Deutsche Bank

Annual Report 2017

Corporate & Investment Bank

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

Segment assets represent consolidated view, i.e., the amounts do not include intersegment balances.

2

Risk-weighted assets and capital ratios are based upon CRR/CRD 4 fully-loaded.

3

See Note 4 “Business Segments and Related Information” to the consolidated financial statements for a description of how average shareholders' equity is allocated to the divisions.

Net revenues

 

 

 

 

 

 

 

Global Transaction Banking

3,942

4,421

4,609

(478)

(11)

(188)

(4)

Equity Origination

396

405

658

(8)

(2)

(253)

(38)

Debt Origination

1,327

1,393

1,481

(66)

(5)

(88)

(6)

Advisory

508

495

575

13

3

(80)

(14)

Origination and Advisory

2,231

2,292

2,714

(61)

(3)

(422)

(16)

Financing

2,231

2,375

2,127

(144)

(6)

248

12

Sales & Trading (Equity)

2,085

2,571

3,416

(486)

(19)

(845)

(25)

Sales & Trading (FIC)

4,380

5,087

6,083

(707)

(14)

(996)

(16)

Sales & Trading

6,465

7,658

9,499

(1,193)

(16)

(1,841)

(19)

Other

(644)

17

(51)

(661)

N/M

68

N/M

Total net revenues

14,226

16,763

18,899

(2,537)

(15)

(2,136)

(11)

Provision for credit losses

213

816

393

(603)

(74)

423

108

Noninterest expenses

 

 

 

 

 

 

 

Compensation and benefits

4,273

3,955

4,897

318

8

(942)

(19)

General and administrative expenses

8,782

9,655

11,662

(872)

(9)

(2,007)

(17)

Policyholder benefits and claims

0

0

0

0

N/M

0

N/M

Impairment of goodwill and other intangible assets

6

285

2,168

(279)

(98)

(1,883)

(87)

Restructuring activities

82

299

129

(217)

(73)

169

131

Total noninterest expenses

13,143

14,193

18,856

(1,050)

(7)

(4,663)

(25)

Noncontrolling interests

26

49

26

(23)

(46)

23

89

Income (loss) before income taxes

843

1,705

(376)

(861)

(51)

2,080

N/M

Cost/income ratio

92 %

85 %

100 %

N/M

8 Ppkt

N/M

(15) ppt

Assets1

1,127,028

1,201,894

1,236,770

(74,866)

(6)

(34,876)

(3)

Risk-weighted assets2

231,574

237,596

247,423

(6,022)

(3)

(9,827)

(4)

Average shareholders' equity3

44,169

40,518

39,258

3,651

9

1,260

3

Post-tax return on average tangible shareholders’ equity

1 %

3 %

(1) %

N/M

(2) ppt

N/M

4 ppt

Post-tax return on average shareholders' equity

1 %

3 %

(1) %

N/M

(2) ppt

N/M

3 ppt

2017

CIB net revenues for the full year 2017 were € 14.2 billion, a decrease of € 2.5 billion, or 15 % year-on-year. The division was impacted by higher funding charges and by a particularly challenging environment for Sales and Trading, with consistently low levels of volatility and subdued client activity from the second quarter through to year end. Global Transaction Banking was also impacted by client and perimeter adjustments initiated in 2016 and margin pressure. Origination and Advisory performance was essentially flat to the prior year.

Global Transaction Banking net revenues were € 3.9 billion, a decrease of € 478 million, or 11 %. Cash Management revenues were slightly lower, as interest rate increases in the U.S. partly offset the negative impact of client and product perimeter reductions initiated in 2016. Trade revenues were lower, driven by active balance sheet management efforts and continued margin pressure. Trust, Agency and Securities Services revenues were essentially flat, as lower transaction volumes due to client and country exits were offset by interest rate increases in the U.S. In addition, GTB revenues were negatively impacted by a change in funding charges allocation methodology in 2017.

Origination and Advisory revenues were € 2.2 billion, a € 61 million, or 3 % decrease compared to the prior year. Equity Origination revenues decreased by € 8 million or 2 %, essentially flat to the prior year. Debt Origination revenues were € 66 million or 5 % lower, with a strong first quarter of 2017 supported by high inflows into the Leveraged Loan market, offset by slightly lower revenues during the remainder of 2017 amid lower client activity and Deutsche Bank’s reduced risk appetite in the U.S. Advisory revenues were € 13 million or 3 % higher driven by a robust market and strong deal participation.

Financing net revenues were € 2.2 billion, a decrease of € 144 million, or 6 % mainly driven by lower revenues from investment grade lending which was impacted by higher funding charges.

Sales & Trading (FIC) net revenues were € 4.4 billion, a decrease of € 707 million, or 14 %. Credit revenues were essentially flat supported by strong performance in distressed products in the first half of 2017, offset by less favorable trading conditions for flow businesses in the second half of 2017. Rates revenues were higher with solid performance in Europe, partly offset by a weaker performance in the U.S. Foreign Exchange revenues were lower as a persistently low volatility environment impacted client flows. Asia Pacific Foreign Exchange and Rates revenues decreased with a strong first quarter of 2017 offset by lower client activity during the remainder of the year. Emerging Markets revenues were significantly lower due to subdued client flow and specific developments in Venezuela, South Africa and Turkey towards the end of the year.

Sales & Trading (Equity) generated net revenues of € 2.1 billion, a decrease of € 486 million, or 19 %. Revenues in Prime Finance were lower reflecting lower average balances during the year, reduced margins and higher funding cost. Equity Derivatives revenues were lower with a challenging trading environment particularly in the second half of 2017. Cash Equities revenues were essentially flat with volumes remaining challenged.

Other revenues incurred a loss of € 644 million, compared to a gain of € 17 million in 2016. 2017 included a loss of € 348 million (2016: a gain of € 27 million) relating to the impact of DVA on certain derivative liabilities. € 136 million of this loss was driven by a change in the creditor hierarchy in the event of a bank insolvency which was introduced by the German Resolution Mechanism Act (Abwicklungsmechanismusgesetz), effective January 1, 2017. This hierarchy change results in derivative counterparties receiving greater protection as they would be satisfied prior to senior unsecured debt holders in the creditor waterfall structure. This greater protection increases the value of the derivative assets for the counterparty, thereby increasing the value of derivative liabilities on our balance sheet, resulting in the loss. Revenues associated with assets identified as not consistent with CIB’s strategy are reported under ‘Other’ as of the second quarter of 2017, including a negative impact related to the valuation of the legacy RMBS portfolio.

Provisions for credit losses of € 213 million were down 74 % year-on-year. The decrease resulted primarily from reductions across all portfolios, including shipping. Despite the year-over-year reduction, shipping continued to be the main driver of provision for credit losses in 2017.

Noninterest expenses of € 13.1 billion, were € 1.1 billion, or 7 % lower than in 2016. Reduced litigation provisions, materially lower goodwill impairment and lower severance and restructuring all positively impacted the comparison versus the prior year. Compensation costs increased due to the normalization of variable compensation payments in 2017, though this was partially mitigated by reduced noncompensation direct costs. The year-on-year development of noninterest expenses also benefitted from foreign exchange rate movements.

Income before income taxes of € 843 million was € 861 million or 51 % lower than in the previous year. The period-over-period reduction in revenues was only partially offset by reduced noninterest expenses and lower credit loss provisions.

2016

Revenues in the Corporate & Investment Bank of € 16.8 billion declined € 2.1 billion, or 11 % in 2016 compared to the prior year. The division was impacted by a particularly challenging environment for Equities, negative market perceptions concerning Deutsche Bank and the impact of strategy execution in line with our targets announced in October 2015. In Corporate Finance, the industry-wide slowdown in client activity and primary market issuances seen in the fourth quarter of 2015 continued through the first half of 2016, while Transaction Banking revenues also decreased slightly, driven by a number of macro-economic headwinds.

Global Transaction Banking net revenues were € 4.4 billion, a decrease of € 188 million, or 4 %. Cash Management revenues were essentially flat and were impacted by low interest rates within the Eurozone area and client perimeter rationalization as part of our targets announced in October 2015. Trade revenues were lower driven by active balance sheet and risk management efforts and margin pressure. Trust, Agency and Securities Services revenues were slightly lower, with the business also affected by lower interest rates in Europe, coupled with lower global IPO activity, though these were partly offset by interest rate increases in the U.S.

Origination and Advisory revenues were € 2.3 billion, a € 422 million, or 16 % decrease compared to the prior year. Equity Origination revenues were down € 253 million or 38 % for the year reflecting an industry wide reduction in issuance levels. Debt Origination was lower by € 88 million or 6 % for the full year, driven by a weak first quarter. Advisory revenues decreased € 80 million or 14 %, as market activity decreased compared to 2015.

Financing net revenues were € 2.4 billion, an increase of € 248 million, or 12 % driven by strong performance in asset based financing and Commercial Real Estate, specifically in the U.S.

Sales & Trading (FIC) net revenues were € 5.1 billion, a decrease of € 996 million, or 16 %. Revenues in Foreign Exchange were in line with a strong prior year. Revenues in Rates were essentially flat, as good performance in Europe was partly offset by a weaker performance in the U.S. Credit revenues were lower and included the impact of de-risking in Securitized Trading as part of our targets announced in October 2015. Underperformance was seen in both Credit Flow and Securitized Trading. Emerging Market revenues were significantly lower in 2016 driven by the impact of country exits, specifically Russia, as part of the implementation of our targets announced in October 2015, lower client flow and macro uncertainty. Asia Pacific Foreign Exchange and Rates revenues were significantly lower as a result of unfavorable market conditions in the first half of the year and subdued market activity negatively impacting client flow.

Sales & Trading (Equity) net revenues were € 2.6 billion, a decrease of € 845 million, or 25 %. Prime Finance revenues were lower reflecting a decline in client balances and trading activity as well as increased cost of funding. Equity Derivatives revenues were significantly lower due to lower client activity. Cash Equity revenues were significantly lower in 2016 as a result of a challenging market environment and lower client volumes.

Other revenues were positive € 17 million, compared to negative € 51 million in 2015. The impact of DVA during the year was a gain of € 27 million (€ 48 million in 2015).

Provisions for credit losses of € 816 million were up € 423 million, or 108 % compared to 2015. The increase was primarily driven by the deterioration in credit quality of the shipping sector where the industry suffered from persistent structural challenges; such as oversupply and redundancy of certain types of ships. As a consequence this severe industry weakness also triggered more borrowers to fall into the defaulted category valued under a liquidation scenario.

Noninterest expenses of € 14.2 billion were € 4.7 billion, or 25 % lower than in 2015. Materially lower goodwill impairment and reduced litigation charges positively impacted the comparison versus the prior year and more than offset an increase in restructuring costs. Compensation costs in 2016 were lower as a result of reduced performance related compensation and a reduction in headcount as part of strategic initiatives.

Income before income taxes of € 1.7 billion was € 2.1 billion higher than in the previous year. The substantial reduction in noninterest expenses more than offset lower revenues and a significant increase in credit loss provisions.