Deutsche Bank AG

Ladies and gentlemen, thank you for standing by. I'm Hayley, your Chorus Call Operator. Welcome and thank you for joining the Deutsche Bank Q3 2021 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. And I would now like to turn the conference over to Ioana Patronich, Head of Investor Relations. Please go ahead.

Thank you for joining us for our third quarter 2021 Results Call. As usual, our Chief Executive Officer, Christian Saving, will speak first, followed by our Chief Financial Officer, James von Malka. The presentation, as always, is available to 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, Ioana. A warm welcome from me as well. It's a pleasure to be discussing our third quarter 2021 results with you today. We are now two-thirds through our transformation journey, and we have continued to deliver against our milestones. We see clear evidence of progress in our businesses. The first basis of this progress is our disciplined execution. We continue to be absolutely focused on cost-saving measures. Adjusted costs, excluding transformation charges, are once again down year on year. These transformation charges will help drive reductions in our expenses in future quarters. And we have now recognized 90 percent of our total anticipated transformation-related effects of almost 8 billion euros since we began this journey. This has resulted in significant progress in our transformation. We promised to self-finance this, and we have delivered. These efforts are being recognized by our stakeholders in the third quarter. Both Moody's and Fitch upgraded our credit ratings and retained our positive outlook. We have maintained a strong capital ratio, a strong balance sheet, and sound liquidity despite certain challenges such as regulatory inflation and the of a global pandemic. Our capital release unit is outperforming against our 2022 goals, which we outlined at our last investor deep dive. Risk-weighted assets are down to 30 billion euros, and the unit continues to reduce costs. And finally, the result is profitability. In all three quarters of this year, we have delivered significant -on-year profit growth, while simultaneously keeping up the pace of transformation. Refocusing on core business is paying off. Revenues have grown as broad-based business performance offsets the effect of normalizing capital markets. And we saw that in the third quarter. Pre-tax profit of 554 million euros grew by 15 percent despite transformation charges of nearly 600 million euros. And on an adjusted basis, profit before tax would have been up by 39 percent to 1.2 billion euros. Now let me take you through the highlights of what we have achieved in the nine months of this year on slide two. Our performance over these past nine months shows that 2022 targets and ambitions are well within reach. Revenues of 19.5 billion euros for the first nine months of 2021 fully support our trajectory to our 2022 revenue goals. We have reduced the adjusted costs, excluding transformation charges, by roughly 4 percent -on-year to 14.4 billion euros, despite 2021 being an investment year. This means we delivered positive operating leverage at both the group and core bank level over the past nine months. We reduced our cost-income ratio from 87 percent to 82 percent -on-year despite the additional transformation charges recognized in the third quarter. Provisions for credit losses declined 83 percent -on-year to 261 million euros or eight basis points of average loans. Return on tangible equity for the core bank is seven and a half percent for the past nine months and above nine percent on an adjusted basis already in line with next year's target. This sets us on a clear path to our group target of eight percent return on tangible equity in 2022. Now let me turn to the progress we have made executing on our strategy across our core business on slide three. The corporate bank continues to execute on its growth strategies as evidenced by increasing loans and new partnerships, including MasterCard, Pfizer, and better payments. 94 billion euros of deposits are within the scope of charging agreements and contributed 96 million euros in revenues to our third quarter results. The investment bank is focused on -to-back efficiency process improvements such as the FIC reengineering program. The results in this quarter again confirm our decision to refocus our investment bank on its core strengths and we delivered a strong performance despite the fact that we have seen a significant increase in revenue growth and a significant increase in normalization in the market. We have now seen -on-year revenue growth in origination and advisory for seven consecutive quarters and our third quarter FIC results demonstrate our market share gains are sustainable. The private bank continued to grow net new business across under management and loans. This -to-date business growth substantially outperform our full year target of 30 billion euros. In the third quarter we announced the sale of DB financial advisors in Italy which supports our international private bank divisional strategy as well as our regional strategy. In asset management, assets under management stand at a record level of 880 billion euros driven by strong net inflows of 12 billion euros this quarter with more than 40 coming from ESG products where we continue to work towards leadership in the field. We continue to undertake investments in growth initiatives and platform transformation to support our performance. In short, the dynamics in all four core businesses show that our clients are supportive of our business model and belief in our capabilities. All four core businesses grew return on tangible equity and improved the cost income ratio over the first nine months of 2021. This relentless focus on transformation has driven a steady improvement in underlying profitability which can be seen on slide four. In the core bank we delivered a 70% -on-year increase in our adjusted profit before tax in the last 12 months. Once again all four core businesses contributed and are either in line with or ahead of their plans so far. In the capital release unit we reduced losses by nearly half compared to a year ago. As we reduce leverage exposure and risk weighted assets we continue to remain committed to minimizing the P&L impact of the portfolio reduction. As we steadily put transformation effects behind us and reduce the cost of the leveraging in the capital release unit more of the earnings power of our core business is reflected in the bottom line. This supports our aim to deliver stable and sustainable returns at the group level. A key driver for this is our sustainable revenue performance which I will now turn to on slide five. Revenues excluding specific items in the core bank for the third quarter stand at six billion euros up one percent -on-year. Business growth has offset the normalization of the capital markets environment which impacted fixed income trading as expected. This quarter still bears the impact of foregone revenues as a result of the BGH ruling of 96 million euros similar to the second quarter. We expect this impact to taper off considerably in the next quarter as we now have condense in place for two-thirds of the affected accounts. Revenues in the investment bank are 2.2 billion euros down only six percent from a very strong third quarter in 2020. Both our corporate bank and private bank continued to offset interest rate headwinds with continued depository pricing and business growth. We see continuing underlying momentum in these businesses. And we see strong underlying growth and lending. The loan portfolio is currently at 456 billion euros up five percent from the same quarter last year. With the period of post-pandemic market normalization behind us, we now expect the current growth rate to remain in the coming quarters. Asset management delivered revenue growth for yet another quarter driven by strong management fees. This is the sixth consecutive quarter of net inflows. Core bank revenues were 25 billion euros in the last 12 months, an 11 percent increase from 2019, which is in line with our current 2022 goal. This reflects the sustainability of our revenues as client engagement continues to improve, particularly following our recent rating upgrades. Now let me turn to costs on slide six. On a 12-month basis, we reduced non-interest expenses by 14 percent to 21 billion euros from 2019. This includes the higher than expected contributions to the Single Resolution Fund and the German Deposit Protection Scheme. We continue to focus on managing our controllable cost base to offset volume-driven expenses and investments in controls and have identified additional cost saving measures. These measures come with around 700 million euros of incremental transformation related effects, including technology related charges that we recognized in the third quarter. We are committed to putting almost all our anticipated transformation effects behind us by the end of 2021. And with that in mind, we reaffirm our 2022 target for a cost income ratio of 70 percent. Let me now update you on our progress on sustainability on slide seven. After nine months, we are already ahead of our full year 2021 target for total volumes of ESG financing and investment. Our volume since the start of 2020 now stand at 125 billion euros, versus a full year ambition of 100 billion euros excluding DWS. This puts us well on track to meet or exceed our year-end 2023 target of 200 billion euros. In addition, we were a book runner on four of the six largest ESG-related bond issues in the quarter. This month, we co-led the EU's inaugural Green Bond, raising 12 billion euros, the largest ever Green Bond today. We also completed our first ever Green Repo agreement, the first green Formosa bond, and built out our offering and sustainability linked loans to German middle-stand companies. ESG is the topic which continues to drive client engagement, allowing us not only to innovate products, but to also provide advisory services underlying our clear client-centric approach. At the Private Bank, we rolled out the ESG advisory concept to more than 100 branches, exceeding our 2021 ambitions, and our International Private Bank is enhancing product offering via new funds in growing green deposits and lending. We are pleased to participate in the COP26 summit in Glasgow next week, and we are looking forward to meeting clients and other stakeholders striving for change. Before I hand over to James, let me now summarize our progress this quarter on slide 8. As we said at the Investor Deep Dive in December, our focus remains on executing our transformation agenda while supporting our clients. We have executed on strategies within our refocused core businesses, and we saw material improvements in core bank profitability and returns.