Private & Business Clients

Deep roots in the home market

In brief

  • Market leadership in Germany consolidated, profitable growth in Europe and Asia
  • Digitalization as a core element of strategic development
  • Postbank integration well advanced, common service unit established

Branch presence in Advisory Banking International

Branch presence in Advisory Banking International (pie chart)

The Private & Business Clients (PBC) Corporate Division provides banking and other financial services to private customers, self-employed clients as well as small and medium-sized businesses both in Germany and internationally. PBC’s product range includes payment and current account services, investment management and retirement planning, securities, deposits and loans. As the leading retail bank in Deutsche Bank’s home market, PBC provides services to approximately 23 million clients in Germany, in addition to five million clients abroad. PBC has approximately 2,700 branches in Germany, Italy, Spain, Belgium, Portugal, Poland and India. The branch network is complemented by a mobile network of independent advisors and by direct distribution channels. In addition, the division maintains cooperation partnerships with companies such as Deutsche Post DHL AG, Deutsche Vermögensberatung AG (DVAG) as well as the Spanish and Italian postal services. In China, PBC holds a 19.99 % stake in Hua Xia Bank and is its second largest shareholder. PBC comprises the three business divisions Private & Commercial Banking (PCB), Advisory Banking International and Postbank.

The market environment remained challenging in 2014. Low interest rates in Europe – and even negative interest rates on deposits with the European Central Bank in the second half of the year – had an adverse effect on the deposits business. PBC did not pass on the negative interest rates to its clients. Continued low interest rates encouraged clients in Germany and abroad increasingly to invest in securities and insurance products. In addition, the low interest-rate environment supported high client demand for mortgage loans.

Excerpt from segment reporting (Private & Business Clients1)

Private & Business Clients recorded income before income taxes of € 1.3 billion in 2014, compared to € 1.6 billion in the prior year. The decrease was mainly due to significant non-recurring charges for loan processing fees recorded in noninterest expenses triggered by two rulings of the German Federal Court of Justice in May and October 2014. Net revenues increased mainly reflecting higher transaction levels and net asset inflows in investment and insurance products. Provision for credit losses benefitted from a favorable environment in Germany. Invested assets increased by € 9 billion versus December 31, 2013, due to € 6 billion in net inflows, mainly in securities, and market appreciation.

 

 

 

in € m.

2014

2013

Net revenues

9,639

9,550

Total provision for credit losses

622

719

Noninterest expenses

7,682

7,276

Income before income taxes

1,335

1,555

Return on equity (pre-tax) in %

9

11

Risk-weighted assets

79,571

73,001

Assets

258,381

265,360

1 Excerpt from segment reporting. For notes and other detailed information, see Financial Report 2014 (Management Report). Regulatory capital amounts and risk weighted assets are based upon Basel 2.5 rules through Dec 31, 2013 and upon CRR/CRD 4 fully–loaded since Jan 1, 2014.

Well balanced income before income taxes* by business division

Well balanced income before income taxes by business division (pie chart)

In 2014, PBC generated income before income taxes (IBIT) of € 1.3 billion (2013: € 1.6 billion). This included investment costs as part of the Postbank integration and the cross-divisional Operational Excellence program as well as expenses due to the refunding of loan processing fees. Net revenues rose by 1 % on 2013 to € 9.6 billion. Client demand for credit, investment and insurance products contributed to higher overall revenues. However, persistently low interest rates led to a decline in revenues from deposits. Changed regulatory requirements in areas such as payments, cards and accounts also weighed on revenues.

Costs rose by 6 % in comparison to 2013. The decisions by the German Federal Court of Justice on the refunding of loan processing fees charged in the past cost € 400 million. Tightening regulatory requirements also resulted in additional expenses for PBC. However, these costs were partially offset by savings from the successful implementation of the Operational Excellence (OpEx) program launched in 2012.

Thanks to the continued stable economic environment in Germany and the high quality of the loan portfolio, provisions for credit losses in Private & Commercial Banking and Postbank were again lower than in the prior year.

A leadership position among private sector banks

PBC’s strategy is to extend its leadership position among private banks in Germany and maintain a focused advisory presence in selected European and Asian markets.

In its home market, PBC completed the integration of the coverage of mid-sized corporate clients under a single roof in Private & Commercial Banking (PCB). Corporate clients now have access to an additional 180 PCB advisory centers. PCB’s relationship managers in the branches are working more closely together with the Global Transaction Banking (GTB) division to enhance the advisory and service quality in trade finance and cash management solutions for mid-sized corporate clients. Furthermore, PCB now provides them with a broader access to the bank’s international product expertise and global network.

Private & Business Clients
Private & Business Clients (organigram)

The integration of Postbank further strengthened PBC’s franchise in Germany and made another significant step forward in 2014.

Advisory Banking International comprises PBC’s activities in Europe (excluding Germany) and India as well as Deutsche Bank’s stake in Hua Xia Bank in China. PBC’s international business is focused on selective and profitable growth. In 2014, all foreign units showed solid revenue and volume development. In China, PBC continues to benefit from its stake in Hua Xia Bank, which once again generated solid earnings growth in the reporting year.

Throughout 2014, a key strategic priority of all three business divisions was to advance digital banking services. The expansion of seamless multi-channel access will enable PBC to serve clients even more effectively.

Increasing revenues through business in loans and mortgages

Revenues from PBC credit products rose across all three business divisions in 2014. Mortgage lending in Germany was particularly positive. The favorable economic environment led to greater client demand for residential mortgages, allowing PBC to raise substantial volumes of new business with a consistently good risk profile. The focus on selective new business with higher margins also contributed to the increase in revenues in the mortgage business.

In the deposits business, the low interest rate environment continued to pose a major challenge. Revenues decreased slightly despite targeted hedging transactions and terms and conditions closely aligned to market developments. The new deposit campaign launched in mid-2014 was very well received by clients. In a persistently low interest rate environment, this underscores Deutsche Bank’s continued strong reputation as a provider of attractive deposits products. Overall, PBC attracted more than € 7 billion in new deposits over the period of the campaign.

Strong increase in net new assets in investment and insurance products

Strong increase in net new assets (bar chart)

As investors were looking for attractive investment alternatives, PBC expanded its investment product business in Europe and India compared to 2013. At € 6.5 billion, PBC recorded the highest level of net new assets in investment and insurance products in more than ten years. Including the market’s positive performance, client assets under management rose by € 9 billion. Expanding its business in securities and insurance products will remain a key priority for PBC in the future.

Increasing efficiency

In the first half of 2014, PBC Banking Services was established by combining the previously separate service units of Private & Commercial Banking and Postbank. With this service holding company, PBC has created the largest integrated services platform in the financial industry in Germany. It is a center of competence for all services relating to accounts, cards, loans and securities and forms the backbone for sales. PBC Banking Services pools the expertise of approximately 10,000 employees and provides the full range of products and services to optimally serve clients. Looking ahead, PBC will continue to streamline structures, simplify products and processes and aim for higher levels of automation.

Further progress was made in the development of the shared IT and service platform, Magellan. This platform is used jointly by Private & Commercial Banking and Postbank. Magellan was designed to consolidate and integrate common IT and bank services.

The platform provides cost savings and more efficient processes. The upgrading and standardization of core applications facilitate faster product developments and service innovations. In 2014, 18 million savings accounts were made SEPA-compatible and a new application was launched to manage sales activities in the branches. Magellan simultaneously constitutes the platform and the foundation for Deutsche Bank’s digitalization campaign.

Digitalization is a high priority

Increasing use of online media

Increasing use of online media (bar chart)

Digitalization is a key strategic priority for PBC. In 2014, the bank allocated € 200 million to the expansion of digital services in PBC over a period of three years. PBC launched comprehensive initiatives to further enhance digital access channels in all three business divisions. PBC thus aims to react quickly to the needs of its clients, while offering a broader range of expertise and information and fostering a dialogue with clients.

In Private & Commercial Banking, initial milestones were reached with the introduction of the PhotoTAN app, the expansion of the digital postbox and the launch of a financial planning app at the end of 2014. In addition, clients can use a greater number of enhanced banking functions on mobile devices. Furthermore, PBC conducted successful pilots of a video advisory service, to enable clients in smaller and less centrally located branches to benefit from the expertise of specialist advisors.

In the second half of 2014, Postbank launched a large-scale marketing campaign, reflecting key themes of Postbank’s new brand positioning, namely “digital and personal”. Postbank is one of the first banks to offer an app allowing clients to authenticate credit transfers using fingerprints. Account information can be sent by e-mail, as well as scanned in and sent using a QR code.

Outlook

In the future, PBC aims to continually increase its revenues despite the headwinds from the persistently low interest rate environment. It intends to strengthen its lending business in Germany, expand the investments and insurance business, and foster targeted growth in its European units. The division intends to further increase its profitability. Clients should benefit through closer cooperation between the business divisions, both within PBC and Deutsche Bank Group. Across its international operations, PBC will continue to strengthen its advisory banking capabilities in the core European markets and India. It also intends to benefit from the stake in China’s Hua Xia Bank. Following intensive balance sheet reduction and de-risking in recent years, Postbank is focusing more strongly on its core business activities. The advanced stage of the Postbank integration will enable PBC to realize additional synergies and cost savings.

Awards 2014

Handelsblatt
Best Investment Advisory – Securities

PASS Online-Banking Awards 2014
Best Branch Banking
Best Online Broker (maxblue)

Euro am Sonntag
Asset Gathering and Pension Planning – Very Good

Structured Retail Products.com
Best Distributor for Structured Products in Portugal