Deutsche Bank

Annual Report 2017

Non-GAAP Financial Measures

This document and other documents the Group has published or may publish contain non-GAAP financial measures. Non-GAAP financial measures are measures of the Group’s historical or future performance, financial position or cash flows that contain adjustments that exclude or include amounts that are included or excluded, as the case may be, from the most directly comparable measure calculated and presented in accordance with IFRS in the Group’s financial statements.

Return on Equity Ratios

The Group reports a post-tax return on average shareholders’ equity and a post-tax return on average tangible shareholders’ equity, each of which is a non-GAAP financial measure.

The post-tax returns on average shareholders’ equity and average tangible shareholders’ equity are calculated as net income (loss) attributable to Deutsche Bank shareholders as a percentage of average shareholders’ equity and average tangible shareholders’ equity, respectively.

Net income (loss) attributable to Deutsche Bank shareholders is a non-GAAP financial measure and is defined as net income (loss) excluding post-tax income (loss) attributable to noncontrolling interests. For the Group, it reflects the reported effective tax rate, which was 160 % for the full year 2017, (67) % for 2016 and (11) % for 2015. For the segments, the applied tax rate was 33 % for all reported periods in 2017 and 35 % for the all reported periods in 2015 and 2016.

At the Group level, tangible shareholders' equity is shareholders’ equity as reported in the Consolidated Balance Sheet excluding goodwill and other intangible assets. Tangible shareholders´ equity for the segments is calculated by deducting goodwill and other intangible assets from shareholders’ equity as allocated to the segments, as described in Note 4 “Business Segments and Related Information” to the consolidated financial statements within the section “Measurement of Segment Profit and Loss”. Shareholders’ equity and tangible shareholders’ equity are presented on an average basis.

The Group believes that a presentation of average tangible shareholders’ equity makes comparisons to its competitors easier, and refers to this measure in the return on equity ratios presented by the Group. However, average tangible shareholders’ equity is not a measure provided for in IFRS, and the Group’s ratios based on this measure should not be compared to other companies’ ratios without considering differences in the calculations.

The reconciliation of the aforementioned ratios is set forth in the table below:

 

2017

in € m.
(unless stated otherwise)

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total

Income (loss) before income taxes (IBIT)

843

359

720

(695)

1,228

Income tax expense

0

0

0

0

(1,963)

Net Income (loss)

565

241

482

(2,023)

(735)

Net income (loss) attributable to noncontrolling interests

0

0

0

(15)

(15)

Net Income attributable to DB shareholders and additional equity components

565

241

482

(2,038)

(751)

 

 

 

 

 

 

 

Average shareholders’ equity

44,169

14,934

4,725

99

63,926

Add (deduct): Average goodwill and other intangible assets

(2,965)

(2,079)

(3,837)

(1)

(8,881)

Average tangible shareholders’ equity

41,203

12,855

888

98

55,045

Post-tax return on average shareholders’ equity

1 %

2 %

10 %

N/M

(1) %

Post-tax return on average tangible shareholders’ equity

1 %

2 %

54 %

N/M

(1) %

 

2016

in € m.
(unless stated otherwise)

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total

Income (loss) before income taxes (IBIT)

1,705

1,439

(206)

(3,207)

(541)

(810)

Income tax expense

0

0

0

0

0

(546)

Net Income (loss)

1,115

941

(135)

(2,097)

(1,181)

(1,356)

Net income (loss) attributable to noncontrolling interests

0

0

0

0

(45)

(45)

Net Income attributable to DB shareholders and additional equity components

1,115

941

(135)

(2,097)

(1,226)

(1,402)

 

 

 

 

 

 

 

Average shareholders’ equity

40,518

15,018

4,864

1,682

0

62,082

Add (deduct): Average goodwill and other intangible assets

(2,749)

(1,896)

(4,907)

(324)

0

(9,876)

Average tangible shareholders’ equity

37,769

13,122

(43)

1,359

0

52,206

Post-tax return on average shareholders’ equity

3 %

6 %

(3) %

N/M

N/M

(2) %

Post-tax return on average tangible shareholders’ equity

3 %

7 %

N/M

N/M

N/M

(3) %

 

2015

in € m.
(unless stated otherwise)

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total

Income (loss) before income taxes (IBIT)

(376)

(3,370)

682

(2,264)

(770)

(6,097)

Income tax expense

0

0

0

0

0

(675)

Net Income (loss)

(243)

(2,177)

441

(1,463)

(3,331)

(6,772)

Net income (loss) attributable to noncontrolling interests

0

0

0

0

(21)

(21)

Net Income attributable to DB shareholders and additional equity components

(243)

(2,177)

441

(1,463)

(3,353)

(6,794)

 

 

 

 

 

 

 

Average shareholders’ equity

39,258

14,333

5,352

3,735

6,377

69,055

Add (deduct): Average goodwill and other intangible assets

(3,177)

(1,781)

(5,048)

(72)

(3,831)

(13,909)

Average tangible shareholders’ equity

36,081

12,552

304

3,663

2,546

55,146

Post-tax return on average shareholders’ equity

(1) %

(15) %

8 %

N/M

N/M

(10) %

Post-tax return on average tangible shareholders’ equity

(1) %

(17) %

145 %

N/M

N/M

(12) %

Adjusted Costs

Adjusted costs is one of the Group’s key performance indicators and is a non-GAAP financial measure most directly comparable to the IFRS financial measure noninterest expenses. Adjusted costs is calculated by adjusting noninterest expenses under IFRS for (i) impairment of goodwill and other intangible assets, (ii) litigation, (iii) policyholder benefits and claims and (iv) restructuring and severance. Policyholder benefits and claims arose from the Abbey Life Assurance business which was sold in late 2016 and so will not occur in subsequent periods. The Group believes that a presentation of noninterest expenses excluding the impact of these items provides a more meaningful depiction of the costs associated with our operating businesses.

 

2017

in € m.

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total Consolidated

Noninterest expenses

13,143

9,518

1,811

223

24,695

Impairment of goodwill and other intangible assets

6

12

3

0

21

Litigation

44

53

5

112

213

Policyholder benefits and claims

0

0

0

0

0

Restructuring and severance

152

399

18

2

570

Adjusted costs

12,941

9,054

1,786

109

23,891

 

2016

in € m.

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total Consolidated

Noninterest expenses

14,193

9,212

3,220

2,701

116

29,442

Impairment of goodwill and other intangible assets

285

0

1,021

(49)

(0)

1,256

Litigation

608

56

(0)

1,750

(18)

2,397

Policyholder benefits and claims

0

0

374

0

0

374

Restructuring and severance

391

204

69

23

(6)

681

Adjusted costs

12,909

8,951

1,757

977

140

24,734

 

2015

in € m.

Corporate & Invest­ment Bank

Private & Commercial Bank

Deutsche Asset Manage­ment

Non-Core Oper­ations Unit

Consoli­dation & Adjust­ments

Total Consolidated

Noninterest expenses

18,856

13,495

2,334

3,006

976

38,667

Impairment of goodwill and other intangible assets

2,168

3,608

0

0

0

5,776

Litigation

2,932

56

1

1,849

380

5,218

Policyholder benefits and claims

0

0

256

0

0

256

Restructuring and severance

257

679

8

24

(3)

965

Adjusted costs

13,499

9,152

2,069

1,133

599

26,451

Book Value and Tangible Book Value per Basic Share Outstanding

Book value per basic share outstanding and tangible book value per basic share outstanding are non-GAAP financial measures that are used and relied upon by investors and industry analysts as capital adequacy metrics. Book value per basic share outstanding represents the Bank’s total shareholders’ equity divided by the number of basic shares outstanding at period-end. Tangible book value represents the Bank’s total shareholders’ equity less goodwill and other intangible assets. Tangible book value per basic share outstanding is computed by dividing tangible book value by period-end basic shares outstanding.

Tangible Book Value

in € m.

 

 

 

2017 increase
(decrease)
from 2016

2016 increase
(decrease)
from 2015

(unless stated otherwise)

2017

2016

2015

in € m.

in %

in € m.

in %

Total shareholders’ equity (Book value)

63,174

59,833

62,678

3,341

6

(2,845)

(5)

Goodwill and other intangible assets

(8,839)

(8,982)

(10,078)

143

(2)

1,096

(11)

Tangible shareholders’ equity (Tangible book value)

54,335

50,851

52,600

3,484

7

(1,750)

(3)

Basic Shares Outstanding

in € m.

 

 

 

2017 increase
(decrease)
from 2016

2016 increase
(decrease)
from 2015

(unless stated otherwise)

2017

2016

2015

in € m.

in %

in € m.

in %

1

The basic shares outstanding have been adjusted for comparative periods in order to reflect the effect of the bonus component of subscription rights issued in April 2017 in connection with the capital increase.

Number of shares

2,066.8

1,545.5

1,545.5

521.3

33.7

0

0

Shares outstanding:

 

 

 

 

 

 

 

Treasury shares

(0.4)

(0.2)

(0.4)

(0.1)

63.5

0.2

(46.0)

Vested share awards

28.5

23.3

9.9

5.2

22.4

13.4

134.3

Basic shares outstanding1

2,094.9

1,568.6

1,555.0

526.3

33.6

13.6

0.9

 

 

 

 

 

 

 

 

Book value per basic share outstanding in €

30.16

38.14

40.31

(7.98)

(20.9)

(2.17)

(5.4)

Tangible book value per basic share outstanding in €

25.94

32.42

33.83

(6.48)

(20.0)

(1.41)

(4.2)

Fully loaded CRR/CRD 4 Measures

Our regulatory assets, exposures, risk-weighted assets, capital and ratios thereof are calculated for regulatory purposes and are set forth throughout this document under CRR/CRD 4. CRR/CRD 4 provides for “transitional” (or “phase-in”) rules, under which capital instruments that are no longer eligible under the new rules are permitted to be phased out as the new rules on regulatory adjustments are phased in, as well as regarding the risk weighting of certain categories of assets. In some cases, CRR/CRD 4 maintains transitional rules that had been adopted in earlier capital adequacy frameworks through Basel 2 or Basel 2.5. Unless otherwise noted, our CRR/CRD 4 solvency measures set forth in this document reflect these transitional rules.

We also set forth in this document such CRR/CRD 4 measures on a “fully loaded” basis, reflecting full application of the final CRR/CRD 4 framework without consideration of the transitional provisions under CRR/CRD 4, except as described below.

The transitional rules included rules permitting the grandfathering of equity investments at a risk-weight of 100 % instead of a risk weight between 190 % and 370 % determined based on Article 155 CRR that would apply under the CRR/CRD 4 fully loaded rules. Despite the grandfathering rule for equity investments not applying under the full application of the final CRR/CRD 4 framework, we continued to apply it in our CRR/CRD 4 fully loaded methodology for a limited subset of equity positions for the periods ended December 31, 2015 and December 31, 2016, based on our intention to mitigate the impact of the expiration of the grandfathering rule through sales of the underlying assets or other measures prior to its expiration at end of 2017. We did not apply the grandfathering rule in our CRR/CRD 4 fully loaded methodology for the period ended December 31, 2017.

As of December 31, 2016, our portfolio of transactions for which we applied the equity investment grandfathering rule in calculating our fully loaded RWA consisted of 15 transactions amounting to € 220 million in exposures. Had we not applied the grandfathering rule for these transactions, their fully loaded RWA would have been no more than € 816 million, and thus our Group fully loaded RWA would have been no more than € 358.1 billion as of December 31, 2016, rather than the Group fully loaded RWA of € 357.5 billion that we reported on a fully loaded basis with application of the grandfathering rule. Also, had we calculated our fully loaded CET 1 capital ratio, Tier 1 capital ratio and Total capital ratio as of December 31, 2016 using fully loaded RWAs without application of the grandfathering rule, such capital ratios would have remained unchanged (due to rounding) at the 11.8 %, 13.1 % and 16.6 %, respectively, that we reported on a fully loaded basis with application of the grandfathering rule.

As of December 31, 2015, our portfolio of transactions for which we applied the equity investment grandfathering rule in calculating our fully loaded RWA amounted to € 1.5 billion in exposures. Had we not applied the grandfathering rule for these transactions, their fully loaded RWA would have been no more than € 5.4 billion, and thus our Group fully loaded RWA would have been no more than € 400.7 billion as of December 31, 2015, rather than the Group fully loaded RWA of € 396.7 billion that we reported on a fully loaded basis with application of the grandfathering rule. Also, had we calculated our fully loaded CET 1 capital ratio, Tier 1 capital ratio and Total capital ratio as of December 31, 2015 using fully loaded RWAs without application of the grandfathering rule, such capital ratios would have been 11.0 %, 12.1 % and 15.2 %, respectively, instead of the 11.1 %, 12.3 % and 15.4 %, respectively, that we reported on a fully loaded basis with application of the grandfathering rule.

As the final implementation of CRR/CRD 4 may differ from our expectations, and our competitors’ assumptions and estimates regarding such implementation may vary, our fully loaded CRR/CRD 4 measures may not be comparable with similarly labeled measures used by our competitors.

We believe that these fully loaded CRR/CRD 4 calculations provide useful information to investors as they reflect our progress against the new regulatory capital standards and as many of our competitors have been describing CRR/CRD 4 calculations on a fully loaded basis.

For descriptions of these fully loaded CRR/CRD 4 measures and the differences from the most directly comparable measures under the CRR/CRD 4 transitional rules, please refer to “Management Report: Risk Report: Risk and Capital Performance: Capital and Leverage Ratio”, in particular the subsections thereof entitled “Development of Regulatory Capital”, “Development of Risk-Weighted Assets” and “Leverage Ratio”.