Consolidated Results of Operations

 

Three months ended

 

 

Six months ended

 

 

in € m.
(unless stated otherwise)

Jun 30, 2014

Jun 30, 2013

Absolute Change

Change in %

Jun 30, 2014

Jun 30, 2013

Absolute Change

Change in %

Net revenues:

 

 

 

 

 

 

 

 

Thereof:

 

 

 

 

 

 

 

 

CB&S

3,532

3,579

(46)

(1)

7,608

8,126

(518)

(6)

PBC

2,367

2,448

(81)

(3)

4,843

4,833

10

0

GTB

1,035

1,036

(1)

0

2,062

2,070

(8)

0

DeAWM

1,134

1,041

93

9

2,201

2,285

(84)

(4)

NCOU

(44)

279

(322)

N/M

30

719

(689)

(96)

Total net revenues

7,860

8,215

(355)

(4)

16,253

17,606

(1,353)

(8)

Provision for credit losses

250

473

(224)

(47)

496

828

(332)

(40)

Noninterest expenses

6,693

6,950

(257)

(4)

13,159

13,572

(413)

(3)

Income before income taxes

917

792

126

16

2,597

3,206

(609)

(19)

Income tax expense (benefit)

679

457

222

49

1,256

1,211

45

4

Net income

238

335

(97)

(29)

1,341

1,995

(654)

(33)

2014 to 2013 Three Months Comparison

Results in the second quarter 2014 reflect a solid performance. Higher revenues in Deutsche Asset & Wealth Management (DeAWM) were offset by reduced net revenues from the Non-Core Operations Unit (NCOU), Private & Business Clients (PBC) and Corporate Banking & Securities (CB&S). Results in Global Transaction Banking (GTB) were substantially unchanged. Lower client investment activity exacerbated by continued low interest rates, lower portfolio revenues reflecting our de-risking strategy and a highly competitive environment are reflected in decreased revenues across most businesses. We made further progress in our Operational Excellence (OpEx) program, which focuses in 2014 on more complex initiatives. Cost reductions from the ongoing implementation of OpEx allowed us to counterbalance higher costs caused by increased regulatory requirements, and enabled us to continue to invest in integrating platforms and process enhancements.

Our net revenues in the second quarter 2014 decreased by 4 %, or € 355 million to € 7.9 billion, compared to € 8.2 billion in the second quarter 2013. In CB&S, revenues were € 3.5 billion, down € 46 million, or 1 %, versus the second quarter 2013. This was mainly attributable to Sales & Trading (equities), where revenues were down by € 88 million, or 11 %, resulting from weaker market volumes and challenging market conditions. PBC revenues were € 2.4 billion in the second quarter 2014, down € 81 million, or 3 %, compared to the second quarter 2013. The decrease was primarily driven by non-recurring items related to Postbank that occurred in the second quarter 2013. Revenues in GTB of € 1.0 billion were stable compared to the second quarter 2013. DeAWM revenues increased by € 93 million, or 9 %, to € 1.1 billion, versus the second quarter 2013, reflecting mark-to-market movements of policyholder positions in Abbey Life, largely offset in noninterest expenses. Excluding the impact of Abbey Life, revenues were unchanged from the prior year period. Revenues in the NCOU were negative € 44 million, a decrease by € 322 million in the second quarter 2014, mainly due to the realisation of € 314 million in accumulated losses triggered by the restructuring of Maher Terminals’ debt financing.

Provision for credit losses was € 250 million in the second quarter 2014, a decrease of € 224 million, or 47 %, compared to the same period 2013. This reduction primarily results from lower provisioning in NCOU, the ongoing good quality of the German retail market portfolio and the non-recurrence of the large single items recorded in our Core businesses in the second quarter 2013.

Noninterest expenses were € 6.7 billion in the second quarter, down € 257 million, or 4 %, compared to the second quarter 2013. Compensation and benefits, which amounted to € 3.0 billion, were down € 212 million, or 7 %, compared to the second quarter 2013. This primarily reflects lower performance related compensation, mainly in CB&S. General and administrative expenses of € 3.6 billion were stable compared to the second quarter 2013. The cost base was further reduced by the deconsolidation of BHF-BANK and benefits from the ongoing implementation of our OpEx program. However, in the second quarter 2014, similar to the prior quarter, there have been offsetting effects from higher expenses relating to increased regulatory requirements and higher investments in platforms. Litigation related charges were € 470 million in the second quarter 2014, which was lower by € 161 million compared to the second quarter 2013. Policyholder benefits and claims, which are offset by mark-to-market movements on investments held to back insurance policyholder claims in Abbey Life, were € 80 million in the second quarter 2014, an increase of € 87 million compared to the second quarter 2013.

Overall, income before income taxes was € 917 million in the second quarter 2014 versus € 792 million in the second quarter 2013, as the decline in revenues was offset by a decline in costs and lower provision for credit losses.

Net income for the second quarter 2014 was € 238 million, compared to € 335 million in the second quarter 2013. Income tax expense in the current quarter was € 679 million versus € 457 million in the comparative period. Both the current quarter’s effective tax rate of 74 % and the prior year’s quarter effective tax rate of 58 % were mainly impacted by expenses, such as litigation, that are not deductible for tax purposes and income taxes of prior periods.

2014 to 2013 Six Months Comparison

Results in the first six months 2014 reflect a mixed performance with higher revenues in PBC, significantly reduced year-on-year revenue contributions from the NCOU, DeAWM and CB&S, substantially unchanged results for GTB. Lower client investment activity and a highly competitive environment exacerbated by continued low interest rates and lower portfolio revenues reflecting our de-risking strategy resulted in decreased revenues. We made further progress in our OpEx program, which focuses in 2014 on more complex initiatives. Cost reductions from the ongoing implementation of OpEx allowed us to counterbalance higher cost incurred by establishing new internal controls for increased regulatory control capabilities, to continue to invest in integrating platforms and to enhance our processes.

Our net revenues in the first six months 2014 decreased by 8 %, or € 1.4 billion to € 16.3 billion, compared to € 17.6 billion in the first six months 2013. In CB&S, revenues were € 7.6 billion, down € 518 million, or 6 %, versus the first six months 2013. The decrease was mainly attributable to reduced revenues in Sales & Trading (debt and other products), which were down by € 282 million, or 6 %, compared to the first six months 2013, resulting from low volatility and client activity reflecting the challenging trading environment. Revenues in Sales & Trading (equity) were lower in the first six months of 2014 due to weaker market volumes. In addition, revenues in CB&S decreased due to losses on DVA on certain derivative liabilities in the first six months of 2014, whereas a gain for DVA was recorded in the first six months of 2013. In the first six months of 2014, revenues in PBC and GTB were stable at € 4.8 billion and € 2.1 billion respectively. DeAWM revenues decreased by € 84 million, or 4 %, to € 2.2 billion, versus the first six months 2013 mainly driven by mark-to-market movements on policyholder positions in Abbey Life. Revenues in the NCOU were € 30 million, a decrease of € 689 million, in the first six months 2014 due to lower portfolio revenues reflecting the significant reduction in assets year-on-year and the realisation of € 314 million in accumulated losses triggered by the restructuring of Maher Terminals’ debt financing. Consolidation & Adjustments (C&A) net revenues declined from negative € 427 million in the first six months 2013 to negative € 492 million in the first six months 2014, predominantly attributable to negative impacts from funding valuation adjustments on internal uncollateralized derivatives.

Provision for credit losses was € 496 million in the first six months 2014, a decrease of € 332 million, or 40 %, compared to the first six months 2013. This reduction primarily results from lower provisioning in NCOU, the ongoing good quality of the German retail market and the non-recurrence of large single items in our Core businesses recorded in the first six months 2013.

Noninterest expenses were € 13.2 billion in the first six months of 2014, down € 413 million, or 3 %, compared to the same period in 2013. Compensation and benefits, which amounted to € 6.3 billion, were down € 412 million, or 6 %, compared to the first six months in 2013. This primarily reflects lower performance related compensation, mainly in CB&S. General and administrative expenses were € 6.6 billion, up € 196 million, or 3 %, compared to the first half 2013. In the first six months of 2014 cost-to-achieve for our OpEx program increased, as planned. Expenses relating to regulatory requirements and for investments in platforms were higher than in the comparison period. Litigation-related charges of € 470 million in the first six months of 2014 were € 292 million below the same period in the last year. In addition, the cost base was further reduced by savings from our OpEx program and the deconsolidation of BHF-BANK. Policyholder benefits and claims, which are offset by mark-to-market movements on investments held to back insurance policyholder claims in Abbey Life, were € 132 million in the first half of 2014, a decrease of € 53 million compared to 2013.

Overall, income before income taxes was € 2.6 billion in the first six months 2014 versus € 3.2 billion in the first six months 2013, mainly driven by lower revenues.

Net income for the first six months 2014 was € 1.3 billion, compared to € 2.0 billion in the first six months 2013. Income tax expense in the first six months was € 1.3 billion versus € 1.2 billion in the first six months of 2013. The effective tax rate of 48 % in the first six months of 2014 was mainly impacted by expenses, such as litigation, that are not deductible for tax purposes and income taxes of prior periods. The effective tax rate in the comparative period was 38 %.