DEUTSCHE POSTBANK AG, BONN ANNUAL FINANCIAL STATEMENTS (HGB) AS OF DECEMBER 31, 2015 DEUTSCHE POSTBANK AG, BONN ANNUAL FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 2015 AND MANAGEMENT REPORT FOR FISCAL YEAR 2015 MANAGEMENT REPORT 2 BALANCE SHEET AS OF DECEMBER 31, 2015 46 INCOME STATEMENT FOR THE PERIOD JANUARY 1, 2015 TO DECEMBER 31, 2015 48 NOTES 50 AUDITOR‘S REPORT 99 MANAGEMENT REPORT Deutsche Postbank AG is currently working on an organiza- tional and technical deconsolidation from Deutsche Bank, BUSINESS AND ENVIRONMENT a necessary condition for deconsolidation on the balance sheet. Deutsche Postbank AG currently seeks to be in a posi- Corporate profile and business model of Postbank tion to operate independently by mid-2016. Corporate profile Business model Postbank has been part of the Deutsche Bank Group, Deutsche Postbank AG (Postbank) provides financial servic- Frankfurt am Main, since December 3, 2010. es for retail, business and corporate customers as well as for other financial service providers primarily in Germany. The Annual General Meeting of Deutsche Postbank AG Its business activities are focused on retail bank ing and approved a control and profit and loss transfer agree- corporate banking (payment transactions and financing). ment on June 5, 2012, between DB Finanz-Holding GmbH, The Bank’s work is rounded out by money market and Frankfurt am Main (a wholly-owned subsidiary of Deutsche capital market activities. Bank AG), and Deutsche Postbank AG. The agreement came into force upon entry into the commercial register on Key locations June 20, 2012. On September 11, 2012, the Cologne Higher The head office of Postbank is located in Bonn. In addition, Regional Court confirmed the validity of the agreement. Postbank operates a nation-wide network of branches that It is concluded for an indefinite period of time and can had 1,066 locations in Germany at the end of 2015, as well be duly terminated at the end of any fiscal year, starting as a branch in Luxembourg. December 31, 2016. The subsidiary BHW Bausparkasse Aktiengesellschaft is On April 27, 2015, Deutsche Bank AG acquired an additional domiciled in Hameln. 5,934,243 shares of Deutsche Postbank AG and as a result increased its direct and indirect holdings from 94.09 % Fundamental sales markets and competitive position to 96.80 %, thus exceeding the 95 % threshold. 38,754,243 In retail banking, Postbank conducts its business almost of Deutsche Postbank shares (corresponding to a partici- exclusively in Germany and is one of the largest financial pation of 17.71 % of voting rights) are held directly by service providers in the country. Its major product fields Deutsche Bank AG for its own account and 173,053,126 are savings, checking accounts, private mortgage lending, of Deutsche Postbank shares (corresponding to a partici- home savings as well as retail lending. Postbank is among pation of 79.09 % of voting rights) are held indirectly the leaders in Germany in each of these areas, based on through DB Finanz-Holding GmbH. Likewise on April 27, balance-sheet volumes. Private retirement provision solu- 2015, Deutsche Bank AG requested that the Management tions, diverse insurance products and the securities busi - Board of Deutsche Postbank AG take the necessary steps ness round out the product range for retail customers. In all to prepare a squeeze-out of its minority shareholders in these areas, Postbank offers some products and services as accordance with section 327a ff. of the Aktiengesetz (AktG – part of partnerships with fund companies, banks and insur- German Stock Corporation Act). For this reason, Deutsche ance companies. In its own Finance Centers, of which there Postbank AG’s Annual General Meeting, which was originally are currently some 1,100, it offers both comprehensive due to take place on May 28, 2015, was postponed until financial services as well as Deutsche Post AG services. Finally August 28, 2015. The Annual General Meeting resolved the the Bank has more than 4,500 Deutsche Post AG partner squeeze-out of its minority shareholders with a majority retail outlets, where customers can access select Postbank of 99.6 % of the represented capital. After entry of the financial services, as well as 700 Postbank Finanzberatung resolution into commercial register B, the Bonn Local Court AG advisory centers. Postbank’s major competitors in the (Amtsgericht Bonn – HRB 6793) confirmed its validity on retail banking business in Germany are providers from the December 21, 2015. Since then Deutsche Bank AG holds sector of savings banks and cooperative banks as well as both directly and indirectly 100 % of the shares in Deutsche several major banks. Postbank AG. In addition to retail banking, Postbank is involved in the A key reason for the exclusion of minority shareholders is corporate banking business. As a mid-sized market player found in the implementation of Deutsche Bank AG’s new in this area, it focuses particularly on German SMEs and strategy announced on April 27, 2015. As a result of its major payment transaction addresses. Postbank’s most sig- strategy process, Deutsche Bank AG made six key decisions, nificant competitors also in this business area are providers one of them being to focus its private and corporate from the sector of savings banks and cooperative banks as customer business on market-leading customer advisory well as several major banks. services. Deutsche Postbank AG, as a consequence, shall also be deconsolidated. In the execution of this strategy Management at Postbank Deutsche Bank AG would prefer to float Deutsche Postbank AG on the stock market after a delisting in connection with Postbank is responsible for the management of the entire an exclusion of minority interests. As an alternative, the Postbank subgroup. disposal of the stake in Deutsche Postbank AG is also under consideration. 2 MANAGEMENT REPORT BUSINESS AND ENVIRONMENT Non-financial key performance indicators at Postbank administrative expenses and writedowns) and other In its management, Postbank makes use of financial as well income (net other income and expenses) are taken into as non-financial key performance indicators. The essential consideration here. non-financial key performance indicators are measures of employee and customer satisfaction. Both are Group targets The central profitability target for the capital market- within the target system and as such were relevant to the oriented management of Postbank is the expectation of remuneration of all Management Board members in 2015. returns on equity in accordance with IFRSs, as measured by return on equity (RoE) before tax. The value is calcu- Employee satisfaction is measured by evaluating the results lated as the ratio of profit before tax to the average time- of Postbank’s annual people survey. It poses a number weighted equity in the reporting period. of questions related to the dimensions of identification, leadership, business success/targets, customer orientation, Efficiency is measured by the cost/income ratio (CIR) – the productivity and efficiency, vision and mission, ability ratio of administrative expenses plus other expenses to to change and communication. Employees indicate their total income plus other income before risk provisions – as approval ratings on a five-point scale. The degree of the central metric for income and productivity manage- employee satisfaction is primarily derived from the results ment. from the “identification” dimension, which consists of various questions used to determine workforce loyalty to In light of factors including changing regulatory require- the Company. ments, Postbank identified other key metrics during 2015 that are measured and managed at the overall bank level. Customer satisfaction is measured quarterly in telephone They are the leverage ratio and the Common Equity Tier 1 interviews using questionnaires that are mostly identical capital ratio (CET1 ratio). in structure. The underlying random sample is representa- tive of the Postbank customer population. The research The CET1 ratio is determined as the ratio of Common Equity design makes it possible to conduct systematic time series Tier 1 capital, which meets the toughest requirements analyses and causal analyses. The questions probe both for capital positions posited by the Capital Requirements the overall satisfaction of customers with the Postbank Regulation (CRR), to risk weighted assets. The leverage products and services as well as satisfaction with the Bank’s ratio is the ratio of Tier 1 capital to total exposure measures central performance factors (accessibility, speed, friend- (leverage exposure). The latter corresponds to the total of liness, propriety, professional advice, satisfaction with sales all on- and off-balance sheet items using regulatory valua- channels, complaints management, etc.). Satisfaction tion adjustments. Both are calculated as part of manage- is measured using a verbalized scale from one to five ment activities as fully phased-in metrics and the leverage (1 = completely satisfied, 5 = dissatisfied). The study is ratio is also calculated on the basis of the new regulatory conducted with due regard for quality standards by a requirements of the Commission Delegated Regulation renowned external market research institute. (EU) 2015/62. The target system for executive employees also includes Management process target dimensions that make it possible to derive targets At the level of the Postbank subgroup, Postbank directs for Postbank executives from the non-financial key perfor - its activities on the basis of a management information mance indicators at the Group level. Apart from the targets system whose core component is management accounting in the cost/finance dimension as an individual financial by business division. In general, management is performed target, each executive employee is assigned targets for much the way it is on the Postbank Group level, with the the dimensions markets/customers, process/quality, and exception of the metric for capital resources (CET1 ratio) employees/team, which are relevant to the individual’s and the leverage ratio. The latter two metrics are man- own area of responsibility.