Deutsche Bank

Annual Report 2017

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.

in € m.

 

 

 

2017 increase
(decrease)
from 2016

2016 increase
(decrease)
from 2015

(unless stated otherwise)

2017

2016

2015

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”.

Net interest income

12,378

14,707

15,881

(2,329)

(16)

(1,174)

(7)

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

2,926

1,401

3,842

1,524

109

(2,440)

(64)

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

15,304

16,108

19,723

(805)

(5)

(3,615)

(18)

 

 

 

 

 

 

 

 

Breakdown by Corporate Division:1

 

 

 

 

 

 

 

Corporate & Investment Bank

9,078

10,773

12,348

(1,695)

(16)

(1,576)

(13)

Private & Commercial Bank

6,158

6,420

6,573

(262)

(4)

(153)

(2)

Deutsche Asset Management

30

365

255

(335)

(92)

110

43

Non-Core Operations Unit

0

(1,307)

(362)

1,307

N/M

(944)

N/M

Consolidation & Adjustments

37

(143)

910

180

N/M

(1,052)

N/M

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

15,304

16,108

19,723

(805)

(5)

(3,615)

(18)

2017

Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 15.3 billion in 2017, compared to € 16.1 billion in 2016, a decrease of € 805 million, or 5 %. The decrease was primarily driven by CIB, where total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 9.0 billion in 2017, a decrease of € 1.7 billion, or 16 %, compared to 2016. In Sales & Trading (FIC), revenues were lower by € 503 million in 2017, a decrease of 10 % compared to 2016. The decline was primarily due to low volatility environment, reducing client demand and lack of major market demand and higher funding cost. In Sales & Trading (equity), revenues were lower by € 342 million in 2017, a decrease of 18 % compared to 2016 mainly due to increased U.S. funding costs, lower average balances and reduced spreads in Prime Finance. Revenues in other CIB products were € 2.8 billion, represented a decline of € 850 million or 23 % compared to 2016. The decline was mainly due to losses of € 348 million in DVA from tightening of credit spreads and decrease in derivative liability exposures. Additionally revenues were also impacted by unfavorable exchange rate movements. In addition, Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss decreased in Deutsche AM, mainly due to nonrecurring revenues from Abbey Life which was sold at the end of 2016 and the absence of a write-up of our exposure to HETA; and in PCB, mainly impacted by the persistent low interest rate environment and loan book reductions. Partly offsetting these decreases was NCOU, which ceased to exist from 2017 onwards and reported negative € 1.3 billion of Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss in 2016, including the aforementioned de-risking losses.

2016

Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss were € 16.1 billion, a decrease by € 3.6 billion, or 18 %, versus € 19.7 billion in 2015. CIB contributed € 1.6 billion to the decrease, with Sales & Trading (FIC) revenues being lower by € 777 million in 2016, a decrease of 13 % compared to 2015. This decline was driven by a challenging market environment and country exits as part of our targets originally announced in October 2015. Lower revenues in Emerging Markets and Foreign Exchange were partly offset by higher Core Rates revenues. In Sales & Trading (equity), revenues were lower by € 904 million in 2016, a decrease of 32 % compared to 2015. This decline was felt across all equity businesses as a result of lower overall client activity in a challenging market environment. Prime Finance revenues were also impacted by higher funding costs due to a widening of our own credit spreads following negative market perceptions concerning Deutsche Bank. Interest revenues in Trade Finance were lower due to margin compression and the impact from negative interest rates. Revenues in other CIB products improved by € 106 million, or 3 % compared to 2015. In PCB, total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss declined by € 153 million. This includes the impact of a low interest rate environment in Europe and was partly offset by positive transaction related effects relating to PCB’s stake in Hua Xia Bank Co. Ltd. In Deutsche AM, Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss increased by € 110 million, mainly due to a write up of our exposure to HETA during 2016, favorable mark-to-market movements on policyholder positions in Abbey Life and positive effects related to the sale of Deutsche AM India. In NCOU, Total net interest income and net gains (losses) on financial assets/liabilities at fair value through profit or loss declined by € 944 million, predominantly driven by the resolution of long-dated derivative exposures, various bond sales and further un-winds across the portfolio. In C&A, the decrease by € 1.1 billion was primarily due to interest rate increases in the long end of the curve in USD and EUR during the fourth quarter of 2016. The offsetting mark to market movements were reported in other lines of the income statement.

Provision for Credit Losses

2017

Provision for credit losses was € 525 million in 2017, a decrease of € 857 million, or 62 %, compared to 2016 as a result of significantly lower charges and higher releases in all divisions. In CIB, the improvement reflected better performance of all portfolios including shipping. Despite the year-over-year reduction, shipping continued to be the main driver of provision for credit losses in 2017, in part related to the re-evaluation of the respective impairment method during the year. In PCB, provision for credit losses improved, reflecting the good portfolio quality and the continued benign environment along with a significant release in Postbank.

2016

Provision for credit losses was € 1.4 billion in 2016, an increase of € 427 million, or 45 %, compared to 2015. This mainly resulted from higher provisions in CIB driven by exposures related to the shipping, metals and mining and oil and gas industry sectors. Further increases in NCOU were driven by IAS 39 reclassified assets within our European mortgage portfolios. These increases were partly offset by lower provisions in PCB reflecting the quality of the retail loan portfolio and the benign economic environment.