C Income statement disclosures
1. Information on operating segments
Financial year 2020
€ million
| Retail Customers and SMEs | Central Institution and Major Corporate Customers | Real Estate Finance | Insurance | Other/ Consolidation | Total | |
|---|---|---|---|---|---|---|
| Net interest income | 15,939 | 1,337 | 1,552 | – | –446 | 18,382 |
| Net fee and commission income | 7,609 | 521 | –112 | – | –579 | 7,439 |
| Gains and losses on trading activities | 211 | 506 | 10 | – | 1 | 728 |
| Gains and losses on investments | –162 | 53 | 67 | – | 49 | 7 |
| Loss allowances | –1,659 | –517 | –108 | – | –43 | –2,327 |
| Other gains and losses on valuation of financial instruments | –101 | –34 | 115 | – | –2 | –22 |
| Premiums earned | – | – | – | 18,741 | – | 18,741 |
| Gains and losses on investments held by insurance companies and other insurance company gains and losses | – | – | – | 2,072 | –64 | 2,008 |
| Insurance benefit payments | – | – | – | –17,561 | – | –17,561 |
| Insurance business operating expenses | – | – | – | –3,046 | 581 | –2,465 |
| Administrative expenses | –15,758 | –1,866 | –891 | – | 479 | –18,036 |
| Other net operating income | 174 | 119 | 51 | 9 | –21 | 332 |
| Profit/loss before taxes | 6,253 | 119 | 684 | 215 | –45 | 7,226 |
| Cost/income ratio (percent) | 66.6 | 74.6 | 52.9 | – | – | 65.4 |
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 |
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
| 2020 € million | 2019 € million | |
|---|---|---|
| Interest income and current income and expense | 22,401 | 23,951 |
| Interest income from | 21,041 | 22,628 |
| Lending and money market business | 19,575 | 21,021 |
| of which: Building society operations | 1,105 | 1,073 |
| Finance leases | 46 | 76 |
| Fixed-income securities | 1,848 | 2,088 |
| Other assets | –135 | –163 |
| Financial assets with a negative effective interest rate | –247 | –318 |
| Current income from | 1,241 | 1,223 |
| Shares and other variable-yield securities | 1,051 | 1,058 |
| Investments in subsidiaries and equity investments | 193 | 152 |
| Operating leases | –3 | 13 |
| Income/loss from using the equity method for | 49 | 35 |
| Investments in joint ventures | 39 | 7 |
| Investments in associates | 10 | 28 |
| Income from profit-pooling, profit-transfer and partial profit-transfer agreements | 70 | 65 |
| Interest expense | –4,019 | –5,766 |
| Interest expense on | –3,795 | –5,559 |
| Deposits from banks and customers | –3,467 | –4,706 |
| of which: Building society operations | –938 | –1,111 |
| Debt certificates issued including bonds | –793 | –1,069 |
| Subordinated capital | –115 | –134 |
| Other liabilities | 2 | 33 |
| Financial liabilities with a positive effective interest rate | 578 | 317 |
| Other interest expense | –224 | –207 |
| Total | 18,382 | 18,185 |
Continued from 2.
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
| 2020 € million | 2019 € million | |
|---|---|---|
| Fee and commission income | 8,929 | 8,445 |
| Securities business | 4,206 | 3,811 |
| Asset management | 516 | 489 |
| Payments processing including card processing | 2,899 | 2,858 |
| Lending business and trust activities | 150 | 167 |
| Financial guarantee contracts and loan commitments | 186 | 175 |
| International business | 148 | 138 |
| Building society operations | 39 | 34 |
| Other | 785 | 773 |
| Fee and commission expenses | –1,490 | –1,353 |
| Securities business | –529 | –439 |
| Asset management | –158 | –134 |
| Payments processing including card processing | –196 | –223 |
| Lending business | –75 | –66 |
| Financial guarantee contracts and loan commitments | –31 | –25 |
| International business | –27 | –28 |
| Building society operations | –62 | –61 |
| Other | –412 | –377 |
| Total | 7,439 | 7,092 |
4. Gains and losses on trading activities
| 2020 € million | 2019 € million | |
|---|---|---|
| Gains and losses on trading in financial instruments | 626 | 411 |
| Gains and losses on trading in foreign exchange, foreign notes and coins, and precious metals | –76 | 55 |
| Gains and losses on commodities trading | 178 | 177 |
| Total | 728 | 643 |
5. Gains and losses on investments
| 2020 € million | 2019 € million | |
|---|---|---|
| Gains and losses on securities | -152 | 749 |
| Gains and losses on investments in subsidiaries and equity investments | 159 | 212 |
| Total | 7 | 961 |
6. Loss allowances
| 2020 € million | 2019 € million | |
|---|---|---|
| Additions | –6,314 | –3,991 |
| Reversals | 4,005 | 3,074 |
| Directly recognized impairment losses | –116 | –97 |
| Recoveries on loans and advances previously impaired | 189 | 214 |
| Other | 26 | 27 |
| Changes in the provisions for loan commitments, provisions for financial guarantee contracts and other provisions for loans and advances | –117 | –59 |
| Total | –2,327 | –832 |
7. Loss allowances – COVID-19-related effects
During the COVID-19 pandemic, the established models and processes for calculating expected losses have generally been retained. The expected macroeconomic conditions are taken into account, primarily by adjusting the model-based default probability profiles used in economic and regulatory risk management (known as shift factors). The shift factors are used to account for current economic conditions (known as a point-in-time focus) and forecasts of future economic conditions for the years covered by the macroeconomic forecast period in the determination of loss allowances. The basis for the shift factors applied as at the balance sheet date are the macroeconomic forecasts provided by DZ BANK's Economic Roundtable in November 2020. For the portfolio segments affected by the pandemic, the shift factors determined using statistical methods were overridden in some areas in consultation with experts because of the extreme COVID-19-related macroeconomic changes, which have not been seen on this scale before, and due to the extensive government support measures. This ensures that the shift factors used are in line with both experts’ expectations and the forecast changes in macroeconomic factors for the calculation of expected losses.
As at the balance sheet date, two macroeconomic scenarios (baseline scenario and risk scenario) were taken into account with a weighting of 80 percent (baseline scenario) and 20 percent (risk scenario).
The baseline scenario is based on the assumption of a further recession in the winter months of 2020/2021 that will give way to an increasingly rapid recovery over the course of 2021. This presupposes that, as has happened, an effective vaccine is developed very quickly and can be rolled out on a broad basis in 2021. The resulting rebound of consumer spending, capital expenditure, and foreign trade will continue to fuel strong growth in 2022 before national economies then return to their trend growth rates. The baseline scenario, with a weighting of 80 percent, reflects the forecasts of the Economic Roundtable made in November 2020, which are almost identical to the ECB scenarios from December 2020.
The risk scenario is based on the assumption that significant problems arise with the vaccines that have been developed, thus casting doubt on their effectiveness. Such problems might include unforeseen side-effects from the vaccines or new mutations of the virus against which the available vaccines are not effective. This will result in a ‘disappointment shock’ for the economy and consumers in 2021 and will significantly hold back the recovery of the economy as a whole. In this scenario, sharp rises in unemployment and huge falls in income make it unlikely that the economy will bounce back in 2021 and 2022. Instead, the economy will probably recover gradually over a period of several years. This scenario will also see further sharp rises in indebtedness.
To mitigate the impact of COVID-19, borrowers and the entities in the DZ BANK Group reached agreement on individual support measures, including the temporary deferral of interest and/or capital repayments. Besides these individual measures, other measures were taken in the context of legislative and non-legislative moratoria on repayments or on the basis of moratoria specified by the Cooperative Financial Network. In accordance with the EBA Guidelines on legislative and non-legislative moratoria on loan repayments applied in the light of the COVID-19 crisis, the general legislative and non-legislative moratoria are, as a rule, not classified as forbearance measures in the event that borrowers face financial difficulties and therefore do not lead to a forbearance-related transfer between stages within the impairment model. A transfer between stages does take place if other transfer criteria are met. This exemption does not apply to individual support measures.
Government support measures in the form of support loans specifically in connection with the pandemic helped to mitigate the impact of the crisis. The Cooperative Financial Network made a significant contribution to these support measures, as illustrated by the approximately 48,000 applications with a volume of over €12 billion that were processed by the Cooperative Financial Network as a channel to pass on development loans from Germany’s KfW development bank and other development banks to companies.
No material deterioration in the value of collateral held in the form of mortgages on real estate is currently observable in connection with the COVID-19 pandemic. The COVID-19 pandemic is particularly affecting real estate in the hotel sector and the non-food segment of the retail sector (e.g. department stores) because they have been hit disproportionately hard as a result of having to close during the lockdowns. The impact of the pandemic on the value of the real estate held as collateral can currently be offset by, for example, low interest rates, low vacancy rates, and a conservative finance structure. Any potential write-down of the value of real estate held as collateral by the entities in the DZ BANK Group is monitored on an ongoing basis, taking account of how the pandemic continues to unfold.
8. Other gains and losses on valuation of financial instruments
| 2020 € million | 2019 € million | |
|---|---|---|
| Gains and losses from fair value hedges | 41 | –2 |
| Gains and losses on derivatives held for purposes other than trading | –173 | –45 |
| Gains and losses on financial instruments designated as at fair value through profit or loss | 110 | 273 |
| Total | –22 | 226 |
9. Premiums earned
| 2020 € million | 2019 € million | |
|---|---|---|
| Net premiums written | 18,754 | 17,255 |
| Gross premiums written | 18,952 | 17,398 |
| Reinsurance premiums ceded | –198 | –143 |
| Change in provision for unearned premiums | –13 | –6 |
| Gross premiums | –14 | –10 |
| Reinsurers' share | 1 | 4 |
| Total | 18,741 | 17,249 |
10. Gains and losses on investments held by insurance companies and other insurance company gains and losses
| 2020 € million | 2019 € million | |
|---|---|---|
| Interest income and current income | 2,250 | 2,447 |
| Administrative expenses | –178 | –171 |
| Gains and losses on valuation and disposals as well as from additions to and reversals of loss allowances | –383 | 3,947 |
| Other gains and losses of insurance companies | 318 | –110 |
| Total | 2,007 | 6,113 |
The net amount of additions to and reversals of loss allowances as well as directly recognized impairment losses recorded in the financial year with expenses of €59 million (2019: income of €2 million).
11. Insurance benefit payments
| 2020 € million | 2019 € million | |
|---|---|---|
| Expenses for claims | –12,122 | –11,953 |
| Gross expenses for claims | –12,201 | –11,981 |
| Reinsurers' share | 79 | 28 |
| Changes in benefit reserve, reserve for premium refunds, and in other insurance liabilities | –5,439 | –7,387 |
| Changes in gross provisions | –5,453 | –7,402 |
| Reinsurers' share | 14 | 15 |
| Total | –17,561 | –19,340 |
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
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At the end of the year | 4,845 | 4,716 | 4,551 | 4,276 | 4,173 | 3,856 | 3,634 | 3,901 | 3,345 | 3,341 | 3,324 |
| 1 year later | 4,606 | 4,471 | 4,142 | 4,103 | 3,767 | 3,523 | 3,847 | 3,336 | 3,359 | 3,135 | |
| 2 years later | 4,405 | 4,067 | 4,046 | 3,682 | 3,457 | 3,769 | 3,247 | 3,279 | 3,160 | ||
| 3 years later | 4,021 | 4,020 | 3,647 | 3,389 | 3,731 | 3,220 | 3,254 | 3,139 | |||
| 4 years later | 3,980 | 3,625 | 3,382 | 3,696 | 3,189 | 3,241 | 3,122 | ||||
| 5 years later | 3,624 | 3,389 | 3,691 | 3,198 | 3,250 | 3,139 | |||||
| 6 years later | 3,329 | 3,626 | 3,126 | 3,183 | 3,080 | ||||||
| 7 years later | 3,616 | 3,118 | 3,172 | 3,065 | |||||||
| 8 years later | 3,108 | 3,165 | 3,060 | ||||||||
| 9 years later | 3,153 | 3,059 | |||||||||
| 10 years later | 3,060 | ||||||||||
| Settlements | – | 110 | 146 | 255 | 193 | 232 | 305 | 285 | 237 | 188 | 264 |
Net claims provisions in direct business and payments made against the original provisions:
€ million
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At the end of the year | 4,787 | 4,702 | 4,518 | 4,255 | 4,110 | 3,827 | 3,574 | 3,669 | 3,313 | 3,298 | 3,254 |
| 1 year later | 4,589 | 4,438 | 4,118 | 4,050 | 3,736 | 3,460 | 3,613 | 3,300 | 3,317 | 3,056 | |
| 2 years later | 4,373 | 4,044 | 3,994 | 3,655 | 3,393 | 3,533 | 3,211 | 3,236 | 3,077 | ||
| 3 years later | 3,999 | 3,965 | 3,624 | 3,331 | 3,490 | 3,180 | 3,208 | 3,057 | |||
| 4 years later | 3,928 | 3,601 | 3,361 | 3,465 | 3,139 | 3,194 | 2,939 | ||||
| 5 years later | 3,602 | 3,369 | 3,670 | 3,166 | 3,191 | 3,049 | |||||
| 6 years later | 3,309 | 3,605 | 3,095 | 3,144 | 2,957 | ||||||
| 7 years later | 3,594 | 3,087 | 3,134 | 2,981 | |||||||
| 8 years later | 3,076 | 3,127 | 2,977 | ||||||||
| 9 years later | 3,115 | 2,977 | |||||||||
| 10 years later | 2,978 | ||||||||||
| Settlements | – | 113 | 145 | 256 | 182 | 225 | 265 | 75 | 237 | 183 | 276 |
Claims rate trend for inward reinsurance business
Gross claims provisions in inward reinsurance business and payments made against the original provisions:
€ million
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross provisions for claims outstanding | 5,009 | 4,411 | 3,642 | 3,197 | 2,718 | 2,433 | 1,976 | 1,710 | 1,506 | 1,409 | 1,190 |
| Cumulative payments for the year concerned and prior years | |||||||||||
| 1 year later | 1,082 | 955 | 852 | 569 | 622 | 464 | 481 | 385 | 463 | 437 | |
| 2 years later | 1,396 | 1,237 | 852 | 867 | 783 | 685 | 630 | 640 | 632 | ||
| 3 years later | 1,482 | 1,062 | 1,022 | 919 | 897 | 764 | 345 | 739 | |||
| 4 years later | 1,189 | 1,154 | 1,026 | 987 | 930 | 891 | 856 | ||||
| 5 years later | 1,249 | 1,117 | 1,051 | 996 | 1,029 | 922 | |||||
| 6 years later | 1,171 | 1,114 | 1,035 | 1,072 | 1,043 | ||||||
| 7 years later | 1,155 | 1,085 | 1,103 | 1,067 | |||||||
| 8 years later | 1,117 | 1,140 | 1,090 | ||||||||
| 9 years later | 1,161 | 1,106 | |||||||||
| 10 years later | 1,119 | ||||||||||
| Gross provisions for claims outstanding and payments made against the original provision | |||||||||||
| At the end of the year | 5,009 | 4,411 | 3,642 | 3,197 | 2,718 | 2,433 | 1,976 | 1,710 | 1,506 | 1,409 | 1,190 |
| 1 year later | 4,313 | 3,951 | 3,392 | 2,654 | 2,434 | 2,157 | 1,840 | 1,593 | 1,536 | 1,402 | |
| 2 years later | 3,651 | 3,315 | 2,561 | 2,271 | 2,004 | 1,859 | 1,569 | 1,472 | 1,343 | ||
| 3 years later | 3,131 | 2,486 | 2,224 | 1,915 | 1,779 | 1,628 | 1,014 | 1,338 | |||
| 4 years later | 2,361 | 2,179 | 1,887 | 1,720 | 1,580 | 1,528 | 1,360 | ||||
| 5 years later | 2,088 | 1,848 | 1,699 | 1,550 | 1,501 | 1,396 | |||||
| 6 years later | 1,779 | 1,677 | 1,536 | 1,486 | 1,379 | ||||||
| 7 years later | 1,627 | 1,526 | 1,481 | 1,368 | |||||||
| 8 years later | 1,490 | 1,468 | 1,354 | ||||||||
| 9 years later | 1,444 | 1,337 | |||||||||
| 10 years later | 1,324 | ||||||||||
| Settlements | – | 98 | –9 | 66 | 357 | 345 | 197 | 83 | 16 | –35 | –134 |
Net claims provisions in inward reinsurance business and payments made against the original provisions:
€ million
| 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net provisions for claims outstanding | 5,001 | 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 | |||||||||||
| 1 year later | 1,082 | 955 | 851 | 567 | 622 | 464 | 473 | 383 | 461 | 432 | |
| 2 years later | 1,396 | 1,236 | 849 | 866 | 782 | 677 | 620 | 636 | 625 | ||
| 3 years later | 1,480 | 1,058 | 1,020 | 918 | 888 | 754 | 333 | 729 | |||
| 4 years later | 1,186 | 1,153 | 1,025 | 978 | 919 | 878 | 839 | ||||
| 5 years later | 1,247 | 1,115 | 1,042 | 985 | 1,016 | 904 | |||||
| 6 years later | 1,170 | 1,105 | 1,024 | 1,059 | 1,025 | ||||||
| 7 years later | 1,146 | 1,074 | 1,090 | 1,049 | |||||||
| 8 years later | 1,105 | 1,126 | 1,071 | ||||||||
| 9 years later | 1,147 | 1,086 | |||||||||
| 10 years later | 1,100 | ||||||||||
| Net provisions for claims outstanding and payments made against the original | |||||||||||
| At the end of the year | 5,001 | 4,408 | 3,639 | 3,193 | 2,710 | 2,428 | 1,970 | 1,695 | 1,491 | 1,389 | 1,164 |
| 1 year later | 4,310 | 3,950 | 3,388 | 2,648 | 2,429 | 2,152 | 1,827 | 1,576 | 1,519 | 1,377 | |
| 2 years later | 3,649 | 3,312 | 2,555 | 2,267 | 1,999 | 1,845 | 1,554 | 1,454 | 1,321 | ||
| 3 years later | 3,129 | 2,482 | 2,219 | 1,911 | 1,766 | 1,612 | 997 | 1,314 | |||
| 4 years later | 2,356 | 2,176 | 1,883 | 1,708 | 1,566 | 1,510 | 1,337 | ||||
| 5 years later | 2,086 | 1,845 | 1,687 | 1,536 | 1,484 | 1,372 | |||||
| 6 years later | 1,777 | 1,666 | 1,522 | 1,470 | 1,357 | ||||||
| 7 years later | 1,616 | 1,513 | 1,464 | 1,346 | |||||||
| 8 years later | 1,477 | 1,453 | 1,332 | ||||||||
| 9 years later | 1,429 | 1,317 | |||||||||
| 10 years later | 1,304 | ||||||||||
| Settlements | – | 98 | –10 | 64 | 354 | 342 | 193 | 79 | 14 | –40 | –140 |
12. Insurance business operating expenses
| 2020 € million | 2019 € million | |
|---|---|---|
| Gross expenses | –2,489 | –2,389 |
| Reinsurers' share | 24 | 19 |
| Total | –2,465 | –2,370 |
13. Administrative expenses
| 2020 € million | 2019 € million | |
|---|---|---|
| Staff expenses | –10,092 | –10,100 |
| General and administrative expenses | –6,843 | –6,976 |
| Depreciation/amortization and impairment losses | –1,101 | –1,066 |
| Total | –18,036 | –18,142 |
14. Other net operating income
| 2020 € million | 2019 € million | |
|---|---|---|
| Gains and losses on non-current assets classified as held for sale and disposal groups | 49 | 211 |
| Other operating income | 998 | 983 |
| Other operating expenses | –714 | –800 |
| Total | 333 | 394 |
15. Income taxes
| 2020 € million | 2019 € million | |
|---|---|---|
| Current tax expense | –2,606 | –2,758 |
| Income from/expense on deferred taxes | 414 | –375 |
| Total | –2,192 | –3,133 |
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. Also as in the previous year, the effective rate for trade tax is 15.26 percent based on an average trade tax multiplier of 436 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.
| 2020 € million | 2019 € million | |
|---|---|---|
| Profit before taxes | 7,226 | 10,179 |
| Notional rate of income tax of the Cooperative Financial Network (percent) | 31.085 | 31.085 |
| Income taxes based on notional rate of income tax | –2,246 | –3,164 |
| Tax effects | 54 | 31 |
| Tax effects of tax-exempt income and non-tax deductible expenses | 29 | 171 |
| Tax effects of different tax types, different trade tax multipliers, and changes in tax rates | 17 | 12 |
| Tax effects of different tax rates in other countries | –1 | 10 |
| Current and deferred taxes relating to prior reporting periods | 19 | –12 |
| Change in deferred tax assets due to valuation adjustments | –30 | –37 |
| Other tax effects | 20 | –113 |
| Total | –2,192 | –3,133 |
The table shows a reconciliation from notional income taxes to recognized income taxes based on application of the current tax law in Germany.