Quarterly Report • Aug 14, 2015
Quarterly Report
Open in ViewerOpens in native device viewer
| pbb Group | |||
|---|---|---|---|
| 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
||
| Operating performance according to IFRS | |||
| Profit or loss before tax | in € million | 112 | 83 |
| Net income/loss | in € million | 88 | 74 |
| Key ratios | |||
| Earnings per share | in € | 0.65 | 0.55 |
| Cost-income ratio | in % | 48.5 | 61.1 |
| Return on equity before tax1) | in % | 6.5 | 4.9 |
| Return on equity after tax1) | in % | 5.1 | 4.3 |
| Balance sheet figures | 30.6.2015 | 31.12.2014 | |
| Total assets1) | in € billion | 69.6 | 74.92) |
| Financial position equity (excluding revaluation reserve)1) | in € billion | 3.5 | 3.4 |
| Financial position equity1) | in € billion | 3.6 | 3.5 |
| Key regulatory capital ratios | 30.6.2015 | 31.12.2014 | |
| CET1 ratio1) | in % | 24.4 | 21.7 |
| CET1 ratio fully phased-in | in % | 15.7 | 13.5 |
| Own funds ratio1) | in % | 28.9 | 26.1 |
| Own funds ratio fully phased-in | in % | 25.1 | 22.1 |
| Leverage ratio1) 3) | in % | 5.5 | 5.3 |
| Leverage ratio fully phased-in3) | in % | 4.9 | 4.6 |
| Staff | 30.6.2015 | 31.12.2014 | |
| Employees4) | 799 | 812 |
1) Including silent partnership contribution of €1.0 billion which was repaid on 6 July 2015
2) Adjusted in accordance with IAS 8.14 et.seq. Details are disclosed in Note «Consistency».
3) Leverage ratio is defined as the ratio of Tier1capital and the relevant exposure in accordance with CRR.
4) On full-time equivalent basis
| 30.6.2015 | 31.12.2014 | |||||
|---|---|---|---|---|---|---|
| Standard& Poor's |
DBRS | Moody's | Standard& Poor's |
Moody's | Fitch Ratings | |
| Long-term rating | BBB | A (low)2) | – | BBB | Baa2 | A– |
| Outlook | Developing | – | – | Negative | Negative | Negative |
| Short-term rating | A–2 | R–1 (low)2) | – | A–2 | P–2 | F1 |
| Public sector Pfandbriefe | AA+3) | – | Aa1 | AA+3) | Aa1 | – |
| Mortgage Pfandbriefe | AA+3) | – | Aa2 | AA+3) | Aa2 | – |
1) Ratings from mandated rating agencies
2) Under review negative
3) Negative outlook
Foreword of the Management Board
The first half of 2015 was another good one for Deutsche Pfandbriefbank (pbb). In a highly competitive environment, we saw new business grow to an impressive €6 billion year-on-year whilst remaining true to our demanding risk standards. Gross margins fell slightly short of the previous year's level in both business segments. However, they were stable throughout the first half of the year in Commercial Real Estate Finance, and showed positive developmentin Public Investment Finance during the period under review.
Strong new business drove our strategic credit portfolio from €28.4 billion at year-end 2014 to €30.8 billion after the first six months of 2015. The higher volume of the strategic credit portfolio had a positive effect on net interest income, our most important source of income, as did other factors. As a result, net interest income rose by 17%, during the first half of 2015, to reach €229 million. At the same time, pbb cut its costs by around 21%, to €98 million. Special effects almost balanced out. All in all, profit before taxes in accordance with IFRS rose by around 35% over the previous year's figure, to €112 million.
pbb is well-established in the European market for commercial real estate finance and public investment finance, and commercially successful. This has paved the way for reprivatisation through a flotation. On 15 July 2015, HRE Holding placed 108 million pbb shares – representing 80% of our capital –with German and international investors, at an issue price of €10.75. Almost all of the shares were allotted to institutional investors. Demand was stronger than supply, and the offer was several times oversubscribed at the issue price. With the flotation, the Federal Republic of Germany (as the indirect owner of pbb) generated a gross proceeds of €1.16billion. pbb shares have traded in the Prime Standard segment of the Regulated Market at the Frankfurt Stock Exchange since 16 July 2015.
Prior to the flotation, pbb repaid the €1billion silent participation of the German Financial Markets Stabilisation Fund in full. This means that we have returned a major part of the financial support received by the Federal Republic of Germany. Even without the silent participation, pbb is well-capitalised. As at 30 June 2015, our fully phased-in CET1 ratio was 15.7%.
With the flotation, our responsibilities have grown, as has our commitment. This applies to all levels: to the Management Board, whose entrepreneurial decisions set the course; to our senior management team, responsible for the well-being of the bank as a whole; and to our staff, whose motivation and dedication drive us to economic success.
Yours sincerely,
Andreas Arndt Thomas Köntgen Andreas Schenk Dr.Bernhard Scholz
On 15 July 2015, Hypo Real Estate Holding AG (HRE Holding) placed 107,580,245 pbb shares held on its own books (including an over-allotment («Greenshoe») of 6,589,289 shares) with a broad investor base, as part of a flotation in its capacity as owner of Deutsche Pfandbriefbank AG (pbb).
The first half of 2015 saw changes to the composition of the Management Board. The Supervisory Boards of HRE Holding and pbb decided that Management Board members of HRE Holding and Deutsche Pfandbriefbank AG (pbb) should no longer hold both offices, with effect from 1April 2015. Following this decision, Wolfgang Groth retired from pbb's Management Board with effect from 1April 2015, while Andreas Arndt, Thomas Köntgen and Andreas Schenk all retired from the Management Board of HRE Holding (also with effect from 1April 2015). Meanwhile, Dr.Bernhard Scholz retired from the Management Board of HRE Holding, with effect from 1June 2015.
In the first half of 2015, pbb Group realised a profit before tax of €112 million, which was a significant improvement year-on-year (1January to 30 June 2014 («6m 2014»): €83 million). Thus, for the third consecutive period, in the first half of 2015 pbb Group was able to increase profit or loss before tax year-on-year. Compared to the first half of 2014, the increase was 34.9%. This reflects pbb Group's success in increasing profitability, which has formed the foundation – together with a conservative risk policy – for a successful privatisation. pbb achieved the following results in the first half of 2015, compared to the previous year period:
> Report on Economic Position >> Development in Earnings
pbb Group 1.1.–30.6. 2015 1.1.–30.6. 2014 Change Operating performance Operating income in € million 202 203 –1 Net interest and similar income in € million 229 195 34 Net fee and commission income in € million 9 – 9 Net trading income in € million 7 –18 25 Net income from financial investments in € million –37 1 –38 Net income from hedging relationships in € million 2 – 6 8 Net other operating income/expenses in € million –8 31 –39 Loan loss provisions in € million 5 –2 7 General and administrative expenses in € million –98 –124 26 Net miscellaneous income/expenses in € million 3 6 –3 Profit or loss before tax in € million 112 83 29 Income taxes in € million –24 –9 –15 Net income/loss in € million 88 74 14 Key ratios Earnings per share in € 0.65 0.55 Cost-income ratio1) in % 48.5 61.1 Return on equity before tax2) in % 6.5 4.9 Return on equity after tax3) in % 5.1 4.3
1) Cost-income ratio is the ratio of general and administrative expenses and operating income.
2) Return on equity before tax is the ratio of annualised profit or loss before tax and average equity (including silent partnership contribution which was repaid on 6 July 2015) excluding revaluation reserve.
3) Return on equity after tax is the ratio of annualised net income/loss and average equity
(including silent partnership contribution which was repaid on 6 July 2015) excluding revaluation reserve.
Operating Income At €229 million, net interest income was significantly higher than the figure for the same period of the previous year (€195 million). Thus, for the third consecutive period, during the first half of 2015 pbb Group increased its most important profit component year-on-year. The higher net interest income was due to the increase in the average strategic portfolio volume, from €27.0 billion in the first half of 2014 to €29.9 billion in the first half of 2015. This figure has been continuously rising during the last eighteen months. This was attributable mainly to the positive development in new business volume during 2014 and the first half of 2015; since the beginning of the year, new business volume amounted to €6.0 billion (6m 2014: €4.3 billion), thus exceeding repayments. Net income from early termination fees stood at €6 million (6m 2014: €20 million). Another positive effect was income from the disposal of a bonded loan (€15 million). Furthermore, net interest income included income from the reversal of the cash flow hedge reserve (€12million) after confirmation of prospective ineffective portions according to IAS 39. Net interest income, adjusted for early termination fees, income from the disposal of the bonded loan, and the reversal of the cash flow hedge reserve, increased during the first half of 2015 by 11.4% year-on-year.
Net fee and commission income totalled €9 million (6m 2014: €0 million), of which €5 million was from realised fees in connection with a French financing arrangement repaid in full.
Net trading income (€7 million; 6m 2014: €–18 million) benefited from positive measurement effects of derivatives, based on interest rate and exchange rate fluctuations (€13 million; 6m 2014: €–3 million). Additional net income was generated by the subsequent measurement of derivatives, taking into account the bilateral credit value adjustment (€2 million; 6m 2014: €–5 million). Net trading income suffered from the so-called ‹pull-to-par› effect (€–8 million; 6m 2014: €–12 million), due to the fact that the net present value of derivatives approaches nil by their maturity date.
Net income from financial investments amounted to €–37 million (6m 2014: €1million) and was burdened with €–73 million from additional valuation adjustments on the securities issued by Heta. As at 30 June 2015, cumulative expenses incurred through valuation adjustments on Heta securities recognised in net income from financial investments and loan loss provisions amounted to 50% of the nominal volume of Heta securities (€395 million). However, these expenses were partly set off by income from the disposal of securities (€55 million) with a nominal volume of GBP200 million, which had been planned for a longer period of time. Further disposals of securities from the AfS and LaR categories led to net expenses of €–16 million. The securities sold were largely part of the non-strategic Value Portfolio (VP). The disposal of these securities allowed pbb Group to further reduce the VP portfolio, thus creating growth potential for the profitable strategic portfolios. The disposal of securities issued by sovereign states, sub-sovereign entities as well as state-guaranteed counterparties, with a nominal volume of €759 million, led to an ICAAP reduction of €260 million and a decrease in RWA of €527million.
The net income from hedging relationships of €2 million (6m 2014: €–6 million) is due to ineffective portions from micro fair value hedge relationships within the range permitted under IAS 39 (80% to 125%).
Net other operating income/expenses (€–8 million; 6m 2014: €31million) was burdened by the bank levy in the amount of €25 million. Against the background of a new EU bank resolution directive and in the context of IFRIC 21 interpretations, the bank levy annual contribution 2015 was not accrued on a monthly basis, but recognised in full during the period under review, for the first time. As from the contribution period 2015, bank levy contributions will be made according to European standards. The differentiated consideration of an institution's risk situation is one reason why the reporting data and calculation of annual contributions will be different compared to the current bank levy, which is part of the national restructuring fund. The amount disclosed as at 30 June 2015 represents pbb Group's best estimate of the expenses necessary to fulfil the current requirements as per the reporting date. Pre-tax income from the disposal of a property in Japan resulted in positive effects of €39 million. Additional income was attributable to rental income generated from real estate taken over, in the amount of €6 million (6m 2014: €5 million), to currency translation effect in the amount of €5 million (6m 2014: €7 million), and to the cost allocation with HRE Holding in the amount of €4 million (6m 2014: €3 million).
Loan Loss Provisions The net reversal of loan loss provisions (€5 million; 6m 2014: net addition of €–2 million) comprises net additions to specific allowances (€–7 million; 6m 2014: €–13 million), net reversal of portfolio-based allowances (€10 million; 6m 2014: €6 million), recovery payments on previously written-off loans and advances of €1million (6m 2014: €5 million) as well as income from the reversal of provisions for contingent liabilities and other commitments (€1million; 6m 2014: €0 million).
Specific allowances related only to a few exposures in the Real Estate Finance (REF) segment (net addition of €–1million) and a bonded loan to Heta in the VP segment, shown under loans and advances to customers (€–6 million). As in the previous year period, no specific allowances were created on Public Investment Finance (PIF) exposures. Portfolio-based allowances are only recognised for loans and advances for which no indication of an individual impairment has been determined. The net reversals of €10 million (6m 2014: €6 million) were due, inter-alia, to rating improvements of borrowers.
General and Administrative Expenses General and administrative expenses decreased to €98 million (6m 2014: €124 million). Based on the half-yearly interim reports, general and administrative expenses have now declined continuously since 2011. This shows evidence of pbb's strict cost discipline and the progress made in Group restructuring. Moreover, pbb Group was able to terminate activities not part of its core business – for example, services rendered to other companies such as DEPFA, except for some contractually agreed remaining minor service work. This allows pbb to concentrate
Development in Earnings
on its core business segments. In the first half of 2015, the decrease in non-personnel expenses more than compensated for the increase in personnel expenses. Personnel expenses (€56 million; 6m 2014: €54 million) grew slightly, in part due to a slight increase in the average number of employees (839; 6m 2014: 831). The drop in non-personnel expenses from €70 million in the first half of 2014 to €42 million in the first half of 2015 was attributable mainly to lower IT and consultancy expenses. Lower IT expenses resulted in particular from the termination of the majority of IT services rendered to DEPFA and a newly concluded framework agreement with an external service provider. Lower expenses for IT services also translated into decreasing income disclosed in net other operating income/ expenses. Expenses for consultancy services also declined due to a lower number of projects.
Net Miscellaneous Income/Expenses Net miscellaneous income/expenses (€3 million; 6m 2014: €6million) was related to the reversal of restructuring provisions resulting from the parameter validation included in the calculation.
Income Taxes Expenses for current taxes of €12 million (6m 2014: €19 million) and expenses for deferred taxes of €12 million (6m 2014: income of €10 million) resulted in a total income tax expense of €24 million (6m 2014: €9 million). Expenses for current taxes in the amount of €9 million were attributable to the subsidiary Hayabusa Godo Kaisha, Tokyo, and were incurred in particular due to the disposal of a property in Japan.
Public investment financings provided to Italy were classified as non-strategic activities as at 1January 2015. Hence, a portfolio with a nominal volume of €1.3 billion was reclassified within segment reporting from the strategic Public Investment Finance (PIF) segment to the non-strategic Value Portfolio (VP) segment. Furthermore, the methodology used for the allocation of IFRS equity to the operating segments was adjusted at the beginning of the 2015 financial year. This adjustment includes the following major changes to the previous approach:
Allocation of the diversified economic capital is based on the allocation of losses across the operating segments using an Expected Shortfall Approach with a confidence level of 99.0%. The chosen confidence level allows for a balanced consideration of both credit spread-related market risks as well as concentration risks.
The previous period's figures were adjusted according to IFRS 8.29 and disclosed hereafter and in the Note «Segment Reporting».
| Operating Segment Real Estate Finance (REF) | ||
|---|---|---|
| --------------------------------------------- | -- | -- |
| Real Estate Finance | ||||
|---|---|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |||
| 2015 | 20141) | Change | ||
| Operating performance | ||||
| Operating income | in € million | 206 | 148 | 58 |
| Net interest and similar income | in € million | 158 | 149 | 9 |
| Net fee and commission income | in € million | 9 | – | 9 |
| Net trading income | in € million | 3 | –8 | 11 |
| Net income from financial investments | in € million | 18 | 2 | 16 |
| Net income from hedging relationships | in € million | 1 | –2 | 3 |
| Net other operating income/expenses | in € million | 17 | 7 | 10 |
| Loan loss provisions | in € million | 11 | –2 | 13 |
| General and administrative expenses | in € million | –75 | –77 | 2 |
| Net miscellaneous income/expenses | in € million | 3 | 4 | –1 |
| Profit or loss before tax | in € million | 145 | 73 | 72 |
| Key ratio | ||||
| Cost-income ratio | in % | 36.4 | 52.0 | |
| Balance-sheet-related measures | 30.6.2015 | 31.12.20141) | ||
| Financing volumes2) | in € billion | 23.5 | 21.8 | |
| Risk-weighted assets3) | in € billion | 6.7 | 7.2 | |
| Equity 4) | in € billion | 0.8 | 0.7 |
1) Adjusted in accordance with IFRS 8.29
2) Notional amounts of the drawn parts of loans granted , plus parts of the securities portfolio
3) Including risk-weighted credit risk positions as well as the capital requirements for market risk positions
and operational risks scaled with the factor 12.5
4) Excluding revaluation reserve, including allocated silent partnership contribution (repaid on 6 July 2015)
The Real Estate Finance (REF) operating segment comprises all commercial real estate financing arrangements of pbb Group. New business volume of €5.2 billion, including extensions with terms of more than one year, underlined pbb's strong position on the market and exceeded the figure for the first half of 2014 (€3.7 billion) considerably.
Operating Income Net interest income increased to €158 million (6m 2014: €149 million) and benefited from the higher average volume of interest-bearing assets, from allocated treasury effects as well as from the reversal of the cash flow hedge reserve. Allocated income from early termination fees stood at €3 million (6m 2014: €8 million). However, expenses allocated to liquidity reserves increased. Net fee and commission income in the amount of €9 million (6m 2014: €0 million) resulted, inter alia, from realised commissions. Net income from financial investments improved from €2 million in the first half of 2014 to €18 million in the first half of 2015, and was due to the allocation of income from security disposals. Net other operating income stood at €17 million (6m 2014: €7 million) and increased compared to the previous year period, based on income from the disposal of a property in Japan. Negative effects resulted mainly from the allocated bank levy.
Loan Loss Provisions Reversals with a total net volume of €11million were recognised in loan loss provisions (6m 2014: additions of €–2 million). Net additions in the amount of €–1million (6m 2014: €–13 million) were recognised in specific allowances, resulting from a small number of individual exposures. Reversals with a total net volume of €10 million (6m 2014: €6 million) were disclosed within portfolio-based allowances. In the first half of 2015, pbb recognised recovery payments on previously written-off loans and advances of €1million (6m 2014: €5 million) and income from the reversal of provisions for contingent liabilities and other commitments of €1million (6m2014: €0million).
Development in Earnings
General and Administrative Expenses General and administrative expenses stood at €75 million, thus slightly below the previous period's level (6m2014: €77million) due to lower non-personnel expenses.
| Public Investment Finance | ||||
|---|---|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |||
| 2015 | 20141) | Change | ||
| Operating performance | ||||
| Operating income | in € million | 22 | 15 | 7 |
| Net interest and similar income | in € million | 22 | 17 | 5 |
| Net fee and commission income | in € million | – | – | – |
| Net trading income | in € million | 1 | –2 | 3 |
| Net income from financial investments | in € million | 6 | – | 6 |
| Net income from hedging relationships | in € million | – | –2 | 2 |
| Net other operating income/expenses | in € million | –7 | 2 | –9 |
| Loan loss provisions | in € million | – | – | – |
| General and administrative expenses | in € million | –13 | –15 | 2 |
| Net miscellaneous income/expenses | in € million | – | 1 | –1 |
| Profit or loss before tax | in € million | 9 | 1 | 8 |
| Key ratio | ||||
| Cost-income ratio | in % | 59.1 | 100.0 | |
| Balance-sheet-related measures | 30.6.2015 | 31.12.20141) | ||
| Financing volumes2) | in € billion | 7.3 | 6.6 | |
| Risk-weighted assets3) | in € billion | 1.2 | 1.3 | |
| Equity4) | in € billion | 0.3 | 0.5 |
1) Adjusted in accordance with IFRS 8.29
3) Including risk-weighted credit risk positions as well as the capital requirements for market risk positions
and operational risks scaled with the factor 12.5
4) Excluding revaluation reserve, including allocated silent partnership contribution (repaid on 6 July 2015)
The Public Investment Finance (PIF) business segment comprises financings of public infrastructure projects which are eligible for inclusion in Pfandbrief cover. Despite increasing competition in the area of public investment financings, pbb increased its new business volume to €0.8 billion (6m 2014: €0.6 billion).
Operating Income At €22 million, net interest income exceeded the figure for the corresponding period of the previous year (6m 2014: €17 million). Both the average portfolio volume as well as the average portfolio margin profited from new business transactions, and thus contributed to the overall increase. Moreover, net interest income was supported by allocated treasury income. However, allocated income from early termination fees (€1million; 6m 2014: €3 million) did not lead to major effects. Net income from financial investments in the amount of €6 million (6m 2014: €0 million) benefited from allocated income from security disposals. Net other operating income/expenses in the amount of €–7 million (6m 2014: €2 million) was burdened, inter alia, from the allocated bank levy.
Loan Loss Provisions In the first half of 2015 and in the first half of 2014, no additions or reversals were required.
General and Administrative Expenses General and administrative expenses stood at €13 million, thus below the previous period's level (6m 2014: €15 million) due to lower non-personnel expenses.
2) Notional amounts of the drawn parts of loans granted , plus parts of the securities portfolio
| Value Portfolio | ||||
|---|---|---|---|---|
| 1.1.–30.6. 2015 |
1.1.–30.6. 20141) |
Change | ||
| Operating performance | ||||
| Operating income | in € million | –28 | 39 | – 67 |
| Net interest and similar income | in € million | 47 | 27 | 20 |
| Net fee and commission income | in € million | – | – | – |
| Net trading income | in € million | 3 | –8 | 11 |
| Net income from financial investments | in € million | – 61 | –1 | –60 |
| Net income from hedging relationships | in € million | 1 | –2 | 3 |
| Net other operating income/expenses | in € million | –18 | 23 | –41 |
| Loan loss provisions | in € million | – 6 | – | – 6 |
| General and administrative expenses | in € million | –10 | –32 | 22 |
| Net miscellaneous income/expenses | in € million | – | 1 | –1 |
| Profit or loss before tax | in € million | –44 | 8 | –52 |
| Key ratio | ||||
| Cost-income ratio | in % | >100.0 | 82.1 | |
| Balance-sheet-related measures | 30.6.2015 | 31.12.20141) | ||
| Financing volumes2) | in € billion | 20.5 | 22.7 | |
| Risk-weighted assets3) | in € billion | 4.7 | 5.5 | |
| Equity 4) | in € billion | 1.8 | 1.8 |
1) Adjusted in accordance with IFRS 8.29
2) Notional amounts of the drawn parts of loans granted , plus parts of the securities portfolio
3) Including risk-weighted credit risk positions as well as the capital requirements for market risk positions
and operational risks scaled with the factor 12.5
4) Excluding revaluation reserve, including allocated silent partnership contribution (repaid on 6 July 2015)
The Value Portfolio (VP) operating segment includes all of pbb Group's non-strategic portfolios and activities. New business is not generated in this segment.
Operating Income Net interest income profited from income generated in connection with the disposal of a promissory note loan and thus increased to €47 million (6m 2014: €27 million). Net interest income was further supported by the reversal of the cash flow hedge reserve. Compared year-on-year, early termination fees were less significant (€2 million; 6m 2014: €9 million). Net income from financial investments decreased from €–1million in the first half of 2014 to €–61million in the first half of 2015. This was due to the value adjustment of the Heta exposure and losses incurred in connection with the disposal of non-strategic securities. Net other operating income/expenses amounted to €–18 million (6m 2014: €23 million), with the allocated bank levy as major driver. Net other operating income/expenses was further reduced year-on-year by the termination of IT services rendered to DEPFA.
Loan Loss Provisions Loan loss provisions in the amount of €–6 million (6m 2014: €0 million) resulted from specific allowances recognised on a Heta bonded loan.
General and Administrative Expenses General and administrative expenses stood at €10 million, thus below the previous period's level (6m 2014: €32 million). The main reason for the decline was the termination of the majority of IT services rendered to DEPFA.
> Report on Economic Position >> Development in Earnings
| Consolidation&Adjustments | ||||
|---|---|---|---|---|
| 1.1.–30.6. 2015 |
1.1.–30.6. 20141) |
Change | ||
| Operating performance | ||||
| Operating income | in € million | 2 | 1 | 1 |
| Net interest and similar income | in € million | 2 | 2 | – |
| Net fee and commission income | in € million | – | – | – |
| Net trading income | in € million | – | – | – |
| Net income from financial investments | in € million | – | – | – |
| Net income from hedging relationships | in € million | – | – | – |
| Net other operating income/expenses | in € million | – | –1 | 1 |
| Loan loss provisions | in € million | – | – | – |
| General and administrative expenses | in € million | – | – | – |
| Net miscellaneous income/expenses | in € million | – | – | – |
| Profit or loss before tax | in € million | 2 | 1 | 1 |
| Balance-sheet-related measures | 30.6.2015 | 31.12.20141) | ||
| Risk-weighted assets2) | in € billion | 1.1 | 1.5 | |
| Equity3) | in € billion | 0.6 | 0.4 |
1) Adjusted in accordance with IFRS 8.29
2) Including risk-weighted credit risk positions as well as the capital requirements for market risk positions
and operational risks scaled with the factor 12.5
3) Excluding revaluation reserve, including allocated silent partnership contribution (repaid on 6 July 2015)
Consolidation&Adjustments reconciles the aggregated segment results with the consolidated result. Besides consolidation adjustments, this includes certain income and expense items outside the operating segments' areas of responsibility.
Consolidation&Adjustments' profit before tax was €2 million (6m 2014: €1million). Net interest income arose from the investment of equity allocated to Consolidation&Adjustments.
| Assets | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.20141) | Change |
| Cash reserve | 1,785 | 57 | 1,728 |
| Trading assets | 1,684 | 2,016 | –332 |
| Loans and advances to other banks | 2,789 | 6,800 | –4,011 |
| Loans and advances to customers | 40,981 | 38,964 | 2,017 |
| Allowances for losses on loans and advances | –133 | –138 | 5 |
| Financial investments | 17,085 | 20,475 | –3,390 |
| Property and equipment | 11 | 8 | 3 |
| Intangible assets | 22 | 23 | –1 |
| Other assets | 5,322 | 6,659 | –1,337 |
| Income tax assets | 41 | 30 | 11 |
| Current tax assets | 40 | 29 | 11 |
| Deferred tax assets | 1 | 1 | – |
| Total assets | 69,587 | 74,894 | –5,307 |
1) Adjusted in accordance with IAS 8.14 et. seq. Details are disclosed in the Note «Consistency».
During the period under review, pbb Group increased its strategic portfolio to a nominal volume of €30.8 billion (31December 2014: €28.4 billion). This development was due to the increases in both the REF portfolio (+€1.7 billion) and the PIF portfolio (+€0.7 billion). Loan disbursements exceeded repayments. The volume of non-strategic portfolios declined to €20.5 billion (31December 2014: €22.7 billion) given active portfolio reductions and maturing funds. Individual balance sheet item developments were as follows:
The increase of the cash reserve to €1.8 billion as at the reporting date (31December 2014: €0.1billion) was attributable, inter alia, to temporarily higher deposits held with Deutsche Bundesbank, in connection with the management of cover pools. Trading assets and other assets declined during the first half of 2015 against the background of market interest rate fluctuations. Loans and advances to other banks decreased from €6.8 billion at year-end 2014 to €2.8 billion because of lower deposits held with Eurex Clearing as well as reduced cash collateral provided. Loans and advances to customers rose particularly due to the increase in strategic portfolios. This was partly offset by market-induced fair value fluctuations in Hedge Accounting. Financial investments dropped during the reporting period, from €20.5 billion as at 31December 2014 to €17.1billion. This was due principally to portfolio disposals (nominal value: €–1.3 billion), maturing funds (nominal value: €–1.3 billion) and fair value hedge adjustments.
> Report on Economic Position
Development in Assets
Development in Financial
Position
| in € million 30.6.2015 31.12.20141) Liabilities to other banks 2,381 3,187 Liabilities to customers 10,660 10,593 Securitised liabilities 44,803 47,827 |
Change |
|---|---|
| –806 | |
| 67 | |
| –3,024 | |
| Trading liabilities 1,670 1,960 |
–290 |
| Provisions 261 272 |
–11 |
| Other liabilities 4,958 6,182 |
–1,224 |
| Income tax liabilities 90 88 |
2 |
| Current tax liabilities 84 82 |
2 |
| Deferred tax liabilities 6 6 |
– |
| Subordinated capital 1,198 1,279 |
–81 |
| Financial liabilities 66,021 71,388 |
–5,367 |
| Financial equity 3,566 3,506 |
60 |
| Total equity and liabilities 69,587 74,894 |
–5,307 |
1) Adjusted in accordance with IAS 8.14 et. seq. Details are disclosed in the Note «Consistency».
Liabilities Total Group liabilities amounted to €66.0 billion (31December 2014: €71.4 billion). Liabilities to other banks declined to €2.4 billion (31December 2014: €3.2 billion) during the reporting period, given a lower level of securities repurchase transactions and decreasing cash collateral received. Securitised liabilities fell to €44.8 billion (31December 2014: €47.8 billion), which is attributable particularly to maturing Pfandbrief issues and smaller fair value adjustments in Hedge Accounting. Trading liabilities and other liabilities declined due to market-induced fair value fluctuations.
Funding In the first half of the year, new long-term funding was raised in the amount of €2.2 billion (6m 2014: €3.0 billion). Early repayments on the assets side and adequate liquidity allowed for a reduction in capital market activities for secured funding. €0.7 billion (6m 2014: €1.4 billion) was attributable to new benchmark new issues, as well as to increases of existing public issues. Approximately twothirds of long-term funding was issued in senior unsecured form, with Pfandbriefe accounting for one-third. Most issues were placed as fixed-rate bonds. Unhedged interest rate exposures are usually hedged by swapping fixed against floating interest rates. In addition to capital markets funding, pbb Group has extended its unsecured funding base through overnight and term deposits from retail investors. At the half-year point, the volume of deposits taken via «pbb direkt» totalled € 2.0 billion (31December 2014: €1.5 billion).
Maturities The following table compares the remaining terms of the assets and liabilities:
| Maturity structure of financial position | 30.6.2015 | 31.12.20141) | ||
|---|---|---|---|---|
| in € million | Assets | Equity and liabilities |
Assets | Equity and liabilities |
| Total | 69,587 | 69,587 | 74,894 | 74,894 |
| Up to 3 months | 7,531 | 7,523 | 8,320 | 6,953 |
| More than 3 months to 1 year | 4,688 | 5,356 | 5,548 | 6,760 |
| More than 1 year to 5 years | 23,184 | 25,982 | 23,013 | 26,637 |
| More than 5 years | 27,237 | 20,181 | 29,415 | 22,536 |
| Other assets2)/equity and liabilities3) | 6,947 | 10,545 | 8,598 | 12,008 |
1) Adjusted in accordance with IAS 8.14 et. seq. Details are disclosed in the Note «Consistency».
2) Trading assets, allowances for losses on loans and advances, property and equipment, intangible assets, other assets, income tax assets 3) Trading liabilities, provisions, other liabilities, income tax liabilities, equity
Liquidity Ratio The liquidity ratio is calculated at the level of the individual institution at pbb in accordance with the Liquiditätsverordnung (LiqV – German Liquidity Regulation), and amounted to 3.5 at the balance sheet date (31December 2014: 4.4). This was significantly higher than the statutory minimum of 1.0.
Equity The equity attributable to equity shareholders changed as follows:
| Financial position equity in accordance with IFRS | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 | Change |
| Equity attributable to equity holders | 3,566 | 3,506 | 60 |
| Subscribed capital | 380 | 380 | – |
| Silent partnership contribution | 999 | 999 | – |
| Additional paid-in capital | 3,265 | 3,265 | – |
| Retained earnings | –1,150 | –1,154 | 4 |
| Profits/losses from pension commitments | –72 | –79 | 7 |
| Foreign currency reserve | 3 | 2 | 1 |
| Revaluation reserve | 53 | 89 | –36 |
| AfS reserve | –77 | –100 | 23 |
| Cash flow hedge reserve | 130 | 189 | –59 |
| Consolidated profit/loss 1.1.– 30.6./31.12. | 88 | 4 | 84 |
| Total financial position equity | 3,566 | 3,506 | 60 |
pbb's subscribed capital amounted unchanged to €380,376,059.67 at 31December 2014, and is composed of 134,475,308 registered ordinary bearer shares in the form of no-parvalue shares with a notional interest in the subscribed capital of €2.83 per share.
Financial position equity mounted to €3.6 billion as of 30 June 2015 (31Dezember 2014: €3.5 billion). The item profits/losses from pension commitments increased equity by €7 million as the discount rate used to measure the defined benefit pension obligations, in accordance with the market interest rate of 2.00% as of 31December 2014, increased to 2.25% as of 30 June 2015.
The increase in the AfS reserve is a result of the spread improvements in southern European bonds, which are assigned to the IFRS valuation category AfS. The cash flow hedge reserve decreased mainly due to the shrinking of the derivatives.
> Report on Economic Position >> Development in Financial Position
Key Regulatory Capital Ratios As of 30 June 2015, thus before privatisation, in accordance with the waiver rule set out in section 7 of the Capital Requirements Regulation (CRR), pbb was exempted from the requirement to establish the equity and core capital ratios. pbb Group voluntarily discloses these figures. CET1 ratio amounted to 24.4% as of 30 June 2015 (31December 2014: 21.7%), own funds ratio amounted to 28.9% (31December 2014: 26.1%). Fully phased-in, therefore after expiry of all Basel III transitional regulations, CET1ratio amounted to 15.7% (31December 2014: 13.5%) and Own Funds Ratio to 25.1% (31December 2014: 22.1%). Please refer to the Risk and Opportunity Report for further information regarding the key regulatory capital ratios.
Ratings The following table shows the senior unsecured ratings and ratings for pbb's Pfandbriefe:
| Senior unsecured ratings and ratings for Pfandbriefe of pbb1) | ||||||
|---|---|---|---|---|---|---|
| 30.6.2015 | 31.12.2014 | |||||
| Standard& Poor's |
DBRS | Moody's | Standard& Poor's |
Moody's | Fitch Ratings | |
| Long-term rating | BBB | A (low)2) | – | BBB | Baa2 | A– |
| Outlook | Developing | – | – | Negative | Negative | Negative |
| Short-term rating | A–2 | R–1 (low)2) | – | A–2 | P–2 | F1 |
| Public sector Pfandbriefe | AA+3) | – | Aa1 | AA+3) | Aa1 | – |
| Mortgage Pfandbriefe | AA+3) | – | Aa2 | AA+3) | Aa2 | – |
1) Ratings from mandated rating agencies
2) Under review negative
3) Negative outlook
The rating agencies may alter or withdraw their ratings at any time. For the evaluation and usage of ratings, please refer to the rating agencies' pertinent criteria and explanations and the relevant terms of use which are to be considered. Ratings should not serve as a substitute for personal analysis. They do not constitute a recommendation to purchase, sell or hold securities issued by pbb.
The development of ratings continued to be heavily influenced by external factors, such as legislative changes and, in this context, changes to rating methodologies. Particularly against the background of the implementation of the European Bank Recovery and Resolution Directive (BRRD) for banks, rating agencies have adjusted their assumptions or have announced adjustments with regards to support components incorporated in senior unsecured ratings. This led to rating changes, or will most likely lead to a rating change at DBRS. In addition, rating agencies increasingly factored possible rating effects resulting from the privatisation of the Bank, which had been imposed by the European Commission by the end of 2015, and the accompanying loss of control by the German government into their assessment.
In the first half of 2015, the Bank has decided to consolidate its rating relationships. In this context, the Bank has terminated the mandates for the assignment of unsecured ratings with Fitch Ratings and Moody's. At the same time, the Bank mandated the rating agency DBRS with the assignment of bank ratings.
In the first half of 2015, the following major rating events occurred with regards to the rating agencies that had been mandated as of the balance sheet date:
The following material rating actions occurred with regards to the rating agencies where pbb has ended the mandates:
With regards to the Pfandbrief ratings, there were no rating changes during the first half of 2015.
The effects of possible rating changes on the development in assets, financial position and earnings of pbb are disclosed in more detail in the report on expected developments.
> Report on Economic Position >> Development in Financial
Position >> Material related party transactions
In the first half of 2015, pbb and HRE Holding reached an agreement that all opportunities and risks arising from a property rented in a contractual relationship are transferred from pbb to HRE Holding. In return, pbb committed to pay compensation amounting to €24 million. Correspondingly, the restructuring provision previously created was used.
Expenses incurred in the context of pbb's privatisation (carried out by HRE Holding) are borne by the seller (again, HRE Holding).
The majority of IT services rendered to DEPFA were discontinued by year-end 2014. With these services, pbb Group generated net income of less than €1million in the first half of 2015 (6m 2014: €18 million).
All further transactions carried out with related parties overall were immaterial for pbb Group.
The Finanzmarktstabilisierungsfonds-FMS silent partnership contribution has been repaid at par on 6 July 2015 based on a repayment agreement between pbb and Finanzmarktstabilisierungsfonds-FMS dated 3 July 2015. In pbb Group's consolidated statement of financial position according to IFRS, equity decreased by €1.0 billion due to the repayment agreement. Within equity, the silent partnership contribution, after the repayment, amounts to €0 compared to €999 million prior to the repayment agreement. Retained earnings decreased by €1million. Without consideration of the silent partnership contribution, the liquidity ratio would have been 3.0, the CET1ratio 17.1% (fully phased-in: 15.7%) and the own funds ratio 21.6% (fully phased-in: 17.8%) as at 30 June 2015.
In the context of the first-time application of the new rating methodologies, Standard&Poor's affirmed the rating of the Mortgage Pfandbrief at «AA+» and raised the outlook to «Stable» from «Negative» on 9 July 2015. At the same time, the rating of the Public Sector Pfandbriefe was lowered to «AA–» with «Developing» outlook. The outlook reflects the outlook on the senior unsecured rating assigned at that time. The introduction of the new rating methodologies was announced early January 2015 with the rating identifier «Under Criteria Observation».
According to a resolution adopted by the European Central Bank on 10 July 2015 regarding the establishment of prudential requirements for pbb, the conditions to use the waiver rule according to Article 7(1)(a) of the CRR were no longer applicable upon completion of the book-building phase (15 July 2015) within the flotation process. Hence, pbb is no longer able to apply the waiver. This means that, in future, the regulatory capital ratios will need to be monitored and reported both on Group level (according to IFRS) and on pbb single-entity level (according to the German Commercial Code (HGB)).
On 15 July 2015, HRE Holding placed 107,580,245 pbb shares held on its own books (including an over-allotment («Greenshoe») of 6,589,289 shares) with a broad investor base, as part of a flotation in its capacity as pbb's owner. The shares were placed at a price of €10.75 per share, with the offer being several times oversubscribed, at the offer price. Almost all of the shares were allotted to institutional investors. Following the flotation (and after exercise of the over-allotment option), HRE Holding will continue to hold 20% of pbb's share capital. pbb shares (trading symbol «PBB»/ISIN DE0008019001) have been traded in the Prime Standard segment of the Regulated Market at the Frankfurt Stock Exchange since 16 July 2015.
HRE Holding has committed itself to avoid exercise of control over pbb by entering into a control termination agreement with pbb. According to this agreement, HRE Holding shall exercise its voting rights at pbb's Ordinary Annual General Meetings held in or after 2016 only to such an extent that corresponds to a maximum of 49% of the voting rights represented at the respective AGM. This rule will apply for a minimum period of five years.
HRE Holding has agreed to enter into a lock-up agreement, according to which – subject to certain contractually-agreed exceptions – it will continue to hold a minimum stake of 20%, but not exceeding 24.9%, for a two-year period. Following exercise of the over-allotment option granted within the framework of the flotation, this stake amounts to 20%. This lock-up agreement may have positive effects on pbb's ratings, and thus its funding costs.
After the privatisation, risk management on pbb Group level as well as on the institution's individual level has been established in accordance with section 25a (1) sentence 3 numbers1, 2 and 3 (b) and (c) of the German Banking act (Kreditwesengesetz – «KWG»).
On 17 July 2015, against the backdrop of the flotation, Standard&Poor's affirmed the bank ratings assigned to pbb and changed the outlook from «Developing» to «Negative». The main reasons for the negative outlook were uncertainties as to the accumulation of a subordinated risk buffer in favour of senior unsecured debt according to the requirements of Standard&Poor's and risks related to the economic environment in Germany.
HRE Holding has issued an unrestricted letter of comfort (Patronatserklärung) in respect of pbb in the last few single-entity financial statements, with the most recent letter of comfort in the 2014 financial statements. According to these letters of comfort, HRE Holding ensures that pbb is able to meet its contractual obligations, with the exception of political risk. As at 20 July 2015, HRE Holding has revoked and terminated its letters of comfort in respect of pbb with immediate effect, in connection with pbb's flotation.
There were no other significant events after 30 June 2015.
The risk and opportunity report shows the risks and opportunities associated with each risk type, as identified within the implemented risk management and risk controlling system. For more general or bank-wide risks and opportunities, please refer to the Report on Expected Developments.
HRE Holding had set up a Group-wide risk management and risk controlling system that laid the groundwork for the application of the so-called waiver according to Article 7 CRR/section 2a of the KWG in the reporting period. All tasks in accordance with section 25a of the KWG for uniform risk identification, measurement and limitation, as well as risk management, were defined centrally by HRE Holding; operational implementation was the responsibility of the respective subsidiary. This Report on Risks and Opportunities also covers opportunities, within the framework of a quality assessment.
As the parent institution of HRE, HRE Holding had developed a Group recovery plan in accordance with the legal requirements (KWG) and the Minimum Requirements for the Design of Recovery Plans (MaSan), and integrated it into the business organisation. The indicators defined for the recovery plan are part of HRE's management of the bank as a whole, with pbb being fully integrated. The objective of the recovery plan is to identify – at an early stage – any developments that may put the bank as a going-concern at risk, and make it possible for the bank to take appropriate (counter-)measures to prevent going-concern risks from materialising.
With effect from 1April 2015, pbb has no longer been part of HRE's Group-wide risk management and, being a parent institution in its own right, is now responsible for risk management.
From a regulatory perspective, pbb has been the parent company of HRE Group since 1April 2015. The Management Board of the parent company is responsible for the risk management system, and decides on the strategies and material issues of risk management and risk organisation at pbb Group and HRE Group (up until the reprivatisation of pbb). The risk management system comprises the plausible and systematic identification, analysis, valuation, management, documentation, monitoring and communication of all major risks.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning other major risk management responsibilities of the Management Board.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details about organisation and committees. Please also note that in preparation for the planned reprivatisation, a decision was taken that as of 1April 2015 the Management Board of HRE Holding AG does no longer have to be identical with the Management Board of Deutsche Pfandbriefbank AG.
The risk strategy of pbb Group is based on the business strategy, risk inventory and the results of a Group-wide financial planning process. It is applicable for the operating segments and legal entities of pbb Group, and reflects the strategic focus of pbb Group as a specialist for real estate finance and public investment finance in Germany and selected countries in Europe, with a focus on Pfandbrief funding. The strategy is reviewed at least annually, and updated if applicable.
The risk strategy was revised in February 2015, adopted by the Management Board of pbb and presented to the Risk Management and Liquidity Strategy Committee of pbb's Supervisory Board. It was presented subsequently to the plenary meeting of the Supervisory Board. It was updated again in June 2015, in preparation of the reprivatisation of pbb and in order to reflect the situation for the time where the waiver option will no longer be applied. This version came into force on 15 July 2015; this is the date where the waiver option was no longer applied.
The operationalisation of the risk strategy is implemented through risk policies for the individual operating segments and all major risk types (credit risk, market risk, liquidity risk, business risk, property risk and operational risk); these risk policies describe risk measurement, risk monitoring, risk management, the limitation process as well as the escalation process if a limit is exceeded. The policies are regularly reviewed and updated where necessary.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning risk reporting, risk quantification, risk controlling and risk management.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning economic capital and monitoring risk-bearing capacity.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning the distinction between major risk types as defined by pbb Group.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning definitions, credit risk strategy and principles, as well as credit risk reports.
Credit Portfolio Model For calculating the economic credit risk capital, pbb Group uses a credit portfolio model, which is described in the Report on Risks and Opportunities of the Annual Report 2014. For details concerning credit risk quantification, please refer to the section «Result of Risk-bearing Capacity Analysis».
Stress Tests For details concerning the stress tests for economic capital in credit risk, please refer to the section «Result of Risk-bearing Capacity Analysis».
In addition to the stress tests regarding economic capital, there are also RWA reverse stress tests. These investigate the extent to which a certain risk parameter (such as rating, loss-given default (LGD), currency) may change before a minimum Common Equity Tier1 (CET1) ratio of 9% is no longer met. For all tested risk parameters, tolerance change levels apply. These levels must not be violated if the tests of pbb Group are to be successfully completed.
Credit Risk Quantification according to CRR The Basel III Framework Agreement of the Basel Committee was implemented on a European level by means of the EU Capital Requirements Regulation (CRR). To determine regulatory capital, pbb Group applies the so-called Advanced Internal Rating-Based Approach (Advanced IRBA).
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning the management and monitoring of credit risk.
Please refer to the disclosures in the Report on Risks and Opportunities of the Annual Report 2014 for details concerning risk protection and mitigation through credit collateral.
The entire credit portfolio of pbb Group is calculated by using the Exposure at Default (EaD).
For most products, EaD is equal to the carrying amount in the accounting systems (including accrued interest). Committed, undrawn credit lines are additionally included in EaD with a productspecific credit conversion factor (CCF). The CCF indicates the portion of an undrawn credit line that is expected to be drawn upon (based on experience) within one year before a potential default. Derivatives and repo transactions are an exception since their EaD is not identical to their carrying amount but must be determined, in accordance with the Capital Requirements Regulation (CRR) using a different methodology. For instance, the mark-to-market method is applied to derivatives, using the market value plus any regulatory add-ons for potential future market value increases and taking any netting or collateralisation effects into account.
The Group's credit portfolio had an aggregate EaD of €64.0 billion as at 30 June 2015 (EaD as at 31December 2014: €65.5 billion). This figure includes assets not regarded upon as core exposure of pbb Group, with an EaD of €0.3 billion (EaD as at 31December 2014: €0.3 billion), which were selected for transfer to FMS Wertmanagement but where the legal (physical) transfer has not yet been possible. The credit risk of these assets was transferred in 2010, by means of guarantees provided by FMS Wertmanagement. As a result, pbb Group's ultimate exposure from these positions is a counterparty credit risk exposure vis-à-vis FMS Wertmanagement – and hence, indirectly against the Federal Republic of Germany.
To adequately reflect pbb Group's actual economic risk exposure, the following overviews of portfolio development and structure do not include the positions mentioned above, which are guaranteed by FMS Wertmanagement. Considering the distinctions set out above, EaD for pbb Group's aggregate exposure totalled €63.7 billion as at 30 June 2015 (31December 2014: €65.2 billion). The EaD figure as at 30 June 2015 includes a €0.8 billion reduction, due to a review of credit conversion factors in the Real Estate Finance segment that was not taken into account in the figures as at 31December 2014. Without this credit conversion factor effect, EaD as at 30 June 2015 would have been €0.8 billion higher.
Overview of the Total Exposure of pbb Group: €63,7 billion EaD The credit portfolio is broken down into the segments of
> the non-strategic segment Value Portfolio (VP) which has been earmarked for winding down.
Besides internal reconciliation and consolidation items, «Consolidation&Adjustments» shows the EaD for transactions which are not directly attributable to the operating segments. These are basically asset items for the purpose of asset/liability management.
As at 30 June 2015, 68% (31December 2014: 54%) of EaD in «Consolidation&Adjustments» was attributed to rating classes AAA to AA–, and 18% (31December 2014: 24%) in rating rating classes A+ to A–. 14% (31December 2014: 22%) of EaD was in rating classes BBB+ to BBB–. The portion of EaD in rating classes BB+ and below was 0.1% as at 30 June 2015 (31December 2014: 0.04%).a)
| Total portfolio: EaD according to business segments | |||
|---|---|---|---|
| in € billion | 30.06.2015 | 31.12.2014 1) |
Change |
| Real Estate Finance | 25.1 | 24.3 | 0.8 |
| Public Investment Finance | 8.3 | 7.8 | 0.5 |
| Value Portfolio | 23.0 | 26.2 | –3.2 |
| Consolidation&Adjustments | 7.3 | 6.9 | 0.4 |
| Total | 63.7 | 65.2 | –1.5 |
1) The figures reflect EaD as at 31December 2014, following the reclassification of Italian bonds in the amount of €1.5 billion from the Public Investment Finance segment to the Value Portfolio segment.
Risk Parameters Expected Loss The Expected Loss (EL) for a period of one year is determined for the entire exposure, except for non-performing loans for which a specific allowance has already been recognised. EL is calculated using the regulatory parameters of one-year Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EaD).
Expected Loss for the pbb Group amounted to €101million as at 30 June 2015 (31December 2014: €146 million). The decline in Expected Loss was primarily due to the recovery of two larger financings in the Real Estate Finance segment; a partial repayment of an additional financing in the Real Estate Finance segment also reduced Expected Loss.
| Total exposure: expected loss according to business segments | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 1) |
Change |
| Real Estate Finance | 78 | 121 | –43 |
| Public Investment Finance | 2 | 2 | – |
| Value Portfolio | 21 | 23 | –2 |
| Consolidation&Adjustments | 1 | 1 | – |
| Total | 101 | 146 | –45 |
1) The figures reflect EL at 31December 2014, following the reclassification of Italian bonds
from the Public Investment Finance segment to the Value Portfolio segment.
As a general rule, future changes in economic data (for example) may lead to changes to the abovementioned EL figures. This is one reason why realised losses may diverge from Expected Loss.
Credit Risk (Counterparty Risk)
Regional Breakdown of the Portfolio The main focus of pbb Group's exposure at the reporting date was unchanged, being Western Europe. The increase in the German exposure was largely due to new business, but also to items booked under «Consolidation&Adjustments». In Sweden new Real Estate Finance business primarily led to an exposure increase of €0.4 billion.
The €0.9 billion decline in exposure to Italy was mainly the result of a sale of Italian bonds. Exposure to Poland declined by €0.5 billion during the first half of 2015, mainly due to the maturity of bonds held.
The category «Other», which accounted for €2.3 billion (or around 4% of the portfolio), largely comprises bonds issued by supranational organisations. The largest items of the category «Other Europe» were Switzerland (€0.4 billion – 31December 2014: €0.4 billion), Belgium (€0.4 billion – 31December 2014: €0.5 billion), and the Netherlands (€0.4 billion – 31December 2014: €0.3 billion).
| Total portfolio: EaD according to regions | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Germany | 27.8 | 27.3 | 0.5 |
| Austria | 6.9 | 7.2 | – 0.3 |
| France | 6.2 | 6.1 | 0.1 |
| Great Britain | 5.1 | 4.9 | 0.2 |
| Spain | 5.0 | 5.2 | – 0.2 |
| Italy | 2.4 | 3.3 | – 0.9 |
| Other1) | 2.3 | 2.6 | – 0.3 |
| Other Europe2) | 1.8 | 2.1 | – 0.3 |
| Poland3) | 1.7 | 2.2 | – 0.5 |
| Sweden | 1.6 | 1.2 | 0.4 |
| Portugal | 1.4 | 1.4 | – |
| Hungary3) | 0.6 | 0.8 | – 0.2 |
| Czechia | 0.6 | 0.4 | 0.2 |
| Finland | 0.4 | 0.5 | – 0.1 |
| Total | 63.7 | 65.2 | –1.5 |
1) Includes Supranational issuers, Japan and the United States
2) Includes Switzerland, Belgium, the Netherlands, Slovenia and Denmark.
In the Annual Report 2014 the Czech Republic and Finland were also included in «Other Europe»;
these countries will be reported separately from 30 June 2015 onwards.
3) In the Annual Report 2014 Poland and Hungary were included in «Emerging Markets»; these countries will be reported separately from 30 June 2015 onwards. Romania, which was also included in «Emerging Markets», was added to the category «Other Europe».
Depending on the results of the internal rating process, maximum limits in certain rating ranges are defined for each individual country or group of countries; these limits restrict pbb Group's business activities. All country ratings and country limits are reviewed at least once every year by Risk Management&Control.
Issuer Risk Bonds, borrowers' note loans and structured loans in the portfolio are broken down by region for the purpose of classifying EaD according to issuer risk. EaD is attributed on the basis of the issuer's country of domicile. The €3.8 billion decline was attributable to maturing bonds and borrowers' note loans, as well as strategic sales from the Value Portfolio.
As at 30 June 2015, the largest items of the category «Other Europe» are Belgium (€0.4 billion – 31December 2014: €0.5 billion), Slovenia (€0.2 billion – 31December 2014: €0.3 billion), and Switzerland (€0.1billion–31December 2014: €0.1billion). The category «Other» almost exclusively comprises bonds issued by supranational organisations.
Looking at the segment breakdown of issuer risk as at 30 June 2015, the Value Portfolio segment accounted for 66% of EaD (31December 2014: 68%), with the Public Investment Finance segment accounting for 23% (31December 2014: 19%) and Consolidation&Adjustments for 11% (31December 2014: 13%).
| Total portfolio: issuer risk according to regions | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Germany | 12.8 | 13.5 | – 0.7 |
| Austria | 6.6 | 7.0 | – 0.4 |
| Spain | 4.6 | 4.8 | – 0.2 |
| France | 3.1 | 2.9 | 0.2 |
| Italy | 2.4 | 3.3 | – 0.9 |
| Other1) | 2.0 | 2.3 | – 0.3 |
| Portugal | 1.4 | 1.4 | – |
| Other Europe2) | 1.0 | 1.1 | – 0.1 |
| Poland3) | 0.3 | 0.8 | – 0.5 |
| Hungary 3) | 0.3 | 0.4 | – 0.1 |
| Finland | 0.2 | 0.2 | – |
| Czechia | 0.1 | 0.1 | – |
| Great Britain | 0.1 | 0.6 | – 0.5 |
| Sweden | < 0.1 | < 0.1 | – |
| Total | 34.7 | 38.5 | –3.8 |
1) Comprises supranational organisations and Japan
2) Comprises among others Belgium, Slovenia, Switzerland, the Netherlands and Denmark.
In the Annual Report 2014 the Czech Republic and Finland were also included in «Other Europe»;
these countries will be reported separately from 30 June 2015 onwards.
3) In the Annual Report 2014 Poland and Hungary were included in «Emerging Markets»;
these countries will be reported separately from 30 June 2015 onwards.
Credit Risk (Counterparty Risk)
Real Estate Finance: €25,1billion EaD Portfolio Development and Structure The EaD in the Real Estate Finance segment was up by €0.8 billion, to €25.1billion, as at 30 June 2015 in comparison to 31December 2014. Moreover, the EaD figure as at 30 June 2015 includes a €0.8 billion reduction, due to a review of credit conversion factors that was not taken into account in the figures as at 31December 2014. Without this credit conversion factor effect, EaD would have increased by €1.6 billion during the period from 31December 2014 to 30 June 2015. Customer derivatives in the portfolio accounted for an EaD of €0.4 billion as at 30 June 2015 (31December 2014: €0.5 billion).
The exposure increase in the Real Estate Finance segment was mainly due to new business in Great Britain and Sweden. Additionally the EaD per se increased because of new business in Germany, which however was overcompensated by the EaD reducing effect from the review of credit conversion factors.
| Real Estate Finance: EaD according to regions | |||
|---|---|---|---|
| in € billion | 30.6.20151) | 31.12.2014 2) |
Change |
| Germany | 12.1 | 12.5 | – 0.4 |
| Great Britain | 4.9 | 4.2 | 0.7 |
| France | 2.6 | 2.7 | – 0.1 |
| Sweden | 1.5 | 1.2 | 0.3 |
| Poland3) | 1.4 | 1.4 | – |
| Other Europe4) | 0.8 | 0.8 | – |
| Czechia | 0.5 | 0.3 | 0.2 |
| Spain | 0.4 | 0.4 | – |
| Hungary 3) | 0.3 | 0.4 | – 0.1 |
| Austria | 0.3 | 0.2 | 0.1 |
| Finland | 0.2 | 0.3 | – 0.1 |
| Other5) | < 0.1 | < 0.1 | – |
| Portugal 6) | < 0.1 | < 0.1 | – |
| Italy 7) | < 0.1 | < 0.1 | – |
| Total | 25.1 | 24.3 | 0.8 |
1) Breakdown including custumer derivatives of approximately €0.4 billion
2) Breakdown including custumer derivatives of approximately €0.5 billion
3) In the Annual Report 2014 Poland and Hungary were included in «Emerging Markets»;
these countries will be reported separately from 30 June 2015 onwards.
4) Comprises among others Switzerland, the Netherlands and Luxembourg.
In the Annual Report 2014 the Czech Republic and Finland were also included in «Other Europe»;
these countries will be reported separately from 30 June 2015 onwards.
5) Category «Other» includes Japan with €0.03 billion EaD as of 31Dezember 2014 and 30 June 2015.
6) Portugal includes €0.03 billion EaD in the Real Estate Finance segment as of 31Dezember 2014 and 30 June 2015.
7) Italy includes €0.02 billion EaD in the Real Estate Finance segment as of 31Dezember 2014 and 30 June 2015.
| Real Estate Finance: EaD according to property type | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Office buildings | 7.7 | 7.2 | 0.5 |
| Retail | 7.7 | 6.7 | 1.0 |
| Housing construction | 4.8 | 4.7 | 0.1 |
| Logistics/storage | 2.3 | 2.3 | – |
| Mixed use | 1.1 | 1.6 | – 0.5 |
| Other | 0.8 | 1.2 | – 0.4 |
| Hotel/leisure | 0.7 | 0.7 | – |
| Total | 25.1 | 24.3 | 0.8 |
The breakdown of the portfolio by property type as at 30 June 2015 changed only slightly compared to year-end 2014.
At the half-year point 2015, investment financings continued to dominate the portfolio (92%–31December 2014: 89%); development financings only accounted for 6% of EaD (31December 2014: 8%). The decline compared to year-end 2014 was due to the adjustment of credit conversion factors. Investment financings are defined as real estate loans, the debt servicing ability of which largely depend upon current cash flows from the property.
| Real Estate Finance: EaD according to loan type | |||
|---|---|---|---|
| in €billion | 30.6.2015 | 31.12.2014 | Change |
| Investment financing | 23.0 | 21.6 | 1.4 |
| Development financing | 1.5 | 2.0 | – 0.5 |
| Customer derivatives | 0.4 | 0.5 | – 0.1 |
| Other | 0.2 | 0.1 | 0.1 |
| Total | 25.1 | 24.3 | 0.8 |
Risk Parameters Using the regulatory parameters, Expected Loss for the Real Estate Finance portfolio totaled €78 million as at 30 June 2015 (31December 2014: €121million). The decline in Expected Loss was primarily due to the recovery of two larger financings in the Real Estate Finance segment; a partial repayment of an additional financing in the Real Estate Finance segment also reduced Expected Loss.
Credit Risk (Counterparty Risk)
Public Investment Finance: €8.3 billion EaD Portfolio Development and Structure The portfolio comprises the following financings:
Italian bonds with EaD in the amount of €1.5billion were transferred from the Public Investment Finance segment to the Value Portfolio segment at the beginning of 2015. The comparative figures as at 31December 2014, as shown in the table, show pro forma the EaD after this segment reclassification.
The EaD in the Public Investment Finance segment increased by €0.5 billion compared to the end of the previous year, particularly as a result of new business originated in Germany and France.
| Public Investment Finance: EaD according to regions | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Germany | 2.8 | 2.5 | 0.3 |
| France | 2.5 | 2.2 | 0.3 |
| Spain | 2.0 | 2.1 | – 0.1 |
| Other Europe1) | 0.3 | 0.3 | – |
| Austria | 0.3 | 0.3 | – |
| Finland | 0.2 | 0.2 | – |
| Other 2) | 0.1 | 0.1 | – |
| Great Britain | 0.1 | 0.1 | – |
| Sweden | < 0.1 | < 0.1 | – |
| Total | 8.3 | 7.8 | 0.5 |
1) Almost 100% Belgium;
in the Annual Report 2014 Austria, Sweden and Finland were also included in «Other Europe»;
these countries will be reported separately from 30 June 2015 onwards.
2) Category «Other» almost exclusively comprises bonds issued by supranational organisations.
«Public Sector Borrowers» summarises claims against sovereign states (9%), public-sector enterprises (31%), and regional governments and municipalities (60%).
| Public Investment Finance: EaD according to counterparty structure | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Public sector borrowers | 6.2 | 6.0 | 0.2 |
| State-regulated companies1) | 2.1 | 1.7 | 0.4 |
| Financial institutions2)/insurance companies | < 0.1 | < 0.1 | – |
| Total | 8.3 | 7.8 | 0.5 |
1) Water utilities, power supply utilities, etc.
2) Financial institutions with government backing or a sovereign guarantee
The EaD share in the PIF segment in rating classes AAA to AA– increased by 12 percentage points year-on-year, to 55%– due, amongst other factors, to new business originated in these rating classes.
| Public Investment Finance: EaD according to internal ratings1) | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| AAA to AA– | 4.5 | 3.9 | 0.6 |
| A+ to A– | 2.6 | 2.9 | – 0.3 |
| BBB+ to BBB– | 0.9 | 0.7 | 0.2 |
| BB+ and worse | 0.3 | 0.3 | – |
| Total | 8.3 | 7.8 | 0.5 |
1) Internal rating classes were mapped to external rating classes for the purpose of determining the breakdown of EaD by rating class.
Risk Parameters Expected Loss for the Public Investment Finance segment portfolio was virtually unchanged, at €2 million (31December 2014: €2 milliona) ).
Value Portfolio: €23,0 billion EaD Portfolio Development and Structure The Value Portfolio comprises non-strategic portfolios of pbb Group.
At the beginning of 2015 Italian bonds with an EaD in the amount of €1.5 billion were transferred from the Public Investment Finance segment to the Value Portfolio segment. The comparative figures as at 31December 2014, as shown in the table, show pro forma the EaD after this segment reclassification.
In conformity with the strategy, the further decrease in the exposure as at 30 June 2015 compared with 31December 2014 was mainly due to reductions in Italy and Germany, with Germany remaining the focus in the portfolio. Exposure to Poland declined by €0.5 billion during the first half of 2015, mainly due to the maturity of bonds held.
| Value Portfolio: EaD according to regions | |||
|---|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 | Change |
| Germany | 7.9 | 8.8 | – 0.9 |
| Austria | 6.3 | 6.7 | – 0.4 |
| Italy | 2.3 | 3.3 | –1.0 |
| Spain | 1.8 | 1.9 | – 0.1 |
| Other1) | 1.4 | 1.5 | – 0.1 |
| Portugal | 1.4 | 1.4 | – |
| France | 0.8 | 0.9 | – 0.1 |
| Other Europe 2) | 0.5 | 0.6 | – 0.1 |
| Poland | 0.3 | 0.8 | – 0.5 |
| Hungary | 0.3 | 0.4 | – 0.1 |
| Czechia | 0.1 | 0.1 | – |
| Finland | < 0.1 | < 0.1 | – |
| Total | 23.0 | 26.2 | –3.2 |
1) Comprises among others supranational organisations and Japan
2) Comprises among others Slovenia, Belgium, Switzerland and the Netherlands
| Value Portfolio: EaD according to counterparty structure | |||
|---|---|---|---|
| in € billion | 30.06.2015 | 31.12.2014 | Change |
| Public sector borrowers | 17.4 | 20.6 | –3.2 |
| Financial institutions/insurance companies | 4.5 | 4.8 | – 0.3 |
| Companies/Project Financing | 1.0 | 0.8 | 0.2 |
| Total | 23.0 | 26.2 | –3.2 |
Risk Parameters Using the regulatory parameters, Expected Loss for the Value Portfolio totalled €21million as at 30 June 2015 (31December 2014: €23 milliona) ). The lower Expected Loss was due to a decline in LGD for a regional government, as well as to the sale of Italian bonds.
a) The figures reflect EL at 31 December 2014, following the reclassification of Italian bonds from the Public Investment Finance segment to the Value Portfolio segment.
pbb Group's residual holdings of fully state-guaranteed Collateralised Debt Obligations had a notional value of €0.7 billion as at 30 June 2015 (31December 2014: €0.7 billion) and a current fair value of €0.6 billion (31December 2014: €0.7 billion).
pbb Group's residual holdings of non-state-guaranteed structured securities – specifically, credit-linked investments in the form of Collateralised Debt Obligations (CDOs in the narrower sense of the term) – remained stable in comparison with the end of 2014, with a notional value of €0.1billion. The fair value of these securities –which securitise credit risks, and which have been almost completely written down – amounted to €3 million as at 30 June 2015 (31December 2014: €3 million). All holdings in non-state-guaranteed structured securities were sold in July 2015.
The valuation of these assets was essentially based on available market prices.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the early warning system implemented throughout pbb Group.
| Watchlist and non-performing loans of pbb Group |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30.6.2015 | 31.12.2014 | ||||||||
| EaD in € million | REF | PIF | VP | Total | REF | PIF | VP | Total | Change |
| Workout loans | 10 | – | – | 10 | 9 | – | – | 9 | 1 |
| Restructuring loans | 635 | – | 243 | 878 | 818 | – | 316 | 1,134 | –256 |
| Non-performing loans1) | 645 | – | 243 | 888 | 827 | – | 316 | 1,143 | –255 |
| Watchlist loans | 263 | – | 244 | 507 | 116 | – | 244 | 360 | 147 |
| Total | 908 | – | 487 | 1,395 | 943 | – | 560 | 1,503 | –108 |
1) In addition €1million EaD as of 31December 2014 in «Consolidations & Adjustments»
Watchlist and non-performing loans declined by a total of €108 million during the period from 31December 2014 to 30 June 2015.
Watchlist loans increased by €217 million (gross) a) and by €147 million (net) during the first half of 2015. The €217 million rise was exclusively attributable to new Watchlist exposures from the REF segment, including one exposure of €110 million. Conversely, two exposures from the REF segment with an aggregate amount of €70 million were returned to ordinary coverage.
Non-performing loans decreased by €283 million (gross) a) and by €255 million (net) during the same period. Successful restructurings and repayments (almost exclusively from the REF segment) totalled €173million. The reduction in the Value Portfolio reflects an additional valuation adjustment on the Heta portfolio; this led to an EaD decline by €73 million. Furthermore, during the reporting period a property with a financing volume of €30 million had to be consolidated according to IFRS as well as to regulatory scope of consolidation. Additional reductions in balances of existing exposures amounted to €7 million. Exposures with an aggregate volume of €3million were newly classified as non-performing, whilst exchange rate fluctuations raised the balance by €25 million.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning impairments and provisions.
Risk Provisioning of pbb Group Please refer to the Notes for an overview of risk provisioning developments, and of provisions.
The coverage ratio is defined as the ratio between the provisions recognised for non-performing exposures (including the residual volume of structured products, as part of the Value Portfolio) and the EaD– or, with regard to structured products and securities, the nominal amount.
As at 30 June 2015, pbb Group's non-performing loans were covered at 45% (31December 2014: 30%). The improvement was mainly due to the fact that the volume of non-performing loans declined more strongly relative to existing provisions.
Non-performing loans in the REF segment were covered at 33% (31December 2014: 24%). As in the previous year, as at 30 June 2015 the PIF segment had no non-performing loans. The coverage ratio in the Value Portfolio stood at 54% (31December 2014: 37%). The increase compared to year-end 2014 was related to additional valuation adjustments, recognised during the first half of 2015, on the non-strategic exposure to Heta Asset Resolution AG (Heta).
Including collateral furnished, the coverage ratio in the REF segment was approximately 100%.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning opportunities.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the definition of market risk. pbb no longer had any direct inflation-linked exposure as at 30 June 2015. 90 80
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning these items. 40
Market Risk Value at Risk Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the definition of market risk value-at-risk (VaR). Januar Februar März April Mai Juni 0
Market risk VaR as at 30 June 2015 amounted to €59 million, taking diversification effects between the individual market risk types into consideration (31December 2014: €57 million). There were no breaches of the market risk VaR limit at pbb Group level during the period under review. pbb's market risk limit was cut from €120 million to €90 million on 2 January 2015.
During the first half of 2015 market risk VaR developments were mainly shaped by changes in credit spread volatility. The following chart shows the development of market risk VaR, as well as VaR developments for the main types of risk, compared to the market risk VaR limit during the course of the year:
The VaR assessment is complemented by additional tools, such as sensitivity analyses, stress tests and back-testing.
Sensitivity Analyses Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning sensitivity analyses.
Stress Testing Whilst VaR measures market risk in «normal» market conditions and does not provide a measure for potential maximum losses, stress scenarios are used to show market risk in extreme conditions. pbb Group employs hypothetical stress scenarios for key risk drivers, on a monthly basis, to determine the impact of extreme changes in yield curves, foreign exchange rates, credit spreads, inflation rates and volatility on the economic present value of pbb Group's overall portfolio. Historical stress scenarios are simulated additionally. For example, the 200 basis point parallel upwards shift in the yield curve – as required by regulatory authorities – would have resulted in market value losses of €178 million as at 30 June 2015 (31December 2014: €509 million) on the aggregate exposure of pbb Group. Conversely, a 200 basis point parallel downwards shift in the yield curve would have resulted in market value profits of €23 million as at 30 June 2015 (31December 2014: €245 million). The asymmetry between potential profits and losses is due, in particular, to the fact that the 200 basis point shift is capped at an interest rate of zero per cent. A significant widening of relevant credit spreads (by between 30 and 1,500 basis points, depending on the rating of the respective positions) would have led to market value losses of €295 million as at 30 June 2015. The Management Board and the relevant executive bodies are informed about the results of stress test scenarios on a regular basis.
Back Testing The quality of the methods used to measure risk is continually reviewed and, where necessary, optimised on the basis of daily comparison of VaR figures and subsequent actual changes in the present value of the portfolio. pbb Group has adopted the Basel Capital Accord's «traffic light» system for the quantitative analysis of its risk model. For this purpose, the number of statistical (negative) outliers detected in backtesting within a period of 250 trading days are counted. Overall, ten outliers were observed in 2015 to date, based on a data history of 250 trading days. These outliers were mainly attributable to extraordinarily strong fluctuations of credit spreads and OIS spreads, and also reflected a significant increase in market volatility levels during the first half of 2015. In contrast, the market data history of 250 trading days on which the VaR model is based mainly includes low-volatility periods. For this reason, pbb plans to introduce an enhanced VaR model for operative risk measurement in the third quarter of 2015, with a considerably longer market data history of seven years. This model would have detected a much lower number of outliers.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning this item.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning these items.
General Interest Rate Risk The general interest rate risk declined to €27 million as at 30 June 2015 (31December 2014: €36 million), largely due to the sale of a position from the capital investment portfolio in March 2015. The average interest rate risk was €28 million during the first half-year 2015, with a maximum of €50 million and a minimum of €5 million. During 2014, the average interest rate risk was €39 million, with a maximum of €66 million and a minimum of €28 million. Aside from the capital investment portfolio, general interest rate risk was at a low level throughout the first half of 2015.
As in the previous year, non-linear interest rate risks from capital market transactions were negligible (30 June 2015: €1.3 million; 31December 2014: €0.049 million).
Credit Spread Risk The credit spread risk reflects potential changes in the present value of exposures as a result of changes in the corresponding credit spread. The majority of credit spread risk is attributable to assets eligible as cover for Pfandbriefe. Risk measurement systems are place for calculating credit spread risk for all relevant exposures. Only credit spread risks of holdings classified as available for sale (AfS) or designated at fair value through profit and loss (dFVTPL) are subject to VaR limitation. Positions classified as Loans and Receivables (LaR), however, are not subject thus.
The credit spread VaR for the AfS and dFVTPL portfolios amounted to €56 million as at 30 June 2015, unchanged from the year-end 2014 (31December 2014: €56 million).
Other Market Risks The present value of foreign currency risk was €2 million as at 30 June 2015, whereas there was no more inflation risk exposure at the record date, due to the sale of a position from the capital investment portfolio, as mentioned above. Basis risks include OIS, tenor spread, crosscurrency spread and Libor/Euribor spread risks; these are quantified and recognised within the framework of the VaR model. All basis risks are included in aggregate VaR and are therefore subject to market risk limitation. The bank is not exposed to share price or commodity risks. Financial derivatives are mainly used for hedging purposes.
As detailed above, the sensitivities result in value at risk: a possible future (economic) loss in the event of an unfavourable market development. It is worth noting that the very same sensitivities may also result in economic gains, in the event of a positive market development. For instance, as described above, high negative credit spread sensitivities represent a risk. In the event of a narrowing of the relevant credit spreads, however, these credit spread sensitivities will yield economic profits, constituting an opportunity. Within the framework of the stress scenarios required by supervisory authorities, for example, a 200 basis point parallel downwards shift of the interest rate curve (subject to a floor of 0%) provides the opportunity for a market value gain of €23 million.
Please refer to the Annual Report 2014 for general information concerning the measurement and management of pbb Group's liquidity risk exposure (including the definition of liqudity risk, the organisation of liquidity management, risk measurement, risk strategy, and risk limits).
The Group's liquidity position during the first half of 2015 exceeded the liquidity projection prepared at the start of the year.
The cumulative liquidity position (liquid assets plus projected net cash flows) determined as part of the liquidity risk measurement process as at 30 June 2015 amounted to €5.1billion for a 12-month horizon in the base scenario – a €1.1billion increase from the end of the previous year (based on the same projection horizon). As at 30 June 2015, the cumulative liquidity position for a six-month horizon amounted to €2.3 billion in the risk scenario (31December 2014: €1.8 billion).
pbb's liquidity ratio in accordance with the German Liquidity Ordinance was 3.5 as at 30 June 2015, thus exceeding the statutory minimum of 1.0.
At the beginning of the first half of 2015, expansive monetary policy of central banks continued to be the dominating factor for capital markets. The extension of the ECB's monetary policy easing measures to include public-sector borrowers, as announced in January (the public-sector purchasing programme, covering bonds issued by euro zone sovereign states, issuers with a development mandate, and European institutions), triggered yet another marked decline in interest rate levels during the first quarter 2015. In April 2015, the yield of ten-year German government bonds hit its record low to date of around 5 basis points.
Negative three-month Euribor rates, together with negative yields on government bonds as well as covered bonds, led to increasing market uncertainty and volatility. During the course of the second quarter 2015, this resulted in a marked turnaround in interest rate developments, with the ten-year yield rising by some 90 basis points. Demand for issuance was revived by the higher interest rate environment.
pbb Group can take advantage of both secured and unsecured issues for funding purposes. Pfandbrief issues are the Bank's main funding instrument: thanks to their high quality and acceptance on the international capital markets, Pfandbriefe are comparatively less affected by market fluctuations than many other funding sources. Thanks to the bank's comfortable liquidity situation, it initially deferred covered benchmark transactions during the period under review.
At the beginning of the year, pbb placed a new senior unsecured benchmark issue and successfully increased the size of an additional issue, to benchmark size. A large portion of funding activities was carried out via private placements, which represent an important funding source for the bank, besides public placements. The small size of private placements contributes to the granularity of pbb's funding.
During the first half of 2015, pbb Group raised long-term funding of approximately €2.2 billion, of which €0.7 billion was placed in the form of benchmark transactions. Approximately two-thirds of long-term funding was issued in senior unsecured form, whilst Pfandbriefe accounted for one-third. Most issues were placed as fixed-rate bonds.
In addition to capital markets funding, pbb Group has extended its unsecured funding base through overnight and term deposits from retail investors. At the half-year point, the related funding volume totalled €2.0 billion (31December 2014: €1.5 billion).
Due to the balanced asset and liability structure, there are no significant liquidity mismatches.
In addition to the forecast liquidity requirement for new business activities, the extent of future liquidity requirements also depends on numerous external factors:
Please refer to the description of business risk in the «Result of Risk-bearing Capacity Analysis» in the Annual Report 2014 for details concerning funding risk.
For financial instruments measured at fair value, quantitative details for a better assessment of market liquidity risk can be obtained from the presentation of the three levels of the fair value hierarchy in the notes. Generally, there is no intention to sell LaR holdings for liquidity management purposes, as liquidity for these holdings can mainly be generated by way of including them in the cover pool, using the funding opportunities provided by the central bank, or using them in repo transactions. Market liquidity risk is included in the internal risk management process as part of market risk.
pbb Group's cumulative liquidity position of €5.1billion in the base scenario over a twelve-month horizon, which is detailed in the section «Development of the Risk Position of the pbb Group», as at 30 June 2015 provides the Group with scope for a flexible response, particularly with regard to possible new business.
If the external factors specified in the section «Forecast Liquidity Requirement» were to develop favourably for pbb Group, this would per se result in a lower future liquidity requirement.
> Risk and Opportunity Report >> Liquidity Risk
Operational Risk
(including Legal Risks)
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the definition of operational risks, the related risk strategy, and the organisation of operational risk management.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning this item.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning this item.
The economic capital for operational risk in the going-concern perspective amounted to €39 million as of 30 June 2015 (31December 2014: €39million). Please refer to the chapter «Result of Risk-bearing Capacity Analysis» in the Annual Report 2014 for calculation details.
In line with the regulatory standard approach, the regulatory capital backing for operational risks, which is calculated at the end of each year, was €81million as at 30 June 2015 (31December 2014: €81million).
pbb suffered financial losses of €2.3 million from operational risks during the first half of 2015 (31December 2014: €10.9 million). In terms of operational losses, 52% was accounted for by the Real Estate Finance segment and 24% each by the Public Sector Finance and the Value Portfolio segments.
The regulatory event type «Execution, Delivery&Process Management» was the category with both the highest number of events (60%) and virtually all related financial effects (99%) during the first half of 2015. This result was also reflected in the operational risk self-assessment process, which is a bottom-up risk assessment performed by all of the bank's divisions.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning opportunities from operational risks.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning this item.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the going-concern approach.
| Going-concern: Economic capital | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 | Change |
| Credit risk | 203 | 219 | –16 |
| Market risk | 150 | 256 | –106 |
| Operational risk | 39 | 39 | – |
| Business risk | – | 3 | –3 |
| Property risk | 6 | 10 | –4 |
| Total before diversification effects | 399 | 527 | –128 |
| Total after diversification effects | 390 | 488 | –98 |
| Available financial resources (free capital) | 1,438 | 1,464 | –26 |
| Excess capital (+)/capital shortfall (–) | 1,048 | 976 | 72 |
In the going-concern approach, the reduction of aggregate economic capital after diversification effects was dominated by lower credit risk and market risk. Market risk in particular declined, due to lower credit spread risks, the sale of a state-guaranteed UK security, as well as sales of securities issued by Italian public-sector entities carried at fair value. To a lesser extent, the reduction was also due to methodological enhancements of the market risk model. The decline in credit risk was mainly attributable to the reduction of exposures to long-term assets, due to higher interest rates at the long end of the yield curve during the first half of 2015. In addition, higher realisation ratios for real estate transactions had a risk-reducing effect.
Since the end of last year, the decline in economic capital after diversification effects has exceeded the decrease in available financial resources, leading to higher excess capital compared to 31December 2014, thus demonstrating the bank's risk-bearing capacity.
Property Risk >> Result of Risk-bearing
Capacity Analysis
A breakdown of economic capital according to segments is provided below:
| Going-concern: Economic capital according to segments | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.20141) | Change |
| Real Estate Finance | 129 | 135 | – 6 |
| Public Investment Finance | 13 | 12 | 1 |
| Value Portfolio | 201 | 257 | –56 |
| Consolidation & Adjustments | 53 | 95 | –42 |
| Total | 390 | 488 | –98 |
1) In order to enhance comparability, economic capital figures as at 31December 2014 are pro-forma figures, based on two assumptions: the transfer of the Italian portfolio from the PIF segment to the Value Portfolio segment (carried out on 1January 2015) was already taken into account at the 2014 year-end and figures calculated as at the 2014 year-end are based on the same allocation mechanism as those for the 30 June 2015 reporting date.
The most important developments on a segment level during the first half of 2015 took place in the Value Portfolio, and in Consolidation&Adjustments. The decline of economic capital for the Value Portfolio was mainly attributable to the sale of securities issued by Italian public-sector borrowers, whilst the sale of a state-guaranteed UK security led to lower economic capital in Consolidation & Adjustments.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the gone-concern approach.
| Gone-concern: Economic capital | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 | Change |
| Credit risk | 1,191 | 1,437 | –246 |
| Market risk | 1,085 | 1,356 | –271 |
| Operational risk | 84 | 84 | – |
| Business risk | 50 | 65 | –15 |
| Property risk | 10 | 23 | –13 |
| Total before diversification effects | 2,421 | 2,965 | –544 |
| Total after diversification effects | 2,196 | 2,647 | –451 |
| Available financial resources before hidden losses | 4,098 | 4,147 | –49 |
| Hidden losses | – | – | – |
| Available financial resources | 4,098 | 4,147 | –49 |
| Excess capital (+)/capital shortfall (–) | 1,902 | 1,500 | 402 |
As in the going-concern approach, developments in the gone-concern approach during the first six months of 2015 were dominated by a reduction in credit risk and market risk.
The decrease in credit risk was largely due to sales of securities issued by Italian public-sector borrowers; this had a positive effect upon portfolio quality, thanks to a reduction in risk concentrations. Due to rising interest rates in the medium- to long-term ranges of the yield curve, long-term credit risk exposures were reduced, given hedge adjustments on related interest rate hedges.
Market risk exposure declined, largely due to the same developments as in the going-concern approach. Both the sale of Italian government bonds from the Value Portfolio and the sale of a state-guaranteed UK security (and the related reversal of inflation, interest rate, and foreign exchange risks) had a significant impact upon risk reduction.
Property risk declined, due to the sale of a Japanese property in April 2015.
Aggregate diversified economic capital decreased significantly as a result of the changes outlined above.
In line with the situation as at 31December 2014, net hidden losses of securities in the banking book were positive as at 30 June 2015; in line with the prudence principle, this positive amount was not included in available financial resources. Overall, the decline in economic capital has exceeded the decrease in available financial resources, leading to higher excess capital in the first half of 2015.
Even the theoretical deduction from available financial resources of the €1billion silent partnership contribution (which was repaid at the beginning of July 2015) would not have threatened risk-bearing capacity on the reporting date, thanks to sufficiently large excess capital. pbb's risk-bearing capacity is thus also demonstrated in the gone-concern approach.
In the event of any renewed escalation of the European sovereign debt crisis, which would once again lead to widening credit spreads of numerous European borrowers, it is fair to expect increasing credit spread risks as well as net hidden losses, regardless of any countermeasures.
A breakdown of economic capital across segments in the gone-concern approach is provided below:
| Gone-concern: Economic capital according to segments | |||
|---|---|---|---|
| in € million | 30.6.2015 | 31.12.20141) | Change |
| Real Estate Finance | 503 | 650 | –147 |
| Public Investment Finance | 192 | 237 | –45 |
| Value Portfolio | 1,181 | 1,557 | –376 |
| Consolidation & Adjustments | 361 | 334 | 27 |
| Total | 2,196 | 2,647 | –451 |
1) In order to enhance comparability, economic capital figures as at 31December 2014 are pro-forma figures, based on two assumptions: the transfer of the Italian portfolio from the PIF segment to the Value Portfolio segment (carried out on 1January 2015) was already taken into account at the 2014 year-end and figures calculated as at the 2014 year-end are based on the same allocation mechanism as those for the 30 June 2015 reporting date.
> Risk and Opportunity Report >> Result of Risk-bearing Capacity Analysis
On a segment level, economic capital increased in Consolidation&Adjustments. The market risk model was refined during the second quarter of 2015, with overall a more conservative calculation of interest risks; in addition, the model can now incorporate negative interest rates. Moreover, the precision of asset revaluations was refined within the market risk model. Consolidation&Adjustments also contains capital investments exposed to interest rate risk. Given the changes in methodology, as explained above, economic capital increased, whereas it declined in all other segments, due to the developments outlined above.
pbb Group observed relief on European bond markets at the end of 2014 and the beginning of 2015, as a result of the ECB's crisis management. If trust in European public finances was fully restored, systematic rating upgrades for public-sector issuers might lead to lower risks, thus further increasing excess capital in the ICAAP.
Please refer to the disclosures in the Report on Risks and Opportunities in the Annual Report 2014 for details concerning the methodology applied to individual types of risk, and on the conduct of stress tests.
On 19December 2014, the EBA published its final guideline on the Supervisory Review and Evaluation Process («SREP»), following a consultation process lasting several months. This guideline (EBA/ GL/2014/13) is directed at national competent authorities of the EU member states; it is set for implementation by institutions in 2015, to be applied from 2016 onwards. In the guideline, the EBA has taken a holistic SREP approach that comprises the assessment of selected key indicators, the business model, governance, as well as capital and liquidity risks.
The SREP is thus based on a holistic evaluation of an institution that leads to an overall credit quality rating of an institution. SREP is therefore the bridge between the former Pillar II (in accordance with Articles 76–87, 97 of CRD IV) and the EU Bank Recovery and Resolution Directive (2014/59/EU – «BRRD»), which focuses on winding up and reorganisation.
pbb Group has already initiated a project that aims to fully implement SREP.
As part of the ECB's implementation of the EBA Guidelines, minimum ratios – including the CET1 ratio and the own funds ratio – were prescribed for HRE on 12 March 2015. These ratios were met as at 30 June 2015. Furthermore, ECB adopted a resolution on 10July 2015, setting out minimum regulatory requirements for pbb and defining minimum ratios for pbb, which were also met as at the reporting date.
Under the waiver option pursuant to Article 7 of EU Regulation no.575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (the EU Capital Requirements Regulation – «CRR»), pbb is exempted from determining own funds and tier1 ratios at a single-entity level; pbb Group discloses these ratios on a voluntary basis.
The CRR came into effect on 1January 2014.
Together with the EU Capital Requirements Directive («CRD IV»), the CRR forms the basis for determining regulatory capital.
Besides the minimum capital ratios, these regulations also govern requirements for the eligibility of capital instruments as well as the mandatory determination of regulatory capital, in line with the accounting standards used. For this reason, pbb has determined its regulatory capital ratios based on IFRS since 1January 2014.
The Management Board manages the Group's capitalisation, based on regulatory capital ratios in accordance with the CRR. According to the CRR, in 2015 the Common Equity Tier1 ratio (CET1ratio – the ratio of Common Equity Tier1 capital to risk-weighted assets) must not fall below 4.5%, the Tier1 ratio (Tier1 capital to risk-weighted assets) must not fall below 6.0%, and the own funds ratio (own funds to risk-weighted assets) must not fall below 8.0%.
These requirements for regulatory capital ratios were satisfied throughout the first half of 2015.
| Own Funds in € million |
30.6.2015 | 30.6.2015 Basel III fully phased-in1) |
31.12.2014 | 31.12.2014 Basel III fully phased-in1) |
|---|---|---|---|---|
| CET1 | 3,337 | 2,152 | 3,364 | 2,090 |
| Additional Tier1 | 193 | 999 | 195 | 999 |
| Tier1 | 3,530 | 3,151 | 3,559 | 3,089 |
| Tier 2 | 429 | 277 | 483 | 334 |
| Own Funds | 3,959 | 3,428 | 4,042 | 3,423 |
1) After expiry of all transitional provisions under Basel III
> Risk and Opportunity Report >> Result of Risk-bearing Capacity Analysis
| 30.6.2015 Basel III |
31.12.2014 Basel III |
||
|---|---|---|---|
| 30.6.2015 | fully phased-in2) |
31.12.2014 | fully phased-in2) |
| 71 | 71 | 217 | 217 |
| – | – | – | – |
| 71 | 71 | 217 | 217 |
| 1,010 | 1,010 | 1,010 | 1,010 |
| 12,601 | 12,601 | 14,261 | 14,261 |
| 426 | 426 | 445 | 445 |
| – | – | 1 | 1 |
| 13,682 | 13,682 | 15,489 | 15,489 |
1) Including weighted credit risk exposures, plus amounts to be included for market risk and operational risk exposures;
using a scaling factor of 12.5
2) After expiry of all transitional provisions under Basel III
| Capital ratios | 30.06.2015 Basel III fully |
31.12.2014 Basel III fully |
|||
|---|---|---|---|---|---|
| in % | 30.06.2015 | phased-in1) | 31.12.2014 | phased-in1) | |
| CET1ratio | 24.4 | 15.7 | 21.7 | 13.5 | |
| Tier1ratio | 25.8 | 23.0 | 23.0 | 19.9 | |
| Own funds ratio | 28.9 | 25.1 | 26.1 | 22.1 |
1) After expiry of all transitional provisions under Basel III
The forecasts for pbb Group's future development represent estimates that were made on the basis of the information currently available. If the assumptions on which the forecasts are based on do not materialise or if risks and opportunities do not occur to the extent calculated, the actual results may differ significantly from the results currently expected.
pbb Group affirms its forecast communicated in the Annual Report 2014. pbb aims at a slight increase in profit or loss before tax for the financial year 2015 compared to the profit or loss before tax for 2014 excluding the valuation adjustment for the Heta exposure in the amount of €–120 million (€174 million). Compared to the profit or loss before tax reported for the financial year 2014 (€54 million), pbb is aiming for a considerable increase. Regarding the volume of new business including extensions with maturities of more than one year (2014: €10.2 billion) as well as the notional volume of REF and PIF financing (31December 2014: €29.8 billion), pbb is also aiming for a slight increase. Furthermore, pbb's aim is to significantly improve return on equity after tax compared to the previous year, both in terms of the disclosed figure (0.1%) as well as return on equity excluding the value adjustment on the Heta exposure (3.4%). Another aim is to modestly improve the cost-income ratio compared to 2014 (57.3% excluding the value adjustment on the Heta exposure). pbb therefore aims to significantly ameliorate the cost-income ratio reported for 2014 (77.0%).
However in the event of a harmful change in ownership as provided for in section 8c Körperschaftssteuergesetz (German Corporate Tax Act), all or part of pbb Group's current tax losses carried forward could no longer be usable. As a result, the current deferred tax assets on tax losses carried forward would have to be written off. This would result in a negative net income/loss and a negative return on equity after tax.
An important secondary condition for pbb Group meeting its earnings and profitability targets is to ensure its risk bearing capacity. With respect to the going-concern perspective, it is aimed for that the risk covering potential available after complying with regulatory minimum capital ratios will exceed the economic capital requirements. From a gone-concern perspective, pbb Group aims for the available capital to exceed the economic capital requirements which is likely as long as spreads of the European countries in focus do not significantly widen increasing the hidden liabilities.
pbb aims at a markedly lower CET1 ratio in 2015, compared to the level of 2014 (21.7%), due to the repayment of silent partnership contribution. However, pbb aims to achieve a CET1 ratio significantly above the minimum 4.5% requirement under the CRR, as well as above the 12.5% targeted by pbb Group.
Opportunities In particular the following opportunities may affect the future developments in assets, financial position and earnings:
> After succesfully completing the privatisation pbb can increase its focus on the relevant client markets. This is aimed to have a positive impact on new business volumes, and hence also on the development in assets and earnings.
> The conditions imposed by the European Commission on pbb Group in connection with the approval of state aid have been lifted following privatisation. Thus, future new business will no longer be subject to such limitations. For instance, pbb Group could expand its business activities in new markets and thereby increase its profitability; however, it does not intend to change the conservative risk profile of its portfolio at this time.
Risks However, the possibility of future negative effects on pbb Group's development in assets, financial position and earnings cannot be ruled out. The level of exposure is influenced through the occurrence or non-occurrence of the following risks, or the extent to which the following risks might materialise:
> Rating agencies continue to adapt their methodologies and models in order to assess, amongst other factors, the changing macro-economic environment and the potential impact of the European sovereign debt crisis. These include the new European legislative initiatives to centralise supervision of large banks and to support bank resolution and bail-in of senior unsecured creditors. As of 30 June 2015, the methodological changes that have been announced in this context were not fully finalised. The possible extent of rating downgrades depends on the respective degree of systemic support uplift taken into account in the senior unsecured ratings and the rating agencies' ultimate dealings with this topic. Furthermore, changes to specific rating drivers with regards to the bank and the Pfandbriefe, its other debt and hybrid instruments may result in rating changes. This also includes the termination of the Federal Republic of Germany's indirect ownership of pbb in the context of the flotation. Due to the existing linkages, changes to issuer ratings can correspondingly affect the Pfandbrief ratings. Downgrades of the bank and/or Pfandbrief ratings and/or other debt and hybrid instruments, could have a negative impact, particularly on the bank's funding conditions, on triggers and termination rights within derivatives and other contracts and on access to suitable hedge counterparties and hence may compromise pbb's liquidity as well as its development in assets, financial position and earnings.
> pbb Group's planned profitability is based on the assumption of adequate growth and high portfolio profitability. Should the targeted development of portfolio size and margins not be achieved – for example, due to increased competition on the market – pbb Group will not be able to reach the required cost-income ratio.
> The risk bearing capacity concept is enhanced on a continuous basis. These enhancements and new regulatory requirements could have an impact on the risk bearing capacity assessment using both the going-concern approach and the gone-concern approach. The development of the market values of assets and liabilities is an influencing factor affecting the risk bearing capacity in the gone-concern approach. If hidden liabilities increased due to changes in fair value, the cover capital could fall below the economic capital requirement.
> Due to the nature of its business and the international expansion as well as the high number of relevant laws and regulations, pbb Group is involved in litigation, arbitration and regulatory proceedings in some countries. Legal disputes which are currently pending (especially relating to participation certificates issued, described under the Note «Provisions»), or could become pending in the future, could have a material negative impact on pbb Group's profit or loss and equity base.
pbb Group's positive development in recent years will result in numerous opportunities to increase profitability in future. However, this assessment is based on the assumption that risks arising, for instance, from factors beyond pbb's control, such as the sovereign debt crisis, do not materialise. Overall, giving due consideration to the opportunities and risks, pbb Group aims at a profit or loss before tax for 2015 slightly above the result for 2014 amounting to €174 million, which was adjusted for the allowances on the Heta exposure (€–120 million). A significant increase is aimed for in comparison with the profit or loss before tax recognised in 2014 of €54 million.
| Consolidated income statement | ||||
|---|---|---|---|---|
| in € million | Notes | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
Change |
| Operating income | 202 | 203 | –1 | |
| Net interest and similar income | 5 | 229 | 195 | 34 |
| Interest and similar income | 1,064 | 1,178 | –114 | |
| Interest and similar expenses | –835 | –983 | 148 | |
| Net fee and commission income | 6 | 9 | – | 9 |
| Fee and commission income | 11 | 6 | 5 | |
| Fee and commission expenses | –2 | – 6 | 4 | |
| Net trading income | 7 | 7 | –18 | 25 |
| Net income from financial investments | 8 | –37 | 1 | –38 |
| Net income from hedging relationships | 9 | 2 | – 6 | 8 |
| Net other operating income/expenses | 10 | –8 | 31 | –39 |
| Loan loss provisions | 11 | 5 | –2 | 7 |
| General and administrative expenses | 12 | –98 | –124 | 26 |
| Net miscellaneous income/expenses | 13 | 3 | 6 | –3 |
| Profit or loss before tax | 112 | 83 | 29 | |
| Income taxes | 14 | –24 | –9 | –15 |
| Net income/loss | 88 | 74 | 14 | |
| attributable to: Equity holders |
88 | 74 | 14 |
| Earnings per share | ||
|---|---|---|
| in € Notes |
1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Basic earnings per share 15 |
0.65 | 0.55 |
| Diluted earnings per share 15 |
0.65 | 0.55 |
| Consolidated statement of comprehensive income | 1.1.–30.6.2015 | 1.1.–30.6.2014 | ||||
|---|---|---|---|---|---|---|
| in € million | Before tax | Tax | Net of tax | Before tax | Tax | Net of tax |
| Profit or loss | 112 | –24 | 88 | 83 | –9 | 74 |
| Items that will not be reclassified to income statement | 10 | –3 | 7 | –17 | 5 | –12 |
| Profits/losses from pension commitments | 10 | –3 | 7 | –17 | 5 | –12 |
| Items that may be reclassified to income statement | –50 | 15 | –35 | 55 | –15 | 40 |
| Foreign currency reserve | 1 | – | 1 | 1 | – | 1 |
| AfS reserve | 31 | –8 | 23 | 109 | –30 | 79 |
| Cash flow hedge reserve | –82 | 23 | –59 | –55 | 15 | –40 |
| Total other comprehensive income | –40 | 12 | –28 | 38 | –10 | 28 |
| Total comprehensive income of the period | 72 | –12 | 60 | 121 | –19 | 102 |
| attributable to: Equity holders (consolidated profit/loss of the parent company) |
72 | –12 | 60 | 121 | –19 | 102 |
| Components of consolidated statement of comprehensive income | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Net income/loss | 88 | 74 |
| Profits/losses from pension commitments | 7 | –12 |
| Unrealised gains/losses | 7 | –12 |
| Foreign currency reserve | 1 | 1 |
| Unrealised gains/losses | 1 | 1 |
| AfS reserve | 23 | 79 |
| Unrealised gains/losses | 23 | 79 |
| Cash flow hedge reserve | –59 | –40 |
| Unrealised gains/losses | –21 | 86 |
| Reclassifications of realised gains/losses included in profit or loss | –38 | –126 |
| Total other comprehensive income | –28 | 28 |
| Total unrealised gains/losses | 10 | 154 |
| Total reclassifications of realised gains/losses included in profit or loss | –38 | –126 |
| Total comprehensive income of the period | 60 | 102 |
| Assets | |||||
|---|---|---|---|---|---|
| in € million | Notes | 30.6.2015 | 31.12.20141) | Change | 1.1.20141) |
| Cash reserve | 1,785 | 57 | 1,728 | 3,532 | |
| Trading assets | 16 | 1,684 | 2,016 | –332 | 1,642 |
| Loans and advances to other banks | 17 | 2,789 | 6,800 | –4,011 | 6,685 |
| Loans and advances to customers | 18 | 40,981 | 38,964 | 2,017 | 36,242 |
| Allowances for losses on loans and advances | 19 | –133 | –138 | 5 | –148 |
| Financial investments | 20 | 17,085 | 20,475 | –3,390 | 20,725 |
| Property and equipment | 11 | 8 | 3 | 1 | |
| Intangible assets | 22 | 23 | –1 | 31 | |
| Other assets | 21 | 5,322 | 6,659 | –1,337 | 4,769 |
| Income tax assets | 41 | 30 | 11 | 45 | |
| Current tax assets | 40 | 29 | 11 | 44 | |
| Deferred tax assets | 1 | 1 | – | 1 | |
| Total assets | 69,587 | 74,894 | –5,307 | 73,524 |
1) Adjustments in accordance with IAS 8.14 et seq. Details are disclosed in Note «Principles».
| Consolidated statement of changes in equity |
Equity attributable to equity holders | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revaluation reserve | ||||||||||
| Subscribed | Silent partnership |
Additional paid-in |
Retained | Profits/ losses from pension |
Foreign currency |
Cash flow hedge |
Consolidated | |||
| in € million | capital | contribution | capital | earnings | commitments | reserve | AfS reserve | reserve | profit/loss | Equity |
| Equity at 1.1.2014 | 380 | 999 | 5,036 | –3,115 | – 41 | 1 | –220 | 285 | 160 | 3,485 |
| Capital increase | – | – | – | – | – | – | – | – | – | – |
| Costs of equity transactions | – | – | – | – | – | – | – | – | – | – |
| Treasury shares | – | – | – | – | – | – | – | – | – | – |
| Distribution | – | – | – | – | – | – | – | – | – | – |
| Total comprehensive income of the period |
– | – | – | – | –12 | 1 | 79 | –40 | 74 | 102 |
| Transfers to retained earnings |
– | – | – | 160 | – | – | – | – | –160 | – |
| Changes in the basis of consolidation |
– | – | – | – | – | – | – | – | – | – |
| Equity at 30.6.2014 | 380 | 999 | 5,036 | –2,955 | – 53 | 2 | –141 | 245 | 74 | 3,587 |
| Equity at 1.1.2015 | 380 | 999 | 3,265 | –1,154 | –79 | 2 | –100 | 189 | 4 | 3,506 |
| Capital increase | – | – | – | – | – | – | – | – | – | – |
| Costs of equity transactions | – | – | – | – | – | – | – | – | – | – |
| Treasury shares | – | – | – | – | – | – | – | – | – | – |
| Distribution | – | – | – | – | – | – | – | – | – | – |
| Total comprehensive income of the period |
– | – | – | – | 7 | 1 | 23 | –59 | 88 | 60 |
| Transfer to retained earnings |
– | – | – | 4 | – | – | – | – | –4 | – |
| Changes in the basis of consolidation |
– | – | – | – | – | – | – | – | – | – |
| Equity at 30.6.2015 | 380 | 999 | 3,265 | –1,150 | –72 | 3 | –77 | 130 | 88 | 3,566 |
| Consolidated statement of cash flows (condensed) | ||
|---|---|---|
| in € million | 2015 | 2014 |
| Cash reserve at 1.1. | 57 | 3,532 |
| +/– Cash flow from operating activities | –1,439 | –3,388 |
| +/– Cash flow from investing activities | 3,237 | 53 |
| +/– Cash flow from financing activities | –70 | –10 |
| +/– Effects of exchange rate changes and non-cash measurement changes | – | – |
| Cash reserve at 30.6. | 1,785 | 187 |
Page Note
pbb Group has prepared the condensed consolidated interim financial statements for the period ended 30 June 2015 in line with EC regulation No.1606/2002 of the European Parliament and of the Council from 19 July 2002 in accordance with International Financial Reporting Standards (IFRS). The condensed consolidated interim financial statements are based on the IFRS rules, which have been adopted into European Law by the European Commission as part of the endorsement process; it is also based on the regulations of the Commercial Law which are applicable in accordance with section 315a(1) HGB (German Commercial Code). In particular, requirements of IAS 34 were considered. With the exception of specific regulations relating to fair value hedge accounting for a portfolio hedge of interest risks in IAS 39 Financial Instruments: Recognition and Measurement all mandatory IFRS rules have been completely endorsed by the European Union (EU). pbb Group does not apply fair value hedge accounting for a portfolio hedge of interest risks. Therefore, the financial statements are accordingly consistent with the entire IFRS as well as with the IFRS as applicable in the EU.
The IFRS are standards and interpretations adopted by the International Accounting Standards Board (IASB). These are the International Financial Reporting Standards (IFRS), the International Accounting Standards (IAS) and the interpretations of the IFRS Interpretations Committee (formerly IFRIC) respectively the former Standing Interpretations Committee (SIC). Furthermore the German Accounting Standards (Deutsche Rechnungslegungs Standards –DRS) published by the Deutsche Rechnungslegungs Standards Committee (DRSC) have been taken into account provided that they are not contrary to IFRS.
On 4 August 2015, the management board of pbb prepared these consolidated interim financial statements under the going-concern assumption.
Initially Adopted Standards and Interpretations The following standards, interpretations and amendments were initially applied in the first half of 2015:
IFRIC Interpretation 21 IFRIC 21 clarifies when a present obligation exists for levies imposed by governments. With first-time adoption the annual contribution of the bank levy 2015 was not accrued on a monthly basis, but recognised in the full amount of €25 million in the reporting period, for the first time.
Amendments to IAS19 (revised 2011) Amendments to IAS19 clarify the requirements regarding the attribution of employee contributions or contributions from third parties to periods of service when the contributions are linked to service. They also provide relief when contributions are independent of the number of years of service. The amendments are effective for financial years beginning on or after 1July 2014. There were no material impacts on these condensed consolidated interim financial statements.
Annual Improvements Project Annual Improvements to IFRSs 2010–2012 relates to IFRS 2, IFRS 3, IFRS 8, IFRS13, IAS16, IAS 38 and IAS 24, and Improvements to IFRSs 2011–2013 to IFRS1, IFRS 3, IFRS13 and IAS 40. The amendments are to be applied initially for periods beginning on or after 1July 2014. All the amendments and adjustments are either not relevant or of minor importance for pbb Group. For this reason there were no material impacts on these condensed consolidated interim financial statements.
During the period under review, recognition of deferred tax assets and deferred tax liabilities was adjusted in accordance with IAS 8.14 et seq. Due to the newly-established process-related requirements regarding the offsetting of deferred tax assets and liabilities according to IAS12.74, such deferred tax assets and liabilities were disclosed on an offset basis as at 30 June 2015 for the first time. The previous year's figures were adjusted accordingly.
On page196, the Annual Report 2014 of pbb Group contains a list of all consolidated and non-consolidated investments of pbb. In the first half of 2015 the basis of consolidation remained unchanged.
Public investment financings provided to Italy were classified as non-strategic activities as at 1January 2015. Hence, a portfolio with a nominal volume of €1.3 billion was reclassified within segment reporting from the strategic Public Investment Finance (PIF) segment to the non-strategic Value Portfolio (VP) segment. Furthermore, the methodology used for the allocation of IFRS equity to the operating segments was adjusted at the beginning of the 2015 financial year. This adjustment includes the following major changes to the previous approach:
Allocation of the diversified economic capital is based on the allocation of losses across the operating segments using an Expected Shortfall Approach with a confidence level of 99.0%. The chosen confidence level allows for a balanced consideration of both credit spread-related market risks as well as concentration risks.
The previous period's figures were adjusted according to IFRS 8.29. These adjustments translate into positive effects for the profit or loss before tax of the VP segment and burdens for the profit or loss before tax of the PIF segment and the C&A reconciliation column.
Consolidated Interim 59 Financial Statements > Notes
2) Adjusted according to IFRS 8.29
3) Including risk-weighted credit risk positions as well as the capital requirements for market risk positions and operational risks
scaled with the factor 12.5
4) Excluding revaluation reserve, including silent partnership contribution (repaid on 6 July 2015)
| Consolidation& | ||||||
|---|---|---|---|---|---|---|
| in € million | REF | PIF | VP | Adjustments | pbb Group | |
| Operating income | 1.1.–30.6.2015 | 206 | 22 | –28 | 2 | 202 |
| 1.1.–30.6.20141) | 148 | 15 | 39 | 1 | 203 | |
| Net interest and similar income | 1.1.–30.6.2015 | 158 | 22 | 47 | 2 | 229 |
| 1.1.–30.6.20141) | 149 | 17 | 27 | 2 | 195 | |
| Net fee and commission income | 1.1.–30.6.2015 | 9 | – | – | – | 9 |
| 1.1.–30.6.20141) | – | – | – | – | – | |
| Net trading income | 1.1.–30.6.2015 | 3 | 1 | 3 | – | 7 |
| 1.1.–30.6.20141) | –8 | –2 | –8 | – | –18 | |
| Net income from financial | 1.1.–30.6.2015 | 18 | 6 | – 61 | – | –37 |
| investments | 1.1.–30.6.20141) | 2 | – | –1 | – | 1 |
| Net income from hedging | 1.1.–30.6.2015 | 1 | – | 1 | – | 2 |
| relationships | 1.1.–30.6.20141) | –2 | –2 | –2 | – | – 6 |
| Net other operating income/ | 1.1.–30.6.2015 | 17 | –7 | –18 | – | –8 |
| expenses | 1.1.–30.6.20141) | 7 | 2 | 23 | –1 | 31 |
| Loan loss provisions | 1.1.–30.6.2015 | 11 | – | – 6 | – | 5 |
| 1.1.–30.6.20141) | –2 | – | – | – | –2 | |
| General and administrative expenses | 1.1.–30.6.2015 | –75 | –13 | –10 | – | –98 |
| 1.1.–30.6.20141) | –77 | –15 | –32 | – | –124 | |
| Net miscellaneous income/expenses | 1.1.–30.6.2015 | 3 | – | – | – | 3 |
| 1.1.–30.6.20141) | 4 | 1 | 1 | – | 6 | |
| Profit or loss before tax | 1.1.–30.6.2015 | 145 | 9 | –44 | 2 | 112 |
| 1.1.–30.6.20141) | 73 | 1 | 8 | 1 | 83 |
1) Adjusted according to IFRS 8.29
Income/expenses
| in % | REF | PIF | VP | pbb Group | |
|---|---|---|---|---|---|
| Cost/income ratio | 1.1.–30.6.2015 | 36.4 | 59.1 | > 100.0 | 48.5 |
| 1.1.–30.6.20142) | 52.0 | 100.0 | 82.1 | 61.1 |
1) The cost/income ratio is the ratio between general and administrative expenses and operating income.
2) Adjusted according to IFRS 8.29
| Balance-sheet-related measures, broken down | ||||||
|---|---|---|---|---|---|---|
| by operating segments | Consolidation& | |||||
| in € billion | REF | PIF | VP | Adjustments | pbb Group | |
| Financing volumes1) | 30.6.2015 | 23.5 | 7.3 | 20.5 | – | 51.3 |
| 31.12.20142) | 21.8 | 6.6 | 22.7 | – | 51.1 | |
| Risk-weighted assets3) | 30.6.2015 | 6.7 | 1.2 | 4.7 | 1.1 | 13.7 |
| 31.12.20142) | 7.2 | 1.3 | 5.5 | 1.5 | 15.5 | |
| Equity4) | 30.6.2015 | 0.8 | 0.3 | 1.8 | 0.6 | 3.5 |
| 31.12.20142) | 0.7 | 0.5 | 1.8 | 0.4 | 3.4 | |
| Net interest and similar income by categories of income/expenses | ||
|---|---|---|
| 1.1.–30.6. | 1.1.–30.6. | |
| in € million | 2015 | 2014 |
| Interest and similar income | 1,064 | 1,178 |
| Lending and money-market business | 624 | 675 |
| Fixed-income securities and government-inscribed debt | 275 | 321 |
| Current gains/losses from swap transactions (net interest income and expense) | 165 | 182 |
| Interest and similar expenses | – 835 | –983 |
| Liabilities to other banks and customers | –164 | –217 |
| Securitised liabilities | – 636 | –709 |
| Subordinated capital | –35 | –57 |
| Total | 229 | 195 |
| Net fee and commission income | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Securities and custodial services | –1 | – |
| Lending operations and other service | 10 | – |
| Total | 9 | – |
| Net trading income | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| From interest rate instruments and related derivatives | 6 | –18 |
| From foreign currency instruments and related derivatives | 1 | – |
| Total | 7 | –18 |
> Notes >> Notes to the Consolidated Income Statement
| Net income from financial investments | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Income from financial investments | 38 | 3 |
| Expenses from financial investments | –75 | –2 |
| Total | –37 | 1 |
| Net income from financial investments by IAS39 categories | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| AfS financial investments | –68 | 3 |
| LaR financial investments | 31 | –2 |
| Total | –37 | 1 |
| Net income from hedging relationships | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Result from fair value hedge accounting | 2 | –7 |
| Result from hedged items | –57 | –426 |
| Result from hedging instruments | 59 | 419 |
| Ineffectiveness from cash flow hedge accounting recognised in profit or loss | – | 1 |
| Total | 2 | – 6 |
| Net other operating income/expenses | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Other operating income | 63 | 40 |
| Other operating expenses | –71 | –9 |
| Net other operating income/expenses | – 8 | 31 |
| Loan loss provisions | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Allowances for losses on loans and advances | 3 | –7 |
| Additions | –12 | –19 |
| Reversals | 15 | 12 |
| Provisions for contingent liabilities and other commitments | 1 | – |
| Additions | – | – |
| Reversals | 1 | – |
| Recoveries from written-off loans and advances | 1 | 5 |
| Total | 5 | –2 |
| General and administrative expenses | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Personnel expenses | –56 | –54 |
| Wages and salaries | –43 | –42 |
| Social security costs | –8 | –8 |
| Pension expenses and related employee benefit costs | –5 | –4 |
| Non-personnel expenses | –42 | –70 |
| Other general and administrative expenses | –37 | – 65 |
| Consulting expenses | –5 | –9 |
| IT expenses | –14 | –36 |
| Office and operating expenses | – 6 | – 6 |
| Other non-personnel expenses | –12 | –14 |
| Depreciation, amortisation and impairment | –5 | –5 |
| of software and other intangible assets | –4 | –5 |
| of property and equipment | –1 | – |
| Total | –98 | –124 |
> Notes >> Notes to the Consolidated Income Statement
| Net miscellaneous income/expenses | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Miscellaneous income | 3 | 6 |
| thereof: | ||
| Reversals of restructuring provisions | 3 | 5 |
| Miscellaneous expenses | – | – |
| Net miscellaneous income/expenses | 3 | 6 |
| Breakdown | ||
|---|---|---|
| in € million | 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
| Current taxes | –12 | –19 |
| Deferred taxes | –12 | 10 |
| thereof: Deferred taxes on capitalised losses carried forward |
–84 | –52 |
| Total | –24 | –9 |
Earnings per share are calculated in accordance with IAS 33 by dividing the consolidated profit/loss by the weighted average number of shares.
| Earnings per share | |||
|---|---|---|---|
| 1.1.–30.6. 2015 |
1.1.–30.6. 2014 |
||
| Consolidated profit/loss | in €million | 88 | 74 |
| Average number of ordinary shares issued | pieces 134,475,308 134,475,308 | ||
| Adjusted average number of ordinary shares issued | pieces 134,475,308 134,475,308 | ||
| Basic earnings per share | in € | 0.65 | 0.55 |
| Diluted earnings per share | in € | 0.65 | 0.55 |
| Trading assets | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Positive fair values of derivative financial instruments | 1,684 | 2,016 |
| Total | 1,684 | 2,016 |
| Loans and advances to other banks by type of business | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Loans and advances | 2,522 | 3,153 |
| Public sector loans | 991 | 1,136 |
| Other loans and advances | 1,531 | 2,017 |
| Investments | 267 | 3,647 |
| Total | 2,789 | 6,800 |
| Loans and advances to other banks by maturities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Repayable on demand | 1,511 | 2,011 |
| With agreed maturities | 1,278 | 4,789 |
| up to 3 months | 273 | 3,689 |
| more than 3 months to 1 year | 74 | 132 |
| more than 1 year to 5 years | 373 | 404 |
| more than 5 years | 558 | 564 |
| Total | 2,789 | 6,800 |
Consolidated Interim 65 Financial Statements
> Notes >> Notes to the Consolidated
Statement of Financial Position
| Loans and advances to customers by type of business | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Loans and advances | 40,241 | 38,964 |
| Public sector loans | 16,707 | 17,125 |
| Real estate loans | 23,516 | 21,822 |
| Other loans and advances | 18 | 17 |
| Investments | 500 | – |
| Claims from finance lease agreements | 240 | – |
| Total | 40,981 | 38,964 |
| Loans and advances to customers by maturities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Unspecified terms | 559 | 591 |
| With agreed maturities | 40,422 | 38,373 |
| up to 3 months | 2,258 | 1,102 |
| more than 3 months to 1 year | 1,970 | 2,349 |
| more than 1 year to 5 years | 18,475 | 16,933 |
| more than 5 years | 17,719 | 17,989 |
| Total | 40,981 | 38,964 |
| Development | |||
|---|---|---|---|
| in € million | Specific allowances |
Portfolio based allowances |
Total |
| Balance at 1.1.2014 | –97 | – 51 | –148 |
| Changes through profit or loss | –24 | 5 | –19 |
| Gross additions | –43 | –5 | –48 |
| Reversals | 11 | 10 | 21 |
| Unwinding | 8 | – | 8 |
| Changes not affecting profit or loss | 28 | 1 | 29 |
| Use of existing allowances | 32 | 1 | 33 |
| Effects of foreign currency translations and other changes | –4 | – | –4 |
| Balance at 31.12.2014 | –93 | –45 | –138 |
| Balance at 1.1.2015 | –93 | –45 | –138 |
| Changes through profit or loss | –4 | 10 | 6 |
| Gross additions | –12 | – | –12 |
| Reversals | 5 | 10 | 15 |
| Unwinding | 3 | – | 3 |
| Changes not affecting profit or loss | –1 | – | –1 |
| Use of existing allowances | 4 | – | 4 |
| Effects of foreign currency translations and other changes | –5 | – | –5 |
| Balance at 30.6.2015 | –98 | –35 | –133 |
Allowances for losses on loans and advances were solely recognised in the measurement category loans and receivables.
Statement of Financial Position
| Breakdown | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| AfS financial investments | 4,042 | 4,906 |
| Debt securities and other fixed-income securities | 4,039 | 4,903 |
| Shares and other variable-yield securities | 3 | 3 |
| LaR financial investments | 13,043 | 15,569 |
| Debt securities and other fixed-income securities | 13,043 | 15,569 |
| Total | 17,085 | 20,475 |
The carrying amounts of the LaR financial investments were reduced by portfolio-based allowances amounting to €–10 million (31December 2014: €–9 million).
| Financial investments by maturities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Unspecified terms | 3 | 3 |
| With agreed maturities | 17,082 | 20,472 |
| up to 3 months | 1,142 | 867 |
| more than 3 months to 1 year | 2,644 | 3,067 |
| more than 1 year to 5 years | 4,336 | 5,676 |
| more than 5 years | 8,960 | 10,862 |
| Total | 17,085 | 20,475 |
pbb Group has made use of the IASB amendments to IAS 39 and IFRS 7, published on 13 October 2008, and reclassified retrospectively as of 1July 2008 financial investments out of the measurement category AfS of €30.2 billion. At the date of reclassification the effective interest rate for the AfS securities was between 0.25% and 34.4%.
| Reclassifications in 2008 Effects as of 30 June 2015 |
into: Financial investment (LaR) | |||
|---|---|---|---|---|
| 30.6.2015 | Effect in reporting period if no assets had been reclassified (1.1.–30.6.2015) |
|||
| Carrying amount in € billion |
Fair value in € billion |
Through profit or loss in € million |
AfS reserve (after taxes) in € million |
|
| out of: Financial investments (AfS) |
6.4 | 7.2 | – | –73 |
| Reclassifications in 2008 Effects as of 31December 2014 |
into: Financial investment (LaR) | |||
| 31.12.2014 | Effect in reporting period if no assets had been reclassified (1.1.–31.12.2014) |
|||
| Carrying amount in € billion |
Fair value in € billion |
Through profit or loss in € million |
AfS reserve (after taxes) in € million |
|
| out of: Financial investments (AfS) |
8.9 | 9.3 | – | 303 |
| Other assets | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Positive fair values from derivative financial instruments | 5,260 | 6,449 |
| Hedging derivatives | 5,260 | 6,449 |
| Fair value hedge | 4,961 | 5,975 |
| Cash flow hedge | 299 | 474 |
| Salvage acquisitions | 49 | 120 |
| Other assets | 4 | 81 |
| Reimbursements under insurance policies | 9 | 9 |
| Total | 5,322 | 6,659 |
| Liabilities to other banks by maturities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Repayable on demand | 1,327 | 1,693 |
| With agreed maturities | 1,054 | 1,494 |
| up to 3 months | 169 | 529 |
| more than 3 months to 1 year | 70 | 116 |
| more than 1 year to 5 years | 276 | 305 |
| more than 5 years | 539 | 544 |
| Total | 2,381 | 3,187 |
| Liabilities to customers by maturities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Repayable on demand | 1,238 | 1,154 |
| With agreed maturities | 9,422 | 9,439 |
| up to 3 months | 836 | 1,274 |
| more than 3 months to 1 year | 1,904 | 1,328 |
| more than 1 year to 5 years | 5,403 | 5,305 |
| more than 5 years | 1,279 | 1,532 |
| Total | 10,660 | 10,593 |
Consolidated Interim 69 Financial Statements
> Notes >> Notes to the Consolidated
Statement of Financial Position
| Securitised liabilities by type of business | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Debt securities issued | 23,240 | 25,330 |
| Mortgage bonds | 10,160 | 10,135 |
| Public sector bonds | 8,299 | 10,026 |
| Other debt securities | 4,531 | 5,169 |
| Money market securities | 250 | – |
| Registered notes issued | 21,563 | 22,497 |
| Mortgage bonds | 5,940 | 5,912 |
| Public sector bonds | 13,820 | 14,715 |
| Other debt securities | 1,803 | 1,870 |
| Total | 44,803 | 47,827 |
| Trading liabilities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Negative fair values from derivative financial instruments | 1,670 | 1,960 |
| Total | 1,670 | 1,960 |
| Breakdown | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Provisions for pensions and similar obligations | 105 | 115 |
| Restructuring provisions | 12 | 42 |
| Provisions for contingent liabilities and other commitments | 2 | 11 |
| Other provisions | 142 | 104 |
| thereof: Long-term liabilities to employees |
1 | 2 |
| Total | 261 | 272 |
pbb closed a reinsurance in the form of a qualifying insurance policy according to IAS19 to hedge parts of the risk from the defined benefit obligations. A discount rate of 2.25% (31December 2014: 2.0%) was used for the measurement of the defined benefit pension obligations. The other actuarial assumption were unchanged compared to the consolidated financial statements 2014.
Other provisions include provisions for legal risks amounting to €109 million (31December 2014: €77 million).
Legal risks (litigation risks) pbb Group is obliged, in all jurisdictions in which it conducts its business, to comply with a large number of statutory and supervisory requirements and regulations such as certain rules of conduct to avoid conflicts of interest, to combat money laundering, to prevent terrorist financing, to prevent criminal offences to the detriment of the financial sector, to regulate foreign trade and to safeguard bank, business and data secrecy. Given the nature of business and international expansion of activities and the large number of relevant requirements and regulations, pbb Group is involved in litigation, arbitration and regulatory proceedings in some countries. These also include criminal and administrative proceedings as well as the assertion of claims in an amount not specified by the party asserting the claim. pbb Group recognises provisions for the uncertain obligations arising from these proceedings if the potential outflow of resources is sufficiently likely and the amount of the obligation can be estimated. The probability of the outflow of resources, which often cannot be estimated with certainty, is highly dependent on the outcome of the proceedings. The assessment of this probability and the quantification of the obligation are largely based on estimates. The actual liability can vary considerably from this estimate. Accounting for the individual legal procedure, pbb Group analyses developments of the individual cases and comparable cases, drawing on its own expertise or opinions by external consultants, and in particular by legal advisors, depending on the significance and complexity of the respective case. The provisions recognised for the proceedings are not reported separately as pbb Group believes that the outcome of the proceedings would be seriously compromised by their disclosure.
In appraisal proceedings relating to the merger of three predecessor mortgage banks to form pbb in 2001, the new appraisal ordered by the Munich Regional Court I has resulted in an additional payment averaging €1.00 per share. The potential subsequent payment claims amount up to €9.4 million plus interest since 2001. However, the Munich Regional Court I has rejected requests of claimants to increase compensation payments. Individual applicants have lodged complaints against the court's decision. As the Munich Regional Court I did not rectify these complaints, complaint proceedings have been initiated at the Munich Higher Regional Court.
Notes to the Consolidated Statement of Financial Position
The profit participation certificates issued by the predecessor institutions participated in significant losses due to the net losses for the period incurred since 2008 respectively pbb's unappropriated retained losses since this time. The redemption amounts have reduced and interest payment has been suspended. Individual investors therefore initiated legal proceedings, contesting in particular various individual clauses relating to loss participation and replenishment following loss participation. The key questions in this connection are which balance sheet items must be taken into account to calculate loss participation and whether replenishment is required if pbb records a net income, unappropriated retained earnings or a other income. Courts have decided against the legal view of pbb in view of the individual decisions regarding profit participation certificates. Some of the court decisions are legally binding; some have been subject to appeals lodged by pbb. The disputed profit-participation certificates had a total nominal volume of €221million, out of which €10.4 million are currently subject to pending litigation. Within these legal proceedings, claimants are demanding the repayment of a nominal €5.9million volume, plus accessory claims. These proceedings may result in a partial or comprehensive increase in redemption claims, or in the subsequent distribution of cancelled coupon payments or interest payment claims. Furthermore, of profit-participation certificate holders have extra-judicially asserted their rights of partial or full replenishment, subsequent distribution of cancelled coupon payments as well as interest payments in the order of a nominal volume in the high double-digit million euro range, while further claims could possibly follow.
Since the decisions of the Federal Court of Justice in 2014 on the inadmissibility of a credit processing fee in credit agreements with private customers, the Bank sees itself facing queries from previous private customers for the repayment of alleged credit processing fees. These demands have not yet proven to be justified. Since the end of last year, individual commercial customers have requested the repayment of the credit processing fees.
In February 2014, pbb has filed with the Federal Central Tax Office (Bundeszentralamt für Steuern) an application to initiate a mutual agreement procedure according to the EU Arbitration Convention for the years 2006 to 2012. The subject matter of this mutual agreement procedure will be the attribution of tax income to the branch in Paris, France. This application was made as an agreement regarding the allocation of taxable profit could not be reached between the German and French fiscal authorities in the context of negotiations regarding an «Advanced Pricing Agreement» as well as a tax audit of the Paris branch performed in the meantime and, therefore, double taxation of income may be possible. Depending on the outcome of the mutual agreement procedure, this could result in a tax expense or a tax income for pbb Group.
Otherwise, no proceedings for which the Management Board believes the probability of an outflow of resources to be not unlikely, or which are of material significance to pbb Group for other reasons, exist with an amount in dispute in excess of more than €5 million.
| Other liabilities | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Negative fair values from derivative financial instruments | 4,839 | 6,083 |
| Hedging derivatives | 4,839 | 6,083 |
| Fair value hedge | 4,630 | 5,649 |
| Cash flow hedge | 209 | 434 |
| Other liabilities | 119 | 99 |
| Total | 4,958 | 6,182 |
| Breakdown | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Subordinated liabilities | 848 | 939 |
| Hybrid capital instruments | 350 | 340 |
| Total | 1,198 | 1,279 |
The unwinding of value adjusted instruments of subordinated capital led to an expense of €–10 million (6m 2014: €–9 million).
Instruments
| Fair values and fair value hierarchy of financial instruments | 30.6.2015 | ||||
|---|---|---|---|---|---|
| Carrying | |||||
| in € million | amount | Fair value | Level1 | Level 2 | Level 3 |
| Financial assets | 69,211 | 70,917 | 13,239 | 25,747 | 31,931 |
| at fair value through profit or loss | 6,645 | 6,645 | – | 6,599 | 46 |
| at fair value not affecting profit or loss | 4,341 | 4,341 | 4,042 | 299 | – |
| not measured at fair value in the balance sheet | 58,225 | 59,931 | 9,197 | 18,849 | 31,885 |
| Cash reserve | 1,785 | 1,785 | 1,785 | – | – |
| Trading assets (HfT) | 1,684 | 1,684 | – | 1,684 | – |
| Loans and advances to other banks | 2,789 | 2,809 | 1,463 | 772 | 574 |
| Category LaR | 2,789 | 2,809 | 1,463 | 772 | 574 |
| Loans and advances to customers1) | 40,608 | 42,208 | – | 13,759 | 28,449 |
| Category LaR | 40,608 | 42,208 | – | 13,759 | 28,449 |
| Real Estate Finance | 23,376 | 24,179 | – | – | 24,179 |
| Public Investment Finance | 5,731 | 6,017 | – | 4,256 | 1,761 |
| Value Portfolio | 9,314 | 9,704 | – | 7,693 | 2,011 |
| Consolidation&Adjustments | 2,222 | 2,343 | – | 1,810 | 533 |
| Portfolio-based allowances | –35 | –35 | – | – | –35 |
| Financial investments | 17,085 | 17,171 | 9,991 | 4,318 | 2,862 |
| Category AfS | 4,042 | 4,042 | 4,042 | – | – |
| Category LaR | 13,043 | 13,129 | 5,949 | 4,318 | 2,862 |
| Other assets | 5,260 | 5,260 | – | 5,214 | 46 |
| Fair value hedge derivatives | 4,961 | 4,961 | – | 4,915 | 46 |
| Cash flow hedge derivatives | 299 | 299 | – | 299 | – |
| Financial liabilities | 65,582 | 66,608 | 20,139 | 7,728 | 38,741 |
| at fair value through profit or loss | 6,300 | 6,300 | – | 6,287 | 13 |
| at fair value not affecting profit or loss | 209 | 209 | – | 209 | – |
| not measured at fair value in the balance sheet | 59,073 | 60,099 | 20,139 | 1,232 | 38,728 |
| Liabilities to other banks | 2,381 | 2,454 | 1,325 | – | 1,129 |
| Liabilities to customers | 10,660 | 10,711 | 801 | – | 9,910 |
| Securitised liabilities | 44,803 | 45,711 | 17,997 | 1,232 | 26,482 |
| Covered | 38,220 | 39,481 | 14,734 | 1,006 | 23,741 |
| Uncovered | 6,583 | 6,230 | 3,263 | 226 | 2,741 |
| Trading liabilities (HfT) | 1,670 | 1,670 | – | 1,670 | – |
| Other liabilities | 4,870 | 4,870 | 16 | 4,826 | 28 |
| Fair value hedge derivatives | 4,630 | 4,630 | – | 4,617 | 13 |
| Cash flow hedge derivatives | 209 | 209 | – | 209 | – |
| Other financial liabilities | 31 | 31 | 16 | – | 15 |
| Subordinated capital | 1,198 | 1,192 | – | – | 1,192 |
| Other items | 2,303 | 2,348 | – | – | 2,348 |
| Contingent liabilities | 149 | 149 | – | – | 149 |
| Irrevocable loan commitments | 2,154 | 2,199 | – | – | 2,199 |
1) Reduced by allowances for losses on loans and advances and claims from finance lease agrrements
| Fair values and fair value hierarchy of financial instruments | 31.12.2014 | ||||
|---|---|---|---|---|---|
| in € million | Carrying amount |
Fair value | Level1 | Level 2 | Level 3 |
| Financial assets | 74,623 | 76,959 | 13,345 | 31,390 | 32,224 |
| at fair value through profit or loss | 7,991 | 7,991 | – | 7,916 | 75 |
| at fair value not affecting profit or loss | 5,380 | 5,380 | 4,906 | 474 | – |
| not measured at fair value in the balance sheet | 61,252 | 63,588 | 8,439 | 23,000 | 32,149 |
| Cash reserve | 57 | 57 | 57 | – | – |
| Trading assets (HfT) | 2,016 | 2,016 | – | 2,016 | – |
| Loans and advances to other banks | 6,800 | 6,846 | 1,955 | 3,907 | 984 |
| Category LaR | 6,800 | 6,846 | 1,955 | 3,907 | 984 |
| Loans and advances to customers1) | 38,826 | 41,063 | – | 13,193 | 27,870 |
| Category LaR | 38,826 | 41,063 | – | 13,193 | 27,870 |
| Real Estate Finance | 21,664 | 22,858 | – | – | 22,858 |
| Public Investment Finance | 5,367 | 5,731 | – | 3,560 | 2,171 |
| Value Portfolio | 10,024 | 10,550 | – | 7,694 | 2,856 |
| Consolidation&Adjustments | 1,816 | 1,969 | – | 1,939 | 30 |
| Portfolio-based allowances | –45 | –45 | – | – | –45 |
| Financial investments | 20,475 | 20,528 | 11,333 | 5,900 | 3,295 |
| Category AfS | 4,906 | 4,906 | 4,906 | – | – |
| Category LaR | 15,569 | 15,622 | 6,427 | 5,900 | 3,295 |
| Other assets | 6,449 | 6,449 | – | 6,374 | 75 |
| Fair value hedge derivatives | 5,975 | 5,975 | – | 5,900 | 75 |
| Cash flow hedge derivatives | 474 | 474 | – | 474 | – |
| Financial liabilities | 70,954 | 73,105 | 17,778 | 13,715 | 41,612 |
| at fair value through profit or loss | 7,609 | 7,609 | – | 7,601 | 8 |
| at fair value not affecting profit or loss | 434 | 434 | – | 434 | – |
| not measured at fair value in the balance sheet | 62,911 | 65,062 | 17,778 | 5,680 | 41,604 |
| Liabilities to other banks | 3,187 | 3,322 | 1,690 | 317 | 1,315 |
| Liabilities to customers | 10,593 | 11,035 | 1,192 | – | 9,843 |
| Securitised liabilities | 47,827 | 49,388 | 14,884 | 5,363 | 29,141 |
| Covered | 40,967 | 42,541 | 12,194 | 5,168 | 25,179 |
| Uncovered | 6,860 | 6,847 | 2,690 | 195 | 3,962 |
| Trading liabilities (HfT) | 1,960 | 1,960 | – | 1,958 | 2 |
| Other liabilities | 6,108 | 6,108 | 12 | 6,077 | 19 |
| Fair value hedge derivatives | 5,649 | 5,649 | – | 5,643 | 6 |
| Cash flow hedge derivatives | 434 | 434 | – | 434 | – |
| Other financial liabilities | 25 | 25 | 12 | – | 13 |
| Subordinated capital | 1,279 | 1,292 | – | – | 1,292 |
| Other items | 2,322 | 2,342 | – | – | 2,342 |
| Contingent liabilities | 84 | 84 | – | – | 84 |
| Irrevocable loan commitments | 2,238 | 2,258 | – | – | 2,258 |
1) Reduced by allowances for losses on loans and advances
Instruments
As at 30 June 2015, no financial instruments measured at fair value were reclassified from Level1 to Level 2 or vice versa (31December 2014: none). The same applies to reclassifications from Level 2 to Level 3 (31December 2014: €8 million). Financial assets measured at fair value in the amount of €20 million (31December 2014: €17 million) and financial liabilities in the amount of €1million (31December 2014: €3 million) were reclassified from Level 3 to Level 2 since inputs were observable on the market again.
| Level 2 instruments measured at fair value as of 30.6.2015 |
|---|
| Observable parameters |
| Cap volatilities |
| Euro zone inflation rates |
| Reference interest rates |
| Saisonalities of Euro zone inflation rates |
| Swaption volatilities |
| Volatilities of Euro zone inflation caps |
| Spot market exchange rates |
| Yield curves |
| Cap volatilities |
| CMS Spread Options (strike prices) |
| CMS Spread Options (option prices) |
| Euro zone inflation rates |
| Reference interest rates |
| Saisonalities of Euro zone inflation rates |
| Swaption volatilities |
| Volatilities of Euro zone inflation caps |
| Spot market exchange rates |
| Exchange rate volatilities |
| Yield curves |
| Level 3 instruments measured at fair value as of 30.6.2015 | |
|---|---|
| Non-observable parameters | Range (weighted average) |
| ATM-Swaption-Vola GBP-XO3M beyond 30Y expiry | 33.84% (33.84%) |
| EUR-EONIA beyond 02/07/2065 | 1.58% (1.58%) |
| EUR-EO6M beyond 02/07/2065 | 1.67% (1.67%) |
| Historical index/index correlations | 73.49% (73.49%) |
| Historical index/exchange rate correlations | –1.56% to –17.63% (–9.60%) |
| Vola ASW-Spread_DE0002461860 | 0.51% (0.51%) |
Sensitivities Positive and negative changes of less than €1million each arose for financial assets and liabilities measured at fair value on 30 June 2015. On 31December 2014 the sensitivity analysis resulted in positive and negative changes for liabilitites of €1million each.
| Fair value hedge Cash flow hedge in € million derivatives derivatives Total Balance at 1.1.2014 79 4 83 Through profit or loss 2 –1 1 Purchases 19 – 19 Sales –19 – –19 Reclassification into Level 3 8 – 8 Reclassification out of Level 3 –14 –3 –17 Balance at 31.12.2014 75 – 75 Balance at 1.1.2015 75 – 75 Through profit or loss –9 – Reclassification out of Level 3 –20 – Balance at 30.6.2015 46 – |
Changes in level 3 financial assets | Financial assets at fair value through profit or loss |
Financial assets at fair value not affecting profit or loss |
|
|---|---|---|---|---|
| –9 | ||||
| –20 | ||||
| 46 |
| Changes in level 3 financial liabilities | Financial liabilities at fair value through profit or loss |
||
|---|---|---|---|
| in € million | Trading liabilities | Fair value hedge derivatives |
Total |
| Balance at 1.1.2014 | 2 | 10 | 12 |
| Through profit or loss | – | –1 | –1 |
| Reclassification out of Level 3 | – | –3 | –3 |
| Balance at 31.12.2014 | 2 | 6 | 8 |
| Balance at 1.1.2015 | 2 | 6 | 8 |
| Through profit or loss | –1 | 7 | 6 |
| Reclassification out of Level 3 | –1 | – | –1 |
| Balance at 30.6.2015 | – | 13 | 13 |
The earnings contributions made by trading assets and trading liabilities are presented under net trading income, whereas the effects of hedge relationships recognised in profit or loss are reported under net income from hedging relationships.
Instruments
| Asset and liabilities according to measurement categories and classes according to IAS39 |
||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Assets | 69,451 | 74,623 |
| Loans and receivables (LaR) | 56,440 | 61,195 |
| Available for sale (AfS) | 4,042 | 4,906 |
| Held for trading (HfT) | 1,684 | 2,016 |
| Cash reserve | 1,785 | 57 |
| Claims from finance lease agreements | 240 | – |
| Positive fair values from hedging derivatives | 5,260 | 6,449 |
| Liabilities | 65,582 | 70,954 |
| Held for trading (HfT) | 1,670 | 1,960 |
| Financial liabilities at amortised cost | 59,073 | 62,911 |
| Negative fair values from hedging derivatives | 4,839 | 6,083 |
The following table shows the total portfolio of the partly or completely past due but not impaired loans and advances as of 30 June 2015 and as of 31December 2014. However, no specific allowances were made for these assets respectively the underlying collaterals as pbb Group does not consider that there is any issue regarding their recoverability. Such timing issues in receipts of payments due occur regularly (up to three months) in the normal course of business and are not considered to be an evidence for impairment.
| Carrying amounts of past due but not impaired LaR assets | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| up to 3 months | 3 | 32 |
| more than 3 months to 6 months | 7 | 10 |
| more than 6 months to 1 year | 1 | 7 |
| more than 1 year | 3 | 10 |
| Total | 14 | 59 |
| Carrying amounts LaR assets | ||
|---|---|---|
| in € billion | 30.6.2015 | 31.12.2014 |
| Carrying amount of LaR assets that are neither impaired nor past due | 55.7 | 60.5 |
| Carrying amount of LaR assets that are past due but not impaired (total investment) | – | 0.1 |
| Carrying amount of individually assessed impaired LaR assets (net) | 0.8 | 0.6 |
| Balance of specific allowances | 0.1 | 0.1 |
| Balance of portfolio-based allowances | – | 0.1 |
| Total | 56.6 | 61.4 |
| thereof: Loans and advances to other banks (including investments) |
2.8 | 6.8 |
| Loans and advances to customers (including investments) | 40.7 | 39.0 |
| Financial investments (gross) | 13.1 | 15.6 |
AfS Assets As of 30 June 2015 and as of 31December 2014 pbb Group had neither past due and not impaired nor impaired AfS financial investments in the portfolio.
As of 30 June 2015 and as of 31December 2014, restructuring agreements mainly related to standstill agreements and to the discontinuation of contractual arrangements.
| Restructured loans and advances | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Carrying amount of loans and advances that are neither impaired nor past due | 793 | 1,048 |
| Carrying amount of loans that are past due but not impaired (gross) | 13 | 12 |
| Carrying amount of impaired loans and advances (gross) | 472 | 241 |
| Total | 1,278 | 1,301 |
| Contingent liabilities and other commitments | ||
|---|---|---|
| in € million | 30.6.2015 | 31.12.2014 |
| Contingent liabilities | 149 | 84 |
| Guarantees and warranties | 149 | 84 |
| Performance guarantees and warranties | 149 | 84 |
| Other commitments | 2,154 | 2,238 |
| Irrevocable loan commitments | 2,154 | 2,238 |
| Guarantees | 20 | 6 |
| Mortgage and public sector loans | 2,134 | 2,232 |
| Total | 2,303 | 2,322 |
As of 30 June 2015, Finanzmarktstabilisierungsfonds-FMS, a special fund of the federal government in accordance with Section 2 (2) FMStFG, represents the ultimate parent entity of HRE Holding and thus also of pbb. Accordingly, on balance sheet date, pbb was a government-related entity and a related party to other companies which are controlled, jointly controlled or significantly influenced by the Federal Republic of Germany.
pbb entered into an agreement with HRE Holding during the first half of 2015, according to which all opportunities and risks associated with a property rented on a contractual basis were transferred from pbb to HRE Holding. In return, the Bank agreed to a one-time payment of €24 million to HRE Holding. The restructuring provision recognised so far was reversed accordingly.
Expenses incurred in the context of pbb's privatisation (carried out by HRE Holding) are borne by the seller (again, HRE Holding).
The majority of IT services rendered to DEPFA were discontinued by year-end 2014. With these services, pbb Group generated net income of less than €1million in the first half of 2015 (6m 2014: €18 million).
All further transactions carried out in the first half of 2015 and in the first half of 2015 with companies, which were controlled, jointly controlled or significantly influenced by the Federal Republic of Germany, related to operational business, and overall were immaterial for pbb Group.
| Average number of employees | ||
|---|---|---|
| 1.1.–30.6. 2015 |
1.1.–31.12. 2014 |
|
| Employees (excluding apprentices) | 839 | 838 |
| thereof: senior staff in Germany | 17 | 17 |
| Total | 839 | 838 |
Munich, 4 August 2015
Deutsche Pfandbriefbank AG The Management Board
Andreas Arndt Thomas Köntgen Andreas Schenk Dr.Bernhard Scholz
Financial Statements > Notes >> Other Notes Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the consolidated interim financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group in accordance with German accepted accounting principles, and the Group interim management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group for the remaining months of the fiscal year.
Munich, 4 August 2015
Deutsche Pfandbriefbank AG The Management Board
Andreas Arndt Thomas Köntgen Andreas Schenk Dr.Bernhard Scholz
We have reviewed the condensed interim consolidated financial statements of the Deutsche Pfandbriefbank AG, Munich – comprising consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of change in equity, consolidated statement of cash flows (condensed) and notes (condensed) – together with the group interim management report of the Deutsche Pfandbriefbank, Munich, for the period from 1January to 30 June 2015 that are part of the semi annual financial report according to § 37w WpHG [«Wertpapierhandelsgesetz»: «German Securities Trading Act»]. The preparation of the condensed interim consolidated financial statements in accordance with those IFRS applicable to interim financial reporting as adopted by the EU, and of the interim group management report in accordance with the requirements of the WpHG applicable to interim group management reports, is the responsibility of the Company's management. Our responsibility is to issue a report on the condensed interim consolidated financial statements and on the interim group management report based on our review.
We performed our review of the condensed interim consolidated financial statements and the interim group management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, and that the interim group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditor's report.
Based on our review, no matters have come to our attention that cause us to presume that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, or that the interim group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports.
Munich, 5 August 2015
KPMG AG Wirtschaftsprüfungsgesellschaft [original German version signed by:]
Wirtschaftsprüfer Wirtschaftsprüferin
[German Public Auditor] [German Public Auditor]
Future-oriented Statements
Internet Service Imprint
This report contains future-oriented statements in the form of intentions, assumptions, expectations or forecasts. These statements are based on the plans, estimates and predictions currently available to the management of Deutsche Pfandbriefbank AG. Future-oriented statements therefore only apply on the day on which they are made. We do not undertake any obligation to update such statements in light of new information or future events. By their nature, future-oriented statements contain risks and factors of uncertainty. A number of important factors can contribute to actual results deviating considerably from future-oriented statements. Such factors include the condition of the financial markets in Germany, Europe and the USA, the possible default of borrowers or counterparties of trading companies, the reliability of our principles, procedures and methods for risk management as well as other risks associated with our business activity.
Visit us at the World Wide Web: www.pfandbriefbank.com
Go to «Investor Relations» and find information on external ratings of our Group companies, facts and figures. Our Annual and Interim Reports can be read online, downloaded on your computer or a print version can be ordered online.
Publisher Deutsche Pfandbriefbank AG, Munich, Germany (Copyright 2015)
Concept, Design and Realisation KMS TEAM GmbH, www.kms-team.com
Deutsche Pfandbriefbank AG Freisinger Straße 5 85716 Unterschleißheim Germany T +49 (0)89 2880-0 F +49 (0)89 2880-10319 [email protected]
www.pfandbriefbank.com
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.