C Income statement disclosures
1. Information on operating segments
Financial year 2019
€ million
| Retail Customers and SMEs | Central Institution and Major Corporate Customers | Real Estate Finance | Insurance | Other/ Consolidation | Total | |
|---|---|---|---|---|---|---|
| Net interest income | 16,197 | 1,421 | 1,305 | – | –738 | 18,185 |
| Net fee and commission income | 7,281 | 531 | –121 | – | –599 | 7,092 |
| Gains and losses on trading activities | 196 | 450 | –2 | – | –1 | 643 |
| Gains and losses on investments | 711 | 37 | 186 | – | 27 | 961 |
| Loss allowances | –628 | –226 | 26 | – | –4 | –832 |
| Other gains and losses on valuation of financial instruments | –56 | –5 | 287 | – | – | 226 |
| Premiums earned | – | – | – | 17,249 | – | 17,249 |
| Gains and losses on investments held by insurance companies and other insurance company gains and losses | – | – | – | 6,192 | –79 | 6,113 |
| Insurance benefit payments | – | – | – | –19,340 | – | –19,340 |
| Insurance business operating expenses | – | – | – | –2,973 | 603 | –2,370 |
| Administrative expenses | –15,732 | –1,971 | –875 | – | 436 | –18,142 |
| Other net operating income | 242 | 115 | 57 | –11 | –9 | 394 |
| Profit/loss before taxes | 8,211 | 352 | 863 | 1,117 | –364 | 10,179 |
| Cost/income ratio (percent) | 64,0 | 77,3 | 51,1 | – | – | 62,2 |
Financial year 2018
€ million
| Retail Customers and SMEs | Central Institution and Major Corporate Customers | Real Estate Finance | Insurance | Other/ Consolidation | Total | |
|---|---|---|---|---|---|---|
| Net interest income | 16,321 | 1,371 | 1,423 | – | –747 | 18,368 |
| Net fee and commission income | 6,918 | 550 | –110 | – | –542 | 6,816 |
| Gains and losses on trading activities | 195 | 267 | 1 | – | –2 | 461 |
| Gains and losses on investments | –1,130 | 195 | 6 | – | 16 | –913 |
| Loss allowances | –232 | 70 | 2 | – | 9 | –151 |
| Other gains and losses on valuation of financial instruments | –34 | –79 | –16 | – | 7 | –122 |
| Premiums earned | – | – | – | 15,997 | – | 15,997 |
| Gains and losses on investments held by insurance companies and other insurance company gains and losses | – | – | – | 1,342 | –96 | 1,246 |
| Insurance benefit payments | – | – | – | –14,208 | – | –14,208 |
| Insurance business operating expenses | – | – | – | –2,721 | 549 | –2,172 |
| Administrative expenses | –15,386 | –1,944 | –885 | – | 136 | –18,079 |
| Other net operating income | 274 | 1 | 56 | 3 | 194 | 528 |
| Profit/loss before taxes | 6,926 | 431 | 477 | 413 | –476 | 7,771 |
| Cost/income ratio (percent) | 68,2 | 84,3 | 65,1 | – | – | 69,5 |
Definition of operating segments
The Volksbanken Raiffeisenbanken Cooperative Financial Network is founded on the underlying principle of decentralization. It is based on the local cooperative banks, whose business activities are supported by the central institution – DZ BANK – and by specialized service providers within the cooperative sector. These specialized service providers are integrated into the central institution. The main benefit derived by the cooperative banks from their collaboration with these specialized services providers and the central institution is that they can offer a full range of financial products and services.
The operating segment “Retail Customers and SMEs” covers private banking and activities relating to asset management. The segment focuses on retail clients. It mainly includes cooperative banks as well as the DZ PRIVATBANK, TeamBank AG Nürnberg (TeamBank) and Union Investment Group.
The operating segment “Central Institution and Major Corporate Customers” combines the activities of the Cooperative Financial Network in the corporate customers, institutional customers and capital markets businesses. The operating segment focuses on corporate customers. It essentially comprises DZ BANK, the VR Smart Finanz sub-group and DVB Bank Group.
The Real Estate Finance operating segment encompasses the buildings society operations, mortgage banking, and real estate business. The entities allocated to this operating segment include the Bausparkasse Schwäbisch Hall Group (BSH), DZ HYP AG, and MHB.
Insurance operations are reported under the Insurance operating segment. This operating segment consists solely of R+V.
Other/Consolidation contains the BVR protection scheme as well as BVR Institutssicherung GmbH (BVR-ISG), whose task is to avert impending or existing financial difficulties faced by member institutions by taking preventive action or implementing restructuring measures. This operating segment also includes intersegment consolidation items.
Presentation of the disclosures on operating segments
The information on operating segments presents the interest income generated by the operating segments and the associated interest expenses on a netted basis as net interest income.
Intersegment consolidation
The adjustments to the figure for net interest income resulted largely from the consolidation of dividends paid within the Cooperative Financial Network.
The figure under Other/Consolidation for net fee and commission income relates specifically to the fee and commission business transacted between the primary banks, TeamBank, BSH, and R+V.
The figure under Other/Consolidation for administrative expenses includes the contributions paid to
BVR-SE and BVR-ISG by member institutions of the Cooperative Financial Network.
The remaining adjustments are largely attributable to the consolidation of income and expenses.
2. Net interest income
| 2019 € million | 2019 € million | |
|---|---|---|
| Interest income and current income and expense | 23,951 | 23,659 |
| Interest income from | 22,628 | 22,463 |
| Lending and money market business | 21,021 | 21,222 |
| of which: Building society operations | 1,073 | 1,044 |
| Finance leases | 76 | 113 |
| Fixed-income securities | 2,088 | 2,080 |
| Other assets | –163 | –541 |
| Financial assets with a negative effective interest rate | –318 | –298 |
| Current income from | 1,223 | 1,113 |
| Shares and other variable-yield securities | 1,058 | 973 |
| Investments in subsidiaries and equity investments | 152 | 141 |
| Operating leases | 13 | –1 |
| Income/loss from using the equity method for | 35 | 38 |
| Investments in joint ventures | 7 | 24 |
| Investments in associates | 28 | 14 |
| Income from profit-pooling, profit-transfer and partial profit-transfer agreements | 65 | 45 |
| Interest expense | –5,766 | –5,291 |
| Interest expense on | –5,559 | –5,058 |
| Deposits from banks and customers | –4,706 | –4,530 |
| of which: Building society operations | –1,111 | –828 |
| Debt certificates issued including bonds | –1,069 | –820 |
| Subordinated capital | –134 | –172 |
| Other liabilities | 33 | 130 |
| Financial liabilities with a positive effective interest rate | 317 | 334 |
| Other interest expense | –207 | –233 |
| Total | 18,185 | 18,368 |
Continued from 2. Net interest income
The interest income from other assets and the interest expense on other liabilities result from gains and losses on the amortization of fair value changes of the hedged items in portfolio hedges of interest-rate risk. Owing to the current low level of interest rates in the money markets and capital markets, there may be a negative effective interest rate for financial assets and a positive effective interest rate for financial liabilities
3. Net fee and commission income
| 2019 € million | 2018 € million | |
|---|---|---|
| Fee and commission income | 8,445 | 7,989 |
| Securities business | 3,811 | 3,499 |
| Asset management | 489 | 423 |
| Payments processing including card processing | 2,858 | 2,746 |
| Lending business and trust activities | 167 | 174 |
| Financial guarantee contracts and loan commitments | 175 | 171 |
| International business | 138 | 132 |
| Building society operations | 34 | 31 |
| Other | 773 | 813 |
| Fee and commission expenses | –1,353 | –1,173 |
| Securities business | –439 | –342 |
| Asset management | –134 | –121 |
| Payments processing including card processing | –223 | –215 |
| Lending business | –66 | –55 |
| Financial guarantee contracts and loan commitments | –25 | –22 |
| International business | –28 | –24 |
| Building society operations | –61 | –69 |
| Other | –377 | –325 |
| Total | 7,092 | 6,816 |
4. Gains and losses on trading activities
| 2019 € million | 2018 € million | |
|---|---|---|
| Gains and losses on trading in financial instruments | 411 | 179 |
| Gains and losses on trading in foreign exchange, foreign notes and coins, and precious metals | 55 | 104 |
| Gains and losses on commodities trading | 177 | 178 |
| Total | 643 | 461 |
5. Gains and losses on investments
| 2019 € million | 2018 € million | |
|---|---|---|
| Gains and losses on securities | 749 | –1,034 |
| Gains and losses on investments in subsidiaries and equity investments | 212 | 121 |
| Total | 961 | -913 |
6. Loss allowances
| 2019 € million | 2018 € million | |
|---|---|---|
| Additions | –3,991 | –3,453 |
| Reversals | 3,074 | 3,061 |
| Directly recognized impairment losses | –97 | –110 |
| Recoveries on loans and advances previously impaired | 214 | 232 |
| Other | 27 | 18 |
| Changes in the provisions for loan commitments, provisions for financial guarantee contracts and other provisions for loans and advances | –59 | 101 |
| Total | -832 | -151 |
7. Other gains and losses on valuation of financial instruments
| 2019 € million | 2018 € million | |
|---|---|---|
| Gains and losses from hedge accounting | –2 | –21 |
| Fair value hedges | –2 | –22 |
| Ineffectiveness of hedges of net investments in foreign operations | – | 1 |
| Gains and losses on derivatives held for purposes other than trading | –45 | –53 |
| Gains and losses on financial instruments designated as at fair value through profit or loss | 273 | –37 |
| Gains and losses from contingent consideration in business combinations | – | –11 |
| Total | 226 | –122 |
8. Premiums earned
| 2019 € million | 2018 € million | |
|---|---|---|
| Net premiums written | 17,255 | 16,009 |
| Gross premiums written | 17,398 | 16,133 |
| Reinsurance premiums ceded | –143 | –124 |
| Change in provision for unearned premiums | –6 | –12 |
| Gross premiums | –10 | –7 |
| Reinsurers’ share | 4 | –5 |
| Total | 17,249 | 15,997 |
9. Gains and losses on investments held by insurance companies and other insurance company gains and losses
| 2019 € million | 2018 € million | |
|---|---|---|
| Interest income and current income | 2,447 | 2,411 |
| Administrative expenses | –171 | –150 |
| Gains and losses on valuation and disposals as well as from additions to and reversals of loss allowances | 3,947 | –1,187 |
| Other gains and losses of insurance companies | –110 | 172 |
| Total | 6,113 | 1,246 |
The net amount of additions to and reversals of loss allowances as well as directly recognized impairment losses recorded in the financial year was €2 million (2018: €1 million).
10. Insurance benefit payments
| 2019 € million | 2018 € million | |
|---|---|---|
| Expenses for claims | –11,953 | –10,742 |
| Gross expenses for claims | –11,981 | –10,786 |
| Reinsurers’ share | 28 | 44 |
| Changes in benefit reserve, reserve for premium refunds, and in other insurance liabilities | –7,387 | –3,466 |
| Changes in gross provisions | –7,402 | –3,483 |
| Reinsurers’ share | 15 | 17 |
| Total | –19,340 | –14,208 |
Claims rate trend for direct non-life insurance business including claim settlement costs
Gross claims provisions in direct business and payments made against the original provisions:
€ million
| 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At the end of the year | 4,716 | 4,551 | 4,276 | 4,173 | 3,856 | 3,634 | 3,901 | 3,345 | 3,341 | 3,324 | 2,953 |
| 1 year later | – | 4,471 | 4,142 | 4,103 | 3,767 | 3,523 | 3,847 | 3,336 | 3,359 | 3,135 | 2,901 |
| 2 years later | – | – | 4,067 | 4,046 | 3,682 | 3,457 | 3,769 | 3,247 | 3,279 | 3,160 | 2,763 |
| 3 years later | – | – | – | 4,020 | 3,647 | 3,389 | 3,731 | 3,220 | 3,254 | 3,139 | 2,756 |
| 4 years later | – | – | – | – | 3,625 | 3,382 | 3,696 | 3,189 | 3,241 | 3,122 | 2,756 |
| 5 years later | – | – | – | – | – | 3,389 | 3,691 | 3,198 | 3,250 | 3,139 | 2,768 |
| 6 years later | – | – | – | – | – | – | 3,626 | 3,126 | 3,183 | 3,080 | 2,710 |
| 7 years later | – | – | – | – | – | – | – | 3,118 | 3,172 | 3,065 | 2,685 |
| 8 years later | – | – | – | – | – | – | – | – | 3,165 | 3,060 | 2,680 |
| 9 years later | – | – | – | – | – | – | – | – | – | 3,059 | 2,680 |
| 10 years later | – | – | – | – | – | – | – | – | – | – | 2,674 |
| Settlements | – | 80 | 209 | 153 | 231 | 245 | 275 | 227 | 176 | 265 | 279 |
Net claims provisions in direct business and payments made against the original provisions:
€ million
| 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|
| At the end of the year | 4,702 | 4,518 | 4,255 | 4,110 | 3,827 | 3,574 | 3,669 | 3,313 | 3,298 | 3,254 |
| 1 year later | – | 4,438 | 4,118 | 4,050 | 3,736 | 3,460 | 3,613 | 3,300 | 3,317 | 3,056 |
| 2 years later | – | – | 4,044 | 3,994 | 3,655 | 3,393 | 3,533 | 3,211 | 3,236 | 3,077 |
| 3 years later | – | – | – | 3,965 | 3,624 | 3,331 | 3,490 | 3,180 | 3,208 | 3,057 |
| 4 years later | – | – | – | – | 3,601 | 3,361 | 3,465 | 3,139 | 3,194 | 2,939 |
| 5 years later | – | – | – | – | – | 3,369 | 3,670 | 3,166 | 3,191 | 3,049 |
| 6 years later | – | – | – | – | – | – | 3,605 | 3,095 | 3,144 | 2,957 |
| 7 years later | – | – | – | – | – | – | – | 3,087 | 3,134 | 2,981 |
| 8 years later | – | – | – | – | – | – | – | – | 3,127 | 2,977 |
| 9 years later | – | – | – | – | – | – | – | – | – | 2,977 |
| Settlements | – | 80 | 211 | 145 | 226 | 205 | 64 | 226 | 171 | 277 |
Claims rate trend for inward reinsurance business
Gross claims provisions in inward reinsurance business and payments made against the original provisions:
€ million
| 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross provisions for claims outstanding | 4,411 | 3,642 | 3,197 | 2,718 | 2,433 | 1,976 | 1,710 | 1,506 | 1,409 | 1,190 | 892 |
| Cumulative payments for the year concerned and prior years | |||||||||||
| 1 year later | – | 955 | 852 | 569 | 622 | 464 | 481 | 385 | 463 | 437 | 282 |
| 2 years later | – | – | 1,237 | 852 | 867 | 783 | 685 | 630 | 640 | 632 | 399 |
| 3 years later | – | – | – | 1,062 | 1,022 | 919 | 897 | 764 | 345 | 739 | 468 |
| 4 years later | – | – | – | – | 1,154 | 1,026 | 987 | 930 | 891 | 856 | 516 |
| 5 years later | – | – | – | – | – | 1,117 | 1,051 | 996 | 1,029 | 922 | 588 |
| 6 years later | – | – | – | – | – | – | 1,114 | 1,035 | 1,072 | 1,043 | 626 |
| 7 years later | – | – | – | – | – | – | – | 1,085 | 1,103 | 1,067 | 652 |
| 8 years later | – | – | – | – | – | – | – | – | 1,140 | 1,090 | 658 |
| 9 years later | – | – | – | – | – | – | – | – | – | 1,106 | 684 |
| 10 years later | – | – | – | – | – | – | – | – | – | – | 696 |
| Gross provisions for claims outstanding and payments made against the original provision | |||||||||||
| At the end of the year | 4,411 | 3,642 | 3,197 | 2,718 | 2,433 | 1,976 | 1,710 | 1,506 | 1,409 | 1,190 | 892 |
| 1 year later | – | 3,951 | 3,392 | 2,654 | 2,434 | 2,157 | 1,840 | 1,593 | 1,536 | 1,401 | 1,026 |
| 2 years later | – | – | 3,315 | 2,561 | 2,271 | 2,004 | 1,859 | 1,569 | 1,472 | 1,343 | 872 |
| 3 years later | – | – | – | 2,486 | 2,224 | 1,915 | 1,779 | 1,628 | 1,014 | 1,338 | 826 |
| 4 years later | – | – | – | – | 2,179 | 1,887 | 1,720 | 1,580 | 1,528 | 1,360 | 837 |
| 5 years later | – | – | – | – | – | 1,848 | 1,699 | 1,550 | 1,501 | 1,396 | 858 |
| 6 years later | – | – | – | – | – | – | 1,677 | 1,536 | 1,486 | 1,379 | 870 |
| 7 years later | – | – | – | – | – | – | – | 1,526 | 1,481 | 1,368 | 876 |
| 8 years later | – | – | – | – | – | – | – | – | 1,468 | 1,354 | 873 |
| 9 years later | – | – | – | – | – | – | – | – | – | 1,337 | 864 |
| 10 years later | – | – | – | – | – | – | – | – | – | – | 856 |
| Settlements | – | –309 | –118 | 232 | 254 | 128 | 33 | –20 | –59 | –147 | 36 |
Net claims provisions in inward reinsurance business and payments made against the original provisions:
€ million
| 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Net provisions for claims outstanding | 4,408 | 3,639 | 3,193 | 2,710 | 2,428 | 1,970 | 1,695 | 1,491 | 1,389 | 1,164 |
| Cumulative payments for the year concerned and prior years | ||||||||||
| 1 year later | – | 955 | 851 | 567 | 622 | 464 | 473 | 383 | 461 | 432 |
| 2 years later | – | – | 1,236 | 849 | 866 | 782 | 677 | 620 | 636 | 625 |
| 3 years later | – | – | – | 1,058 | 1,020 | 918 | 888 | 754 | 333 | 729 |
| 4 years later | – | – | – | – | 1,153 | 1,025 | 978 | 919 | 878 | 839 |
| 5 years later | – | – | – | – | – | 1,115 | 1,042 | 985 | 1,016 | 904 |
| 6 years later | – | – | – | – | – | – | 1,105 | 1,024 | 1,059 | 1,025 |
| 7 years later | – | – | – | – | – | – | – | 1,074 | 1,090 | 1,049 |
| 8 years later | – | – | – | – | – | – | – | – | 1,126 | 1,071 |
| 9 years later | – | – | – | – | – | – | – | – | – | 1,086 |
| Net provisions for claims outstanding and payments made against the original provision | ||||||||||
| At the end of the year | 4,408 | 3,639 | 3,193 | 2,710 | 2,428 | 1,970 | 1,695 | 1,491 | 1,389 | 1,164 |
| 1 year later | – | 3,950 | 3,388 | 2,648 | 2,429 | 2,152 | 1,827 | 1,576 | 1,519 | 1,377 |
| 2 years later | – | – | 3,312 | 2,555 | 2,267 | 1,999 | 1,845 | 1,554 | 1,454 | 1,321 |
| 3 years later | – | – | – | 2,482 | 2,219 | 1,911 | 1,766 | 1,612 | 997 | 1,314 |
| 4 years later | – | – | – | – | 2,176 | 1,883 | 1,708 | 1,566 | 1,510 | 1,337 |
| 5 years later | – | – | – | – | – | 1,845 | 1,687 | 1,536 | 1,484 | 1,372 |
| 6 years later | – | – | – | – | – | – | 1,666 | 1,522 | 1,470 | 1,357 |
| 7 years later | – | – | – | – | – | – | – | 1,513 | 1,464 | 1,346 |
| 8 years later | – | – | – | – | – | – | – | – | 1,453 | 1,332 |
| 9 years later | – | – | – | – | – | – | – | – | – | 1,317 |
| Settlements | – | –311 | –119 | 228 | 252 | 125 | 29 | –22 | –64 | –153 |
11. Insurance business operating expenses
| 2019 € million | 2018 € million | |
|---|---|---|
| Gross expenses | –2,389 | –2,193 |
| Reinsurers’ share | 19 | 21 |
| Total | –2,370 | –2,172 |
12. Administrative expenses
| 2019 € million | 2018 € million | |
|---|---|---|
| Staff expenses | –10,100 | –10,076 |
| General and administrative expenses | –6,976 | –7,011 |
| Depreciation/amortization and impairment losses | –1,066 | –992 |
| Total | –18,142 | –18,079 |
13. Other net operating income
| 2019 € million | 2018 € million | |
|---|---|---|
| Gains and losses on non-current assets classified as held for sale and disposal groups | 211 | 2 |
| Other operating income | 983 | 1,266 |
| Other operating expenses | –800 | –740 |
| Total | 394 | 528 |
14. Income taxes
| 2019 € million | 2018 € million | |
|---|---|---|
| Current tax expense | –2,758 | –2,731 |
| Expense on/income from deferred taxes | –375 | 362 |
| Total | –3,133 | –2,369 |
As in the prior year, current taxes in relation to the German limited companies are calculated using an effective corporation tax rate of 15.825 percent based on a corporation tax rate of 15 percent plus the solidarity surcharge. The effective rate for trade tax is 15.26 percent (2018: 14.35 percent) based on an average trade tax multiplier of 436 percent (2018: 410 percent).
Deferred taxes must be calculated using tax rates expected to apply when the tax asset or liability arises. The tax rates used are therefore those that are valid or have been announced for the periods in question as at the balance sheet date.
| 2019 € million | 2018 € million | |
|---|---|---|
| Profit before taxes | 10,179 | 7,771 |
| Notional rate of income tax of the Cooperative Financial Network (percent) | 31,085 | 30,175 |
| Income taxes based on notional rate of income tax | –3,164 | –2,345 |
| Tax effects | 31 | –24 |
| Tax effects of tax-exempt income and non-tax deductible expenses | 171 | 22 |
| Tax effects of different tax types, different trade tax multipliers, and changes in tax rates | 12 | 14 |
| Tax effects of different tax rates in other countries | 10 | –20 |
| Current and deferred taxes relating to prior reporting periods | –12 | 32 |
| Change in deferred tax assets due to valuation adjustments | –37 | 3 |
| Other tax effects | –113 | –75 |
| Total | –3,133 | –2,369 |
The table shows a reconciliation from notional income taxes to recognized income taxes based on application of the current tax law in Germany.