Deutsche Bank AG

Ladies and gentlemen, thank you for standing by. I am Emma, your chorus call operator. Welcome and thank you for joining the Q1 2020 Analyst Call of Deutsche Bank. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to James Rivett, Head of Investor Relations. Please go ahead.

Thank you, Emma, and thank you all for joining us. As usual on our call, our CEO, Christian Saving, will speak first, followed by our Chief Financial Officer, James Von Malka. The presentation, as always, is available for download in the Investor Relations section of our website, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

Thank you, James, and good afternoon and welcome from me. I hope that you and your families are all safe and healthy. This is an extremely difficult time for everyone, and at this stage, we do not have full visibility on how the situation will develop. This is the perfect Black Swan event an event none of us has experienced in such a dimension before. But it is in times like these that our bank can prove its resilience, its experience, and moreover, its value to society and all our stakeholders. And I'm proud of the way the bank has responded. The investments that we have made into our technology have supported our operational resilience with the majority of our employees working from home. With our refocus strategy, we are now operating in businesses with leading positions, providing industry leading solutions. This means we are at the center of the dialogue with our clients at a time when they need us most. We are very happy with our performance in the quarter and we outperformed our expectations for both revenues and costs, specifically in the core bank. Our client franchise is absolutely intact. We have not let the recent turbulence distract us, and we have continued to execute in a disciplined manner against our cost targets. As a result, we reduced adjusted costs excluding transformation charges and bank levies for the ninth quarter in a row on a year-on-year basis. And we also made solid progress against the strategic priorities set out in July and at the investor deep dive in December. The transformation is even ahead of the plan. We are benefiting from our conservative balance sheet management, and this stability is enabling us to support our clients through these difficult times. They are at the center of what we do, and the business is on the right track. We are regaining market positions. The Swiss and decisive action that the German government has recently taken and the strong fiscal position of the public and private sectors mean that our home economy is well positioned to fight the crisis. We believe this further supports our mission, which we set out when we launched our strategy last year, July, to be aligned with the strength of our home market economy. Ten months after the announcements, we are absolutely convinced that our strategy is the right one. As a result, we feel well positioned as the leading bank with a global network in Europe's strongest economy. Do we underestimate the severity of the challenge facing the global economy? Absolutely not. But with the right strategy, scale, and leading franchises globally, a relentless focus on execution, strong balance sheet, And with Germany as our home market, we believe that Deutsche Bank can strengthen its competitive position in these difficult times. Let me briefly discuss these themes. While James will go into the details, a few words from me on the first quarter performance starting on slide two. Overall, I'm pleased with the progress that we have made in the quarter. Revenues were flat year on year with material growth in the core bank offsetting the exit of equity sales and trading in the capital release unit. The CLU performed in line with our internal plans. Adjusted group pre-tax profit increased as lower costs and higher core bank revenues offset the higher provisions for credit losses and the drag from the capital release unit. In the core bank, the combination of revenue growth and lower costs generated significant positive operating leverage in the quarter. Core bank pre-tax profit grew by 32% year-on-year to 1.1 billion euros, excluding specific revenue items, restructuring, and severance and transformation charges. This corresponds to a core bank pre-provision net revenue of 1.8 billion before bank levies. This performance demonstrates the resilience of this company and the progress we are making. The management team and I are determined to not let the current environment disrupt the execution of our cost reduction plans. We delivered against our internal targets again in the first quarter, as you can see on slide three. Excluding transformation charges and bank levies, adjusted costs declined by 7% year on year to 4.9 billion euros our ninth quarter in a row of reductions. At the end of the first quarter, we have put 73% of our transformation-related effects behind us. We currently have more than 20 core transformation initiatives in flight under the responsibility of our management board members, all overseen and managed by the Chief Transformation Office. These initiatives will continue despite current market conditions. The progress we have made in the first quarter and the projects underway put us on a good path to achieve or outperform our 19.5 billion Euro target for 2020. Turning now to the core banks starting on slide four. I'm happy with the progress that our business have made towards the strategic objectives we laid out in December. This progress makes us even more confident that the strategy is the right one. In the corporate bank, revenues were flat as we offset the pressures from the interest rate environment. The team continued to actively reprice deposits in the first quarter, and this puts us on a good track to pass through negative interest rates to €25 billion of deposits in 2020 as part of our 2022 targets. The investment bank grew revenues by 15%, with revenues up in both fixed income and origination and advisory. The first quarter showed further stabilization and improvements in market share in our target segments. In fixed income, excluding specific items as well as movements in CVA and FVA, which we have booked in the businesses, FIC revenues would have increased by 25%. Our strategy to refocus our rates and emerging markets franchises in 2019 are working with revenues from our corporate clients growing 30% year on year. In origination and advisory, our strategy is also paying off, specifically in debt capital markets where revenues were significantly higher. We increased market share in our European and German franchise to the highest level since 2017. In the private bank, revenues increased by 3%. This growth was supported by the strong performance in wealth management, where strategic hiring in prior periods has started to pay off. Again, consistent with what we told you in December. And in our German and international businesses, we have continued to grow loans and volumes to broadly offset the ongoing interest rate headwinds. This includes the conversion of deposits into investment products with a €4 billion net inflow in the quarter. In asset management, growth in management fees was offset by interest rate-driven changes in the fair value of certain guaranteed funds. Despite the market conditions at the end of the quarter, DWS has continued to grow assets in core areas, most notably through strategic partnerships and ESG funds. On the cost side, our core businesses also continue to implement their objectives. Slide 5 shows our adjusted costs excluding transformation charges. In the corporate bank, we held costs largely stable in the quarter, excluding the impact of higher internal service cost allocations, which we have discussed in prior quarters. The changes in internal cost allocation are part of the control and technology investments we have made to better steer our businesses and to reduce costs over time. The corporate bank also made progress on its strategic initiatives and benefited from reorganization measures implemented last year. We particularly focused on efficiency optimization in Germany and across infrastructure functions. In the investment bank, COF declined by 15%, in part driven by the front office headcount reductions implemented in 2019, as well as lower internal service cost allocations. We made progress on reducing infrastructure costs without further compromising our front office capabilities. In the private bank, costs declined by 2% with further progress on the integration of PostBank and Deutsche Bank retail operations with €70 million of run rate synergies now achieved. In asset management, costs declined by 7% as they implement their cost efficiency programs. Slide six repeats the chart which we have shown you consistently. We have been managing our balance sheet conservatively and intend to keep doing so through this period of volatility. With a 12.8% CET1 ratio at quarter end, we are comfortably above our regulatory requirements despite absorbing 30 basis points of regulatory headwinds at the start of the quarter. Our January guidance of above 13% for the first quarter would have been conservative. Excluding the impact of COVID, we would have been at 13.2%. And this sound capital position gives us now scope to continue to deploy resources to support clients in these challenging conditions. As we made clear in our release on Sunday night, it is our deliberate decision and Deutsche Bank's priority to stand by its clients without compromising on capital strengths. We kept our liquidity position strong at 205 billion euros, comfortably above regulatory requirements, while providing an additional 25 billion euros in loans to our clients. And our funding position has rarely been stronger than today. We continue to fund our balance sheet through stable sources, predominantly our low-cost deposit base. Our results also show that we continue to operate with low risk levels. We continue to manage our market risk exposure tightly. Our average value at risk of 24 million euros remains low. And we are focused on maintaining strong credit quality. Provisions for credit losses increased, reflecting a normalization from historically low levels that we already anticipated in our outlook. we also absorb the initial impacts of the COVID-19 pandemic. Our 4.3 billion euros of allowances for loan losses or 95 basis points of loans speak for that. This represents a prudent level of cover relative to our conservative loan book, which we discuss on slide seven. Our loan books are well diversified across our businesses, client segments, and regions. Around half of our total loan portfolio is in the private bank, mainly German mortgages with conservative loan to value ratios and low delinquency rates. In wealth management, almost all our loans are secured typically by high quality liquid stocks and bonds with conservative loan to values. 90% of our commitments in the corporate and investment bank are to clients rated investment grade. And from a regional perspective, our loan books are also well diversified. Approximately half of our portfolios are in Germany, with a further 20% in EMEA and the U.S. In short, our loan book is low risk and well diversified. The results of the EBA stress test in 2018 support this. So from a risk perspective, we feel well positioned to navigate the current environment. Strategically, too. The core pillars of the mission we laid out last year are well matched to the current environment, as you can see on slide eight. The strategic changes we made in July are taking the bank back to the strategy we were founded for 150 years ago. With the corporate bank at the center of our strategy, we have put German, European, and multinational companies at the heart of what we do. And we assist these clients with our market-leading positions in cash management, trade finance, foreign exchange, financing, strategic advisory, and investment advice. With an extremely solid foundation, we are there for our clients as risk managers and advisors in difficult times. And these are the real strengths of our bank. Such strengths have never been more crucial than today, when so much depends on how fast the global economy, trade, and investment can recover. And Germany is our home market, where we generate almost 40% of our revenues. In the corporate bank, we are positioned to be the bank of choice for corporate treasurers. And that mission is even more valuable in times like these. As the house bank to nearly 1 million small and medium-sized companies in Germany, here, too, we are well positioned to help clients through the crisis. Year to date, and for the first time since 2017, we have regained our position as the market leader in German corporate finance. In the private bank and DWS, we are helping our clients navigate through the turbulent conditions. We are the leading retail bank with 19 million customers and the leading retail asset manager. We also believe that Germany is relatively well positioned. Thanks to the strong and decisive actions of the government, The German support programs of around 730 billion euros, amounting to around 22% of total GDP, are the highest of any major country. Working in partnership with us, there are now a series of well-designed programs which should provide support quickly to the broader economy. And given the strong fiscal position, the German government is well positioned to take additional action if required. The German consumer and corporate sectors are relatively well positioned to deal with the crisis too. Consumer debt levels are among the lowest in the Eurozone and the developed world. German small and large corporate customers are also operating with the lowest level of leverage and the highest levels of liquidity in the last 30 years. We feel fortunate to have Germany as a home market in volatile times. As a bank, our core mission is to be there for our clients and provide a safe home for our employees through good times as well as challenging ones. And as you can see on slide nine, our employees have risen to the challenge and have continued to perform. Our people have coped with a major disruption in the work environment, around 65,000 logging in remotely day by day. They have maintained the operational resilience of Deutsche Bank and have gone the extra mile for our clients. And all this at a time of concern for the health and well-being of the families and themselves. In December, I talked about reinvigorating the spirit of the bank with greater collaboration across our businesses. The last few weeks have shown what is possible here with staff helping out in other areas of the bank, most notably in processing new client applications. I'm also proud of the way that we have been able to help the communities in which we operate. And in our businesses, we have been active in helping our clients to access schemes implemented by the German government. In the corporate bank to date, we are processing over 5,000 applications under the German government's KfW program with a volume of Euro 4.4 billion. In this regard, We are uniquely positioned to provide clients access to the services they need in a timely and efficient way. Since mid-March, the Investment Bank has helped corporate and government clients raise 150 billion euros of debt to fund their financing needs. And we improved to a number two market share position in electronic US treasuries, helping to fund the federal government support programs. In the Investment Bank, The positive momentum has continued in April, particular in our trading business and origination and advisory. In the past four weeks, we have been involved in nearly half of all investment-grade bond issuance for corporates in Europe. In private bank, we have continued to be there for customers thanks to the dedication of our staff. We have kept more than 80% of Deutsche Bank and PostBank branches open, and our call centers have handled a 30% increase in inquiries. We have also seen a significant increase in securities transactions. And DWS, as a fiduciary, has continued to support clients when they need us most. DWS Direct has seen a 50% increase in retail inbound sales and 25% more visits to the website. In all these examples, we are helping clients and the economy, deepening our relationships with clients while growing our loan and earnings fees. In summary, We are proud of the way our people have performed in these difficult conditions. Deutsche Bank is on the right track strategically and financially as demonstrated by our first quarter results. Our refocus strategy means we are operating in businesses where we have a leading position with industry leading products. It is our priority to stand by our clients and the community to navigate these challenging times together. Our balance sheet is strong enough to support growth in these turbulent times, and we have a resilient and crisis-proven management team. For this management team, our priority is simple. It's all about execution, especially in conditions like these. In the first quarter of 2020, as in 2019, we have delivered on all our targets and objectives. Revenue momentum across the core bank continues to build. On costs, we are confident of reaching our adjusted cost target or beating it for this year, and we are working on additional cost reduction measures. We also continue to manage our balance sheet conservatively and keep our capital and liquidity ratios well above our regulatory requirements. This positions us well to meet a temporary increase in client demand for balance sheet commitments over the next few quarters. As Germany's leading international bank, we also believe we operate from a solid macroeconomic and political backdrop. In short, we have positioned Deutsche Bank to be a core part of the solution to the current crisis. With that, let me hand over to James.