18 – Equity Method Investments


Investments in associates and jointly controlled entities are accounted for using the equity method of accounting.

Significant investees as of December 31, 20121

Investment2

Ownership percentage

1

Representing 75 % of the carrying value of equity method investments.

2

All significant equity method investments are investments in associates.

3

The Group has significant influence over the investee through board seats or other measures.

Hua Xia Bank Company Limited, Beijing3

19.99 %

Station Holdco LLC, Wilmington

25.00 %

Huamao Property Holdings Ltd., George Town3

0.00 %

Huarong Rongde Asset Management Company Limited, Beijing

40.70 %

Harvest Fund Management Company Limited, Shanghai

30.00 %

Summarized aggregated financial information of significant investees

in € m.

Dec 31, 2012

Dec 31, 2011

Total assets

185,470

160,016

Total liabilities

172,781

148,282

Revenues

4,862

5,143

Net income (loss)

1,287

1,270

Components of the net income (loss) from all equity method investments

in € m.

2012

2011

2010

Net income (loss) from equity method investments:

 

 

 

Pro-rata share of investees’ net income (loss)

397

222

457

Net gains (losses) on disposal of equity method investments

73

29

14

Impairments

(311)

(515)

(2,475)

Total net income (loss) from equity method investments

159

(264)

(2,004)

Total net income from equity method investments were € 159 million in 2012, compared to € (264) million in 2011. This increase was mainly driven by a positive equity pick-up of € 311 million from the Group’s investment in Hua Xia Bank Company Limited, partly offsetted by an impairment charge of € 257 million recognized in the first quarter of 2012 related to Actavis Group before reclassification from equity method investments to held for sale.

For further details on the development of Actavis Group in 2012, please refer to Note 26
“Non-Current Assets and Disposal Groups Held for Sale”.

In 2010 a charge of approximately € 2.3 billion attributable to the equity method investment in Deutsche Postbank AG prior to consolidation was included. On December 3, 2010, Deutsche Bank gained a controlling majority in Postbank shares and commenced consolidation of the Postbank Group as of that date. As a consequence the Group ceased equity method accounting for its investment in Postbank. Further detail is included in Note 04 “Acquisitions and Dispositions”.

There was no unrecognized share of losses of an investee, neither for the period, nor cumulatively.

Equity method investments for which there were published price quotations had a carrying value of € 2.4 billion and a fair value of € 1.8 billion as of December 31, 2012, and a carrying value of € 2.2 billion and a fair value of € 2.1 billion as of December 31, 2011. According to the Group’s accounting policy relating to Associates and Jointly Controlled Entities, as described in Note 01 “Significant Accounting Policies”, no objective evidence of impairment was determined.

The investees have no significant contingent liabilities to which the Group is exposed.

In 2012 and 2011, none of the Group’s investees experienced any significant restrictions on transferring funds in the form of cash dividends, or repayment of loans or advances.

Hua Xia Bank. On May 6, 2010, Deutsche Bank announced that it had signed a binding agreement to subscribe for newly issued shares in Hua Xia Bank Co. Ltd. (“Hua Xia Bank”) for a total subscription price of RMB 5.6 billion (€ 587 million). Deutsche Bank’s subscription was part of a private placement of Hua Xia Bank shares to its three largest shareholders with an overall issuance value of up to RMB 20.8 billion (€ 2.2 billion). Upon final settlement of the transaction, which was effective with the registration of the new shares on April 26, 2011, this investment increased Deutsche Bank’s equity stake in Hua Xia Bank from 17.12 % to 19.99 % of issued capital.

The purchase of the newly issued shares was subject to substantive regulatory approvals to be granted by various Chinese regulatory agencies. The last substantive regulatory approval, which resulted in Deutsche Bank having a claim to receive the additional shares and the associated voting rights, was received on February 11, 2011.

Upon this date, the new shares to be issued have been taken into consideration when assessing Deutsche Bank’s level of influence in accordance with IAS 28, “Investments in Associates”, because they represent potential voting rights.

As of February 11, 2011, Deutsche Bank’s influence was represented by the existing voting rights of 17.12 % and the potential voting rights of 2.87 %. The resulting 19.99 % of the voting power is considered to evidence significant influence because it is materially equal to the 20 % of the voting power upon which significant influence is generally presumed to exist. Furthermore, Deutsche Bank’s significant influence is evidenced by the fact that Deutsche Bank has successfully negotiated its stake increase with Hua Xia Bank’s management and the other stakeholders and is represented on four of six of Hua Xia Bank Board Committees.

The equity method of accounting has been applied from February 11, 2011.

Upon reclassifying the investment from Financial assets available for sale to Equity method investments in the first quarter 2011, Deutsche Bank used the remeasurement approach by analogy to IFRS 3R, “Business Combinations”. As a result unrealized net gains of € 263 million previously recorded in Other comprehensive income were reclassified into Net gains (losses) on financial assets available for sale in the income statement.

As of December 31, 2012 and December 31, 2011 the carrying value of the reclassified investment was € 2.3 billion and € 2.0 billion, respectively,