Corporate Banking & Securities Corporate Division
Sales & Trading (debt and other products) net revenues decreased due to significantly lower revenues in Rates and Credit Flow Trading, predominantly in Flow Credit, reflecting weakened credit markets, lower client volumes across the industry, and reduced liquidity especially in the latter half of 2011. The aforementioned revenue decrease in Rates was due to lower flow client volumes as a result of market uncertainty. Structured Finance revenues were solid and in line with prior year, reflecting demand for restructuring capabilities. Emerging Markets revenues were lower than 2010 primarily due to lower flow client volumes as a result of market uncertainty. RMBS revenues were significantly higher than the prior year as a result of successful business realignment. Money Markets revenues increased, driven by strong client activity and volatile markets. Foreign Exchange revenues were very strong, with record annual client volumes offsetting lower margins. Commodities delivered record annual revenues despite a challenging environment, reflecting successful strategic investment.
Sales & Trading (equity) revenues decreased due to a more difficult market environment, with higher volatility and declining markets impacting client sentiment and activity, especially in Europe, which accounts for a high proportion of our business. Cash Trading revenues were lower due to the impact of the deterioration in equity markets during 2011 and lower client activity in Europe. Equity Derivatives revenues were lower as a result of a more challenging environment and lower client activity, although record revenues were achieved in the U.S. Prime Finance revenues were slightly lower reflecting reduced levels of client leverage, partially offset by our strong market position.
Noninterest expenses decreased, primarily driven by lower compensation expenses and efficiency savings partly offset by higher litigation related expenses, and a specific charge of € 310 million relating to the impairment of a German VAT claim.
Income before income taxes decreased driven by the aforementioned revenue effects and partly offset by lower noninterest expenses.
Global Transaction Banking Corporate Division
Net revenues increased driven by a performance on record levels across all businesses with growth in fee and interest income. 2010 included € 216 million related to negative goodwill from the acquisition of commercial banking activities in the Netherlands. Trust & Securities Services profited from improved market conditions in the custody and depositary receipt business. Trade Finance further capitalized on high demand for international trade products and financing. In Cash Management, revenues increased on the basis of higher fees from strong payment volumes as well as higher net interest income mainly driven by slightly improved interest rate levels in Asia and the Euro area compared to the prior year period.
Provision for credit losses increased mainly due to the commercial banking activities acquired in the Netherlands.
Noninterest expenses increased slightly mainly driven by the aforementioned acquisition in the second quarter 2010, including higher expenses related to the amortization of an upfront premium paid for credit protection received and higher insurance-related expenses, partially offset by the non-recurrence of significant severance charges which related to specific measures associated with the realignment of infrastructure areas and sales units and the impact of an impairment of intangible assets in 2010.
Asset & Wealth Management Corporate Division
Net revenues decreased due to € 279 million effects from mark-to-market movements on investments held to back insurance policyholder claims in Abbey Life, which are offset in noninterest expenses. Revenues from other products overall decreased, including the aforementioned effect which was partly compensated by € 72 million in alternative assets and € 46 million in Sal. Oppenheim. Revenues from discretionary portfolio management/fund management decreased reflecting the reduced asset base and performance fees resulting from negative market conditions especially in the second half of 2011. Revenues from advisory/brokerage decreased driven by negative market conditions. In contrast, revenues from deposits and payment services increased. Reflecting higher deposit volumes resulting from dedicated product initiatives. Furthermore, revenues from credit products improved across all Wealth Management units partly offset by Sal. Oppenheim.
Noninterest expenses decreased, mainly influenced from the above mentioned effects related to Abbey Life, € 144 million from Sal. Oppenheim, reflecting the successful integration into Deutsche Bank, and lower expenses in Active mostly facilitated by measures to improve platform efficiency.
Invested assets declined due to an impact of € 26 billion from market depreciation and € 7 billion net outflows, partly offset by € 9 billion due to foreign currency movements.
Private & Business Clients Corporate Division
The increase in net revenues is mainly attributable to the consolidation of Postbank, which began on December 3, 2010, and contributed revenues of € 4.5 billion in 2011, compared to € 460 million in 2010. In 2011 revenues from other products also included € 62 million impairments on Greek government bonds in Advisory Banking Germany as well as a one-time positive impact of € 263 million related to our stake in Hua Xia Bank, driven by the application of equity method accounting upon receiving all substantive regulatory approvals to increase our stake. Revenues from deposits and payment services increased, largely driven by higher volumes in Advisory Banking Germany. Advisory/brokerage revenues increased while revenues from discretionary portfolio management/fund management revenues decreased mainly in Advisory Banking Germany due to the challenging environment. Credit products revenues were down with negative effects from lower margins overcompensating revenue increases due to higher volumes in both Advisory Banking Germany and Advisory Banking International.
Provision for credit losses was € 1.2 billion, of which € 742 million related to Postbank. This number excludes releases from Postbank-related loan loss allowance recorded prior to consolidation of € 402 million. The impact of such releases is reported as net interest income. Excluding Postbank, provisions for credit losses were € 444 million, down € 91 million compared to 2010. The decrease was driven by Advisory Banking Germany.
The increase in noninterest expenses is predominantly driven by Consumer Banking Germany reflecting the consolidation of Postbank. Excluding the Consumer Banking Germany related increase, noninterest expenses were up by € 84 million, mainly resulting from higher costs-to-achieve related to Postbank integration.
Income before income taxes improved due to Consumer Banking Germany and Advisory Banking International.
Invested assets were € 296 billion, down € 1 billion compared to 2010. This was mainly driven by € 9 billion due to market depreciation, partly offset by € 8 billion net inflows, mainly in deposits.
Non-Core Operations Unit Corporate Division
Net revenues increased compared to 2010, including revenues from our exposure to Actavis Group as well as investments in BHF-BANK, Maher Terminals and The Cosmopolitan of Las Vegas which were partly reduced by impairment charges of € 457 million related to Actavis Group as well as impairments on Greek Government bonds. Net revenues in 2010 were mainly impacted by a charge of € 2.3 billion from our investment in Postbank.
Provision for credit losses decreased due to an improvement in Consumer Finance Business portfolio and lower provisions required in relation to IAS 39 reclassified assets.
The increase in noninterest expenses is mainly caused by the start of operations at The Cosmopolitan of Las Vegas at the end of 2010 and non-core business of Postbank, which was consolidated in December 2010, as well as a specific impairment charge on The Cosmopolitan of Las Vegas property and ongoing litigation and settlement costs.
Loss before income taxes decreased mainly due to revenues impacted by the aforementioned Postbank investment.