Equity Investments

Accounting and Valuation of Equity Investments

Outside of trading, equity investments which are neither consolidated for regulatory purposes nor deducted from our regulatory capital are held as equity positions in the regulatory banking book. In our consolidated balance sheet, these equity investments are either classified as “Financial assets available for sale (“AFS”)” or “Equity method investments”.

For details on our accounting and valuation policies related to AFS equity instruments and investments in associates and joint ventures please refer to Notes 1 “Significant Accounting Policies and Critical Accounting Estimates”, 14 “Financial Instruments carried at Fair Value” and 17 “Equity Method Investments”.

Equity Investments Held

The following section on Equity Investments Held presents specific disclosures in relation to Pillar 3. Per regulation it is not required to audit Pillar 3 disclosures. As such this section is labeled unaudited.

The tables below present IFRS classifications and the gains (losses) for equity investments held. These equity investments principally constitute equity positions in the regulatory banking book or capital deductions according to Section 10 (6) KWG. However, the following aspects need to be considered when comparing the equity investments held – presented below – with the equity position in the regulatory banking book:

  • Equity investments held by entities, which are consolidated for IFRS purposes but not consolidated for regulatory purposes, are included in the tables.
  • Collective investment undertakings, which are disclosed for IFRS purposes, are treated differently for regulatory purposes and are not included in the tables.
  • Entities holding equity investments which are considered for regulatory purposes but not consolidated according to IFRS, do not provide IFRS balance sheet and profit or loss information, and are excluded from these tables. The regulatory exposure value (“EAD”) of these excluded equity investments amounted to € 176 million as of December 31, 2013, and € 246 million as of December 31, 2012.
  • Other positions like equity underlyings resulting from derivative transactions or certain subordinated bonds which from a regulatory point of view are also assigned to the exposure class “Equity in the banking book” are excluded from the tables. Their EAD amounted to € 167 million as of December 31, 2013, and € 217 million as of December 31, 2012.
  • The regulatory equity position includes € 3.3 billion EAD as of December 31, 2013, and € 3.2 billion EAD as of December 31, 2012, in respect of equity investments which are Group-internal from an IFRS perspective.
  • “Non-exchange-traded positions” combine the two regulatory equity classes “Non-exchange-traded, but belonging to an adequately diversified equity portfolio” and “Other equity positions” according to Section 78 SolvV.

Equity Investments According to IFRS Classification

 

Carrying value

in € m.

Dec 31, 2013

Dec 31, 2012

Financial assets available for sale – equity instruments

1,226

1,179

Exchange-traded positions

327

616

Non-exchange-traded positions

899

563

Equity method investments

3,574

3,575

Exchange-traded positions

52

2,395

Non-exchange-traded positions

3,522

1,180

Financial assets designated at fair value through profit or loss – equity instruments

119

104

Exchange-traded positions

0

0

Non-exchange-traded positions

119

104

Total equity investments

4,919

4,858

A difference between the carrying value of the investment positions and their fair value was only observable for the exchange-traded equity method investments, which had a carrying value of € 2.6 billion and a fair value of € 1.9 billion as of December 31, 2013 compared with € 2.4 billion and a fair value of € 1.8 billion as of December 31, 2012.

Realized Gains (Losses) in the Reporting Period and Unrealized Gains (Losses) at Year-end from Equity Investments

in € m.

2013

2012

Gains and losses on disposal

97

325

Impairments

(110)

(402)

Pro-rata share of net income (loss)

433

397

Total realized gains (losses) from equity investments

420

320

 

 

 

 

Dec 31, 2013

Dec 31, 2012

Unrealized revaluation gains (losses)

424

345

Difference between carrying value and fair value

(682)

(568)

Total unrealized gains (losses) from equity investments

(258)

(223)

For AFS equity investments, the components considered are realized gains and losses from sales and liquidations as well as unrealized revaluation gains and losses and impairments. For equity method investments, the gain and loss elements consist of realized gains and losses from sales and liquidations, pro-rata share of net income (loss), impairments and unrealized revaluation gains (losses) in form of the differences between carrying amounts and fair values. In this respect, the realized gains (losses) on disposals, the impairments and the pro-rata share of net income (loss) are referring to the reporting period 2013 and 2012 whereas the unrealized revaluation gains (losses) as well as the difference between the carrying values and the fair values for the at equity investments represent the amounts as of December 31, 2013, and December 31, 2012.

The valuation gains (losses) presented are in relation to equity investments. Overall the unrealized gains (losses) on listed securities as to be determined for regulatory purposes were € 294 million as of December 31, 2013, 45 % of which was included in Tier 2 capital, and € 122 million as of December 31, 2012, 45 % of which was included in Tier 2 capital.