4 – Business Segments and Related Information

The Group’s segmental information has been prepared in accordance with the “management approach”, which requires presentation of the segments on the basis of the internal management reports of the entity which are regularly reviewed by the chief operating decision maker, which is the Deutsche Bank Management Board, in order to allocate resources to a segment and to assess its financial performance.

Business Segments

The Group’s business segments represent the Group’s organizational structure comprising five Corporate Divisions; Corporate Banking & Securities (CB&S), Global Transaction Banking (GTB), Deutsche Asset & Wealth Management (DeAWM), Private & Business Clients (PBC) and Non-Core Operations Unit (NCOU). For further detail on the five business segments please see “Management Report: Operating and Financial Review: Deutsche Bank Group: Corporate Divisions” of the Financial Report.

In 2013 DeAWM revised their revenue disclosure categories. The new revenue disclosure segregates revenues by their character and type to allow distinction into Recurring and Non-recurring components, Net interest revenues and Revenues from other products. The new disclosure is more aligned with the market convention, adds transparency and allows for more coherent analysis of the business. Prior periods were restated to reflect these changes.

PBC has decided to rename its business units to better reflect its market approach. Advisory Banking Germany is now labelled as Private & Commercial Banking, which comprises former Advisory Banking Germany and the recently established joint venture between the Corporate Divisions PBC and GTB. Consumer Banking Germany is re-named as Postbank, while Advisory Banking International’s name remains unchanged. The former revenue category “Deposits & Payment Services” has been split into “Deposits” and “Payments, Cards & Accounts” while revenue categories “Advisory/Brokerage” and “Discretionary Portfolio Management / Fund Management” have been merged into “Investment & Insurance Products”. Prior periods were restated to reflect these changes.

In September 2012, following a strategic review, the Bank announced changes to the composition of its business segments. Effective in the fourth quarter 2012, the management responsibility for the passive and third-party alternatives businesses, such as exchange traded funds (“ETF’s”), was transferred from CB&S to the newly integrated DeAWM. Additionally, a NCOU was set up which represents a distinct corporate division besides CB&S, GTB, DeAWM and PBC and into which non-core assets, liabilities and businesses from CB&S, DeAWM and PBC, and the entirety of the former CI Group Division, have been assigned. Following further integration of CB&S and GTB activities, a refinement was made to the allocation of coverage costs between both corporate divisions. Prior periods were restated to reflect these changes.

Restating of comparative financial information generally requires some assumptions and judgments. When setting up the NCOU and presenting how the business segments would have looked had the new structure been in place in prior periods, the following assumptions were applied. For businesses and portfolios of assets and liabilities that had already been run as legacy or non-core activities for the prior periods, all associated revenues and costs were extracted and moved into the NCOU, even when parts of the portfolio had already been sold before the date at which the NCOU was established. When restating for certain individual assets and liabilities, which were embedded within larger portfolios previously not treated as run-off or legacy, all revenues and costs associated with the transferred positions were allocated to the NCOU. The financials of similar individual assets and liabilities, which hypothetically would have qualified for the NCOU, have not been transferred to the NCOU if the positions were already disposed of before the date at which the NCOU was established.

The following describes other changes in management responsibilities with a significant impact on segmental reporting:

  • In 2013, the long-term cash lending portfolio of German MidCap clients was transferred from the Corporate Division CB&S to the Corporate Division GTB.
  • Effective in the fourth quarter 2012, the management responsibility for the passive and third-party alternatives businesses, such as ETF’s, was transferred from CB&S to the newly integrated DeAWM.
  • Following further integration of CB&S and GTB activities, a refinement was made effective in the fourth quarter 2012 to the allocation of coverage costs between both corporate divisions.
  • Effective August 15, 2012, Postbank’s Asset Management activities were sold to DWS Group and therefore transferred from the Corporate Division PBC to the Corporate Division DeAWM.
  • Effective January 1, 2011, BHF-BANK was transferred from the former Business Division PWM within the Corporate Division DeAWM back to the former Group Division CI. In the second quarter 2010, the BHF-BANK operations had been transferred from the former Group Division CI to the former Business Division PWM.
  • Effective January 1, 2011, the exposure in Actavis Group was transferred from the Corporate Division CB&S to the former Group Division CI.
  • During the third quarter 2011, the former Capital Markets Sales business unit within the Corporate Division GTB was transferred to the Corporate Division CB&S. In addition, a portfolio consisting of short-term lending transactions with German mid-cap clients was transferred from the Corporate Division CB&S to the Corporate Division GTB in order to leverage the adjacencies between the cash management, trade financing and short-term lending activities with these clients.

Measurement of Segment Profit or Loss

Segment reporting requires a presentation of the segment results based on management reporting methods, including a reconciliation between the results of the business segments and the consolidated financial statements, which is presented in the “Management Report: Operating and Financial Review: Deutsche Bank Group: Corporate Divisions: Consolidation & Adjustments. The information provided about each segment is based on the internal management reporting about segment profit or loss, assets and other information which is regularly reviewed by the chief operating decision maker.

Non-IFRS compliant accounting methods are rarely used in the Group’s management reporting and represent either valuation or classification differences. The largest valuation differences relate to measurement at fair value in management reporting versus measurement at amortized cost under IFRS (for example, for certain financial instruments in the Group’s treasury books in CB&S and PBC) and to the recognition of trading results from own shares in revenues in management reporting (mainly in CB&S) and in equity under IFRS. The major classification difference relates to noncontrolling interest, which represents the net share of minority shareholders in revenues, provision for credit losses, noninterest expenses and income tax expenses. Noncontrolling interest is reported as a component of pre-tax income for the businesses in management reporting (with a reversal in C&A) and a component of net income appropriation under IFRS.

Since the Group’s business activities are diverse in nature and its operations are integrated, certain estimates and judgments have been made to apportion revenue and expense items among the business segments. In 2012, the Group ceased to disclose a split of the net revenues between revenues from external customers and intersegment revenues, which was previously presented in the section “Segmental Results of Operations”, as this information is not provided to and not reviewed by the chief operating decision maker within the internal management reporting. The change in approach has also been reflected in the information for the comparative year 2011 and is continued to be applied in 2013.

The management reporting systems follow a “matched transfer pricing concept” in which the Group’s external net interest income is allocated to the business segments based on the assumption that all positions are funded or invested via the wholesale money and capital markets. Therefore, to create comparability with those competitors who have legally independent units with their own equity funding, the Group allocates a net notional interest credit on its consolidated capital (after deduction of certain related charges such as hedging of net investments in certain foreign operations) to the business segments, in proportion to each business segment’s allocated average active equity.

When implementing the changes to the Group’s business segments in the fourth quarter 2012, a review of the information provided to and reviewed by the chief operating decision maker was conducted. Segment assets are presented in the Group’s internal management reporting based on a consolidated view, i.e., the amounts do not include intersegment balances. This consolidated view is deemed more appropriate, especially for the NCOU, as it improves external transparency on the Group’s non-core positions (i.e., assets) and on progress of targeted de-risking activities. The presentation of segment assets in this note has been changed accordingly in 2012 and is continued to be applied in 2013. Segment assets for the comparative years 2011 were restated.

Management uses certain measures for equity and related ratios as part of its internal reporting system because it believes that these measures provide it with a useful indication of the financial performance of the business segments. The Group discloses such measures to provide investors and analysts with further insight into how management operates the Group’s businesses and to enable them to better understand the Group’s results. These measures include:

Average Active Equity: The Group uses average active equity to calculate several ratios. However, active equity is not a measure provided for in IFRS and therefore the Group’s ratios based on average active equity should not be compared to other companies’ ratios without considering the differences in the calculation. Effective July 1, 2013, the definition of active equity has been aligned to the CRR/CRD 4 framework. Under the revised definition, shareholders’ equity is adjusted only for dividend accruals (i.e., accumulated other comprehensive income (loss) excluding foreign currency translation, net of taxes, is now part of active equity). Prior periods for 2013 and 2012 have been adjusted accordingly.

  • The total amount of average active equity allocated is determined based on the higher of the Group’s overall economic risk exposure or regulatory capital demand. Starting 2013, the Group refined its allocation of average active equity to the business segments to reflect the further increased regulatory requirements under CRR/CRD 4 and to align the allocation of capital with the communicated capital and return on equity targets. Under the new methodology, the internal demand for regulatory capital is derived based on a Common Equity Tier 1 ratio of 10 % at a Group level and assuming full implementation of CRR/CRD 4 rules. Therefore, the basis for allocation, i.e., risk-weighted assets and certain regulatory capital deduction items, is also on a CRR/CRD 4 fully-loaded basis. As a result, the amount of capital allocated to the segments has increased, predominantly in CB&S and the NCOU. The figures for 2012 were adjusted to reflect this effect. If the Group’s average active equity exceeds the higher of the overall economic risk exposure or the regulatory capital demand, this surplus is assigned to Consolidation & Adjustments.
  • Return on Average Active Equity in % is defined as income (loss) before income taxes less pre-tax noncontrolling interest as a percentage of average active equity. These returns, which are based on average active equity, should not be compared to those of other companies without considering the differences in the calculation of such ratios.

Segmental Results of Operations

For the results of the business segments, including the reconciliation to the consolidated results of operations under IFRS please see “Management Report: Operating and Financial Review: Results of Operations: Segment Results of Operations”.

Entity-Wide Disclosures

The Group’s Entity-Wide Disclosures include net revenues from internal and external counterparties. Excluding revenues from internal counterparties would require disproportionate IT investment and is not in line with the Bank's management approach. For detail on our Net Revenue Components please see “Management Report: Operating and Financial Review: Results of Operations: Corporate Divisions”.

The following table presents total net revenues (before provisions for credit losses) by geographic area for the years ended December 31, 2013, 2012 and 2011, respectively. The information presented for CB&S, GTB, DeAWM, PBC and NCOU has been classified based primarily on the location of the Group’s office in which the revenues are recorded. The information for C&A is presented on a global level only, as management responsibility for C&A is held centrally.

in € m.

2013

2012

2011

1

Consolidated net revenues comprise interest and similar income, interest expenses and total noninterest income (including net commission and fee income). Revenues are attributed to countries based on the location in which the Group’s booking office is located. The location of a transaction on the Group’s books is sometimes different from the location of the headquarters or other offices of a customer and different from the location of the Group’s personnel who entered into or facilitated the transaction. Where the Group records a transaction involving its staff and customers and other third parties in different locations frequently depends on other considerations, such as the nature of the transaction, regulatory considerations and transaction processing considerations.

Germany:

 

 

 

CB&S

1,008

1,370

1,248

GTB

1,348

1,364

1,317

DeAWM

1,193

1,157

1,181

PBC

7,723

7,559

8,519

NCOU

365

1,016

520

Total Germany

11,637

12,466

12,785

UK:

 

 

 

CB&S

4,085

4,652

4,367

GTB

291

318

264

DeAWM

983

398

1,246

PBC

0

0

0

NCOU

(109)

(533)

(318)

Total UK

5,250

4,836

5,559

Rest of Europe, Middle East and Africa:

 

 

 

CB&S

884

1,095

940

GTB

983

1,165

1,100

DeAWM

894

823

824

PBC

1,812

1,949

1,851

NCOU

(31)

110

194

Total Rest of Europe, Middle East and Africa

4,543

5,142

4,909

Americas (primarily United States):

 

 

 

CB&S

4,867

5,656

4,694

GTB

833

771

642

DeAWM

1,173

1,667

622

PBC

(21)

0

0

NCOU

708

484

444

Total Americas

7,561

8,578

6,402

Asia/Pacific:

 

 

 

CB&S

2,778

2,675

2,650

GTB

614

581

493

DeAWM

491

424

405

PBC

36

32

27

NCOU

(65)

(23)

37

Total Asia/Pacific

3,854

3,689

3,611

Consolidation & Adjustments

(929)

(975)

(39)

Consolidated net revenues1

31,915

33,736

33,228