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NOTES ON INDIVIDUAL ITEMS 2016

BALANCE SHEET

(Balance sheet figures refer to 31 December of each year).

 

BREAKDOWN OF RECEIVABLES BY RESIDUAL MATURITY

The following breakdown of receivables (apart from those payable on demand) is shown according to residual maturity:

  Up to 3 months Between 3 months
and 1 year
1 to 5 years More than 5 years Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Other receivables from banks 771 1,369 191 330 184 228 9 91 1,155 2,019
Due from clients 4,424 4,456 219 306 356 440 136 104 5,135 5,306

 

Amounts due on demand from clients totalled EUR 340 million (2015: EUR 367 million).

 

BONDS AND OTHER FIXED-INTEREST SECURITIES

Bonds and other fixed-income securities totalling EUR 708 million (2015: EUR 681 million) are due within the next year.

In accordance with the retention option, the Bank has maintained value adjustments totalling EUR 14 million (2015: EUR 16.5 million), which are no longer justified.

Bonds and other fixed-income securities amounting to EUR 2,889 million (2015: EUR 2,544 million) are attributable to current assets. Part of fixed assets is an amount of EUR 1,110 million (2015: EUR 1,517 million), which includes debt instruments approved for refinancing, an amount of EUR 3,438 million (2015: EUR 3,611 million). Bonds of a nominal amount of EUR 2,302 million (2015: EUR 1,877 million) are in a valuation unit with hedging transactions; the market value of these securities amounts to EUR 2,411 million (2015: EUR 1,990 million). The corresponding market values of the hedging transactions amount to EUR -93 million (2015: EUR -101 million).

 

REPURCHASE TRANSACTIONS

On the balance sheet date, securities with a market value of EUR 376 million (2015: EUR 344 million) were delivered as genuine repurchase agreements.

 

LISTED AND UNLISTED SECURITIES

  Listed Unlisted Total
in EUR million 2016 2015 2016 2015 2016 2015
Bonds and other fixed-interest securities 3,927 3,974 72 87 3,999 4.061
Equities and other variable-interest securities 0 0 4 4 4 4
Shares in affiliated companies 0 0 188 201 188 201
Total 3,927 3.974 264 292 4,191 4.266

 

On the balance sheet date, an amount of securities of EUR 311 million (2015: EUR 194 million) were deposited as collateral.

 

SHARES IN AFFILIATED COMPANIES

The Bank holds shares in affiliated credit institutions totalling EUR 177.5 million (2015: EUR 198 million), in an affiliated financial institution EUR 3 million (2015: EUR 3 million), and in DZ PRIVATBANK Singapore Ltd. (in liquidation) EUR 7.3 million. Shares in affiliated companies in which the Bank has a stake of not less than 20% of the equity capital:

  Registered office Holding in & Book value Equity

Latest net profit figure

In EUR ‘000     2016 *) *)
DZ PRIVATBANK (Schweiz) AG Zürich 100 177,500 162,729 181
DZ PRIVATBANK Singapore Ltd. **) Singapore 100 7,267 7,267 -1,065
IPConcept (Luxemburg) S.A. Luxembourg 100 3,000 4,580 4,441

*) as at the date of the latest annual financial statements

**) currently in liquidation

During the reporting year, Europäische Genossenschaftsbank S.A. merged with DZ PRIVATBANK S.A. The effects of the merger (other revenue reserves of EUR 1.4 million and collective general valuation adjustments of EUR 0.1 million) were transferred to other revenue reserves and collective general valuation adjustments respectively without recognition as profit or loss.

OTHER ASSETS

in EUR million 31/12/2016 31/12/2015
Tax assets 20 13
Other receivables 29 25
Option premiums paid 0 71


The other receivables mainly include commission claims.

 

ACCRUALS AND DEFERRALS

Prepayments and accrued income of EUR 95.4 million are mainly comprised of EUR 58.7 million in deferred interest, as well as foreign currency adjustment items of EUR 25.6 million and upfront payments of EUR 11 million. Deferrals of EUR 151.1 million are mainly comprised of EUR 54.8 million in deferred interest, as well as foreign currency adjustment items of EUR 44.6 million, upfront payments of EUR 21.9 million and discounts of EUR 26.8 million.

 

FINANCIAL ASSETS

The developments of financial assets over the course of the year can be shown as follows:

  Shares in affiliated companies Bonds and other
fixed-interest securities
Total financial assets
in EUR million 2016 2015 2016 2015 2016 2015
Gross value as at 1 January 244 244 1,518 1,693 1,762 1,937
Additions 0 0 8 0 8 0
Disposals 11 0 413 176 424 176
Foreign exchange adjustments 0 0 1 1 1 1
Gross value as at 31 December 233 244 1,114 1,518 1,347 1,762
Cumulative value adjustments
as at 1 January
45 43 0 0 45 43
Additions 0 0 4 1 4 1
Net value as at 31 December 188 201 1,110 1,517 1,298 1,718

 

TANGIBLE FIXED ASSETS

The performance of tangible assets during the year can be shown as follows:

  Land and buildings Furniture, fittings and equipment Total tangible fixed assets
in EUR million 2016 2015 2016 2015 2016 2015
Gross value as at 1 January 83 83 51 52 134 135
Additions 0 0 3 2 3 2
Disposals 0 0 12 3 12 3
Gross value as at 31 December 83 83 42 51 125 134
Accumulated additions for value adjustments 43 42 35 44 78 86
Net value as at 31 December 40 41 7 7 47 48

 

The share of real property used by the Bank for its own business operations amounts to EUR 37 million.

 

INTANGIBLE ASSETS

The development in intangible assets over the course of the year can be shown as follows:

  Purchased goodwill Software/licences Total intangible assets
in EUR million 2016 2015 2016 2015 2016 2015
Gross value as at 1 January 39 37 44 41 83 78

Additions

0 2 2 3 2 5
Disposals 0 0 3 0 3 0
Gross value as at 31 December 39 39 43 44 82 83
Accumulated additions for value adjustments 36 35 39 36 75 71
Net value as at 31 December 3 4 4 8 7 12

 

The gross value of goodwill as at 1 January 2016 relates to private customer portfolios acquired in 2011, 2012 and 2013. The capitalised goodwill is amortised over a period of five years. The net book value of software/licences was divided into software of EUR 2 million and licences of EUR 2 million.

 

RECEIVABLES AND LIABILITIES TO/FROM AFFILIATED COMPANIES AND SUBORDINATED ASSETS

  Affiliated companies
in EUR million 2016 2015
Assets 568 1,315
Due from banks 401 1,198
Due from clients 27 5
Bonds and other fixed-interest securities 140 41
Other assets 0 71
Liabilities 227 1,104
Liabilities to banks 177 949
Liabilities to clients 50 155

 

There were no subordinated liabilities as at the balance sheet date.

 

ASSETS AND LIABILITIES IN FOREIGN CURRENCY

The equivalent value of balance sheet items in foreign currency was as follows:

in EUR million 2016 2015
Assets 7,687 7,237
Liabilities 6,863 7,153

 

Open currency positions in the balance sheet are offset by corresponding off balance sheet foreign currency transactions.

 

ACCUMULATED WRITE-OFFS ON PREMIUMS AND DISCOUNTS

Write-offs accumulated since the day of purchase on premiums and discounts charged/paid on bonds and other fixed-interest securities forming part of the financial assets amount to EUR 11.9 million and EUR -1.1 million respectively (2015: EUR 9.2 million (EUR -3.1 million).

 

BREAKDOWN OF LIABILITIES ACCORDING TO RESIDUAL MATURITY

The following breakdown of liabilities (apart from those payable on demand) is shown according to residual maturity:

  Up to 3 months Between 3 months and 1 year 1 to 5 years More than
5 years
Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Liabilities to banks 1,564 1,713 322 507 9 10 0 5 1,895 2,235
Other amounts due to clients 874 715 120 95 3 24 10 10 1,007 844
Bonds issued 0 0 842 164 693 1.328 314 71 1,849 1,563
Other securitised liabilities 2,122 1,773 428 204 0 0 0 0 2,550 1,977

 

The other securitised liabilities relate, inter alia, to the ECP programme. The volume of these rose slightly during the reporting year due to the market situation.

 

SUNDRY LIABILITIES

Composition according to the most important items:

in EUR million 31/12/2016 31/12/2015
Preferential liabilities 4 2
Redemption liabilities 8 15
Sundry liabilities 11 13

 

The redemption liabilities essentially relate to maturing fund coupons. Sundry liabilities relate, inter alia, to open commission payments (EUR 0.8 million), outstanding administrative expenses (EUR 2.5 million) and liabilities towards pension funds (EUR 5.7 million).

 

SUBORDINATED LOANS

As at the balance sheet date, the Bank reported subordinated external funds totalling EUR 15 million. The interest expense relating to these amounted to EUR 916,000 during the financial year. Subordinated bearer bonds of EUR 7.5 million are allocated to additional capital.

In EUR '000 Amount Interest rate Maturity date
Bearer bonds 15,000 6.1 05/07/2019

 

COLLECTIVE GENERAL VALUATION ADJUSTMENT

Tax-allowable collective general valuation adjustments of EUR 43.9 million (2015: EUR 11.7 million) are capitalised. An amount of EUR 32.2 million was added during the reporting year.
 

 

FUND FOR GENERAL BANKING RISKS

The fund is endowed with EUR 112.8 million for general banking risks (2015: EUR 111 million). An amount of EUR 1.8 million was added during the reporting year.

 

SUBSCRIBED CAPITAL

The subscribed capital amounts to EUR 116.6 million. The capital is divided into 18,281,925 fully paid-up A registered shares and 4,482,688 fully paid-up B registered shares of no par value.
 

RESERVES

Statutory reserves amount to EUR 11.7 million. In accordance with Article 72 of the law of 10 August 1915, 5% of the annual profit is required to be transferred to the reserve until it is equal to 10% of the subscribed capital. Statutory reserves may not be distributed. After the allocation (not carried to profit or loss) due to the merger with Europäische Genossenschaftsbank S.A., other reserves amount to EUR 74.1 million, of which EUR 56.6 million are earmarked for the purpose of settling the wealth tax.

 

LUXEMBOURG RESOLUTION FUNDS, DEPOSIT GUARANTEE SCHEMES AND INVESTOR COMPENSATION

Under the law of 18 December 2015 on the implementation of the BRRD (Bank Recovery and Resolution Directive) in Luxembourg law, EU Directive 2014/49/EU on deposit guarantee schemes and investor compensation was also implemented. The Luxembourg Deposit Guarantee Fund (Fonds de garantie des dépôts Luxembourg, FGDL) was founded under Article 154 of this Law. The Luxembourg investor compensation scheme (Système d’indemnisation des investisseurs Luxembourg, SIIL) was created under Article 156 of the same law.

These deposits are guaranteed up to an amount of EUR 100,000 and assets under custody up to an amount of EUR 20,000.
However, the law stipulates that deposits which result from specific transactions or serve specific social or other purposes are covered for twelve months once over EUR 100,000 is paid in.

During 2016, DZ PRIVATBANK S.A. joined FGDL (in March 2016) and SIIL (in August 2016). In the event of a guarantee claim being made, the annual payment obligation of each member of the SIIL (ex-post procedure) is limited to 5% of the equity capital.

The Luxembourg Resolution Fund (Fonds de résolution Luxembourg, FRL) was established under Article 105 of the above-mentioned law. DZ PRIVATBANK S.A. paid a bank levy of EUR 2.3 million during the reporting year. The ADGL provision is used in a corresponding amount for these purposes. DZ PRIVATBANK S.A. used the option to deposit 15% (EUR 0.3 million) of the bank levy as Irrevocable Payment Commitments (IPC). Exercising the option means that only 85% of the bank levy can be recognised in the income statement.

DZ PRIVATBANK S. A. is also, by means of a voluntary guarantee scheme, a member of the BVR protection scheme under the
German Volksbanken Raiffeisenbanken cooperative financial network (BVR) in Germany. The German branches of DZ PRIVATBANK S.A. are legally dependent and, via the membership of DZ PRIVATBANK S.A., are in the legal deposit guarantee scheme in Luxembourg and the voluntary deposit guarantee scheme of the BVR. In order to meet guarantee obligations that are accepted by BVR for the collective guarantee scheme, DZ PRIVATBANK S.A. has assumed a guarantee obligation of EUR 4.8 million pursuant to the statute of the protection scheme.

 

 

OFF BALANCE SHEET ITEMS

(Figures refer to 31 December of each year).

CONTINGENT LIABILITIES

The following contingent liabilities exist:

in EUR million 2016 2015
Guarantees and other credit substitutes 45 45

 

As at 31 December 2016, contingent liabilities in relation to affiliated companies amounted to EUR 11.0 million (2015: EUR 11.0 million).

 

CREDIT RISKS

Credit risk is as follows:

in EUR million 2016 2015
Company loan commitments 28 26
incl.: Forward purchases of assets 5 3

 

As at the balance sheet date, there were no fixed lending commitments.

 

CURRENT FORWARD TRANSACTIONS (BY RESIDUAL MATURITY)
EXCHANGE RATE LINKED TRANSACTIONS (NOMINALS)

  Up to 3 months Between
3 months
and 1 year
1 to 5 years More than
5 years
Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Forward exchange transactions on organised markets (futures/options) 773 836 0 0 0 0 0 0 773 836
Forward exchange transactions OTC (swaps/outrights) 14,057 21,302 2,799 4,421 33 58 0 0 16,889 25,781
Interest rate and currency swaps 0 240 322 374 733 941 0 102 1,055 1,657
Non-value dated spot transactions 406 483 0 0 0 0 0 0 406 483

These include transactions with affiliated companies amounting to EUR 2,178 million (2015: EUR 4,685 million).
 


INTEREST RATE-LINKED TRANSACTIONS (NOMINALS)

  Up to 3 months Between
3 months
and 1 year

1 to 5 years

More than
5 years
Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Interest rate swaps 208 203 538 553 2,877 2,870 1,267 995 4,970 4,621
Interest rate futures 7,662 6.875 703 222,639 1,352 714 0 0 9,717 230,138
Options on organised markets 1,402 123 87 0 0 0 0 0 1,489 123
Interest limit agreements (caps) 3 104 0 0 0 0 0 0 3 104


Interest rate linked transactions that are not for hedging purposes include open positions amounting to EUR 70 million (2015: EUR 60 million); EUR 709 million (2015: EUR 650 million) relates to transactions with affiliated companies.
 

TRANSACTIONS LINKED TO OTHER MARKET RATES (NOMINALS)

  Up to 3 months Between
3 months
and 1 year

1 to 5 years

More than
5 years
Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Futures on variable interest securities 12 7 0 5 2 3 0 0 14 15
Options on variable interest securitites 2,243 1,165 677 400 322 135 0 0 3,242 1,700

These transactions were conducted solely with other companies.
 

MANAGEMENT AND AGENCY SERVICES

The Bank provides the following management and agency services to third parties:

  • Investment advice or asset management
  • Securities deposit and management
  • Safe deposit box rental
  • Trusteeship services
  • Payment agent function
  • Custodian bank function
  • Services to cooperative banks
  • Business procurement

PROFIT AND LOSS ACCOUNT

Other operating expenditure:

in EUR '000
Operating expenditure 2016 2015
Addition to provision for risks on depositary activities* 10,000 0
Contribution to subsidiary companies 2,485 0
Off-period expenditure 2,442 1,465
Addition to investor protection (SIIL) provision 2,400 0
Addition to provision for closure costs of subsidiary companies 800 0
Addition to provision for private banking 120 0
Addition to provision for staff costs 100 8
Addition to provision for banking operations risks 76 7,100
Other expenses 306 1,229
Summe 18,729 11,268

*The Bank made use of the tax option during the year to create a provision for latent risks of EUR 99,532 million for 0.1 per mille of the volume of funds in custody.

Other operating income:

in EUR '000
Operating income 2016 2015
Writing back of provisions 4,355 1,845
Refund of wage continuation insurance 1,054 1,353
Off-period income 1,896 3,406
Rental income 902 865
Other income 512 1,332
Summe 8,719 8,801

 

STAFF AND CORPORATE BODIES

AVERAGE NUMBER OF STAFF

In the year under review, the Bank's staff numbers averaged:

Group 2016 2015
Board of Management, Chief Representatives, Directeurs and Directeurs-Adjoints 47 46
Senior management 67 62
Employees 795 751
Total 909 859

 

EMOLUMENTS, PENSION COMMITMENTS AND LOANS TO THE BANK'S GOVERNING BODIES

Group Board of Management,
Chief Representatives, Directeurs and
Directeurs-Adjoints
Supervisory Board
in EUR '000 2016 2015 2016 2015
Salaries, emoluments, benefits 7,385 8,255 277 284
Social insurance for pensions 985 1,261 0 0
Loans, guarantees 1,363 791 786 800

 

Loans and guarantees consist of short-term loans as well as collateral loans and rental guarantees.

OTHER

BREAKDOWN OF EARNINGS ACCORDING TO GEOGRAPHICAL MARKETS

  Luxembourg Germany Rest of Europe Other countries Total
in EUR million 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Interest and similar income 12 12 221 216 51 50 19 18 303 296
Commission income 106 109 47 50 4 3 3 4 160 166
Other operating income 7 7 2 2 0 0 0 0 9 9
Total 125 128 270 268 55 53 22 22 472 471

 

AUDITOR'S FEES

The audit fee for Ernst & Young for the 2016 financial year consists of auditing fees of EUR 444,000 and other audit services of EUR 98,000 (all amounts are exclusive of VAT).

 

OTHER GUARANTEES AND COMMITMENTS

The Bank signed an unlimited and irrevocable guarantee for an unlimited period for its subsidiary DZ PRIVATBANK Singapore Ltd in favour of the Monetary Authority of Singapore in order to fulfil its contractual obligations and to guarantee an appropriate level of liquidity. This guarantee expires when the liquidation is completed.

The Bank’s corporate pension scheme is provided by the GENO pension fund Assep. As at 31/12/2016, the plan assets of the fund for employees of the Bank amounted to EUR 68.3 million. The Bank has undertaken to guarantee the solvency and financing, as well as the hedging of all actuarial provisions at all times, by allocating additional funds.

The provisions for pensions and similar obligations reported on the Bank’s balance sheet primarily relate to the pension commitments for the employees of the Dusseldorf branch, amounting to EUR 1.9 million, the creation of a EUR 3 million provision for future pension claims and the flat-rate income taxes adopted by the Bank amounting to EUR 1.1 million.

Future expenses resulting from rental liabilities, due over the remaining term of the lease, amount to EUR 30.6 million.

 

INTEGRATED COMPANY

On 1 January 2007, a taxable integrated company was founded between the Bank, as the controlling company, and IPConcept (Luxemburg) S.A. as the subsidiary company. Europäische Genossenschaftsbank S.A. ceased to be a group company during the year due to the merger with DZ PRIVATBANK S.A.

ANALYSIS OF PRIMARY FINANCIAL INSTRUMENTS

The following tables subdivide the Bank’s primary financial instruments of the non-trading portfolio and by balance sheet items and residual maturities as at 31 December 2016. There are no primary financial instruments which were attributable to trading portfolios.

CLASS OF INSTRUMENT (FINANCIAL ASSET ITEMS)

 

Primary financial instruments of the non-trading portfolio (by residual term)  

Book value in EUR million

Up to
3 months

Between
3 months and 1 year
1 to 5 years More than 5 years No maturity date Total
Cash, balances with central banks and post office accounts 1,944 - - - - 1,944
Due from banks 3,721 191 184 9 - 4,105
Due from non-banks 4,764 219 356 136 - 5,475
Bonds and other fixed-interest securities 259 449 2,426 865 - 3,999
Equities and other variable-interest securities - - - - 4 4
Total financial assets           15,527
Other assets           387
Total assets           15,914

Explanation: The amounts provided are net figures, i.e. charges for bad and doubtful debts have already been subtracted.

CLASS OF INSTRUMENT (FINANCIAL LIABILITY ITEMS)

  Primary financial instruments of the non-trading portfolio (by residual term)  
Book value in EUR million Up to
3 months
Between 3 months and 1 year 1 to 5 years More than
5 years
No maturity date Total
Due from banks 1,709 322 9 - - 2,040

Liabilities
Non-banking institutions

8,306 120 3 10 - 8,439

Securitised liabilities
- bonds

- 842 693 314 - 1,849
- Other 2,122 428 - - - 2,550
Subordinated loans (external) - - 15 - - 15
Sundry liabilities 23 - - - - 23
Total financial assets           14,916
Other assets           998
Total assets           15,914

ANALYSIS OF FINANCIAL DERIVATIVES

The following tables provide a summary of the Bank's derivative financial instruments. The transactions are subdivided into the various underlying transactions and residual maturities as at 31 December 2016. The classification of derivative instruments into assets or liabilities depends on whether the transaction has a positive or negative market value. A positive market value corresponds to the expenses incurred by the Bank for a substitute transaction should the contracting party default. Options are classified according to maturity.

 

DERIVATIVE INSTRUMENTS NOT PART OF TRADING PORTFOLIO

  Nominals

Up to 3 months

Between 3 months and 1 year 1 to 5 years More than 5 years Total

Nominal amount in EUR million

  Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities
Class of instruments                      
Interest - OTC                      
Swaps 4,971 11 277 171 367 575 2,302 482 786 1,239 3,732
Caps / Floors 6 - - 0 - 2 3 - 1 2 4
Interest - listed                      
Futures 10 - - - - 10 - - - - 10
Foreign currencies / precious metals - OTC                      
Forwards 11,001 5,044 4,646 641 639 16 15 - - 5,701 5,300
Swaps (FX/CCS) 7,044 2,347 2,063 1,259 627 93 655 - - 3,699 3,345
Total                   10,641 12,391

 

DERIVATIVE INSTRUMENTS OF THE TRADING PORTFOLIO (MARKET VALUE IN EUR MILLION)

 

As at 31 December 2016 there were no derivative transactions in the trading portfolio.

 

DERIVATIVE INSTRUMENTS NOT PART OF TRADING PORTFOLIO

Instruments in EUR million Total market value Deferred Interest Adjusted market values
Swaps - Cross-Currency -110 1 -111
Currency forwards 2 - 2
Swaps - Currencies 98 - 98
Swaps - Interest -204 -44 -160
Summe -214 -43 -171

 

ANALYSIS OF THE CREDIT RISK FROM FINANCIAL DERIVATIVES

The following table provides an overview of the credit risk resulting from derivative instruments. In addition to the current market value, the credit risk also covers potential market values that could arise from future market price fluctuations.

 

CREDIT RISK FOR DERIVATIVE INSTRUMENTS

(applying the market risk method)

Type of derivative in EUR million

Nominals (1) Current market value(2) Potential future market(3) Provisions (4) Global market value (5) = (2) + (3) - (4) Collateral (6) Net risk management (7) = (5) - (6)
Interest rate swaps 4,347 10 30 - 40 - 40
Bonds-Futures 10 - - - - - -
Currency swaps/ CCS / forwards 15,853 246 187 - 433 - 433
Caps / floors / swaptions 4 - - - - - -
Total             473

 

The credit risk calculated here does not take internal transactions into account.

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