all of our retail outlets.

This forms part of the systematic process allowing us to offer an “easy” product. In other

words, it is not our aim – nor should it be – to impress our customers with jargon and exotic

offers which they generally do not even need. Instead, advice should take the form of a

structured dialog, with just a few questions, and oriented toward the prior knowledge of the

customers. The recommendation made as a result must be clear and comprehensible for the

customer. This also means that product and target group managers should pay more atten-

tion to transparency and the customer needs. In order to guarantee the advisory competence

of the retail outlets – a matter of the highest importance – we will employ a systems-based

approach to the organization of our advisory services, ensuring identically high levels of

quality by establishing a systematic sales process. At the same time, our advisors’ expertise

will be backed up by certification and ongoing monitoring.


“We aim to achieve above-average growth by expanding our product range, harnessing the

synergies of DSL Bank, leveraging new business segments within Deutsche Post World Net,

and intensifying our links with existing customers.” This was how we outlined our targets

for our corporate banking activities in fiscal year 2001. In doing so, we set ourselves high

standards: “We aim to leverage additional strategic potential in the logistics sector through

our integration in Deutsche Post World Net.” Consequently, we are working toward making

our vision of being the corporate bank for financial and logistics solutions come true. But

how does this look in reality? How far have we progressed toward this goal? What has been

the reaction of our around 400,000 corporate and business customers to our initiative? The

successes of the past fiscal year provide answers to these questions.

Logistics finance I:

Establishing our international presence

Our corporate banking offensive is closely tied to the positioning of “the new Postbank” as

a provider of financial logistics solutions within Deutsche Post World Net. In this area, we

took a big step during the year under review, in every sense of the word – namely, “across

the Atlantic”. In order to further expand our activities in the market for financial logistics

services, we acquired BHF (USA) Holdings Inc., including its operating units, from BHF-Bank,

Frankfurt/Main. This is the first time we have been active on this market outside Germany.

PB Capital Corp., as the company was renamed, is now providing Postbank with a strategic

platform for the expansion of logistics finance on a global basis, and particularly on the US

market.

Corporate and business customers:from vision to reality


With our entry into the US market, we are able to offer corporate customers the concept of

one-stop shopping in the area of logistics finance on a far greater geographical scale than

before. Our presence in the USA allows us to offer our customers end-to-end solutions for

the complete logistics and finance chain, from manufacturer to consumer – all within Deutsche

Post World Net, and in particular through the globally operating Danzas and DHL brands.

We are benefiting from the experience of our new subsidiary in various regions of the USA,

but at the same time will continue and expand the successful business already in place.

Logistics finance II:

Postbank as a successful outsourcing partner

The strategic positioning of Deutsche Post World Net as an international logistics service

provider is allowing Postbank to leverage a range of synergies for its own business segments,

with a focus on financing for logistics solutions. We offer products and services for all

processes in the logistics value chain, from ordering and warehousing, order processing and

dispatch preparation through to transport distribution and collection. In this way, we are

rounding off Deutsche Post World Net’s comprehensive service range as an outsourcing

partner for logistics and inventory management: “One-stop shopping at its best.”

>> Expansion of corporate banking business in the USA

PB Capital Corp. has total assets of €3.2 billion. It is primarily active in the markets for corporate finance and

commercial real estate finance across wide areas of the USA. In general, Postbank is pushing ahead with its

corporate banking business on the US market by financing logistics projects. At the same time we will provide

effective support on the US market for other divisions of the Group, such as DHL and Danzas.

>> Establishment of significant joint venture with Fiat

In the past year, we formed a joint venture together with DHL Worldwide Express, which is part of Deutsche Post

World Net, and Fiat Auto. The focus of the joint venture is on financing and logistics for Fiat Auto’s European

spare parts business. It allows Fiat Auto to optimize the delivery and financing of spare parts – supply chain

management, which contributes around €2.5 billion to Fiat’s annual revenues – through an integrated European

approach. In future, Fiat Auto will be able to concentrate fully on its core competencies, placing the entire logis-

tics chain, including financing, in professional hands.

>>Postbank 2001 17


Move into new business segments

Postbank is also continually working to expand its range of financial services beyond the

area of financial logistics solutions. In the past year, we set up two new business segments,

Leasing and Factoring, making us even more attractive to corporate customers.

– Postbank Leasing

In April 2001, we offered our corporate customers leasing services for the first time

through our subsidiary, Postbank Leasing GmbH. The initial offering involves commercial

vehicles. In future, however, we also plan to offer leasing of machines and other movable

investment goods apart from vehicle leasing. The aim is to provide a comprehensive

range of leasing services for movable assets.

With the establishment of the Leasing segment, Postbank has entered a market with

large growth potential. According to the Bundesverband deutscher Leasinggesellschaften

(Association of German Leasing Companies), only 15 percent of all capital goods in

Germany are currently leased. In the USA, the figure is already around 20 percent.

We see offering leasing services to our customers as a systematic demonstration of our

efforts to further strengthen our commitment to medium-sized companies. As well as

commercial vehicle leasing, we also provide corporate customers with leasing as a

financing alternative in the area of real estate. We are creating customized solutions

in cooperation with renowned real estate leasing companies.

>> Leasing offering: 3,600 companies already on board

Customers who make use of Postbank Leasing’s offering benefit from synergies within Deutsche Post World Net

right from the start. For example, around 3,600 transport companies which already carry goods for Deutsche

Post World Net are taking advantage of our leasing offers. With this service, the Deutsche Post concept, which

has been established since mid-2000, will be complemented by support for partner companies to reduce costs –

for example in the area of commercial vehicle purchase.

18 >


Feather currency: a sign of wealth also used for paying the bride price

On the South Seas archipelago of Santa Cruz, the feathers of the cardinal honeyeater were

used as a luxury currency and for paying the bride price. They were a sign of wealth and

prestige. Producing the feather currency was a complicated affair: head, back and breast

feathers from the cardinal honeyeater were made into platelets, which were then woven

together on two parallel raffia strings in the form of roofing tiles – using as many as 1,800

individual platelets each time – so that only a narrow stripe with the red feathers remained

visible. The value of this feather currency depended on its condition. With time, the bright

red of the feathers would fade. The currency depreciated all by itself, so to speak – thereby

eliminating the danger of inflation. The last example was produced in 1978.


– PB Factoring

Our newest business segment, launched at the start of 2002, is Factoring. Our factoring

business is operated by our subsidiary PB Factoring GmbH and is currently focused on the

national market. In a second phase, we intend to expand our factoring activities abroad

in order to facilitate PB Factoring’s cooperation with other companies of Deutsche Post

World Net, as well as with external partners such as credit insurance companies. PB

Factoring can offer the customers and subcontractors of Deutsche Post World Net financial

services which complement their logistics services. Its formation was a further step

toward the realization of cross-selling potential within Deutsche Post World Net, and

also added a new facet to Postbank’s offering for corporate customers.

PB Factoring will offer end-to-end solutions in cooperation with logistics specialists from

Deutsche Post World Net. For example, customers will be able to outsource transport to

the logistics partners, while the Postbank Group takes responsibility for receivables

financing, invoicing and collection. This allows customers to concentrate on their core

business, while avoiding liquidity shortages due to the delay between delivery and pay-

ment of goods.

Payment transactions: Expanding our core competencies

Despite all the innovations introduced during recent years, we have always concentrated

above all on our core competencies. The best example of this is payment transactions, an

area which has been one of Postbank’s strengths right from the start. Therefore, the expansion

and optimization of this business segment through the development of modern payment

offerings is of central importance to us. For example, we have developed a new product for

Internet payment transactions. We have also formed a joint venture with the credit card

processor First Data Merchant Services, which is important for our positioning in the area of

payment transactions.

>> Entry into a dynamic growth market

Factoring is considered to be a first-class, highly dynamic growth market. Since 1995, the German factoring market

has recorded average annual growth of 12 percent. Growth potential in Germany is particularly high in comparison

with other countries. On average, around four percent of European countries’ gross domestic product is financed

by factoring, while the German figure is only around one percent.

20 >


>>Postbank 2001 21

This joint venture is allowing us to strengthen our position in a sector which continues to

be considered a high-potential growth market. At the start of this year, the eurocheque

guarantee facility was terminated. This fact alone prompted numerous merchants and service

providers to switch to Postbank’s card systems for offering their customers cashless payments.

Expansion of our commercial real estate loan activities

In the year under review, we made considerable progress in the expansion of our commercial

real estate loan business thanks to the merger with DSL Bank. With new business of over

€1.3 billion, we were able to increase the lending portfolio in this segment to a current

figure of around €4.5 billion. A major contributing factor in this increase was the high level

of acceptance that Postbank’s syndicated loan business enjoys with leading German and

international real estate banks.

>> New product supports our customers’ e-commerce offerings

In the year under review, we introduced a product for Internet payment transactions. Postbank PaySolution is a

payment system which makes online shopping easier and more secure. It provides online retailers with a solution

to the problem of online customers – even experienced users – not trusting existing payment systems, or choos-

ing not to use them because they are not sufficiently user-friendly.

A standard user interface allows the online retailers to offer customers various tried and tested payment methods

based on established technology. Credit card payments and online direct debits are already available as complete

modules. Further payment options, such as m-commerce via mobile telephone and debtor management, are

currently being tested, and the corresponding modules can be added at a later date. Security considerations are

always given priority. All payment transactions are executed over encrypted connections, which are supported as

standard by modern Internet browsers.

In addition, we further expanded our position as a specialist for payment transactions for corporate customers

with the formation last year of a joint venture with First Data Merchant Services, the world’s largest credit card

processor. This joint venture allows us to offer customers who accept cards for cashless payment a comprehensive

service from a single source. The service does not only cover payment processing for all types of cards, but also

providing end-to-end support, including advice and installation of card terminals.

>> Financing of logistics real estate: a pillar of our business

One of our focal points is financing of logistics real estate, an area where Postbank benefits from synergies within

Deutsche Post World Net. This year, for example, a number of logistics centers operated by Group companies

have already been financed through Postbank. In addition, Postbank provides support for investors who have

acquired real estate from the Group’s portfolio.


Salt bars: a currency with useful value

“Natural currencies” comprise a wide range of plant, animal and mineral materials: salt

and tea in Asia; cola nuts, tobacco and coffee in South and Central America; livestock,

onions and spices in Africa. Natural currencies have first been used for bartering. A factor

common to all natural currencies is the dual role they play in the economic environment.

On the one hand, they represent a way to measure value and a means of payment for spe-

cific goods and services, and thus form part of the currency system. Yet, on the other hand,

they are continuously removed from this system by being consumed, as they are valuable

primary consumables in their own right. Although many of these goods are no longer used

for payment, certain natural currencies remain in circulation – salt, for example, is still

an important medium of exchange for the pastoral tribes of Tibet.


>>Postbank 2001 23

The Bank for companies of all sizes

Whether self-employed, small business owners, medium-sized or large companies – Postbank

aims to be the principal bank for customers from all segments. For example, in the past year

we showed our commitment to middle market companies in particular with new products

in the areas of payment transactions, liquidity, financing, and retirement provision. With this

complete offering, which also allows our customers to benefit from the synergies within

Deutsche Post World Net, we support the huge contribution that small and medium-sized

companies make to Germany’s economy, year after year.

Business customers should also feel that Postbank is providing them with professional

support. Small companies present Postbank with the same support challenges as large

companies. Postbank uses its multi-channel strategy in the same way as in the retail sector,

where it has been a crucial success factor. Accordingly, our customers are able to contact

Postbank through Deutsche Post retail outlets, by PC or by telephone, with the minimum of

effort for both parties. We also offer a competitive pricing strategy and a product portfolio

which is tailored exactly to the requirements of small companies, which makes us even

more attractive to business customers.

With our commitment to our business customers, we are concentrating on filling the gap

which has opened up as a result of other banks’ reluctance in this sector, a phenomenon

that has been widely reported in the media.


>24

Significant expansion of our product range for business customers

In 2000, great progress was made in our initiative to support our business customer activities.

In the past year, we were again able to significantly expand our services for this customer

group.

>> Professional banking for business customers – our “Business” product range

In the year under review, Postbank expanded its specific offering for small and medium-sized companies with

the creation of a range of customized products. For example: Postbank Business-Giro, introduced at the start of

last year, is our new business checking account. In terms of price, it is systematically targeted at the requirements

of our business customers – for example, with flat-rate prices and a particularly competitive overdraft facility.

Since June 2001, Postbank has complemented its payment transaction services by also offering customers who

hold a business checking account Postbank Business Festgeld, a fixed-term deposit product. This solves one of

the typical problems facing corporate customers, namely short-term excess liquidity. Postbank offers them a

profitable form of short-term investment for amounts starting from €10,000, with the advantage of an attractive

interest rate, even with relatively short terms of between 30 and 360 days. At the same time, deposits can be

made readily available again.

Completing this range of new products for business customers is the Postbank VISA Business Card, developed in

conjunction with DER Business Travel. This credit card, which is targeted specifically at the requirements of busi-

ness customers, makes business trips more comfortable and helps to simplify travel cost management. Alongside

classic credit card functions, the offering combines booking of business trips through DER Business Travel, special

rates for selected hotel chains and car rental companies, as well as insurance and assistance abroad.

Occupational pension provision through Postbank

In future, the area of private retirement provision will be of considerable importance for

Postbank, and not only in its business with private customers. We aim to be an active player

in the corporate customers sector too, offering products for occupational pension provision.

Through PB Versicherung, we can provide companies of all sizes with attractive models for

offering occupational pensions.


>> Pension funds – the alternative in private retirement provision

Many employees are likely to be able to receive state subsidies for their private retirement provision in the form

of occupational pension provision. According to the German Federal Government’s new pension model, direct

insurance, Pensionskassen (staff pension schemes) and pension funds will be eligible for state subsidies.

In order for an occupational pension scheme to be eligible for subsidies and tax benefits, participating employees

must make their own contributions toward capital accumulation. Since the beginning of this year, employees

have had the right to make their contributions through salary reduction plans, meaning that contributions to a

supplementary pension, such as a pension fund, are taken directly from their gross salary before taxes.

Pension funds function in a similar way to Pensionskassen, but are more flexible when it comes to choosing how

the money will be invested. Funds are normally managed by a bank or insurance company, which places the

employee’s pension contributions, including state subsidies, in investments such as equities or fixed-interest

securities. Once the employees have made all the necessary contributions, they are paid a supplementary pension

for the rest of their lives.

Postbank offers this type of pension fund through PB Versicherung – for example, to Deutsche Post World Net

employees. Around 270,000 employees of Deutsche Post and all its domestic subsidiaries have an opportunity to

participate in an occupational pension scheme through this fund. PB Versicherung creates customized pension

funds for companies with more than 3,000 employees. Smaller companies may participate in a shared fund.

Pension funds represent an area of high growth potential for Postbank. In Germany, the assets managed by pen-

sion funds represented just 2.9 percent of the gross domestic product at the end of the 1990s. In the USA the

figure was 69 percent, in the United Kingdom around 77 percent, and in the Netherlands almost 89 percent.

>>Postbank 2001 25


Spade coins: making tools into money

Work and hunting tools made from stone, wood or bone, such as spades and arrowheads,

were important currencies for bartering and trade from primeval times onward. The emer-

gence of bronze and the skills subsequently developed for working with the new material

made these tools more stable and long-lasting – and so increased their value as a currency.

Bronze objects were particularly suitable for setting standard values against which all other

products were measured. This gave rise to the first abstract forms of early tools which

served as coins, symbolically representing the value of the original object. In this way, tool

coins provide a vivid illustration of the interface between trade and coin-based currency. At

the start of the 7th century B.C., so-called spade coins began to replace cowrie shells as the

currency in some eastern and western regions of the Chinese heartland. The spade coins

were in circulation until the start of the Qin dynasty in around 200 B.C.


>>Postbank 2001 27

In the past year, the international financial markets felt the impact of the downturn in the

global economy. The starting point was the profoundly weak US economy whose effect

rippled out to other regions of the world. Any signs of improvement were suddenly wiped

out by the terrorist attacks on September 11 that prolonged the continuing stock market

slump, which had begun in spring, and in turn the low confidence of investors.

Despite a difficult market environment we managed to achieve a significant positive earnings

contribution thanks to active risk management within the individual asset classes and a

strategic selection of necessary compensatory factors between the various risk categories in

Treasury.

In addition, Treasury developed a new asset allocation model in several stages, thus allowing

the continued optimization of the investment of available resources. To support decision-

making processes, a committee was also established which is charged with analyzing financial

market tendencies. The committee convenes monthly to discuss cross-divisional assessments

of the economy and the market and to make investment proposals. In addition, a new com-

munication platform was established, enabling this specialized Treasury know-how to be

passed on to the banking divisions and ultimately to the end customer.

Financial markets:maintaining stability in a difficult environment


28 >

Postbank as a competent partner on the money, foreign exchange and capital markets

In fiscal year 2001, we systematically pressed ahead with the introduction of new financial

instruments. The main focus was on instruments supporting the implementation of our own

investment policy as well as on those helping to control market risks derived from the cus-

tomer segments. This enabled Postbank to realize ideas from the Financial Engineering seg-

ment. An impressive example is the DAX Sparbuch retail product which was introduced in

the year under review. The expansion of our product range and the inclusion of additional

trading portfolios enabled an increased income from trading activities. The division was

further strengthened by the decision in the year under review to relocate the most important

trading activities in the Postbank Group from Bonn to Frankfurt while simultaneously

increasing the workforce in this business department.

Rapid expansion of issuing and underwriting business

In the past year, Postbank was able to offer a wide spectrum of investment opportunities to

both private customers and institutional investors through the sale of Postbank treasuries and

bonds, which met with brisk demand and made a positive contribution to net trading income

for the first time. In this connection, the issue program for short-term bonds in various cur-

rencies – a Multi-Currency Euro Commercial Paper Program – launched in November 2001

with a volume of up to €5 billion – had an enormous impact.

Furthermore, we managed to successfully position the Postbank brand in the international

underwriting business and on the European capital market, ensuring that Postbank was

well furnished with capital.

In the year under review we also began to build up the Corporate Finance department. By

virtue of this expansion we participated in the successful Fraport AG IPO and achieved our

first cross-selling success: from among several competitors Postbank EasyTrade.AG was

selected to manage Fraport AG’s employee stock option program.

>> Expansion and relocation of trading activities to Frankfurt

A significant decision in the Financial Markets business division in the year under review was the relocation of

the most important trading activities from Bonn to the financial center Frankfurt in 2002. The intention is to

access the largest possible pool of talent in Germany to strongly improve the quantity and quality of risk man-

agement know-how. Hence, the prerequisites will be put in place to establish Postbank as a leading address for

money and capital market products.


>>Postbank 2001 29

>> Commercial Paper Program successfully implemented

With its new Commercial Paper Program, Postbank is primarily targeting institutional investors such as funds,

banks and insurance companies who wish to invest amounts of over €2.5 million on a short-term basis. The

papers are offered at terms fixed on a daily basis and has a maturity of up to one year. Moody’s awarded the

program a P-1 rating, the best possible rating for short-term bonds and the main precondition for being accept-

ed by the European Central Bank as refinancing assets.

Continued restructuring of Postbank’s investment fund business

At the end of the first quarter of 2001, our two German investment fund management com-

panies Deutsche Postbank Invest Kapitalanlagegesellschaft mbH and Deutsche Postbank

Privat Investment Kapitalanlagegesellschaft mbH were merged with retroactive effect as of

January 1, 2001. The merger was a significant step toward optimizing the available resources

in investment fund banking. In addition, the formation of PB Fund Services GmbH on April 25,

2001, a wholly-owned subsidiary of Deutsche Postbank AG, represented the creation of a

center of competence for investment consulting within the Group. The new company expresses

our continued focus on the still very high growth rates in the investment fund business.

Postbank AG has thus redefined the core competencies in the respective companies and

optimally leveraged employee potential.

The first joint product of the two new German companies is Postbank Global OptiMix, a

global hybrid fund which was launched in April 2001 and allows a flexible reaction to changing

market conditions. The Luxembourg subsidiaries’ fund products were also expanded to include

Postbank Dynamik Vision, a new sectoral fund which reconciles maximum earnings with

ecological and social criteria. Investors affected by the expiration of the maturity fund

Postbank Rendite were offered attractive alternative investments from our broad range of

bond fund offerings. A strong increase in net cash was generated in particular by the bond

fund Rendite Cash which is strongly influenced by money markets. In the period under

review Postbank’s investment fund products achieved a slight increase in net cash despite

weak capital markets. Toward the end of the year under review, some 420,000 customers

had invested in Postbank investment funds, a good 75,000 more than at the beginning of

the year.


Raffia textiles, woven from palm fibers, served as a currency in various parts of Africa. In

the 15th century, colonization brought them to Europe for the first time. The plush material

was used for paying taxes, fines, wages, and the bride price. Raffia mats were a sign of

wealth and status, their value and importance displayed aesthetically. The plush mats were

originally used as loincloths – symbols of fertility and vitality – thus making them valuable

objects. Today, raffia mats are still used by the Kuba people of the Congo in burial ceremonies.

Raffia mats: from clothing to currency


>>Postbank 2001 31

Furthermore, as a strategic measure we prepared the streamlining of portfolio custodianship

for private customers. In a partial hive-off, Deutsche Postbank Privat Investment will trans-

fer its custodianship for investment fund shares to Postbank EasyTrade.AG.

Postbank International S.A.: Strategic diversification safeguards good overall income

Where corporate banking is concerned, our Luxembourg subsidiary Postbank International S.A.

last year focused on the successful acquisition of new customers alongside increased cross-

selling to existing customers. The foreign currency and securities businesses with this cus-

tomer segment were strengthened. Altogether, the year under review saw the corporate

banking division consolidated at a continued high level; the record figures of 2000 could

be maintained yet again.

2001 also saw the continued expansion of Treasury activities, with a major focus on the tar-

geted establishment of asset and liability management capacities. The degree of diversifica-

tion between the private, corporate and treasury businesses thus achieved has already

borne fruit: the tangible decrease in net commission income in the private customer busi-

ness was clearly overcompensated by the conscious taking and controlling of market risks,

resulting in good overall earnings.

>> Independent center of competence for investment advice founded

PB Fund Services GmbH (PFS) was founded on April 25, 2001 as an independent center of competence for provid-

ing investment consulting services to the Group. Its main tasks include consulting on Postbank-own retail and

special funds alongside advising on the development of new, structured financial products. In addition, PFS sup-

ports other divisions within the Group in developing and implementing investment strategies. The pooling of

existing and future resources within the company prevents any duplication of capital market-specific know-how

in the Group.

>> Merger of both German investment fund companies completed

Until now, Postbank separated its domestic investment fund activities into retail funds and special funds. Postbank

Privat Investment, which was formed in 1998, had managed assets for around 185,000 private customers by the

end of 2001, whereas Deutsche Post Invest had been offering institutional investors a range of special funds

since 1997 – 22 in total at the last count. We expect the merger of the two companies to result in numerous

synergy effects, particularly with regard to information technology and back office processes.


>>Konzernlagebericht 33Management Board

Dr Wolfgang Klein

born in 1964, Board Member

since January 1, 2002,

responsible for products,

marketing, e-banking and

mortgage lending in the Private

Customers board department.

Lothar Rogg

born in 1950, Board Member

since January 1, 2002,

responsible for over-the-counter

sales in the Private Customers

board department.

Prof Dr Wulf

von Schimmelmann

born in 1947, Chairman of the

Management Board since 1999,

responsible for Strategic Planning,

Corporate Communications,

Accounting/Controlling and

Internal Audit. At the same time

Member of the Corporate Board

of Management of Deutsche

Post World Net in charge of the

FINANCIAL SERVICES corporate

division.

Stefan Jütte

born in 1946, Board Membersince 2000, responsible for the Corporate Banking boarddepartment.

Volker Mai

born in 1949, Board Membersince 1995, labour director andresponsible for the Resourcesboard department.

Dirk Berensmann

born in 1963, Board Membersince January 1, 2002,responsible for the IT/Operationsboard department.

Loukas Rizos

born in 1956, Board Membersince 1999, responsible forthe Financial Markets boarddepartment.

5407 SE Post GB0 11-33 engl 24.06.2002 11:41 Uhr Seite 32

The Supervisory Board has fulfilled the obligations required of it by law and the articles of

association and supervised Postbank’s management in an ongoing and timely manner. Four

regular meetings of the Supervisory Board were held in fiscal year 2001. The Executive

Committee and the Loan and Equity Investments Committee each met four times; the

Human Resources Committee met twice.

The Management Board informed the Supervisory Board about the Bank’s situation and

development by providing up-to-date reports. Postbank’s business and earnings development

was explained in detail at the Supervisory Board meetings; additional reports provided com-

prehensive information on the overall situation and on particular events. The Supervisory Board

was fully consulted on all the Bank’s measures requiring its approval.

Walter Wortmann, member of the Supervisory Board of Deutsche Postbank AG, died on

February 28, 2001. The Supervisory Board members greatly appreciate the services per-

formed by their late colleague and will always honor his memory. Harald Kuhlow was

appointed to succeed him as a member of the Supervisory Board with effect from August 9,

2001. At the Annual General Meeting on September 6, 2001, Prof Dr Hans-E. Büschgen,

Dr Edgar Ernst, Prof Dr Ralf Krüger, Dr Axel Nawrath, Dr Hans-Dieter Petram, Dr Klaus Schlede,

Dr Manfred Schüler, Dr-Ing Dieter Soltmann, Dr Alfred Tacke and Dr Klaus Zumwinkel were

all re-elected as shareholders’ representatives on the Supervisory Board.

Report of the Supervisory Board

5407 SEA Post_GB0 34-63 engl 24.06.2002 11:04 Uhr Seite 34

>>Report of the Supervisory Board 35

The Supervisory Board agreed to the resignation of Achim Scholz from the Management

Board with effect from November 30, 2001 and to the resignation of Wolfgang Schneider

from the Management Board with effect from December 31, 2001. At the meeting of the

Supervisory Board on November 30, 2001 Dirk Berensmann and Lothar Rogg were appointed

as members of the Management Board with effect from January 1, 2002. Dr Wolfgang Klein

also became a member of the Management Board as of January 1, 2002, on the basis of his

appointment by the Supervisory Board on September 7, 2000.

The annual financial statements, the consolidated financial statements, the management

reports and the dependent companies report were audited by PwC, Deutsche Revision,

Düsseldorf, and issued with an unqualified audit opinion.

PwC’s audit reports were discussed in detail at the Supervisory Board meeting on March 14,

2002, in the presence of the auditor. The Supervisory Board’s examination did not lead to

any objections. The Supervisory Board approved the annual financial statements of

Deutsche Postbank AG prepared by the Management Board, which are thus adopted.

The Supervisory Board wishes to thank the members of the Management Board and the

management of its subsidiaries, all employees and the works councils of the companies

belonging to Deutsche Postbank Group for their commitment and successful work during

the past fiscal year.

Bonn, March 14, 2002

Dr Klaus Zumwinkel

Chairman of the Supervisory Board


Yap stones: a currency hewn from rock

The Micronesian island of Yap boasts a currency unique in the world, using stone discs –

similar to millstones – carved from a type of rock that does not actually occur on the island

itself. Instead, the stone was hewn from the cliffs of the Palau archipelago, 450 kilometers

away. Transporting the stones by raft was extremely dangerous, so the money became

highly valuable. Yap stones were used in large-scale transactions such as the purchase of

boats or land. They were also used as ritual and atonement money, for war reparations,

in inheritances and marriage contracts. The stones changed owner regularly, but remained

where they stood: everyone knew which stone belonged to whom. Today, the US dollar is

the common currency on Yap, but the stone discs are still used by banks as collateral.

>>37


General information

Economic environment

2001 saw a marked slowdown in global economic growth triggered by substantial cyclical

weakness in the USA. This in turn affected other regions of the world. Germany was particu-

larly hard hit because of its export-driven economy. Overall economic growth fell by 0.6 per-

cent to its lowest level since 1993. This also had a negative effect on the labor market, with

the unemployment rate rising considerably during the course of the year.

Around the start of 2001, the upswing in the USA, which had lasted almost a decade, showed

signs of coming to an abrupt end. US companies drastically cut back the extensive invest-

ments they had made during the boom years. In the course of the year, the pace of growth

of US consumer spending slowed considerably. The Federal Reserve tried to stabilize the

economic situation through aggressive interest rate cuts, but was unable to prevent the

first recession in the USA for a decade. The crisis then deepened as a result of the terrorist

attacks on September 11, although hopes of a recovery rose gradually toward the end of

the year.

The euro-zone economy, still quite robust at the start of the year, suffered considerably as a

result of the weakness in the USA. The growth rate slowed substantially, although the euro

zone avoided going into recession. However, Germany’s economic output declined during

the year as a result of falling demand for exports and the country’s inability to kick-start

economic growth.

The economic crisis affected sentiment on the global equity markets, leading to huge price

losses, particularly on tech stocks. This slump reached its low in the aftermath of September 11.

By the end of the year, brighter economic prospects had allowed prices to recover again,

but these gains did not come close to offsetting the losses recorded previously. This trend

was more or less mirrored on the fixed-income markets. Until late in the year, capital market

interest rates fell considerably due to the global economic crisis, cuts in key interest rates

by the Federal Reserve and the European Central Bank, and the sharp fall in inflation in the

Group Management Report


second half of the year. By the end of the year, though, they had recovered to approximately

the same level as in the previous year. All told, the yield differential between ten-year Federal

government bonds and money market interest rates rose from 0 to around 1.7 percent. The

euro was unable to benefit from the recession in the USA and the accompanying key interest

rate cuts; indeed, it lost more ground against the dollar, with the Federal Reserve’s aggressive

monetary policy leading market participants to expect a quicker economic recovery in the

USA than in the euro zone.

Significant events in the fiscal year

In 2001, Postbank acquired a 100 percent interest in the holding company BHF (USA)

Holdings Inc., including its operating units, from BHF Bank, Frankfurt/Main. It immediately

renamed the company PB (USA) Holdings Inc., Delaware, USA. PB Holdings holds interests

in PB Capital Corp., Delaware, and PB Finance (Delaware) Inc., Delaware (PB Capital Group).

PB Capital Group’s core business activities are structured finance and commercial real estate

financing. This acquisition, together with the formation of PB Factoring GmbH, Bonn, and

Postbank Leasing GmbH, Bonn, gives Postbank a strategic platform for the further expansion

of its logistics financing solutions.

Deutsche Postbank Invest Kapitalanlagegesellschaft mbH was merged with Deutsche

Postbank Privat Investment Kapitalanlagegesellschaft mbH in order to strengthen the

private customer business.

The direct broker EasyTrade is being further developed as a securities competence center for

the whole Deutsche Postbank Group.

We have leveraged the opportunities presented by the “Riester pension“ by certifying our

PB Rentenkonto product.

>>Group Management Report 39


For centuries, bracelets of various shapes and sizes were a major currency across Western

and Central Africa. They were also worn as talismans to fend off disease, protect against

witchcraft and help in cases of infertility. A so-called wedding manilla, used to pay the bride

price, could weigh as much as four kilograms. As the shape of the manilla was clearly of

great importance in African societies, the English colonial traders introduced a standardized

form, known as Birmingham manillas. These were important trade items between the native

Africans and the Portuguese, and later the British and the French. They were traded for

gold, ivory, spices, and particularly slaves – which led to them becoming known as “slave

money”. Birmingham manillas remained accepted currency in the Nigerian markets until

1948.

Manillas: currency and talisman in one



Postbank further expanded its payment transaction activities with the acquisition of a 51 per-

cent interest in DVB Processing GmbH, Frankfurt/Main, whose services include providing

multi-function payment terminals and card solutions.

Postbank applied IAS 39 for the first time as of December 31, 2001. IAS 39 contains com-

prehensive standards on the recognition and measurement of financial instruments.

Postbank successfully completed the euro conversion at the start of the year.

Income statement

In the year under review, Deutsche Postbank Group’s pre-tax profit rose by 46.6 percent on

the previous year to €343 million.

Factors contributing to this result included a slight rise in total income, largely stable

administrative expenses, an increased allowance for losses on loans and advances, and

higher net other income and expenses.

Net interest income

Deutsche Postbank Group’s net interest income for fiscal year 2001 amounted to €1,639

million, down €13 million or 0.8 percent on the previous year. Unfavorable interest rate

movements meant that last year’s good result was not quite reached.

Allowance for losses on loans and advances

As in previous years, the Group made adequate provision for all identifiable risks. In 2001,

the allowance for losses on loans and advances amounted to €102 million (previous year:

€76 million).

Net fee and commission income

Net fee and commission income fell by €41 million to €408 million. Fee and commission

income from payment transactions remained stable, but market trends resulted in a sub-

stantial drop in fee and commission income from securities business.


42 >

Net trading income

Net trading income amounted to €56 million, as against €5 million in the previous year.

This increase can be primarily attributed to measurement gains on derivative items.

Net income from investment securities

Net income from investment securities is disclosed separately for the first time and amounts

to €63 million.

Administrative expenses

Total administrative expenses amounted to €1,811 million, down 0.6 percent on last year’s

figure of €1,822 million.

Staff costs remained constant at €603 million. Non-staff operating expenses rose by €93

million to €1,121 million, primarily due to Deutsche Post AG’s intensified sales activities

and an increase in IT expenditure. Depreciation of property and equipment was down on

the previous year.

Other income and expenses

Net other income and expenses rose by €64 million to €90 million, due in part to the

reversal of provisions.

Profit before tax

Profit before tax amounted to €343 million (previous year: €234 million). The Private Customers

business division contributed €116 million to this profit, Corporate Banking contributed

€80 million, and Financial Markets contributed €81 million.

Net profit for the period

After income taxes and minority interests, net profit for the period amounted to €190 million.


Historically, some materials achieved importance beyond that of a normal trade item. Their

transition to standard instruments for determining value represented the first step toward

the creation of economically relevant currencies. This particularly applies to natural cur-

rencies. One of the plant products which became a major natural currency in Africa was red-

wood powder. Decorated bars of this material, which was used as a dye, were a desirable

currency for a long time. The key to redwood powder’s value was its rarity, along with its

characteristics of durability and portability. As well as being used as a currency, redwood

powder was also an important offering in ceremonies such as burials.

Redwood powder: dye as a desirable object


44 >

Total assets and changes in the balance sheet structure

Total assets rose by €5.8 billion on the previous year to €139.8 billion. This increase is

largely due to the integration of PB Capital and the measurement of derivative items in

accordance with IAS 39.

Money market and capital market investments

Loans and advances to other banks remained almost constant at €37.4 billion compared

with the prior-year figure of €38.0 billion.

The increase in trading assets by €4.6 billion to €5.4 billion is attributable to the debt

securities previously disclosed as investment securities, as well as the derivatives disclosed

here on the basis of the new IAS rules.

Correspondingly, investment securities fell by €3.1 billion to €48.1 billion.

For the first time, the fair values of hedging transactions that satisfy the IAS 39 criteria are

disclosed as hedging derivatives. They amounted to €1.7 billion.

Loans and advances to customers

Loans and advances to customers rose by €5.0 billion year-on-year to a total of €44.3 billion.

This figure includes €2.5 billion from PB Capital. Total mortgage lending rose by €0.9 billion

to €13.3 billion, and total private customer lending rose by €0.1 billion to €0.7 billion.

Commercial lending amounted to €4.5 billion, an increase of €1.2 billion. Municipal loans

in particular declined.

Money market and capital market liabilities

Deposits from other banks amounted to €26.8 billion at the balance sheet date, represent-

ing a year-on-year increase of €12.0 billion.

Securitized liabilities fell by €7.1 billion to €39.5 billion in fiscal year 2001 as issues expired.

Hedging derivatives, disclosed for the first time in accordance with IAS 39, amounted to

€2.4 billion.



Amounts due to customers

Amounts due to customers fell by €1.6 billion from the previous year-end figure to €62.3 bil-

lion. The savings deposits included in this figure remained almost constant compared with

an outflow of €5.0 billion in 2000. Taken together with the savings bonds and investments

in Kapital Plus savings products included in other liabilities, the total recognized savings

volume rose by €1.4 billion to €32.4 billion.

Equity

The Bank’s disclosed equity amounted to €4.7 billion as of December 31, 2001, compared

to the previous year’s figure of €4.5 billion.

The overall capital ratio in accordance with Principle 1 of the Bundesaufsichtsamt für das

Kreditwesen (Federal Banking Supervisory Authority) amounted to 10.0 percent, with a Tier

1 ratio of 6.7 percent.


Since the Bronze Age, metals have been widely used as currencies for bartering and trade. In

both Eurasia and the Americas, precious, ferrous and non-ferrous metals were in circulation in

a variety of forms and compositions, and across long distances. The popularity of metal-based

currencies is due to their particularly high durability, portability and divisibility – characteristics

which made them predestined for use in long-distance trade and the storage of value. Metal

can also be worked into all kinds of jewelry, tools, weapons and everyday items, making it a

desirable and widely accepted material. Metal can be an expression of financial power, giving

its owner prestige.

Silver cast coins: a currency with long-term value



Total risk management and risk control system

2001 was characterized by increasing global competition and continued global economic

slowdown, with more volatile markets and higher risks than usual. Postbank’s risk manage-

ment strategy is centered on risks arising from its extensive deposits business, together with

lending and its refinancing – the so-called banking book. In order to expand its business,

Postbank also offers innovative products, such as the Dax-Sparbuch index-linked savings

plan. Holding own positions in order to participate in market fluctuations affecting the trad-

ing book is also becoming increasingly important for Postbank. These trends were recog-

nized at an early stage and the risk management process was focused on the entire Bank

accordingly.

The areas of Postbank which are active on the financial markets are consolidated in the

Financial Markets board department.

Management

The banking book is managed by Treasury. Trading activities are combined in the Money

Market, Foreign Exchange Market and Capital Market business department. Both come

under the authority of the board member responsible for Financial Markets.

The risk management process was revised last year in order to shorten decision-making

channels and to take into account the constantly changing dynamics of the financial markets.

Internal committees were created to manage price and counterparty (default) risks on a

bank-wide basis. Last year, Postbank also began a project to incorporate the issue of oper-

ational risk into the risk management and risk monitoring process.

Risk report


48 >

Treasury manages the price risks of the banking book. This comprises all risks for which Post-

bank is liable, with the exception of trading portfolios and risks relating to its subsidiaries

in Luxembourg and New York. These subsidiaries manage their own risks independently

with separate limits.

Management of the banking book is based on a gap analysis, which records all of Postbank’s

risk-related balance sheet items on a cash flow basis and consolidates them for tax purposes.

The interest rate sensitivity of savings and demand deposits and other similar balance sheet

items is transferred to the total position using model assumptions. Management itself uses

balance sheet and off-balance sheet transactions, with the selection of instruments depend-

ing on the purpose of the control activity and current market prices.

The Bank’s lending business is partly refinanced through issues. The surplus arising from the

deposit volume is invested in a portfolio of high-quality securities, including special funds

and asset swaps. The risk/return profile is optimized through the constant analysis of this

portfolio.

These activities require a constant presence on the capital markets, a task which is fulfilled

by the Money Market, Foreign Exchange Market and Capital Market business department.

Alongside the implementation of management and optimization transactions in the area of

loan and deposit management, proprietary trading is carried out in money, currency, interest

and stock market products.

The following section outlines the committees and other parties involved in Postbank’s risk

management process.

Group Management Board

The Group Management Board is responsible for the company’s risk policy and for the proper

organization and supervision of trading transactions. It determines the basic strategies for

market activities, decides on limiting procedures, and sets the size of limits. It determines

how much capital will be used in entering risks and how it should be spread across the

individual risk types and portfolios. It also decides with which products and in which markets

Postbank should be active.

The Group Management Board is informed on a monthly basis about the credit risks and

price risks arising from trading transactions, and the results achieved. The members of the

Management Board responsible for risk control and risk management receive detailed daily

reports.



Market Risk Committee

In the Market Risk Committee, which is chaired by the Financial Markets board member, the

members of the Management Board responsible decide on the management of market

risks, and in particular interest rate risks, price risks and currency risks. The committee also

determines how the total market risk capital made available by the Management Board

should be allocated to the individual units.

Credit Risk Committee

The Credit Risk Committee, chaired by the board member responsible for Corporate Banking,

is responsible for determining the framework for credit policy and driving forward credit

portfolio management. It also develops and monitors risk management strategies, and

allocates the total credit risk capital made available by the Management Board.

Controlling

The Management Board has described Postbank’s areas of activity in the form of guidelines,

and has taken extensive measures to limit and monitor the risks arising from the Bank’s

business. In order to guarantee uniform risk control, the Management Board has stipulated

that a unit, functionally and organizationally independent of the Financial Markets board

department, should inform it daily about the positions entered into and the utilization of

the limits in place. This function is fulfilled by the Risk Management department, which is

integrated with the Accounting/Controlling business department and so comes under the

control of the Chairman of the Management Board.

With regard to market risks, the Risk Management department is charged with identifying

such risks, ensuring appropriate valuation and monitoring of this valuation, and reporting

on price and liquidity risks. In addition, the Risk Management department monitors compli-

ance with counterparty limits for all transactions in accordance with the aforementioned

minimum requirements. Postbank makes use of suitable mathematical/statistical models

and procedures. In particular, the value-at-risk (VaR) approach based on the variance-covari-

ance method is used for price risks. The core functions of the Risk Management department

also include the continuous cataloging and reporting of the operating results in trading.

As well as price and credit risks, limit allocation also applies to model risks and operational

risks. For Postbank, model risks occur when the use of models for quantifying risks makes it

more difficult to forecast potential losses.


50 >

Internal Audit

Internal Audit is a key element in Postbank’s business monitoring system. In accordance

with the Minimum Standards for Auditing Departments of Credit Institutions, all sectors of

the Bank are audited internally at least once every three years. Audits are planned and their

frequency determined on the basis of the results of the last audit, taking into account recent

changes.

Regularity audits and system examinations take place on a regular basis. Internal Audit also

carries out special examinations under particular circumstances, and performs auditing and

consulting activities for the introduction and implementation of important projects. Audit

concepts are continuously adapted to reflect current changes in the Bank and the legal situ-

ation.

Internal Audit reports its audit results independently to the Management Board of the Bank.

It comes under the control of the Chairman of the Management Board.

Risk monitoring and management

Counterparty (default) risk

Counterparty (default) risks consists of credit, country and settlement risk.

Postbank defines credit risk as possible losses arising from failure or unwillingness of cus-

tomers to discharge their payment obligations, or from a reduction in creditworthiness.

Country risk describes the transfer risk inherent in cross-border payments that arises from a

country’s willingness to pay (political risk) and ability to pay (economic risk) due to its

national sovereignty.

Risk policy

The Management Board is responsible for determining credit strategy and risk policy. Risk

policy affects areas such as the determining of issuer, counterparty and country limits.

Credit risks are carried by the Financial Markets, Private Customers and Corporate Banking

business divisions. Postbank makes an organizational distinction between markets, back

office and credit management. The Credit Management business department provides

guidelines and systems, as well as a credit monitoring procedure at individual business

level and credit risk management at portfolio level.



Alongside determining risk policy, the key elements of Postbank’s credit position manage-

ment workflow are risk measurement, risk management and risk control.

Individual risk measurement/individual risk management

At individual business level, all credit investments are carried out on the basis of credit

decision processes and systems adequate to the risk. The credit competencies and processes

are clearly defined in the form of guidelines and documented centrally. One central element

of credit management is the bank-wide rating system. Various rating and scoring models are

employed depending on the business division. In Postbank’s retail business, which includes

private mortgage lending and automated and standardized lending for corporate customers,

a decision-making system is available comprising a number of statistical scorecards. In the

individual credit business with corporate customers and banks, internal ratings form the

decision support system for credit experts. In this segment, the parameters included in the

rating are not only quantative, but also qualitative: for example, soft properties and for-

ward-looking parameters. The internal ratings are empirically validated, partly – such as for

banks – through mapping key business data to externally rated counterparties. In the case

of anticipated credit defaults, the average default costs are individually accounted for in the

precalculation. This system allows the evaluation of all lending transactions by way of pre-

calculation.

Standard risk costs are included as a premium for anticipated loss in pricing and in the

profitability calculation, both of which are determined in the form of Return on Equity (ROE)

and Return on Risk Adjusted Capital (RORAC) ratios.

An objective credit monitoring process has been implemented on the basis of defined risk

indicators. The aim of the process is to better identify risky exposures, to quantify the provi-

sion requirement on an ongoing basis, and to guarantee efficient loan restructuring and,

where necessary, settlement.

Risk policy

– Strategic targets

– Limit allocation

– Individual credit allocation for large exposures

Risk measurement

– Individual risk measurement/rating/scoring

– Portfolio risk measurement

Risk management

– Credit guidelines

– Credit experts

– Portfolio management

– Credit monitoring

Risk control

– Limit checks

– Reporting

Key elements of credit position management


One of the earliest forms of banknote was introduced in China. “Flying money”, as it was

known, was drawn by merchants from government offices against other types of money,

and could be re-exchanged elsewhere at a later date. Although it seems unlikely that these

notes were printed, they were probably already made of paper. Printed and painted paper

copies of coin designs actually existed much earlier. However, this “heavenly money”, used

in sacrificial rituals and burial ceremonies, had no direct purchasing power. The first eco-

nomically relevant paper currency dates back to the 11th century and was introduced in

China’s flourishing domestic trade market. Today, “heavenly money” still retains its symbolic

power in various, mostly religious rituals.

Heavenly money: early forms of paper currency



Portfolio risk measurement/portfolio management

As well as recording individual risks, Postbank has evaluated the credit value at risk (CVaR)

of the Group credit portfolio for a number of years. CVaR measures unexpected losses on the

basis of the 99 % quantile of the value distribution of the portfolio which could occur within

a period of one year. The graph below shows a typical value distribution for a portfolio.

CVaR is calculated as the difference between the anticipated losses and the quantile value.

CVaR is measured using a credit risk model which allows the consistent evaluation of all

credit risks. This ratings-based model takes into account migration behavior and commonal-

ities within the portfolio, thus permitting a suitable evaluation of the risks arising from a

disadvantageous concentration of counterparties in terms of sector, country, size category

and creditworthiness.

The details of the model are being constantly developed. For example, in the last fiscal year

there were further improvements to key model parameters such as the illustration of sector-

specific risks and the derivation of repayment rates.

Postbank intends to further develop risk measurement methods in the area of credit risk in

future.

The following table shows Postbank’s credit risks:

Volume Anticipated Credit VaR

losses

2001 2001 2001

Corporate Banking 24,314 83 118

Private Customers 14,637 41 27

Financial Markets 97,976 43 150

Total (incl. portfolio effect) 136,927 167 171

Freq

uenc

y of

cre

dit l

osse

s >

Statistical mean value

Covered bycredit price

(cost component)

Covered byregulatory capital

Credit losses in € >

99 % confidence level

Quantile value (99 %)

Value distribution of a credit portfolio (example)


54 >

This demonstrates that rating category distribution within the Group credit portfolio is

extremely stable. The very good rating categories continue to dominate. The Bank’s business

strategy means that there is a significant proportion of unrated retail lending.

The sector distribution of the volume also remained essentially constant. The high exposure

in the banking sector is primarily attributable to money market and capital market invest-

ments, which belong almost exclusively to the rating categories A and higher.

Price risk

We define price risk as the potential loss that could arise for our positions as a result of

price fluctuations on the financial markets or changes in parameters which affect prices.

All transactions carried out in line with the Mindestanforderungen an das Betreiben von

Handelsgeschäften (Minimum Standards for Securities Trading at Credit Institutions) are

recorded in the front office and risk control systems for the purposes of risk management,

analysis and monitoring. Postbank monitors price risks through a system of limits and sub-

limits for transactions on the basis of the value-at-risk method. Overall limits and sublimits

are updated dynamically in line with results and have been approved by the Group Manage-

ment Board, which lays down the maximum sums involved, and spread across the individ-

ual portfolios by the Market Risk Committee. Compliance with the limits for transactions is

monitored constantly.

Rating distribution as % of volume

AAA

AA

A

BBB

≤ BB

2 %

19 %

39 %

35 %

5 %

Sector distribution as % of volume

Banks

Governments

Insurance companies/financial service providers

Manufacturing industry

Other sectors

Retail portfolios

11 %

54 %

22 %

5 %

2 %

6 %



The VaR parameters adopted were a holding period of ten days, a history of 250 days and a

confidence level of 99 percent. The effect of extraordinary events not covered by the value-

at-risk method on the asset position of Postbank is quantified using regular worst case

scenario analyses of all the Bank’s trading and non-trading positions.

Postbank also calculates a daily value-at-risk figure for the Bank overall; this describes the

aggregate price risk for the entire Bank, including non-trading positions. In this way, the

overall gap structure (including derivatives) and the resulting overall risk for the Bank are

measured and monitored on a daily basis. In addition, the decision-makers are provided

with key information relating to funds management – such as cash flow structures, limit

utilization, effects on earnings, and present values.

The procedures used for daily risk measurement are regularly subjected to backtesting in

order to ensure their reliability. In this process, the significance of the value-at-risk proced-

ures, which are based on historical market movements, is tested by comparing the daily no

action profit and loss with the value at risk for all transactions. The figures are analyzed

using the Bank for International Settlement’s three-zone approach.

As of December 31, 2001, the value at risk of the trading portfolios (holding period: ten

days, history: 250 days, confidence level: 99 percent) of Deutsche Postbank AG amounted to

€3.95 million.

During 2001, the mean value at risk for the trading portfolios was €3.83 million, with a

range of €2.21 million to €7.02 million.

Financial Markets

Capital Market

Money market incl. Trading in Total trading

and currency equity trading Luxembourg book incl.

trading correlation

2001 2001 2001 2001

in €m in €m in €m in €m

Value at risk at Dec. 31, 2001 3.51 2.06 0.51 3.95

Minimum value at risk 0.25 1.17 0.19 2.21

Maximum value at risk 5.25 7.05 6.29 7.02

Average value at risk 2.62 2.69 0.98 3.83


56 >

Liquidity risk

Short-term liquidity management takes place within the framework of money market activities.

Long-term liquidity management is the responsibility of Treasury as part of loan and deposit

management.

Liquidity management is based on cash flow analyses, which are being constantly enhanced,

and financial planning. A variety of money market and capital market instruments are avail-

able for the purposes of liquidity management. Last year, this range was rounded off with

the start of repo transactions and the introduction of a commercial paper program. In add-

ition, an impressive portfolio of liquid short-term securities makes it possible for Postbank

to generate large amounts of liquidity in a short period of time, allowing it to meet unex-

pectedly high levels of customer demand.

Operational risk

Postbank bases its classification of operational risks on the definition set out by the Basel

Committee on Banking Supervision. Operational risk is defined as the risk of direct or indirect

loss resulting from inadequate or failed internal processes, people and systems or from

external events.

Postbank adheres to the principle of decentralized risk management, meaning that all par-

ticipants in the process are required to recognize risks in their areas of competence and

deal with such risks responsibly. In order to support the responsible parties on-site and to

fulfill legal requirements, the work carried out within the framework of the Gesetz zur Kon-

trolle und Transparenz im Unternehmensbereich (German Act on Control and Transparency

in Business) in recent years has been further intensified under the terms of the New Basel

Capital Accord. The central coordination of this process by the Risk Management department

at Postbank’s Head Office ensures a unified Group-wide procedure.

The aim of this process is to guarantee that existing risks are cataloged in a systematic and

unified way across the Bank. Postbank makes use of various methods to achieve this. For

example, a central database is created to catalog cases of damage on a bank-wide basis,

risk indicators for each business division are defined in conjunction with those responsible

for the process, and a risk analysis of existing processes is carried out in the form of quali-

tative, on-site self-assessment.


The loss database is primarily used for collecting and cataloging losses incurred across the

whole Bank. The use of mathematical/statistical procedures for determining a VaR figure for

operational risks, as for other types of risk, is based on the loss data collected in the course

of the continued implementation of the Basel II requirements. So that sufficient data can be

made available in a relatively short period of time, Postbank, as a member of the Bundes-

verband öffentlicher Banken (Association of German Public Sector Banks), is involved in

establishing a data consortium for the exchange of loss data.

Postbank will install an early warning system for the whole Bank by defining risk indicators

for each division. The aim of these indicators is to facilitate active risk management, and so

they must be able to give conclusive information about the future development of the risk

situation in a given division. The indicators are determined on-site in conjunction with those

responsible for the process, and are subjected to backtesting. For the purpose of establish-

ing a history, they are also collected and maintained in a database, the foundations for

which were laid last year.

Group-wide self-assessment has also been established in conjunction with those responsible

for the process decentrally. The existing control framework is constantly revised. With the

help of this assessment, weak points in processes, systems and workflows can be recorded.

The results form the basis for ratios for every division, and provide information on the qual-

ity of processes and systems. The method employed ensures that the individual divisions

across the Group are able to prepare, implement and evaluate this self-analysis in a struc-

tured manner.

In 2001, Postbank carried out a pilot project for the implementation of the Basel II require-

ments. In the course of this project, the methods described above were tested and adapted

to suit Postbank’s requirements, and introduced in a selected division. Following the evalu-

ation of the results, the bank-wide roll-out will begin in 2002. A manual for operational risk

management sets out the plan for the establishment and operation of the control process,

and defines responsibilities.

With these measures, Postbank is preparing to fulfill the requirements for equity backing of

operational risks laid out by the Basel Committee in a focused manner and in good time.

From 2005, the standard approach will be used for this purpose. At the same time, however,

principles for risk-sensitive approaches will be established. Important steps toward this

objective were taken last year.



The first real credit card dates back to the middle of the 20th century. Diner’s Club was

formed in 1950 to allow the founders’ friends and acquaintances to make cashless payments

at a certain number of restaurants. Gradually, companies from other sectors also started to

sign up to the service – and this new method of payment, the credit card, began its triumphant

march around the world. The global expansion of the Internet, and in particular the accom-

panying improvement in Internet security, gave the credit card a great boost at the end of

the 90s and made it one of the key methods of payment for online trade. In Germany in

particular, the credit card has one main “competitor” – the “ec” card, which is used mainly

for withdrawing money at ATMs, but also frequently functions as a debit card for payment

transactions.

Credit and debit cards: leading the field in cashless payments



Basel II

With its New Capital Accord (Basel II), the Basel Committee on Banking Supervision – respon-

sible, among other things, for setting minimum capital adequacy requirements for banks –

aims to correct considerable deficits from the 1988 Accord while ensuring a greater focus

on economic risks in the field of regulatory capital requirements by making equity backing

for loans obligatory in future, depending on their rating. Also, for the first time, the New

Capital Accord makes it necessary for operational risks to be given equity backing.

The criteria for Basel II will be finalized by the end of 2002. Postbank addressed this matter

at an early stage and introduced a comprehensive Basel II project in order to build up the

necessary data histories and ensure that rating systems, processes and IT systems are adapted

in good time.

The sub-project “ratings and credit-specific processes“ is aimed at fulfilling the requirements

of Basel II which relate to the internal rating basis approach as early as possible and across

all business divisions. This includes the integration of rating systems into credit-specific

processes. Comprehensive data histories must be established in order to aid the continuous

improvement of the rating systems. In addition, improvements are being made to the IT

infrastructure. As well as satisfying the regulatory requirements, the further development

and adaptation of the rating models presents a considerable business advantage: by using

ratings which conform to Basel II, credit decisions can be optimized, thereby reducing

default costs and ensuring that the “right“ loans are accepted.

The sub-project “risk mitigation“ is aimed at implementing possibilities for the future

reduction of necessary liable capital through credit risk minimization techniques, such as

netting agreements and credit derivatives. The core content of the project is the adaptation

of existing collateral systems and the definition and implementation of processes for the

recording and administration of collateral.


60 >

The sub-project “operational risks“, as described above, is aimed at implementing an in-

depth operational risk control process on a bank-wide basis, with a particular focus on the

systematic and comprehensive collection and cataloging of operational risks. This includes

carrying out regular self-assessment, establishing a loss database, and defining risk indica-

tors.

These measures will allow Postbank to implement Basel II in good time, thereby creating

the conditions under which it can make the most of the opportunities presented by the

Accord.

Financial market activities

Postbank will continue to expand its activities on the financial markets and will broaden its

product range in line with market developments. One important phase in this plan is the

relocation of the Money Market, Foreign Exchange Market and Capital Market business

department from Bonn to Frankfurt, scheduled for this year, and the accompanying expan-

sion of capacities.

The demands made of the Bank’s IT systems and the need for readily available data are

constantly increasing. Consequently, the Bank has decided that this year will see the intro-

duction of a new IT system for risk management with comprehensive product coverage. In

particular, the new IT system will valuate modern interest rate, currency and equity deriva-

tives, and integrate them into risk measurement. Further challenges are the harmonization

of the parameters and procedures used across the Bank, and the further development of

business process chains.


The latest innovation in payment is electronic money. “Cyber money” works in a similar way

to the payment chip on the “ec” card: the chip is loaded with credit, which can then be used

to pay smaller amounts, such as parking charges. Once the credit has been used up, the

chip must be recharged. On the Internet, too, cyber money is used for payment transactions,

like pay-per-downloads of newspaper articles or music files. The big advantage: users only

have to “buy” their electronic money once, from a central provider, where they register

with their personal details. They can then use cyber money for easy, secure and anonymous

payments, without having to give out their credit card details again. Many operators of virtual

shops also support secure online shopping through software-based payment solutions.

Virtual payment: cyber money and payment solutions


62 >

Outlook

Postbank is well prepared for increased competition in the financial services sector. We

modernized our IT, streamlined our structures and optimized our sales channels before other

service providers, and we will continue to implement this strategy systematically. We expect

to be able to strengthen our market presence considerably and further improve our cost/income

ratio.

We will be more proactive on the market for private customers, using a multimedia image

campaign to increase Postbank’s brand recognition. Low prices and a largely self-explanatory

product range will allow us to increase sales significantly. In particular, we intend to optimize

financial advice for complex investment and provision products, paving the way for further

growth in this high-margin sector. Between two and three million customers visit Deutsche

Post retail outlets every day. This represents an immense potential which we will leverage

for targeted cross-selling activities. Despite the need for considerable investment, we antici-

pate clear income growth in this area as early as the coming year.

We will press ahead with our successful initiatives for intensifying relations with our

400,000 corporate customers. To allow these customers to benefit even more from our

experience in the retail sector in future, we will incorporate product design and sales into

the organization of the Private Customers board department. The resulting synergies will

give rise to advantageous conditions for our customers, and Postbank will also benefit from

a more streamlined organization.

We will continue to expand our offerings for medium-sized and large companies, whether

based around our core competencies or in new areas, where we can offer the customers

and subcontractors of Deutsche Post World Net financial services which complement their

logistics services.

In order to make our activities in money market and capital market trading both broader

and more efficient, we will relocate a part of this business to the financial center of

Frankfurt/Main. To this end, we have formed Postbank Fund Services GmbH, which will look

after the financial portfolios of the Bank and its subsidiaries and sister companies in future.

We also plan to offer this service to external companies.


We will continue to invest in our information technology. In conjunction with SAP, we are

developing standard software for large banks which can be used anywhere in the world.

Alongside this software, the second important component for the modern transaction bank-

ing of the future will be delivered in cooperation with Siemens Business Services, with

whom we are currently working on a new system for domestic and foreign payment trans-

actions. We expect to see the first concrete applications this coming fall, and we are sure

that their introduction will be a success. In the medium term, this will make us the cost

leader in information technology, an area of immense importance to retail banks.

Overall, we will further reduce costs. In fiscal year 2001, we reduced the number of our call

centers from eleven to three. We also intend to further reduce our locations from 13 to ten.

The resulting workforce reduction will be carried out in a socially responsible manner and

in cooperation with employee representatives.

For 2002, we anticipate a year-on-year increase in profit before tax, and a slight rise in net

interest income. We also expect net fee and commission income to grow. We are forecasting

an increase in commissions, particularly from our fund business, and income from payment

transactions should also increase in light of the optimization of our product and price strat-

egy in 2002.

We anticipate a slight decrease in staff costs, and a moderate rise in operating expenses.



The euro: a single currency for almost 300 million Europeans

Uniting the people of Europe - for more than 50 years, that has been the goal of European

integration. And the history of European unification has always been synonymous with the

history of a single European currency. In 1971, the then European Economic Community

passed a timetable for economic and monetary harmonization. In 1979, the European Monetary

System was established – together with the European Currency Unit, the predecessor to

today’s euro. With the Maastricht Treaty in 1991, the euro was born. The Maastricht Treaty

saw the creation of the European Union, and with it the establishment of the Economic

and Monetary Union. The euro was introduced in three phases, firstly as “book” money on

January 1, 1999, and finally as notes and coins on January 1, 2002. The great logistical

challenge posed by the currency’s introduction involved bringing 12 million banknotes and

80 billion coins into circulation – making the euro zone the second-largest economic area

in the world.

>>65

5407 SE Post GB0_64-156 engl 24.06.2002 11:00 Uhr Seite 64

66 >

Consolidated income statement for the period Appropriation of net profit 68January 1 to December 31, 2001 Earnings per share 68

Consolidated balance sheet as of December 31, 2001 69Statement of changes in equity as of December 31, 2001 70Consolidated cash flow statement of Deutsche Postbank Group 71

Notes to the consolidated financial statements

Basis of preparation (1) Accounting policies 73(2) Significant differences between the accounting

standards applied and the accounting principlesof the HGB 74

(3) Basis of consolidation 81(4) Consolidation methods 82(5) Recognition and measurement principles 83

Income statement disclosures (6) Net interest income 91(7) Allowance for losses on loans and advances 92(8) Net fee and commission income 92(9) Net trading income 93

(10) Net income from investment securities 94(11) Administrative expenses 95(12) Other income 96(13) Other expenses 96(14) Income tax expense 97

Balance sheet disclosures (15) Cash reserve 98(16) Loans and advances to other banks 98(17) Loans and advances to customers 99(18) Total credit extended 100(19) Allowance for losses on loans and advances 101(20) Trading assets 102(21) Hedging derivatives 103(22) Investment securities 104(23) Property and equipment 107(24) Other assets 109(25) Deferred tax assets 109(26) Intangible assets 110(27) Deposits from other banks 111(28) Due to customers 112(29) Securitized liabilities 112(30) Trading liabilities 113(31) Hedging derivatives 113(32) Provisions 114(33) Provisions for pensions and other employee benefits 114(34) Provisions for taxes 115(35) Other provisions 116(36) Other liabilities 116(37) Hybrid capital 117(38) Shareholders’ equity 118

Consolidated Financial Statements in accordance with International Accounting Standardsfor the period ended December 31, 2001

5407 SEA Post GB0_64-156 engl 24.06.2002 10:59 Uhr Seite 66

>>Consolidated Financial Statements 67

Other disclosures (39) Segment reporting 119(40) Contingencies and obligations 120(41) Bonds outstanding 120(42) Cover for bonds outstanding 121(43) Foreclosures and compulsory administration 121(44) Fair value of financial instruments carried at

amortized cost 122(45) Foreign currency volumes 123(46) Disclosures on significant concentration of business 123(47) Financial instruments in accordance with IAS 39 –

Measurement categories 124(48) Derivatives 125(49) Risk position 128(50) Maturity structure 133(51) Intragroup and associate receivables 135(52) Intragroup and associate payables 135(53) Other financial obligations 136(54) Subordinated assets 137(55) Trust activities 137(56) Related party disclosures 138(57) Employees 139(58) Remuneration of the Management and

Supervisory Boards 140(59) Supplemental disclosures 140(60) Members of executive bodies 141

Auditors’ Report 146


68 >

Consolidated income statement for the period January 1 to December 31, 2001

Note 2001 2000

€m €m

Interest income (6) 6,810 7,446

Interest expense (6) –5,171 –5,794

Net interest income (6) 1,639 1,652

Allowance for losses on loans and advances (7) –102 –76

Net interest income after allowance for losses on loans and advances 1,537 1,576

Fee and commission income (8) 484 525

Fee and commission expense (8) –76 –76

Net fee and commission income (8) 408 449

Net trading income (9) 56 5

Net income from investment securities (10) 63 –

Administrative expenses (11) –1,811 –1,822

Other income (12) 360 164

Other expenses (13) –270 –138

Profit before tax 343 234

Income tax expense (14) –152 –85

Profit from ordinary activities after tax 191 149

Minority interest –1 –8

Net profit for the period 190 141

Appropriation of net profit

2001 2000

€m €m

Net profit for the period 190 141

Appropriation to retained earnings –53 –60

Consolidated net profit 137 81

Earnings per share

As in the previous year, the average number of shares outstanding in fiscal year 2001 was

16,000,000.

2001 2000

Earnings per share (€) 11.91 8.84

Basic earnings per share (€) 11.91 8.84



Consolidated balance sheet as of December 31, 2001

Assets Note Dec. 31, 2001 Dec. 31, 2000

€m €m

Cash reserve (15) 1,373 1,396

Loans and advances to other banks (16) 37,402 38,014

Loans and advances to customers (17) 44,278 39,323

Allowance for losses on loans and advances (19) –621 –323

Trading assets (20) 5,407 764

Hedging derivatives (21) 1,723 –

Investment securities (22) 48,058 51,144

Property and equipment (23) 1,022 1,063

Other assets (24) 1,174 2,606

Total assets 139,816 133,987

Liabilities and Shareholders’ Equity Dec. 31, 2001 Dec. 31, 2000

€m €m

Deposits from other banks (27) 26,819 14,851

Due to customers (28) 62,318 63,964

Securitized liabilities (29) 39,468 46,595

Trading liabilities (30) 560 –

Hedging derivatives (31) 2,413 –

Provisions (32) 1,641 1,553

a) Provisions for pensions and other employee benefits (33) 552 528

b) Provisions for taxes (34) 737 523

c) Other provisions (35) 352 502

Other liabilities (36) 516 1,723

Hybrid capital (37) 1,174 657

Minority interest 60 64

Shareholders’ equity (38) 4,847 4,580

a) Issued capital 410 409

b) Share premium 1,159 1,160

c) Retained earnings 3,141 2,930

d) Consolidated net profit 137 81

Total liabilities and shareholders’ equity 139,816 133,987


70 >

Statement of changes in equity as of December 31, 2001

Issued Share Retained Revaluation Consolidated Total

capital premium earnings reserve net profit

€m €m €m €m €m €m

Balance at January 1, 2000 409 1,160 2,382 0 384 4,335

Dividend payment for 1999 –384 –384

First-time consolidation ofspecial funds 493 493

Other adjustments –5 –5

Appropriation to retainedearnings 60 60


Balance at December 31, 2000 409 1,160 2,930 81 4,580

First-time application of IAS 39 134 259 393

Balance at January 1, 2001 409 1,160 3,064 259 81 4,973

Capital increase fromshare premium 1 –1 –

Appropriation to retainedearnings from prior-periodprofit 81 –81 –

Currency translationdifferences 6 6

Changes in unrecognizedgains and losses, net ofdeferred taxes –330 –330

Other adjustments 8 8

Appropriation to retainedearnings from current year 53 53


Balance at December 31, 2001 410 1,159 3,212 –71 137 4,847

Changes in unrecognized gains and losses, net of deferred taxes, relate to measurement

and disposal gains and losses on available-for-sale financial instruments.

€16 million was withdrawn from the revaluation reserve and recognized in income on

disposals of available-for-sale financial instruments during the year under review. Measure-

ment losses on available-for-sale financial instruments reduced the revaluation reserve by

a further €346 million.

The effects of the first-time application of IAS 39 are disclosed in detail in note (38).



Consolidated cash flow statement of Deutsche Postbank Group

2001 2000

€m €m

Profit for the period (after taxes) 191 149

Non-cash items in net profit for the period and reconciliationof net profit to net cash used in operating activities

Depreciation, amortization, write-downs and write-ups of property and equipment, investment securities and trading assets –33 227

Changes in provisions 639 297

Change in other non-cash items 11 591

Gains on disposal of property and equipment and investment securities –48 16

Remeasurement losses from hedge accounting –35 –

Other adjustments (net) –1,470 –716

Subtotal –2,023 564

Changes in working capital after adjustments for non-cash components

Loans and advances to other banks 1,575 4,518

Loans and advances to customers –5,263 545

Trading assets –2,220 –408

Other operating assets 3,479 1,029

Deposits from other banks 11,275 –10,609

Due to customers –949 3,149

Securitized liabilities –8,133 –6,632

Trading liabilities 104 –

Other operating liabilities –682 –

Interest received 6,770 7,115

Interest payments –4,880 –5,720

Other income 6 –

Dividends received 33 25

Other operating expenses –2,713 –

Income taxes paid – –7

Net cash used in operating activities –3,621 –6,431

Proceeds from the disposal of

Investment securities 23,266 8,878

Property and equipment 97 25

Intangible assets 1 1

Payments to acquire

Investment securities –20,068 –2,101

Investments in subsidiaries –12 –

Property and equipment –99 –112

Intangible assets –51 –38

Net cash from investing activities 3,134 6,653

Dividends paid –14 –383

Net change in cash and cash equivalents from other financing activities 478 –5

Net cash from/used in financing activities 464 –388


72 >

2001 2000

€m €m

Cash and cash equivalents at beginning of period 1,396 1,537

Change in basis of consolidation – 25

Net cash used in operating activities –3,621 –6,431

Net cash from investing activities 3,134 6,653

Net cash from/used in financing activities 464 –388

Cash and cash equivalents at end of period 1,373 1,396

Cash and cash equivalents includes cash and balances with central banks, public-sector

debt instruments and bills eligible for rediscounting with the central bank.

The allocation of cash flows to operating activities is based on the definition of profit from

ordinary activities. The change in other non-cash items relates in particular to changes in

the positive and negative fair values of derivatives.

Net cash from investing activities results primarily from proceeds and payments from the

disposal of, and payments to acquire, financial instruments and property and equipment.



Notes to the Consolidated Financial Statements

Basis of preparation

(1) Accounting policies

The consolidated financial statements prepared in accordance with International Accounting

Standards (IASs) are based largely on capital market-oriented accounting and reporting stand-

ards derived from Anglo-Saxon accounting systems. The IASs emphasize the decision-useful-

ness of financial statements for investors.

Deutsche Postbank AG prepares its consolidated financial statements in accordance with the

IASs, and thus in accordance with internationally accepted accounting principles. The accom-

panying consolidated financial statements satisfy the criteria set out in section 292 a (2) of the

HGB (German Commercial Code) for exemption from the obligation to prepare consolidated

financial statements in accordance with the provisions of the HGB. The IAS consolidated

financial statements also comply with EC Directive 83/349/EEC (Consolidated Accounts

Directive), GAS 1 (German Accounting Standard No. 1: Exempting Consolidated Financial

Statements in accordance with section 292 a of the German Commercial Code) and EC

Directive 86/635/EEC (Bank Accounts Directive), and thus satisfy the disclosure requirements

of the European Union (section 292 a (2) b) of the HGB).

The consolidated financial statements for fiscal year 2001 were prepared in compliance with

the International Accounting Standards (IASs) adopted and published by the International

Accounting Standards Board (IASB) and with the interpretations of these standards by the

Standing Interpretations Committee (SIC). IAS 39 (Financial Instruments: Recognition and

Measurement) and IAS 40 (Investment Property) were applied for the first time in the con-

solidated financial statements for the period ended December 31, 2001. Annex A1 to these

consolidated financial statements provides an overview of the IASs applied (as of December 31,

2001); Annex A2 lists the SIC interpretations applied (as of December 31, 2001).

In accordance with IAS 39, all financial instruments – including derivatives – must be recog-

nized on the balance sheet at amortized cost or at their fair values, depending on certain

criteria. IAS 39.142 imposes restrictions on the use of hedge accounting.

Accounting and measurement are based on the going concern principle. Income and expenses

are accrued. They are recognized and recorded in the period to which they relate.


74 >

The consolidated financial statements comprise the income statement, the statement of

earnings per share, the balance sheet, the statement of changes in equity, the cash flow

statement and the notes.

Unless otherwise indicated, all amounts are shown in millions of euros (€m).

The IASs do not require a specific format for the presentation of the income statement and

the balance sheet. In accordance with customary international practice, the income statement

and the balance sheet are presented in a summary format complying with IAS 1 and 30,

and supplemented by additional disclosures in the notes. All disclosures required by the EC

4th and 7th Directives and by Directive 86/635/EEC (Bank Accounts Directive) that are not

already presented on the balance sheet or the income statement are contained in the notes.

(2) Significant differences between the accounting standards applied and the

accounting principles of the HGB

In accordance with section 292 a (2) 4b) of the HGB, exemption from the obligation to pre-

pare consolidated financial statements in accordance with the HGB requires an explanation

of accounting, measurement and consolidation policies that differ from those under

German law.

(a) Creation of hidden reserves for general banking risks in accordance with sec-

tion 340 f of the HGB, disclosed reserves and presentation of allowances and

provisions for losses on loans and advances

IAS 30.44 prohibits the creation of hidden reserves for general banking risks; this is per-

mitted by section 340 f of the HGB.

IAS 30.44 and IAS 30.50 permit the creation of reserves for general banking risks only as

appropriations of retained earnings.

The allowance for losses on loans and advances is recognized under assets on the face of

the balance sheet.

(b) Loans and receivables

The HGB requires disclosure of loans and advances to other banks and to customers. Under

the IASs, loans held for trading are also carried under trading assets.

In addition, IAS 39 classifies financial assets into originated loans and purchased loans, irre-

spective of whether or not they are securitized.



Under the HGB, all loans and advances are carried at their principal amounts. Deferred

interest is allocated directly to loans and advances and carried under the relevant balance

sheet item. Discounts and premiums are carried under prepaid expenses and deferred

income.

Under the IASs, both deferred interest and discounts/premiums are recognized directly

under the corresponding balance sheet items in which the loans are carried.

In accordance with IAS 39, originated loans are carried at amortized cost unless they are

held for trading purposes. By contrast, originated loans held for trading are measured at

their fair values.

In accordance with IAS 39, purchased loans are measured at cost if there is a positive

intent or ability to hold them to maturity and they can thus be classified as held-to-maturity

financial assets. By contrast, if they are held for trading or available for sale, IAS 39.69

requires them to be measured at their fair values.

Gains or losses on the remeasurement of loans held for trading are recognized directly in

net profit or loss for the period. For the recognition of measurement gains or losses on pur-

chased available-for-sale loans, IAS 39 allows a one-time option to choose between recog-

nition in the income statement and recognition directly in the revaluation reserve in equity.

Postbank has opted to recognize such gains and losses directly in equity. Gains or losses on

the remeasurement of purchased available-for-sale loans are therefore reported in the

revaluation reserve in equity and are not recognized in the income statement until they are

sold, collected, or otherwise disposed of, or until they are determined to be impaired.

(c) Securities

Under the HGB, securities are assigned to the liquidity reserve or the trading portfolio, or

are classified as long-term investments. Measurement depends on their allocation to one of

these categories.


Under the HGB, securities assigned to the liquidity reserve or the trading portfolio are meas-

ured using the strict principle of lower of cost or market. They must therefore be carried at

the quoted or market price if this is lower than historical cost at the balance sheet date

(section 253 (3) sent. 1 and 2 of the HGB). By contrast, long-term investments must be

carried using the less strict principle of lower of cost or market as set out in section 253 (2)

sent. 3 of the HGB. This means that these investments are only written down to the lower

of cost or quoted/market price in the event of expected lasting impairment. In the case of

temporary impairment, the investments can be carried at either the lower value at the bal-

ance sheet date or at the existing higher value. In accordance with section 280 (1) of the

HGB, the requirement to reverse write-downs applies only up to the original historical cost,

even if the quoted/market price is higher.

In accordance with IAS 39.10, purchased financial instruments (and thus securities) are

classified into three categories: held-to-maturity financial instruments, available-for-sale

financial instruments and financial instruments held for trading.

In accordance with IAS 39.69, held-to-maturity financial instruments are carried at amortized

cost. Financial instruments held for trading and available-for-sale financial instruments are

generally measured at their fair values.

If the reasons for a write-down no longer apply, any gain from reversal should be recognized

in income (IAS 39.114). In the case of financial instruments held to maturity and financial

instruments purchased directly from the issuer and carried at amortized cost, the amount of

any reversal may not result in the carrying amount exceeding what amortized cost would

have been if no impairment had been recognized.

Remeasurement gains or losses on financial instruments held for trading are recognized in

income.

For the recognition of measurement gains or losses on available-for-sale financial instruments,

IAS 39 allows a one-time option to choose between recognition in the income statement

and recognition directly in the revaluation reserve in equity. Postbank has opted to recognize

such gains and losses directly in equity. Gains or losses on the remeasurement of purchased

available-for-sale financial instruments are therefore reported in the revaluation reserve in

equity and are not recognized in the income statement until they are sold, collected, or

otherwise disposed of, or until they are determined to be impaired.

76 >


(d) Derivatives and hedges

There are no specific rules in the HGB at present governing the measurement of derivatives,

and the general valuation principles of sections 252ff. of the HGB are used. If a derivative

has been purchased for trading purposes, measurement losses are recognized in income by

setting up a provision (provision for anticipated losses), while unrealized gains are not rec-

ognized.

By contrast, the HGB does not generally allow gains or losses to be recognized on the

measurement of hedging derivatives. Under German accounting principles, the hedged item

and the hedging instrument are integrated and accounted for as a closed position. The hedged

item is carried at amortized cost on the balance sheet. The hedging instrument, and thus

any gain or loss on remeasurement, is generally not recognized on the balance sheet.

Under IAS 39, all derivatives must be recognized at their fair values, with gains and losses

on remeasurement to fair value recognized in income. Derivatives held for trading are carried

under trading assets.

As a rule, a hedging instrument can be allocated to a single hedged item, to several similar

hedged items, or to a portion of a hedged item. Such hedges are termed “micro-hedges”.

IAS 39 restricts the use of hedge accounting. For instance, only hedges that are classified as

effective under IAS 39.142 qualify for hedge accounting. This results in a distinction being

made between ineffective and effective hedges.

Derivatives from ineffective hedging relationships are recognized as “economic” hedging

derivatives at their fair values under trading assets or liabilities.

The criteria set out in IAS 39.142 ff. must be reviewed and satisfied at each balance sheet

date.

If the following conditions for hedge accounting in accordance with IAS 39.142 are met,

the accounting treatment makes a distinction between fair value hedges and cash flow

hedges:

– At the inception of the hedge, there is formal documentation of the hedging relationship

that identifies the hedged item and the hedging instrument, and the nature of the risk

being hedged, and that specifies the risk management objective.



– The hedge is expected to be highly effective in achieving offsetting changes in fair value

attributable to the risk, consistent with the originally documented risk management strategy

for the hedging relationship concerned. A hedge is regarded as highly effective if, through-

out the life of the hedge, it can be assumed that changes in the fair value of the hedged

item will be almost fully offset by changes in the fair value of the hedging instrument, and

actual results are within a range of 80 percent to 125 percent. This is verified by effective-

ness testing.

– The effectiveness of the hedge can be reliably measured.

– The effectiveness of the hedge is assessed on an ongoing basis and determined to be

effective.

Postbank enters exclusively into fair value hedges for hedge accounting purposes.

A fair value hedge is a hedge of the exposure to changes in the fair value of assets and li-

abilities where these changes are based on price risks. In accordance with IAS 39.153, the gain

or loss on the hedged item attributable to the hedged risk should adjust the carrying amount

of the hedged item and be recognized immediately in net profit or loss. This applies both to

financial instruments carried at amortized cost (originated loans and securities purchased

directly from the issuer) and to hedged items measured at fair value where gains and losses

on remeasurement are recognized directly in the revaluation reserve (available-for-sale finan-

cial instruments).

The gains and losses from the remeasurement of the hedging instrument are recognized

directly in net profit or loss for the period. Changes in the fair value of the hedged item not

attributable to the hedged risk are accounted for using the rules applicable to the relevant

financial asset category.

A hedging relationship ends when the hedging instrument expires, is sold or exercised, or if

the hedge no longer meets the criteria for qualification for hedge accounting.

78 >


(e) Pension obligations

Pension obligations arise from a direct commitment by a company to grant its employees

future pension benefits. These obligations are liabilities of uncertain timing and amount.

Section 249 of the HGB thus requires provisions to be set up for obligations from direct

pension commitments.

The IASs require provisions to be recognized for both direct and indirect pension obligations.

IAS 19 requires future economic and demographic trends (e.g. salary increases and career

trends, selection of a comparable market rate of interest for discounting provisions) to be

factored into the measurement of pension obligations. This reflects the economic and

demographic trends impacting the amount of obligations entered into by the company

more accurately than is the case with HGB financial statements. By contrast, calculation of

pension obligations for German accounting and reporting purposes uses the net present

value method in accordance with section 6 a of the EStG (German Income Tax Act).

IAS pension obligations are calculated using the projected unit credit method. Based on the

concept of vested entitlement, this method calculates projected future obligations that reflect

future salary and pension increases, as well as inflation. The IASs require the discount rate

to be based on capital market rates.

IAS 19 makes a distinction between defined contribution and defined benefit pension plans.

A provision is recognized only for defined benefit plans (IAS 19.49), as defined contribution

plans are recognized as a liability and an expense in the period (IAS 19.44), and carried as

other liabilities (accrued expenses).

(f) Other provisions

IAS 37 prohibits the recognition of certain provisions for future internal expenses required

to be recognized by section 249 (1) sent. 2 of the HGB.

(g) Recognition of amounts due to tax rules

Write-downs, appropriations to the special tax-allowable reserve and accelerated depreciation

charges taken for tax reasons in accordance with the HGB are prohibited in IAS financial

statements.



(h) Deferred taxes

In accordance with sections 274 and 306 of the HGB, deferred taxes are recognized only for

timing differences between accounting profit and taxable profit that will reverse in future

years (deferral method).

Section 306 of the HGB requires deferred tax assets to be recognized, but prohibits their

recognition for tax loss carryforwards. The HGB allows deferred tax assets and liabilities to

be netted out, with the balance reported as prepaid expense or as a provision.

By contrast, IAS 12 (revised 2000) uses the balance sheet liability method, under which all

temporary differences between the carrying amounts in the tax base and the carrying amounts

in the IAS financial statements resulting in future benefits or liabilities are recognized in the

computation of deferred tax assets and liabilities.

Under the IASs, deferred tax assets and liabilities must be recognized, irrespective of whether

the differing carrying amounts in the IAS financial statements and the tax base have affected

net profit or loss. The calculation of deferred tax assets and liabilities using the balance

sheet liability method uses the future enacted local tax rates.

The IASs only permit deferred tax assets and deferred tax liabilities to be offset where the

company has a legally enforceable right to set off current tax assets against current tax

liabilities (IAS 12.74). The following criteria must be satisfied:

– The deferred tax assets and liabilities relate to income taxes levied by the same taxation

authority,

– which requires or at least accepts settlement of the taxes on a net basis.

In addition, IAS 12 requires deferred tax assets to be recognized for tax loss carryforwards

where their utilization is probable in future periods. Under the IASs, exceptions to the

recognition of deferred taxes relate to permanent differences, undistributed profits of indi-

vidual group companies, goodwill from capital consolidation and differences from the initial

recognition of assets and liabilities.

(i) Trust activities

In accordance with IAS 30.55, trust transactions are not recognized on the balance sheet

(as is the case with the HGB), but are disclosed in the notes.

80 >


(j) Minority interest

Under the HGB, minority interest in equity are reported under equity; under the IASs, they

are reported in a separate line item between shareholders’ equity and liabilities.

(3) Basis of consolidation

In addition to the parent company Deutsche Postbank AG, Bonn, 23 (previous year: 15)

subsidiaries and two (previous year: two) joint ventures, all of which are presented in the

list of shareholdings (Note 56), are included in the consolidated financial statements as of

December 31, 2001.

A further ten (previous year: eight) subsidiaries were not consolidated because they are

insignificant for the presentation of a true and fair view of the Group’s net assets, financial

position and results of operations. The companies concerned are also presented in the list

of shareholdings (Note 56). The investments in these companies are carried as financial

instruments under investment securities in accordance with IAS 39.

The following new companies were included in the basis of consolidation in the year under

review:

– PB (USA) Holdings Inc., Delaware, USA

– PB Capital Corp., Delaware, USA

– PB Realty Corp., New York, USA

– PB Finance (Delaware), Inc., Delaware, USA

– Deutsche Postbank Finance Center GmbH, Luxembourg

– DPBI Immobilien KGaA, Luxembourg

– PB Fund Services GmbH, Bonn

– Postbank Leasing GmbH, Bonn and

– einsnull IT-Support GmbH, Bonn

Deutsche Postbank AG acquired BHF Holdings Inc., USA, and its operating units from BHF-

Bank, Frankfurt/Main, giving it a strategic platform to expand its logistics financing activ-

ities worldwide, and in particular in the US market. The core business activities of BHF

Holdings are corporate finance and commercial real estate loans. This company was

renamed PB (USA) Holdings Inc., Delaware.



These transactions had the following effects on net assets, financial position and

results of operations:

PB (USA) Holdings Inc.*

€m

Assets 3,622

Liabilities and provisions 3,348

Income 16

Net profit after tax 5

* Amounts at December 31, 2001; income and net profit from the date of first-time consolidation

One subsidiary was deconsolidated since December 31, 2000 due to its merger with another

consolidated company. This relates to:

– Deutsche Postbank Invest Kapitalanlagegesellschaft mbH, Bonn

In accordance with Interpretation SIC-12 issued by the Standing Interpretations Committee

(SIC), which requires the consolidation of special purpose entities under certain conditions,

23 (previous year: 23) special funds were consolidated as special purpose entities in fiscal

year 2001.

(4) Consolidation methods

In accordance with IAS 27.21, the consolidated financial statements of Deutsche Postbank

have been prepared in accordance with uniform Group accounting and measurement policies.

Capital consolidation of subsidiaries uses the purchase method in accordance with IAS 22.

The date of formation or acquisition was used as the date of first-time consolidation for

newly consolidated companies.

Joint ventures are proportionately consolidated in accordance with IAS 31.25.

Intercompany receivables and liabilities, as well as income and expense from intercompany

transactions, were eliminated in accordance with IAS 27.17f.

With the exception of the equalization reserves, the financial statements of the insurance

companies are not adjusted for inclusion in the consolidated financial statements. Owing to

the special nature of their business, intercompany transactions of the insurance companies

are not generally eliminated.

82 >


(5) Recognition and measurement principles

(a) Cash reserve

With the exception of bills, which are carried at their fair values, all cash holdings are carried

at their notional amounts.

(b) Loans and advances

Originated loans and advances to other banks and customers are carried at amortized cost.

Purchased loans in the available-for-sale portfolio are measured at their fair values, with

gains and losses from remeasurement credited/charged directly to the revaluation reserve in

equity.

Impairments of loans and advances are recognized and reported separately under assets in

the allowance for losses on loans and advances.

The carrying amount of securitized loans that qualify for hedge accounting is adjusted for

the gains and losses from changes in fair value attributable to the hedged risk.

Premiums, discounts and transaction costs are recognized in net interest income. Deferred

interest on loans and advances, as well as premiums and discounts, are carried together

under the relevant items of loans and advances. Interest is deferred, and premiums and

discounts reversed, using the straight-line method.

Net gains or losses from changes in the fair value of purchased available-for-sale loans are

reported directly in the revaluation reserve in equity until the loans are sold or otherwise

disposed of.

If loans have market values as defined by IAS 32.5, these are generally used as the fair

value; if this is not the case, the fair value is determined using recognized valuation models

(discounted cash flow or option pricing models).



(c) Allowances and provisions for losses on loans and advances, write-downs and

impairment

Identifiable credit risks are covered by recognizing specific valuation allowances based on

uniform Group criteria. General valuation allowances, whose amount is calculated on the

basis of historical default rates, are also recognized for potential risks.

The allowance for losses on loans and advances is reported under assets as a separate bal-

ance sheet item. It relates to allowances for losses on loans and advances to other banks

and customers.

A financial asset is impaired if its estimated recoverable amount is lower than its carrying

amount, i.e. if a loan is (partly) uncollectable. If this is the case, the loss on both assets

carried at amortized cost (IAS 39.111) and assets carried at fair value (IAS 39.117) must

either be recognized through an indirect write-down (loan loss allowance) or by writing

down the asset directly and recognizing the loss in net profit or loss (IAS 39.111).

In accordance with IAS 39.111 ff., the estimated recoverable amount can be determined

using the following methods:

– The discounted present value of estimated future cash flows (interest and principal pay-

ments) from the financial asset;

– The market price, where there is an observable market price for the financial instrument,

because marking-to-market reflects the greater counterparty risk (IAS 39.113).

Uncollectable loans and advances are written off directly against income in the appropriate

amount; recoveries on loans previously written off are recognized in income.

Credit risk provisions are recognized for liabilities under bill of exchange and other guaran-

tees involving a default risk.

(d) Trading assets

Securities and derivatives (including embedded derivatives) with positive fair values acquired

for the purpose of generating a profit from short-term fluctuations in market prices or dealing

margins are carried under this item. It also contains the positive fair values of derivatives clas-

sified as economic hedges, i.e. that do not meet the criteria for qualification for hedge account-

ing in accordance with IAS 39.142.

Trading assets are carried at their fair values. Remeasurement gains and losses as well as gains

or losses on the sale or disposal of trading assets are recognized in net trading income.

84 >


(e) Hedging derivatives

Hedging derivatives relate to those hedging instruments that meet the criteria set out in

IAS 39.142 (note 2d).

Hedging derivatives are carried at their fair values.

Hedges qualifying for hedge accounting relate primarily to hedges of interest rate and

currency risks.

(f) Investment securities

Investment securities are composed of bonds and other fixed-income securities, equities and

other non-fixed-income securities, investments in unconsolidated subsidiaries and other

equity investments.

Investment securities are measured at cost at the time of initial recognition. Available-for-sale

investment securities are subsequently measured at their fair values. Securities purchased

directly from the issuer, investments in unconsolidated subsidiaries and certain other equity

investments are generally carried at amortized cost. Changes in the fair values of available-

for-sale investment securities are recognized directly in the revaluation reserve in equity and

are not recognized in income until the gain or loss is realized.

Held-to-maturity bonds and securities purchased directly from the issuer are carried at amort-

ized cost. Premiums and discounts are allocated directly to the financial instruments and

spread over the remaining maturity. Write-downs are charged in the event of lasting impair-

ment.

Available-for-sale equities and other non-fixed-income securities are carried at their fair values.

Write-downs are charged in the event of lasting impairment.



(g) Property and equipment

Property and equipment is carried at cost and reduced by depreciation over the standard

useful life of the asset. Determination of the useful life of an asset reflects physical wear

and tear, technical obsolescence and legal and contractual restraints. Write-downs are

charged in the event of additional impairment.

The carrying amount of property and equipment is reduced by straight-line

depreciation over the following periods:

Useful life (years)

Buildings 60

IT systems 4–7

Other operating and office equipment 3–20

Maintenance and repair costs for property and equipment are expensed as incurred.

IAS 40 (Investment Property) defines investment property as property held to earn rentals

and/or for capital appreciation, rather than for use in the production or supply of goods or

services or for administrative purposes, or for sale in the ordinary course of business.

The following procedure was adopted to distinguish between investment property and

owner-occupied property in the case of mixed-use property. An assessment is made as to

whether the leased portion could be sold separately from the portion used for operating

purposes. If this is the case, the two portions are accounted for separately: one portion as

an item of property, plant and equipment (owner-occupied property) and the other portion

as investment property. A leased portion of less than 20 % of the total area and less than

20 % of total rental income is treated as insignificant.

IAS 40 allows an option to measure investment property at fair value or at cost. Postbank

has opted to measure it at cost, and the necessary disclosures are contained in note (23).

86 >


(h) Other assets

In addition to intangible assets, prepaid expenses and all assets not allocated to other items

of assets are carried under other assets.

Intangible assets are carried at cost, and relate primarily to software and purchased good-

will.

The accounting treatment of intangible assets distinguishes between internally generated

and purchased intangible assets.

At present, Postbank only holds purchased intangible assets.

The carrying amounts of intangible assets are mostly reduced by straight-line amortization

over a useful life of three years. Purchased goodwill is amortized over a standard useful life

of 20 years.

Write-downs are charged in the event of impairment or where no further economic benefits

are expected to flow to the enterprise in the future.

(i) Liabilities

Liabilities are carried at amortized cost (IAS 39.93).

The carrying amount of securitized liabilities qualifying for hedge accounting is adjusted for

gains and losses from changes in the fair value attributable to the hedged risk.

Premiums, discounts and issue costs are recognized ratably in net interest income.



(j) Trading liabilities

Derivatives with negative fair values which were acquired for the purpose of generating a

profit from short-term fluctuations in market prices or dealing margins are carried under this

item. It also contains the negative fair values of derivatives classified as economic hedges.

Remeasurement gains and losses as well as gains or losses on the settlement of trading

liabilities are recognized in net trading income.

(k) Provisions

Adequate provisions have been recognized for all uncertain liabilities and anticipated losses

from pending contracts at the balance sheet date.

Occupational pensions are governed by defined benefit plans that are fully funded by provi-

sions for pensions and other employee benefits. These correspond to the present value of

pension entitlements earned at the valuation date. They reflect expected compensation increases

and forecasted pension growth and are calculated on the basis of actuarial reports in accord-

ance with IAS 19 (revised 2000). Pension obligations and pension expenses are calculated

using the projected unit credit method.

The agreements that underlie the pension obligations provide for a range of benefits, depend-

ing on the beneficiaries concerned:

– Old-age pensions starting at age 62 or 65;

– Invalidity pensions for total or occupational disability;

– Surviving dependents’ pensions.

Postbank has assumed a direct occupational pension commitment for pensioners and

employees admitted to the Bank’s occupational pension plan who were previously insured

with Versorgungsanstalt Post (VAP – Postal Service Institution for Supplementary Retirement

Pensions).

88 >


Pension provisions are calculated using the following actuarial assumptions:

Discount rate 6.0 % p.a.

Salary growth 2.5 %–3.0 %

Pension growth 1.75 %–2.5 %

Fluctuation 4.0 % p.a.

Pensionable age 60–63 years

Disability 1998 Heubeck tables

In accordance with IAS 19.92, actuarial gains and losses are not recognized as income or

expense until the net cumulative unrecognized actuarial gains or losses at the end of the

previous reporting period exceed 10% of the present value of the defined benefit obligation

at this time.

(l) Currency translation

In accordance with IAS 21.11, all foreign currency monetary items and equities denomin-

ated in foreign currencies that are classified as non-monetary items in accordance with IAS

21.7 are translated into euros at the middle spot rate at the balance sheet date. There were

no material non-monetary items at the balance sheet date measured at (amortized) cost (in

particular property and equipment, prepaid expenses and deferred income) and translated

at the historical rate in accordance with IAS 21.7. Foreign currency income and expenses

are generally translated at the exchange rate at the transaction date.

Exchange differences were recognized in income in accordance with the benchmark method

(IAS 21.15-18).

The subgroup consolidated financial statements of PB Capital Group prepared in US dollars

were translated using the modified closing rate method (IAS 21.30). The resulting exchange

difference was taken directly to equity.



(m) Income taxes

Income taxes are recognized and measured in accordance with IAS 12 (revised 2000). Deferred

taxes are generally recognized for all temporary differences between the carrying amounts

in the IAS financial statements and the carrying amounts in the tax accounts (tax base).

Deferred tax assets are recognized for tax loss carryforwards only in the amount of probable

future utilization.

Deutsche Postbank AG became liable for corporate income tax for the first time effective

January 1, 1996. Assets and liabilities were measured at their fair values for the preparation

of the opening tax accounts. When calculating deferred taxes in accordance with IAS 12,

initial differences between the carrying amounts in the financial accounts and in the tax

accounts as of January 1, 1996 were eliminated, as this remeasurement is not comparable

with taxable government grants for which no deferred taxes can be recognized in accord-

ance with IAS 12. The differences arising as of January 1, 1996 are adjusted in subsequent

periods and recognized when calculating deferred taxes.

Deferred tax assets are carried under other assets; deferred tax liabilities are carried under

tax provisions.

Deferred taxes are calculated using the expected tax rates. A tax rate of 39.9 percent was

applied for fiscal year 2001.

Income and expenses from deferred taxes are recognized under income tax expense in net

profit or loss for the period separately from current tax income and expenses. Recognition

depends on the accounting treatment of the underlying item. For example, deferred taxes

are recognized in net profit or loss if the balance sheet item is itself recognized in net profit

or loss. Deferred taxes are credited or charged to the revaluation reserve in equity if the

balance sheet item is itself credited or charged directly to equity (IAS 12.61), e.g. in the

case of remeasurement of available-for-sale financial instruments.

90 >


Income statement disclosures

(6) Net interest income

2001 2000

€m €m

Interest and current income

Interest income from:

Lending and money market transactions 3,677 4,251

Fixed-income and book-entry securities 2,924 3,170

Trading operations 136 –

Net gains on hedges 35 –

6,772 7,421

Current income from:

Equities and other non-fixed-income securities 37 24

Investments in associates 1 1

38 25

6,810 7,446

Interest expense

Interest expense on deposits 2,445 –

Interest expense on securitized liabilities 2,193 –

Interest expense on hybrid capital 49 –

Swaps 358 –

Interest expense on trading operations 120 –

Other interest expenses 6 –

5,171 5,794

Total 1,639 1,652

Interest income and expense on swaps is reported as a net expense. The corresponding item

was not reported separately in the previous year. The interest expense on the trading port-

folio includes imputed interest expenses of €115 million.

Gains or losses from the remeasurement of fair value hedges are carried under net gains on

hedges. This item is reported for the first time in 2001 and results from the first-time appli-

cation of IAS 39.



Net gains on hedges are composed of the following items:

2001

€m

Losses on the fair value remeasurement of hedged items –206

Gains on the fair value measurement of hedging transactions 241

Total 35

(7) Allowance for losses on loans and advances

2001 2000

€m €m

Cost of additions:

Specific valuation allowances 147 143

Country risks 8 3

Global valuation allowances 1 –

156 146

Direct loan write-offs 8 4

164 150

Income from reversals:

Specific valuation allowances 36 59

Country risks 3 2

Global valuation allowances 21 4

60 65

Recoveries on loans previously written off 2 9

62 74

Total 102 76

(8) Net fee and commission income

2001 2000

€m €m

Fee and commission income

Money transmission and clearing business 331 328

Lending and guarantee business 30 22

Securities business 86 136

Other fee and commission income 37 39

484 525

Fee and commission expense

Money transmission and clearing business 37 30

Lending and guarantee business 22 21

Securities business 11 17

Other fee and commission expenses 6 8

76 76

Total 408 449

92 >


(9) Net trading income

Quoted prices are generally used to establish the fair values of trading assets and trading

liabilities. The fair values of unlisted products are established using the discounted present

value method or suitable option pricing models. In addition to trading income and expenses,

net trading income also includes net remeasurement gains on trading assets.

2001 2000

€m €m

Net income from sale of securities 2 4

Net gain on remeasurement of trading assets and liabilities

Bonds and other fixed-income securities 12 –

Equities –1 –

Other trading assets –2 –

9 –

Net gain on sale and remeasurement of derivatives carried in the trading portfolio

Gain on derivatives 2,264 –

Loss on derivatives –2,214 –

50 –5

Foreign exchange gain (loss) –5 6

Total 56 5

The net gain on derivatives is composed of the following items:

2001

€m

Loss on trading derivatives –11

Gain on economic hedging derivatives 61

Total 50



(10) Net income from investment securities

Net income from investment securities contains net gains from the sale and remeasurement

of investment securities, investments in associates and investments in unconsolidated sub-

sidiaries.

2001

€m

Net income from sale of securities purchased directly from issuers

Gains on sale of securities purchased directly from issuers 18

Losses on sale of securities purchased directly from issuers 2

16

Net income from sale of available-for-sale assets classed as investment securities

Gains on sale of available-for-sale assets 147

Losses on sale of available-for-sale assets 121

26

Net income from sale of loans to other banks

Originated loans 12

Available-for-sale loans 7

19

Other net income from investment securities

Other income from investment securities 3

Other expense from investment securities 1

2

Total 63

In the previous year, net income from investment securities was reported under other

expenses (note 13).

94 >


(11) Administrative expenses

Administrative expenses in the Group are composed of staff costs, non-staff operating expenses

and depreciation and write-downs of operating and office equipment and property. These

expenses are composed of the following items:

2001 2000

€m €m

Staff costs

Wages and salaries 419 418

Social security contributions 49 33

Expenses for pensions and other benefits 135 153

603 604

Other administrative expenses 1,121 1,028

Depreciation and write-downs of property and equipment 87 190

Total 1,811 1,822

Depreciation and write-downs of property and equipment contain write-downs of €3 million.

€2 million of the depreciation and write-downs of property and equipment relates to

investment property.

Other administrative expenses relate primarily to counter charges (€468 million), building

and premises expenses including rent (€2 million), rent for operating and residential prop-

erty (€30 million), office and motor vehicle costs (€141 million), IT costs (€299 million),

entertainment and advertising (€7 million), and legal and consulting services (€83 million).

€8 million of the other administrative expenses relates to investment property.



(12) Other income

2001 2000

€m €m

Income from property and equipment 28 –

Net income from insurance business 4 3

Income from the reversal of provisions 255 –

Net income from profit pooling agreements 1

Other operating income 72 161

Total 360 164

Income from items of property and equipment include sale proceeds (€3 million) and rental

income (€25 million).

€8 million of the rental income relates to investment property.

(13) Other expenses

2001 2000

€m €m

Expenses from property and equipment 35 –

Expenses for other taxes 15 8

Net income from investment securities – 20

Amortization and write-downs of intangible assets 36 28

Appropriation to restructuring provision 90 –

Miscellaneous 94 82

Total 270 138

Expenses for other taxes relate primarily to land taxes amounting to €15 million.

Net income from investment securities is reported as a separate item (10) in fiscal year 2001.

Amortization and write-downs of intangible assets include write-downs of €6 million.

Miscellaneous other expenses relate primarily to expenses for special projects amounting to

€59 million.

96 >


(14) Income tax expense

Income taxes in the Group were composed of the following items:

2001 2000

€m €m

Current income tax expense

Corporate income tax and solidarity surcharge 13 –21

Trade income tax 7 2

20 –19

Prior-period income tax expense 7 –

Effective income tax expense 27 –19

Income/expense from deferred taxes

from temporary differences 13 –24

from loss carryforwards 112 128

125 104

Total 152 85

The tax expense changed as follows:

2001 2000

€m €m

Net profit 191 149

Income tax expense 152 85

Profit before tax 343 234

Applicable tax rate 39.90 % 44.20 %

Expected income taxes 137 103

Tax effects

Effect of prior-period differences 12 –11

Effect of tax rate change 5 37

Tax-exempt foreign income – –16

Reversal of negative goodwill from merger – –8

Prior-period taxes and reversal of tax provisions –3 –21

Other 1 1

15 –18

Income tax expense 152 85



Balance sheet disclosures

(15) Cash reserve

The cash reserve is composed of the following items:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Cash 1,093 1,052

Balances with central banks 267 333

Public-sector debt instruments and bills eligible forrediscounting with central banks 13 11

Total 1,373 1,396

€250 million (previous year: €271 million) of the balances with central banks relate to

balances with the Deutsche Bundesbank.

The minimum reserve requirement at end-December 2001 was €930 million (previous year:

€884 million).

(16) Loans and advances to other banks

Dec. 31, 2001 Dec. 31, 2000

€m €m

Domestic banks

payable on demand 765 390

other loans and advances 19,377 23,992

20,142 24,382

Foreign banks

payable on demand 1,028 998

other loans and advances 16,232 12,634

17,260 13,632

Total 37,402 38,014

As of December 31, 2001, there were only bona fide transactions under repurchase agree-

ments amounting to €290 million. Postbank is the buyer in such transactions. Securities

purchased under agreements to resell relate to negotiable bonds of public-sector issuers or

German banks.

98 >


Loans and advances to other banks are classified as follows in accordance with

the categories of financial instruments as defined in IAS 39:

Dec. 31, 2001

€m

Originated loans to other banks 27,904

thereof fair value hedges 2,782

Purchased loans to other banks (available-for-sale) 2,295

thereof fair value hedges 736

Money market assets 7,203

Total 37,402

Gains on the measurement of unhedged purchased available-for-sale loans to other banks

were credited directly to the revaluation reserve in the amount of €11 million. €0.5 million

of the revaluation reserve was reversed to income in the period under review from the dis-

posal of available-for-sale loans to other banks.

Valuation allowances of €3 million were recognized in the year under review for originated

loans to other banks.

(17) Loans and advances to customers

Dec. 31, 2001 Dec. 31, 2000

€m €m

Mortgage lending 13,316 12,413

Public sector 18,522 20,351

Installment credits 741 595

Other loans and advances 11,699 6,052

Total 44,278 39,323

thereof:

Secured by mortgage charges 10,520 8,876

Public-sector loans 18,522 20,351

Dec. 31, 2001 Dec. 31, 2000

€m €m

Domestic customers 37,475 35,783

Foreign customers 6,803 3,540

Total 44,278 39,323

Undated loans and advances to customers amounted to 0.9 percent (previous year: 1.7 per-

cent) of total assets.

Amounts due under finance leases are included in the amount of €9 million (previous year:

€9 million). The total amount of future lease payments and unguaranteed residual values is

€9 million (previous year: €9 million).



Loans and advances to customers are classified as follows in accordance with the

categories of financial instruments as defined in IAS 39:

Dec. 31, 2001

€m

Originated loans to customers 37,984


Purchased loans to customers (held to maturity) 889

Purchased loans to customers (available for sale) 5,405


Total 44,278

Gains on the measurement of unhedged purchased available-for-sale loans to customers

were credited directly to the revaluation reserve in the amount of €21 million. €2 million

of the revaluation reserve was reversed to income in the period under review from the dis-

posal of available-for-sale loans to customers.

Valuation allowances of €153 million were recognized in the year under review for ori-

ginated loans to customers.

(18) Total credit extended

Dec. 31, 2001 Dec. 31, 2000

€m €m


Loans and advances to customers 44,278 39,323

Guarantees 1,969 941

Total 83,649 78,278

100 >


(19) Allowance for losses on loans and advances

The allowance for losses on loans and advances is recognized on the basis of uniform

Group rules and covers all identifiable credit and country risks. Global valuation allowances

were recognized for the potential credit risk on the basis of historical amounts.

Risks have been provided for by an allowance for losses on loans and advances carried

under assets, and by the recognition of provisions for credit risks.

The allowance for losses on loans and advances is composed of the following items:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Allowance for losses on loans and advances to other banks 10 10

Allowance for losses on loans and advances to customers 611 313

Total allowance for losses on loans and advances 621 323

Provisions for credit risks 3 3

Total 624 326

The allowance for losses on loans and advances carried under assets changed as

follows in the year under review:

Specific risks Country risks Potential risks Total

2001 2000 2001 2000 2001 2000 2001 2000

€m €m €m €m €m €m €m €m

Balance at Jan. 1 244 279 7 13 72 76 323 368

Additions

Addition from acquisitionof company recognizedin equity 221 – – – – – 221 –

Allowance chargedto the income statement 147 143 8 3 1 – 156 146

Disposals

Utilization 15 119 3 7 1 – 19 126

Allowance reversed to the income statement 36 59 3 2 21 4 60 65

Balance at Dec. 31 561 244 9 7 51 72 621 323

The total amount of loans at the balance sheet date for which no interest payments are

received was €246 million. Loans with a total volume of €1,123 million were written down.

The outstanding interest receivables accounted for by these loans amounted to €51 million

at December 31, 2001.



Capitalized default interest on loans and advances to customers amounted to €12 million

at December 31, 2001 (previous year: €7 million), of which €4 million (previous year:

€4 million) related to amounts capitalized during the year under review. The amount

remaining after write-downs was €2 million (previous year: €1 million).

€8 million of loans and advances was written off directly in the year under review (previ-

ous year: €4 million). Recoveries on loans written off amounted to €2 million (previous

year: €9 million).

Provisions for credit risks amounted to €3 million (previous year: €3 million).

(20) Trading assets

Group trading activities consist of trading in bonds and other fixed-income securities,

equities and other non-fixed-income securities, promissory note loans, foreign currencies and

precious metals, as well as derivatives. All trading assets are carried at their fair values.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Bonds and other fixed-income securities issued by

Public-sector issuers 283 4

Other issuers 4,192 703

thereof money market instruments 112 12

4,475 707


Positive fair values of derivatives 275 36

Positive fair values of economic hedging derivatives 630 –

Total 5,407 764

The own bonds contained in the total carrying amount in the previous year are deducted

directly from securitized liabilities in fiscal year 2001.

The following amounts of bonds and other fixed-income securities, and equities and other

non-fixed-income securities carried as trading assets, are negotiable and listed:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Bonds and other fixed-income securities 3,721 354


102 >


(21) Hedging derivatives

Hedges with positive fair values that qualify for hedge accounting in accordance with IAS 39

are composed of the following items:

Fair Value Hedge

Dec. 31, 2001

€m

Assets

Hedging derivatives on loans to other banks

Originated loans 7

Hedging derivatives on loans to customers

Originated loans 54

54

Hedging derivatives on investment securities

Bonds and other fixed-income securities 89

89

Liabilities

Deposits from other banks 30

Securitized liabilities 1,543

1,573

Total 1,723



(22) Investment securities

Investment securities includes bonds and other fixed-income securities, equities and other

non-fixed-income securities, investments in associates and investments in unconsolidated

subsidiaries.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Bonds and other fixed-income securities issued by

Public-sector issuers 12,151 13,663

thereof equalization claims against the government 49 61

Other issuers 34,442 36,360

thereof money market instruments 324 648

46,593 50,023

Equities and other non-fixed-income securities

Equities 1,206 963

Investment fund shares 193 135

1,399 1,098

Investments in associates 52 21

Investments in unconsolidated subsidiaries 14 2

Total 48,058 51,144

The own bonds contained in the total carrying amount in the previous year are deducted

directly from securitized liabilities in fiscal year 2001.

Bonds and other fixed-income securities contain collection documents amounting to

€390 million. In the previous year, collection documents were reported under other assets

(note 24).

104 >


Investment securities are classified as follows in accordance with the categories of

financial instruments as defined in IAS 39:

Dec. 31, 2001

€m

Bonds and other fixed-income securities

Purchased directly from the issuer 10,731


Held to maturity 3,278

Available for sale 32,535


Equalization claims against the government 49

46,593

Equities and other non-fixed-income securities

Equities and other non-fixed-income securities 1,206

thereof fair value hedges 140

Investment fund shares 193

1,399

Investments in associates 52

Investments in unconsolidated subsidiaries 14

Total 48,058

The following amounts of investment securities are negotiable and listed:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Bonds and other fixed-income securities 34,293 41,546

Equities and other non-fixed-income securities 1,033 960

Gains on the measurement of unhedged available-for-sale securities were credited directly

to the revaluation reserve in the amount of €250 million. €8 million of the revaluation

reserve was reversed to net income for the period under review from the disposal of invest-

ment securities.

To enable it to enter into open market transactions, Postbank has pledged securities with

an eligible value of €14.2 billion (previous year: €16.8 billion) as collateral to the European

Central Bank. There were open market transactions amounting to €10.5 billion at the bal-

ance sheet date (previous year: €1.5 billion). The securities lodged as collateral are reported

as investment securities.



Changes in investment securities in fiscal year 2001 are presented in the following

table:

Investments Invest- Bonds and other Equities and

in unconsoli- ments in fixed-income securities other non-fixed-

dated associates income securities

subsidiaries Securities Held to Available Equalization Invest- Equities

purchased maturity for sale claims ment-

directly from against the funds

the issuer government

€m €m €m €m €m €m €m €m

Historical cost

Balance at Jan. 1, 2001 2 21 7,835 3,538 38,219 434 133 920

Exchange differences 49 46

Additions 12 3 5,730 14 12,999 59 1,212

Disposals 2,896 274 19,818 384 605

Balance at Dec. 31, 2001 14 24 10,718 3,278 31,446 49 192 1,527

Write-downs

Balance at Jan. 1, 2001 8 –505 –9 –81

Current write-downs 2 259 13 437

Reversals of write-downs 28 23 843 5 35

Balance at Dec. 31, 2001 –28 –13 –1,089 1 321

Carrying amounts

Balance at Jan. 1, 2001 2 21 7,827 3,538 38,724 434 142 1,001

Balance at Dec. 31, 2001 14 52 10,731 3,278 32,535 49 193 1,206

Historical cost is amortized cost at January 1, 2001 following adjustment for the first-time

application of IAS 39. Write-downs at January 1, 2001 contain value adjustments from the

first-time application of IAS 39.

106 >


(23) Property and equipment

Dec. 31, 2001 Dec. 31, 2000

€m €m

Land and buildings 867 881

Technical equipment and machinery 1 2

Operating and office equipment 149 173

Advance payments and assets under development 5 7

Total 1,022 1,063

A comparison of historical cost and cumulative depreciation on property and

equipment with the prior-period amounts is presented below:

Historical cost Cumulative depreciation

Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000

€m €m €m €m

Land and buildings 1,062 1,061 195 180

Technical equipment and machinery 3 4 2 2

Operating and office equipment 375 456 226 283

Advance payments and assets under development 5 7 0 –

Total 1,445 1,528 423 465

The carrying amounts of property and equipment changed as follows in the year

under review:

Carrying amount Reclassi- Carrying amount

Jan. 1, 2001 Additions Disposals fications Depreciation Dec. 31, 2001

€m €m €m €m €m €m

Land and buildings 881 3 1 – 16 867

Technical equipmentand machinery 2 – 1 – – 1

Operating andoffice equipment 173 99 55 3 71 149

Advance paymentsand assets underdevelopment 7 1 0 –3 0 5

Total 1,063 103 57 0 87 1,022



The following amounts relating to investment property were recognized in the

income statement:

Third-party Lease Direct Restraints Disposal Contractual

use revenue operating on disposal proceeds obligations

expenses received

(%) €m €m

Investment property 88 8 8 – – –

A comparison of historical cost and cumulative depreciation with the prior-period

amounts is presented below:

Historical cost Cumulative depreciation

Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000

€m €m €m €m

Investment property 203 203 60 58

The carrying amounts of investment property changed as follows in the year

under review:

Carrying amount Additions Disposals Reclassi- Depreciation Carrying amount

Jan. 1, 2001 fications Dec. 31, 2001

€m €m €m €m €m €m

Investment property 145 0 – 0 2 143

The fair value of investment property amounts to €140 million.

108 >


(24) Other assets

Notes Dec. 31, 2001 Dec. 31, 2000

€m €m

Deferred tax assets (25) 824 762

Intangible assets (26) 93 65

Prepaid expenses 169 301

Collection documents – 412

Receivables from tax authorities 8 –

Miscellaneous 80 1,066

Total 1,174 2,606

€110 million (previous year: €110 million) of the prepaid expenses relates to prepaid rent

or lease expenses.

With the application of IAS 39, the deferred premiums/discounts carried under other assets

in previous years are now allocated to their relevant balance sheet items, and thus to the

relevant financial instruments.

The collection documents reported here in the previous year are carried under investment

securities (22) in fiscal year 2001.

Miscellaneous receivables include advances amounting to €14 million and receivables from

the insurance business amounting to €2 million. The sharp decline is due partly to the

asset-side foreign currency translation adjustment item of €672 million reported here in the

previous year.

(25) Deferred tax assets

Dec. 31, 2001 Dec. 31, 2000

€m €m

Deferred tax assets

on temporary differences 284 145

on tax loss carryforwards, thereof 540 617

domestic 503 –

foreign 37 –

Total 824 762

The acquisition of subsidiaries increased deferred tax assets on tax loss carryforwards in

the Group by €37 million year-on-year; this amount was taken directly to equity. This also

increased deferred tax assets on temporary differences by €32 million.



Deferred tax assets were recognized in connection with temporary differences

relating to the following balance sheet items, and in connection with unused tax

losses:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Assets

Loans and advances 73 1

Trading assets 108 –

Investment securities 233 3


Intangible assets – 5

Other assets 1 –

Liabilities

Amounts due to other banks and customers 169 6

Trading liabilities 73 –

Hedging derivatives 270 –

Provisions for pensions and other employee benefits 16 19

Other provisions 50 66

Other items of liabilities 32 29

1,033 145

Tax loss carryforwards 540 617

Netted against deferred tax liabilities 749 –

Total 824 762

There were no deductible temporary differences and tax loss carryforwards at December 31,

2001 for which no deferred tax assets were recognized in the balance sheet.

(26) Intangible assets

Dec. 31, 2001 Dec. 31, 2000

€m €m

Software 43 52

Purchased goodwill 14 3

Advance payments on intangible assets 36 10

Total 93 65

110 >


A comparison of historical cost and cumulative amortization with the prior-period

amounts is presented below:

Historical cost Cumulative amortization

Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000

€m €m €m €m

Software 198 171 155 119

Purchased goodwill 16 3 2 –

Advance payments on intangible assets 36 10 – –

Total 250 184 157 119

The carrying amounts of intangible assets changed as follows in the year under

review:

Carrying amount Additions Disposals Reclassi- Amortization Carrying amount

Jan. 1, 2001 fications Dec. 31, 2001

€m €m €m €m €m €m

Software 52 23 – 2 34 43

Purchased goodwill 3 14 1 – 2 14

Advance paymentson intangible assets 10 29 1 –2 – 36

Total 65 66 2 – 36 93

(27) Deposits from other banks

Dec. 31, 2001 Dec. 31, 2000

€m €m

Domestic banks

Payable on demand 278 311

With an agreed maturity or withdrawal notice 19,583 11,068

19,861 11,379

Foreign banks

Payable on demand 284 80


6,958 3,472

Total 26,819 14,851

€1,489 million of the deposits from other banks is covered by fair value hedges.



(28) Due to customers

Amounts due to customers are composed of savings deposits, amounts payable on demand

and term deposits, including savings bonds.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Savings deposits

With an agreed withdrawal notice of three months 23,579 23,453

With an agreed withdrawal notice of more than three months 712 995

24,291 24,448

Other amounts due

Payable on demand 18,351 15,935


37,997 39,516

Money market liabilities 30 –

Total 62,318 63,964

Domestic customers 52,668 60,432

Foreign customers 1,715 3,532

Total 62,318 63,964

€623 million of the amounts due to customers is covered by fair value hedges.

(29) Securitized liabilities

Amounts reported as securitized liabilities relate to bonds, including mortgage bonds and

public-sector mortgage bonds (Pfandbriefe), money market instruments (e.g. certificates of

deposit, Euro notes, commercial paper), own acceptances outstanding and promissory notes

outstanding.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Mortgage bonds 1,451 1,824

Public-sector mortgage bonds (Pfandbriefe) 8,207 10,252

Other debt instruments 29,810 34,519

Total 39,468 46,595

€22,493 million of the securitized liabilities is covered by fair value hedges.

In fiscal year 2001, own bonds are deducted directly from holdings of securitized liabilities

in the amount of €468 million. In the previous year, own bonds were reported under trad-

ing assets and investment securities (in the total amount of €471 million).

112 >


(30) Trading liabilities

Trading liabilities consist of the negative fair values of derivatives carried in the trading

portfolio.

Dec. 31, 2001

€m

Negative fair values of trading derivatives 297

Negative fair values of economic hedging derivatives 263

Total 560

In prior-year periods, trading liabilities were reported under other liabilities (36).

(31) Hedging derivatives

Hedges with negative fair values that qualify for hedge accounting in accordance with

IAS 39 are composed of the following items:

Fair Value Hedge

Dec. 31, 2001

€m

Assets

Hedging derivatives on loans to other banks

Originated loans 142

Purchased available-for-sale loans 24

166

Hedging derivatives on loans to customers

Originated loans 626

Purchased available-for-sale loans 109

735

Hedging derivatives on investment securities

Bonds and other fixed-income securities 1,340

1,340

Liabilities

Deposits from other banks 6

Due to customers 7

Securitized liabilities 152

Subordinated liabilities 7

172

Total 2,413



(32) Provisions

Dec. 31, 2001 Dec. 31, 2000

€m €m


Provisions for taxes

for current tax obligations 45 131

for deferred tax obligations 692 392

737 523

Other provisions 352 502

Total 1,641 1,553

(33) Provisions for pensions and other employee benefits

The provisions for pensions and other employee benefits relate primarily to provisions for

the obligations to pay occupational pensions on the basis of direct pension commitments.

The nature and amount of the pension payments of those employees entitled to pension

benefits are governed by the applicable pension rules (including pension guidelines and

pension fund rules), which depend largely on the date of commencement of employment.

The provisions for pension obligations changed as follows:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Balance at Jan. 1 528 459

Addition of DSL Bank (2000) – 49

Appropriations

Current service cost 7 8

Past service cost 1

Interest expense 31 29

Effects of plan curtailments and settlements 17 17

55 55

Utilization

Pension benefits paid 34 36

Provisions for pension commitments by subsidiaries 3 1

Balance at Dec. 31 552 528

A total expense of €55 million (previous year: €55 million) was recognized in the income

statement for Deutsche Postbank AG in the year under review and reported in full under

administrative expenses.

114 >


The provision for pensions and other employee benefits is derived from the

present value of the pension obligations:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Present value of pension obligations 588 554

Unrecognized actuarial losses –39 –28

Unrecognized past service cost – 1

Present value of pension obligations attributable to subsidiaries 3 1


The amount of net unrecognized actuarial losses is less than 10 % of the present value of the

defined benefit obligation of €588 million, so this amount has not yet been recognized in the

income statement.

(34) Provisions for taxes

Provisions for current taxes relate to current payment obligations to the tax authorities.

Balance at Balance at

Jan. 1, 2001 Utilization Reversal Additions Dec. 31, 2001

€m €m €m €m €m

Current taxes 131 108 2 24 45

Deferred taxes 392 – – 300 692

Total 523 108 2 369 737

Deferred tax liabilities relate to the following balance sheet items:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Assets

Loans and advances 204 1

Trading assets 178 13

Hedging derivatives 26 –

Investment securities 546 310


Other assets 87 –

Liabilities

Amounts due to other banks and customers 95 4

Trading liabilities 3

Other provisions 8

Other items of liabilities 282 32

1,441 392

Netted against deferred tax assets 749 –

Total 692 392



(35) Other provisions

The other provisions changed as follows in the year under review:

Balance at Balance at

Jan. 1, 2001 Utilization Reversal Additions Dec. 31, 2001

€m €m €m €m €m

Restructuring 145 15 11 90 209

Staff costs 1 1 0 8 8

Obligations fromintragroup settlements 237 – 237 – –

Miscellaneous 119 19 5 40 135

Total 502 35 253 138 352

The provision for restructuring was set up for the outlines of a far-reaching reform of the

operating and organizational structure resolved by the Management Board. The aim is to

create an organizational structure that is competitive in the long term and that meets the

industry-standard development criteria.

Provisions for staff costs relate to provisions for jubilee benefits amounting to €8 million.

Obligations from intragroup settlements relate to provisions for value-added tax to be calcu-

lated on services rendered by Deutsche Post AG.

The miscellaneous other provisions include the provisions for risk compensation amounts of

the Postbeamten-Krankenkasse (Postal Civil Service Health Insurance Fund) amounting to

€77 million, provisions for litigation costs amounting to €11 million and provisions for audit

costs amounting to €2 million.

(36) Other liabilities

Dec. 31, 2001 Dec. 31, 2000

€m €m

Trade payables 67 61

Liabilities from other taxes 19 21

Miscellaneous liabilities 267 332

Deferred income 163 1,269

Trading liabilities – 40

Total 516 1,723

With the application of IAS 39, the deferred premiums/discounts reported under other liabil-

ities in the previous year (€134 million in 2000) are now allocated to their relevant balance

sheet items, and thus to the relevant financial instruments.

116 >


The trading liabilities reported under other liabilities in fiscal year 2000 are carried as a

separate balance sheet item (30) in 2001.

Miscellaneous other liabilities include liabilities from early termination fees of €13 million,

expenses for outstanding invoices amounting to €60 million, expenses for management

bonuses amounting to €6 million and expenses for outstanding vacation entitlements and

other compensated absences amounting to €19 million.

(37) Hybrid capital

Dec. 31, 2001 Dec. 31, 2000

€m €m

Subordinated liabilities1 866 371

Profit participation certificates outstanding2 253 235

Contributions by typical silent partners 55 51

Total 1,174 657

The items reported as hybrid capital correspond to section 10 (4, 5 and 5a) of the KWG

(German Banking Act), and are classified as liable capital.

€37 million (previous year: €37 million) of the subordinated liabilities is attributable to

Deutsche Postbank International S.A., Luxembourg.

€329 million of the subordinated liabilities is hedged against changes in fair value.

The interest expense on subordinated liabilities amounts to €27 million (previous year:

€27 million). Deferred interest not yet due amounting to €12 million (previous year:

€12 million) is also carried as hybrid capital and allocated to subordinated liabilities.

Holders of profit participation certificates receive an annual profit-related distribution rank-

ing prior to shareholders’ profit rights; the distribution right is reduced if and to the extent

that no distributable profit is available.

Interest for 2001 on profit participation certificates outstanding amounting to €18 million

(previous year: €19 million) is also allocated directly to this item.

The interest expense on contributions of assets by silent partners amounts to €4 million

(previous year: €3 million).


1 The subordinated liabilities are own funds within the meaning of section 10 (5a) of the KWG (German Banking Act). Creditors’ claimsfor repayment of these liabilities rank behind the claims of other creditors. No early repayment obligations may arise. In the event ofbankruptcy or liquidation, they may only be repaid after all prior-ranking creditors have been satisfied.

2 Profit participation certificates serve to strengthen liable capital in accordance with the provisions of the German Banking Act. Theyparticipate fully in losses. Interest is paid only if an unappropriated surplus is recorded. The claims of profit participation certificateholders for repayment of their capital rank behind the claims of other creditors.


(38) Shareholders’ equity

Dec. 31, 2001 Dec. 31, 2000

€m €m

Issued capital 410 409

Share premium 1,159 1,160

Retained earnings 3,212 2,930

thereof from first-time application of IAS 39 134 –

Revaluation reserve

From first-time application of IAS 39 259 –

From changes in the fair values of available-for-sale financial instruments –330 –

–71 –

Unappropriated surplus 137 81

Total 4,847 4,580

Postbank’s issued capital is composed of 16 million no-par value registered shares.

To ensure a rounded amount following the conversion to the euro, the issued capital was

increased to €410 million by converting a corresponding portion of the share premium.

The Management Board is authorized to increase the share capital on one or more occasions

by issuing new shares against cash or non-cash contributions. Aggregate authorized capital

is limited to half of the share capital; the authorized capital expires on December 5, 2005.

In addition to appropriations from the net profit of Deutsche Postbank AG, retained earnings

contain Group interests in the net retained profits or accumulated losses of consolidated

subsidiaries where these have been recorded since the subsidiaries joined the Group.

Retained earnings also include the cumulative effects of consolidation adjustments, as well

as adjustments from the first-time application of IAS 39.

Adjustments to retained earnings from the first-time application of IAS 39 relate only to

changes in the fair values of transactions whose changes in fair value would be recognized

in the income statement. In the case of transactions whose changes in fair value would

have been credited or charged directly to the revaluation reserve, such changes have been

recognized in the revaluation reserve for the first-time application of IAS 39.

118 >


The gains or losses on the measurement of available-for-sale financial instruments

reported in the revaluation reserve changed as follows:

Available-for-sale

financial instruments

€m

Balance at Dec. 31, 2000 0

First-time application IAS 39 259

Available for sale, unhedged 259

Additions/disposals in 2001 after deferred taxes –346

Available for sale, hedged (ineffective portion) –94

Available for sale, unhedged –252

Reclassified to the income statement 16

Balance at Dec. 31, 2001 –71

Other disclosures

(39) Segment reporting

Segment reporting by business division

Postbank Group manages its activities on the basis of a management information system

whose core component is management accounting by business division. The business div-

isions correspond to the Group’s organizational structure.

Private Customers Corporate Banking Financial Markets Others Group

€m €m €m €m €m €m €m €m €m €m

2001 2000 2001 2000 2001 2000 2001 2000 2001 2000

Income 1,391.7 1,433.4 300.7 269.2 164.5 127.2 309.1 276.2 2,166 2,106

Expenses –1,245.7 –1,296.9 –206.3 –192.0 –77.9 –65.6 –281.1 –267.5 –1,811 –1,822

Allowance for losses onloans and advances –39.7 –37.7 –15.6 –15.5 0.4 –10.7 –47.1 –12.1 –102 –76

Other income/expense 9.3 3.0 1.6 0.7 –6.0 –2.3 85.1 24.6 90 26

Segment result 115.6 101.8 80.4 62.4 81.0 48.6 66.0 21.2 343 234

Segment assets 14,745 13,663 23,203 16,502 12,920 9,433 84,277 89,647 135,145 129,245

Segment liabilities 45,226 41,115 3,112 3,089 8,344 7,919 72,483 73,287 129,165 125,410

Calculation of profit in the management accounting system is based on state-of-the-art

standards for modern performance reporting. The “Others” item contains consolidation

adjustments, items not attributable to the business divisions, unallocated overhead costs

and the Treasury result.

The prior-period amounts were adjusted to reflect the organizational structures prevailing in

2001 as well as modified allocation criteria.



Segment reporting by geographical region

The allocation of segments by the domicile of the retail outlet or Group company produces

the following distribution:

Assets Liabilities Income Profit

before tax

Dec. 31, 2001 €m €m €m €m

Germany 109,559 104,651 2,057 294

Rest of world 25,586 24,514 109 49

Total 135,145 129,165 2,166 343

(40) Contingencies and obligations

Contingent liabilities arise from past events that will lead to possible future obligations.

These obligations arise from the occurrence of uncertain future events whose settlement

amount cannot be estimated with sufficient reliability.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Contingent liabilities

on guarantees and warranties 1,969 941

Other obligations

Irrevocable loan commitments 12,001 8,723

Total 13,970 9,664

(41) Bonds outstanding

Dec. 31, 2001 Dec. 31, 2000

€m €m

Bonds outstanding

Bonds issued 21,237 24,324

Registered mortgage bonds issued as collateral 180 96

Public-sector mortgage bonds (Pfandbriefe)/municipal bonds 169 91

Cover requirement for bonds outstanding 21,586 24,511

120 >


(42) Cover for bonds outstanding

Dec. 31, 2001 Dec. 31, 2000

€m €m

Mortgage bond cover

Loans to other banks (mortgage loans) 6,067 –

Loans to customers (mortgage loans) 5,058 6,567

Total mortgage bonds requiring cover 1,010 5,477

Excess cover 10,115 1,090

Municipal bond cover

Loans to other banks – public-sector loans 998 1,191

Loans to customers – public-sector loans 20,588 22,235

Total municipal bonds requiring cover 16,180 18,989

Excess cover 5,406 4,437

Cover for interest expenses on mortgage bonds

Interest expenses on mortgage bonds 278 301

Interest income from cover assets 363 413

Excess cover 85 112

Cover for interest expenses on municipal bonds

Interest expenses on municipal bonds 764 895

Interest income from cover assets 1,237 1,350

Excess cover 474 455

(43) Foreclosures and compulsory administration

Dec. 31, 2001 Dec. 31, 2000

Number Number

Foreclosures pending 638 540

Compulsory administration proceedings 235 197

Foreclosures completed 127 98



(44) Fair value of financial instruments carried at amortized cost

In accordance with IAS 39.166 in conjunction with IAS 32, both the carrying amounts and the

fair values must be disclosed for financial instruments carried at amortized cost. As defined

by IAS 39, fair value is the amount at the balance sheet date for which an asset could be

exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length

transaction.

If there is an active market for a financial instrument (e.g. a stock exchange), the fair value is

expressed as the market or quoted price at the balance sheet date. Because there is no

active market for all assets, the fair value of such instruments must be calculated by using

investment techniques (in particular the discounted present value method and option pricing

models). The parameters factored into the calculation of fair value are based on market con-

ditions at the balance sheet date.

The fair values are compared with the carrying amounts (amortized cost) of the

financial instruments, classified by balance sheet item:

Dec. 31, 2001

Carrying Fair value

amount

Assets

Cash reserve 1,373 1,373



Allowance for losses on loans and advances –621 –621


89,195 89,963

Liabilities

Deposits from other banks 26,819 27,258

Due to customers 62,318 61,467

Securitized and subordinated liabilities 40,587 41,539

129,704 130,264

Management of the market risk of positions not allocated to the trading portfolio is based on

their risk content in various portfolios, and not on an individual product basis. This operational

management is based on present value concepts that also include the use of derivatives in the

portfolios. The fair values of these derivatives are presented in the overview of fair values (see

note 48). The fair values of balance sheet items should therefore be assessed in conjunction

with the fair values of the derivatives.

122 >


(45) Foreign currency volumes

Dec. 31, 2001 Dec. 31, 2000

€m €m

Foreign currency assets 16,415 12,214

Foreign currency liabilities 18,832 15,894

(46) Disclosures on significant concentration of business

The Group’s lending and borrowing business is largely determined by the business activities

of the parent company, Deutsche Postbank AG.

The percentage classification of loans by sector is as follows:

2001 2000

% %

Dependent employees and other private individuals 18.9 17.2

Not-for-profit organizations 0.1 0.1

Public sector 23.1 24.4

Enterprises and self-employed private individuals

Credit institutions 48.3 49.2

Other enterprises and self-employed private individuals 9.6 9.1

100.0 100.0

The percentage classification by German and foreign residents is as follows:

2001 2000

% %

German residents 76.1 77.8

Foreign residents 23.9 22.2

100.0 100.0



(47) Financial instruments in accordance with IAS 39 – Measurement categories

Dec. 31, 2001

€m

Fair value hedge Unhedged

Assets 38,213 98,540

Originated loans 11,992 61,099

Loans to other banks 2,782 32,325

Loans to customers 9,210 28,774

Securities purchased directly from the issuer 1,250 9,481


Available-for-sale assets 23,248 18,386

Loans to other banks 736 1,559

Loans to customers 3,112 2,293


Held to maturity investments – 4,167

Loans to customers – 889

Investment securities – 3,278

Held for trading – 5,407

Trading assets – 5,407

Hedging derivatives 1,723 –

Liabilities 27,018 104,560

Liabilities 24,605 104,000

Deposits from other banks 1,489 25,330

Due to customers 623 61,695

Securitized liabilities 22,493 16,975

Held for trading – 560

Trading liabilities – 560

Hedging derivatives 2,413 –

124 >


(48) Derivatives

The Postbank Group uses derivatives primarily to hedge positions as part of its asset/liability

management policy. They are also entered into to a limited extent for trading purposes.

Derivatives on foreign currencies are mostly entered into in the form of currency forwards,

currency swaps, cross-currency swaps and currency options. Interest rate derivatives relate pri-

marily to interest rate swaps, forward rate agreements and interest rate futures and options;

forward transactions in fixed-income securities are occasionally entered into.

The presentation of derivatives follows the recommendation of the Verband öffentlicher Banken

(Association of German Public Sector Banks). The notional amounts represent the gross volume

of all sales and purchases. The notional amount is a reference value for determining recipro-

cally agreed settlement payments; it does not represent recognizable receivables or liabilities.

The fair values result from the gross replacement costs of the individual contracts and do not

reflect any netting agreements or counterparty credit weightings.

Holdings of derivatives are composed of the following items:

Notional amounts Positive fair values Negative fair values

Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000

€m €m €m €m €m €m

Trading derivatives 71,781 – 905 – 560 –

Hedging derivatives 58,115 – 1,723 – 2,413 –

Total 129,896 100,080 2,628 2,255 2,973 2,576



The following table presents the open interest-rate and foreign-currency forward and option

contracts of the Postbank Group at the balance sheet date.

Fair Value

Notional Positive Negative

amounts fair values fair values

Dec. 31, 2001 Dec. 31, 2001 Dec. 31, 2001

€m €m €m

Trading derivatives

Foreign currency derivatives

OTC currency instruments

Currency forwards 713 17 10

Currency swaps 7,933 47 71

Total holdings of OTC currency instruments 8,646 64 81

Total holdings of foreign currency derivatives 8,646 64 81

Interest rate derivatives

OTC derivatives

Interest rate swaps 52,285 795 455

Cross-currency swaps 32 32 4

FRAs 2,379 9 6

OTC interest rate options 203 – 10

Other interest rate contracts 56 – –

Total holdings of OTC derivatives 54,955 836 475

Exchange-traded interest rate futures 5,609 – –

Exchange-traded interest rate options 2,490 2 1

Total holdings of interest rate derivatives 63,054 838 476

126 >


Fair value

Notional Positive Negative

amounts fair values fair values

Dec. 31, 2001 Dec. 31, 2001 Dec. 31, 2001

€m €m €m

Equity/index derivatives

Equity options (long/short) 72 3 2

Total holdings of OTC derivatives 72 3 2

Exchange-traded equity/index futures 4 – –

Exchange-traded equity/index options 5 – –

Total holdings of equity/index derivatives 81 3 2

Total holdings of derivative assets/(liabilities)held for trading 71,781 905 560

thereof economic hedging derivatives 17,842 630 255

Hedging derivatives

Fair value hedges

Interest rate swaps 52,640 1,017 2,264

Cross-currency swaps 5,475 706 149

Total holdings of derivative assets/(liabilities)held for hedging purposes 58,115 1,723 2,413

Total holdings of derivative assets/(liabilities) 129,896 2,628 2,973

The effects of the first-time application of IAS 39 relating to the recognition of derivatives

and the adjustments to the carrying amounts of balance sheet items designated as hedged

items for hedge accounting purposes in accordance with IAS 39 are as follows:

First-time adjustment to retained

earnings in accordance with IAS 39

Jan. 1, 2001

€m

Value of derivatives after recognition at fair values –380

thereof:

Trading derivatives: 256

Economic hedging derivatives 256

Hedging derivatives: –636

Fair value hedges –636

Changes in the carrying amount of hedged items that are a componentof effective hedges for hedge accounting purposes 624

less: deferred taxes from initial remeasurement –110

Total holdings net of deferred taxes 134



Total holdings of recognized derivative assets and liabilities:

Hedging derivatives Trading derivatives

Positive Negative Positive Negative

fair values fair values fair values fair values

Dec. 31, 2001 Dec. 31, 2001 Dec. 31, 2001 Dec. 31, 2001

€m €m €m €m

Remaining maturity

less than 3 months 120 87 52 83

3 months to 1 year 395 133 63 165

1 to 5 years 668 1,071 434 214

More than 5 years 540 1,122 355 98

1,723 2,413 905 560

The remaining maturity is the period between the balance sheet date and the contractual

maturity of the asset or liability.

The following table presents the positive and negative fair values of derivatives by counter-

party.

Positive Negative

fair values fair values

Dec. 31, 2001 Dec. 31, 2001

€m €m

Counterparties

Banks in OECD countries 2,534 2,729

Public institutions in OECD countries 94 244

Other counterparties in OECD countries – –

2,628 2,973

(49) Risk position

Counterparty (default), price, liquidity and operational risks are a component of the banking

business. Postbank’s risk management performs its independent functions at Postbank’s Head

Office for the entire Postbank Group. Its activities focus on internal information processing to

enable the responsible division of Postbank Group to manage the various risks.

Postbank Group distinguishes between the following types of risk:

128 >


Counterparty (default) risk

Counterparty (default) risk consists of the following types of risk:

Credit risk

Postbank defines credit risks as possible losses arising from the failure or unwillingness of

customers to discharge their payment obligations (default risk), or from a deterioration in

creditworthiness.

The default risk results from the potential partial or complete default by a borrower or a

counterparty on contractually assured payments. By contrast, the creditworthiness (credit

standing) risk results from the potential loss in the value of receivables in the event of

deterioration in the Bank’s borrowers’ or counterparties’ financial position.

Country risk

The country risk describes the transfer risk inherent in cross-border payments that arises

from the willingness to pay (political risk) and ability to pay (economic risk) of a country

due to its national sovereignty. Where funds are loaned abroad, the relevant country risk

must be reflected in addition to the specific or credit risk in that country.

Settlement risk

Settlement risk is the risk arising to the Bank from default in the settlement of obligations

or untimely performance at Postbank AG either directly or indirectly as an agent for cus-

tomers or third parties.

Price risk

Price risk arises primarily from open positions in interest rate, currency and equity products;

these products are subject to both specific and general market fluctuations. In addition to

general price risk, financial instruments may also be subject to issuer risks.

The measurement of Postbank’s price risk is based on the value-at-risk method, with a

holding period of ten trading days and a 99 percent confidence level assumed for the port-

folios, reflecting the requirements of Principle I. The probability that a loss will not exceed

the computed risk within ten days is 99 percent.



The following value-at-risk figures were calculated using these parameters for the

trading book portfolios of Postbank AG as of December 31, 2001:

Financial markets

Interest rate Capital market Trading by

trading incl. equity Postbank Total trading book

Money market trading International incl. correlation

2001 2001 2001 2001 2000

€m €m €m €m €m

Value at risk at Dec. 31 3.51 2.06 0.51 3.95 3.99

Minimum value at risk 0.25 1.17 0.19 2.21 0.48

Maximum value at risk 5.25 7.05 6.29 7.02 10.18

Average value at risk 2.62 2.69 0.98 3.83 2.03

The quality of the computed value-at-risk figures is assured by regular comparison with

actual performance (clean backtesting).

In addition to the value-at-risk figures, worst case scenarios are computed at regular inter-

vals to enable an estimate of the effects of extreme market movements on the Postbank

portfolios.

Interest rate risk

Interest rate risk is the term used to denote changes in the fair values of interest-bearing

financial instruments resulting from changes in market interest rates. Interest rate risk arises

if there are differences between interest-bearing assets and liabilities for certain maturity

ranges. To classify interest rate risk, interest-bearing financial instruments are allocated for

hedging purposes to the maturity range in which they are locked in to fixed interest rates,

based on the time to maturity or an earlier interest rate adjustment date.

The following table presents the open fixed-rate positions of Deutsche Postbank AG.

Positions with a positive value denote the fixed-rate risk of assets, i.e. there is a surplus of

assets; negative values represent a surplus of liabilities.

The effects on Postbank AG’s hedges (e.g. interest rate swaps) are contained in the interest

rate risk position shown below.

130 >


Interest rate risk position:

Maturity ranges

1 to less than 4 to less than 6 to less than 8 to less than

4 years 6 years 8 years 10 years

€m €m €m €m

Fixed-rate assets 119,516 17,381 12,883 8,213

Fixed-rate liabilities –120,809 –15,344 –13,545 –7,607

Interest rate risk position –1,293 2,036 -661 606

Liquidity risk

Above and beyond the existing daily operating liquidity management systems in the

Financial Markets business division, the financial projections produced by risk management

also forecast the development of investable cash flow for the current and the following

year to obtain advance information on the development of Postbank’s cash position.

Operational risk

Postbank AG approaches operational risk as a separate type of risk. The underlying definition

meets the standards issued by the Basel Committee on Banking Supervision, which defines

operational risk as “the risk of direct or indirect loss resulting from inadequate or failed

internal processes, people and systems or from external events”. Bank-specific criteria have

been developed to distinguish operational risk from the other types of risk, as well as for

the individual subcategories of operational risk.



Risk assets and capital ratio

Regulatory own funds (based on the HGB financial statements) at December 31, 2001 are

as follows:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Risk-weighted assets 39,176 32,054

Capital charge for market risk positions 4,375 151

Positions for which capital charges are required 43,551 33,942

Tier 1 capital 2,626 2,260

Tier 2 capital 1,590 1,269

Liable capital 4,216 3,529

Eligible own funds 4,349 3,637

Tier 1 ratio (%) 6.7 6.7

Capital ratio (%) 10.8 10.4

Overall capital ratio (%) 10.0 10.7

With a capital ratio of 10.8 percent, Deutsche Postbank Group satisfies the minimum

requirement of 8 percent.

132 >


(50) Maturity structure

As of December 31, 2001:

Payable Less than 3 months 1 to More than

on demand 3 months to 1 year 5 years 5 years Total

€m €m €m €m €m €m

Loans and advancesto other banks 1,860 8,170 7,295 10,967 9,110 37,402

Loans and advancesto customers 1,434 2,275 2,741 16,808 21,020 44,278

Trading assets 35 563 1,727 2,553 529 5,407

Hedging derivatives 120 395 668 540 1,723

Investment securities 932 2,855 5,428 24,985 13,858 48,058

Other assets 851 6 76 231 10 1,174

Total 5,112 13,989 17,662 56,212 45,067 138,042

Deposits from other banks 438 11,298 3,753 5,498 5,832 26,819

Due to customers 18,342 29,205 5,444 5,627 3,700 62,318

Securitized liabilities 661 7,070 23,501 8,236 39,468

Trading liabilities 83 165 214 98 560

Hedging derivatives 87 133 1,071 1,122 2,413

Other liabilities 342 38 34 65 37 516

Provisions 695 62 26 145 713 1,641

Provisions for pensions 2 5 26 519 552

Provisions for taxes 692 45 – – – 737

Other provisions 3 15 21 119 194 352

Hybrid capital 260 218 696 1,174

Total 19,817 41,434 16,885 36,339 20,434 134,909

The remaining maturities of derivatives are presented separately in a table in note (48).



As of December 31, 2000:

Payable on Less than 3 months 1 to More than

demand 3 months to 1 year 5 years 5 years Total

€m €m €m €m €m €m

Loans and advancesto other banks 1,388 9,258 5,039 12,700 9,629 38,014

Loans and advancesto customers 1,030 2,197 2,743 13,949 19,404 39,323

Trading assets – 54 412 223 75 764

Investment securities 2 3,847 5,063 22,480 19,752 51,144

Other assets

Total 2,420 15,356 13,257 49,352 48,860 129,245

Deposits from other banks 391 7,812 1,471 1,646 3,531 14,851

Due to customers 15,935 29,465 3,803 8,246 6,515 63,964

Securitized liabilities 2,859 6,191 25,947 11,598 46,595

Trading liabilities 8 28 3 1 40

Hybrid capital 427 230 657

Total 16,326 40,144 11,493 36,269 21,875 126,107

134 >


(51) Intragroup and associate receivables

Receivables from unconsolidated subsidiaries and associates are presented below:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Due from customers

Subsidiaries 119 178

119 178

Other assets

Subsidiaries 9 160

Associates 2 –

11 160

Total 130 338

The items relate primarily to receivables from Deutsche Post AG.

(52) Intragroup and associate payables

Payables to unconsolidated subsidiaries and associates are presented below:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Due from customers

Subsidiaries 53 128

Associates 31 –

84 128

Other liabilities

Subsidiaries 99 2

Associates 5 –

104 2

Total 188 130

The items relate primarily to payables to Deutsche Post AG.



(53) Other financial obligations

Commencing in 2000, Postbank pays 33 percent of the gross compensation of its active civil

servants and the notional gross compensation of its civil servants on leave of absence to a

pension fund (Unterstützungskasse) established for this purpose. Postbank has no further

obligations for benefits paid by the pension fund, which are the responsibility of the German

government.

Postbank has issued a comfort letter for its subsidiary Deutsche Postbank International S.A.,

Luxembourg, in which it undertakes to ensure that, with the exception of political risk, PBI

S.A. will be able to meet its obligations.

Postbank AG has issued guaranty bonds for its subsidiary PB Capital Corp., Delaware, USA, in

the amount of $632.4 million. These include a payment guaranty for refinancing ($500.0 mil-

lion), a guaranty bond for swaps and derivatives ($96.0 million), a rental guaranty for business

premises in New York ($26.4 million) and a guaranty bond for the CP program ($10.0 million).

Postbank has additional funding obligations from the voluntary deposit protection fund of

the Bundesverband öffentlicher Banken Deutschlands e.V. (Association of German Public

Sector Banks) in the amount stipulated in the bylaws, and the deposit protection amount

determined in fiscal year 2000.

In addition, Deutsche Postbank International S.A., Luxembourg, is a member of the “Association

pour la Garantie des Dépôts Luxembourg” (AGDL), the Luxembourg deposit guaranty and

investor indemnity fund.

Deutsche Postbank AG underwrites all issues by DSL Finance N.V.

136 >


(54) Subordinated assets

Assets are subordinated if their recovery as receivables ranks behind other creditors in the

event of liquidation or bankruptcy of the issuer.

Balance sheet assets contain the following subordinated assets.

Dec. 31, 2001 Dec. 31, 2000

€m €m

Loans and advances to customers 114 158

Loans and advances to other banks 47 16

Investment securities 5

Total 166 179

(55) Trust activities

Trust activities are composed of the following items:

Dec. 31, 2001 Dec. 31, 2000

€m €m

Trust assets

Loans and advances to other banks 56 55


1,844 1,971

Trust liabilities

Trust funds for transmitted loans 857 916

Special fund of the State of Mecklenburg-Western Pomerania 68 71

Retired farmers’ pension fund 11 11

Special-purpose funds 908 973

1,844 1,971



(56) Related party disclosures

Name and domicile Equity interest Equity interest

(%) direct (%) indirect

1) Fully consolidated companies:

Deutsche Postbank International S.A., Luxembourg 100.0

Deutsche Postbank Asset Management S.A., Luxembourg 100.0

Deutsche Postbank Capital Management S.A., Luxembourg 100.0

Deutsche Postbank Vermögens-Management S.A., Luxembourg 100.0

Deutsche Postbank Fonds-Management S.A., Luxembourg 100,.

Deutsche Postbank Privat Investment Kapitalanlage-Gesellschaft mbH, Bonn 100.0

Postbank Data GmbH, Bonn 100.0

Postbank Immobilien und Baumanagement GmbH, Bonn 100.0

Postbank Immobilien und Baumanagement GmbH & Co. Objekt Leipzig KG, Bonn 90.0

Postbank EasyTrade.AG, Cologne 100.0

Postbank Systems AG, Bonn 100.0

RALOS Verwaltungs GmbH &Co. Vermietungs KG, Munich 94.0

DSL Finance N.V., Amsterdam 100.0

DSL Holding AG i.A., Bonn 85.93

einsnull IT-Support GmbH, Bonn 100.0

PB Fund Services GmbH, Bonn 100.0

Deutsche Postbank Finance Center GmbH, Luxembourg 90.0

DPBI Immobilien KGaA, Luxembourg 10.0 0.06

Postbank Leasing GmbH, Bonn3 100.00

PB (USA) Holdings Inc., Delaware, USA 100.00

PB Capital Corp., Delaware, USA 100.0

PB Realty Corp., New York, USA 94.65

PB Finance (Delaware), Inc., Delaware, USA 100.0

2) Proportionately consolidated companies:

PB Lebensversicherung Aktiengesellschaft, Hilden 50.0

PB Versicherung Aktiengesellschaft, Hilden 50.0

138 >

3 Formerly Sila Grundstücks-Vermietungsgesellschaft mbH, Bonn


3) Unconsolidated companies:

CREDA Objektanlage- und -verwaltungsgesellschaft mbH, Bonn 100.0

KORDOBA Gesellschaft für Bankensoftware mbH & Co. KG, Munich 21.86

KORDOBA Bankensoftware Verwaltungsgesellschaft mbH, Munich 23.0

interServ Gesellschaft für Personal- und Beraterdienstleistungen mbH, Bonn 100.0

VöB-ZVD Bank für Zahlungsverkehrsdienstleistungen GmbH, Bonn 75.0

DVD Gesellschaft für DV-gestützte Dienstleistungen mbH & Co. KG, Cologne 51.0

easytrade services Köln GmbH, Cologne 100.0

easytrade services Leipzig GmbH, Leipzig 100.0

DVB Processing GmbH, Frankfurt/Main 51.0

PB Factoring GmbH, Bonn 100.0

PB Erste Beteiligungen AG, Bonn 100.0

PB Zweite Beteiligungen GmbH, Bonn 100.0

PB Pensionsfonds-Service AG, Hilden 50.0

PB Mitarbeiter Pensionsfonds-Service AG, Hilden 50.0

Postbank P.O.S. Transact GmbH, Schwalbach am Taunus 50.0

Società di Commercializzazione e Distribuzione Ricambi S.p.A., Turin 29.1

(57) Employees

The average number of employees in the Group in the period under review was as

follows:

Total

2001 2000

Full-time

Civil servants 4,030 4,747

Salaried employees 4,693 4,336

Wage earners 153 173

8,876 9,256

Part-time4

Civil servants 1,080 1,123

Salaried employees 541 549

Wage earners 13 15

1,634 1,687

10,510 10,943


4 adjusted to FTEs


(58) Remuneration of the Management and Supervisory Boards

The total remuneration of the members of the Management Board in the period under

review was €2.98 million (previous year: €3.28 million).

€2.56 million (previous year: €1.71 million) was paid to former Management Board mem-

bers. Provisions for pensions covering all obligations to these individuals were set up in the

amount of €22.06 million (previous year: €25.05 million).

Loans of €0.42 million (previous year: €0.25 million) had been granted to members of the

Management and Supervisory Boards at the balance sheet date. No other contingent liabil-

ities had been entered into.

The remuneration paid to the members of the Supervisory Board amounted to €0.42 million

(previous year: €0.43 million).

(59) Supplemental disclosures

In accordance with section 2 (4) of the Postumwandlungsgesetz (PostUmwG – Postal Service

Transformation Act), the German government guarantees settlement of all liabilities existing

at the time of Deutsche Postbank AG’s registration in the commercial register. The govern-

ment guarantee for savings deposits expires no later than five years after the date of regis-

tration in the commercial register.

Deutsche Postbank AG has been a member of the Einlagensicherungsfonds des Verbandes

öffentlicher Banken (deposit protection fund of the Association of German Public Sector

Banks) since 1995.

Deutsche Postbank AG holds more than five percent of the voting rights of DSL Holding AG,

i.A., Bonn, as of December 31, 2001.

140 >


(60) Members of executive bodies

Management Board

The members of the Management Board are:

Prof Dr Wulf von Schimmelmann, Bonn (Chairman of the Management Board)

Dirk Berensmann, Unkel since January 1, 2002

Stefan Jütte, Bonn

Dr Wolfgang Klein, Bonn since January 1, 2002

Volker Mai, Bad Honnef

Loukas Rizos, Bonn

Lothar Rogg, Bonn since January 1, 2002

Wolfgang Schneider, Cologne until December 31, 2001

Achim Scholz, Bonn until November 30, 2001

Offices held by members of the Management Board of Deutsche Postbank AG as of

December 31, 2001 on supervisory boards or other supervisory bodies of large

corporations:

Prof Dr Wulf von Schimmelmann, Bonn

Function Company

Chairman of the Supervisory Board Postbank Systems AG, Bonn

Chairman of the Supervisory Board DSL Holding AG i.A., Bonn

Chairman of the Supervisory Board PB Lebensversicherung AG, Hilden

Chairman of the Supervisory Board PB Versicherung AG, Hilden

Chairman of the Board of Directors PB (USA) Holdings Inc., Wilmington (Delaware, USA), since September 26, 2001

Chairman of the Board of Directors PB Capital Corp., Wilmington (Delaware, USA), since September 26, 2001

Deputy Chairman of the Supervisory Board PB Fund Services GmbH, Bonn, since July 2, 2001

Member of the Board of Directors Accenture Corp., Irving (Texas, USA), since October 18, 2001

Member of the Management Board Bundesverband Öffentlicher Banken Deutschlands e.V. (VÖB), Bonn

Offices relinquished during the year

Chairman of the Supervisory Board Postbank EasyTrade.AG, Cologne, until February 13, 2001

Chairman of the Supervisory Board Neue Sentimental Film AG, Frankfurt, until November 30, 2001

Dirk Berensmann, Unkel

Function Company

No other offices

Mr. Berensmann was appointed to the Management Board effective January 1, 2002.



Stefan Jütte, Bonn

Function Company

Chairman of the Supervisory Board Postbank Leasing GmbH, Bonn, since February 15, 2001

Member of the Supervisory Board Postbank Leasing GmbH, Bonn, February 5 – February 14, 2001

Chairman of the Supervisory Board PB Factoring GmbH, Bonn, since October 24, 2001

Member of the Supervisory Board PB Factoring GmbH, Bonn, August 13 – October 23, 2001

Deputy Chairman of the Supervisory Board DSL Holding AG i.A., Bonn

Member of the Board of Directors PB (USA) Holdings Inc., Wilmington (Delaware, USA), since September 26, 2001

Member of the Board of Directors PB Capital Corp., Wilmington (Delaware, USA), since September 26, 2001

Member of the Board of Directors Deutsche Postbank International S.A., Luxembourg

Member of the Supervisory Board BVVG Bodenverwertungs- und Verwaltungsgesellschaft mbH, Berlin

Offices relinquished during the year

Chairman of the Advisory Board CREDA Objektanlage- und -verwaltungsgesellschaft mbH,

Bonn, until September 21, 2001

Chairman of the Advisory Board VÖB-ZVD Bank für Zahlungsverkehrsdienstleistungen GmbH,Bonn, until June 12, 2001

Dr Wolfgang Klein, Bonn

Function Company

Chairman of the Supervisory Board Postbank EasyTrade.AG, Cologne, since February 16, 2001

Chairman of the Advisory Board VÖB-ZVD Bank für Zahlungsverkehrsdienstleistungen GmbH,

Bonn, since June 13, 2001

Chairman of the Management Committee Postbank P.O.S. Transact GmbH, Schwalbach am Taunus, since September 20, 2001

Member of the Management Committee Postbank P.O.S. Transact GmbH, Schwalbach am Taunus,

September 6 – September 19, 2001

Member of the Supervisory Board PB Lebensversicherung AG, Hilden, since March 29, 2001

Member of the Supervisory Board PB Versicherung AG, Hilden, since March 29, 2001

Member of the Supervisory Board Comma Soft AG, Bonn

Member of the Administrative Board VISA Deutschland e.V., Frankfurt

Dr Wolfgang Klein was appointed to the Management Board effective January 1, 2002.

Dr Wolfgang Klein was a General Manager until December 31, 2001.

142 >


Volker Mai, Bad Honnef

Function Company

Chairman of the Supervisory Board Postbank Data GmbH, Bonn

Chairman of the Supervisory Board einsnull IT-Support GmbH, Bonn, since December 18, 2001

Deputy Chairman of the Supervisory Board einsnull IT-Support GmbH, Bonn, March 30 – December 17, 2001

Member of the Supervisory Board einsnull IT-Support GmbH, Bonn, March 15 – March 29, 2001

Chairman of the Supervisory Board Postbank Immobilien und Baumanagement GmbH, Bonn

Chairman of the Supervisory Board interServ Gesellschaft für Personal- und Beraterdienstleistungen mbH, Bonn

Deputy Chairman of the Supervisory Board Postbank Systems AG, Bonn

Deputy Chairman of the Supervisory Board Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH, Bonn

Deputy Chairman of the Board of Directors Deutsche Postbank International S.A., Luxembourg

Deputy Chairman of the Board of Directors Deutsche Postbank Capital Management S.A., Luxembourg

Deputy Chairman of the Board of Directors Deutsche Postbank Asset Management S.A., Luxembourg

Deputy Chairman of the Board of Directors Deutsche Postbank Vermögens-Management S.A., Luxembourg

Deputy Chairman of the Board of Directors Deutsche Postbank Fonds-Management S.A., Luxembourg

Member of the Advisory Board CREDA Objektanlage- und -verwaltungsgesellschaft mbH,

Bonn, until September 23, 2001

Chairman of the Advisory Board CREDA Objektanlage- und -verwaltungsgesellschaft mbH,

Bonn, since September 24, 2001

Chairman of the Advisory Board KORDOBA Gesellschaft für Bankensoftware mbH & Co. KG,

Munich, since July 10, 2001

Member of the Advisory Board KORDOBA Gesellschaft für Bankensoftware mbH & Co. KG,

Munich, until July 9, 2001

Member of the Supervisory Board Niedersächsische Landesgesellschaft mbH, Hanover

Member of the Administrative Board Bundesanstalt für Post und Telekommunikation Deutsche Bundespost, Bonn

Chairman of the Advisory Board Einlagensicherungsfonds des Bundesverbandes Öffentlicher

Banken Deutschlands e.V., Bonn

Chairman of the Investment Committee Einlagensicherungsfonds des Bundesverbandes Öffentlicher

Banken Deutschlands e.V., Bonn

Loukas Rizos, Bonn

Function Company

Chairman of the Supervisory Board Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH, Bonn

Chairman of the Board of Directors Deutsche Postbank International S.A., Luxembourg

Chairman of the Board of Directors Deutsche Postbank Capital Management S.A., Luxembourg

Chairman of the Board of Directors Deutsche Postbank Asset Management S.A., Luxembourg

Chairman of the Board of Directors Deutsche Postbank Vermögens-Management S.A., Luxembourg

Chairman of the Board of Directors Deutsche Postbank Fonds-Management S.A., Luxembourg

Deputy Chairman of the Supervisory Board Postbank EasyTrade.AG, Cologne

Chairman of the Supervisory Board PB Fund Services GmbH, Bonn, since July 2, 2001



Lothar Rogg, Bonn

Function Company

Member of the Supervisory Board Postbank EasyTrade.AG, Cologne

Member of the Supervisory Board Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH, Bonn

Member of the Supervisory Board PB Lebensversicherung AG, Hilden

Member of the Supervisory Board PB Versicherung AG, Hilden

Chairman of the Supervisory Board Mc Paper AG, Falkensee

Chairman of the Advisory Board of a total of eleven Deutsche Post distribution companies, each of them a GmbH

(private limited company) located in Germany, in each case since

September 20, 2001

Chairman of the Advisory Board of a total of eleven Deutsche Post retail companies, each of them a GmbH

(private limited company) located in Germany, in each case

since September 20, 2001

Lothar Rogg was appointed to the Management Board effective January 1, 2002.

Lothar Rogg was a General Manager until December 31, 2001.

Wolfgang Schneider, Cologne

Function Company

No other offices

Wolfgang Schneider left the Management Board effective December 31, 2001.

Achim Scholz, Bonn

Function Company

Chairman of the Board of Directors Eurogiro Network AS, Taastrup (Denmark), until November 30, 2001

Member of the Supervisory Board Postbank Systems AG, Bonn, until November 30, 2001

Member of the Supervisory Board interServ Gesellschaft für Personal- und Beraterdienstleistungen mbH,

Bonn, until November 30, 2001

Member of the Board of Trustees Organisationsforum Wirtschaftskongreß e.V., University of Cologne,

until November 30, 2001

Chairman of the Supervisory Board einsnull IT-Support GmbH, Bonn, March 30 – November 30, 2001

Member of the Supervisory Board einsnull IT-Support GmbH, Bonn, March 15 – March 29, 2001

Mr. Scholz left the Management Board effective November 30, 2001.

144 >


The members of the Supervisory Board of Deutsche Postbank AG are:

1. Shareholders’ representatives

Dr Klaus Zumwinkel, Chairman of the Board of Management of Deutsche Post AG, Bonn (Chairman)

Prof Dr Hans-E. Büschgen, Professor emeritus, Director of Forschungsinstitut für Leasing, Cologne

Dr Edgar Ernst, Member of the Board of Management of Deutsche Post AG, Bonn

Prof Dr Ralf Krüger, Professor, Wiesbaden University of Applied Sciences, Kronberg

Dr Axel Nawrath, Head of Department, Federal Ministry of Finance, Berlin since January 29, 2001

Dr Hans-Dieter Petram, Member of the Board of Management of Deutsche Post AG, Bonn

Dr Klaus Schlede, Chairman of the Supervisory Board of Deutsche Lufthansa AG, Cologne

Dr Manfred Schüler, State Secretary (retd.), Bonn

Dr-Ing Dieter Soltmann, Chairman of the Supervisory Board of Spaten – Franziskaner – Bräu KgaA, Munich

Dr Alfred Tacke, State Secretary, Federal Ministry of Economics and Technology, Berlin

2. Employees’ representatives

Michael Sommer, Deputy Federal Chairman of the ver.di trade union, Berlin (Deputy Chairman)

Marietta Auer, Head of Department, Deutsche Postbank AG, Head Office, Unterhaching

Rosemarie Bolte, “Fachbereichsleiterin” of the ver.di trade union, Stuttgart since March 15, 2002

Ralf Höhmann, Member of Deutsche Postbank AG’s Works Council, Stuttgart Branch, Stuttgart

Elmar Kallfelz, Chairman of Deutsche Postbank AG’s Central Works Council, Bonn

Harald Kuhlow, Chairman of Deutsche Postbank AG’s Works Council, Karlsruhe Branch, Karlsruhe since August 9, 2001

Sabine Lerner, Head of Special Projects, Deutsche Postbank AG, Head Office, Bonn until March 15, 2002

Bernd Lindenau, former Berlin Regional Chairman of the ver.di trade union, Berlin until March 15, 2002

Werner Schulte, former Regional Chairman of the ver.di trade union, Northern Region, Kiel until March 15, 2002

Sabine Schwarz, Chair of Deutsche Postbank AG’s Works Council, Berlin Branch, Berlin

Horst-Peter Voegler, Member of the Hanover Works Council of Deutsche Postbank AG, Langenhagen since March 15, 2002

Christine Weiler, Chair of Deutsche Postbank AG’s Works Council, Munich Branch, Munich

Walter Wortmann, Chairman of Deutsche Postbank AG’s Works Council, Dortmund Branch, Dortmund until February 28, 2001

(deceased)

Christel Zobeley, “Bundesfachgruppenleiterin” of the ver.di trade union’s Federal Executive Board, Berlin since March 15, 2002

Bonn, March 4, 2002

Deutsche Postbank Aktiengesellschaft

Management Board

Prof Dr Wulf von Schimmelmann

Dirk Berensmann Stefan Jütte Dr Wolfgang Klein

Volker Mai Loukas Rizos Lothar Rogg



Auditors’ Report

“Auditors’ Report

We have audited the consolidated financial statements of Deutsche Postbank AG, Bonn, for

the fiscal year January 1 to December 31, 2001, comprising the balance sheet, income

statement, statement of changes in equity, cash flow statement and notes. The preparation

and content of the consolidated financial statements are the responsibility of the company’s

Management Board. Our responsibility is to express an opinion on whether the consolidated

financial statements comply with the International Accounting Standards (IASs), based on

our audit.

We conducted our audit of the consolidated financial statements in accordance with German

auditing requirements and German generally accepted standards for the audit of financial

statements promulgated by the Institut der Wirtschaftsprüfer (IDW), as well as in accordance

with the International Standards on Auditing (ISAs). Those standards require that we plan

and perform the audit to obtain reasonable assurance as to whether the consolidated

financial statements are free of material misstatements. Knowledge of the business activ-

ities and the economic and legal environment of the Group and evaluations of possible mis-

statements are taken into account in the determination of audit procedures. The evidence

supporting the amounts and disclosures in the consolidated financial statements are exam-

ined on a test basis within the framework of the audit. The audit includes assessing the

annual financial statements of the companies included in the consolidated financial state-

ments, defining the basis of consolidation, and assessing the accounting principles used

and significant estimates made by management, as well as evaluating the overall presenta-

tion of the consolidated financial statements. We believe that our audit provides a reason-

able basis for our opinion.

In our opinion, the consolidated financial statements give a true and fair view of the net

assets, financial position, results of operations and cash flows of the Group for the fiscal

year in accordance with IASs.

146 >


Our audit, which also extends to the Group management report prepared by the company’s

Management Board for the fiscal year January 1 to December 31, 2001, has not led to any

reservations. In our opinion, on the whole the Group management report provides a suitable

understanding of the Group’s position and suitably presents the risks of future development.

We also confirm that the consolidated financial statements and the Group management

report for the fiscal year January 1 to December 31, 2001 satisfy the conditions required for

the company’s exemption from its obligation to prepare consolidated financial statements

and a group management report in accordance with German law. We conducted our audit

of the compliance of the consolidated financial statements with the EC 7th Directive and

the EC Bank Accounts Directive required for the exemption from the requirement to prepare

consolidated financial statements in accordance with German commercial law on the basis

of the interpretation of the Directive contained in GAS 1 issued by the German Accounting

Standards Committee.”

Düsseldorf, March 4, 2002

PwC Deutsche Revision

Aktiengesellschaft/Wirtschaftsprüfungsgesellschaft

(Kütter) (Güldenberg)

Wirtschaftsprüfer Wirtschaftsprüfer

(German Certified Public Accountant) (German Certified Public Accountant)

>>Auditors’ Report 147


Annexes

A.1 International Accounting Standards applied as of December 31, 2001

Standard Original Title German Title effective since

IAS 1 (rev. 1997) Presentation of Financial Statements Darstellung des Abschlusses July 1, 1998

IAS 7 (rev. 1992) Cash Flow Statements Kapitalflussrechnungen Jan. 1, 1994

IAS 8 (rev. 1993) Net Profit or Loss for the Period, Fundamental Errors Periodenergebnis, grundlegende

and Changes in Accounting Policies Fehler und Änderungen der Bilanzie-

rungs- und Bewertungsmethoden Jan. 1, 1995

IAS 10 (rev.1999) Events after the Balance Sheet Date Ereignisse nach dem Bilanzstichtag Jan. 1, 2000

IAS 12 (rev. 2000) Income Taxes Ertragsteuern Jan. 1, 2001

IAS 14 (rev. 1997) Segment Reporting Segmentberichterstattung July 1, 1998

IAS 16 (rev. 1998) Property, Plant and Equipment Sachanlagen July 1, 1999

IAS 17 (rev. 1997) Leases Leasingverhältnisse Jan. 1, 1999

IAS 18 (rev. 1993) Revenue Erträge Jan. 1, 1995

IAS 19 (rev. 2000) Employee Benefits Leistungen an Arbeitnehmer Jan. 1, 2001

IAS 21 (rev. 1993) The Effects of Changes in Foreign Exchange Rates Auswirkungen von Änderungen

der Wechselkurse Jan. 1, 1995

IAS 22 (rev. 1998) Business Combinations Unternehmenszusammenschlüsse July 1, 1999

IAS 24 (rev. 1994) Related Party Disclosures Angabe über Beziehungen zu nahe

stehenden Unternehmen und Personen Jan. 1, 1986

IAS 27 (rev. 1994) Consolidated Financial Statements and Accounting Konzernabschlüsse und Bilanzierung

for Investments in Subsidiaries von Anteilen an Tochterunternehmen Jan. 1, 1990

IAS 28 (rev. 2000) Accounting for Investments in Associates Bilanzierung von Anteilen an Jan. 1, 1990

assoziierten Unternehmen Jan. 1, 2001

IAS 30 (rev. 1994) Disclosures in the Financial Statements of Angaben im Abschluss von Banken

Banks and Similar Financial Institutions und ähnlichen Finanzinstitutionen Jan. 1, 1991

IAS 31 (rev. 2000) Financial Reporting of Interests in Joint Ventures Rechnungslegung über Anteile an Jan. 1, 1992

Joint Ventures Jan. 1, 2001

IAS 32 (rev. 1998) Financial Instruments: Disclosure and Presentation Finanzinstrumente:

Angaben und Darstellung Jan. 1, 1996

IAS 33 (1997) Earnings per Share Ergebnis je Aktie Jan. 1, 1998

IAS 36 (1998) Impairment of Assets Wertminderung von Vermögenswerten July 1, 1999

IAS 37 (1998) Provisions, Contingent Liabilities Rückstellungen, Eventualschulden

and Contingent Assets und Eventualforderungen July 1, 1999

IAS 38 (1998) Intangible Assets Immaterielle Vermögenswerte July 1, 1999

IAS 39 (rev. 2000) Financial Instruments: Recognition and Measurement Finanzinstrumente: Ansatz und

Bewertung Jan. 1, 2001

IAS 40 (2000) Investment Property Als Finanzinvestition gehaltene

Immobilien Jan. 1, 2001

148 >


A.2 SIC Interpretations applied as of December 31, 2001

Standard Original Title German Title effective since

SIC-6 Costs of Modifying Existing Software (Framework) Kosten der Anpassung

vorhandener Software

(Rahmenkonzept) June 1, 1998

SIC-7 Introduction of the Euro Einführung des Euro June 1, 1998

SIC-8 First-time Application of IASs as the Erstmalige Anwendung der

Primary Basis of Accounting IAS als primäre Grundlage

der Rechnungslegung Aug. 1, 1998

SIC-9 Business Combinations – Classification either Unternehmenszusammenschlüsse –

as Acquisitions or Unitings of Interests Klassifizierung als Unternehmens-

erwerb oder Interessenzusammen-

führung Aug. 1, 1998

SIC-12 Consolidation – Special Purpose Entities Konsolidierung – Zweckgesellschaften July 1, 1999

SIC-18 Consistency – Alternative Methods Stetigkeit – Alternative Verfahren July 1, 2000

>>Annexes 149


Directors

Andreas Buck,

Wachtberg

Dr Mario Daberkow,

Düsseldorf, since Feb. 16, 2002

Ludger Dörr,

Bonn

Alfred Fernholz,

Hennef

Heiko Fischer,

Gütersloh

Werner Grünewald,

Essen, since Oct. 1, 2001

Dr Wilhelm Hemmerde,

Wachtberg, until Oct. 31, 2001

Dr Jörg Hille,

Bonn, since Oct. 1, 2001

Werner Hille,

Weinstadt-Endersbach

Ingo Husemeyer,

Remagen, since Oct. 1, 2001

Claus Kleine,

Bonn

Klaus Kreienkamp,

Velbert

Thea Kutzscher,

Berlin

Albert Lechner,

Mering

Manfred Löw,

Bad Camberg

Dr Torsten Lund,

Berlin

Dr Michael Meyer,

Bonn

Lutz Meyer,

Freiburg

Dr Carsten Meyer-Raven,

Frankfurt, since Sept. 16, 2001

Rainer Mothes,

Schwaig

Uwe Nagel,

Cologne

Hans-Jürgen Niehof,

Berlin

Andreas Nix,

Kandel

Helmuth Pawletta,

Delmenhorst

Dieter Pfeiffenberger,

Barsbüttel

Peter Prill,

Hamburg, until Feb. 28, 2001

Dr Dieter Richter,

Troisdorf

Rainald Schomburg,

Cologne

Klaus Schöniger,

Hofheim a. Taunus,

until Feb. 28, 2001

Prof Dr Gert Schukies,

Verl

Friedhelm Schwarze,

Oberhausen

Ralf Stemmer,

Königswinter

Heinz Wachter,

Marl

Bernhard Walbrecht,

Hofheim a. Taunus,

since July 1, 2001

Klaus Werner,

Munich

Werner Wessinghage,

Schwerte, until Sept. 30, 2001

Andrea Wiegand,

Bochum

150 >


>>Annexes 151


A.3 Glossary

Actuarial gains and losses Gains and losses that comprise experience adjustments (the effects of differences

between the previous actuarial assumptions and what has actually occurred) and the

effects of changes in actuarial assumptions.

Amortized cost The amount at which a financial asset or liability was measured at initial recognition

minus principal repayments, plus or minus the cumulative amortization of any difference

between that initial amount and the maturity amount, and minus any write-downs for

impairment or uncollectability.

Associate An enterprise that is consolidated using the equity method (rather than full or proportion-

ate consolidation), and over whose business or financial policies a consolidated company

has significant influence. At Postbank, such companies are alternatively proportionately

consolidated.

Available-for-sale Financial assets that are not:

financial assets – originated loans and receivables

– held-to-maturity investments

– financial assets held for trading.

Backtesting Backtesting compares historical trading income in a defined period with the dispersion

range of the trading income forecasted for the same period using the risk aggregation

model. The statistical methodology of backtesting and the related problems can be sum-

marized as follows:

Based on assumed binomial distribution, independence of the individual realizations and

a constant confidence level, the test merely records the frequency of the event ‘Trading

loss is greater than VaR’ (number of exceptions). The extent to which a loss exceeds the

VaR is ignored.

Cash flow hedge A hedge of the exposure to variability in cash flows.

Cash flows Inflows and outflows of cash and cash equivalents.

Currency risk The risk that the value of a financial instrument will fluctuate due to changes in foreign

exchange rates.

Deferred tax assets The amounts of income taxes recoverable in future periods in respect of deductible tem-

porary differences, the carryforward of unused tax losses and the carryforward of unused

tax credits.

Deferred tax liabilities The amounts of income taxes payable in future periods in respect of taxable temporary

differences.

152 >


Derivative financial instrument A financial instrument whose value changes in response to the change in a specified

(derivative) interest rate, security price, foreign exchange rate or similar variable, and that requires no

or little initial net investment and that is settled at a future date. The most common de-

rivatives are options, futures, forwards, interest rate and currency swaps.

Discount The value of a financial instrument below its notional or par value; the opposite of premium.

Effective interest method The amortization of differences between cost and notional value (premium/discount)

using the effective interest rate of a financial asset or financial liability. The effective inter-

est rate is the rate that exactly discounts the expected stream of future cash payments

through maturity or the next market-based repricing date to the current net carrying

amount of the financial asset or financial liability.

Equity method A method of consolidating interests in associates, based on the historical cost of the

investment. The investor’s share of the net income/loss of the investee is taken to the con-

solidated income statement as investment income/loss and credited/charged to the carry-

ing amount of the investment. Distributions reduce the carrying amount by the investor’s

proportionate share of the distribution.

Fair value The amount for which an asset could be exchanged, or a liability settled, between know-

ledgeable, willing parties in an arm's length transaction.

Fair value hedge A hedge of the exposure to changes in fair value.

Financial assets or liabilities A financial asset or liability that was acquired or incurred principally for the purpose of

held for trading generating a profit from short-term fluctuations in price or dealer's margin.

Hedge accounting Methods for recognizing and measuring hedging instruments and the related hedged

items that satisfy the strict criteria set out in IAS 39.142. Hedge accounting recognizes

symmetrically the offsetting effects on net profit or loss of changes in the fair values of

the hedging instrument and the related item being hedged.

Hedges Transactions whose change in fair value offsets the change in the fair value of a hedged

item.

Hedging instrument A financial asset or liability, usually a derivative, used for hedging purposes.

Held-to-maturity investment Financial assets with fixed or determinable payments and fixed maturity that an enter-

prise has the positive intent and ability to hold to maturity, other than originated loans

and receivables.

Hybrid capital Subordinated capital consisting of profit participation certificates and subordinated liabilities.

Interest rate risk The risk that the value of a financial instrument will fluctuate due to changes in market

interest rates.

>>Annexes 153


International Accounting Financial reporting standards issued by the International Accounting Standards Board

Standards (IASs) (IASB). The objective of financial statements prepared in accordance with the IASs is to

provide investors with information about the net assets, financial position and results of

operations of the company, or their changes over time, that will assist them in their deci-

sions. By contrast, financial statements prepared in accordance with the HGB (German

Commercial Code) are slanted towards creditor protection.

Investment property Land and/or buildings held to earn rentals or for capital appreciation and not used in the

production or supply of goods or services or for administrative purposes.

Liquidity risk The risk that an enterprise will encounter difficulty in raising funds needed to settle finan-

cial obligations.

Loans and receivables originated Financial assets that are created by the enterprise by providing money, goods, or services

by the enterprise directly to a debtor other than those that are originated with the intent to be sold

(originated loans and receivables) immediately or in the short term.

Market risk The risk that the value of a financial instrument will fluctuate as a result of changes in

market prices.

Market value The amount obtainable from the sale of a financial instrument in an active market.

Premium The value of a financial instrument in excess of its notional or par value; the opposite of

discount.

Primary financial instruments Financial instruments such as receivables, payables and equity securities, that are not

derivative financial instruments.

Repos (repurchase agreements) Agreements to repurchase securities (bona fide transactions under repurchase agreements

where the risks and rewards of the transaction accrue to the borrower); securities are

transferred to the counterparty in exchange for payment of an amount –> Instrument for

liquidity management.

Reverse repo A repo from the perspective of the lender, i.e. spot purchase of a security and simultan-

eous forward sale of a security.

Securities loan The lending of fixed-income securities or equities; a distinction is made between closed

term (retransfer of the same quantity and type of securities at an agreed date in the

future) and open term (securities are made available until further notice) loans.

Securitization The process by which financial assets are transformed into securities.

154 >


Sell-and-buy-back A combination of two purchase agreements, i.e. a separate agreement for each of the

spot and forward trades.

A sell-and-buy-back involves the spot sale of securities and a simultaneous obligation to

repurchase the same type and quantity of securities for a forward date at a previously

negotiated price.

Settlement date The date that a financial asset is delivered to the enterprise that purchased it.

Temporary differences Differences between the carrying amount of an asset or liability in the IAS balance sheet

and its tax base.

Trade date The date that an enterprise commits to purchase a financial asset.

Trading assets This balance sheet item contains securities, promissory note loans, foreign currencies, pre-

cious metals and derivatives held for trading and measured at their fair values.

Trading liabilities This balance sheet item contains derivatives used for proprietary trading with negative

fair values and delivery obligations under securities sold short. They are measured at their

fair values.

>>Annexes 155


156 >

Deutsche Postbank AGHead OfficeFriedrich-Ebert-Allee 114–12653113 BonnPostfach 40 0053105 BonnPhone: +49 (0) 2 28 9 20-0Fax: +49 (0) 2 28 9 20-3 51 51Internet: www.postbank.de

Subsidiaries

Deutsche PostbankInternational S.A.Airport Center2, route de TrèvesL-2966 Luxemburg-SenningerbergPostfach 11 21L-2966 LuxembourgPhone: (0 03 52) 34 95 31-1Fax: (0 03 52) 34 62 05

Deutsche PostbankPrivat InvestmentKapitalanlagegesellschaft mbHAhrstrasse 2053175 BonnPostfach 40 0053105 BonnPhone: +49 (0) 2 28 9 20-0Fax: +49 (0) 2 28 9 20-5 88 09

Postbank EasyTrade.AGEdmund-Rumpler-Strasse 351149 KölnPhone: +49 (0) 22 03 92 55-0Fax: +49 (0) 22 03 92 55-53 59

PB Lebensversicherung AGNeustrasse 6240721 HildenPhone: +49 (0) 21 03 3 45-1 00Fax: +49 (0) 21 03 3 45-1 09

PB Versicherung AGNeustrasse 6240721 HildenPhone: +49 (0) 21 03 3 45-100Fax: +49 (0) 21 03 3 45-109

PB Capital Corporation 590 Madison AvenueNew York, NY 10022-2540USAPhone: (0 01) 2 12 7 56-59 67Fax: (0 01) 2 12 7 56-55 36

PB Factoring GmbHFriedrich-Ebert-Allee 114-12653113 BonnPostfach 40 0053105 BonnPhone: +49 (0) 2 28 9 20-2 80 01Fax: +49 (0) 2 28 9 20-2 80 09

Postbank Leasing GmbHFriedrich-Ebert-Allee 114–12653113 BonnPostfach 40 0053105 BonnPhone: +49 (0) 2 28 9 20-2 33 14Fax: +49 (0) 2 28 9 20-2 33 99

DVB Processing GmbHFrankfurter Strasse 71-75 65760 EschbornPhone: +49 (0) 69 9 75 04-7 48Fax: +49 (0) 69 9 7504-2 40

Postbank P.O.S. Transact GmbHAm Kronenberger Hang 565824 SchwalbachPhone: +49 (0) 61 96 88 38-0Fax: +49 (0) 61 96 88 24 91

Postbank Systems AGBaunscheidtstrasse 853113 BonnPostfach 26 014653153 BonnPhone: +49 (0) 2 28 9 20-0Fax: +49 (0) 2 28 9 20-6 30 10

einsnull IT-Support GmbHKennedyallee 62-7053175 BonnPhone: +49 (0) 2 28 9 20-6 90 00Fax: +49 (0) 2 28 9 20-6 90 02

Postbank addresses


Published byDeutsche Postbank AGHead OfficePress and PR departmentFriedrich-Ebert-Allee 114–12653113 Bonn, GermanyPostfach 40 00

Phone: 02 28 - 9 20-0Fax: 02 28 - 9 20-3 51 51Internet: postbank.de

Private CustomersPostbank Direkt-ServicePhone: 01 80 - 30 40-500Fax: 01 80 - 30 40-800E-mail: [email protected]

Business CustomersBusiness-CenterPhone: 01 80 - 44 40-400Fax: 01 80 - 30 40-999E-mail: [email protected]

PressPhone: 02 28 - 9 20-1 21 01Fax: 02 28 - 9 20-1 21 99E-mail: [email protected]

Coordination, editingPress and PR department

DesignCitigate SEA, Düsseldorf

PhotosPatrick Rohner, ZurichBernd Arnold, Cologne

TranslationDeutsche Post Foreign LanguageService et al.

We thank the EthnographicMuseum of Zurich University andPaola von Wyss-Giacosa for theirfriendly assistance.


Group A

Deu

tsch

e Po

stba

nk A

G G

roup

Ann

ual R

epor

t 200

1

678

102

001


group annual report 2001 - postbank€¦ · other €bn – 2.27 2.47 home savings contracts...

Documents