Consolidated Results of Operations

 

Three months ended

 

 

Nine months ended

 

 

in € m.
(unless stated otherwise)

Sep 30, 2014

Sep 30, 2013

Absolute Change

Change
in %

Sep 30, 2014

Sep 30, 2013

Absolute Change

Change
in %

N/M – Not meaningful

Net revenues:

 

 

 

 

 

 

 

 

Thereof:

 

 

 

 

 

 

 

 

CB&S

3,147

2,900

247

9

10,755

11,026

(271)

(2)

PBC

2,392

2,324

69

3

7,235

7,157

79

1

GTB

1,039

1,023

16

2

3,101

3,093

8

0

Deutsche AWM

1,267

1,265

1

0

3,468

3,550

(82)

(2)

NCOU

20

402

(382)

(95)

50

1,121

(1,071)

(96)

Total net revenues

7,864

7,745

119

2

24,116

25,351

(1,235)

(5)

Provision for credit losses

269

512

(243)

(47)

765

1,340

(575)

(43)

Noninterest expenses

7,328

7,215

113

2

20,488

20,787

(299)

(1)

Income before income taxes

266

18

248

N/M

2,864

3,224

(361)

(11)

Income tax expense (benefit)

358

(33)

391

N/M

1,614

1,178

436

37

Net income (loss)

(92)

51

(143)

N/M

1,250

2,047

(797)

(39)

2014 to 2013 Three Months Comparison

Results in the third quarter 2014 reflect a solid performance despite the ongoing market challenges. Higher net revenues were reported across Corporate Banking & Securities (CB&S), Private & Business Clients (PBC) and Global Transaction Banking (GTB), partially offset by reduced net revenues from the Non-Core Operations Unit (NCOU). Revenues in Deutsche Asset & Wealth Management (Deutsche AWM) remained stable. Higher revenues from increased client investment activity reflecting higher volatility and a slight improvement in market conditions across all businesses in the third quarter were partially offset by lower portfolio revenues from NCOU reflecting further de-risking. The Operational Excellence (OpEx) program focuses in 2014 on more complex initiatives and achieved further cost reductions in the quarter. These were offset by higher costs from increased regulatory requirements and continued investments in integrating platforms and process enhancements.

Group net revenues in the third quarter 2014 increased by 2 %, or € 119 million, to € 7.9 billion compared to € 7.7 billion in the third quarter 2013. CB&S revenues were € 3.1 billion, up € 247 million, or 9 %, versus the third quarter 2013. This was mainly attributable to Sales & Trading (debt and other products), where revenues were up by € 186 million, or 15 %, resulting from improved market conditions and increased client activity. PBC revenues were € 2.4 billion in the third quarter 2014, up € 69 million, or 3 %, compared to the third quarter 2013. The increase was primarily driven by an increase in loan volumes and increased revenues from Investment and Insurance products. Revenues in GTB of € 1.0 billion were slightly higher as compared to the third quarter 2013 with strong volumes compensating for the impacts from the challenging market environment. Deutsche AWM revenues of € 1.3 billion were stable compared to the third quarter 2013. NCOU revenues were € 20 million, a decrease by € 382 million in the third quarter 2014, reflecting a significant reduction in revenue generating assets as a result of further de-risking. Revenues in Consolidation & Adjustments (C&A) were net zero in the third quarter 2014, compared to negative € 168 million in the third quarter 2013, with the development predominantly attributable to valuation and timing differences from different accounting methods used for management reporting and IFRS, as well as FVA on internal uncollateralized derivatives between Treasury and CB&S.

Provision for credit losses was € 269 million in the third quarter 2014, a decrease of € 243 million, or 47 %, compared to the same period 2013. This reduction results from improvements across all businesses especially lower provisioning for IAS 39 reclassified assets in NCOU.

Noninterest expenses were € 7.3 billion in the third quarter, up € 113 million, or 2 %, compared to the third quarter 2013. Compensation and benefits, which amounted to € 3.2 billion, were up € 285 million, or 10 %, compared to the third quarter 2013. This primarily reflects higher fixed compensation costs to comply with regulatory requirements, mainly in CB&S, as well as strategic hires for our new control functions. General and administrative expenses of € 4.0 billion were down € 60 million, or 1 %, compared to the third quarter 2013. The cost base further increased due to higher expenses from increased regulatory requirements and ongoing higher investments in platforms. Offsetting effects during the quarter include benefits from the ongoing implementation of our OpEx program and from the sale of BHF-BANK. Litigation-related charges were € 894 million in the third quarter 2014, which was lower by € 270 million compared to the third 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 € 77 million in the third quarter 2014, a decrease of € 94 million compared to the third quarter 2013.

Group income before income taxes was € 266 million in the third quarter 2014 versus € 18 million in the third quarter 2013, as an increase in revenues was further supported by lower provision for credit losses, partially offset by increase in costs.

Net loss for the third quarter 2014 was € 92 million, compared to a net income of € 51 million in the third quarter 2013. In the third quarter 2014 Deutsche Bank recorded an income tax expense of € 358 million versus an income tax benefit of € 33 million in the comparative period. In the current quarter, the effective tax rate of 134 %, based on an income before income taxes of € 266 million, was mainly impacted by non tax deductible litigation charges.

2014 to 2013 Nine Months Comparison

Results in the first nine months 2014 reflect a mixed performance with higher net revenues in PBC, significantly reduced year-on-year revenue contributions from NCOU, lower net revenues in Deutsche AWM and CB&S, and substantially unchanged revenues in GTB. Lower client investment activity and a highly competitive environment were 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 arising from the OpEx program enabled us to partly offset higher costs incurred in relation to increased regulatory control requirements as well as the ongoing cost of platform integration and process enhancement.

Our net revenues in the first nine months 2014 decreased by 5 %, or € 1.2 billion to € 24.1 billion, compared to € 25.4 billion in the first nine months 2013. Despite lower market volatility, lower client activity and a challenging market environment, CB&S reported solid revenues of € 10.8 billion, down € 271 million, or 2 %, versus the first nine months 2013. Revenues in Sales & Trading (debt and other products) and Sales & Trading (equity) were largely unchanged compared to the first nine months of 2013. In the first nine months of 2014, revenues in PBC and GTB were stable at € 7.2 billion and € 3.1 billion, respectively. Revenues in Deutsche AWM decreased by € 82 million, or 2 %, to € 3.5 billion, versus the first nine months 2013 mainly driven by mark-to-market movements on policyholder positions in Abbey Life. Revenues in NCOU were € 50 million, a decrease of € 1.1 billion, in the first nine months 2014 due to lower portfolio revenues reflecting the significant reduction in assets year-on-year and mark-to-market losses of € 302 million from Maher Terminals’ debt financing and € 151 million on exposure to the US power sector. Net revenues in Consolidation & Adjustments (C&A) were negative € 492 million in the first nine months 2014, compared to negative € 595 million in the first nine months 2013. This development was predominantly attributable to positive effects from different accounting methods used for management reporting and IFRS in the first nine months 2014.

Provision for credit losses was € 765 million in the first nine months 2014, a decrease of € 575 million, or 43 %, compared to the first nine months 2013. This reduction primarily results from lower provisioning in NCOU, the non-recurrence of large single items in our Core businesses recorded in the first nine months 2013 and the ongoing stability of the German retail market.

Noninterest expenses were € 20.5 billion in the first nine months of 2014, down € 299 million, or 1 %, compared to the same period in 2013. Compensation and benefits, which amounted to € 9.5 billion, were down € 127 million, or 1 %, compared to the first nine months in 2013. This primarily reflects lower performance related compensation, offset by an increase in fixed compensation costs to comply with regulatory requirements, mainly in CB&S, as well as strategic hires for our new control functions. General and administrative expenses were € 10.6 billion, up € 136 million, or 1 %, compared to the first nine months 2013. In the first nine 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 comparative period. Litigation-related charges of € 1.4 billion in the first nine months of 2014 were € 562 million below the same period last year. In addition, the cost base was further reduced by savings from our OpEx program and the sale 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 € 209 million in the first nine month of 2014, a decrease of € 147 million compared to 2013.

Overall, income before income taxes was € 2.9 billion in the first nine months 2014 versus € 3.2 billion in the first nine months 2013, mainly driven by lower revenues, partially offset by a lower provision for credit losses and lower costs.

Net income for the first nine months 2014 was € 1.2 billion, compared to € 2.0 billion in the first nine months 2013. Income tax expense in the first nine months was € 1.6 billion versus € 1.2 billion in the first nine months of 2013. The effective tax rate in the first nine months of 2014 of 56 % was mainly impacted by non tax deductible litigation charges. This compares to an effective tax rate of 37 % in the first nine months of 2013.