Deutsche Bank Ag · XETR:DBK
Deutsche Bank — Investor Presentation (April 2007)
45 slides from Deutsche Bank's investor presentation, Apr 19, 2007
Slide 1: Transition to IFRS
Transition to IFRS Analyst and Media Workshop Frankfurt, 19 April 2007
Slide 2: Agenda
financial transparency. Agenda 1 Introduction Anthony di Iorio Martin Edelmann, 2 Impact and key differences Charlotte Jones 3 Summary Anthony di Iorio Investor Relations / Press and Media Relations 04/07 · 2
Slide 3: Background
financial transparency. Background In the past, consolidated financial statements of listed German companies could be based on U.S. GAAP, IFRS or HGB EU regulation and Bilanzrechtsreformgesetz require DB to prepare consolidated financial statements under IFRS (International Financial Reporting S
Slide 4: Documents published today
financial transparency. Documents published today Transition Report Workshop presentation IFRS FDS Investor Relations / Press and Media Relations 04/07 · 4
Slide 5: Scope of information
financial transparency. Scope of information The information provided today… … gives an overview of the impact of IFRS on 2006 comparatives; it is not a full set of financial statements … was prepared on the basis of standards and interpretations issued and effective at 31 Dec 2006 … complies
Slide 6: Impact on key 2006 financial and risk measures not material
financial transparency. Impact on key 2006 financial and risk measures not material 2006 / 31 Dec 2006, in EUR m U.S. GAAP IFRS Difference Revenues 28,008 28,196 188 Expenses 19,883 19,857 (26) Pre-tax income 8,125 8,339 214 Net income 5,986 6,070 84 Shareholders’ equity 32,808 32,666 (142) Total as
Slide 7: Agenda
financial transparency. Agenda 1 Introduction Anthony di Iorio Martin Edelmann, 2 Impact and key differences Charlotte Jones 3 Summary Anthony di Iorio Investor Relations / Press and Media Relations 04/07 · 7
Slide 8: IFRS first-time adoption
financial transparency. IFRS first-time adoption General principle – All IFRS were applied retrospectively – Adjustments between previous GAAP and IFRS relating to events and transactions prior to the transition date were recognized directly in retained earnings (or another category of equity wher
Slide 9: Overview of impact – Net income 2006
financial transparency. Overview of impact – Net income 2006 In EUR m 228 41 6,070 9 6,079 42 (94) 5,986 (26) (37) (34) (36) 84 U.S. Consoli- Loan ori- Fair Financial Share Derivatives Real Tax IFRS net Minority IFRS GAAP dation gination value instru- plans & on DB estate, income interest total net
Slide 10: Overview of impact – Equity as at 31 Dec 2006
financial transparency. Overview of impact – Equity as at 31 Dec 2006 In EUR m 717 33,383 32,808 417 1,034 32,666 (2) (295) (193) (257) 39 (886) (142) U.S. Consoli- Loan ori- Fair Financial Share Derivatives Real Tax IFRS Minority IFRS GAAP dation gination value instru- plans & on DB estate, share-
Slide 11: Key difference: Consolidation (A)
financial transparency. Key difference: Consolidation (A) Financial impact Accounting background In EUR m Different approach to consolidation of special IFRS vs U.S. GAAP purpose entities No exemption for QSPEs (qualifying special purpose entities) from consolidation Net income (post-tax) 41 200
Slide 12: Key difference: Loan origination costs (B)
financial transparency. Key difference: Loan origination costs (B) Financial impact Accounting background In EUR m Internal loan origination costs are expensed if IFRS vs U.S. GAAP non-incremental (can be capitalized and recognized over lifetime of loan under U.S. GAAP) Pre-tax income At transit
Slide 13: Key difference: Fair value option (C)
financial transparency. Key difference: Fair value option (C) Financial impact Accounting background In EUR m Any financial asset and liability may be IFRS vs U.S. GAAP designated at fair value through P&L on initial recognition and at transition to IFRS where one of the following criteria is met:
Slide 14: Key difference: Fair value option (C) – Details
financial transparency. Key difference: Fair value option (C) – Details In EUR m Financial Pre-tax Shareholders’ impact income equity Rationale Businesses 2006 31 Dec 2006 Reduce accounting asymmetry between certain Loan Exposure 148 (142) investment grade loans / loan commitments Management Group*
Slide 15: Key difference: Equity method investments (D)
financial transparency. Key difference: Equity method investments (D) Financial impact Accounting background In EUR m No specific guidance to use the equity method IFRS vs U.S. GAAP of accounting for 3 to 20% interests in limited liability partnerships or corporations Only use the equity method
Slide 16: Key difference: Definition of a derivative (E)
financial transparency. Key difference: Definition of a derivative (E) Financial impact Accounting background In EUR m No net settlement requirement to be met IFRS vs U.S. GAAP when assessing for derivative classification Therefore, more contracts are classified as derivatives Pre-tax income 66
Slide 17: Key difference: Loans held for sale reclassified to trading (F)
financial transparency. Key difference: Loans held for sale reclassified to trading (F) Financial impact Accounting background In EUR m No loans held for sale classification, thus, the IFRS vs U.S. GAAP rules of IAS 39 have to be applied The majority of loans held for sale were classified as tra
Slide 18: Key difference: Financial assets available for sale (G)
financial transparency. Key difference: Financial assets available for sale (G) Financial impact Accounting background In EUR m Classification of non-marketable equity IFRS vs U.S. GAAP investments as AFS at fair value rather than as other investments at historical cost less impairment, if the fai
Slide 19: Key difference: Financial asset derecognition (H)
financial transparency. Key difference: Financial asset derecognition (H) Financial impact Accounting background In EUR m Derecognition primarily based on risks and IFRS vs U.S. GAAP rewards Control only considered if the risks and rewards analysis is inconclusive Pre-tax income 20 2006 Business
Slide 20: Key difference: Real estate & leasing (I)
financial transparency. Key difference: Real estate & leasing (I) Financial impact Accounting background In EUR m No deferral and amortization of gains arising IFRS vs U.S. GAAP in sale and leasebacks if the sale is at fair value Different impairment trigger because the Pre-tax income impairment
Slide 21: Key difference: Share-based compensation (J)
financial transparency. Key difference: Share-based compensation (J) Financial impact Accounting background In EUR m Expense amortization for early retirement is not IFRS vs U.S. GAAP from grant to vesting date but instead to the date when the employee meets the eligibility criteria Under IFRS t
Slide 22: Key difference: Pensions (K)
financial transparency. Key difference: Pensions (K) Financial impact Accounting background In EUR m DB elected to recognize all previously IFRS vs U.S. GAAP unrecognized actuarial gains / losses in retained earnings at transition Therefore, amortization of these gains and Pre-tax income losses
Slide 23: Key difference: Derivatives on DB shares (L)
financial transparency. Key difference: Derivatives on DB shares (L) Financial impact Accounting background In EUR m IFRS requires derivatives indexed to, and IFRS vs U.S. GAAP settled in, DB shares to be treated as equity instruments Under U.S. GAAP these instruments are Pre-tax income treated
Slide 24: Key difference: Tax (O)
financial transparency. Key difference: Tax (O) Financial impact Accounting background In EUR m Tax impact of aforementioned differences IFRS vs U.S. GAAP Share-based compensation impact: – Deferred tax assets on share-based compensation schemes are calculated Tax (37)(1) – based on share price
Slide 25: Tax impact from share-based compensation: Two scenarios
financial transparency. Tax impact from share-based compensation: Two scenarios Scenario 1: Scenario 2: Current share price higher than at grant Current share price lower than at grant Excess tax benefit = Credit to equity Shortfall of taxes = Debit to tax line Market value at delivery / reporting d
Slide 26: Tax impact from share-based comp under IFRS: Example
financial transparency. Tax impact from share-based comp under IFRS: Example Assumptions: Grant of one share on 1 Jan of year 1 at 100, 4-year vesting period, straight-line amortization, 40% tax rate Scenario 1: Scenario 2: Share price is 150 at end of year 2 Share price is 50 at end of year 2 Accou
Slide 27: Equity reclassifications reduce future net income charges
financial transparency. Equity reclassifications reduce future net income charges Financial impact Explanation As of 1 Jan 2006, Tax reversal: in EUR bn Debit to Credit to retained other equity Future sales of industrial holdings earnings components will not result in a change to the reported tax
Slide 28: IFRS impact on provision for credit losses
financial transparency. IFRS impact on provision for credit losses When a loan is identified as impaired, the impairment loss is measured as the difference between the carrying amount of the loan and the net present value of expected future cash flows Under IFRS the accretion of the net present
Slide 29: Overview of impact – Balance sheet as at 31 Dec 2006
financial transparency. Overview of impact – Balance sheet as at 31 Dec 2006 In EUR bn 40 1,572 52 1,531 303 51 1,126 405 Gross-up impact U.S. GAAP Positive Reverse Receivables U.S. GAAP Consolidation IFRS total assets MTM(1) on repos from unsettled total assets & other total assets derivativies reg
Slide 30: IFRS grosses up the balance sheet, but risk is unchanged
financial transparency. IFRS grosses up the balance sheet, but risk is unchanged Financial impact Explanation Impact of different IFRS does not have specific netting guidance netting rules on the for derivatives, repos / reverse repos and balance sheet, in IFRS vs U.S. GAAP unsettled regular way t
Slide 31: Key difference: Regulatory capital
financial transparency. Key difference: Regulatory capital Financial impact Explanation 31 Dec 2006, IFRS requires derivatives indexed to in EUR m IFRS vs and settled in DB shares to be treated IFRS U.S. GAAP as equity instruments which had the effect of reducing Tier I capital BIS core capital
Slide 32: IFRS shareholders' equity vs IFRS BIS core capital
financial transparency. IFRS shareholders’ equity vs IFRS BIS core capital As of 31 Dec 2006, in EUR m 32,666 27,404 (3,163) 4,496 (2,099) 23,539 (148) (8,213) Total Net unrealized Dividend Adjusted Goodwill, Hybrids Others BIS core shareholders’ gains on accrued shareholders intangibles capital equ
Slide 33: Key differences: EPS and RoE
financial transparency. Key differences: EPS and RoE Financial impact Explanation 2006, in EUR Basic EPS was negatively impacted by treating IFRS vs IFRS early retirement awards as outstanding shares U.S. GAAP Dilution increased due to accelerated expense amortization for share-based compensatio
Slide 34: Agenda
financial transparency. Agenda 1 Introduction Anthony di Iorio Martin Edelmann, 2 Impact and key differences Charlotte Jones 3 Summary Anthony di Iorio Investor Relations / Press and Media Relations 04/07 · 34
Slide 35: Summary
financial transparency. Summary The application of IFRS will not change… … how we manage our businesses and our business strategy … our cash flows … our risk and capital management … our dividend policy Investor Relations / Press and Media Relations 04/07 · 35
Slide 36: Streamlining financial disclosure (1)
financial transparency. Streamlining financial disclosure (1) Historical presentation has included different formats to provide greater transparency of the impact of our management agenda Reported Underlying Target Significant progress on management agenda since 2002 With transition to I
Slide 37: Streamlining financial disclosure (2)
financial transparency. Streamlining financial disclosure (2) Future focus will be on reported P&L Previously indicated intent to eliminate ‘underlying’ results and focus on reported figures Differences between ‘underlying’ and reported substantially reduced IFRS presentation requires fewer
Slide 38: Additional Information
Additional Information Analyst and Media Workshop Frankfurt, 19 April 2007
Slide 39: Our target definition
financial transparency. Our target definition Pre-tax return on equity (target definition) IBIT attributable to DB shareholders (target definition) IBIT attributable to DB shareholders (target definition) Reported income before income tax expense Less minority interest Average active equity IBIT att
Slide 40: Reconciliation of pre-tax targets (RoE / IBIT)
financial transparency. Reconciliation of pre-tax targets (RoE / IBIT) In EUR m 2006 1Q 2Q 3Q 4Q FY Income before income tax expense (IBIT) 2,601 2,042 1,782 1,915 8,339 Less minority interest (13) (4) (7) 15 (9) IBIT attributable to DB shareholders 2,587 2,038 1,775 1,930 8,331 Significant gains (n
Slide 41: Reconciliation of EPS target
financial transparency. Reconciliation of EPS target In EUR m 2006 1Q 2Q 3Q 4Q FY Net income attributable to DB shareholders 1,636 1,352 1,239 1,843 6,070 Post-tax effect of significant gains / charges (131) - (160) - (291) Significant tax effects - - - (355) (355) Net income attributable to DB shar
Slide 42: Number of shares for EPS calculation
financial transparency. Number of shares for EPS calculation In million Average 2006 31 Dec 2006 US GAAP IFRS Diff. US GAAP IFRS Diff. Common shares issued 522 522 - 525 525 - Total shares in treasury (22) (22) - (26) (26) - Common shares outstanding 500 500 - 499 499 - SFAS 150 effect (65) (65) - (
Slide 43: How both U.S. GAAP and IFRS treat deferred taxes on share-based compensation
financial transparency. How both U.S. GAAP and IFRS treat deferred taxes on share-based compensation The compensation expense for share awards equals the fair market value of the award at grant, i.e. share price at grant less discount for discounted dividend The compensation expense is not adjus
Slide 44: Tax impact from share-based compensation: Where U.S. GAAP and IFRS differ
financial transparency. Tax impact from share-based compensation: Where U.S. GAAP and IFRS differ U.S. GAAP IFRS Timing Adjusted at delivery only Adjusted at every reporting date of adjustment All awards outstanding Awards recognized Awards vested (proportionally, as amortized) and vested Credit to
Slide 45: Cautionary statements
financial transparency. Cautionary statements Preliminary information: The purpose of this presentation is to provide an overview of the impact of the transition of Deutsche Bank’s consolidated financial statements from U.S. GAAP to IFRS on the 2006 results. The information provided herein does not