Net Interest Income and Net Gains (Losses) on Financial Assets/Liabilities at Fair Value through Profit or Loss

Our trading and risk management businesses include significant activities in interest rate instruments and related derivatives. Under IFRS, interest and similar income earned from trading instruments and financial instruments designated at fair value through profit or loss (i.e., coupon and dividend income) and the costs of funding net trading positions are part of net interest income. Our trading activities can periodically shift income between net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss depending on a variety of factors, including risk management strategies.

In order to provide a more business-focused discussion, the following table presents net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss by corporate division and by product within CB&S.

in € m.

 

 

 

2014 increase (decrease)
from 2013

2013 increase (decrease)
from 2012

(unless stated otherwise)

2014

2013

2012

in € m.

in %

in € m.

in %

N/M – Not meaningful

1

This breakdown reflects net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss only. For a discussion of the corporate divisions’ total revenues by product please refer to Note 4 “Business Segments and Related Information”.

2

Includes the net interest spread on loans as well as the fair value changes of credit default swaps and loans designated at fair value through profit or loss.

3

Includes net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss of origination, advisory and other products.

Net interest income

14,272

14,834

15,975

(562)

(4)

(1,141)

(7)

Total net gains (losses) on financial assets/liabilities at fair value through profit or loss

4,299

3,817

5,608

481

13

(1,791)

(32)

Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss

18,570

18,651

21,583

(81)

0

(2,932)

(14)

 

 

 

 

 

 

 

 

Breakdown by Corporate Division/product:1

 

 

 

 

 

 

 

Sales & Trading (equity)

2,314

2,129

1,732

185

9

397

23

Sales & Trading (debt and other products)

6,685

6,069

7,851

616

10

(1,782)

(23)

Total Sales & Trading

8,998

8,197

9,582

801

10

(1,385)

(14)

Loan products2

695

599

182

95

16

418

N/M

Remaining products3

(61)

72

589

(133)

N/M

(517)

(88)

Corporate Banking & Securities

9,632

8,869

10,353

764

9

(1,485)

(14)

Private & Business Clients

5,962

5,966

6,220

(4)

0

(254)

(4)

Global Transaction Banking

2,232

1,984

2,016

248

12

(32)

(2)

Deutsche Asset & Wealth Management

1,505

1,568

1,974

(63)

(4)

(406)

(21)

Non-Core Operations Unit

(573)

245

650

(818)

N/M

(405)

(62)

Consolidation & Adjustments

(187)

19

369

(206)

N/M

(350)

(95)

Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss

18,570

18,651

21,583

(81)

0

(2,932)

(14)

Corporate Banking & Securities (CB&S)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 9.6 billion in 2014, an increase of € 764 million, or 9 %, compared to 2013. In Sales & Trading (debt and other products), the main drivers for the increase were higher revenues in RMBS after having been impacted by de-risking activity and challenging market conditions in 2013, mark-to-market gains in relation to RWA mitigation efforts arising on CVA compared to a loss in 2013, and higher revenues in Credit Solutions due to increased financing. The increase in Sales & Trading (equity) in 2014 was primarily driven by client financing balances in Prime Finance and favorable trading conditions in Equity Derivatives. Revenue from Loan products also increased in the year reflecting investment in the Commercial Real Estate business. These revenue increases were partly offset by a decrease in Remaining products, mainly due to a Debt Valuation Adjustment (DVA) loss of € 126 million (full year 2013: a loss of € 21 million).

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 9.0 billion in 2013, a decrease of € 1.5 billion, or 14 %, compared to 2012. This decrease was partly driven by products outside of Sales & Trading. For Remaining products, the decrease was mainly related to the non-recurrence of a refinement in the calculation methodology of the DVA on certain derivative liabilities in 2012. In Sales & Trading (debt and other products), the main drivers for the decrease were lower revenues in RMBS due to de-risking activity undertaken this year, weaker liquidity and market uncertainty, lower revenues in Foreign Exchange due to lower volatility and margin compression and weaker trading revenues in Commodities and Rates. Partly offsetting these were an increase in Loan products due to favourable movements in credit spreads, a lower proportion of lending activity measured at fair value and lower overall hedge costs. The increase in Sales & Trading (equity) in 2013 was primarily driven by non-recurrence of higher dividend payout in 2012 in Equity Derivatives, increased client activity and an improved market environment in Equity Trading business.

Private & Business Clients (PBC)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 6.0 billion in 2014, a decrease of € 4 million, compared to 2013, primarily reflecting a continued challenging interest rate environment in Europe. This was partly offset by the positive impact of a subsequent gain related to a business sale closed in a prior period.

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 6.0 billion in 2013, a decrease of € 254 million, or 4 %, compared to 2012. This decrease was primarily due to the ongoing low interest rate environment affecting revenues on deposits and a higher negative impact from purchase price allocation on Postbank.

Global Transaction Banking (GTB)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 2.2 billion in 2014, an increase of € 248 million, or 12 %, compared to 2013. The increase was primarily driven by a change of our hedging instruments to manage the interest rate risk which increases our revenues at fair value through profit or loss but is offset in other revenues. Overall, net interest income remained under pressure due to the low interest rate environment.

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 2.0 billion in 2013, a decrease of € 32 million, or 2 %, compared to 2012. Net interest income declined compared to the prior year driven by low interest rate in core markets, and competitive pressure on margins. Furthermore, foreign exchange-movements compared to 2012 adversely impacted the income reported in Euro.

Deutsche Asset & Wealth Management (Deutsche AWM)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 1.5 billion in 2014, a decrease of € 63 million, or 4 %, compared to 2013. Higher net interest revenues in lending, deposits and alternatives were more than offset by an unfavorable change in the fair value of guarantees and negative effects from mark-to-market movements on policyholder positions in Abbey Life.

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 1.6 billion in 2013, a decrease of € 406 million, or 21 %, compared to 2012. The decrease in net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss was mainly attributable to the deconsolidation of funds in 2013 and was offset by increases in other revenues categories.

Non-Core Operations Unit (NCOU)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were a loss of € 573 million in 2014, a decrease of € 818 million, compared to 2013. The main driver of the decrease was lower net interest revenues due to asset reductions in NCOU as a result of our de-risking strategy. A one-time loss related to the Special Commodities Group from our exposure to traded products in the U.S. power sector during the first quarter 2014 also contributed to the fair value losses.

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 245 million in 2013, a decrease of € 405 million, or 62 %, compared to 2012. The main driver of the decrease was lower portfolio revenues due to asset reductions across all products in the NCOU. This was a result of an accelerated de-risking strategy, leading overall to a reduction in fair value losses.

Consolidation & Adjustments (C&A)

2014

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were a negative € 187 million in 2014, compared with a gain of € 19 million in 2013. This decrease was largely driven by negative effects from timing differences from different accounting methods used for management reporting and IFRS. This was partially offset by higher income from our capital account, largely resulting from the capital increase.

2013

Combined net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss was a gain of € 19 million in 2013, compared with € 369 million in 2012. This decrease primarily reflected lower positive effects resulting from timing differences from different accounting methods used for management reporting and IFRS. The remaining decline was mainly due to net interest income which was not allocated to the business segments and items outside the management responsibility of the business segments, for example funding expenses on non-divisionalized assets/liabilities.

Provision for Credit Losses

2014

Provision for credit losses in 2014 was € 1.1 billion, down by € 931 million, or 45 % versus 2013 reflecting material reductions in all businesses. Reduction in NCOU was driven by decreased provision for credit losses in IAS 39 reclassified and commercial real estate assets. Our Core bank benefited from increased releases and a non-recurrence of large single name bookings.

2013

Provision for credit losses recorded in 2013 increased by € 344 million to € 2.1 billion. In NCOU, provision for credit losses increased reflecting a number of single client items, including an item related to the European Commercial Real Estate sector. Provision for credit losses also increased in GTB, related to a single client credit event, and in CB&S, from higher charges relating to shipping companies. These increases were partly offset by lower provisions in PBC reflecting the improved credit environment in Germany.