Deutsche Bank

Annual Report 2017

Deutsche Asset Management

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

 

 

 

 

 

 

 

Management Fees

2,215

2,161

2,299

53

2

(138)

(6)

Performance and transaction fees

199

219

246

(20)

(9)

(28)

(11)

Other revenues

118

239

213

(121)

(51)

25

12

Mark-to-market movements on policyholder positions in Abbey Life

0

396

258

(396)

N/M

139

54

Total net revenues

2,532

3,015

3,016

(483)

(16)

(1)

(0)

Provision for credit losses

(1)

1

1

(1)

N/M

(0)

(4)

Noninterest expenses

 

 

 

 

 

 

 

Compensation and benefits

778

708

870

70

10

(163)

(19)

General and administrative expenses

1,025

1,071

1,209

(47)

(4)

(138)

(11)

Policyholder benefits and claims

0

374

256

(374)

(100)

117

46

Impairment of goodwill and other intangible assets

3

1,021

0

(1,018)

(100)

1,021

N/M

Restructuring activities

6

47

(2)

(41)

(88)

49

N/M

Total noninterest expenses

1,811

3,220

2,334

(1,409)

(44)

886

38

Noncontrolling interests

1

0

(0)

1

N/M

1

N/M

Income (loss) before income taxes

720

(206)

682

926

N/M

(888)

N/M

Cost/income ratio

72 %

107 %

77 %

N/M

(35) ppt

N/M

29 ppt

Assets1

8,050

12,300

30,316

(4,250)

(35)

(18,016)

(59)

Risk-weighted assets2

8,432

8,960

10,757

(528)

(6)

(1,797)

(17)

Average shareholders' equity3

4,725

4,864

5,352

(139)

(3)

(489)

(9)

Post-tax return on average tangible shareholders’ equity

55 %

N/M

145 %

N/M

N/M

N/M

N/M

Post-tax return on average shareholders' equity

10 %

(3) %

8 %

N/M

13 ppt

N/M

(11) ppt

2017

In 2017, Deutsche AM reported significantly higher income before income taxes compared to 2016. Excluding Abbey Life, which was disposed in the fourth quarter of 2016, Deutsche AM results in 2017 were in line with those in 2016, driven by higher revenues, offset by higher expenses. 2017 saw a positive turnaround with € 16 billion net inflows compared to the net outflows reported in the prior year.

Net revenues were € 2.5 billion, a decrease of € 483 million or 16 %. Excluding Abbey Life in 2016, net revenues were up by € 54 million, or 2 %, compared to the prior year. Management fees increased slightly by € 53 million, or 2 %, mainly in Active driven by favorable market movements. Performance and transaction fees were lower by € 20 million or 9 %, primarily driven by lower fund performance fees, from one of the Active funds, compared to the prior year. Other revenues were significantly lower by € 121 million or 51 % compared to the prior year. The decline was primarily due to non-recurring revenues from Abbey Life excluding mark-to-market revenues, proceeds on sale of Deutsche AM India and a write-up relating to HETA exposure which was exited in 2016. These drivers in other revenues were partly offset by a non-recurring recovery in the current year relating to a real-estate fund legal matter, unfavorable impact from the sale of Luxembourg-based Sal. Oppenheim asset servicing business and prior year negative fair value related to guaranteed products. Following the sale of Abbey Life in 2016, no mark-to-market movements on policyholder positions were recorded in 2017, compared to € 396 million reported in the prior year.

Noninterest expenses of € 1.8 billion decreased significantly by € 1.4 billion, or 44 %, due to non-recurrence of costs relating to Abbey Life and lower restructuring expenses. Compensation and benefits were higher due to increased variable compensation costs, General and administrative expenses were slightly lower compared to prior year, driven by the aforementioned non-recurrence of costs relating to Abbey Life, partly offset by an operational loss provision taken in 2015 and released in 2016, coupled with 2017 costs relating to the Asset Management separation.

Income before income taxes of € 720 million significantly increased by € 926 million, driven by the impairment of goodwill and other intangible assets related to Abbey Life in 2016. These items were partly offset by lower revenues due to several non-recurring items in the prior year including Abbey Life, the sale of Deutsche AM India and the write-up relating to HETA.

Assets under Management (AuM) were € 702 billion, a decrease of € 4 billion versus December 31, 2016, driven by € 36 billion unfavorable foreign exchange rate movements and € 13 billion negative Other adjustments mainly relating to disposals of the Luxembourg-based Sal. Oppenheim asset servicing business and U.S. Private Clients business, partly offset by € 30 billion favorable market performance and € 16 billion net inflows led by Europe ETF, multi asset and liquidity product inflows, partly offset by insurance asset outflows.

The following table provides a development of AuM during 2017, broken down by product type as well as the respective management fee margins:

in € bn.

Active Equity

Active Fixed Income

Active Multi Asset

Active SQI

Active Cash

Passive

Alter­natives

Assets under Manage­ment

1

Inflows and Outflows as reported include the AuM shifts between asset classes.

Balance as of December 31, 2016

92

264

54

53

63

98

82

706

Inflows1

20

68

23

15

9

36

16

187

Outflows1

(22)

(71)

(12)

(17)

(9)

(25)

(16)

(172)

Net Flows

(2)

(3)

11

(3)

1

11

0

16

FX impact

(3)

(17)

(1)

(0)

(3)

(7)

(5)

(36)

Performance

9

5

1

2

(1)

11

3

30

Other

(1)

(2)

(5)

0

0

1

(6)

(13)

Balance as of December 31, 2017

96

247

60

52

59

115

73

702

Management fee margin (in bps)

76

14

38

29

9

24

55

31

2016

In 2016, Deutsche AM performance was impacted by the sale of Abbey Life resulting in € 1.0 billion impairment of goodwill and other intangible assets and net outflows, driven by market concerns about Deutsche Bank. Despite less favorable market conditions reflecting ongoing uncertainty from sustained low global growth, excluding Abbey Life, Deutsche AM achieved an income before income taxes of € 731 million, an increase of 16 % from € 632 million in 2015.

Net revenues for full year 2016 were € 3.0 billion, and were in line with prior year. Net revenues excluding Abbey Life were € 2.5 billion, a decrease of 6 % from € 2.7 billion in 2015. Management fees decreased slightly by € 138 million, or 6 %, due to lower AuM and unfavorable market conditions impacting the Passive and Active businesses. Performance and transaction fees decreased by € 28 million, or 11 %, compared to a strong prior year period in Alternatives. Other revenues increased by € 25 million, or 12 %, due to a prior year write down relating to HETA and the 2016 sale of Abbey Life and Deutsche AM India, partly offset by negative fair value of guaranteed products and lower dividend income in Alternatives. Mark-to-market movements on policyholder positions in Abbey Life increased significantly by € 139 million, or 54 %, following higher market gains.

Noninterest expenses of € 3.2 billion were significantly higher by € 886 million, or 38 %, due to impairments of goodwill and other intangible assets predominantly related to the sale of Abbey Life and an increase in policyholder benefits and claims which offsets with revenues. Excluding Abbey Life, noninterest expenses of € 1.7 billion decreased by € 251 million compared to 2015, mainly due to lower compensation costs and the reversal of an operational loss provision taken in 2015.

Loss before income taxes was € 206 million, significantly lower by € 888 million compared to 2015, primarily driven by the aforementioned impacts related to the sale of Abbey Life.

AuM were € 706 billion as of December 31, 2016, a decrease of € 39 billion versus December 31, 2015, driven by challenging market conditions exacerbated by the negative market perceptions concerning Deutsche Bank, market rumors surrounding the future of Deutsche AM and changes in Deutsche AM’s management. Net outflows of € 41 billion were driven by the Americas region, where outflows in cash were the main source of the results, driven by money market reform. Exchange-traded funds were another area with sizeable outflows as the currency-hedged category experienced outflows across the industry. The decrease was also driven by disposals of € 18 billion mainly relating to Abbey Life and Deutsche AM India. Partly offsetting the outflows was the effect from favorable Equity and Fixed Income market performance of € 16 billion, and favorable foreign exchange rate movements of € 4 billion. Deutsche AM also experienced positive inflows of € 2 billion in Asia Pacific in 2016.

The following table provides a development of AuM during 2016, broken down by product type as well as the respective management fee margins:

in € bn.

Active Equity

Active Fixed Income

Active Multi Asset

Active SQI

Active Cash

Passive

Alter­natives

Assets under Manage­ment

1

Inflows and Outflows as reported include the AuM shifts between asset classes.

Balance as of December 31, 2015

102

276

54

54

75

101

82

745

Inflows1

20

56

14

19

9

24

15

158

Outflows1

(25)

(73)

(14)

(23)

(18)

(32)

(15)

(199)

Net Flows

(5)

(17)

(0)

(4)

(9)

(7)

0

(41)

FX impact

(1)

2

(0)

0

1

1

1

4

Performance

4

6

1

2

(1)

3

2

16

Other

(9)

(3)

0

(0)

(2)

0

(3)

(18)

Balance as of December 31, 2016

92

264

54

53

63

98

82

706

Management fee margin (in bps)

68

15

37

29

8

27

53

30