Deutsche Bank - 20-F annual report

Deutsche Bank Aktiengesellschaft, which we also call Deutsche Bank AG, is a stock corporation organized under the laws of the Federal Republic of Germany. Unless otherwise specified or required by the context, in this document, references to “we”, “us”, and “our” are to Deutsche Bank Aktiengesellschaft and its consolidated subsidiaries.

Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

Our registered address is Theodor-Heuss-Allee 70, 60486 Frankfurt am Main, Germany, and our telephone number is +49-69-910-00.

In addition, we may from time to time make forward-looking statements in our periodic reports to the United States Securities and Exchange Commission on Form 6-K, annual and interim reports, invitations to Annual General Meetings and other information sent to shareholders, offering circulars and prospectuses, press releases and other written materials. Our Management Board, Supervisory Board, officers and employees may also make oral forward-looking statements to third parties, including financial analysts.

Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. We use words such as “believe”, “anticipate”, “expect”, “intend”, “seek”, “estimate”, “project”, “should”, “potential”, “reasonably possible”, “plan” and similar expressions to identify forward-looking statements.

By their very nature, forward-looking statements involve risks and uncertainties, both general and specific. We base these statements on our current plans, estimates, projections and expectations. You should therefore not place too much reliance on them. Our forward-looking statements speak only as of the date we make them, and we undertake no obligation to update any of them in light of new information or future events.

In “Item 4: Information on the Company–Business Overview”, we present our targets for pre-tax return on average active equity (target definition) and diluted earnings per share across the business cycle and our vision for IBIT attributable to Deutsche Bank shareholders that we aim to achieve in 2008. When used with respect to future periods, these targets are forward-looking statements as well as non-GAAP financial measures. We cannot predict or quantify the levels of the most directly comparable IFRS financial measures (listed in the table above) that would correspond to these targets for future periods. This is because neither the magnitude of such IFRS financial measures, nor the magnitude of the adjustments to be used to calculate the related non-GAAP financial measures from such IFRS financial measures, can be predicted. Such adjustments, if any, will relate to specific, currently unknown, events and in most cases can be positive or negative, so that it is not possible to predict whether, for a future period, the non-GAAP financial measure will be greater than or less than the related IFRS financial measure.

Not required because this document is filed as an annual report.

 

Not required because this document is filed as an annual report.

 

We have derived the data we present in the tables below from our audited consolidated financial statements for the years presented. You should read all of the data in the tables below together with the consolidated financial statements and notes included in “Item 18: Financial Statements” and the information we provide in “Item 5: Operating and Financial Review and Prospects.” Except where we have indicated otherwise, we have prepared all of the consolidated financial information in this document in accordance with International Financial Reporting Standards (“IFRS“) as issued by the International Accounting Standards Board (“IASB”) and as endorsed by the European Union (“EU”). Until December 31, 2006, we prepared our consolidated financial information in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). All 2006 data included in this report has been prepared in accordance with IFRS as issued by the IASB. Our group division and segment data come from our management reporting systems and are not necessarily based on, or prepared in accordance with, IFRS. For a discussion of the major differences between our management reporting systems and our consolidated financial statements under IFRS, see “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment.”

The following table shows in euro and in U.S. dollars the dividend per share for the years ended December 31, 2007 and 2006. We declare our dividends at our Annual General Meeting following each year. Our dividends are based on the nonconsolidated results of Deutsche Bank AG as prepared in accordance with German accounting principles. Because we declare our dividends in euro, the amount an investor actually receives in any other currency depends on the exchange rate between euro and that currency at the time the euros are converted into that currency.

Dividends per share in the table below are presented before German withholding tax. Dividends that we pay have been subject to German withholding tax at an aggregate rate of 21.1 % (consisting of a 20 % withholding tax and an effective 1.1 % surcharge).

Residents of countries that have entered into an income tax convention with Germany may be eligible to receive a refund from the German tax authorities of a portion of the amount withheld. U.S. residents have been entitled to receive a refund equal to 6.1 % of those dividends.

For U.S. federal income tax purposes, the dividends we pay are not eligible for the dividends received deduction generally allowed for dividends received by U.S. corporations from other U.S. corporations.

The following table shows the period-end, average, high and low noon buying rates for the euro. In each case, the period-end rate is the noon buying rate announced on the last business day of the period.

On March 20, 2008, the noon buying rate was U.S.$ 1.5417 per euro.

 

We believe that maintaining a strong credit quality is a key part of the value we offer to our clients, bondholders and shareholders. Below are our long-term credit ratings.

As of the date of this document, there has been no change in any of the above ratings.

Each rating reflects the view of the rating agency only at the time it gave us the rating, and you should evaluate each rating separately and look to the rating agencies for any explanations of the significance of their ratings. The rating agencies can change their ratings at any time if they believe that the circumstances so warrant. You should not view these long-term credit ratings as recommendations to buy, hold or sell our securities.

An overall market downturn can adversely affect our business and financial performance. Market downturns can occur not only as a result of purely economic factors, but also as a result of war, acts of terrorism, natural disasters or other similar events.

Since the second half of 2007, financial markets have experienced exceptionally difficult conditions, which have been reflected in considerably lower volumes of business activity in the areas most directly affected and concerns about slowing economic and business momentum more generally. Among the principally affected areas in which we do business have been the leveraged finance and structured credit markets. In addition to causing reduced business activity and revenues in these and other areas, continuing difficult market conditions may require us to write down the carrying values of some of our portfolios of assets, including leveraged loans and loan commitments. Compensating for these negative effects on our profitability through performance in our other businesses may not be feasible, particularly if assumptions for continuing, albeit slower, economic growth in 2008 are not correct and less favorable economic conditions prevail. See “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment – Corporate Banking & Securities Corporate Division” for information on the impact of the current market environment on a number of our key businesses.

In each of the product and business lines in which we enter into these kinds of positions, part of our business entails making assessments about the financial markets and trends in them. The revenues and profits we derive from many of our positions and our transactions in connection with them are dependent on market prices. When we own assets, market price declines can expose us to losses. Many of the more sophisticated transactions we describe in our discussions of our Corporate Banking & Securities Corporate Division are designed to profit from price movements and differences among prices. If prices move in a way we have not anticipated, we may experience losses. Also, when markets are volatile – characterized by rapid changes in price direction – the assessments we have made may prove to lead to lower revenues or profits, or losses, on the related transactions and positions.

In addition, we sometimes commit capital and take market risk to facilitate certain capital markets transactions; doing so can result in losses as well as income volatility.

See “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment – Corporate Banking & Securities Corporate Division” for information on the impact of the current market environment on a number of our key businesses.

Observable prices or inputs are not available for many financial instruments. Fair value is determined in these cases using valuation techniques appropriate for the particular instrument. The application of valuation techniques to determine fair value involves estimation and management judgment, the extent of which will vary with the degree of complexity and liquidity in the market. Management judgment is required in the selection and application of the appropriate parameters, assumptions and modeling techniques. If any of the assumptions change due to negative market conditions or for other reasons, subsequent valuations may result in significant changes in the fair values of our financial instruments, requiring us to record further write-downs. Market volatility increases the risk that the value of financial instruments carried at fair value will change in the future.

Furthermore, our exposure and related write-downs are reported net of any fair value gains we may record in connection with hedging transactions related to the underlying assets. However, we may never realize these gains, and the fair value of the hedges may change in future periods for a number of reasons, including as a result of deterioration in the credit of our hedging counterparties. Although such declines may be independent of the fair values of the underlying hedged assets, they may nonetheless result in the need for further write-downs in future periods.

Our results for the fiscal year 2007 included losses relating primarily to the write down in the fair values of our trading activities in relative value trading in both debt and equity, CDO correlation trading and residential mortgage-backed securities, and the leveraged loan book including loan commitments. We continue to have exposure to these markets and products and, therefore, could be required further to write down their carrying values and incur further losses. Any of these write-downs could have a material adverse effect on our results of operation and financial condition. See “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment – Group Divisions – Corporate and Investment Bank Group Division – Corporate Banking and Securities Corporate Division” for information on the impact of the current market environment on a number of our key businesses.

The exceptionally difficult market conditions since the second half of 2007 which we have noted above have adversely affected certain areas in which we do business that entail nontraditional credit risks, including the leveraged finance and structured credit markets, and appear likely to continue to do so in 2008. See “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment – Corporate Banking & Securities Corporate Division” for information on the impact of the current market environment on a number of our key businesses.

Our liquidity may become impaired due to a reluctance of our counterparties or the market to finance our operations due to actual or perceived weaknesses in our businesses. Such impairments can also arise from circumstances unrelated to our businesses and outside our control, such as, but not limited to, disruptions in the financial markets, negative developments concerning other financial institutions perceived to be comparable to us or negative views about the financial services industry in general, or disruptions in the markets for any specific class of assets. Negative perceptions concerning our business and prospects could develop as a result of large losses, changes of our credit ratings, a general decline in the level of business activity in the financial services sector, regulatory action, serious employee misconduct or illegal activity, as well as many other reasons.

We have implemented a group-wide liquidity risk management framework, which we describe in “Item 11 — Quantitative and Qualitative Disclosures about Credit, Market and Other Risk — Liquidity Risk”, for the purposes of managing and reducing the impact of the above-mentioned events on our liquidity risk position.

Although we have not so far experienced any constraint in our access to liquidity, market sentiment can change quickly. Any significant constraint on our ability to borrow funds can swiftly have a material adverse effect on our business and financial condition.

Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies, and the transactions we process have become increasingly complex. Consequently, we rely heavily on our financial, accounting and other data processing systems. If any of these systems do not operate properly, or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

If we avoid entering into additional business combination transactions or fail to identify attractive companies to acquire, market participants may, especially in the current climate of consolidation, perceive us negatively. We may also be unable to expand our businesses, especially into new business areas, as quickly or successfully as our competitors if we do so through organic growth alone. These perceptions and limitations could cost us business and harm our reputation.

Our existing business with Iranian counterparties consists mostly of participations as lender and/or agent in a few large trade finance facilities arranged some years ago to finance the export contracts of exporters in Europe and Asia, which exporters are primarily multinational corporations supplying goods, equipment and related services in the petrochemical and hydrocarbon processing industries. The lifetime of most of these facilities is ten years or more and we are legally obligated to fulfill our contractual obligations. Other business activities, such as correspondent banking services to banks located in Iran and private banking loans to Iranian citizens, have already been terminated or closed down. We do not believe our business activities with Iranian counterparties are material to our overall business, with our outstandings to Iranian borrowers representing less than 0.1 % of our total assets as of December 31, 2007 and our revenues from all such activities representing less than 0.1 % of our total revenues for the year ended December 31, 2007.

We are aware, through press reports and other means, of initiatives by governmental entities in the U.S. and by U.S. institutions such as universities and pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with Iran. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers or as investors in our securities. In addition, our reputation may suffer due to our association with Iran. Such a result could have significant adverse effects on our business or the price of our securities.

Since January 1, 2007, there have been no public takeover offers by third parties with respect to our shares.

 

We are organized into three group divisions, two of which are further sub-divided into corporate divisions. As of December 31, 2007, our group divisions were:

These divisions are supported by infrastructure functions and our Corporate Center. In addition, we created a regional management function that covers regional responsibilities worldwide.

We have operations or dealings with existing or potential customers in almost every country in the world. These operations and dealings include:

OUR IDENTITY. We are a leading global investment bank with a strong private clients franchise. These are mutually reinforcing businesses; taking full advantage of the synergy potential between these businesses is a strategic priority for us. We are a leader in Europe, with powerful and growing positions in North America, Asia, and key emerging markets. Our focus is on growth by organic investment and selective, incremental acquisitions.

OUR MISSION AND VALUES. We compete to be the leading global provider of financial solutions for demanding clients, and to create exceptional value for our shareholders and people. We are committed to our core values of customer focus, teamwork, innovation, performance and trust.

OUR BRAND. Our brand is synonymous with strength and quality throughout the world and our logo is one of the best-recognized brand symbols in the global financial industry as confirmed by Global B2B Brand Monitor. Our brand campaign aims to leverage a distinctive logo, our business achievements, and our offering to clients. This campaign has further strengthened our profile in established markets and built awareness in new growth markets.

OUR MANAGEMENT AGENDA. In 2002, we initiated a multi-year and multi-phased agenda. The first phase of this agenda focused on management’s priorities to transform Deutsche Bank and the second phase focused on a strategy of achieving sustainable profitable growth. The implementation of these two phases of our strategy was successful. We made significant gains in profitability as measured by growth in net income and pre-tax return on average active equity; we command leading positions in our chosen core businesses; we have substantially reduced our credit risk and alternative asset risk; and we have a clear capital management strategy, which allowed us to maintain core capital strength within our stated target range while simultaneously investing in business growth and returning cash to shareholders.

In 2006, we launched “Phase 3” of our management agenda, covering the period 2006-2008. Our overall objective is to leverage our global platform for accelerated growth. We have defined four specific goals. First, to maintain our cost, risk, capital and regulatory discipline; second, to continue to invest in organic growth and bolt-on acquisitions; third, to further grow our businesses which we believe are viewed by the market as having more stable earnings streams, namely Private Clients and Asset Management (PCAM) and Global Transaction Banking; and fourth, to build on our competitive strength in the Corporate and Investment Bank (CIB). Furthermore, we aim to exploit synergies, for both revenue generation and cost-efficiency, by fostering teamwork and collaboration between our mutually supporting businesses. We continue to aim for a sustainable pre-tax return on average active equity, using our target definition, of 25 % across the business cycle, together with double-digit percentage growth in diluted earnings per share. Moreover, we have provided a vision under which we aim to deliver IBIT attributable to Deutsche Bank shareholders (using our target definition) of € 8.4 billion in 2008. (Our targets are forward-looking statements as well as non-GAAP financial measures. Please refer to “Cautionary Statement Regarding Forward-Looking Statements” and “Use of Non-GAAP Financial Measures” on pages (iv) and (v) for certain considerations relating to such targets. Such targets are summarized on pages S-19 and S-20.)

InGLOBAL TRANSACTION BANKING, we have achieved significant growth in pre-tax profitability between 2004 and 2007, and our cost-income ratio in 2006 and 2007 compared favorably with leading global competitors with comparable business models (based on publicly available financial data). Our aim is to achieve further profitable growth by means of several initiatives. In Europe, we aim to grow revenues by expanding on our current position in Germany, by building out our European domestic custody platform and by increasing our business with European mid-cap clients. We further aim to take advantage of opportunities created by the launch of the Single European Payment Area (SEPA) in January 2008. In the Asia-Pacific region, our growth strategy focuses on large local corporate clients and on fast-growing markets such as China, India and Korea. We also aim to grow in Central and Eastern Europe, and the Middle East, and to support our growth with selective incremental acquisitions where appropriate. Increased cooperation with Corporate Banking & Securities, and with Private Clients and Asset Management, is central to our strategy.

InPRIVATE & BUSINESS CLIENTS, our strategy is to build on our position in Germany and other core European markets, while also expanding our platform in growth markets in Central and Eastern Europe and the Asia-Pacific region. Our business model is based on the two core competencies of advisory banking and consumer banking. Our commitment to growth in our home market, Germany, was underlined by two acquisitions announced in 2006: Berliner Bank, which significantly extends both our branch network and our market share in Germany’s capital city, and norisbank, which expands our presence in consumer banking. During 2007, our position in Germany benefited from the integration of Berliner Bank, while norisbank was re-launched in September 2007. We aim to expand further on exist-

reputation and customer franchise, while making optimal usage of, and achieving optimal return on, our economic capital. The division also continues to exploit business synergies with the Private Clients and Asset Management Group Division and the Corporate Investments Group Division. The Corporate and Investment Bank Group Division’s activities and strategy are primarily client-driven. Teams of specialists in each business division give clients access not only to their own products and services, but also to those of our other businesses.

At December 31, 2007, this group division included two corporate divisions, comprising the following business divisions:

Corporate Banking & Securities includes our debt and equity sales and trading businesses, which are housed in our Global Markets Business Division. Global Markets has eight primary business lines and three horizontally-integrated client-facing groups (Debt Capital Markets / Corporate Coverage, the Institutional Client Group, and Research), unified at a local level by strong regional management. Corporate Banking & Securities also includes the Corporate Finance Business Division, which focuses on providing advisory, equity and debt financing and structuring services to corporates and financial institutional clients. CIB’s client coverage functions are also a key part of the Corporate Finance Business Division.

Global Transaction Banking is closely aligned with Corporate Finance, but is a separately managed corporate division, providing trade finance, cash management and trust & securities services.

Corporate Banking & Securities and Global Transaction Banking are supported by the Loan Exposure Management Group (LEMG). LEMG has responsibility for a range of loan portfolios, actively managing the risk of these through the implementation of a hedging regime on a selective basis. LEMG manages the credit risk of loans and lending-related commitments related to both our investment-grade portfolio and our medium-sized German companies portfolio.

In July 2007, we announced the acquisition of Abbey Life Assurance Company Limited, a UK company that consists primarily of unit-linked life and pension policies and annuities. The acquisition was completed in October 2007.

In January 2008, we acquired HedgeWorks LLC, a hedge fund administrator based in the United States.

In July 2007, we closed the acquisition of the institutional cross-border custody business of Türkiye Garanti Bankasi A.S. The client transition is expected to be completed in April 2008.

In May 2006, we completed the acquisition of the UK Depository and Clearing Centre business from JPMorgan Chase.

Cash Management caters to the needs of a diverse client base of corporates and financial institutions. With the provision of a comprehensive range of innovative and robust solutions, we handle the complexities of global and regional treasury functions including customer access, payment and collection services, liquidity management, information and account services and electronic bill presentation and payment solutions.

Trust & Securities Services provides a range of trust, payment, administration and related services for selected securities and financial transactions, as well as domestic securities custody in more than 28 markets.

Among significant transactions, in July 2007 RREEF Private Equity acquired a significant minority interest in Aldus Equity, an alternative asset management and advisory boutique specializing in customized private equity investing for institutional and high net worth investors.

In July 2007, AM RREEF Infrastructure acquired Maher Terminals LLC, a privately-held operator of port terminal facilities in North America. The company was deconsolidated effective October 2007 after a partial sale into a new infrastructure fund.

In July 2007, AM completed the sale of its local Italian mutual fund business and established long term distribution arrangements with our strategic partner, Anima S.G.R.p.A.

In June 2007, AM closed the sale of part of its Australian business to Aberdeen Asset Management. As a result of the repositioning, AM’s Australian operation has migrated from being primarily a domestic manufacturing platform to become a distribution platform with specialist investment management capabilities.

In August 2007, AM signed an agreement with shareholders of Harvest Fund Management to increase its stake by 10.5 % to 30 %. Harvest is the fifth largest mutual fund manager in China, with a 5.5 % market share (source: Z-Ben Advisors, September 2007).

In 2007, PWM established a Global Key Client function to more systematically organize and augment the cooperation with CIB in all its regions and to generate additional fee income and net new assets.

In December 2006, PWM closed the acquisition of the UK wealth manager Tilney Group Limited, strengthening our position in the second-largest wealth management market in Europe. The acquisition is an important element in our strategy to expand the onshore presence in dedicated core markets and to expand into various client segments, including the Independent Financial Advisors sector.

At the end of 2006, PWM entered into the important Chinese onshore market with the opening of an office in Shanghai to serve wealthy clients.

The opening of a Deutsche Bank branch in Riyadh, Saudi Arabia, in April 2006 allows PWM to offer a full range of wealth management services in the largest market in the Middle East.

AM focuses primarily on active investing. Its products and services encompass a broad range of investment strategies and asset classes, and cover many industries and geographic regions. AM’s product offering includes mutual funds, structured products, commingled funds and separately managed accounts.

vides payment, account & remaining financial services, processing and disposition of cash and non-cash payments in local currency, international payments, letters of credit, guarantees, and other cash transactions.

AWM generates revenues from other products, including direct real estate investments included in our alternative investments business, rental revenues and gains and losses earned on real estate deal flows and revenues that are not part of our core business, specifically, the gain on sale of businesses.

Products for institutional clients are distributed through the substantial sales and marketing network within AM and through third-party distribution channels. They are also distributed through our other businesses, notably the Corporate and Investment Bank Group Division.

Alternative investment products are distributed through our sales and marketing network within Asset and Wealth Management and through third-party distribution channels, predominantly to high net worth clients, institutions and retail customers worldwide.

Insurance asset management solutions are marketed and distributed by AM’s specialist insurance unit, which provides advisory and portfolio management services for insurers and re-insurers globally.

PWM pursues an integrated business model to cater to the complex needs of high net worth clients, their families and selected institutions. Based on individual strategic asset allocation including individual risk management we offer discretionary portfolio management, structured advisory process including alternative investments, family office solutions, wealth preservation strategies and succession planning, philanthropic advisory services as well as art advisory services and services for financial intermediaries. The relationship managers work within target customer groups, assisting clients in developing individual investment strategies and creating enduring relationships with our clients.

In our PWM onshore business, wealthy customers are served via our relationship manager network in the respective countries. Where PBC has a presence, our customers also have access to our retail branch network and other general banking products. The offshore business encompasses all of our clients who establish accounts outside their countries of residence. These customers are able to use our offshore services to access financial products that may not be available in their countries of residence.

In addition, the client advisors of the U.S. Private Client Services business focus on traditional brokerage offering and asset allocation, including a wide range of third party products.

and the entry in the Polish consumer finance market. Loan and deposit products also include the home loan and savings business in Germany, offered through our subsidiary Deutsche Bank Bauspar AG.

PBC’s payments, account & remaining financial services comprise administration of current accounts in local and foreign currency as well as settlement of domestic and cross-border payments on these accounts. They also include the purchase and sale of payment media and the sale of insurance products, home loan and savings contracts and credit cards. In Italy, PBC issues credit cards under the BankAmericard brand.

Other products include primarily activities related to asset and liability management.

In addition to our branch network and financial agents, we enter into country-specific distribution arrangements. In Germany, for example, we have a cooperation agreement with Deutsche Vermögensberatung AG (referred to as DVAG) whereby we distribute our mutual funds and other banking products through DVAG’s independent distribution network. We also work together with ADAC (Germany’s and Europe’s largest automobile club with more than 15 million members), with whom we have an exclusive sales cooperation agreement in place. In order to complement our product range, we have signed distribution agreements, in which PBC distributes the products of reputable product suppliers. These include an agreement with Zurich Financial Services for insurance products, and a strategic alliance with nine fund companies for the distribution of their investment products.

In 2007, we sold and leased back the bank-occupied building 60 Wall Street in New York City. In addition, we disposed of our interest in the building at 31 West 52^nd Street in New York City.

In 2007, we reduced our stake in HCL Technologies Limited from 2.4 % to 1.2 % in a partial sale. In 2006, we had reduced our stake in this company from 3.6 % to 2.4 %.

In 2006, we sold our remaining 27.99 % stake in EUROHYPO AG to Commerzbank.

The business combination of Atradius N.V., in which we held a 12.7 % stake at the end of 2007, and Crédito y Caución S.A. was signed in April 2007 and closed in January 2008. The completion of this transaction resulted in a reduction of our stake to 9.1 %.

In May 2006, we closed the sale of 21.16 % of Atradius N.V. to Crédito y Caución and Seguros Catalán Occidente, reducing our stake to 12.73 %.

In December 2006, we sold our 6.75 % stake in Germanischer Lloyd AG to Günter Herz.

 

The infrastructure group consists of our centralized business support areas and our Corporate Center. These support areas principally comprise control and service functions supporting the CIB and PCAM businesses. The Corporate Center comprises those functions that directly support the Management Board in its management of the Group.

This infrastructure group is organized to reflect the Management Board members’ areas of responsibilities into COO functions (e.g., information technology, global sourcing and human resources), CFO functions (e.g., finance, operations, tax, audit and insurance), CRO functions (e.g., risk management, treasury, legal and compliance), and CEO functions (e.g., corporate development and economics). In addition, a transaction management group is organizationally aligned with and provides trading support to the Global Markets business division in CIB.

The Regional Management function covers regional responsibilities worldwide. Country heads and management committees are established in the regions to enhance client-focused product coordination across businesses and to ensure compliance with regulatory and control requirements, both from a local and Group perspective. In addition, in a global context, the Regional Management function represents regional interests at the Group level and enhances cross-regional coordination.

All expenses and revenues incurred within the Infrastructure and Regional Management areas are fully allocated to the Group Divisions CIB, PCAM and CI.

Our reputation for financial strength and integrity is vital to our ability to attract and maintain customers. To keep our well-established reputation we have to promote and market our brand adequately and may decide to abstain from certain transactions or activities even where they would be financially profitable. The loss of business that would result from damage to our reputation could affect our results of operations and financial condition.

We have generally experienced intensifying price competition in recent years. We are observing this pressure on pricing of loans, trading commissions, management fees, transaction spreads and many other areas. We believe that we may experience pricing pressure in these and other areas in the future as some of our competitors seek to obtain market share by reducing prices.

As indicated by continued strong levels of industry-wide mergers and acquisitions, especially in the banking, securities and financial services industries, the trend toward consolidation and convergence is expected to continue. This trend has significantly increased the capital base and geographic reach of our competitors and has hastened the globalization of the securities and other financial services markets. As a result, we have committed capital to support our international operations and to execute large global transactions for our clients.

dictions in which we operate. Beyond these countries, and the European Economic Area member states where the European Passport applies, local country regulations generally have limited impact on our operations that are unconnected with these countries.

We are subject to comprehensive regulation and supervision by the BaFin and the Deutsche Bundesbank (referred to as Bundesbank, the German central bank). The European Central Bank regulates us in regard to minimum reserves on deposits and issued securities. We are materially in compliance with the German laws that are applicable to our business.

The Banking Act and the rules and regulations adopted thereunder, implement certain recommendations of the Basel Committee on Banking Supervision (which we refer to as the Basel Committee) the secretariat of which is provided by the Bank for International Settlements (which we refer to as the BIS), as well as certain European Union directives relating to banks. These directives address issues such as accounting standards, regulatory capital, risk-based capital adequacy, consolidated supervision, the monitoring and control of large exposures and the creation of a single European Union-wide banking market with no internal barriers to banking and financial services. The Agreement on the European Economic Area extends this single market to Iceland, Liechtenstein and Norway.

In June 2004, the Basel Committee adopted revised recommendations for international capital adequacy standards, widely referred to as the Basel II capital framework, which align capital requirements more closely with the underlying risks and introduce a capital charge for operational risk (comprising, among other things, risks related to certain external factors, as well as to technical errors and errors of employees). In 2006, the European Union enacted the Capital Requirements Directive, which adopts the Basel II capital framework. Germany transposed the Capital Requirements Directive effective as of January 1, 2007, subject to certain transition periods. Following the application of transitional rules in 2007 and approval by the BaFin of our internal rating models for measuring credit risk and operational risk, we have applied the revised capital framework on the basis of our approved internal models since January 1, 2008. We generally expect a decrease of our capital requirements under the new capital framework from 2008 onwards. As a result of the increased risk sensitivity of the Basel II framework, however, capital requirements may also increase compared to current levels in times of economic downturn. This could increase our financing costs.

Under the Solvency Regulation, at the close of each business day, the sum of the total amount calculated for counterparty risks and the total amount calculated for operational risks of a bank must not exceed its regulatory banking capital (Tier 1 and Tier 2 capital) as modified to give effect to the Basel II capital framework (“modified regulatory banking capital”) as set forth below.

Regulatory banking capital is defined in the Banking Act as consisting principally of the following items:

Tier 1 capital:

Own shares held by the bank, losses and certain intangible assets are subtracted from the Tier 1 capital calculation.

pany, or holds (directly or indirectly) 20 % or more of the capital or voting rights of such other company. No such deduction is required if the bank and the relevant company form part of a financial conglomerate (Finanzkonglomerat).

For capital adequacy purposes, regulatory banking capital is modified by deducting from each of Tier 1 and Tier 2 capital 50 % of the following amounts (“modified regulatory banking capital”):

Market Price Risk and Tier 3 Capital:

Market price risk positions of a bank are foreign exchange positions, commodities positions, trading book positions relating to interest rate risk and share price risk, other market risk positions which create a financial asset for one party and financial liability for the other party, and options positions. Market price positions are measured pursuant to standard methods for each category as set forth in the Solvency Regulation. Banks may instead use an internal risk model, if the BaFin approves the respective model. We use an internal model to measure market price risk.

Under the Solvency Regulation, at the close of each business day, a bank’s total net risk-weighted market price risk positions must not exceed the sum of:

Tier 3 capital consists of the following items:

therefore determined that we are a financial conglomerate. The main effect of this determination is that we also have to report to the BaFin and the Bundesbank capital adequacy requirements and risk concentrations also on a conglomerate level. In addition, we are required to report significant conglomerate internal transactions. After determination of the applicable calculation method by the BaFin, the first capital adequacy calculation for the financial conglomerate will be performed in 2008.

These rules contain separate restrictions for large exposures related to the banking book (banking book large exposures) and aggregate large exposures (aggregate book large exposures) of a bank or group of institutions.

Banking book large exposures are exposures incurred in the banking book and related to a single client (and clients affiliated with it) that equal or exceed 10 % of a bank’s or group’s regulatory banking capital. Individual banking book large exposures must not exceed 25 % of the bank’s or group’s regulatory banking capital (20 % in the case of exposures to affiliates of the bank that are not consolidated for regulatory purposes).

Aggregate book large exposures are created when the sum of banking book exposures and the exposures incurred in the trading book related to a client, and clients affiliated with it, (trading book large exposures) equals or exceeds 10 %

The Banking Act requires that a bank’s auditor informs the BaFin of any facts that come to the accountant’s attention which would lead it to refuse to certify or to limit its certification of the bank’s annual financial statements or which would adversely affect the financial position of the bank. The auditor is also required to notify the BaFin in the event of a material breach by management of the articles of association or of any other applicable law.

The auditor is required to prepare a detailed and comprehensive annual audit report (Prüfungsbericht) for submission to the bank’s supervisory board, the BaFin and the Bundesbank.

Banks are also required to have a written plan of organization that sets forth the responsibilities of the employees and operating procedures. The bank’s internal audit department is required to monitor compliance with the plan.

The BaFin may also conduct investigations at a foreign entity that is part of a bank’s group for regulatory purposes. Investigations of foreign entities are limited to the extent that the law of the jurisdiction where the entity is located restricts such investigations.

The BaFin may attend meetings of a bank’s supervisory board and shareholders’ meetings. It also has the authority to require that such meetings be convened.

value of each creditor’s deposits with the bank and to 90 % of the aggregate value of obligations arising from securities transactions. The maximum liability of an investor compensation institution to any one creditor is limited to € 20,000.

Banks are obliged to make annual contributions to the investor compensation institution in which they participate. An investor compensation institution must levy special contributions on the banks participating therein or take up loans, whenever it is necessary to settle compensation claims by such institution in accordance with the Deposit Guarantee Act. There is no absolute limit on such special contributions. The investor compensation institution may exempt a bank from special contributions in whole or in part if full payments of such contributions are likely to render such bank unable to repay its deposits or perform its obligations under securities transactions. The amount of such contribution will then be added proportionately to the special contributions levied on the other participating banks.

Banks that participate in the Deposit Protection Fund make regular contributions to the fund based on their liabilities to customers, and may be required to make special contributions up to the amount of their regular contributions to the extent requested by the Deposit Protection Fund to enable it to fulfill its purpose. If one or more German banks are in financial difficulties, we may therefore participate in their restructuring even where we have no business relationship or strategic interest, in order to avoid making special contributions to the Deposit Protection Fund in case of an insolvency of such bank or banks, or we may be required to make such special contributions.

DBTCA is a New York state-chartered bank and a member of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation (the FDIC). As such, DBTCA is subject to regulation, supervision

Our status as a financial holding company, and resulting ability to engage in the broader range of activities permitted under the GLB Act, are dependent on Deutsche Bank AG and our two insured U.S. depository institutions remaining “well capitalized” and “well managed” and upon our insured U.S. depository institutions meeting certain requirements under the Community Reinvestment Act. In order to meet the “well capitalized” test, we and our U.S. depository institutions are required to maintain capital ratios comparable to those of a well-capitalized U.S. bank, including a Tier 1 risk-based capital ratio of at least 6 % and a total risk-based capital ratio of at least 10 %. If we or one of our U.S. depository institutions cease to be well-capitalized or well-managed, or otherwise fail to meet any of the requirements for financial holding company status, then, depending on which requirement we fail to meet, we may be required to discontinue activities and investments authorized under the GLB Act or terminate our U.S. banking operations.

The U.S. is party to the Basel Capital Accord, and the U.S. bank regulatory authorities have adopted risk-based capital requirements for U.S. banks and bank holding companies that are generally consistent with the Accord. In addition, the U.S. regulatory authorities have adopted “leverage” capital requirements that generally require U.S. banks and bank holding companies to maintain a minimum amount of capital in relation to their balance sheet assets (measured on a non-risk-weighted basis). As described previously, the Basel Committee has developed a revised capital framework – i.e., Basel II. While the EU intends to apply Basel II to all banks and investment firms, the U.S. bank regulatory agencies have proposed taking a different approach, mandating that only the largest internationally active banks be required to comply with Basel II. (Other banks may, in certain cases, have the option to “opt into” Basel II or remain subject to the original Accord.) Our two U.S. depository institution subsidiaries would currently appear to fall within the group of mandated Basel II banks for purposes of the U.S. regulation. The regulation does not disturb the current policy of the Federal Reserve Board not to apply U.S. capital guidelines to our U.S. subsidiaries that are also registered as bank holding companies by virtue of their direct and indirect ownership of the two U.S. depository institution subsidiaries.

The GLB Act and Federal Reserve Board regulations contain other provisions that could affect our operations and the operations of all financial institutions. One of these provisions requires us to disclose our privacy policy to consumers and to offer them the ability to opt out of having their non-public information disclosed to third parties. In addition, individual states are permitted to adopt more extensive privacy protections through legislation or regulation.

The so-called “push-out” provisions of the GLB Act also narrow the exclusion of banks (including U.S. branches of foreign banks, such as our New York branch) from the definitions of “broker” and “dealer” under the Securities Exchange Act of 1934. The rules of the Securities and Exchange Commission narrowing the exclusion of banks from the definition of “dealer” became effective on September 30, 2003. In September 2007, the Securities and Exchange Commission and the Federal Reserve Board issued a joint rulemaking that implements the GLB requirement to narrow the exclusion of banks from the definition of “broker”. The rule becomes effective for DBTCA on January 1, 2009. As a result of these rules, certain securities activities conducted by DBTCA and our New York branch have been or will be restructured or transferred to one or more U.S. registered broker-dealer subsidiaries.

In addition, under U.S. federal banking laws, state-chartered banks (such as DBTCA) and state-licensed branches and agencies of foreign banks (such as our New York branch) may not, as a general matter, engage as a principal in any type of activity not permissible for their federally chartered or licensed counterparts, unless (i) in the case of state-chartered banks (such as DBTCA), the FDIC determines that the additional activity would pose no significant risk to

an unsafe manner, impairment of capital, suspension of payment of obligations, or initiation of liquidation proceedings against the foreign bank at its domicile or elsewhere. In liquidating or dealing with a branch’s business after taking possession of a branch, only the claims of creditors which arose out of transactions with a branch are to be accepted by the Superintendent of Banks for payment out of the business and property of the foreign bank in the State of New York, without prejudice to the rights of the holders of such claims to be satisfied out of other assets of the foreign bank. After such claims are paid, the Superintendent of Banks will turn over the remaining assets, if any, to the foreign bank or its duly appointed liquidator or receiver.

Under the New York State Banking Law, our New York branch is generally subject to the same limits on lending to a single borrower, expressed as a ratio of capital, that apply to a New York state-chartered bank, except that for our New York branch such limits are based on our worldwide capital.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (referred to as FDICIA) provides for extensive regulation of depository institutions (such as DBTCA and its direct and indirect parent companies), including requiring federal banking regulators to take “prompt corrective action” with respect to FDIC-insured banks that do not meet minimum capital requirements. For this purpose, FDICIA establishes five tiers of institutions: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized” and “critically undercapitalized”. As an insured bank’s capital level declines and the bank falls into lower categories (or if it is placed in a lower category by the discretionary action of its supervisor), greater limits are placed on its activities and federal banking regulators are authorized (and, in many cases, required) to take increasingly more stringent supervisory actions, which could ultimately include the appointment of a conservator or receiver for the bank (even if it is solvent). In addition, FDICIA generally prohibits an FDIC-insured bank from making any capital distribution (including payment of a dividend) or payment of a management fee to its holding company if the bank would thereafter be undercapitalized. If an insured bank becomes “undercapitalized”, it is required to submit to federal regulators a capital restoration plan guaranteed by the bank’s holding company. The guarantee is limited to 5 % of the bank’s assets at the time it becomes undercapitalized or, should the undercapitalized bank fail to comply with the plan, the amount of the capital deficiency at the time of failure, whichever is less. If an undercapitalized bank fails to submit an acceptable plan, it is treated as if it were “significantly undercapitalized”. Significantly undercapitalized banks may be subject to a number of restrictions, including requirements to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and restrictions on accepting deposits from correspondent banks. “Critically undercapitalized” depository institutions are subject to appointment of a receiver or conservator. Since the enactment of FDICIA, both of our U.S. insured banks have been categorized as “well capitalized” under Federal Reserve Board regulations.

We own 100 % of the equity and voting interests in these significant subsidiaries.

 

As of December 31, 2007, we operated in 76 countries out of 1,889 facilities around the world, of which 52 % were in Germany. We lease a majority of our offices and branches under long-term agreements.

As of December 31, 2007, we had premises and equipment with a total book value of approximately€ 2.4 billion. Included in this amount were land and buildings with a carrying value of approximately € 981 million. As of December 31, 2006, we had premises and equipment with a total book value of approximately € 3.2 billion. Included in this amount were land and buildings with a carrying value of approximately€ 1.9 billion. The decline in the carrying value of land and buildings was primarily the result of the sale and leaseback of our premises at 60 Wall Street in New York City.

We continue to review our property requirements worldwide taking into account cost containment measures as well as growth initiatives in selected businesses.

 

We have not received written comments from the Securities and Exchange Commission regarding our periodic reports under the Exchange Act, as of any day 180 days or more before the end of the fiscal year to which this annual report relates, which remain unresolved.

cept where they are in cash flow hedge accounting relationships when changes in fair value of the effective portion of the hedge are reflected directly in a component of shareholders’ equity.

Trading assets include debt and equity securities, derivatives held for trading purposes and trading loans. Trading liabilities consist primarily of derivative liabilities and short positions. Financial assets and liabilities which are designated at fair value through profit or loss, under the fair value option, include repurchase and reverse repurchase agreements, certain loans and loan commitments, debt and equity securities and structured note liabilities. Private equity investments in which we do not have a controlling financial interest or significant influence, are also carried at fair value.

Fair value is defined as the price at which an asset or liability could be exchanged in a current transaction between knowledgeable, willing parties, other than in a forced or liquidation sale.

Since the fair value determined might differ from actual net realizable values, the fair value estimates are considered critical accounting estimates for our Corporate Banking & Securities Corporate Division, which trades certain illiquid securities and over-the-counter derivatives, some of which are long-dated or are complex structures. Fair value estimates are also critical for our Corporate Investments Group Division, which holds investments that are not actively traded.

In other markets or for certain instruments, observable prices or inputs are not available, and fair value is determined using valuation techniques appropriate for the particular instrument. For example, instruments subject to valuation techniques include: trading loans and other loans or loan commitments designated at fair value through profit or loss, under the fair value option; new, complex and long-dated OTC derivatives; transactions in immature or limited markets; distressed debt securities; private equity securities and retained interests in securitizations of financial assets. The application of valuation techniques to determine fair value involves estimation and management judgment, the extent of which will vary with the degree of complexity and liquidity in the market. Valuation techniques include models based on discounted cash flow analysis, which are dependent upon estimated future cash flows and the discount rate used. For more complex products, the valuation models include more complex modeling techniques, parameters and assumptions, such as volatility, correlation, prepayment speeds, default rates and recovery rates. Management judgment is required in the selection and application of the appropriate parameters, assumptions and modeling techniques. Because the objective of using a valuation technique is to establish the price at which market participants

observable and others are not. Further, the classification of an instrument can change over time to reflect changes in market liquidity and therefore price transparency.

Other valuation controls include review and analysis of daily profit and loss, validation of valuation through close out profit and loss and Value-at-Risk back-testing. For further discussion on our Value-at-Risk Analysis, see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Market Risk – Value-at-Risk Analysis.”

The components of the allowance for loan losses are an individually assessed loss component and a collectively assessed loss component. The individually assessed loss component relates to loans which are individually significant and for which there is objective evidence of impairment that can be reliably measured. The collectively assessed loss component relates to the amount for losses incurred on loans that are assessed collectively. Loans assessed collectively are those that are not individually significant and individually significant loans for which there was no objective evidence of impairment when they were assessed individually. The collectively assessed loss component consists of the country risk allowance, the smaller-balance standardized homogeneous loan loss allowance and the allowance for estimated incurred losses inherent in the group of loans not yet individually identified.

We believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate for our Corporate Banking & Securities and Private & Business Clients Corporate Division because the underlying assumptions used for both the individually and collectively assessed loss components of the allowance can change from period to period. Such changes may materially affect our results of operations.

The individually assessed loss component is the allowance for losses on loans for which management believes that we will be unable to collect all of the principal and interest due under the loan agreement. This component comprises the largest portion of our allowance for loan losses and requires consideration of various underlying factors which include, but are not limited to, the financial strength of our customers, the present value of expected future cash flows, including cash flows that may result from foreclosure less costs for obtaining and selling the collateral, or the market price of the loan. We regularly re-evaluate all loan exposures that have already been specifically provided for, as well as all loan exposures that appear on our watchlist. Our assumptions are either validated or revised accordingly based on our re-evaluation.

Some of the underlying factors used in determining the collectively assessed loss component are historical loss experience and political, economic and other relevant factors. We determine our country risk allowance based on historical loss experience and current market data affecting a country’s financial condition. Our smaller-balance standardized homogeneous portfolio allowance is established based on analyses of historical loss experience for each product type according to criteria such as past due status and collateral recovery values. The allowance for estimated incurred

for sale, see Note [7] to the consolidated financial statements and for equity method investments, see Note [14] to the consolidated financial statements.

Goodwill and other intangible assets are tested for impairment on an annual basis, or more frequently if events or changes in circumstances, such as an adverse change in business climate, indicate that these assets may be impaired. The fair value determination used in the impairment assessment requires estimates based on quoted market prices, prices of comparable businesses, present value or other valuation techniques, or a combination thereof, necessitating management to make subjective judgments and assumptions. Because these estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change, we consider this estimate to be critical. As of December 31, 2007 and 2006, goodwill had a carrying amount of € 7.2 billion and € 7.3 billion, respectively, and other intangible assets had a carrying amount of € 2.2 billion and€ 1.3 billion, respectively. Evaluation of impairment of these assets is a significant estimate for multiple divisions.

In 2007, a goodwill impairment loss totaling € 54 million was recognized in Corporate Investments after an impairment review in the first quarter of 2007. In 2006, a goodwill impairment loss of € 31 million was recorded in Corporate Investments relating to a private equity investment in Brazil, which was not integrated into the cash-generating unit. The impairment loss was triggered by changes in local law that restricted certain business activities. For further discussion on goodwill and other intangible assets, see Note [21] to the consolidated financial statements.

We believe that the accounting estimate related to the deferred tax assets is a critical accounting estimate because the underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change of the deferred tax asset. If we were not able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to income tax expense/equity in the period such determination was made.

For further information on our deferred taxes see Note [33] to the consolidated financial statements.

dence in the financial markets. Unexpectedly high losses reported by many market participants, and a growing uncertainty about whether further losses were forthcoming, caused the interbank, securitization, and syndicate markets to dry up. Results in our capital-markets related businesses were negatively impacted by the market conditions in the second half of 2007. These results were limited somewhat by the strength of our risk management and were in part offset by those in most other areas of CIB, as well as in PCAM and CI, highlighting the benefits of our diversified global business portfolio. Despite the particular challenges of 2007, we reported one of the best financial years in our history and increased our earnings versus 2006, while also strengthening our competitive position.

In 2007, income before income tax expense was € 8.7 billion, a 5 % increase over 2006, and revenues were € 30.7 billion, up 8 %. We reported a pre-tax return on average active equity of 29 % in 2007 and 33 % in 2006, with the decline due largely to an increase in average active equity to € 29.8 billion in 2007 versus € 25.5 billion in 2006 (pre-tax return on average shareholders’ equity was 24 % and 28 %, for 2007 and 2006, respectively). In 2007, net income was€ 6.5 billion, up 7 % versus 2006. Diluted earnings per share increased by 14 % to € 13.05.

Total CIB net revenues advanced by 2 % to € 19.1 billion, with increases in transaction services and advisory offsetting a decline in Origination (debt), mainly related to leveraged finance activities. Overall results from Sales & Trading businesses in CIB were flat year-on-year. Increases in our customer-oriented businesses, such as foreign exchange, money markets, rates and equities trading, offset lower results on credit trading, which were due largely to the stressed credit markets in the second half of 2007. PCAM’s net revenues increased by€ 814 million, largely driven by acquisition-related business and organic growth. Net revenues in CI were € 943 million above those of 2006 due mainly to gains on sales from our industrial holdings portfolio.

Our total noninterest expenses were € 21.4 billion in 2007 compared to€ 19.9 billion in 2006. Compensation and benefits expenses were up 5 % due mainly to a 9,442 increase in headcount and the accelerated recognition of share-based compensation expense following a new definition of early retirement eligibility for the awards granted under the DB Equity Plan in 2007. General and administrative expenses for the year increased by 13 % due largely to the impact of acquired businesses.

In 2007, the provision for credit losses was € 612 million compared to€ 298 million in 2006. The increase was due largely to acquisition-related and organic growth in PBC and a provision related to a single counterparty relationship in CIB.

est income was related to Sales & Trading (debt) activity and was largely offset by decreased net gains (losses) on financial assets/liabilities at fair value through profit or loss from related activity. Interest income from loans increased year-on-year along with higher rates and volumes of our average loans outstanding, partly resulting from the acquisition of Berliner Bank and norisbank. Our overall funding costs rose slightly by 2 basis points, mainly reflecting increased rates on customer deposits and longer-term funding.

The development of our net interest income is also impacted by the accounting treatment of some of our hedging-related derivative transactions. We enter into nontrading derivative transactions primarily as economic hedges of the interest rate risks of our nontrading interest-earning assets and interest-bearing liabilities. Some of these derivatives qualify as hedges for accounting purposes while others do not. When derivative transactions qualify as hedges of interest rate risks for accounting purposes, the interest arising from the derivatives is reported in interest income and expense, where it offsets interest flows from the hedged items. When derivatives do not qualify for hedge accounting treatment, the interest flows that arise from those derivatives will appear in trading income.

Net gains (losses) on financial assets/liabilities at fair value through profit or loss from CIB – Sales & Trading (debt and other products) decreased by € 2.1 billion, or 35 %. This development was primarily driven by a weaker performance in our credit trading businesses given exceptionally challenging markets in the second half of 2007. The increase in net gains (losses) on financial assets/liabilities at fair value through profit or loss from Sales & Trading (equity), which was partially offset in net interest income from trading activities as described below, reflected significant improvements across our customer-driven businesses. The main contributors to the decrease in Other net gains (losses) on financial assets/liabilities at fair value through profit or loss were mark-to-market losses (net of fees and gains on sales) on leveraged loans and loan commitments in 2007 as a consequence of the difficulties in the leveraged finance markets.

Our trading and risk management businesses include significant activities in interest rate instruments and related derivatives. Under IFRS, interest and similar income earned from trading instruments and financial instruments designated at fair value through profit or loss (e.g. coupon and dividend income), and the costs of funding net trading positions are part of net interest income. Our trading activities can periodically shift income between net interest income and net gains (losses) of financial assets/liabilities at fair value through profit or loss depending on a variety of factors, including risk management strategies. In order to provide a more business-focused commentary, we disclose net