Half-Yearly Financial Report as at 30 June 2016

Transcription

1 Half-Yearly Financial Report as at 30 June 2016

2 2 Anhang Contents 03 Key figures at a glance Interim management report Financial position and performance 10 Report on expected developments 12 Report on opportunities and risks 13 Report on major related party transactions Futher information DVB worldwide 36 Imprint Interim financial statements Condensed income statement 16 Condensed statement of comprehensive income 17 Statement of financial position 18 Condensed statement of changes in equity 18 Condensed cash flow statement 19 Segment report 20 Notes Review report 33 Symbols Legal notice Further information

3 Key figures at a Anhang glance 3 mn 1 Jan Jun Jan Jun 2015 % Earnings data Net interest income Allowance for credit losses Net interest income after allowance for credit losses Net fee and commission income Results from investments in companies accounted for using the equity method Net other operating income/expenses 1) Total income 1) General administrative expenses 1) Net result from financial instruments in accordance with IAS 39 1) Consolidated net income before bank levy, BVR 2) Deposit Guarantee Scheme and taxes 1) Consolidated net income before taxes 1) Consolidated net income 1) Key financial indicators Return on equity (before taxes, %) 1) pp Cost/income ratio (%) 1) pp Economic Value Added ( million) 1) mn 30 Jun Dec 2015 % Key items from the statement of financial position Business volume 27, , Customer lending volume 24, , Total assets 26, , Loans and advances to customers 22, , Deposits from customers 7, , Securitised liabilities 12, , Subordinated liabilities Equity 1, , Total capital in accordance with the Capital Requirements Regulation Common equity tier 1 capital 1, , Tier 2 capital Modified available capital 1, , Capital ratios Basel III (%) Common equity tier 1 ratio pp Total capital ratio pp 30 Jun Jun 2015 % Staff by business division Transport Finance/Investment Management Service areas LogPay Financial Services Total active staff Rating Standard & Poor s Long-term counterparty credit rating A+ A+ A+ Short-term credit rating A-1 A-1 A-1 Outlook stable stable stable Fitch Ratings 3) Long-term issuer default rating AA- AA- A+ Short-term issuer default rating F1+ F1+ F1+ 1) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure. 2) National Association of German Cooperative Banks (BVR) 3) Within the scope of the German Cooperative Financial Services Network s rating

4 05 Financial position and performance 10 Report on expected developments 12 Report on opportunities and risks 13 Report on major related party transactions Interim management report Development of net income, as at 30 June mn ) 8.4 1) Net interest income Net fee and commission income Net other operating income/expenses Consolidated net income before taxes 1) Previous year s figure adjusted (for a more detailed explanation, please refer to Note 3)

5 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Financial position and performance 5 Consolidated net income before taxes, as at 30 June The present interim management report and condensed consolidated financial statements of DVB Bank Group as at 30 June 2016 were subject to a review pursuant to section 37w (5) of the German Securities Trading Act (WpHG). The Half-Yearly Financial Report comprises the condensed interim financial statements and the interim management report of DVB Bank Group. mn ) Figures in the interim management report and condensed consolidated financial statements (including notes) are rounded, pursuant to standard business principles. This may result in slight differences when aggregating figures and calculating percentages. Some financial figures of the previous year differ from the values stated in the Half-Yearly Financial Report For a detailed explanation of the reasons for these adjustments, please refer to Note 3 on pages 21. DVB posts positive consolidated net income before taxes for the first six months Thanks to the cycle-neutral, global market presence, sustainable client service, and the proximity to transactions being originated on the markets, DVB succeeded in generating positive consolidated net income before taxes. However, DVB s performance during the first half of 2016 was burdened by the persistent shipping crisis, the ECB s low-interest rate policy, and the high costs induced by banking regulation. DVB generated positive consolidated net income before taxes, at 14.1 million (previous year: 75.7 million). DVB s results were largely shaped by the following components: In a continuously challenging environment, DVB originated 63 new transactions in its core Transport Finance business, with an aggregate volume of 2.8 billion in the first half of 2016 (previous year: 100 new transactions with a total volume of 3.6 billion). The Bank continues to be available to its clients in the persistently difficult segments of the shipping industry given reduced opportunities to originate new business, however, on a lower level. New business in Aviation Finance with aircraft financings and in Land Transport Finance, where it finances rail rolling stock and other rail-related vehicles, continued to develop successfully ) Previous year s figure adjusted (for a more detailed explanation, please refer to Note 3) Allowance for credit losses amounted to 83.4 million during the period under review (previous year: 39.7 million), in line with DVB s expectations. The increase was largely required for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, which is to be burdened by the slump in oil prices. The Bank was successful in the fee and advisory businesses: net fee and commission income rose by 8.0%, from 52.3 million to 56.5 million. On another positive note, the Bank managed to keep general administrative expenses of 91.3 million almost in line with the previous year s figure ( 89.5 million) in spite of continued high expenses incurred from regulatory-driven projects. Net income from financial instruments in accordance with IAS 39 which is generally volatile amounted to 10.0 million (previous year: 63.5 million). The considerable decline was primarily due to substantial non-recurring income from the sale of investment securities (the partial disposal of the stake in Wizz Air Holdings Plc) recognised in 2015 and generated by the Bank s Aviation Investment Management activities. The individual items of the half-yearly financial statements developed as follows: Total income (before IAS 39) amounted to million, thus 8.7% below the figure of the previous year ( million). Net interest income increased by 34.6%, from 92.5 million to million, driven mainly by lower interest expenses for securitised liabilities and for operating leases, as well as by currency translation effects. 14.1

6 6 Financial position and performance Allowance for credit losses amounted to 83.4 million (previous year: 39.7 million). Specifically, new allowances recognised for credit losses totalled million (previous year: 69.2 million), of which million (previous year: 49.0 million) was accounted for by Shipping Finance and Offshore Finance, due to the persistently difficult environment surrounding the international shipping and offshore markets. Conversely, allowance for credit losses of million (previous year: 34.8 million) was reversed, of which 95.8 million (previous year: 20.9 million) was in Shipping Finance and Offshore Finance. Net interest income after allowance for credit losses of 41.1 million was lower than the previous year s figure of 52.8 million. Net fee and commission income, which primarily includes fees and commissions from new Transport Finance business, asset management fees, and fees generated from Corporate Finance advisory mandates, was up 8.0%, from 52.3 million to 56.5 million. Fee and commission income was up 1.5%, to 59.7 million (previous year: 58.8 million); fee and commission expenses declined by 50.8%, from 6.5 million to 3.2 million. Results from investments accounted for using the equity method were up 32.3%, from 3.1 million to 4.1 million. Net other operating income/expenses amounted to 4.8 million (previous year: 8.4 million). Total allowance for credit losses (comprising specific allowance for credit losses, portfolio-based allowances for credit losses, and provisions) rose to million, up 16.7% from year-end 2015 ( million). Allowance for credit losses by business division as at 30 June 2016 ( mn) Additions Reversals Direct write-offs Recoveries on loans and advances previously written off Total Shipping Finance Aviation Finance Offshore Finance Land Transport Finance Investment Management ITF Suisse Business no longer in line with DVB s strategy Other Total specific allowance for credit losses Shipping Finance Aviation Finance Offshore Finance Land Transport Finance Investment Management ITF Suisse Business no longer in line with DVB s strategy Other Total portfolio-based allowance for credit losses Offshore Finance Total provisions Total as at 30 June Total as at 30 June

7 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Financial position and performance 7 General administrative expenses rose by 2.0%, to 91.3 million (previous year: 89.5 million). Staff expenses increased by 7.2%, to 55.2 million (previous year: 51.5 million), which was largely due to additional staff required to fulfil a substantial range of new regulatory requirements. Together with its LogPay Financial Services subsidiary, DVB employed a total of 614 staff (in active employment) as at 30 June 2016, an increase of 26 compared to the previous year (588 employees). Non-staff expenses (including depreciation, amortisation and write-downs) decreased by 5.0%, from 38.0 million to 36.1 million. Net income from financial instruments in accordance with IAS 39 (comprising the trading result, the hedge result, the result from derivatives entered into without intention to trade, and the result from investment securities) which is generally volatile amounted to 10.0 million (previous year: 63.5 million). The previous year s figure included substantial non-recurring income from the sale of investment securities, due to the partial disposal of the stake in Wizz Air Holdings Plc. This one-off effect, which was generated in the Bank s Aviation Investment Management activities, did not materialised during the reporting period Consolidated net income before bank levy, BVR Deposit Guarantee Scheme, and taxes decreased by 72.2%, to 25.2 million (previous year: 90.6 million). Estimated bank levy charges of 6.4 million (2015: 3.3 million in bank levy actually paid) as well as 4.7 million in expenses for the Deposit Guarantee Scheme of the National Association of German Cooperative Banks (BVR; 2015: 4.6 million in expenses for the BVR Deposit Guarantee Scheme) needed to be deducted from this figure already at the beginning of the year. Consolidated net income before taxes amounted to 14.1 million (previous year: 75.7 million), and consolidated net income after taxes of 10.6 million was short of the previous year s figure of 62.5 million. Derivation of consolidated net income as at 30 June 2016 ( mn) Total income 1) General administrative expenses Net result from financial instruments in accordance with IAS 39 Expenses for the bank levy and the BVR 2) Deposit Guarantee Scheme (financial year) Income taxes Consolidated net income 1) Comprising net interest income after allowance for credit losses, net fee and commission income, result from investments in companies accounted for using the equity method, and net other operating income/expenses 2) National Association of German Cooperative Banks

8 8 Financial position and performance DVB s total assets decreased to 26.5 billion as at 30 June 2016, down 0.4% from the 2015 year-end figure of 26.6 billion largely due to currency translation effects. Distribution of customer lending by business division, as at 30 June 2016 DVB s nominal volume of customer lending (the aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments, and derivatives) decreased by 3.6%, to 24.4 billion. In US dollar terms, it was down 1.8%, from US$27.5 billion to US$27.0 billion. The chart illustrates the breakdown of customer lending (in euro terms) across the Bank s business divisions. Shipping Finance 45.9 % ( 0.7 pp) Aviation Finance 32.0 % (+1.6 pp) Offshore Finance 9.0 % ( 0.5 pp) Land Transport Finance 7.0 % (+0.3 pp) ITF Suisse 3.3 % ( 0.7 pp) Investment Management 2.5 % (+0.5 pp) Business no longer in line with the Bank s strategy 0.4 % ( 0.4 pp) Development of the customer lending volume bn US$ bn 30 Jun Dec 2015 % 30 Jun Dec 2015 % Shipping Finance Aviation Finance Offshore Finance Land Transport Finance ITF Suisse Investment Management Business no longer in line with DVB s strategy Total

9 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Financial position and performance 9 The Bank employs key financial indicators to assess and manage its business: return on equity (ROE) before taxes, cost/ income ratio (CIR) and risk-adjusted Economic Value Added (EVA ). In order to harmonise the calculation methodology and enhance transparency thereof, the Bank has included expenses for the bank levy and the BVR Deposit Guarantee Scheme, as well as the operative component of the IAS 39 result (the result from investment securities) in its calculation methodology for all three management indicators since the first quarter of Expenses for the bank levy and the BVR Deposit Guarantee Scheme must be recognised at the beginning of each financial year, for the full year, and are then no longer amortised over the course of the year. However, in DVB s view, amortising these charges over the periods within a financial year is commercially sensible for calculating key financial indicators, since this allows for a more realistic reflection of business performance. On this basis, the financial indicators developed as follows: ROE (before taxes) of 0.6% (previous year: 8.8%) was calculated as follows: consolidated net income before IAS 39 and taxes (but including the result from investment securities), in the amount of 3.8 million was divided by the pro-rata total of weighted capital in the amount of 1,335.4 million (issued share capital, capital reserve, retained earnings excluding funds for general banking risks, non-controlling interests and deferred taxes, as well as before appropriation of consolidated net income). CIR totalled 52.6% (previous year: 49.9%) and was calculated in the following manner: the aggregate of general administrative expenses and pro-rata expenses for bank levy and BVR Deposit Guarantee Scheme ( 96.9 million) was divided by the total of net interest income before allowance for credit losses, net fee and commission income, results from investments in companies accounted for using the equity method, net other operating income/expenses, and the result from investment securities ( million). Risk-adjusted EVA amounted to 47.2 million (previous year: 8.0 million). It was calculated by deducting risk capital costs ( 51.0 million), on a pro-rata basis, from consolidated net income before IAS 39 and taxes, but including the result from investment securities ( 3.8 million). DVB discloses capital ratios determined in accordance with the Basel III framework (Advanced Approach). On this basis, DVB s common equity tier 1 ratio as at 30 June 2016 was 12.6% (31 December 2015: 16.3%), whilst the total capital ratio amounted to 17.2% (31 December 2015: 22.4%).

10 10 Report on expected developments This Half-Yearly Financial Report contains forward-looking statements, including statements concerning the future development of DVB. As usual, any assessments and forecasts contained herein will always be subject to the risk of erroneous perception or judgement errors, and may thus turn out to be incorrect. By their very nature, any deliberations regarding developments or events in the future are based on conjecture rather than precise predictions. Actual future developments may therefore diverge from expectations, not least as a result of fluctuations in capital market prices, exchange rates or interest rates, or similar causes of uncertainty; or due to fundamental changes in the economic environment. Although we believe the forward-looking statements to be realistic, DVB cannot accept any responsibility that they will actually materialise, for the reasons outlined above. Macroeconomic overview There are no new insights that would indicate any material changes to the forecasts regarding the development of transport markets, Transport Finance and Investment Management portfolios, or to the financial outlook as set out in the group management report on pages 95 97, , , , 133, 139, 143, and of the Group Annual Report Before the vote in the United Kingdom in favour of leaving the European Union (Brexit), economic data and financial market developments suggested that the global economy was evolving broadly as forecasted by the International Monetary Fund (IMF) in April The outcome of the referendum, which surprised global financial markets, implies the materialisation of an important downside risk for the world economy. As a result, the global outlook for 2016 has worsened, despite the better-than-expected performance in early This deterioration reflects the expected macroeconomic consequences of a sizable increase in uncertainty, including on the political front. With Brexit still very much unfolding, the extent of uncertainty complicates the already difficult task of macroeconomic forecasting. The baseline global growth forecast by the IMF has been revised modestly downwards relative to the forecast made in April 2016 (by 0.1 percentage points for 2016 (3.1%), as compared to a 0.1 percentage point upward revision for 2016 envisaged pre-brexit). Pending further clarity on the exit process, this baseline reflects the benign assumption of a gradual reduction in uncertainty going forward, with arrangements between the European Union and the United Kingdom avoiding a large increase in economic barriers, no major financial market disruption, and limited political fallout from the referendum. However, more negative outcomes are a distinct possibility. DVB agrees with this expert opinion and expects economic growth in the foreseeable future to remain volatile. One of the key drivers for DVB s business model will continue to be the development of the oil price, which is expected to remain at a low level for a longer period of time. The reasons for this are the still very high (but continuously decreasing) production volumes of the OPEC member states and Russia, an expected increase in supply from Iran, as well as existing uncertainty regarding the resilience of global demand and the medium-term growth potential. In addition, investors are currently refraining from commodity and equity investments given the prevailing risk aversion on the financial markets.

11 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Report on expected developments 11 Moreover, DVB will probably be heavily influenced by the following risk factors: geopolitical crises and their impact on the global economy through sanctions; global stock markets in decline and rising uncertainties surrounding market development in the future; increased capital withdrawal from commodity-exporting emerging countries as commodity prices continue to fall in the wake of the expected interest rate hikes in the US; impact of the interest rate turnaround in the US on asset prices in industrial countries, as well as on capital flows in major emerging economies; further development of the Chinese economy. Developments on the track and transport markets have remained mixed during The demand forecast for the aviation markets remains positive. Worldwide, airlines have benefited from low oil prices and high load factors and are reporting excellent results. Industry profit has even made a new record high. The demand forecast for the land transport markets remains positive for Europe as well transport price, lease rate and utilisation rate increases can be expected across the board while the outlook for the Australian and North American markets is more challenging. Continued oil price uncertainty is leading to further cuts in exploration and production (E&P) spending on offshore markets, as oil and gas majors not only implement cost-cutting programmes, but also delay investments. A further decline in E&P spending is expected for Demand for offshore assets is likely to decline further from the levels seen in 2015, although at varying degrees depending on asset type and region. Offshore assets, largely involved in exploration will be most affected while activity in lower-cost regions (Middle East) is expected to be more resilient. With the market continuing to remain difficult, cash reserves amongst rig owners and shipowners are gradually becoming depleted. Hence, we expect to see even more restructurings, distressed sales, and bankruptcies during DVB s outlook is as follows: The Bank continues to assess the financial year 2016 with cautious optimism, and is endeavouring to achieve consolidated net income that should approach the previous year s level. Given the persistent challenges on the shipping and offshore markets, DVB is of course aware that allowance for credit losses will continue to remain on an elevated level. In the shipping markets, growth prospects for 2016 are worse than originally expected. As a consequence, most shipping sectors will probably have to wait longer for any significant increase in demand. Until such time, the excess capacity in the existing fleet will represent a challenge for the industry. The structural oversupply continues to burden vessel values and charter rates in the three troubled sectors (container vessels, dry bulk carriers, and crude oil tankers). The tanker market is currently reaping short-term benefits with clearly positive effects on demand, which are likely to curb during 2016, resulting in a probable deceleration of demand growth.

12 12 Report on opportunities and risks No risks which would jeopardise DVB s continued existence are expected to materialise during the remainder of the financial year Please refer to the report on opportunities and risks on pages of the Group Annual Report 2015, which contains detailed information regarding risk management principles and organisation, DVB s risk-bearing capacity and risk capital, and on the different types of risk.

13 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Report on major related party transactions 13 Full reference is made in this respect to the information provided on pages , note 65.4 of the Annual Report As part of DVB s funding operations, the Bank s securitised liabilities vis-à-vis DZ BANK Group amounted to 6,091.8 million as at 30 June 2016 (31 December 2015: 7,582.6 million adjustment of the figure originally disclosed in the Group Annual Report 2015 in the amount of 10,829.8 million)). At the reporting date, the Bank had no securities repurchase agreements in place where DZ BANK AG is the borrower (31 December 2015: two transactions). Given these transactions, an aggregate amount of 75.8 million was recognised in loans and advances to banks as at year-end Other than this, there were no material changes to related party transactions during the first half of 2016 which might have materially affected the financial position or financial performance of DVB.

14 15 Condensed income statement 16 Condensed statement of comprehensive income 17 Statement of financial position 18 Condensed statement of changes in equity 18 Condensed cash flow statement 19 Segment report1 1) 20 Notes 1) This table is part of the Notes. Interim financial statements Total income 1) development in Transport Finance, as at 30 June mn Shipping Finance Aviation Finance Offshore Finance Land Transport Finance Total Transport Finance results 1) Before IAS 39 and before allocation of general costs 2) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3).

15 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Condensed income statement 15 mn Note 1 Jan Jun Jan Jun 2015 % Net interest income (4) Allowance for credit losses (5) Net interest income after allowance for credit losses Net fee and commission income (6) Results from investments in companies accounted for using the equity method General administrative expenses 1) (7) Net other operating income/expenses 1) (8) Consolidated net income before IAS 39, bank levy, BVR 2) Deposit Guarantee Scheme and taxes 1) Net result from financial instruments in accordance with IAS 39 1) (9) Consolidated net income before bank levy, BVR 2) Deposit Guarantee Scheme and taxes 1) Expenses for the bank levy and the BVR 2) Deposit Guarantee Scheme Consolidated net income before taxes 1) Income taxes Consolidated net income 1) thereof: consolidated net income attributable to non-controlling interests thereof: consolidated net income attributable to shareholders of DVB Bank SE 1) Earnings per share Average number of shares issued 45,581,303 45,696, Basic earnings per share ( ) 1) Diluted earnings per share ( ) 1) ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3). 2) National Association of German Cooperative Banks

16 16 Condensed statement of comprehensive income mn 1 Jan Jun Jan Jun 2015 % Consolidated net income 1) Other comprehensive income reclassified subsequently to profit or loss Revaluation of AfS financial instruments thereof: changes in fair value thereof: reclassifications to the income statement Cash flow hedges thereof: changes in fair value thereof: reclassifications to the income statement Net investment hedges thereof: changes in fair value thereof: reclassifications to the income statement Currency translation thereof: changes in fair value thereof: reclassifications to the income statement Deferred taxes Other comprehensive income from associates and joint ventures reclassified subsequently to profit or loss Revaluation of AfS financial instruments thereof: changes in fair value thereof: reclassifications to the income statement Cash flow hedges thereof: changes in fair value thereof: reclassifications to the income statement Currency translation thereof: changes in fair value thereof: reclassifications to the income statement Other comprehensive income not reclassified subsequently to profit or loss Revaluation of defined benefit plans Deferred taxes Total comprehensive income 1) thereof: total comprehensive income attributable to non-controlling interests thereof: total comprehensive income attributable to shareholders of DVB Bank SE 1) ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3).

17 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Statement of financial position 17 Assets ( mn) Note 30 Jun Dec 2015 % Cash and balances with the central bank 1, , Loans and advances to banks (10) 1, , Loans and advances to customers (11) 22, , Allowance for credit losses (12) Positive fair values of derivative hedging instruments Trading assets Investment securities (13) Investments in companies accounted for using the equity method (14) Intangible assets (15) Property and equipment (16) Income tax assets Other assets (17) Non-current assets held for sale 20.9 Total 26, , Liabilities and equity ( mn) Note 30 Jun Dec 2015 % Deposits from other banks (18) 2, , Deposits from customers (19) 7, , Securitised liabilities (20) 12, , Negative fair values of derivative hedging instruments Trading liabilities Provisions (21) Income tax liabilities Other liabilities (22) Subordinated liabilities (23) Equity (24) 1, , Issued share capital Capital reserve Retained earnings thereof: fund for general banking risks Revaluation reserve Reserve from cash flow hedges Reserve from net investment hedges Currency translation reserve Distributable profit Non-controlling interests Total 26, ,

18 18 Condensed statement of changes in equity mn 1 Jan Jun Jan Jun 2015 % Equity as at 1 Jan 1) 1, , Consolidated net income attributable to shareholders of DVB Bank SE 1) Other comprehensive income Dividend payment Changes in treasury shares Changes in consolidated group and other changes Equity as at 30 Jun 1, , ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3). Condensed cash flow statement mn 1 Jan Jun Jan Jun 2015 % Cash flow from operating activities 1) Cash flow from investing activities 1) Cash flow from financing activities Net change in cash and cash equivalents 1) Cash and cash equivalents at beginning of period 1, Cash and cash equivalents at end of period 1, ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3).

19 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Segment report 19 Group Shipping Finance Aviation Finance Offshore Finance Land Transport Finance Investment Management Treasury Other Reconciliation/consolidation mn 06/ / / / / / / / / / / / / / / / / /2015 Net interest income Allowance for credit losses Net interest income after allowance for credit losses Net fee and commission income Results from investments in companies accounted for using the equity method Net other operating income/ expenses 1) Total income 1) Staff expenses Non-staff expenses 1) Depreciation, amortisation, impairment and write-ups General administrative expenses 1) Consolidated net income before IAS 39, bank levy, BVR Deposit Guarantee Scheme and taxes 1) Net result from financial instruments in accordance with IAS 39 1) Consolidated net income before bank levy, BVR Deposit Guarantee Scheme and taxes 1) Cost/income ratio 1) 2) (%) Return on equity 1) 3) (%) Lending volume 4) 28, , , , , , , , , , , , , ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure in relation to the Group and the Shipping segment (see note under 3). 2) Excluding allowance for credit losses 3) Before taxes 4) According to internal management

20 20 Notes General notes 1 Summary of material accounting policies applied The present interim consolidated financial statements for the period ended on 30 June 2016 have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). They also comply with the requirements for interim financial reporting set out in section 37w of the German Securities Trading Act (WpHG). The present interim consolidated financial statements are presented in the form of condensed interim financial statements in accordance with IAS 34. The accounting policies applied therein are in line with those applied for the consolidated financial statements as at 31 December 2015, in which allowances for companies accounted for using the equity method were reported under the result from investment securities. So far, expenses from allowances for companies accounted for using the equity method were reported as other expenses. The change of presentation was consistently applied to the comparative figures of the previous year in the present interim consolidated financial statements. Regardless of this fact, operating income/expenses from investments in companies accounted for using the equity method are recognised in a separate item of the income statement. The following amendments to accounting standards and new interpretations have been taken into account in the interim consolidated financial statements for the first time: Amendments to IAS 19 Employee Benefits Amendments to IFRS 11 Accounting for Acquisition of Interests in Joint Operations Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 1 Disclosure Initiative Improvements to the International Financial Reporting Standards, period Improvements to the International Financial Reporting Standards, period The amendments to IAS 19 Employee Benefits govern the accounting for components of direct pension commitments. It is possible to recognise cost components that depend directly on the service period directly through profit or loss in the current period. The amendments to IAS 16 and IAS 38 clarify which methods are appropriate for the depreciation of property, plant and equipment and the amortisation of intangible assets. In general, depreciation and amortisation have to be recognised in a manner that reflects the consumption of the expected future economic benefits generated by an asset. Firstly, a reduction in selling prices may be an indication to recognise a special writedown for the assets necessary for production. Secondly, the determination of an appropriate amortisation method for intangible assets has to take into consideration a predominant limiting factor for use of the asset (e.g. time limits, limits in relation to the number of produced units). The other revised and amended standards set out above do not have a significant impact on DVB s interim consolidated financial statements. In the period under review, DVB did not enter into securities repurchase agreements. As at year-end 2015, DVB held two transactions structured as genuine repurchase agreements (with DVB as lender), all of which expired during the first half of Currency translation differences related to companies with a different functional currency are recognised directly in equity, in the currency translation reserve. In total, 31 companies accounted for using the equity method have a different functional currency (31 December 2015: 27 companies). To the extent that estimates are necessary for recognition and measurement, these were made in accordance with the relevant standards. The basis for these estimates is continuously reviewed and adjusted, if necessary, taking into account historical experience as well as changed expectations with regard to future developments. 2 Consolidated group The group of consolidated companies changed as a result of the establishment of the following, fully consolidated companies: Intermodal Investment Fund IX LLC, Majuro, Marshall Islands Iron Maple Rail Ltd, Vancouver, Canada SIIM Marlin Holdings LLC, Majuro, Marshall Islands The amendments to IFRS 11 clarify that the rules of IFRS 3 and other standards have to be applied for the accounting for business combinations if the shares in a joint operation constitute a business as defined in IFRS 3. This applies to the extent that the rules are not in conflict with the basic rules of IFRS 11.

21 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Notes 21 The following newly-established companies were included in the group of consolidated companies using the equity method: MSEA Marlin Holdings LLC, Majuro, Marshall Islands MSN 1272&1278 Aircraft Leasing (Cayman) Ltd, Grand Cayman, Cayman Islands After the acquisition of shares, the following companies were included in the group of consolidated companies using the equity method: Celestyal Cruises Ltd, Strovolos, Cyprus TAP Ltd, Hamilton, Bermuda The following companies are no longer included in the group of consolidated companies: American Flirtation N.V., Willemstad, Curaçao Clementine Shipping LLC, Majuro, Marshall Islands DVB Objektgesellschaft Geschäftsführungs GmbH, Frankfurt/ Main, Germany Mount Kaba Shipping LLC, Majuro, Marshall Islands S1 Offshore Pte Ltd, Singapore Shipping Capital Antilles N.V., Willemstad, Curaçao TEU Management Company N.V., Willemstad, Curaçao from the error correction made to the consolidated financial statements for the reporting date 31 December Correction of errors mn 30 June 2015 before correction of errors 4 Net interest income Correction/ adjustment 30 June 2015 after correction of errors Income statement General administrative expenses Net other operating income/expenses ) Net result from financial instruments in accordance with IAS ) Consolidated net income before taxes Consolidated net income ) In addition, 8.8 million was reclassified from "Net other operating income/expenses" to the "Result from investment securities", which is part of the "Net result from financial instruments in accordance with IAS 39". 3 Correction of errors mn 1 Jan Jan Jun Jun 2015 % In the context of the audit of the 2013 consolidated financial statements, the German Financial Reporting Enforcement Panel (FREP) issued a letter dated 16 December 2015 in which it determined an error regarding the presentation of a claim for damages. This finding refers to the capitalised claim for damages in relation to arbitration proceedings against COSCO which DVB lost by virtue of the arbitral award dated 5 August The proceedings were in relation to claims for damages from the pre-delivery payment loan for the construction of a sixth-generation drillship. The result of the arbitral award was published in an ad-hoc disclosure dated 7 August The error identified by the FREP refers to the allegation that the claim for damages, in accordance with IAS 37, should only be recognised in relation to the contractually secured rights. The claim amounted to US$153.0 million as at 31 December 2013, of which US$116.9 million were secured by contractual rights. The FREP therefore determined that the receivable, which had been recognised for the first time in the consolidated financial statements as at 31 December 2013, had been overstated by 26.6 million (US$36.1 million). Pursuant to the rules set out in IAS 8.41, the consolidated financial statements for 2013 and 2014 have to be adjusted retrospectively. For further information, reference is made to page 190, note of the Group Annual Report The presented reconciliation shows the effects on the individual items in the income statement for the reporting date 30 June 2015, resulting Interest income from lending and money market transactions from bonds and other fixed-income securities from finance leases Current income from operating leases from equity investments and other investment securities Interest income Interest expenses for deposits for securitised liabilities for subordinated liabilities for operating leases Interest expenses Net interest income Net interest income includes negative interest from financial assets in the amount of 3.2 million and positive interest from financial liabilities in the amount of 0.2 million.

22 22 Notes 5 Allowance for credit losses mn 1 Jan Jan Jun Jun 2015 % Additions Reversals Direct write-offs Recoveries on loans and advances previously written off Total Net fee and commission income 9 Net result from financial instruments in accordance with IAS 39 mn 1 Jan Jan Jun Jun 2015 % Trading result 1) Hedge result Result from derivatives entered into without intention to trade Result from investment securities Total 1) mn 1 Jan Jan Jun Jun 2015 % 1) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3). Fee and commission income from guarantees and indemnities from the lending business Other fee and commission income Fee and commission income Fee and commission expenses Net fee and commission income General administrative expenses mn 1 Jan Jan Jun Jun 2015 % 9.1 Trading result mn 1 Jan Jan Jun Jun 2015 % Trading result from derivatives from foreign currency transactions 1) from interest and dividend payments Other Total 1) ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3). Staff expenses Non-staff expenses 1) Depreciation, amortisation, impairment and write-ups Total 1) ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3). 8 Net other operating income/expenses mn 1 Jan Jan Jun Jun 2015 % 9.2 Hedge result (hedge accounting) mn % Result from derivative hedging instruments Result from hedged items Result from remeasurement Ineffectiveness of cash flow hedges Total 2,1 7,1 70,4 Other operating income Other operating expenses 1) Total 1) ) The correction of errors pursuant to IAS 8.41 results in an adjustment of the previous year s figure (see note under 3).

23 INTERIM MANAGEMENT REPORT INTERIM FINANCIAL STATEMENTS REVIEW REPORT FURTHER INFORMATION Notes Loans and advances to banks mn 30 Jun Dec 2015 % 13 Investment securities mn 30 Jun Dec 2015 % Loans and advances 1, , thereof: payable on demand 1, , thereof: with a limited term 2.8 Money market transactions 79.2 thereof: with a limited term 79.2 Other loans and advances to banks Total 1, , German banks Foreign banks Total 1, , Bonds and other fixed-income securities thereof: bonds and notes Equities and other non-fixed-income securities Equity investments Total DVB does not hold any investment securities from Greece, Ireland, Portugal, Spain or Italy. 11 Loans and advances to customers mn 30 Jun Dec 2015 % 14 Investments in companies accounted for using the equity method mn 30 Jun Dec 2015 % Loans and advances 22, , thereof: payable on demand thereof: with a limited term 22, , Other loans and advances to customers Total 22, , German customers Foreign customers 21, , Total 22, , DVB does not hold any claims against Greece, Ireland, Portugal, Spain or Italy. Investments in associates Interests in joint ventures Total Intangible assets mn 30 Jun Dec 2015 % Goodwill Other intangible assets Total Loans and advances to clients domiciled in these countries are not exposed to any country-specific risks, especially due to the fact that the relevant claims are collateralised by the financed transport assets. 12 Allowance for credit losses Specific allowance Portfolio-based allowance Total for credit losses for credit losses mn 30 Jun Dec Jun Dec Jun Dec 2015 Allowance for credit losses as at 1 Jan Additions Utilisation Reversals Interest income Changes resulting from exchange rate fluctuations Allowance for credit losses as at the reporting date Interest income arises from unwinding impaired loans and advances to customers, recognised at their present value as specified in IAS 39.AG93.

24 24 Notes 16 Property and equipment mn 30 Jun Dec 2015 % Land and buildings 0.0 Operating and office equipment Assets held under operating leases Other property and equipment Total Other assets mn 30 Jun Dec 2015 % Receivables from taxes not related to income Advance payments and prepaid expenses Miscellaneous other assets Total Deposits from other banks mn 30 Jun Dec 2015 % Loans and advances 2, , thereof: payable on demand thereof: with a limited term 2, , Money market transactions thereof: payable on demand 99.6 thereof: with a limited term Total 2, , German banks 2, , Foreign banks Total 2, , Deposits from customers mn 30 Jun Dec 2015 % Loans and advances 7, , thereof: payable on demand thereof: with a limited term 7, , Money market transactions thereof: payable on demand thereof: with a limited term Other deposits from customers Total 7, , German customers 7, , Foreign customers Total 7, , Securitised liabilities mn 30 Jun Dec 2015 % Ship covered bonds Bearer bonds 11, , Total 12, , During the first half of 2016, the Bank issued securitised liabilities with a nominal value of 1,000.0 million and a term of five to seven years. Bearer bonds were due in the nominal amount of 1,495.1 million. 6,091.8 million (31 December 2015: 7,582.6 million) of securitised liabilities were related to transactions with the DZ BANK Group.