annual report 1999 group - Postbank · The Postbank Group – 5 years at a glance % 1995 1996 1997...

visions

annual report 1999group

success

1996 1997 1998 2000➝ a common future1999

The Postbank Group – 5 years at a glance

%

1995 1996 1997 1998 1999 98/99

Payment transactions

Checking accounts DM million 4.35 4.2 4.08 4.01 3.95 – 1.5

Online banking DM million 0.40 0.43 0.47 0.56 0.66 + 17.9

Telephone banking DM million 0.68 0.70 0.77 0.96 1.22 + 27.1

ec cards DM million 1.18 1.20 1.20 1.40 1.67 + 19.3

Postbank cards DM million 3.6 3.6 3.5 3.3 3.0 – 9.1

Credit cards DM million 0.28 0.31 0.44 0.40 0.41 + 2.5

Sight deposits DM billion 28.6 27.9 26.8 28.4 30.4 + 7.0

Customer deposits business

Savings accounts DM million 20.4 20.4 20.2 19.9 19.1 – 4.0

thereof

Postbank SparCard DM million – – – 0.08 0.53 + 663

Deposit amount DM billion 91.6 97.3 97.1 101.9 103.7 + 1.8

thereof

“3000 plus” savings

accounts DM billion 31.1 37.8 41.9 46.3 47.5 + 2.6

Assets under management DM billion 1.20 1.70 2.60 3.30 5.65 + 71.2

Lending business

Consumer loans DM billion 0.01 0.10 0.32 0.67 0.85 + 26.9

Mortgage lending DM billion – 0.05 0.62 1.30 2.49 + 91.5

Employees 16,224 14,778 13,523 12,542 11,796 – 5.9

Personnel expense DM billion 1.84 1.49 1.88 1.43 1.35 – 5.6

Payments to federal

government DM million 196 – – – – –

Profit after risk

provisioning and

payments to government DM million 234 308 1.058 22 178 + 709.1

Net income/net loss

for the period DM million 226 – 1,256 27 16 857 + 5,256.3

Total equity and liabilities DM million 99,221 106,788 111,455 114,079 117,291 + 2.8

Table of Contents

2 A common future

“A new bank will emerge”

20 Report of the Supervisory Board

Financial section

22 Group Management Report

48 Notes to the consolidated financial statements

54 Statement of changes in consolidated fixed assets

66 Audit opinion

68 Consolidated balance sheet

as of December 31, 1999

70 Consolidated income statement

for the period

January 1 to December 31, 1999

A strong bank in a strong Group

Continually growing competitive pressure is shaping the banking market of the

future. Substantially increased cost consciousness, a declining “principal bank

mentality” and the trend towards modern transaction banks are causing signifi-

cant shifts. The classic division of labor in the banking business is disappearing,

large banks are discovering the retail market, and the rules of competition are

being redefined.

Postbank is facing this challenge squarely. The impetus from the Deutsche Post

WorldNet Group is livening up the Group. The traditional companies Deutsche

Post, Postbank and DSL Bank are combining their strengths to the benefit of

their joint customers.

Further increasing competitiveness

Our clearly defined growth-oriented program for the future highlights the fact

that – in addition to the necessary increase in our efficiency – we are focusing

on expanding our market position. We want to increase Postbank’s business

results to an attractive new level, decrease cost ratios appreciably, substantially

increase our lending business in selected areas, and further improve our manage-

ment of assets and liabilities – in other words, to further strengthen our com-

petitivenesss. We have now introduced around 40 individual projects in four

core areas:

• reorienting the Bank in line with its key market segments

• optimizing distribution

• expanding our product range

• reorienting information technology

Our central strategic themes include the introduction of direct brokerage, a

corporate banking campaign, strengthening Postbank as a multi-channel bank,

modernizing our branch offices, as well as taking advantage of our new partner-

ship with the leading software provider SAP. However, our forward-looking pro-

gram is not an end in itself. It is based on the belief that the customer should be

our main focus.

A new bank is emerging: Deutsche Post AG effectively became the only shareholder of

Deutsche Postbank AG on January 1, 1999. Six months later, we signed the purchase agreement

for DSL Bank shares. Our common future is based on the close interdependence of these three

companies, and we intend to realize it with an ambitious forward-looking program. The goal is clear.

We want to create a new bank – a strong bank in a strong Group.

a strong

2

3

3

1999 Activity Report

group

We focus on our customers

Focusing on our customers means aligning the entire Bank’s organizational

structure with this business philosophy. We did this in two steps on October 1,

1999:

First of all, the Chairman of Postbank’s Management Board took over responsi-

bility for the newly-established Financial Services division in Deutsche Post

Group’s Management Board. The responsibility for Postbank and Deutsche Post’s

subsidiaries thus lies with one person; all sales channels and financial products

can be controlled together.

The second key step: Postbank’s organizational structure was divided into three

market-oriented and three support departments. We combined all our business

activities with our current ten million customers – as well as those which we

will acquire – in our private customer departments. Whether these customers do

business with us via Deutsche Post branches, the Internet or call centers – these

departments are responsible for their satisfaction our and success. In order to

do justice to the importance of the Mortgage Lending business and customers’

greater need for consulting services, we plan to establish a special area of re-

sponsibility within the private customer sector in future, following the merger

with DSL Bank, which will also include third-party sales via brokers.

We have also bundled our corporate banking activities in a single department

based around our core competency, electronic banking. This focuses on our

400,000 commercial customers, to whom we would like to appeal substantially

more than in the past, as well as to our key corporate accounts. A particular

focus will be e-commerce and related finance solutions as well as state-of-the-

art payment transaction services.

Clear responsibility and customer orientation are also the focal points of our

third market-oriented department. The Financial Markets department handles

volume of more than DM 100 billion and is thus one of Postbank’s key revenue

generators. Naturally, the Financial Markets department is responsible for all

trading activities, assets & liabilities management, our funding program and

asset management.

customer

4

5

One person has held sole responsibility for both Postbank and Deutsche Post’s branch offices since 1999 –

the Chairman of Postbank’s Management Board. In addition, Postbank was divided into three market-

oriented and three support departments. As a result, we are now even closer to our customers.


oriented

By creating the Operations department, we have consolidated the Bank’s entire

processing functions across all regions under a single area of responsibility.

The advantages: in future, the customer can expect higher quality and the Bank

simpler business processes.

The IT department includes our current technology, as well as the future SAP-

based environment. The activities of Postbank Data and the new Postbank

Systems are bundled here.

Finally, the Resources department manages our most significant asset – our

staff and their development. In addition, this department is responsible for the

Bank’s internal functions as well as legal issues and, in future, DSL Bank’s trust

business. We are exploiting Deutsche Post WorldNet’s synergies in this depart-

ment consistently, for example in real estate administration and for purchasing.

Optimization of distribution –

the first “true” multi-channel bank

We want to be the most accessible bank for our customers. A web site, no

matter how good, can generally not replace physical proximity. Quite simply,

customers like to communicate with their bank in whatever way is most appro-

priate for their purposes, e.g. calling up their account balance on their mobile

phone, ordering securities over the Internet, obtaining advice from a specialist

relating to mortgages and discussing specific issues at their branch office. In

short, the same customer wants to use different methods depending on what

precisely his needs are at any given moment. And he wants to be able to do this

in an uncomplicated and easily accessible way. This is why we intend to boost

the further expansion of all sales channels.

Postbank is the first “true” multi-channel bank in Germany. Together with

Deutsche Post, we have the largest and closest-knit network of branches of all

individual competitors. At the same time, we are one of the market leaders

in the direct banking sector by mail, telephone, the Internet, and T-Online. We

intend to do everything in our power to make this a real trademark.

The largest branch network of all its competitors and market leadership in direct banking by mail, telephone,

the Internet and T-Online makes Postbank the first true multi-channel bank in Germany.

multi-

6

7


channel bank

Customer and competitive advantage:

the branches of Deutsche Post

Despite the boom in online and Internet banking, it will still be difficult in

future to expand business on a large scale without offering personal service

to customers. This means that over-the-counter sales at Deutsche Post’s

branches will continue to play a crucial role in business with our ten million

private customers. We are building on this concept of comprehensive one-stop

shopping, which is unique in the banking market, and on the outstanding

degree of recognition and the excellent basis of trust that we have on the

market.

By merging our service offerings into a common network of branches, Postbank

and Deutsche Post are taking the next strategic step in a cooperation that has

always existed. The two companies’ businesses are completely interdependent

with their branches forming a central interface to the customer.

The focal point of this concept are the 300 plus center branches that already

exist – and the 700 or more that will exist in the future – with their comprehen-

sive advice and self-service areas. This network of competence centers, which

will be complete by 2002, forms the core of future over-the-counter sales. It is

our goal to use the two to three million daily customer contacts for active sales

by way of carefully tailored cross-selling approaches.

Nothing can replace personal contact with the client. Over-the-counter sales at the branches of Deutsche

Post give Postbank a decisive competitive advantage.

customer

8

9


orientation

online

10

11

Internet in the limelight

The second pillar of our sales strategy are our direct sales. With 650,000 cus-

tomers, we are one of the market leaders in online banking. More than 1.2 mil-

lion customers use their accounts with us via telephone, making us the leader

also in this area. We plan to optimize this promising strategy in a focused

manner. We want to consistently integrate direct sales with our over-the-counter

channel. This will enable the customers to obtain the same information and

carry out their business at all times via all channels.

We will pay particular attention to the Internet as a state-of-the-art information,

sales and transaction medium. The introduction of mobile phone banking and

Web TV expands our opportunities for access. Due to our direct brokerage activi-

ties, electronic channels will become even more significant. The traditional

medium – the letter – complemented by the fax, rounds off our direct sales

channel.

By merging with DSL Bank we have opened up an additional sales channel. DSL

third-party sales – its supplier business – promise to provide new impetus for

Postbank, reinforcing existing relations and acquiring new cooperation partners.

As a “second-level brand”, DSL Bank will also operate independently and act as

a mortgage lending partner for around 1,500 financial service providers.

With regard to these newly emerging structures, we see substantial unused

sales potential within the Group, which is yet unexploited. Deutsche Post

contributes its potential with the largest sales network in Germany and its

outstanding market recognition. Postbank contributes, among other things, its

position as Germany’s largest online and telephone bank, while DSL Bank

rounds off the concept with its excellent reputation in the supplier business and

its prestigious sales partnerships.

Postbank is Germany’s Number One in online and telephone banking.

We intend to consistently further expand this good position.


banking

Direct sales: Direct mail 7 million letters

Telephone banking 1.6 million customers

Online banking 650,000 customers

Over-the-counter sales: Branches of Deutsche Post 720 Center branches (planned)

2,500 standard branches

10,700 basic branches

Agency business: DSL Bank sales partners 1,500 partners

25,000 sales staff

logistics

12

13

Using synergies in the Group – developing new areas of business

As a result of the strategic expansion of the Deutsche Post WorldNet Group to

an international logistics service provider, Postbank is becoming the Group’s

principal bank for financing logistic solutions. Logistic financing is thus the sec-

ond key business area in which Deutsche Post and Postbank can display their

common strengths.

More and more companies are opting for outsourcing in the areas of logistics

and merchandise management. Deutsche Post WorldNet has established itself

extremely well with Danzas and other partners in this area. However, a truly

well-rounded service depends on providing financing at the same time.

Postbank is becoming the principal bank for the international logistics service provider

Deutsche Post WorldNet. We will provide optimal financial services along the entire value chain.


financingLogistics finance completes the chain

Deutsche Post, Danzas and Postbank work hand in hand. From ordering to

warehouse management, order processing, dispatch preparation and transport

distribution, all workflows – and in particular all the financial transactions

related to these – are optimally structured. As a result, customers can devote

all their attention to the development of their company.

The services portfolio ranges from individual payment transactions through real

estate financing and cash forwarding, and from credit management to financing

large-scale investment projects. It also includes all business relations, from sub-

contractors to consumers.

Whether it is a small or a multinational company that is involved, Postbank,

Deutsche Post and Danzas always adapt to requirements and develop an ideal

services package together with the customer. This is because it is not the size

of a company that counts, but rather the scope of its business ideas.

14

15

Two brands – one goal: integrating DSL Bank

We are paying particular attention to the integration of DSL Bank in 2000. This

specialist institute for private and commercial mortgage lending and for the issue

of securities is the ideal complement to the services portfolio we now offer to

our private and corporate customers. DSL Bank, with its agency business, is thus

a major reinforcement for Postbank in the mortgage lending sector. The volume

of DSL Bank’s mortgage lending business amounts to DM 20 billion, as against

the DM 3 billion provided by Postbank. As a result, we are able not only to put

our know-how to much better use together, but also to achieve a substantially

improved cost and risk profile.

Such additional know-how is particularly important in the corporate business

sector for driving forward our logistic finance with Deutsche Post. The same

applies to Postbank’s innovative offerings relating to e-commerce.

Last but not least, DSL Bank has many years of experience with lucrative de-

rivative products in its financial markets unit. DSL Bank contributes a large and

successful new issues business.

We are continuing to develop our clear two-brand strategy. Using “Postbank” as

a trademark for volume business, we intend to increase the number of products

being used by the customer. In future as well, “DSL Bank” will be a reliable

partner for mortgages.

Everything the customer wants:

new business areas and new products

In order to profile Postbank as a competent lending partner – in addition to its

traditional specialties such as electronic payment transactions – we plan to

further expand the range of loan products which accompany payment trans-

actions and operating loans, as well as commercial real estate financing in the

leasing and property development sectors. Here, too, DSL Bank’s know-how is

useful to us.

new Our two-brand strategy is clearly focused. Postbank’s products and services

are tailored to the customers’ core requirements, while DSL Bank’s brand stands

for differentiated mortgage lending products.


The independent “Business Customers” division emerged as a result of the

further development of the Postbank organization in line with its program for

the future. This division handles smaller companies, as well as freelancers and

self-employed people. Our attractive products cover payment transactions,

liquidity, financing, investments and pension products. Our business line is avail-

able for telephone consulting.

We are also meeting the challenges faced by medium-sized and large companies:

Postbank, with its leading market position and excellent settlement of payment

transactions, DSL Bank with its high level of expertise in commercial real estate

finance, and Deutsche Post with its networking potential. A common strategy for

this target group and a “Selective Strategy for Foreign Business” are effective

steps towards bundling performance.

The introduction of e-commerce, payment transactions and communication on

the market are a focal point. Deutsche Post and Postbank have an unparalleled

advantage in this area: an end-to-end chain of ordering, delivery, invoicing

and payment processes.

Our new business area, direct brokerage, will be the focus of our new product

launches. We began expanding this area during the summer of 1999. Our goals

are ambitious: Postbank intends to become one of the leading brokerage service

providers in Germany in terms of both volume and scope. With 250,000 planned

deposit accounts, we are already optimistic in our first full fiscal year, that we

will rank among the big names in this sector. We have transferred the responsi-

bility for success in this extremely dynamic market – which has a unique “culture”

of its own – to our new subsidiary, Postbank EasyTrade.AG.

goals

direct

Direct brokerage on the starting line

Postbank’s recently founded brokerage company is called Postbank EasyTrade.AG.

During the pilot phase, selected customers and employees are subjecting this

new area of business to a critical test as part of a friends & family program: they

are carrying out securities transactions under real market conditions. The critical

phase will begin in summer 2000, when Postbank EasyTrade. AG enters the

market.

We have acquired strong partners in this area: the FrontOffice system of

Netlife AG forms the interface to all other functions. WPS Bank will take over

full service in the BackOffice, i.e. order processing and adminstrative and

custody processes.

The latest development is WAP: Postbank EasyTrade.AG’s customers will be

able to process their orders via their mobile phones in the future. Netlife AG has

developed a mobile brokerage application with our subsidiary based on the

WAP standard, which runs on all WAP-enabled mobile phones currently on the

market.

16

17

Postbank’s recently founded brokerage company has made a very promising start. Its cooperation

with Wüstenrot is a success story. And Postbank funds continue to be real winners.


brokerage

The cooperation with the Wüstenrot savings and loan association has been

extremely successful in the area of home loan and savings contracts. In 1999,

Postbank sold contracts worth over DM 1 billion. This corresponds to an increase

of more than 80 percent over 1998. The cooperative venture has also shown

progress in the area of mortgages. In order to better service to customers we are

establishing fixed mortgage finance centers.

A successful partnership also exists with HDI Haftpflichtverband der Deutschen

Industrie. Together, we founded PB Versicherung AG and PB Lebensversiche-

rung AG. Under the name “PB Versicherung – A Partner of Postbank and

Deutsche Post”, we have successfully been providing pension, accident and life

insurance policies since April 1999. Risk and credit life insurance relating to

private loans are also part of our product range.

We are also paying particular attention to the “winners” in Postbank’s product

range – investment funds. We plan to expand business appreciably with new

equities funds, corporate customer funds and an e-commerce fund. Postbank

has now made a good name for itself in this area. The fact that the international

equities fund “Postbank Global Player”, which was launched in March 2000, has

already exceeded the DM 1 billion mark after only ten weeks is proof of this.

Postbank funds well ahead

Once again, we received an award for our successful investment fund “Postbank

Dynamik Global”. The magazine “Capital” awarded it first place in its “Global

Equities funds” category. In addition, the judges ranked the fund among the

cream of the investment community, awarding it five stars, the highest possible

rating. Only 22 of the around 1,400 funds tested received this rating.

In addition to charting the growth in value of “Postbank Dynamik Global” over

a period of three years, the award also takes the risk and the continuity of man-

agement performance into account.

18

19

Reorientation of information technology

The success or failure of a bank is increasingly determined by its IT systems.

This is particularly true for Postbank with its many different sales channels and

enormous volumes. If we are to realize our ambitious plans, we require infor-

mation technology with a guaranteed future. For this reason, we have resolved

to replace our information technology (IT) throughout the enterprise with state-

of-the-art systems based on cost-efficient market standards.

We are focusing here on our strategic partnership with SAP – the company that

has put itself at the forefront of the technological future. With Postbank’s assist-

ance – we have selected almost 100 employees specially for this – SAP is fur-

ther developing a standard software package for operating applications at large

banks. Postbank is acting as SAP’s exclusive pilot partner and is thus setting the

pace for the financial services sector as a whole.

The cooperation agreement concluded in July 1999 served as the kick-off for a

crucial project aimed at highly-automated, largely paperless processing of all

business transactions. This SAP solution forms the basis for the introduction of a

new systems environment geared towards future requirements in all areas and

all branches of Postbank by the end of 2003. Last but not least, this IT architec-

ture will also become the core of our brokerage business.

clear 1999 Activity Report

Major challenges for IT

Since the middle of 1999, we have been making this cooperation with the lead-

ing software provider SAP a reality. We are defining the business processes to

be supported and the resulting demands on SAP software. The goal is the fast,

appropriate and definitive handling of customer demands via all sales channels.

Over the next few years, our IT unit will be faced with the challenge of prepar-

ing our entire IT systems for implementing the SAP system, as well as perform-

ing the restructuring and upgrading measures associated with it by the end of

2003. At the same time, the sector must ensure that Postbank’s current system

environment is not only dealt with, but will also be continually adapted to meet

current requirements.

Overall, our technological platforms are based on established standards. As a

result, our information processing will also be reorganized in the future. We plan

to bundle Postbank and DSL Bank’s IT activities in a new subsidiary, Postbank

Systems AG. This company will be responsible for the future IT strategy.

Planning horizon for an ambitious vision

Our program for the future has achieved initial successes in many sections of

the Bank and thus sent clear signals about the company’s restructuring program

which is already underway. Our employees are motivated and are actively in-

volved in shaping the future. The path we are taking is fascinating and requires

our undivided attention. Together, we are working torwards our goals.

signals

20

21

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 and two extraordinary meetings of the

Supervisory Board took place in fiscal year 1999. The Executive Committee met

five times, the Lending and Equity Investments Committee six times, the Human

Resources Committee twice and the Financial Reporting Committee once in fis-

cal year 1999.

The Management Board informed the Supervisory Board about the Bank’s situ-

ation and development by providing up-to-date reports. The Supervisory Board

meetings explained the development of Postbank’s business and earnings in

detail; additional reports provided comprehensive information on the overall

situation and on particular events. The Supervisory Board was fully consulted

on all the Bank’s measures requiring its approval.

The composition of the Supervisory Board changed during fiscal year 1999. The

existing Chairman of the Supervisory Board, Dr. Hans Friderichs, who chaired

Postbank’s Supervisory Board since autumn 1989, ended on January 7, 1999.

Dr. Thea Brünner resigned from office on January 8, 1999. Prof. Dr. Paul Laufs

was removed from the Supervisory Board by the extraordinary General Meeting

on January 11, 1999.

The Annual General Meeting elected Dr. Edgar Ernst, Dr. Hans-Dieter Petram,

Dr. Alfred Tacke and Dr. Klaus Zumwinkel as new members of the Supervisory

Board. The extraordinary meeting of the Supervisory Board on the same day

appointed Dr. Zumwinkel as the Chairman of the Supervisory Board.

An additional extraordinary meeting of the Supervisory Board on January 25,

1999 appointed Prof. Dr. Wulf von Schimmelmann as the new Chairman of the

Management Board of Deutsche Postbank AG with effect from February 1, 1999.

Dr. Dieter Boening, Chairman of the Management Board, and Joachim Sperbel

retired from Postbank’s Mangement Board on January 31, 1999 by mutual

agreement; Rainer Neumann left by mutual agreement on October 31, 1999.

The meeting of the Supervisory Board on November 30, 1999 elected Loukas

Rizos as a member of the Management Board from spring 2000.

Report of the SupervisoryBoard

1999 Report of the Supervisory Board

The parent bank 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 certi-

ficate.

The audit reports of PwC were discussed in detail at the Supervisory Board

meeting on March 14, 2000 in the presence of the auditor following thorough

previous examination by the Financial Reporting Committee. 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

agrees with the proposal for the appropriation of the profits.

The Supervisory Board wishes to thank its former members, the members of the

Management Board and the management of its subsidiaries, all employees, and

the works councils of the companies belonging to the Deutsche Postbank Group

for their commitment and successful work during the past fiscal year.

Bonn, March 14, 2000

Dr. Klaus Zumwinkel

Chairman of the Supervisory Board

Facing the new millennium with an ambitious program for the future and without any Y2K problems. Customer

deposits business continues to dominate balance sheet. On the way to becoming a leading lender. Market lead

in online banking consolidated. Postbank investment funds among the best. Acquisition of DSL Bank rounds off

product range. Sales link to Deutsche Post strengthens selling power. 1999 was a year of new departures.

chances

22

23

Group Management

1999 Report

Economic framework

The dynamic growth of the world economy accelerated in the course of last

year. The majority of the transition economies in Asia showed clear signs of

recovery, while the crises in the real economies of Russia and Brazil turned out

to be less severe than at first expected. Once again, the USA retained its pos-

ition as the global growth driver in 1999. The German economy profited in the

course of the year from the improvement in the global economic environment

and the decline in the external value of the euro. Due to the export-driven up-

swing in the second half of the year, the real gross domestic product rose by

1.4 percent in 1999 compared to the previous year.

Increasing oil prices led in the course of the year to high inflation rates on both

sides of the Atlantic. Although price increases remained moderate up to the end

of the year, fear of inflation became a subject of increased concern to the inter-

national financial markets. The German bond market could not escape the effect

of the increased interest rates in the USA, with the result that long-term dom-

estic capital market rates increased clearly in the course of the year – by around

1 3/4 percentage points – as against their low in January 1999.

The millennium date change: a challenge mastered with flying colors

Postbank administers four million checking accounts and twenty million savings

accounts for its ten million customers. 20,000 counters in 14,000 Deutsche Post

branch offices, around 1,700 ATMs and the voice-enabled computers used in

telephone banking all had to be checked for Y2K compliance. Not that this

proved to be a problem: in contrast to the situation at other banks and savings

banks, Postbank customers were even able to use our ATMs on New Year’s Eve.

2000

Cards business

in thousands

1995 1996 1997 1998 1999

1995 1996 1997 1998 1999

Credit cards 276 312 338 401 406

ec cards 1,177 1,195 1,213 1,437 1,673

Postbank cards 3,569 3,553 3,547 3,284 3,009

SparCard –

Savings account cards – – – 83 534

Total 5,022 5,060 5,098 5,205 5,622

1995 1996 1997 1998 1999

Total 881 1,173 1,346 1,575 1,700

Expansion of ATM network

number of ATMs

1995 1996 1997 1998 1999

24

25

Prof. Dr. Wulf von Schimmelmann new Chairman

of the Postbank Management Board

On February 1, 1999 Prof. Dr. Wulf von Schimmelmann was appointed as the

Chairman of the Management Board of Postbank, replacing Dr. Dieter Boening,

who had headed the Bank since July 1, 1997. Already on January 11, 1999, the

Supervisory Board of Deutsche Postbank AG appointed the Chairman of the

Management Board of Deutsche Post AG, Dr. Klaus Zumwinkel, as its head.

Customer deposits business continues to be a winner

The savings opportunities offered by Postbank continued to be highly attractive

in 1999. In fact, Postbank was able to extend its market lead in this area. Its

“Sparen 3000 plus“ savings product accounted for the lion’s share of business

(82.5 percent), while the newly introduced “Kapital plus“ savings product estab-

lished itself with customers right from the start. The “Postbank SparCard“

introduced the previous year was a particular success.


Total deposits

in DM billion 1995 1996 1997 1998 1999

Savings deposits 57.1 59.8 60.7 62.7 57.6

Savings certificates,

Time deposits 5.9 9.6 9.6 10.8 15.7

Sight deposits 28.6 27.9 26.8 28.4 30.4

Total 91.6 97.3 97.1 101.9 103.7

1995 1996 1997 1998 1999

Rapid increase in retail banking and mortgage lending

The annuity loans granted to customers doubled in 1999 in comparison to

the previous year, with the average size of the 26,379 new loans rising to

DM 17,200. The tighter integration of all Deutsche Post branch offices in 2000

will provide further impetus in this area. Postbank’s declared goal is to become

one of the leading suppliers of consumer loans in Germany. In addition, new

mortgage lending increased substantially, with the total contract portfolio

amounting to almost DM 3 billion as at December 31, 1999.

Online banking: further expansion of market lead

The number of telephone banking callers in 1999 rose by an impressive 62 per-

cent, while the number of calls to our direct service and our voice-enabled

computers increased even more, to around 26 million (79.5 percent). Given our

24x7 availability, this means that 74,000 customers contact Postbank by tele-

phone every day.

Roughly 650,000 customers already manage their Postbank accounts via the

Internet or T-Online today. The number of transfers made via this channel rose

by nearly 15 percent to over 15 million.

Postbank now an expert lending partner for corporate customers

In addition to being a specialist in the area of payment transactions, Postbank

also intends to provide its corporate customers with advice on lending in the

future. We are developing the add-on credit products for our payments services

further and are also offering net working capital financing. In addition, Postbank

is participating in selected syndicated loans. Last but not least, we will be offer-

ing commercial real estate and special finance solutions in the areas of property

development and leasing together with DSL Bank.

New unit for business customers established

As part of the ongoing development of the Postbank’s organizational structure,

a dedicated unit for business customers was established within the Corporate

Customers division. This unit provides support for companies with annual sales

of up to DM 5 million self-employed individuals and small independent busi-

nesses.

The business strategy behind this unit is similar to that in the retail customer

business. The immediate focus is on the development of standardized trans-

parent products for this target group. Customers are provided with telephone

advice via our business line and have access to qualified advisors in our Center

branches. In addition, mobile business customer advisors are available when-

ever and wherever needed. In this segment as everywhere else, Postbank’s

basic principle applies: products and services have to be as easily-advailable,

fast and cost-effective as possible.

26

27


Developments in online banking and telephone banking

number of accounts

Funds business continues to expand

The Postbank Group’s entire fund portfolio has developed extremely positively.

This applies not only to products from Postbank Privat Investment (PPI) in Bonn

but also to the funds offered by Deutsche Postbank International S.A., Luxem-

bourg, which have been successful for many years now, as well as to the special

investment funds offered by Deutsche Postbank Invest Kapitalanlagegesell-

schaft mbH, Bonn, which specializes in this area.

PPI’s “Europafonds Aktien“ (Stocks Europe) produced a return in 1999 of almost

40 percent, and was followed by its “Europafonds Plus“(Stocks Europe Plus).

“Postbank Dynamik Garant II“, Deutsche Postbank Asset Management S.A.’s

European share guarantee fund, is a limited special offer to investors.

The German finance magazine “Capital“ ranked the “Postbank Dynamik Global“

fund managed by Deutsche Postbank International S.A. first among the global

equity funds.

The volume of funds under management by Deutsche Postbank Invest

Kapitalanlagegesellschaft mbH at the end of 1999 amounted to almost

DM 15 billion. 19 specialized funds were managed.

Since the chances are good that the year 2000 will be another bumper year for

securities, Postbank’s fund management companies are confident about the

short-term future.

1995 1996 1997 1998 1999

Online banking 401,000 432,000 466,000 561,000 660,000

Telephone banking 670,000 683,000 770,000 960,000 1,220,000

Total 1,071,000 1,115,000 1,236,000 1,521,000 1,880,000

1995 1996 1997 1998 1999

Successful start for PB insurance companies

Our joint ventures with HDI, PB Lebensversicherung AG and PB Versicherung AG

started active operations in mid-April 1999 under the name of “PB Versiche-

rung“. This Postbank and Deutsche Post partner offers pension and accident

insurance as well as credit life insurance in connection with consumer loans.

Acquisition of DSL Bank

In the middle of the year, Postbank and the Federal Ministry of Finance agreed

that Postbank would acquire the Federal Government’s interest in DSL Bank with

effect from January 1, 2000. Postbank had already held more than 80 percent of

the shares in DSL Holding AG since October 1999.

DSL Bank specializes in private and commercial mortgage finance as well as in

issuing securities. In future, these services will be used to supplement and

strengthen Postbank’s product range.

The multi-channel bank: all roads lead to the customer

The sales partnership between Postbank and Deutsche Post was further

strengthened by the integration of DSL Bank with its agency-based sales model.

The multiple sales channels and the resulting intensive advice as well as the

high-quality advice tailored to customer needs in each case make Postbank the

first true multi-channel bank in Germany.

Together with Deutsche Post, Postbank has one of the largest fixed sales net-

works in place with a very wide geographical coverage. It has long been the

28

29


leader in the area of direct banking via the telephone, the Internet and T-Online.

Now DSL’s agency sales, comprising roughly 1,500 partners and their 25,000

employees, are being added.

New divisional organization strengthens sales force and improves work-

flow transparency

On October 1, 1999, Prof. Dr. von Schimmelmann, Chairman of the Management

Board of Postbank, was appointed to the Group Management Board of Deutsche

Post AG, where he is responsible for financial services (i.e. Postbank and the

branch offices). This dual function underlines the importance that the alliance

between Postbank and Deutsche Post attaches to the financial services division

on the one hand and fixed branch sales channel on the other. All activities by

the partners to the alliance are now being optimally coordinated.

In order to be able to react as flexibly as possible to increased market require-

ments on Postbank, the members of the Management Board with responsibility

for Retail Customers, Corporate Customers and the newly created Financial

Markets area are now also responsible for the profitability of these areas.

Future-oriented strategic partnership with SAP

Postbank has concluded a strategic partnership with the world-famous software

company SAP. The goal is to use Postbank as a reference customer for the fur-

ther development of SAP’s standard software for major banks’ core operational

processes. This will result in software for the financial services sector that sup-

ports all the standard products in a major retail bank.

At the end of this development process we will have a completely revamped

IT infrastructure that will ensure that processing of all transactions within

the Group takes place in as automated and paperless a manner as possible.

Postbank is the first German bank to decide to reengineer its IT to such a funda-

mental extent.

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31

Cooperation with Wüstenrot proves its value

Since the end of 1997, Postbank has been brokering home savings and loan con-

tracts for its partner Wüstenrot. Last year the value of these contracts amounted

to over DM 1 billion – twice the figure for the previous year. At the same time,

Postbank’s earnings rose by a factor of three and a half.

Postbank’s Mortage Lending unit will become more important in future, with

the home savings and loan contracts brokered for Wüstenrot being joined by an

increase in commercial mortage lending products which will be offered under

the DSL Bank brand, particularly as agency business.

Optimal concentration of payments

Postbank’s core competency has always been payment transactions, and it is

only natural that we continuously focus on optimizing and improving the profit-

ability of this area of our activities in particular.

For example, we decided to concentrate both domestic and foreign payments,

both in order to achieve synergy effects and to reduce to a minimum the time

needed to perform and settle customer orders by streamlining as many unneces-

sary interfaces as possible.


Customer accounts

in millions 1995 1996 1997 1998 1999

Savings accounts 20.40 20.40 19.10 19.67 19.14

Checking accounts 4.35 4.20 4.10 4.01 3.95

Thereof online/

telephone banking 1.08 1.13 1.24 1.56 1.88

Total 24.75 24.60 23.20 23.68 23.09

1995 1996 1997 1998 1999

Thus the number of domestic payments locations was reduced from 14 to 5 with-

in the space of only ten months. This not only directly benefited our customers

but also tangibly improved the profitability of this area of our business.

All foreign payments transactions were consolidated in a single location in

Saarbrücken, a task that was completed within five months. This has resulted

in processing times becoming noticeably faster.

Active credit management implemented

The extension of our lending business and compliance with the regulatory

requirements naturally entail active credit management. Implementation of this

has already started and customer-specific risk measurement procedures have

been introduced.

Postbank’s future credit risk management system will manage credit risks both

at the level of individual transactions and at the portfolio level. The commercial

scoring and rating procedures introduced at the level of individual transactions

will support the decision-making process and help identify credit risks at an

early stage, thereby minimizing loan defaults.

Further increase in total assets

In the year under report total assets rose from DM 114,079 million at the end of

the previous year by DM 3,212 million or 2.8 percent to DM 117,291 million as

of December 31, 1999.

Liabilities and shareholders’ equity

Customer business dominates liabilities and shareholders’ equity

In the year under report liabilities to non-bank customers once again dominated

Postbank’s balance sheet, accounting for 88.4 percent of total liabilities and

shareholders’ equity. They amounted to DM 103,718 million as of December 31,

1999, after DM 101,878 million the previous year.

Switch from savings deposits to longer-term time deposits –

slight expansion of market position

The revamping of our product range in the savings area led to a decline in sav-

ings deposits of DM 5,099 million or 8.1 percent, to DM 57,600 million. However,

this drop was more than compensated for by our new savings product “Kapital

plus“, for example, which is disclosed under Other liabilities with an agreed

maturity (up DM 5,721 million).

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33

Savings deposits with an agreed withdrawal notice of three months

in DM million 1995 1996 1997 1998 1999

Sparbuch 3000 plus 31,124 37,855 41,889 46,284 47,529

Dynamic interest rate

savings account 3,285 1,782 783 312 123

Other 10,906 9,959 9,060 7,777 6,836

Total 45,315 49,596 51,732 54,373 54,488

1995 1996 1997 1998 1999

Balance sheet structure

and developments in the

balance sheet


Savings deposits with an agreed withdrawal notice of more than three months

in DM million 1995 1996 1997 1998 1999

Fixed-interest savings 9,428 8,138 7,113 6,653 1,627

Other 2,312 2,065 1,878 1,673 1,485

Total 11,740 10,203 8,991 8,326 3,112

1995 1996 1997 1998 1999

“3000 plus“ savings program

Once again, our “3000 plus“ savings book grew in the year under report. This

growth, by a further DM 1,245 million (plus 2.7 percent) increased the share of

total savings deposits accounted for by this successful savings product to 82.5

percent (previous year: 74 percent).

Other liabilities to non-bank customers

ChangeDec. 31, 1999 Dec. 31, 1998 as against Dec. 31, 1998

DM million DM million in DM million in%

Payable on demand 30,375 28,371 2,004 7.1

With agreed maturity or withdrawal notice

Time deposits 6,703 6,724 – 21 – 0.3

Kapital Plus 5,721 – 5,721 > 100

Savings certificates 3,319 4,084 – 765 – 18.7

Subtotal 15,743 10,808 4,935 45.7

Total 46,118 39,179 6,939 17.7

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35


Current account deposits and overnight deposits

On the balance sheet date, the customer deposits grouped together in the Lia-

bilities payable on demand item in the amount of DM 30,375 million were up

DM 2,004 million or 7.1 percent as against the figure for the end of 1998.

“Kapital Plus”, savings certificates and other time deposits

The introduction of our “Kapital plus“ product resulted in deposits totaling DM

5,721 million in its first year. This product, part of our revamped product range,

replaces our previous savings offerings for deposits with maturities of more

than three months, including savings certificates and time deposits.

Provisions

Provisions declined from DM 3,075 million at the end of the previous year to

DM 2,337 million as of December 31, 1999. This drop is mainly due to the

restructuring measures performed in the context of our sales partnership with

Deutsche Post AG (DM 1,043 million). Special factors led to additions to the

provisions for pensions in the amount of DM 109 million.

Fund for general banking risks

Reserves totaling DM 1,300 million were allocated to the fund for general bank-

ing risks in the year under report by means of a reclassification of the reserves

created under Art. 340f HGB (Handelsgesetzbuch – German Commercial Code).

This increased our corporate liability base in accordance with the provisions of

the KWG (Kreditwesengesetz – German Banking Act).

Assets

Postbank’s assets reflect its investment activities on the money and capital market.

Development of key asset items


DM million DM million in DM million in %

Due from banks 52,796 63,309 – 10,513 – 16.6

Bonds and otherfixed-income securities 31,300 27,159 4,141 15.3

Shares and othernon-fixed-income securities 14,440 10,258 4,182 40.8

Due from customers 6,977 5,653 1,324 23.4

Total 105,513 106,379 – 866 – 0.8

Due from banks

Due from banks declined by DM 10,513 million to DM 52,796 million. This bal-

ance sheet item remains the largest position on the assets side of the balance

sheet, at 45.0 percent (previous year: 55.5 percent) of the total.

Bonds and other fixed-income securities


DM million DM million in DM million in %

Public issuers 2,910 6,546 – 3,636 – 55.5

Other issuers 28,390 20,613 7,777 37.7

Total 31,300 27,159 4,141 15.2

Bonds and other fixed-income securities amounted to DM 31,300 million as of

December 31, 1999. This corresponds to 26.4 percent of total assets.

36

37

Shares and other non-fixed-income securities

The carrying value of shares and other non-fixed-income securities as of Decem-

ber 31, 1999 is DM 14,440 million. The increase in this item of DM 4,182 million

mainly results from increases in existing funds.

Due from customers

As of December 31, 1999, due from customers amounted to DM 6,977 million,

up from DM 5,653 million the previous year.

Total annuity loans amounted to DM 852 million, up from DM 673 million

the previous year. Total mortgage lending rose by DM 1,169 million to

DM 2,494 million.

Relationship to affiliated companies

The Management Board issued a affiliated companies report and stated as

follows,“... on the basis of the circumstances prevailing at the time of each

transaction, Postbank received an appropriate consideration for each service

within the meaning of this report. No measures were taken or omitted at the

instruction or in the interests of Deutsche Post AG or its affiliates.“


Income Statement

Jan. 1–Dec. 31, Jan. 1–Dec. 31, Change1999 1998 as against 1998

DM million DM million in DM million %

Net interest income 2,765 2,639 126 4.8

Net commission income 784 788 – 4 – 0.5

Net underwriting income 3 0 3 > 100

Net profit/loss on financial operations 7 29 – 22 – 75.9

Personnel expenses 1,354 1,430 – 76 – 5.3

Other administrative expenses 1,618 1,794 – 176 – 9.8

Depreciation of tangible assets 213 208 5 2.4

Administrative expenses(incl. depreciation) 3,185 3,432 – 247 – 7.2

Net other operating income/ expenses 186 201 – 15 – 7.5

Operating result before provisions for risk 560 225 335 > 100

Provisions for risk – 382 – 203 – 179 88.2

Operating result after provisions for risk 178 22 156 > 100

Net extraordinaryincome/expense 970 – 970

Operating result before taxes 1,148 22 1,126 > 100

Taxes on income 291 6 285 > 100

Net income for the year 857 16 841 > 100

Net interest income

Net interest income rose by DM 126 million or 4.8 percent to DM 2,765 million.

DM 4,661 million in interest income were generated from lending and money

market transactions and from fixed-income securities and book-entry securities

(previous year: DM 4,887 million). This reduction is primarily due to the decline

in interest. Current income from shares and other non-fixed-income securities

amounted in the period under report to DM 512 million, as opposed to DM 478

million the previous year. Income from profit and loss transfer agreements rose

to DM 2 million.

At DM 2,410 million, total interest expenses, especially for savings deposits, time

deposits and open market transactions, were DM 317 million lower than in the

previous year.

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39

Net commission income

Net commission income declined in fiscal year 1999 by DM 4 million to DM 784

million. Net income from securities transactions developed gratifyingly. In con-

trast, revenue from payments services declined due to the changes in terms and

conditions during the previous year.

Net profit on financial operations

A net profit on financial operations of DM 7 million was produced (previous

year: DM 29 million). The decline in revenue mainly resulted from the drop in net

income from foreign exchange transactions due to the introduction of the euro.

Administrative expenses

Administrative expenses including depreciation on tangible assets amounted

in 1999 to DM 3,185 million, as opposed to DM 3,432 million the previous

year. Personnel expenses declined overall by DM 76 million to DM 1,354 mil-

lion, with wages and salaries dropping by DM 44 million to DM 821 million.

Social security contributions and pension costs amounted to DM 533 million,

following DM 565 million the previous year. Other administrative expenses

declined in the year under report by DM 176 million from DM 1,794 million to

DM 1,618 million, a drop of 9.8 percent. Restructuring of the sales partnership

with Deutsche Post AG contributed to the decline.

In addition, Postbank’s cost situation improved as a result of optimization of

the organization of the operations centers, branch locations and head office.

We are actively pursuing the introduction of cost-efficient processes.

Operating result and provisions for risks

The operating result before provisions for risks in 1999 amounted to DM 560

million (previous year: DM 225 million). Following additions to the provisions

for risks, the operating result amounted to DM 178 million, as against DM 22

million the previous year.

Net extraordinary income/expenses

The positive net extraordinary income/expenses primarily result from the write-

back of the provision for the sales partnership.

Net income for the year and changes in shareholders’ equity

In fiscal year 1999 the Postbank Group produced net income of DM 857 million,

as compared with DM 16 million the previous year. Shareholders’ equity (not

including net retained profits) as of December 31, 1999 amounted to DM 3,327

million (previous year: DM 3,147 million).


Organization of risk management

On the basis of guidelines approved by the Management Board, the Financial

Markets division is responsible for the management of the market price and

liquidity risks, while the management of counterparty risks is the responsibility

of the Chief Credit Officer. In addition, the Loans and Deposits Committee (for

market price and liquidity risks) and the Credit Investment Committee (for coun-

terparty risks), support the operational units that conduct day-to-day business

and manage the risk profile of the individual divisions.

At the strategic level a Risk Committee supports the Management Board in all

risk-related issues. These include in particular making suggestions as regards

appropriate methods and processes for managing, quantifying, limiting and

monitoring the risks facing the Postbank Group. Equally, the Risk Committee is

responsible for preparing decisions regarding the allocation of risk capital, which

is apportioned to the different divisions within the bank in accordance with a

risk/reward analysis. At present, the current risk capital allocation to trading required

by the “Mindestanforderungen an das Betreiben von Handelsgeschäften“ (MaH –

Minimum Standards for Securities Trading at Credit Institutions) is being ex-

panded to produce an overall bank allocation within the framework of overall

risk management for the bank.

Risk Report

Risk Control Functions

Postbank’s risk control department performs its functions independently at

Postbank headquarters for the entire Postbank Group. It is organized into two

different functions: trading risk control and overall bank risk control.

The key tasks performed by Postbank’s risk control function are risk identifi-

cation and ongoing risk quantification, risk monitoring and risk reporting for

market and liquidity price risks, and monitoring of compliance with counterparty

limits for all transactions in line with the “Mindestanforderungen an das Betrei-

ben von Handelsgeschäften (MaH)”. In doing so, Postbank makes use of modern

processes and suitable mathematical/statistical models and procedures. In par-

ticular, the value-at-risk (VaR) approach is used for market price risks. In ad-

dition, the ongoing ascertainment and reporting of the operating results of the

trading departments is a core function of the risk control department. Rounding

off the list of tasks are independent quality control of the market parameters

used for measuring risks and results, and the further development and group-

wide application of methods and systems based on uniform risk standards and

risk/reward analyses.

40

41


Ongoing expansion of our product range

90-day credit facility

Savings certificate (4 and 6 years)

Postbank Card

Issue of Eurocard

Cash service

Sparbuch 3000 plus

Capital life insurance (brokerage)

EUROGIRO

Issue of VISA card

Investment certificates

Telephone service

Investment certificates (2nd generation)

Private customer loans

Share/fixed-interest security funds

Term life assurance

Standard credit facilities

Euro term deposits

Time deposits

Express transfer service (abroad)

Mortgage lending

Cash card

Internet

Standard overdrafts for corporate customers

Foreign exchange accounts

Internet home banking

Home savings and loans

Postbank Giro plus

July Oct AprJan1992

July Oct AprJan1993

July Oct AprJan1994

July Oct AprJan1995

July Oct AprJan1996

July Oct AprJan1997

July Oct July OctAprJan1998

JulyAprJan1999

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

Oct Jan2000

Cybercash

SparCard 3000 plus

Apr July Oct Jan2001

• • • • •

Postbank Kapital plus, Postbank Sparplan

Life, pension and accident insurance

Corporate card

Investment funds for business customers

Commercial real estate financing

Open-ended property funds

Brokerage

Pension programs for business customers

Monitoring of market price risk

We define the market price risk as the potential loss that can arise for our pos-

itions as a result of changes in market prices. At Postbank, market prices risks are

monitored by a system of limits and sublimits for transactions in accordance with

the MaH, on the basis of the value-at-risk approach. Overall limits and sublimits

are updated dynamically in line with results and are approved by the Group

Management Board, which lays down the maximum sums involved. Compliance

with the limits for transactions are monitored daily.

The VaR parameters adopted were a holding period of 10 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 procedures on the asset position of

Postbank is quantified using regular worst case scenario analyses. These worst

case scenarios are derived from historical distribution analyses.

Postbank also calculates a monthly value-at-risk figure for the bank overall; this

describes the aggregate market price risk for the entire bank, including non-

trading positions.

The procedures used for daily risk measurement are regularly subjected to back-

testing in order to assure their reliability. In this process, the significance of the

value-at-risk procedures, which are based on historical market movements, is

tested by comparing the daily non action profit and loss with the value-at-risk for

all trades. The figures are analyzed using the Bank for International Settlement’s

three-zone approach, dated January 1996.

42

43


Jahr 1999 Ausblick Value-at-risk

The value-at-risk of the trading portfolios (holding period: 10 days, history: 250

days, confidence level: 99 percent) of Deutsche Postbank AG as of December 31,

1999 amounted to DM 2.5 million.

During 1999 the value-at-risk risk measure for the trading portfolios amounted

on average to DM 1.2 million and ranged from DM 0 million to DM 6.2 million.

in DM million Financial Financial Financial OverallMarkets Markets Markets trading book

Interest rate Interest rate Interest rate incl. correlationtrading trading trading

Money market Capital market Stock trading

Value-at-Risk as of Dec. 31, 1999 2.5 0 0.2 2.5

Minimum value-at-risk 1999 0 0 0 0

Maximum value-at-risk 1999 3.1 6.2 1.5 6.2

Average value-at-risk 1999 0.5 0.6 0.5 1.2

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45

Monitoring of counterparty exposure

Postbank defines counterparty exposure as the default risk, credit risk, settle-

ment risk, counterparty risk and country risk. In the lendings business, the coun-

terparty default risk is managed by the Bank on a case-by-case basis by granting

debtor-specific limits and limits for country risks. The Bank is currently devel-

oping a credit portfolio management model designed to measure credit risks

and create the organizational framework for their management.

The Bank’s IT systems environment enables the online assignment of trans-

actions to the counterparty limit concerned as well as online monitoring.

Derivates are monitored as credit equivalents on the basis of the marking-to-

the-market method.

Monitoring of operational risks

At Postbank, two basic types of risk are classified as operational risks: the oper-

ating event risk covers risks relating to faulty processes, insufficient controls

and events beyond the Bank’s control, while the business risk covers the risk of

an unexpected rise in costs or fall in income. In addition to its existing internal

control systems and the regular checks by internal audit staff, the Bank also

produced a comprehensive catalog of operational risks conforming with uniform

standards in the course of the past fiscal year. In this way, Postbank has taken

the first step towards cataloging operational risks at the overall Bank level.


Jahr 1999 Ausblick Risk reporting

The risk control department informs the member of the Management Board with

responsibility for this area and the risk control managers on a daily basis of the

results of transactions as well as of limit utilizations in the case of market price

and counterparty risks. The entire Management Board receives this information

in the form of a monthly report, together with the results of backtesting and the

scenario analyses. The monthly report also contains the aggregate market pos-

ition for the Bank as a whole, including non-trading positions.

Summary

Postbank has not only created the basis for a successful risk management sys-

tem and effective risk monitoring at the overall Bank level, but has also laid

the foundations for the rapid and successful integration of DSL Bank from a

risk management point of view. In addition, the risks arising from the extensive

projects to implement Postbank’s vision in the year 2000 (our program for the

future) are controlled and monitored via detailed, tightly run project manage-

ment.

46

47

Postbank’s strategic goals in the current fiscal year 2000 are closely bound up

with Deutsche Post. Postbank is affected in a number of areas: for example, in

the summer “Postbank EasyTrade.AG“, its new brokerage company, will be

launched onto the market with an attractive range of services. This not only

enables Postbank, as part of the Deutsche Post WorldNet Group, to maintain

securities accounts for Group employees. Independently of this, Postbank will be

able to round off its product range in this decisive area and increasingly take on

the role of a principal bank for its 10 million customers. The challenge is to ex-

ploit the resulting cross-selling potential in a profitable manner. Postbank

EasyTrade’s business plan is already forecasting a number of securities accounts

for the current fiscal year that will make Postbank one of the major players in

the sector.

Postbank has undertaken to do its bit to contribute to Group success and to fur-

ther improve its earnings situation. One key aspect here is the rapid and suc-

cessful integration of DSL Bank. With total assets of over DM 270 billion, the

new institute will be one of the major banks in Germany. In particular, the ratio

between assets and liabilities and shareholders’ equity will be put on a new,

more balanced footing.

In addition, it is decisive for the implementation of Postbank’s vision in the year

2000 to strengthen our sales culture and the quality of the advice we provide.

As a true multi-channel bank, we will continue to implement corresponding

measures in order to be able to offer customers appropriate products in our

branch offices, on the telephone or via the Internet. Further improvements in

efficiency and in our IT orientation are absolutely vital if we are to achieve this

end. Our goal of achieving a further substantial increase in our operating result

is closely linked to further progress in Postbank’s program for the future. This

includes implementing Postbank’s new organizational structure in practice.

Outlook


Initial trends for the current fiscal year show that Postbank is on the right track

here. We need to perpetuate and strengthen this trend in our core business in

particular. We were able to halt the decline in private checking accounts in 1999

and are aiming for a slight increase in 2000. We intend to preserve and expand

our position as Germany’s leading savings bank by offering market and cus-

tomer-oriented products at attractive conditions. In the investment funds sector,

our goal is to repeat the record results we achieved in 1999. And, together with

DSL Bank, we can achieve our ambitious growth targets in the mortgage lending

sector.

We are aware of the fact that Deutsche Postbank AG will be in the public eye

in the year 2000. We will do everything in our power to further strengthen the

positive developments we have initiated at all levels of the Bank.

Bonn, March 15, 2000

Deutsche Postbank AG

The Management Board

Prof. Dr. Wulf von Schimmelmann Volker Mai Loukas Rizos Achim Scholz

I. General information

The consolidated financial statements of Deutsche Postbank AG have been pre-

pared in accordance with the provisions of the Handelsgesetzbuch (HGB – German

Commercial Code) and the Aktiengesetz (AktG – German Public Companies Act)

together with the Verordnung über die Rechnungslegung der Kreditinstitute und

Finanzdienstleistungsinstitute (RechKredV – German Bank Accounting Regula-

tion) and cover the period January 1 to December 31, 1999.

II. Companies consolidated

Eleven companies were fully consolidated in the consolidated financial state-

ments of Deutsche Postbank AG in addition to Deutsche Postbank AG as the

parent company. Of these eleven companies, four are foreign and three were

included in consolidation for the first time. Two companies were consolidated

proportionately and for the first time.

Four companies were included as affiliates, all for the first time. Two of these

companies are foreign-domiciled companies.

Three companies were not included in consolidation in accordance with section

296 (2) HGB, and a further five companies were omitted in accordance with sec-

tion 311 (2) HGB due to their insignificance for the presentation of a true and

fair view of the net assets, financial position and results of operations.

A detailed list of the companies included in the consolidated financial statements

and of those companies not included in consolidation is presented elsewhere in

these Notes.

III. Consolidation principles

In accordance with section 308 HGB, the consolidated financial statements were

prepared on the basis of the consistent accounting policies applied at Deutsche

Postbank AG.

Capital consolidation was effected by netting the book values of the invest-

ments at the parent company against the equity of the consolidated companies

in accordance with section 301 (1) sentence 2 clause 1 HGB (purchase method).

notes

48

49

A. General information on the

classification of the annual financial

statements and on the accounting

policies applied

1999 Notes

In accordance with section 301 (2) HGB, capital consolidation is generally effec-

ted at the date of acquisition of the Group company concerned. An exception

has been made in the case of one fully consolidated company, for which capital

consolidation was effected at the date of first-time consolidation. The resulting

net income for the year of DM 0.3 million was eliminated in the Group income

statement by creating an adjustment item.

Asset-side differences are deducted from reserves or are taken to assets as hid-

den reserves. During the year under review, asset-side differences resulting from

the capital consolidation of proportionately consolidated companies amounted

to DM 2 million; this amount was eliminated against other revenue reserves.

In the consolidated financial statements, investments in associates are carried

at the book value at the balance sheet date of the consolidated financial state-

ments (December 31, 1999) using the equity method in accordance with section

312 (1) sentence 1 clause 1 HGB and adjusted in accordance with section 312

HGB. No adjustment was made to the measurement methods applied at the par-

ent company. An asset-side difference of DM 49 million arose at one associate;

this is contained in the item “Investments in associates“.

Intercompany receivables and liabilities as well as income and expenses were

eliminated.

Due to the insignificance for the presentation of the net assets, financial pos-

ition and results of operations of the Group, intercompany profits from intragroup

deliveries of goods and services were not eliminated in accordance with section

304 (3) HGB. Adjustments due to timing differences in the carrying values are

recognized in income. Appropriate deferred tax assets in accordance with section

306 HGB were provided to reflect consolidation measures recognized in income

in accordance with section 303 HGB.

IV. Accounting policies

The cash in hand, balances with central banks, due from banks and from cus-

tomers are carried at their nominal amounts including accrued interest.

The registered securities and borrower’s note loans contained in the due from

banks and from customers are carried at their nominal amounts plus accrued

interest in accordance with section 340e (2) sentence 1 HGB. The difference

between the nominal amounts and the acquisition cost was deferred and re-

leased on a regular basis.

to the consolidated financial statements

Structure of the balance sheet 1999, assets

in DM million 1995 1996 1997 1998 1999

Liquid funds 5,399 4,741 7,234 3,954 2,983

Due from banks 40,347 59,529 59,863 63,309 52,796

Due from

customers 4,953 5,961 3,522 5,653 6,977

Securities 44,705 33,096 37,200 37,416 45,740

Due from affiliates – – – – –

Other assets 3,817 3,461 3,636 3,747 8,794

Total 99,221 106,788 111,455 114,079 117,291

Liquid funds

Other assets

Due from banks

Due from customers

Securities

Bonds and notes carried under fixed assets are carried at cost in accordance

with the moderated principle of lower of cost or market (section 340e (1) HGB).

Differences between acquisition costs and the redemption amount

(premiums/discounts) were allocated pro rata temporis.

Bonds, other fixed-income securities and shares and other non-fixed-income

securities (investment fund shares) classified as current assets are carried at his-

torical cost in accordance with the strict principle of lower of cost or market and

the requirement to reverse write-downs where the reasons for them no longer

exist (section 340e (1) sentence 2 HGB in conjunction with section 253 (3) sen-

tence 1 HGB and section 280 HGB). Single valuation units have been formed

where fixed-income securities are secured by swap transactions with matching

amounts, currencies and maturities.

Investments in non-affiliated and affiliated companies are carried at cost.

Trust assets and liabilities are carried at their respective nominal amounts.

Equalization claims from the 1990 currency conversion are carried in accordance

with the D-Mark-Bilanzgesetz (DMBilG – D-mark Accounting Act).

Tangible assets are carried at cost less regular depreciation in accordance with

the standard useful life on the basis of the official tax depreciation tables.

50

51

1999 Notes

Structure of the balance sheet 1999, liabilities and shareholders’ equity

in DM million 1995 1996 1997 1998 1999

Savings deposits 57,055 59,799 60,723 62,699 57,600

Savings certificates,

term deposits 5,962 9,584 9,615 10,808 15,743

Demand deposits 28,603 27,942 26,786 28,371 30,375

Capital and reserves 4,318 3,104 3,131 3,147 4,077

Other liabilities and

shareholders’ equity 3,283 6,359 11,200 9,054 9,496

Total 99,221 106,788 111,455 114,079 117,291

Other liabilities and shareholders’ equity

Capital and reserves

Savings certificates and term deposits

Demand deposits

Savings certificates and term deposits

Exceptional write-downs taken account of probable lasting impairment. Low-

value assets are written off in full in the year of acquisition in accordance with

6 (2) EStG.

Liabilities are carried at their redemption amount plus deferred interest.

Provisions for current pensions and vested pension entitlements are set up in

the amount allowed by commercial law. Pension provisions are measured on

the basis of the 1998 Heubeck mortality tables. The interest rate is unchanged

at 6 percent.

Provisions for taxes and other provisions take account of identifiable risks

where the obligation and/or the amount is uncertain. Jubilee provisions are

set up in the maximum amount allowed by tax law.

Full account is taken of specific banking risks by the application of strict risk

assessment standards. Specific and general valuation allowances take account

of identifiable specific risks and the general credit risk.

Derivatives were individually measured at their fair value or market value at the

closing date in accordance with the realization and imparity principle. Where

derivative and primary financial instruments form a single entity, valuation units

were formed on the basis of ex-ante-defined strict criteria.

V. Currency translation

Foreign currency receivables and liabilities were translated into DM at the

mean spot rates at the balance sheet date in accordance with section 340h (1)

sentence 2 HGB. Differences from the translation of rate-hedged balance sheet

items and corresponding pending transactions were eliminated by setting up

adjustments.

Balance sheet items and pending transactions denominated in foreign currencies

are measured in each currency in accordance with section 340h (2) sentence 2

HGB and classified as separately covered. All income and expenses from foreign

currency translation are therefore recognized in the income statement in accord-

ance with section 340h (2) sentence 1 and 2 HGB. There were no income items

to be disclosed separately because there were no substantial timing differences

items at the balance sheet date due to the high turnover rate.

VI. Ownership

In accordance with section 20 (1) and (4) in conjunction with section 16 (1) and

2 AktG, Deutsche Post AG has notified us that it holds all shares of Deutsche

Postbank AG as of December 31, 1999 with the exception of 100 shares.

The Deutsche Postbank Group was included for the first time in the consolidated

financial statements of Deutsche Post AG, Bonn, as of December 31, 1999. The

financial statements of Deutsche Post AG are filed with the Bonn Commercial

Register.

I. Balance sheet

“Due from banks“ contain subordinated borrower’s note loans

amounting to DM 31 million.

“Due from customers“ contain subordinated loans amounting to

DM 2 million.

52

53

B. Notes to the balance sheet and

the income statement

1999 Notes

Holdings of marketable securities:

Dec. 31, 1999 Dec. 31, 1998

in DM million in DM million

Bonds and other fixed-income securities

listed 26,447 27,015

unlisted 10 143

Shares and other non-fixed-income securities

listed 77 90

Investments in affiliated companies

listed 4 0

DM 4,013 million of the securities are classified as fixed assets. Amounts of

bonds and other fixed-income securities falling due in the following year

amount to DM 8,706 million.

“Participations“ do not contain any marketable securities.

The “fiduciary assets“ disclosed in the amount of DM 163 million (previous

year: DM 164 million) relate exclusively to pass-through loans to employees of

companies of the former Deutsche Bundespost financed by postal savings and

loan associations. Fiduciary liabilities in the same amount were disclosed.

The land, buildings, assets under construction and leasehold improvements

contained under “tangible assets“ amounting to DM 1,840 million (previous

year: DM 1,771 million) were used by Deutsche Postbank AG in the amount of

DM 1,338 million (previous year: DM 1,454 million) as part of its own business

activities. Operating and office equipment amounted to DM 222 million (previous

year: DM 260 million).

“Other assets“ include collection documents amounting to DM 3,122 million

(previous year: DM 385 million) and prepayments of DM 702 million, among

other things.

At the reporting date, foreign currency assets and receivables amounted to

DM 1,525 million (previous year: DM 2,856 million) and DM 245 million respect-

ively (previous year: DM 739 million).

“Deferred items and prepaid expenses“ include a premium of DM 74 million

(previous year: DM 3 million), among other things. The premium results from

the measurement of borrower’s note loans and registered bonds at face value.

It also includes prepayments of services not yet received amounting to

DM 650 million.

Statement of changes in consolidated fixed assets

Historical cost

Balance at Balance at Jan. 1, 1999 Additions Disposals Reclassifications Dec. 31, 1999

DM DM DM DM DM

1. Investments in affiliatedcompanies 4,055,000.00 102,000.03 – – 4,157.000.03

2. Participations 44,490,310.00 – 26,575,000.00 – 17,915,310.00

3. Bonds and other fixed- income securities 1) – 4,013,431,333.87 – – 4,013,431,333.87

4. Investments in associated companies – 598,676,704.83 – – 598,676,704.83

5. Intangible assets 263,812,556.18 28,520,076.46 45,250,549.96 – 13,670.96 246,798,411.72

6. Tangible assets 2,657,004,996.64 215,292,878.59 74,280,801.66 13,670.96 2,798,030,744.54

2,969,362,862.82 4,856,022,993.78 146,106,351.62 – 7,679,009,504.98

1) Securities reclassified as fixed assets

Maturity structure of selected assets items by remaining maturity

Dec. 31, 1999 Dec. 31, 1998


Due from banks 51,403 62,304

of which with an indefinite time to maturity – –

remaining maturity of 3 months or less 19,312 30,411

remaining maturity of between 3 months and 1 year 8,277 9,816

remaining maturity of between 1 and 5 years 16,220 17,404

remaining maturity of more than 5 years 7,594 4,673

Due from customers 6,977 5,653

of which with an indefinite time to maturity 1,190 754


remaining maturity of between 3 months and 1 year 1,186 309


remaining maturity of more than 5 years 2,238 1,372

54

55

1999 Notes

Depreciation/amortization Net book value

Balance at Depreciation/amortization Balance at Jan. 1, 1999 in the fiscal year Disposals Transfers Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1998

DM DM DM DM DM DM DM

– – – – – 4,157,000.03 4,055,000.00

– – – – – 17,915,310.00 44,490,310.00

– – – – – 4,013,431,333.87 –

– – – – – 598,676,704.83 –

154,656,691.27 43,533,439.20 40,363,677.07 – 157,846,453.40 88,951,958.32 109,155,864.91

625,556,342.37 169,772,185.86 68,279,051.19 – 727,049,477.05 2,070,964,642.15 2,031,448,654.27

780,213,033.64 213,325,625.06 108,642,728.26 – 884,895,930.44 6,794,096,949.20 2,189,149,829.18

Equivalent securities were pledged as part of an open market transaction and

a lombard loan with the Deutsche Bundesbank amounting to DM 1,490 million

(previous year: DM 1,176 million) under the terms of the security pooling system.

“Deferred income“ contains discounts of DM 6 million (previous year: DM 5 mil-

lion). The discounts result from the measurement of borrower’s note loans and

registered bonds at face value. This item also includes discounts from mortgage

lending amounting to DM 5 million.

The provision of DM 1,043 million for the joint sales network was released due

to restructuring and the consequence amendment to the cooperation agreement

with Deutsche Post AG.

In accordance with Article 5 (1) of the Articles of Association, the “subscribed

share capital” amounts to DM 800 million. It is composed of 16 million bearer

shares each with a nominal value of DM 50.

DM 1,300 million was transferred to the “fund for general banking risks”.

DM 750 million of the net income of Deutsche Postbank AG amounting to

DM 857 million will be distributed to the shareholder. In accordance with Article

22 (3) of the Articles of Association of Deutsche Postbank AG, DM 108 million

will be appropriated to “other revenue reserves“ after allowance for minority

interests (DM 1 million).

After adoption of the annual financial statements, unrealized reserves from

securities amounting to DM 359 million will be appropriated to liable capital

in accordance with section 10 (4a) sentence 1 KWG.

Structure of the income statement 1999, expenses

in DM million 1995 1996 1997 1998 1999

Interest and commission

expenses 2,469 2,353 2,465 2,778 2,470

Net income for the year 226 – 27 16 857

Other administrative

expenses 2,013 2,030 1,829 1,794 1,619

Other expenses 91 1,818 1,167 264 1,730

Depreciation/

amortization 189 200 205 208 213

Transfer to federal government 196 – – – –

Personnel expenses 1,843 1,489 1,881 1,430 1,354

Total 7,027 7,890 7,574 6,490 8,243

Interest and commission expenses

Net income for the year

Other expenses

Depreciation/amortization

Personnel expenses

Maturity structure of selected liabilities items by remaining maturity

Dec. 31, 1999 Dec. 31, 1998


Due to banks with an agreed maturity or period of notice 2,089 4,049


remaining maturity of 3 months or less 753 3,941

remaining maturity of between 3 months and 1 year 1,193 95

remaining maturity of between 1 and 5 years 116 –

remaining maturity of more than 5 years 27 13

Savings deposits with an agreedperiod of notice of more than 3 months 3,112 8,326


remaining maturity of 3 months or less 573 2,227

remaining maturity of between 3 months and 1 year 844 3,292



Due to customers with an agreedmaturity or period of notice 15,743 10,808



remaining maturity of between 3 months and 1 year 3,975 1,859



56

57

1999 Notes

Structure of the income statement 1999, income

in DM million 1995 1996 1997 1998 1999

Commission income 928 888 946 839 844

Other income 495 642 1,516 286 2,226

Interest income 5,604 5,104 5,112 5,365 5,173

Net loss for the year – 1,256 – – –

Total 7,027 7,890 7,574 6,490 8,243

Commission income

Interest income

Other income

II. Income statement

“Other operating income“ contains reimbursed excess amounts paid in 1998

(DM 99 million) for service and sales network services.

The release of the provision for the joint sales network of DM 1,043 million

was disclosed as “extraordinary income”.

The restructuring of the company pension plan resulted in an “extraordinary

expense” of DM 73 million.

The “taxes on income” result almost exclusively from the taxable distribution.

I. Forward transactions

Forward transactions not settled at the balance sheet date are presented below.

Derivative transactions – Volumes

in DM million Nominal values Credit risk equi- Replacementvalents (6th amend- costment to the KWG)

Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1999

Interest rate risks

OTC products

Interest rate swaps 6,915 5,479 13 37

FRAs 939 866 0 0

Exchange-trade products

Interest rate futures 916 9 0 0

Total 8,770 6,354 13 37

Currency risks

OTC products

Currency forwards/swaps 1,523 3,961 4 5

Interest rate/currency swaps 70 40 1 1

Total 1,593 4,001 5 6

The nominal values represent the gross volume of all buy and sell transactions.

To increase the clarity and comparability of presentation, the credit risk equiva-

lents and the replacement cost are presented to enable risk assessment.

The credit risk equivalents were measured by marking-to-market and reflect

counterparty weightings. No netting procedures were applied.

The replacement cost refers to all contracts with positive fair values. These were

not eliminated against contracts with negative fair values.

58

59

C. Other disclosures

1999 Notes

II. Contingent liabilities

There were contingent liabilities at the balance sheet date in the form of

guarantees and indemnities amounting to DM 2,166 million (previous year:

DM 332 million).

The guarantees and indemnities include a master guarantee to a credit insti-

tution to secure certain committed housing construction loans (DM 1,500 million).

Derivative transactions – Maturities

Nominal values Interest rate risks Currency risks Shares and otherin DM million price risks

Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998

Remaining maturity

of 3 months or less 2,777 3,104 1,117 2,824 0 0

3 months to 1 year 2,435 1,099 406 1,137 0 0

1 to 5 years 2,756 1,714 70 0 0 0

more than 5 years 802 437 0 40 0 0

Total 8,770 6,354 1,593 4,001 0 0

Derivative transactions – Counterparty classification

Nominal values Nominal values Credit risk equivalents (6th Replacement costin DM million amendment to the KWG)

Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1999

Banks in OECD 10,363 10,355 18 43

Banks outside OECD

Public sector in OECD

Other

Counterparties

Total 10,363 10,355 18 43

Derivative transactions – Commercial transactions

Nominal values Nominal values Credit risk equivalents (6th Replacement costin DM million amendment to the KWG)

Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1999

Interest rate contracts 749 193 0 0

Currency contracts 1 0 0 0

Total commercial transactions 750 193 0 0

Deutsche Postbank AG has issued a recoverability guarantee of DM 653 million

to investors in Luxembourg investment funds in the amount of the initial sub-

scription price.

There are additional funding obligations from the voluntary deposit protection

fund of Bundesverband Öffentlicher Banken Deutschlands e. V. in the amount set

out in the articles, and from the statutory deposit protection fund.

III. Other financial obligations

In accordance with Article 4 section 16 PTNeuOG, Postbank is required to pay

DM 310 million per annum until 1999 inclusive and 33 percent of the gross com-

pensation of its active civil servants and the notional gross compensation of its

suspended civil servants in the subsequent years to its welfare fund established

for this purpose. Any obligations of Postbank for payments to the welfare fund

exceeding the above amounts are borne by the federal government.

IV. Employees

Average number of Postbank employees in the year under review:

female male total

Full-time

Civil servants 4,353 1,526 5,879

Salaried employees 2,324 1,537 3,861

Hourly paid workers 62 243 305

6,739 3,306 10,045

Part-time

Civil servants 1,212 9 1,221

Salaried employees 499 12 511

Hourly paid workers 16 3 19

1,727 24 1,751

8,466 3,330 11,796

In addition, the Deutsche Postbank Group employed 626 apprentices and 24

trainees as of December 31, 1999.

60

61

1999 Notes

V. Remuneration of the Management Board and the Supervisory Board

Total remuneration paid to the members of the Management Board in the period

under review amounted to DM 2,852 thousand.

DM 8,914 thousand were paid to former members of the Management Board.

Provisions for pensions amounting to DM 20,152 thousand and covering all ob-

ligations existed for this circle of people.

Loans amounting to DM 462 thousand had been granted to members of the

Management Board at the balance sheet date. No other contingent liabilities had

been entered into.

The remuneration paid to the Supervisory Board amounted to DM 569 thousand.

VI. Related party disclosures

Schedule of shareholdings of Deutsche Postbank AG in accordance with section

285 clause 11 HGB and section 313 (2) HGB:

Interest (%) Interest (%)

direct indirect

Name and registered office of the company

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 Invest Kapitalanlagegesellschaft mbH, Bonn 100.0

Deutsche Postbank Privat Investment Kapitalanlagegesellschaft mbH, Bonn 100.0

DSL Holding AG, Bonn 81.3

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 Service GmbH, Bonn 100.0

2) Proportionately consolidated companies:

PB Lebensversicherung AG, Hilden 50.0

PB Versicherung AG, Hilden 50.0

3) Companies included in accordance with the equity method:

DSL Bank AöR, Bonn* 39.0

DSL Bank Luxembourg S. A., Luxembourg* 39.0

DSL Finance N. V., Amsterdam* 39.0

Ralos Verwaltung GmbH & Co. Vermietungs-KG, Munich* 39.0

4) Companies not included in consolidation:

Creda Objektanlage- und -verwaltungsgesellschaft mbH, Bonn* 39.0

DSL-Objekt 1. Hamburger GbR mbH, Bonn* 39.0

KORDOBA Gesellschaft für Bankensoftware mbH & Co.KG, Munich 23.0

KORDOBA Gesellschaft für Bankensoftware Verwaltungs mbH, Munich 23.0

InFo Score Business Support GmbH, Bonn 51.0

interServ Gesellschaft für Personal- und Beratungs-dienstleistungen mbH, Bonn 100.0

Sila Grundstücks-Vermietungsgesellschaft mbH, Bonn* 39.0

VöB-ZVD Zahlungsverkehrsdienstleistungs-Gesellschaft mbH, Bonn 75.0

* indirect investment via DSL Holding AG

62

63

1999 Notes

VII. Other information

According to section 2 (4) of the Postumwandlungsgesetz (PostUmwG – Postal

Reform Act) the federal government has provided a guarantee for all Deutsche

Postbank AG liabilities in existence at the time that the company was entered in

the Commercial Register. The federal government’s guarantee of savings deposits

ends no later than five years after the date of entry in the Commercial Register.

Deutsche Postbank AG has been a member of the Einlagensicherungsfonds des

Bundesverbandes Öffentlicher Banken Deutschlands e. V. (the deposit protection

fund maintained by the Association of German Public Sector Banks) since 1995.

Deutsche Postbank AG controlled more than 5 percent of the voting rights in

DSL Holding AG, Bonn, as of December 31, 1999.

Prof. Dr. Hans-E. Büschgen

Professor emeritus, Cologne

Dr. Edgar Ernst

Member of the Management Board

of Deutsche Post AG, Bonn

(since January 11, 1999)

Dr. Joachim Henke

Head of Department, Federal Finance

Ministry, Bonn

Prof. Dr. Ralf Krüger

Senior Adviser, Lazard&Co GmbH,

Frankfurt am Main

(since April 1, 2000)

Prof. Dr. Paul Laufs

Member of the Bundestag, Bonn

(until January 11, 1999)

Dipl.-Ing. Roman Lorenz

Vice-President, Dresden Chamber of

Trade and Commerce, Dresden

(until March 31, 2000)

Dr. Hans-Dieter Petram

Member of the Board of Deutsche

Post AG, Bonn


Dr. Klaus Schlede

Chairman of the Supervisory Board

of Deutsche Lufthansa AG,

Cologne

(since April 1, 2000)

Dr. Manfred Schüler

State Secretary (retd.),

Bonn

Dr.-Ing. Dieter Soltmann

Personally liable partner of

Spaten-Franziskaner-Bräu KGaA,

Munich

64

65

D. Executive Bodies Management Board

Prof. Dr. Wulf von Schimmelmann

Chairman

Bonn

(since February 1, 1999)

Dr. Dieter Boening

Chairman

Wachtberg


Rainer Neumann, Königswinter

(until October 31, 1999)

Volker Mai, Bad Honnef

Loukas Rizos, Frankfurt am Main

(since February 14, 2000)

Achim Scholz, Bonn

Joachim Sperbel, Overath


Supervisory Board

1. Shareholder representatives

Dr. Klaus Zumwinkel

Chairman

Chairman of the Management Board

of Deutsche Post AG, Bonn


Dr. Hans Friderichs

Chairman

Federal Minister (retd.), Mainz


Dr. Thea Brünner

Managing Director of Verbraucher-

zentrale Berlin e. V., Berlin


1999 Executive Bodies

Dr. Alfred Tacke

State Secretary, Federal Ministry of

Economics and Technology, Bonn


Alfred Waiß

Postdirektor (retd.), Stuttgart

(until March 31, 2000)

2. Employee representatives

Michael Sommer

Deputy Chairman

Deputy Chairman of the German

Postal and Telecommunications

Workers’ Union,

Frankfurt am Main

Marietta Auer

Head of Department, Deutsche

Postbank AG, Unterhaching

Ralf Höhmann

Member of the Postbank Stuttgart

Branch Works Council, Stuttgart

Elmar Kallfelz

Chairman of the Main Works Council

of Deutsche Postbank AG, Meckenheim

Sabine Lerner

Head of Special Projects,

Deutsche Postbank AG, Rheinbach

Prof. Dr. Wulf von Schimmelmann Volker Mai Loukas Rizos Achim Scholz

Bernd Lindenau

Regional Chairman, German Postal

and Telecommunications Workers’

Union, Berlin

Werner Schulte

Northern Regional Chairman, German

Postal and Telecommunications

Workers’ Union, Kiel

Sabine Schwarz

Chairwoman of the workers’ Council,

Postbank Berlin Branch, Berlin

Christine Weiler

Chairwoman of the workers’ Council,

Postbank Munich Branch, Munich

Walter Wortmann

Chairman of the Postbank Dortmund

Branch Works Council, Dortmund

Bonn, April 2000

Deutsche Postbank AG

The Management Board

Audit opinion “We have audited the consolidated financial statements and the Group manage-

ment report of Deutsche Postbank AG, Bonn, for the fiscal year January 1 to

December 31, 1999. The consolidated financial statements and the Group manage-

ment report in accordance with the provisions of the HGB (German Commercial

Code) are the responsibility of the legal representatives of Deutsche Postbank

AG. Our responsibility is to express an opinion, based on our audit, on the con-

solidated financial statements and the Group management report.

We conducted our audit in accordance with section 317 of the HGB and in com-

pliance with the principles of proper auditing adopted by the Institut der Wirt-

schaftsprüfer (IDW). Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether inaccuracies and violations are

identified that could have a material effect on the view of the financial position

and results of operations presented by the financial statements prepared in

accordance with proper accounting principles and the management report. The

process of defining the audit procedures takes account of knowledge about the

business activities and the economic and legal environment of the Group, as

well as expectations of possible errors. An audit includes examining, largely on a

test basis, the effectiveness of the internal control system and evidence support-

ing the amounts and disclosures in the consolidated financial statements and

the Group management report. An audit also includes assessing the annual

financial statements of the companies included in the consolidated financial

statements, the definition of the companies consolidated, the accounting and

consolidation principles used and significant estimates made by the legal repre-

sentatives, as well as evaluating the overall presentation of the consolidated

financial statements and the Group management report. We believe that our

audit provides a reasonable basis for our opinion.

Our audit did not give rise to any objections.

In our opinion, the consolidated financial statements give, in accordance with

proper accounting principles, a true and fair view of the financial position of the

Group and of the results of its operations. Overall, the Group management

report accurately reflects the position of the Group and fairly presents the risks

associated with future developments.“

Düsseldorf, February 23, 2000

PwC Deutsche RevisionAktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Kütter Güldenberg

Wirtschaftsprüfer Wirtschaftsprüfer

66

67

1999 Audit opinion

General Manager

Lothar Rogg, Heiligenhaus

(since October 1, 1999)

Directors in 1999

Heiko Fischer, Gütersloh

(since August 1, 1999)

Michael Flötenmeyer, Witten

Bernd Geilen, Mendig

(until December 31, 1999)

Gerd Hartwig, Sankt Augustin

Dr. Wilhelm Hemmerde, Wachtberg

Werner Hille, Weinstadt

(since November 1, 1999)

Bernhard Koblischeck, Dannstadt

Klaus Kreienkamp, Velbert


Thea Kutzscher, Mölkau


Albert Lechner, Mehring


Jürgen Lengwenat, Bad Iburg

(since August 1, 1999)

Manfred Löw, Bad Camberg


Dr. Torsten Lund, Berlin


Lutz Meyer, Freiburg


Dr. Hans Molnar, Königswinter

Reiner Mothes, Schwaig

(since October 1, 1999) )

Uwe Nagel, Cologne

Hans-Jürgen Niehof, Berlin


Andreas Nix, Kandel


Peter Prill, Hamburg


Dr. Dieter Richter, Troisdorf

Gerd Richter, Sankt Augustin


Peter Schmedes, Kaltenkirchen


Klaus Schöniger, Hofheim

Prof. Dr. Gert Schukies, Verl

(since July 7, 1999)

Friedhelm Schwarze, Oberhausen


Ralf Stemmer, Königswinter


Heinz Wachter, Marl


Norbert Wahl, Wiesbaden

Werner Wessinghage, Schwerte


Andrea Wiegand, Bochum

68

69

Assets DM DM DM DM thousand

Dec. 31, 1998

1. Cash reserves

a) Cash in hand 2,534,394,387.69 2,911,454

b) Balances with central banks 448,910,811.56 1,042,891

of which: with the Deutsche Bundesbank

DM 243,657,563.82 (prior year: DM 1,042,891 thousand)

c) Balances in postal giro accounts –.– 2,983,305,199.25 –

2. Debt and bills issued by public-sector borrowers

eligible for refinancing at central banks

a) Treasury bills, discounted treasury notes

and similar treasury securities –.–

b) Bills 23,815,933.09 23,815,933.09 –

of which: eligible for funding with the Deutsche Bundesbank

DM 23,815,933.09 (prior year: DM 0 thousand)

3. Due from banks

a) payable on demand 1,393,524,334.30 1,005,388

b) other receivables 51,402,603,466.18 52,796,127,800.48 62,304,043

4. Due from customers 6,976,956,920.35 5,653,291

of which: secured by mortgages

DM 1,958,464,537.96 (prior year: DM 1,026,821 thousand)

communal loans DM 571,350,522.11 (prior year: DM 1,866,045 thousand)

5. Bonds and other fixed-income securities

a) Money market securities

aa) from public-sector issuers –.– –

of which: eligible as collateral

for advances from the Deutsche Bundesbank

DM 0 (prior year: DM 0 thousand)

ab) from other issuers 459,957,963.60 459,957,963.60 50,266


or advances from the Deutsche Bundesbank

DM 152,278,432.60 (prior year: DM 50,266 thousand)

b) Bonds and notes

ba) from public sector issuers 2,910,193,392.97 6,545,438




bb) from other issuers 27,929,751,207.07 30,839,944,600.04 20,563,112




c) own bonds –.– 31,299,902,563.64 –

nominal value DM 0 (prior year: DM 0 thousand)

6. Shares and other non-fixed-income securities 14,439,926,565.73 10,257,602

7. Participations 616,592,014.83 44,490

of which: in credit institutions DM 0 (prior year: DM 0 thousand)

in financial services institutions DM 0 (prior year: DM 0 thousand)

8. Investments in affiliated companies 4,157,000.03 4,055

of which: in credit institutions DM 0 (prior year: DM 0 thousand)

in financial services institutions DM 0 (prior year: DM 0 thousand)

9. Fiduciary assets 162,900,211.51 163,987

of which: loans DM 162,900,187.04 (prior year: DM 163,987 thousand)

10. Equalization claims against the government

including debt securities from their conversion 864,520,175.75 880,736

11. Intangible assets 88,954,313.28 109,156

12. Tangible assets 2,070,964,642.15 2,031,449

13. Other assets 4,066,321,857.23 434,678

14. Deferred items and prepaid expenses 896,781,302.11 77,084

Total assets 117,291,226,499.43 114,079,120

Consolidated balance sheet as of December 31, 1999

1999 Consolidated balance sheet

Liabilities and shareholders’ equity DM DM DM DM thousand

Dec. 31, 1998

1. Due to banks

a) payable on demand 3,278,737,251.51 1,375,663

b) with an agreed maturity or period of notice 2,089,354,687.13 5,368,091,938.64 4,048,630

2. Due to customers

a) Savings deposits

aa) with an agreed period of

notice of 3 months 54,488,509,816.05 54,373,103

ab) with an agreed period of

notice of more than 3 months 3,111,628,399.84 57,600,138,215.89 8,325,885

b) other liabilities

ba) payable on demand 30,374,951,519.33 28,370,720

bb) with an agreed maturity or

period of notice 15,742,994,009.41 46,117,945,528.74 103,718,083,744.63 10,808,315

3. Fiduciary liabilities 162,900,187.04 163,987

of which: loans DM 162,900,187.04

(prior year: DM 163,987 thousand)

4. Other liabilities 188,728,795.52 272,483

5. Deferred income 139,479,158.23 118,834

6. Provisions

a) Provisions for pensions and

similar obligations 846,734,490.98 737,513

b) Provisions for taxes 282,722,919.04 22,433

c) Other provisions 1,207,327,689.40 2,336,785,099.42 2,314,963

7. Fund for general banking risks 1,300,000,000.00 –

8. Capital and reserves

a) Subscribed share capital 800,000,000.00 800,000

b) Capital reserve 2,268,575,398.04 2,268,575

c) Revenue reserves 187,467,763.60 81,060

d) Minority interests 71,114,414.31 – 3,044

e) Distributable profit 750,000,000.00 4,077,157,575.95 0

Total liabilities and shareholders’ equity 117,291,226,499.43 114,079,120

1. Contingent liabilities

a) Contingent liabilities on endorsed

bills settled with customers –.– 46,600

b) Liabilities on guarantees and

warranty agreements* 2,166,024,590.75 285,341

c) Liability from the provision of

security for third-party liabilities –.– 2,166,024,590.75 –

2. Other obligations

a) Commitments from the sale of

assets subject to repurchase agreements –.– –

b) Placement and underwriting commitments –.– –

c) Irrevocable credit commitments 2,300,939,914.43 2,300,939,914.43 274,393

* Obligations from comfort letters are given in the annex under point C.II.

70

71

Expenses DM DM DM DM thousand

Prior year

1. Interest expenses 2,409,694,347.96 2,726,387

2. Commission expenses 59,976,725.88 51,457

3. Costs relating to insurance business 4,558,584.25 –

4. General and administrative expenses

a) Personnel expenses

aa) Wages and salaries 820,537,089.31 864,715

ab) Social security contributions and expenses

for pensions and other employee benefits 533,023,849.12 1,353,560,938.43 565,157

of which: pension expenses DM 442,769,215.16

(prior year: DM 423,862 thousand)

b) Other administrative expenses 1,618,734,271.73 2,972,295,210.16 1,794,318

5. Amortization, depreciation and adjustments

to intangible and tangible assets 213,463,792.26 207,508

6. Other operating expenses 54,574,863.54 49,712

7. Write-downs and adjustments to receivables

and certain securities and loan loss

provisions –.– 203,164

8. Additions to the fund for general banking risks 1,300,000,000.00 –

9. Extraordinary expenses 73,453,956.50 –

10. Taxes on income 290,492,907.68 6,558

11. Other taxes not disclosed under item 6 7,298,594.09 5,830

12. Net income for the year 857,119,126.15 15,527

Total expenses 8,242,928,108.47 6,490,333

Consolidated income statement

for the period January 1 to December 31, 1999

1999 Consolidated Income Statement

Income DM DM DM thousand

Prior year

1. Interest income from

a) lending and money market transactions 2,792,721,297.95 2,925,522

b) fixed-income securities

and book-entry securities 1,867,924,618.79 4,660,645,916.74 1,961,308

2. Current income from

a) shares and other non-fixed-income

securities 511,937,598.89 477,894

b) Participations –.– –

c) investments in affiliated companies 517,569.63 512,455,168.52 318

3. Income from profit pools, profit and loss transfer agreements

and partial profit and loss transfer agreements 1,784,688.57 173

4. Commission income 844,446,513.67 839,358

5. Income from insurance business 7,745,097.24 –

6. Net profit on financial operations 7,313,385.43 28,568

7. Income from revaluations of receivables

and certain securities and from the reversal

of loan loss provisions 915,829,593.85 –

8. Income from revaluations of participations,

investments in affiliated companies

and securities classified as long-term investments 1,928,209.01 –

9. Other operating income 247,779,535.44 257,192

10. Extraordinary income 1,043,000,000.00 –

Total income 8,242,928,108.47 6,490,333

1. Net income for the year 857,119,126.15 15,527

2. Consolidated retained profits/accumulated loss brought

forward from previous year dividend/appropriation – –

3. Profit attributable to minority interests 878,308.33 291

4. Withdrawal from revenue reserves

a) from the legal reserve – –

b) from the reserve for own shares – –

c) from statutory reserves – –

d) from other revenue reserves – –

5. Allocation to revenue reserves

a) to the legal reserve – –

b) to the reserve for own shares – –

c) to statutory reserves – –

d) to other revenue reserves – 107,997,434.48 – 15,818

6. Distributable profit 750,000,000.00 0

Postbank addresses Postbank HeadquartersFriedrich-Ebert-Allee 114 –12653113 Bonn, GermanyPostfach 40 00✉ 53105 Bonn, Germany Phone: +49(0)2 28 920-0Fax: +49(0)2 28 920-2818/-2819Internet: www.postbank.deE-mail: direkt@postbankde

Subsidiaries

Postbank Data GmbH Friedrich-Ebert-Allee 114 –12653113 Bonn, GermanyPostfach 40 00✉ 53105 Bonn, GermanyPhone: +49(0)2 28 920-0Fax: +49(0)2 28 9 20-5810

Postbank EasyTrade.AGEdmund-Rumpler-Straße 351149 Cologne, Germany✉ 51174 Köln, GermanyPhone: +49(0)22 03 92 55- 0Fax: +49(0)22 03 92 55- 53 59

Deutsche PostbankInternational S. A.Airport Center 2, route de TrèvesL-2633 Luxembourg -SenningerbergP.O. Box 11 21✉ L -2966 LuxembourgPhone: +352 34 95 31-1Fax: +352 34 62 06

72

73

Deutsche Postbank InvestKapitalanlagegesellschaft mbHFriedrich-Ebert-Allee 114 –12653113 Bonn, GermanyPostfach 40 00✉ 53105 Bonn, Germany Phone: +49(0)2 28 920 - 0Fax: +49(0)2 28 920 - 1878

Deutsche PostbankPrivat InvestmentKapitalanlagegesellschaft mbHFriedrich-Ebert-Allee 114 –12653113 Bonn, GermanyPostfach 40 00✉ 53105 Bonn, Germany Phone: +49(0)2 28 920 - 0Fax: +49(0)2 28 920 - 76 99

PB Lebensversicherung AGNeustraße 6240721 Hilden, GermanyPostfach 10 10 54✉ 40710 Hilden, GermanyPhone: +49(0)21 03 3 45-100Fax: +49(0)21 03 3 45-109

PB Versicherung AGNeustraße 6240721 Hilden, GermanyPostfach 10 10 54✉ 40710 Hilden, GermanyPhone: +49(0)21 03 3 45-100Fax: +49(0)21 03 3 45-109

1999 Postbank addresses

Acknowledgements

Published by:Deutsche Postbank AGHeadquartersFriedrich-Ebert-Allee 114 –12653113 Bonn, GermanyPostfach 40 00✉ 53105 Bonn, Germany

Phone: +49(0)2 28 920-0Fax: +49(0)2 28 9 20 -28 18/-2819Web: postbank.de

Retail customers:Postbank Direkt-ServicePhone: (0180) 30 40 - 500Fax: (0180) 30 40 - 800E-mail: [email protected]

Business customers:Business LinePhone: (0180) 30 40 - 900Fax: (0180) 30 40 - 999E-mail: [email protected]

Press:Phone: +49(0)2 28 920 - 11 10Fax: +49(0)2 28 920 - 18 10E-mail: [email protected]

Coordination, editing:Press and PR department

Text, design:Charles Barker GmbH, Frankfurt am Main

English translation:Fry & Bonthrone Partnerschaft, Mainz-Kastel

Photographs:Michael Hudler, Frankfurt am Main

Picture agencies:IFA-Bilderteam, business lifestyle This annual report is also published in German.

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