Deutsche Bank AG

Ladies and gentlemen, thank you for standing by. I'm Stuart Takora's call operator. Welcome and thank you for joining the Deutsche Bank Q3 2022 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'd like to ask a question, you may press star followed by one on your touchstone telephone. Please press star key followed by zero for operator assistance. I would now like to turn the conference over to Ioana Patranich, Head of Investor Relations. Please go ahead.

Thank you for joining us for our third quarter 2022 results call. As usual, our Chief Executive Officer, Christian Saving, will speak first, followed by our Chief Financial Officer, James Van 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, Joanna. A warm welcome from me as well. It's a pleasure to be discussing our third quarter and nine months results with you today. We continue to operate in a difficult and uncertain environment. We are mindful that the economic impacts of the war in Ukraine and the energy crisis are yet to be fully seen. However, despite these challenges, we are progressing towards completion of our transformation strategy. Our efforts continue to be recognized by our stakeholders as we saw with the rating upgrade from Moody's earlier this month. And we believe our progress is reflected in our third quarter and nine-month results. We delivered our highest third-quarter pre-tax profit since 2006 and our best nine-month results since 2011 as we work towards our 2022 financial goals. Turning first to our performance, the positive trends we saw in the first half of the year continued in the third quarter. We delivered group revenues of 20.9 billion euros in the first nine months, an increase of 7% year-on-year. We also achieved average revenue growth of 10% year-on-year across the four core businesses, driven by business volume growth, market share gains improving interest rates and business investments, all of which will support sustainable growth in future years. In the first nine months of 2022, we generated an 8% return on tangible equity in line with our target and up from 4.8% in the first nine months of 2021. This is the result of increased profitability and efficiency. Post-tax profit for the first nine months was 3.7 billion euros, up 68% year-on-year, reflecting our improving pre-provision profit. Our cost-income ratio was 73% for the first nine months, down from 82% in the prior year period. We also proved our resilience. We maintained strong risk management in this challenging business environment. Provision for credit losses was higher but contained at 24 basis points of average loans. We are well capitalized. We finished the third quarter with the common equity tier 1 capital ratio of 13.3% up from 13% in the second quarter and above our target minimum of 12.5%. Now let me take you through the progress in our core businesses on slide 2. All four core businesses delivered strong post-tax returns on tangible equity in the first nine months. This gives us confidence that our 2022 targets and ambitions are well within reach. In the corporate bank, revenues are up 20% year-to-date thanks to the further improving interest rate environment and higher fee income supported by volume growth in loans and deposits. Return on tangible equity was 11%, a 4 percentage point increase year on year. In the investment bank, continued client engagement and strong risk management in our leading FIG franchise drove revenue growth of 8%, with particular strength in our macro trading businesses. The investment bank delivered a return on tangible equity of 12%, despite lower origination and advisory activity, as markets became more volatile. The private bank boosted its return on tangible equity to 9.5% by delivering a more than three-fold rise in pre-tax profits in the first nine months. 7% revenue growth was backed by net new business of €36 billion year-to-date. including net inflows into assets under management and loan growth. In addition, the business continued to optimize its distribution channels with the closure of more than 130 branches. Asset management delivered revenue growth of 4% year on year, proving its resilience in a much tougher market environment. The business achieved a 20% return on tangible equity while continuing to invest in growth initiatives and platform transformation. This strong performance across all core businesses enables the core bank to deliver 9 months profit before tax of 5.6 billion euros up 29% year on year. On slide 3 you can see in more detail the positive operating leverage we achieved in the first 9 months. Group revenues were the highest since 2016, up 7% year-on-year. Across all core businesses, growth is in line with or ahead of the growth rates we foresaw at the launch of our strategic transformation three years ago. Despite absorbing some items outside our control, non-interest expenses were down 5% year-on-year. This was mainly driven by lower transformation charges and restructuring and severance as we approached the completion of our transformation program. Our adjusted costs, excluding transformation charges and bank levies, increased by 1%. Excluding FX, our cost base was down 2% as we successfully offset current cost pressures with our savings initiatives. This improvement in operating leverage drove our cost-income ratio down to 73% in line with our full-year guidance of mid to low 70s. Turning to slide 4, we believe that strong profitability positions us well in the face of a tougher macroeconomic outlook and more challenging credit environment. The core bank delivered a return on tangible equity of 10% in the first nine months up from 7.5% in 2021 and in line with our 2022 target of greater than 9%. As a result, core bank pre-provision profit rose 40% year-on-year to 6.4 billion euros in the first nine months. And pre-provision profit is not only higher, but also better diversified across our franchise. The contribution from our stable businesses has increased significantly. The corporate bank, private bank and asset management now account for over 60% of pre-provision profits. And with the turn in the interest rate cycle, we expect the contributions from our corporate bank and private bank to remain sustainably strong in future periods. Let me now spend some time talking to our risk management and balance sheet strengths on slide 5. As always, we remain extremely focused on disciplined risk management. We constantly monitor and manage risks through our early identification systems, multiple downside analysis, stress tests and selective limit reduction. We proactively responded to the escalating war in Ukraine and the broader European energy crisis via focused hedging and selectively reducing risk appetite in our focused portfolios. Our underwriting standards remain robust, even as we continue to support clients through these challenging times. We are engaged with our key clients on their liquidity needs and we are also working closely with KfW and the government on support programs. Our approach and our resilient balance sheet mean we have seen limited impacts on our risk profile so far. Our key risk and balance sheet metrics have remained stable since the fourth quarter of 2021, before the start of the war in Ukraine. Our CET1 capital ratio is now at 13.3% and our liquidity coverage ratio is at 136%. Our provision for credit losses increased to 24 basis points of average loans for the first 9 months compared to 8 basis points for the same period last year. This is the normalization we expected following a less benign macroeconomic environment compared to the previous year. Nonetheless, we still expect the full year provision to be in line with our earlier guidance at around 25 basis points. Overall, our credit portfolio quality is broadly stable and despite the volatility we have seen, our market risk is managed within our appetite parameters and we have taken measures to address K-risk. Given the uncertainties in the outlook, we are continuously reviewing our risk appetite and updating our downside analysis to ensure that we remain well prepared for potential further negative developments. Let me now turn to page 6. In the third quarter, ESG-related financing and investment volumes grew by €6 billion net and the cumulative total since 2020 is €197 billion for the Group, excluding DWS. This compares to a year-end 2022 target of €200 billion. The volume development seen in the quarter reflect the implementation of the new MIFID II ESG reporting standards introduced in August. We also made significant progress in implementing our commitment to reduce our carbon footprint. On October 21st, we published our net zero targets for financed emissions in key industry sectors in the corporate loan book. These targets seek specific reductions by 2030 and 2050 in four particularly carbon-intensive sectors, namely upstream oil and gas, power generation, automotives, and steel. We aim to achieve these targets by supporting clients on their transition strategies on the path to net zero emissions by 2050 in accordance with the Paris Agreement on Climate Change and are focusing the dialogue on the top emitters where we see a high concentration of finance emissions. Our methodology envisions a progressive and orderly phase-out of fossil fuel usage while incentivizing the financing of lower carbon intensive technologies for clients with credible transition plans. We look forward to discussing this with you in more detail at our Sustainability Deep Dive in March 2023. And now, before I hand over to James, Let me summarize our progress to date this year on slide 7. Our improved profitability in the first nine months of 2022, despite a very challenging environment, proves our transformation has positioned Deutsche Bank on the right track strategically. This transformation resulted in the strong business performance we have seen, and we are on track to meet our 2022 goals. Our core bank revenues are rising, reflecting strong momentum across all businesses and the execution of strategic management actions. Our private bank and corporate bank will in particular benefit from this, which will further support our franchise. We continue to deliver positive operating performance. This is driven by our improved profitability and builds our pre-provision profits, providing better protection to shareholders. We continue with our disciplined risk management and our third quarter risk profile remains contained, supported by a high quality loan book, market risk discipline and solid capital and liquidity. And we will continue to stay focused on this in light of the environment. The transformation phase we began in 2019 is nearing completion and we have laid strong foundations for the next phase of our strategy to 2025. We aim to further improve our operating margins as we continue to focus on costs in light of the inflationary pressures. We are executing on a number of tactical measures to offset these near-term pressures and then As we progress with our strategy, the four key initiatives which we communicated at our IDD in March will support our cross-trajectory while enabling further investments. To be clear, we stick to our 2025 financial and strategic targets, including our capital distribution plans. With that, let me now hand over to James.