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 Deutsche Bank Q3 2020 analyst call. 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 all for joining us. As usual on our call, our CEO, Christian Saving, will speak first, followed by our Chief Financial Officer, James Vermolker. The presentation, as always, is available for download in the Investor Relations section of our website, db.com. But before we get started, let me 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 welcome from me. It is now five quarters since we launched our strategic transformation. And for the fifth quarter in a row, we have delivered on or ahead of our financial targets and transformation agenda. And this positions us well to deliver against our long-term targets. We were profitable in the third quarter and in the first nine months of the year with results ahead of our internal plan. The results are clearly a reflection of our refocus strategy. And yes, the results are in part driven by higher revenues in the investment bank where market conditions remain supportive. But we see our revenue growth in the investment bank as much more than just market-driven. The performance also reflects the refocus of this division around businesses where we have market-leading positions. In Q3, we have outperformed peers in several of our key areas within fixed income and increased market share. Despite the revenue headwinds we are facing in the corporate and private bank, the results are in line with our original plans. Asset management is performing in line with our expectations as well. We also continue to reduce costs with the 11th quarter in a row of year-on-year declines. The combination of higher revenues and lower cost is driving higher core bank profitability, which more than offsets the combined impacts of transformation costs to implement our strategy, the burden of winding down the capital release unit, which continues in line with our plan, and elevated provisions for credit losses given the COVID-19 pandemic. And finally, we continue to manage our balance sheet conservatively. Capital was broadly stable in the quarter, while liquidity further increased. This provides a solid position in the current environment to maintain our financial strength, and to support our clients. Let us go through these themes in more detail, starting with our progress against our strategic transformation on slide two. In July 2019, we identified the transformation-related effects that we would take over the next 14 quarters. After just five quarters, we have put over 80% of these costs behind us. In the third quarter, we continued to implement our strategic transformation. Some examples include, in the private bank Germany, we announced the reduction of a further 100 Deutsche Bank branded branches. Since 2016, we will have removed approximately 30% of our entire German branch network, including post bank. This announcement reflects the changes in customer behavior that we are seeing. including a near doubling of online securities transactions, of which 30% are now coming through our mobile app. To support our revenue objectives, we extended partnerships with Zurich and MasterCard. We further rationalized our real estate footprint with the early closure of a significant part of our New York campus. We continued to simplify our legal entity structure with the completion of the sale of our trust business in Mexico. And we completed the formation of the International Private Bank and introduced a simplified reporting and leadership structure. This should unlock further revenue and cost synergies between wealth management and the former Private and Commercial Bank International consistent with our agenda. These examples demonstrate our relentless focus on execution. Let me now discuss our revenue performance on slide three. A core objective of our transformation has been to stabilize and then grow revenues. We have grown group revenues by approximately half a billion euros over the last 12 months, driven mainly by the investment bank. The revenue growth in our refocused business model has offset the exit from equities trading. Clients have re-engaged with a model which focuses on our core strengths. In each of the last four quarters, we have grown thick revenues year on year by high double-digit percentage, including a near doubling of rates revenues mainly driven by strong underlying client flow. In origination and advisory, we have consistently outperformed the global fee pool in 2020, resulting in our highest market share in six quarters. And this includes ranking third in green bond issuance up from 14th in 2019. As a result, we see a substantial part of the investment bank revenue performance to be sustainable. You see this in core bank revenues, which have increased to around 24 billion euros over the last 12 months. And this puts us close to the plan of 20.5 billion euros that we described at the last investor deep dive as part of our path to the 8% return on tangible equity target in 2022. But we are not complacent. We will continue to work on measures to offset the interest rate headwinds and the further anticipated normalization of market conditions in investment banking. Turning now to our progress on cost reductions on slide four. We promised that we would not let COVID-19 slow down our pace of execution, and we kept that promise. We have delivered 11 quarters of year-on-year reductions in adjusted costs, excluding transformation charges and bank levies. Excluding transformation charges and prime finance costs, adjusted costs were 4.7 billion euros in the third quarter. This puts us well on track to meet our 2020 target of 19.5 billion euros. This would be a reduction of 3.3 billion euros, almost 15% over the past two years. Our relentless focus on costs is now in the mindset of the bank and will continue. The disciplined execution is becoming increasingly visible in our financial results, as you can see on slide 5. A core objective of our transformation is to improve sustainable profitability. That means generating positive operating leverage by growing revenues and, at the same time, reducing costs. We have generated positive operating leverage for four quarters in a row at both a group and a core bank level. This operating leverage has driven significant improvements in core bank profitability. The improved core bank performance has increasingly offset the negative impact of the wind down of the capital release unit. Over time, More of the core bank's profitability should flow to the group's bottom line as we continue to progress on our transformation agenda and provisions for credit losses normalize. I'm also encouraged that all four of our core businesses generated positive operating leverage, as you can see on slide six. The improvements were driven by disciplined implementation of our strategy as each business works to improve its return on equity. Both the corporate bank and the private bank have implemented measures to offset the interest rate headwinds. The corporate bank has now charging agreements in place on approximately 68 billion euros of deposits. These agreements added 55 million euros to revenues in the current quarter alone. This is materially above the targets we laid out at the investor deep dive in December 2019. To further accelerate growth, we have recently combined all our operations for business clients in Germany into a single unit. The investment bank benefited from the before-mentioned recovery in revenues combined with ongoing cost reductions. The private bank generated 5 billion euros of net new client loans and €3 billion of net inflows into investment products in the quarter. On the cost side, in the private bank, we have now generated €260 million of cost synergies from the German merger year-to-date. And here we remain on track to reach our full-year objectives. In asset management, DWS has shown its resilience with a rebound in revenues driven in part by ongoing cost reductions as well as net asset inflows. DWS has generated €17 billion of net inflows year-to-date with more than one-third in ESG products. Across our businesses, the operating leverage has not been generated at the expense of resource disciplines. Over the last 12 months, risk-weighted assets were broadly flat or slightly down in each of our businesses. This discipline around risk-weighted assets is a key element of our commitment to conservative balance sheet management, which we discuss on slide seven. We held our CET1 ratio broadly stable at 13.3%. Liquidity reserves increased to around 250 billion euros. Both of these metrics are comfortably above regulatory requirements. Provisions for credit losses were 25 basis points of loans on an annualized basis in the third quarter. Performance in our loan portfolio since the first quarter supports our guidance for the full year that provisions will remain in the 35 to 45 basis point range. We reiterate this guidance even today. with the recent renewed uncertainties in the macroeconomic outlook. This compares favorably to our international peers, reflecting the high-quality nature of our loan portfolios and tight management of credit risk. It also reflects the fact that around 50% of our loan portfolio is in Germany. In summary, our performance is in line with or even ahead of all our major strategic and financial objectives. We are confident we can continue on this path, including our expectation to be profitable at the pre-tax level for the full year. We look forward to discussing this with you in more detail in our investor deep dive on the 9th of December. With that, let me hand over to James.