C Income statement disclosures
6. Information on operating segments
Financial year 2023
€ million
| Retail Customers and SMEs | Central Institution and Major Corporate Customers | Real Estate Finance | Insurance | Other/ Consolidation | Total | |
|---|---|---|---|---|---|---|
| Net interest income | 20,417 | 2,612 | 1,868 | – | –790 | 24,107 |
| Net fee and commission income | 8,713 | 638 | –71 | – | –451 | 8,829 |
| Gains and losses on trading activities | 203 | –103 | –1 | – | –80 | 19 |
| Gains and losses on investments | 1,151 | 48 | 10 | – | 129 | 1,138 |
| Loss allowances | –1,337 | –99 | –255 | – | –118 | -1,809 |
| Other gains and losses on valuation of financial instruments | 156 | –103 | 82 | – | 91 | 227 |
| Other insurance gains and losses | – | – | – | 1,972 | 446 | 2,418 |
| EGains and losses on investments held by insurance companies and other insurance company gains and losses | – | – | – | 3,143 | –161 | 2,982 |
| Insurance finance income or expenses | – | – | – | –4,107 | – | -4,107 |
| Administrative expenses | –17,911 | –2,017 | –947 | – | 505 | -20,370 |
| Other net operating income | 559 | 79 | 115 | – | –11 | 742 |
| Profit before taxes | 11,951 | 1,055 | 801 | 1,008 | –440 | 14,375 |
| Cost/income ratio (percent) | 57.4 | 63.6 | 47.3 | – | – | 55.7 |
Financial year 2022
€ million
| Retail Customers and SMEs | Central Institution and Major Corporate Customers | Real Estate Finance | Insurance | Other/ Consolidation | Total | |
|---|---|---|---|---|---|---|
| Net interest income | 17,771 | 1,577 | 2,070 | – | –872 | 20,546 |
| Net fee and commission income | 8,697 | 575 | –82 | – | –544 | 8,646 |
| Gains and losses on trading activities | 234 | 710 | –1 | – | 66 | 1,009 |
| Gains and losses on investments | –6,524 | 37 | –84 | – | –203 | -6,774 |
| Loss allowances | –1,2231 | –93 | –1661 | – | 10 | –1,472 |
| Other gains and losses on valuation of financial instruments | –118 | 41 | 9 | – | –143 | -211 |
| Other insurance gains and losses | – | – | – | 1,9801 | 5421 | 2,522 |
| Gains and losses on investments held by insurance companies and other insurance company gains and losses | – | – | – | –3,7401 | –361 | -3,776 |
| Insurance finance income or expenses | – | – | – | 1,9511 | – | 1,951 |
| Administrative expenses | –16,811 | –1,915 | –930 | – | 578 | -19,078 |
| Other net operating income | 757 | 116 | 40 | –5 | –33 | 875 |
| Profit before taxes | 2,783 | 1,048 | 856 | 186 | –635 | 4,238 |
| Cost/income ratio (percent) | 80.8 | 62.7 | 47.6 | – | – | 77.0 |
1 Amount restated
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. 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 DZ PRIVATBANK, TeamBank AG Nürnberg (TeamBank) and the 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 and the VR Smart Finanz sub-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 (BVR-SE) 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 also largely attributable to the consolidation of income and expenses.
7. Net interest income
| 2023 € million | 2022 € million | |
|---|---|---|
| Interest income and current income and expense | 38,399 | 24,045 |
| Interest income from | 36,988 | 22,593 |
| Lending and money market business | 33,181 | 21,304 |
| of which: Building society operations | 1,117 | 1,059 |
| of which: Finance leases | 20 | 23 |
| Fixed-income securities | 2,408 | 1,658 |
| Other assets | 1,405 | –77 |
| Financial assets with a negative effective interest rate | –6 | –293 |
| Current income from | 1,313 | 1,357 |
| Shares and other variable-yield securities | 1,148 | 1,055 |
| Investments in subsidiaries and equity investments | 164 | 302 |
| Income/loss from using the equity method for | 34 | 17 |
| Investments in joint ventures | 34 | 10 |
| Investments in associates | – | 6 |
| Income from profit-pooling, profit-transfer and partial profit-transfer agreements | 64 | 77 |
| Interest expense | –14,291 | –3,499 |
| Interest expense on | –14,007 | –3,352 |
| Deposits from banks and customers | –11,649 | –3,435 |
| of which: Building society operations | –698 | –457 |
| Debt certificates issued including bonds | –1,696 | –723 |
| Subordinated capital | –238 | –155 |
| Other liabilities | –465 | –62 |
| Financial liabilities with a positive effective interest rate | 40 | 1,023 |
| Other interest expense | –284 | –147 |
| Total | 24,107 | 20,546 |
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.
8. Net fee and commission income
| 2023 € million | 2022 € million | |
|---|---|---|
| Fee and commission income | 10,407 | 10,278 |
| Securities business | 4,804 | 4,877 |
| Asset management | 625 | 596 |
| Payments processing including card processing | 3,473 | 3,254 |
| Lending business and trust activities | 200 | 192 |
| Financial guarantee contracts and loan commitments | 231 | 200 |
| International business | 164 | 196 |
| Building society operations | 35 | 45 |
| Other | 875 | 918 |
| Fee and commission expenses | –1,578 | –1,632 |
| Securities business | –507 | –529 |
| Asset management | –140 | –154 |
| Payments processing including card processing | –280 | –234 |
| Lending business | –99 | –104 |
| Financial guarantee contracts and loan commitments | –41 | –38 |
| International business | –28 | –25 |
| Building society operations | –51 | –49 |
| Other | –430 | –499 |
| Total | 8,829 | 8,646 |
9. Gains and losses on trading activities
| 2023 € million | 2022 € million | |
|---|---|---|
| Gains and losses on trading in financial instruments | –219 | 661 |
| Gains and losses on trading in foreign exchange, foreign notes and coins, and precious metals | 68 | 150 |
| Gains and losses on commodities trading | 171 | 199 |
| Total | 19 | 1,009 |
10. Gains and losses on investments
| 2023 € million | 2022 € million | |
|---|---|---|
| Gains and losses from securities | 1,730 | –6,856 |
| Gains and losses on investments in subsidiaries and equity investments | –393 | 82 |
| Total | 1,338 | –6,774 |
11. Loss allowances
| 2023 € million | 2022 € million | |
|---|---|---|
| Additions | –5,849 | –4,7521 |
| Reversals | 3,935 | 3,3411 |
| Directly recognized impairment losses | –152 | –126 |
| Recoveries on loans and advances previously impaired | 213 | 197 |
| Other | 33 | 34 |
| Changes in the provisions for loan commitments, provisions for financial guarantee contracts and other provisions for loans and advances | 11 | –166 |
| Total | –1,809 | –1,472 |
1 Amount restated
12. Other gains and losses on valuation of financial instruments
| 2023 € million | 2022 € million | |
|---|---|---|
| Gains and losses from fair value hedges | –44 | –45 |
| Gains and losses on derivatives held for purposes other than trading | 156 | –6 |
| Gains and losses on financial instruments designated as at fair value through profit or loss | 114 | –160 |
| Total | 227 | –211 |
13. Other insurance gains and losses
| 2023 € million | 2022 € million | |
|---|---|---|
| Other insurance gains | 12,317 | 12,4241 |
| Other insurance losses | –9,821 | –9,7791 |
| Net gains or losses from reinsurance contracts | –78 | –1231 |
| Total | 2,418 | 2,522 |
1 Amount restated
14. Gains and losses on investments held by insurance companies and other insurance company gains and losses
| 2023 € million | 2022 € million | |
|---|---|---|
| Interest income and current income | 2,512 | 2,3841 |
| Administrative expenses | –154 | –1681 |
| Gains and losses on valuation and disposals as well as from additions to and reversals of loss allowances | 1,155 | –5,9031 |
| Other non-insurance gains and losses | –530 | –891 |
| Total | 2,982 | –3,776 |
1 Amount restated
The net amount of additions to and reversals of loss allowances as well as directly recognized impairment losses recorded in the financial year was an expense in the amount of €62 million (2022: expense of €10 million).
15. Insurance finance income or expenses
| 2023 € million | 2022 € million | |
|---|---|---|
| Insurance finance income or expenses from insurance contracts | –4,109 | 1,9511 |
| Insurance finance income or expenses from reinsurance contracts | 2 | –1 |
| Total | –4,107 | 1,951 |
1 Amount restated
16. Administrative expenses
| 2023 € million | 2022 € million | |
|---|---|---|
| Staff expenses | –11,063 | –10,456 |
| General and administrative expenses | –7,924 | –7,494 |
| Depreciation/amortization and impairment losses | –1,383 | –1,128 |
| Total | –20,370 | –19,078 |
17. Other net operating income
| 2023 € million | 2022 € million | |
|---|---|---|
| Gains and losses on non-current assets held for sale and disposal groups | 25 | 49 |
| Other operating income | 1,499 | 1,620 |
| Other operating expenses | –782 | –793 |
| Total | 742 | 875 |
18. Income taxes
| 2023 € million | 2022 € million | |
|---|---|---|
| Current tax expense | –3,558 | –2,807 |
| Expense on/income from deferred taxes | –13 | 8631 |
| Total | –3,571 | –1,944 |
1 Amount restated
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 15.260 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.
The following table shows a reconciliation from notional income taxes to recognized income taxes based on application of the current tax law in Germany.
| 2023 € million | 2022 € million | |
|---|---|---|
| Profit before taxes | 14,375 | 4,2381 |
| Notional rate of income tax of the Cooperative Financial Network (percent) | 31.085 | 31.085 |
| Income taxes based on notional rate of income tax | –4,468 | –1,317 |
| Tax effects | 898 | –627 |
| Tax effects of tax-exempt income and non-tax deductible expenses | 71 | 941 |
| Tax effects of different tax types, different trade tax multipliers, and changes in tax rates | 69 | –831 |
| Tax effects of different tax rates in other countries | 26 | 25 |
| Current and deferred taxes relating to prior reporting periods | –38 | –21 |
| Change in deferred tax assets due to valuation adjustments | 38 | 21 |
| Other tax effects | 732 | –6631 |
| Total | –3,571 | –1,944 |
1 Amount restated