Deutsche Bank AG

Good afternoon, ladies and gentlemen. Thank you for standing by. I'm Francie, your chorus call operator. Welcome and thank you for joining the Deutsche Bank Q4 2022 Analyst Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will follow with our question and answer session. If you would like to ask a question, you may press star followed by one. Press the star key followed by zero for operator assistance. It's my pleasure, and I would now like to turn the conference over to Iona Patrinche, Head of Investor Relations. Please go ahead.

Thank you for joining us for our fourth quarter and full year 2022 preliminary results call. This quarter, we will start with our Chief Executive Officer, Christian Saving, followed by our Chief Risk Officer, Olivier Vigneron, and then 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 warnings at the end of our materials. With that, let me hand over to Christian.

Thank you, Your Honor, and welcome from me, too. Today marks a very significant milestone for us. Three and a half years ago, in July 2019, we came together with you to discuss our plans for a fundamental transformation of Deutsche Bank. And we set ourselves some key financial goals for the end of 2022. Today, we would like to talk you through what we have achieved despite facing significant challenges from a pandemic and the war in Ukraine. We would also like to highlight how Deutsche Bank today is a fundamentally different bank, positioning us for further sustainable growth. Let's start with the five decisive actions we took as we launched our transformation strategy in 2019 on slide one. Firstly, we created four client-centric divisions. which have delivered stable growth as promised. In 2022, these four businesses contributed to our best profits for 15 years. These divisions complement each other and provide well-diversified earning streams. We are now a better balanced bank. We are particularly pleased that the corporate and private banks together more than doubled their contribution since 2018, contributing just over 70% of the group's pre-tax profits in 2022. Secondly, we exited businesses and activities which were not core to our strategy. We exited equities trading, transferred our global prime finance business, refocused our rates business, and downsized or disposed of other non-strategic activities. Our capital release unit reduced leverage exposure from non-strategic activities by 91% and risk-weighted assets by 83%, excluding RWAs from operational risk. This has enabled us to redeploy capital into our core businesses. Thirdly, we cut costs. Compared to the pre-transformation level of 2018, we reduced our cost-income ratio by 18 percentage points. We achieved this while absorbing more than 8 billion euros of transformation-related effects and facing an inflation rate we have not seen for decades. Fourthly, we committed to and invested in controls and technology to support growth. We also signed state-of-the-art agreements with Google Cloud and other partners. Our focus on technology has allowed us to grow revenues through closer interface with clients, reduce costs by removing complexity in our technology, and improve our control environment. Finally, we managed and freed up capital, as promised. We kept our CET1 ratio above our target minimum of 12.5% through all 14 quarters of transformation and finished the year at 13.4%. This was despite an impact of around 170 basis points from regulatory changes, 100 basis points from transformation-related impacts, and of course, supporting the growth of our business. The capital release unit played an important role here too, contributing around 45 basis points on a net basis to our CET1 ratio. All of this progress since 2018 has enabled us to start return capital to our shareholders through both share repurchases and dividends. We plan to propose a dividend of 30 cents per share in respect of 2022 and we reaffirm our commitments for 2025. Most importantly, pride returned to the organization, which in turn supports our positive momentum. Commitment and enablement scores materially improved over the last three years. This positive atmosphere will of course help to further shape the future of our bank and even accelerate our momentum. Let me now turn to our performance in 2022 on slide two. These five decisive actions and the renewed belief and pride of our people have positioned us to build and maintain a trajectory of sustainable growth, and this is reflected in our 2022 results. Revenues are above 27 billion euros, well ahead of what we had planned in 2019, despite the business exits I mentioned. All four core businesses produced positive operating leverage compared to their pre-transformation levels. In 2022, our reported return on tangible equity was above 9%, including a deferred tax asset valuation adjustment James will outline in more detail. In terms of profitability, We delivered our highest profit since 2007 at 5.6 billion euros before tax. Our cost income ratio is 75% and significantly below the pre-transformation level of 93 in 2018. Pre-provision profit for the group was nearly 7 billion euros in 2022 and diluted earnings per share were 2 euros 37 cents. Deutsche Bank has proved its resilience during the challenging environment over the past few years. We have maintained disciplined risk management and a strong balance sheet, as Olivier will discuss in a moment, and we maintained robust capital and leverage ratios. Germany's provision of support to households and industry during times of stress is another testament to the strength of operating in the German economy as our home market. Let's now discuss the key aspects of our transformation in more detail, starting with revenues on slide three. In 2019, we refocused our business and looked to grow. Our core bank and our efforts have clearly paid off. 2022 revenues were over 27 billion euros, 7% higher than pre-transformation levels and well ahead of our original aspiration thanks to growth across all our core businesses. This more than offset the foregone revenues from business exits as the core businesses outperformed their targets for revenue growth. So as a result, We are now not only operating a more focused bank, but also a more productive one. Revenues per employee are now 16% higher than pre-transformation levels. Turning now to our costs on slide four. Our cost income ratio in 2022 was 75%, an improvement of 18 percentage points compared to pre-transformation levels at the high end of our guidance. We significantly reduced costs and generated annual run rate savings of more than 3 billion euros from our transformation. Our focused restructuring efforts more than offset investments in our franchise and investments in technology and controls, which I will discuss in a moment. As a result, profit growth has been driven by significant operating leverage. But we know we also need to continue to focus on generating further operational efficiency. In addition to the 2 billion euros of efficiency measures we announced in March 2022, which James will provide an update on later, we will focus our efforts on generating further incremental cost savings. These additional measures will relentlessly focus on a more efficient workforce structure, including but not limited to reviews of layers, cost per seat, and location. We will also streamline our non-client facing divisional functions and infrastructure teams. And of course, this also means a continuation of a very disciplined and agile management of our total headcount numbers. Furthermore, we will also take advantage of further automation opportunities for our front-to-back experience, leveraging technology to augment client service processes in the corporate and private banks. Over the last three years, we have successfully developed internal tools which, together with external benchmarking, give us the support and transparency to drive these incremental cost savings. We are pleased with the progress we have made to date with the drivers of the 2 billion euros of efficiency measures, and hence we are confident we can deliver these additional items. Let me now go through the diversification of our businesses on slide five. The core bank produced pre-provision profits of nearly 8 billion euros in 2022, more than double pre-transformation levels and diversification has been a key contributor. The corporate and private banks together contributed about 5 billion euros, more than 60% of the core bank total. With four strong businesses, we have delivered resilient financial performance through a very unpredictable economic environment and volatile financial markets. This enabled the core bank to deliver return on tangible equity of 11.3% in 2022. Let me now turn to the performance of these business in more detail on slide six. All four core businesses have significantly improved profitability through the transformation period on all key metrics, revenue growth, cost income ratio improvements, and higher returns. The corporate bank delivered its best ever profit before tax of over 2 billion euros in 2022 with a cost income ratio of 62% and return on tangible equity of 12%. The business leveraged our global network and capabilities to build out its franchise. Deposits are up by nearly 35 billion euros over pre-transformation levels, enabling us to take advantage of rising interest rates and loans are around 8 billion euros higher than in 2018. The investment bank has tripled its return on tangible equity and improved its cost-income ratio by more than 20 percentage points since 2018. The work undertaken within our FIG business since 2019 has led to significant revenue growth. While we appreciate this took place in supportive markets, Importantly, we have also been able to materially grow market share, supported by improved external ratings allowing clients to come back to the platform. The investment into our diversified platform will enable us to consolidate our current market position whilst continuing to identify target areas of further growth. In 2022, FIG revenues were nearly 9 billion euros, the highest for a decade and up around 60% over 2018. We have further strengthened our European bond franchise in the investment bank. We were number one by volume in European investment-grade bond issuance, and we saw our highest electronic market shares of EGBs for over 10 years, building on 2021, which was the previous high. Lower activity and volumes negatively impacted origination and advisory in 2022. but the business had areas of positive momentum, including regaining the number one position in German M&A. Private Bank has significantly improved both cost-income ratio and return on tangible equity, outperforming their targets and resulting in profit before tax of 2 billion euros, its highest ever. The business has adapted to the changing needs of clients automated processes, made progress on consolidating our IT platform in Germany and reduced branches by nearly 500 since 2018. Business volumes have grown by 130 billion euros over pre-transformation levels with new client loans of around 50 billion euros and assets under management up by about 80 billion euros since 2018. Asset management has seen its return on tangible equity rise to 17% since 2018, while improving its cost-income ratio by around 9 percentage points. The business has continued to invest in the future and demonstrated its resilience in tougher financial markets. Despite challenging markets in 2022, assets under management are now around 160 billion euros higher than at the end of 2018. Simply put, all four businesses have demonstrated positive momentum on all three dimensions, and this positions us well for the future. Again, supported by our improved ratings with all three leading rating agencies, we continue to see clients coming back to the platform. Combined with the continued expected interest rate tailwinds and the strength of our underlying franchise, we are confident that our strong performance will continue. Let me now turn to another of our key decisions in 2019, investing in technology and controls on slide seven. We committed to spending A cumulative 15 billion euros on technology and an additional 4 billion euros on our control environment as part of our transformation. The benefits of our delivery for clients, costs and controls have been substantial. Let me give you a few examples. We took advantage of cloud technology, both through strategic partnerships and our own efforts. We now have more than 200 apps in Google Cloud and have migrated over 1,000 databases to Oracle Private Cloud. We simplified our IT landscape by retiring apps, which helped deliver a reduction in annual spend of around a quarter of a billion euros per year. We have built a closer interface with FIG clients by automating our flow trading capabilities. We made progress in migrating contracts of postbank clients and related business volumes onto the Deutsche Bank IT platform. This migration is expected to be completely halfway through the year with planned run rate savings of around 300 million euros by 2025 in the private bank. We have reinforced our control functions increasing the number of dedicated professionals by more than a quarter. We continue to focus investments on our cybersecurity capabilities, and we have improved our processing capacity and improved quality assurance in KYC. Building a more sustainable Deutsche Bank was also part of our transformation agenda. We have made considerable progress, which we summarize on slide eight. We have rolled out a comprehensive sustainability strategy and installed a clear governance structure which establishes sustainability as a core part of the way we run Deutsche Bank. We set clear targets for business volumes in ESG financing and investment and made each business accountable for delivering on these targets. We have strengthened our controls further and have embedded sustainability criteria into senior executive compensation. Our businesses have outperformed against our original targets and this enabled us to accelerate the timeframe for delivery twice. From 2020 to 2022, we outperform our target of 200 billion euros in cumulative ESG financing and investment volumes with a total of 215 billion euros in our core businesses, excluding DWS. In last year's difficult market environment, we increased volumes by 58 billion euros. In the fourth quarter of 2022, we published Pathways to Net Zero for the most carbon-intensive sectors in our loan book, and we have created a Net Zero alignment forum in which business, risk, and the sustainability office manage our footprint accordingly. We look forward to providing you with an update and details of our future plans at our second sustainability deep dive on March 2nd this year. Before I hand over to Olivier, let me say a few words on the next phase of our strategy through to 2025 on slide nine. The progress we have made in transforming Deutsche Bank leaves us well positioned to deliver sustainable growth through 2025. When we set out our strategy in March last year, we outlined the key themes which underpin these goals and ambitions. And these themes have become even more important in the light of the geopolitical and macroeconomic upheavals of 2022. In an environment of macroeconomic and geopolitical uncertainty, We will leverage the more favorable interest rate environment, deploy our risk management expertise to support clients, and allocate capital to high return growth opportunities. With sustainability being so important, we will deepen our dialogue with and support for clients, expand our product range, and broaden our agenda for our own operations. And as technology continues to evolve, we will re-add further cost savings, accelerate our transition to a digital bank, and expand on our strategic partnerships, which are already creating significant value. Our platform is positioned to deliver sustainable growth and seize the opportunities of the evolving environment. Finally, a word on our 2025 targets on slide 10. We are confident we can build on the momentum we have generated in all our core businesses on all dimensions as we continue to transform the bank. And we reaffirm the financial goals we set out last March. Our target is the return on tangible equity of above 10% in 2025. The performance of our core bank in 2022 gives us confidence that this goal is very achievable. We reaffirm our target for compound annual revenue growth of between 3.5% and 4.5%, supported by the momentum we already have in our core businesses from a dynamic interest rate environment and the performance we have delivered in the divisions to date. With this revenue growth and the additional efficiency drivers I outlined, We also reaffirm our goal for a cost-income ratio of below 62.5% in 2025. For 2023, we remain focused on continuing to deliver positive operating leverage, and our strong performance in January supports this. We also confirm our capital objectives. We will build capital to support profitable growth and absorb future regulatory changes, and we continue to aim for a CT1 capital ratio of around 13%. We aim to achieve our capital distribution objectives through a combination of dividends and share repurchase in line with our previous guidance, aiming for a payout ratio of 50% from 2025 onwards. We outlined a clear dividend path, which we reaffirm today. We propose a dividend of 30 cents for the financial year 2022, but given the remaining uncertainties in the market environment, it is too early to comment on the exact amount and timing of share repurchase in this year. With that, let me hand over to Olivier.