Dresdner Bank: From Turnaround to Profitability and Growth

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1 Dresdner Bank: From Turnaround to Profitability and Growth Herbert Walter Goldman Sachs Conference Navigating the Sea of Change Puerto Banus, 9 June 2005

2 Back in the black! Revenues and Cost in EUR bn Operating profit in EUR m Revenues after risk Cost 1, ,000-2,

3 Dresdner Bank Our steps to transformation Restructure business model Streamline portfolio Achieve breakeven Sharpen business model Focused growth Earn the cost of capital Leverage business model Profitable growth Mid-term target ROE 12% Turnaround Profitability Growth

4 Step 1: Mastering the turnaround! Establish customer-centric business model! Leverage strong distribution! Focus strategic businesses! Increase cost efficiency! Reduce risk, improve portfolio quality! Wind-down non-strategic assets Turnaround Profitability Growth

5 Customer-centric go-to-market model established Production/products Distribution Customers Allianz agencies Dresdner Bank Personal Banking Private & Business Banking Corporate Banking 21 m customers Third-party products Dresdner Kleinwort Wasserstein

6 Leverage strong distribution power Sales points in Germany ~ 17,000 ~ 15,000 ~ 12,000 1) ~ 5,500 ~ 800 ~ 800 ~ 800 Sales staff ~ 90,000 ~ 65,500 ~ 20,000 ~ 15,500 ~ 10,000 ~ 8,000 ~ 8,000 1) Thereof Dresdner Bank: 940 Personal Banking branches and 138 Private & Business Banking locations, 42 Corporate Banking locations

7 Focus strategic businesses on profitability Growth > 0 Private & Business Banking Revenues after risk Non-strategic business Personal Banking RoE 8.4% RoE 30.1% RoE 55.0% Corporate Banking RoE -13.1% RoE 13.7% Growth < 0 RoE -66.0% Consolidation & Adjustments Dresdner Kleinwort Wasserstein equates to EUR 1.0 bn of venture capital (average) Return < capital costs 1) Profitability Return > capital costs 1) 1) Match capital costs: RoE of 12.64% before tax = 8.85% after tax Note: 2004 figures; Dresdner Bank Group IFRS stand alone

8 Cost efficiency significantly increased Administrative expenses in EUR m Employees in FTE Cost-income ratio in % -2.1 bn -9,600 FTE -16%-points 7,500 39, ,912 34, ,403 30, Note: Dresdner Bank Group IFRS stand alone

9 De-risking strategy successfully implemented Loan loss provisions in EUR m Non performing loans 1) in EUR bn Coverage ratio 2) in % -1.9 bn -6.3 bn +7.1%-points 2, , ) Risk elements in accordance with Guide 3 2) Total loan loss provisions / risk elements in % Note: Dresdner Bank Group IFRS stand alone

10 Rigorous wind-down of non-strategic assets Strategic business Risk weighted assets 1) Non-strategic business Risk weighted assets 1) Core capital ratio in % -22 bn -16 bn +0.6%-points CI 6.0 IRU ) In EUR bn as at year-end / IRU = Institutional Restructuring Unit; CI = Corporate Investments Note: Dresdner Bank Group IFRS stand alone

11 Turnaround into profitability Operating profit in EUR m Non-operating profit in EUR m Profit after tax in EUR m +2.9 bn +2.0 bn +1.0 bn 611 1, ,308-2,633-1, Note: Dresdner Bank Group IFRS stand alone

12 Step 2: Managing for profitability and growth! Establish customer-centric business model! Leverage strong distribution! Focus strategic businesses! Increase cost efficiency! Reduce risk, improve portfolio quality! Wind-down non-strategic assets Customer focus We are advisors Team performance We are partners Operational excellence We are entrepreneurs Turnaround Profitability Growth

13 Neue Dresdner driving transformation Customer focus Team performance Operational excellence Increase customer revenues; grow customer base Drive systematic performance management Improve efficiency and service quality Drive product and sales initiatives Empower and develop employees Optimize processes and platforms Strengthen cross-selling Foster team success and motivation Superior risk management Program with ~120 initiatives implemented

14 Our strengths Bancassurance and Assurbanking What we have achieved How we will further improve Market share Bancassurance in Germany 1) Selected initiatives 1 Dresdner Bank 13.1% Integrated financial services provider Consumer-credit initiative (Cetelem) 2 Deutsche Bank 8.5% New account models 3 Citibank 6.3% Improve sales performance 4 HVB 5.7% Optimize branch processes 5 Postbank 0.5% Savings banks 35.7% 2) Cooperatives 21.0% Multi-channel integration 1) New Business Premiums, duration of premium payment: 20 years, all numbers ) Incl. Neue Leben and Gothaer Versicherung (for Berliner Sparkasse) Source:NFO-Infratest; Tillinghast; BCG

15 From the #1 Bancassurer in Germany... Life Insurance 1) Total Premiums in m EUR 2) +361% P&C Insurance New / incremental premiums in m EUR 3) +1,275% Company Pension Scheme Total Premiums in m EUR 2) +1,495% 3, ,056 2, ) Incl. ADFP, Riester-Stufe and AZ-Schutzbrief 2) Valued total premiums of new business = Bewertungssumme (BWS) 3) New business premiums/incremental premiums on existing business = Neu/Mehrbetrag (NMBT)

16 to the leading Assurbanking player New clients via tied agents "Banking Year 2005" 21,000 22,000 20,000 Pilot phase 10,000 10,900 4,000 2,100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

17 Our strengths Asset gathering What we have achieved How we will further improve Private banks by Assets under Management in EURO bn 1 UBS Group 1,117 Selected initiatives New Wealth Management offering 2 Merrill Lynch 964 Expand international Private Banking 3 Credit Suisse Group 463 Enhance domestic Private Banking 4 Wachovia Corporation 275 Coaching and leadership initiative 5 Deutsche Bank (Private Banking) 196 Optimize Business Banking offering Dresdner Bank 139 Align investment process Source: Scorpio Partnership

18 Our strengths Wholesale solutions What we have achieved How we will further improve Market penetration Corporate Banking in Germany 1) 1 Deutsche Bank 82% Selected initiatives Value management of credit business Grow structured finance 2 Dresdner Bank 76% Capital market products initiative 3 Commerzbank 69% Partnership model CB & DrKW 4 HVB 51% Expand credit portfolio management 5 HSBC 38% Optimize sales management 1) % of total customers Source: Greenwich Associates; Corporate Banking in Germany (March 2005)

19 Q on track Key indicators What it demonstrates Q vs Q Operating profit 208 m + 21 m Operating strength, further uplift in profitability Operating revenues 1,610 m 97 m 1) Difficult market environment, decrease of operating revenues Loan loss provisions 100 m 35 m Tightly controlled risk, high quality loan book Administrative expenses 1,302 m 83 m Continued cost discipline Risk weighted assets 106 bn 2bn Further reduction of non-strategic assets 1) Unadjusted All figures in EUR ; Note: Dresdner-Bank-Gruppe IFRS stand-alone

20 The Transformation progresses Restructure business model Streamline portfolio Achieve breakeven Sharpen business model Focused growth Earn the cost of capital Leverage business model Profitable growth Mid-term target ROE 12% Turnaround Profitability Growth