Deutsche Bank

Annual Report 2017

Private & Commercial 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:

 

 

 

 

 

 

 

Private & Commercial Clients

5,013

5,225

5,603

(213)

(4)

(377)

(7)

Postbank

3,124

3,366

3,112

(242)

(7)

254

8

Wealth Management

2,041

1,880

2,097

161

9

(217)

(10)

Hua Xia

0

618

(175)

(618)

(100)

793

N/M

Total net revenues

10,178

11,090

10,637

(912)

(8)

453

4

thereof:

 

 

 

 

 

 

 

Net interest income

5,876

6,201

6,415

(325)

(5)

(214)

(3)

Commissions and fee income

3,367

3,395

3,816

(28)

(1)

(421)

(11)

Remaining income

935

1,494

406

(559)

(37)

1,088

N/M

Provision for credit losses

313

439

511

(126)

(29)

(73)

(14)

Noninterest expenses:

 

 

 

 

 

 

 

Compensation and benefits

3,979

4,042

4,161

(63)

(2)

(119)

(3)

General and administrative expenses

5,166

5,029

5,139

138

3

(110)

(2)

Policyholder benefits and claims

0

0

0

0

N/M

0

N/M

Impairment of goodwill and other intangible assets

12

0

3,608

12

N/M

(3,608)

N/M

Restructuring activities

360

141

586

219

155

(445)

(76)

Total noninterest expenses

9,518

9,212

13,495

306

3

(4,283)

(32)

Noncontrolling interests

(12)

0

0

(12)

N/M

0

3

Income (loss) before income taxes

359

1,439

(3,370)

(1,080)

(75)

4,809

N/M

Cost/income ratio

94 %

83 %

127 %

N/M

10 ppt

N/M

(44) ppt

Assets1

333,069

329,869

312,731

3,200

1

17,138

5

Risk-weighted assets2

87,472

86,082

92,857

1,390

2

(6,776)

(7)

Average shareholders' equity3

14,934

15,018

14,333

(84)

(1)

685

5

Post-tax return on average tangible shareholders’ equity

2 %

7 %

(17) %

N/M

(5) ppt

N/M

25 ppt

Post-tax return on average shareholders' equity

2 %

6 %

(15) %

N/M

(5) ppt

N/M

22 ppt

Additional information

in € bn.

 

 

 

2017 increase
(decrease)
from 2016

2016 increase
(decrease)
from 2015

(unless stated otherwise)

2017

2016

2015

in € bn.

in %

in € bn.

in %

N/M – Not meaningful

1

We define assets under management as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage assets under management on a discretionary or advisory basis, or these assets are deposited with us. Deposits are considered assets under management if they serve investment purposes. In our Private and Commercial Clients and Postbank businesses, this includes all time deposits and savings deposits. In Wealth Management, we assume that all customer deposits are held with us primarily for investment purposes.

Assets under management1

506

501

583

5

1

(83)

(14)

Net flows

4

(42)

3

47

N/M

(46)

N/M

2017

PCB’s results in 2017 were significantly impacted by strategy-related items, which included restructuring provisions related to the planned merger of Private & Commercial Clients Germany and Postbank as well as a negative revenue impact subsequent to the agreement related to the sale of a significant portion of the retail business in Poland. In contrast, results in 2016 benefited from a gain related to the sale of the stake in Hua Xia Bank Co. Ltd. These specific factors explain most of the year-on-year decline in PCB’s income before income taxes.

Net revenues of € 10.2 billion decreased by € 912 million, or 8 %, compared to the prior year. This decline was primarily attributable to business disposals in both years. 2016 included a € 618 million revenue contribution from Hua Xia Bank Co. Ltd. as well as a € 140 million higher revenue contribution from the Private Client Services (PCS) unit in the U.S. prior to its sale. In contrast, net revenues in 2017 were negatively impacted by € 157 million related to the agreement to sell a significant portion of the retail business in Poland. Excluding these effects, net revenues remained essentially flat year-on-year. Positive impacts from workout activities in Sal. Oppenheim compensated for negative impacts from lower gains from asset sales and the termination of a legacy trust preferred security. The decrease in deposit revenues in the ongoing low interest rate environment was largely mitigated by growth in loan revenues and by higher commission and fee income from account and investment products.

In the Private & Commercial Client (PCC) businesses, revenues decreased by € 213 million, or 4 %, compared to the prior year, mainly attributable to a negative impact of € 157 million from the agreement to sell a significant portion of the retail business in Poland reflected in remaining income. Additionally, both periods included gains from asset sales on a comparable level (2017 included a gain of € 95 million from the sale of shares in Concardis GmbH, 2016 included a gain of € 98 million from the sale of shares in VISA Europe Limited). Net interest income decreased slightly compared to 2016, which was attributable to the ongoing low interest rate environment. Commission and fee income remained essentially flat year-on-year with improved revenues from investment products.

Revenues in the Postbank businesses decreased by € 242 million, or 7 %, compared to the prior year, primarily driven by a negative impact of € 118 million from the termination of a legacy trust preferred security in 2017 whereas revenues in 2016 benefited from gains from certain asset sales including € 104 million related to the sale of shares in VISA Europe Limited. Postbank’s net interest income declined slightly year-on-year. The impact of the low interest rate environment on deposit revenues was partly mitigated by higher loan revenues as a result of growth in lending volumes. Commission and fee income increased mainly reflecting the introduction of a new pricing model for current accounts and an enhanced advisory model for investment products.

Revenues in the Wealth Management (WM) businesses increased by € 161 million, or 9 %, mainly caused by positive impacts of approximately € 400 million from workout activities in the Sal. Oppenheim franchise, which more than compensated for the lower revenue contribution in 2017 after the disposal of the Private Client Services (PCS) unit in September 2016. Workout gains were primarily driven by favorable legal outcomes positively impacting the valuation of loans, which were reduced in their carrying amount as part of the acquisition. Excluding these effects, net revenues decreased compared to the previous year reflecting foreign exchange rate movements as well as a decline in net interest revenues driven by loan book reductions mainly in the Americas. Commission and fee income was slightly below the prior year, reflecting lower client activities and a lower asset base in the Americas and EMEA partly compensated by good growth momentum in Asia Pacific.

Provision for credit losses of € 313 million decreased by € 126 million, or 29 %, year-on-year benefiting from a provision release in Postbank as well as a good portfolio quality in a continued benign economic environment. Both periods included positive impacts from selective portfolio sales.

Noninterest expenses of € 9.5 billion increased by € 306 million, or 3 %, compared to the last year. As mentioned above, the current year was impacted by net restructuring charges of € 360 million (versus € 141 million in 2016) related to strategic items including the reorganization and integration measures in Germany. Noninterest expenses also increased due to higher variable compensation and higher investment spending. These effects were partially compensated by savings from executed reorganization measures and a reduced cost base after the disposal of the PCS unit.

Income before income taxes of € 359 million decreased by € 1.1 billion compared to 2016. The decrease was mainly attributable to the aforementioned specific factors and the continued difficult interest rate environment.

PCB’s Assets under Management of € 506 billion increased by € 5 billion compared to December 31, 2016. Negative impacts from foreign exchange rate movements were more than compensated by market appreciation and by net inflows of € 4 billion (primarily in the PCC businesses). Net inflows mainly occurred in deposit products, in part reflecting the successful win-back of mandates after outflows in the third and fourth quarter of 2016. In Wealth Management net inflows were partly impacted by strategic business decisions and continued de-risking.

2016

During 2016, PCB made substantial progress in the execution of strategic measures including the streamlining of distribution models and the further expansion of digital offerings. Also as part of our targets originally announced in October 2015, PCB completed the disposals of the Private Client Services (PCS) unit in the U.S. and the Hua Xia Bank Co. Ltd. stake in China. The latter transaction resulted in a significant gain on sale. Additionally, PCB benefited from the sale of its shares in VISA Europe Limited. PCB’s prior year results were negatively impacted by Hua Xia-related valuation effects, impairment charges of € 3.6 billion and significant expenses for restructuring activities.

Net revenues in PCB of € 11.1 billion increased by € 453 million, or 4 %, compared to the prior year period. This increase was driven by a higher contribution from Hua Xia Bank Co. Ltd. with revenues of € 618 million in 2016 including the aforementioned positive impact from the sale transaction. 2015 included net negative revenues of € 175 million related to Hua Xia Bank Co. Ltd. Excluding the impacts from the disposals of Hua Xia Bank Co. Ltd. and PCS, net revenues declined compared to the prior year period.

In the Private & Commercial Client (PCC) businesses, revenues decreased by € 377 million, or 7 %. Net interest income declined slightly driven by the lower interest rate environment in Europe resulting in reduced Deposit revenues. Commission and fee income declined year-on-year as the ongoing turbulent market environment with reduced client activity, resulted in lower revenues from Investment & insurance products. PCC’s remaining income increased significantly, including a € 98 million gain attributable to the sale of the shares in VISA Europe Limited.

Revenues in the Postbank businesses increased by € 254 million, or 8 %, compared to 2015 primarily driven by gains from certain asset sales including a € 104 million gain from aforementioned sale of shares in VISA Europe Limited reflected in remaining income. Net interest income remained essentially flat. Lower revenues from deposit products following the continued low interest rate environment in Europe were compensated by a discontinued revenue burden from the adjustment of home loan savings interest provisions in 2015. Beyond that, net interest income from credit products increased driven by volume growth. Net commission and fee income remained essentially flat compared to the prior year period.

Revenues in the Wealth Management (WM) businesses decreased by € 217 million, or 10 %, in part due to a deconsolidation impact after the disposal of the PCS unit in September 2016. Apart from this effect, WM’s net interest income remained essentially flat, while net commission and fee income in WM was also impacted by the difficult market environment with reduced client activity, strategic de-risking initiatives and the negative market perceptions associated with Deutsche Bank in the second half of 2016.

Provision for credit losses of € 439 million decreased by € 73 million, or 14 %, compared to prior year reflecting the continued good quality of the loan portfolio and the benign economic environment. Provision for credit losses also benefited from selective portfolio sales with similar impacts in 2015 and 2016.

Noninterest expenses of € 9.2 billion in 2016 decreased by € 4.3 billion, or 32 %, compared to the prior year period. 2015 included € 3.6 billion impairments, € 475 million higher charges for restructuring and severance and a € 131 million partial write-off of software, whereas noninterest expenses in 2016 benefited from a reduced cost base after the disposal of the PCS unit in September. Excluding these effects, noninterest expenses were at comparable levels in 2015 and 2016. The impact of higher investments in digitalization and further spending related to strategic measures was offset by lower compensation expenses and strict cost discipline.

Income before income taxes of € 1.4 billion increased by € 4.8 billion compared to 2015. The increase was attributable to the aforementioned impairment items and higher charges for restructuring and severance in 2015 combined with the positive impact from the disposal of the Hua Xia Bank Co. Ltd. stake in 2016. Excluding these factors, income before income taxes declined in 2016 compared to 2015 reflecting the impact of the continued low interest rate environment and the volatile market environment on revenues in the WM, PCC and Postbank businesses.

Assets under management of € 501 billion decreased by € 83 billion compared to December 31, 2015. The decline was mainly attributable to a deconsolidation effect of € 38 billion subsequent to the disposal of the PCS unit and net outflows of € 42 billion (€ 32 billion in WM, € 7 billion in PCC businesses, € 3 billion in Postbank) mainly occurring subsequent to the negative market perceptions associated with Deutsche Bank in the second half of 2016. In WM, net outflows during 2016 also reflected continued deleveraging activities of the clients as well as efforts to optimize risk management practices and to improve efficiencies such as cross-border servicing.