DZ BANK Part of the cooperative financial network Volksbanken Raiffeisenbanken DZ BANK Group 2018
Agenda 1. Cooperative financial network Volksbanken Raiffeisenbanken 2. DZ BANK: strategy and strength 3. DZ BANK s business performance 4. Future and sustainability Page 2
1. Cooperative financial network Volksbanken Raiffeisenbanken
Highlights of DZ BANK and the cooperative financial network One joint cooperative central institution after more than 100 years With our strong brands we are market leaders in many products and services One of the best ratings in the European banking sector 18.5 million members Profit before taxes 2017: 8.9 bn 104.4 bn capital in the cooperative financial network as at 31.12.2017 Page 4
The three pillars of the German banking sector Regional focus Domestic market << 10% (each) 24% 36% share 1 Banking sector Private banking sector and foreign banks Cooperative banking sector 1 central institution: DZ BANK Group, 915 local coop. banks 2 Public banking sector 6 Landesbank groups, DekaBank, 393 savings banks 3 1 Market share according to deposits of private households as at 31.12.2016, 2 31.12.2017, 3 15.06.2017 Page 5
Cooperative financial network in figures Cooperative financial network At a glance (as at 12/31/2017) 2017 2016 Consolidated total assets 3 % 35 % 62 % Local cooperative banks DZ BANK Group Münchener Hypothekenbank Profit before taxes ( bn) 8.9 8.3 Cost/income ratio (%) 65.3 67.0 Loans and advances to customers ( bn) 762 733 Deposits from customers ( bn) 801 774 Consolidated total assets ( bn) 1,243 1,216 Consolidated equity ( bn) 104.4 98.6 Common equity Tier 1 capital ratio (%) 1 15.4 15.2 Leverage Ratio (%, fully loaded) 7.7 7.3 Employees 177,248 181,740 1 incl. reserves in accordance with section 340g HGB Page 6
Cooperative diversity finanzgruppe.de Page 7
Interaction within the German Cooperative Financial Network 30 million customers, thereof 18.5 million shareholders Shareholders 104,4 bn Consolidated equity 8.9 bn Profit before taxes 1,243 bn Consolidated total assets 177,248 Employees Client relationship cooperative banks 915 banks 11,108 branches Shareholders No. 2 in Germany 505.6 bn total assets Retail Banking Capital Markets Cooperative Banks/ Verbund Corporate Banking Transaction Banking Product provider as at 31.12.2017 Page 8
Strengths of a fully-integrated organisational structure Strategy The Cooperative Financial Network follows a uniform strategy The strong brands of the Cooperative Financial Services Network are well known within Germany and beyond Risk assessment The Cooperative Financial Network uses a common rating language to assess its clients credit worthiness The process for joint loans in the Cooperative Financial Services Network has been further improved Transparency The Cooperative Financial Network has published consolidated accounts since 2004 Since 2009 figures according to IFRS Solidarity The Cooperative Financial Network s protection scheme guarantees for every member institution Risk-specific contributions for all members Fitch Ratings and Standard & Poor s have assigned a Verbundrating because of the high level of cohesion within the Cooperative Financial Network Page 9
The Cooperative institution protection of our association BVR The "Dual System" of institution protection BVR Protection Scheme* Additional voluntary protection system since 1934 BVR-SE as Institution Protection and indirect Deposit Protection Measures for the avoidance of threatening or impending economic difficulties faced by member institutions 100% subsidiary of BVR BVR-ISG BVR-Institutssicherung GmbH as direct deposit protection Officially recognised deposit protection system as Institutional Protection Scheme since 3 July 2015 Simplification of depositor compensation by protection of customer deposits of up to 100,000 per person per institution Liability for BVR-ISG exclusively in case of compensation Page 10 2018 DZ Haftung BANK für BVR-ISG ausschließlich für den Entschädigungsfall
Key figures and function of the Protection Scheme Members 915 cooperative banks, 1 central institution and special cooperative network institutes Tasks of the Institution Protection Preventing or remedying impending or existing economic difficulties at institutions affiliated with the BVR-ISG and BVR-SE protection schemes Monitoring By Federal Financial Supervisory Authority (BaFin) Institution Protection Comprehensive institution protection for all members, no bankruptcy among members since 1934 Responsible body National Association of German Cooperative Banks (BVR) Deposit Protection Comprehensive protection for customer deposits held by non-banks, including bearer bonds and certificates issued by the cooperative banks (indirectly via BVR-SE). Direct deposit protection via BVR-ISG GmbH up to EUR 100,000 per person per institute. Page 11
2. DZ BANK: strategy and strength
Our vision determines the strategic framework of the united DZ BANK Group The DZ BANK Group will align itself toward the cooperative banks such that the Vision Vision will further develop its position as the leading financial services provider in Germany Strategic framework The most important requirement for the success of the cooperative financial network is the strengthening of cooperative banks in their market (mandate for sponsorship). The high network orientation of the united central bank is reflected by the fact that the emphasis is on the interests of the cooperative financial network which is in close proximity to local market conditions and takes into account the respective features of the different market sections. The basis of the cooperation between cooperative banks on the one hand and the central bank and specialized service providers of the cooperative financial network on the other hand is subject to the principles of subsidiarity, de-centrality and regional market responsibility. Page 13
Strengthen cooperative banks market position as a mandate of DZ BANK Group DZ BANK Group Services for cooperative banks Goal: Ziel: Führende leading market Marktposition for the cooperative der banks banks Central institution function for all german cooperative banks Liquidity management in the cooperative financial network Provide decentralised services as product specialist for private clients, corporate clients, capital markets business and transaction banking Earnings of DZ BANK AG and of the DZ BANK Group are broadly diversified across various client groups and products due to the business models. Page 14
Network-oriented central institution/ financial services group is the guiding principle for what we do and determines our core business Network-oriented central institution / financial services group means Region Customers The DZ BANK Group s business activities are mainly focused on the business territory of the cooperative banks (Germany) The DZ BANK Group s core customers are the cooperative banks and their customers what we do is focused on satisfying their needs Products / services Focus Financial contribution As a financial services provider, the DZ BANK Group provides the cooperative financial network with decentralised products, platforms and services at competitive prices and with strong brands The focus on the interests of the cooperative financial network takes top priority, especially in times when resources are short (capital, liquidity, staff) The DZ BANK Group makes an important financial contribution to strengthening the position of the cooperative financial network in the form of commissions/bonuses, profit distribution and by passing on cost synergies. It also contributes free services (e.g. advisory services) Page 15
Strategic directions: Continuation/ Sharpening the profile of networkoriented central institution/ financial services group Growth in conformity with the cooperative financial network Exploitation of potential in core activities, especially in Retail Banking and SME business Leverage of earnings potential in the DZ BANK Group Network-compliant growth initiatives Continuation of the focus Management of scarce resources Handling of new regulatory requirements Non-network activities up for review Networking in the Group and with cooperative banks Bundling of general strategic and management functions to an entity with only few, direct business functions with the cooperative financial network (holding structure) Further development of governance within the DZ BANK Group Alignment of DZ BANK toward the cooperative financial network as a permanent mandate Page 16
DZ BANK - Evolution towards holding model DZ BANK continues evolution towards holding model Primary aims: Better inclusion of the local cooperative banks in strategy development and implementation, improvement of transparency across the earnings structure of the central institution and evolution of management Establish a central advisory committee in 2018 for cooperation and influence of primarily banks on strategic decisions Responsibility for holding and commercial bank operations shall be separated from one another as far as possible, for the time being within one legal entity Decisions on legal structure of holding model are to be taken from 2020 following the implementation of the above measures Page 17
Management of DZ BANK AG Members of the Board of Managing Directors Wolfgang Kirsch Chief Executive Officer Cooperative Banks/Verbund Communication/Marketing/Corporate Responsibility Legal Group Audit Research and Economics Uwe Berghaus Corporate Banking Promotional Loan Business Structured Finance Dr. Christian Brauckmann IT Organisation Wolfgang Köhler Capital Markets Trading / Retail Clients / InstitutionalClients Group Treasury Dr. Cornelius Riese Group Finance Bank Finance Group Financial Services Strategy and Corporate Development Michael Speth Group Risk Controlling Compliance Credit Credit Special Thomas Ullrich Transaction Management Operations Payments & Accounts Group Human Resources Uwe Fröhlich General Executive Manager Cooperative Banks/Verbund Structured Finance Capital Markets Retail Clients Ulrike Brouzi will join the bank on September 1, 2018 as a member of the Board of Managing Directors Page 18
DZ BANK s subsidiaries per business activities Retail Banking Corporate Banking Cooperative Banks/ Verbund Capital Markets Transaction Banking Page 19
Retail Banking leading specialised product provider Market position in Germany Asset Management: Mutual funds 1 Asset Management: Retail derivatives 2 Consumer credits 3 Home savings Life insurance 4 1 2 3 31.12.2016 1 Net inflow Assets under Management, 2 Capital protection investment certificates 3 Volume of loan extensions in Germany s cooperative banking group, 4 New business, Page 20
Transaction Banking Market leader in processing Market position 2016 1 1 5 SEPA Credit cardissuing Custodian bank Market share 2016 6% 14% 9% Relevant peer group Relevant market EU DE DE Source: McKinsey Page 21
Corporate Banking DZ BANK Group as a strong partner Our offering is focused to the customer s needs Bank products Insurance Asset management Leasing/factoring Commercial real estate finance business Equity finance Growth Support the customer with advisory ideas from a single source Stability The business relationship is guaranteed by one of Europe s best bank ratings Safety for our customers plans for the future based on sustainable cooperation in a strong cooperative financial network Financial investments Page 22 2018 DZ BANK
DZ BANK s worldwide presence to support our clients needs New York London Istanbul Moskau Beijing Mumbai Hongkong Singapur São Paulo Jakarta Office/ Branch office Representative office German office Page 23
One of the best and most stable ratings in the European banking sector Extracts from the rating reports Intensive cooperation and solidarity within the cooperative financial network No. 2 market position in German retail banking Stable deposits and sizable surplus liquidity Strong capitalization from high earnings retention Consolidation process on track by merger of central banks and from DG HYP and WL BANK Long Term Rating / Outlook AA- / stable 1 Confirmation of the rating and outlook in Q1 2018 Material strengthening of capital levels within the last years, further regulatory pressure on capital ratios expected Sound asset quality supported by positive economic environment in Germany; risky portfolios remain manageable Solid and diversified earnings situation compensates losses of individual portfolios Sound funding and liquidity profile Aa1 / stable Issuer rating upgraded in Q3 2018 Strengthened capitalisation due to earnings retention and capital measures Decline of earnings expected primarily driven by the current low-rate environment Shipping and Offshore portfolios cause pressure on earnings situation Stable access to funding sources AA- / stable 1 Confirmation of the rating and outlook in Q4 2017 * For additional information and reports, please go to: www.ratings.dzbank.com 1 Rating of the cooperative financial network Page 24 2018 DZ BANK
3. DZ BANK s business performance
DZ BANK Group Key points for 2017 DZ BANK Group reports a profit before taxes of 1.8 billion Good operating performance in most group companies Common equity Tier 1 capital ratio of 13.8 percent, leverage ratio rises to 4.4 percent (fully loaded under CRR in both cases) Progress on the DZ BANK Group's further development: completion of the merger/migration, merger of DG HYP and WL BANK to create DZ HYP, transformation of VR LEASING into a digital provider of finance for the self-employed and small businesses Negative contribution to profits from DVB due to increased allowances for losses on loans and advances; strategic options being examined One of the best bank credit ratings in Europe (S&P/Fitch: AA-) Page 26 2018 DZ BANK
Ownership structure as at 12/31/2017 DZ BANK AG 5,6 % 94,4 % (in Mio. ) Cooperative banks (direkt und indirekt) Other cooperative and other companies Total share capital 4.652 274 4.926 Page 27
DZ BANK Group: Income Statement (IFRS) Figures for 2017 million Jan. 1 Dec. 31, 2017 Jan. Dec. 31, 2016 1 Change (%) Net interest income 2,941 2,660 10.6 Allowances for losses on loans and advances -786-569 38.1 Net fee and commission income 1,864 1,698 9.8 Gains and losses on trading activities 506 780-35.1 Gains and losses on investments 10 127-92.1 Other gains and losses on valuation of financial instruments 289 51 >100.0 Net income from insurance business 907 760 19.3 Administrative expenses -3,868-3,600 7.4 Other net operating income 38 34 11.8 Net income from the business combination with WGZ BANK -91 256 >100.0 Profit before taxes 1,810 2,197-17.6 Income taxes -712-591 20.5 Net profit 1,098 1,606-31.6 1 The income statement line items for 2016 relate to the business performance of DZ BANK Group before the merger in the first half of 2016 and to the performance of the merged bank in the second half of 2016. They therefore have only limited comparability with the figures for 2017. Page 28 2018 DZ BANK
DZ BANK Group: Income Statement (IFRS) Income statement by group company million Jan. 1 Dec. 31, 2017 Jan. 1 Dec. 31, 2016 Change (%) DZ BANK AG 752 702 7.1 BSH 334 158 >100.0 R+V 795 681 16.7 UMH 610 468 30.3 DG HYP 4 504 237 >100.0 WL BANK 1,4 133 118 12.7 TeamBank 148 143 3.5 DZ PRIVATBANK 20 3 >100.0 VR LEASING 2-17 7 >100.0 DVB -774-278 >100.0 Other/consolidation 3-695 -42 >100.0 Profit before taxes 1,810 2,197-17.6 1 WL BANK included from July 1, 2016. 3 Positive merger effects of around 500 million included in the prior-year figure. Page 29 2018 DZ BANK 2 VR Leasing Group, in its business segments focused on medium-sized corporate business in cooperation with the cooperative banks, appears under its brand 'VR Smart Finanz'. 4 Merger of DG HYP and WL BANK by 7/30/2018 named DZ HYP
4. Future and Sustainability
Mega trends from digitization pick up on our cooperative idea Membership Achieving more together Crowd funding Promotion of members Community Helping others to help themselves Strong as a group Social network Social sharing Regional orientation Success through closeness Social responsibility Commitment Page 31 Financial contributions to community projects Advisory platforms Social trading
How the DZ BANK Group s innovation activities intermesh with the cooperative financial network Volksbanken Raiffeisenbanken cooperative financial network DZ BANK AG s business divisions and group companies DZ BANK Group Trend radar Ideas management Learning & further development Corporate Campus for Management & Strategy Innovation process Trend evaluation Integrated roadmap Communication & cultural change Innovation LAB Hackathons Innovation and digitisation in the DZ BANK Group Fymio (TeamBank) R+V Scan-App VR Butler VisualVest Innovations VR-AgrarInvestplan Joined projects BSH Kreditfuchs Ratenkauf by easycredit VR-GeschäftsNavigator Lego Serious Play Innovationsblog Tech Quartier FinTechs Formats & methods Cooperation Design thinking Round table Innovation Intensive exchange Diverse, decentralised activities Page 32 2018 DZ BANK
Taking responsibility together DZ BANK s sustainability ratings oekom research assigns prime status (C+) to DZ BANK Group Since 2011 Prime Status Rating assignment (C+) as at 1 February, 2018 above-average commitment to environmental and social issues positive / neutral AA 74 points neutral (CC) Uncovered Bonds positive (BB) Mortgage Covered Bonds positive (BB) Public Sector Covered Bonds Excellent rating Far above the sector average (Industry Banks ) Outperformer in the areas environment and governance (37 of 342 in Industry Banks ) Page 33
Disclaimer This document is for information purposes only. This document has been prepared by DZ BANK AG Deutsche Zentral-Genossenschaftsbank ( DZ BANK ) and may only be distributed outside Germany in accordance with the local legal requirements, and persons coming into possession of this information and these materials should inform themselves about and observe the local legal requirements. This document constitutes neither a public offer nor a solicitation of an offer for the purchase of securities or financial instruments. DZ BANK does not act as investment adviser or portfolio manager. This document does not constitute a financial analysis. All evaluations, opinions or explanations contained herein are those of the author of the document and do not necessarily correspond with those of third parties. DZ BANK assumes no liability for damages caused directly or indirectly by the distribution and/or use of this document and/or for damages which are in any way connected with the distribution/use of this document. Any investment decision with respect to securities or any other financial instruments should be based on an individual advice and a prospectus or information memoranda and under no circumstances on this document. The contents of this document correspond to the status at the point in time at which the document was drafted. Future developments may render them obsolete without the document s having been changed accordingly. Page 34