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Growing into the future. A look at the DZ BANK Group Growing into the future. A look at the DZ BANK Group »Last year, we made good progress in terms of the DZ BANK Group’s strategic development.« www.annualreport.dzbank.com/dz-bank-group/letter-to-shareholders Dear Shareholders, In 2018, the DZ BANK Group generated profit before of the capital markets, we also adjusted the enterprise taxes of just under € 1.4 billion. This respectable figure value of DZ PRIVATBANK to reflect the more challenging was the result of its good operating performance. conditions in the private banking market. Our entities increased their volume of business and gained market share in most areas. By contrast, capi- An overview of our organization’s main financial KPIs can tal markets provided more headwind than tailwind be found toward the end of this short report. We have re- in 2018. ported in detail on the results for the DZ BANK Group in our Online Annual Report at www.annualreport.dzbank.com. Nonetheless, the level of profit was sufficient to enable us to absorb adverse one-off items. As well as recognizing Last year, we made good progress in terms of the strate- negative valuation effects due to the performance gic development of our financial services group. Under 4 EDITORIAL ‘Verbund First 4.0’, DZ BANK AG set itself ambitious The third important aspect is the contribution of our targets for earnings and costs and has already launched employees to our long-term success. Our organization a comprehensive action plan. DG HYP and WL BANK already has a unique reputation for a values-based, successfully merged to form DZ HYP, the largest responsible approach to business. It is our ambition to Pfandbrief bank in Germany. Subsequently, the merged translate these values into the future and to ensure in­­­stitution expanded both existing and new business. that our corporate culture is even more focused on our DVB Bank has made good headway with reducing risks customers, on efficiency, and on performance. That is and divesting parts of its business. As we examine fur- another reason why attracting and promoting talented ther options, we continue to be guided by the principle employees and so managing demographic change of preservation of value. is high on our list of priorities. We doubled the number of new trainees for 2019. The outlook for 2019 reflects the first indications of a deterioration in the economy, both abroad and in our domestic German market. However, at the start of the » The respectable results for 2018 year, we still see high demand from customers in our are thanks to our good operating business. We anticipate that our profit before operating performance. « taxes will rise slightly in 2019 and is therefore likely Uwe Fröhlich to be at the lower end of our long-term target range of € 1.5 billion to € 2 billion. Thanks to our financial strength and due to our deep roots within society, we are well equipped for these » Every day, we work to safeguard future challenges. However, we do not neglect our the strength of our organization day-to-day business. We must do everything we can to beyond the immediate future. « remain the first port of call for the cooperative banks, Dr. Cornelius Riese to provide added value, and to pave the way for further growth. The constructive collaboration between the BVR, the co operative banks, the companies within the coop- Every day, we work to safeguard the strength of our erative financial network, and Fiducia & GAD as part of organi zation beyond the immediate future. Following the the joint digitization strategy is a cause for optimism. successful merger to create one central institution, we have laid a solid foundation on which we build ‘Verbund We are pooling our broad and diverse digital expertise First 4.0’. Firstly, we are investing in our market offering in order to deliver this crucial project successfully and are in the Capital Markets, Corporate Banking, and Trans- also benefiting from the expertise contributed by each action Banking business lines. One of the top priorities is partner involved. We are there for one another and are customer focus and efficiency in all corporate customer operating strategically and as one. We do not rest on processes, from the customer portal through to the back our success but are working together to find useful solu- office. Secondly, we are optimizing control and pro- tions; rolling up our sleeves, and playing an active part. duction, which includes seizing opportunities to digitize As long as we maintain this approach, we have every and automate core processes. The areas of focus are IT reason to be optimistic. and the lending and control functions. It is essential that we further optimize our cost base. We will significantly Kind regards, reduce our expenditure on external service providers and we believe it is necessary to reduce the headcount by almost 500 by 2023. This figure equates to roughly 10 percent of positions after implementation of the Uwe Fröhlich Dr. Cornelius Riese merger synergies. Co-Chief Executive Officer Co-Chief Executive Officer 5 CONTENTS 14 SozialpartnerRente Pension provision in partnership 16 Home savings and finance Proven solutions and new advantages 18 4 Editorial Joint lending business Stronger together 8 Growing into the future The DZ BANK Group is constantly evolving and remains resilient. It responds to new challenges not necessarily by making radical changes but by showing a sense of perspective and, above all, adopting a sustainable approach. 10 Green bonds Sustainability creates a competitive edge 12 easyCredit mit Kontoblick Credit in 10 minutes 6 CONTENTS 26 Good operating performance Expansion of customer business In 2018, the DZ BANK Group generated profit before taxes of € 1.4 billion thanks to the strength of its customer business and good operating performance. 30 Review of 2018 20 DZ BANK Group – 32 HR strategy partners in the Volksbanken Employer of choice Raiffeisenbanken cooperative The DZ BANK Group is the employer of choice for financial network more than 30,000 employees. We live by the cooperative values in accordance with our motto The DZ BANK Group offers a broad range ‘Mehr beWIRken’ (achieving more as a team). of services for the cooperative banks and their customers. 34 Editorial information 21 Strong brands – strong partners Some of the DZ BANK Group's brands 7 GROWING INTO THE FUTURE Growing into the future Our world is changing at an unprecedented pace. The resulting challenge for companies is that trends such as digitization are pushing tried-and-tested business models to their limits, but also opening up enormous opportunity. At the same time, customers’ needs and wishes are changing rapidly. As a result, companies will only be successful in the future if they go with the times, evolve, explore new avenues, and turn new opportunities to their benefit. This is especially true for companies in the financial sector, where competition has always been fierce. And for some years now, financial start-ups have increasingly emerged as new competitors. The entities in the DZ BANK Group have to respond to these devel op- ments, although not necessarily by making radical changes. Instead, they need to take an evolutionary yet innovative and, above all, sus tainable approach in accordance with our cooperative DNA. The DZ BANK Group and the cooperative financial network will remain fit for the future by demonstrating resilience and the ability to change. www.annualreport.dzbank.com/focus-topics 8 GROWING INTO THE FUTURE 9 Green bonds Sustainability creates a competitive edge DZ BANK recently launched a green bond with an issue volume of € 250 million. Treasurer Heiko de Wall explains why sustainability means future viability and describes the competitive advantages that come with it. Mr. de Wall, people have been talking about DZ BANK recently issued its first green bond. sustain ability for a long time now. Why is it more What exactly is a green bond? than just a passing trend in the financial sector? de Wall: When investors buy a bond, they are lending Heiko de Wall: It is something that is part of our coop- money to its issuer. In the case of green bonds, this money erative DNA. Moreover, society is becoming increasingly is used to fund sustainable projects, particularly those interested in sustainability, and demand for investment aimed at combating climate change. products in this segment has been growing for years. Decisions made in the banking sector have a significant And what is the advantage for investors? impact on developments in other industries. Sustain- ability is now firmly embedded in banks’ core business de Wall: With a green bond, investors know exactly and will remain an important subject going forward. what they are buying. They know what the bank is 10 GROWING INTO THE FUTURE looking to achieve, or what projects it wants to fund. Do banks often issue their own green bonds, Sustainability -oriented investors need suitable investment or is this quite unusual? options that enable them to achieve their objectives and adhere to their rules. A green bond can be used as part de Wall: Many banks facilitate sustainability-oriented of an overarching sustainability strategy. And by the way, investments that support environmental and/or social investors opting for green bonds do not miss out when causes as part of their lending business. But a bank that it comes to yields. issues a green bond of its own is going a step further, because it is sending a clear signal and showing a firm What prompted DZ BANK to issue the green bond? commitment to sustainability. de Wall: We want to boost our environmental credentials What makes green investment products credible? on the funding side of our business, i.e.

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