Deutsche Bank AG

Ladies and gentlemen, thank you for standing by. I'm Natalie, your chorus call operator. Welcome and thank you for joining the Deutsche Bank Q1 2023 analyst conference 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 touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Silke Scheiber as Deputy Head of Investor Relations. Please go ahead.

Thank you for joining us for our first quarter 2023 results call. As usual, our Chief Executive Officer Christian Seving will speak first, followed by our Chief Financial Officer James von Moltke. 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 material. With that, let me hand over to Christian.

Thank you, Silke, and welcome from me too. It's a pleasure to discuss our first quarter 2023 results with you today. and we are pleased with the progress we continue to make towards our 2025 goals. The first quarter was marked by turbulent conditions in the banking sector, particularly March, in addition to the macroeconomic challenges. However, our transformation has provided us with strong foundations, which enabled us to navigate these challenges successfully. We delivered on four critical dimensions. First, profitability. Pre-tax profits increased by 12% to 1.9 billion euros, and post-tax profit by 8% to 1.3 billion euros, which on both counts represents our strongest first quarter since 2013. Our cost-income ratio was 71% this quarter, two percentage points better than the prior year, driven by positive operating leverage. We also generated an 8.3% post-tax return on tangible equity this period. As you know, annual bank levies are recognized in the first quarter. Spreading these bank levies equally across the four quarters of the year, our first quarter cost-income ratio would be 67%, with the post-tax return on tangible equity of 10%, putting us well on track to our 2025 targets. Second, we proved the strength of our franchise. Our business model is focused on four client-centric businesses, which complement each other and provide a well-diversified earnings mix, as this quarter shows. We delivered revenues of 7.7 billion euros, up 5% over the prior year quarter. Third, we again proved our resilience. Our common equity tier one ratio was 13.6%, up from 13.4% in the previous quarter and 12.8% in the first quarter of last year. Our liquidity reserves were 241 billion euros and our liquidity coverage ratio rose to 143%. Finally, sustainability is an important part of our strategy. As you heard at our sustainability deep dive in March, we have updated our business strategies and policies and expanded on our commitments in several ways to fight climate change. Namely, our thermal coal policy and our ambition is to encourage our corporate clients to commit to net zero. This quarter, we made further progress towards our target of 500 billion euros of sustainable financing and investments, excluding DWS, by end 2025. Our cumulative volume since January 2020 has grown to 238 billion euros. Let me now turn to slide two to discuss the strong performance across our divisions this quarter. We saw good momentum across all business and delivered on the strategic steps which support our 2025 targets and strengthen our global house bank model. The corporate bank showed financial strength with record revenues and good client activity across our main businesses. I'm pleased that we are winning mandates with top clients to support working capital and their global value chain. In the investment bank, we added talent to support growth and we are expanding our core franchise. We increased our global market share by more than 40 basis points compared to the previous quarters in origination and advisory and achieved year-on-year revenue growth in rates for the fifth consecutive quarter. This reflects our ongoing investments, especially in capital light business areas. The private bank produced its best ever operating revenues, grew assets under management and captured net inflows. We also successfully completed the next wave of the postbank IT migration at the beginning of April, transferring over 6.5 million contracts from 5 million postbank clients. This will unlock the 300 million euros of cost efficiencies as we previously communicated. Asset management saw inflows of 6 billion euros and 9 billion euros excluding cash, despite turbulent markets. Stefan Holtz is progressing with a strategy by investing into transformation to create a standalone platform while expanding the product offering. Xtrackers launched the largest ETF of all time in the U.S. of approximately $2 billion. This is also the single largest climate investing ETF launch. Turning now to the pre-provision profit on slide three. Pre-provision profit for the group was 2.2 billion euros in the first quarter, up 14% compared to the prior year period. We again achieved positive operating leverage as we grew our revenues and controlled expenses. This quarter underlined how complementary our businesses are and how our strategic transformation has helped us to rebalance our income streams. I'm particularly pleased with the performance at the corporate bank and private bank, which benefited from the normalized rate environment. The contribution from the corporate bank and the private bank to pre-provision profit increased to almost 60% from 33% compared to the first quarter of last year. The investment bank also produced a solid underlying contribution against an exceptionally strong prior year quarter. The rebalancing towards our stable revenue businesses is especially visible when looking at their contribution to the total group's pre-provision profit on a last 12 months basis. The corporate bank and private bank alone have contributed 70% over this period. You will recall that our corporate and other results were negatively impacted by valuation timing in the prior year quarter. We anticipated that these would reverse over time and we are benefiting from this effect this quarter. Momentum and balance we see across our four businesses gives us confidence we have the right business model and a strong platform to further improve returns. In addition to our gross focus, we maintained our discipline on cost as we continue to invest in technology and controls and face inflationary pressures. In February, we said that we were working on additional efficiency measures, which we are now implementing and which are shown on slide four. The changes we announced to the management board yesterday should support this agenda. The creation of a group chief operating officer will help us to deliver our strategic transformation agenda and drive inefficiencies out of the bank. We also focus on rightsizing our non-client-facing functions. During the second quarter, we will begin to reduce our senior non-client-facing workforce by 5% and will limit new hiring without compromising our controls. We continue to align our German private bank to the current trends and market environment including actions to streamline our mortgage platform. In addition, we are working on a series of productivity measures, including sophisticated capacity planning in several areas, including anti-financial crime. Our target is to increase returns over time, and we continue to look for more opportunities to deliver on this. I will speak about this later. Let me now turn to our balance sheet strengths and resilient funding profile on slide 5. Once again, we benefited from disciplined risk management in our strong and stable balance sheet. Our loan book is well diversified across businesses and regions. Around 70% of the book is secured or hedged, and almost 80% of our loan portfolio is in stable and mostly lower risk businesses in the private bank and corporate bank. Nearly half of our book is based in Germany, and 40% is equally distributed across EMEA and North America with the remainder in APEC. Our deposit base funds about 60% of the net balance sheet, and our loan-to-deposit ratio was 82% at quarter end. Over 80% of our deposits are from most stable client segments, such as retail, corporates, small and medium-sized enterprises or sovereigns where we have long-standing and deep-rooted client relationships. 77% of our German retail deposits are insured via the statutory protection scheme. In the corporate bank, close to three-quarters of all deposits are sticky operational and term deposits supporting our clients' daily needs. James will say more on deposits later. Our CET1 ratio strengthened to 13.6%, 250 basis points above the MDA buffer, and our highest level for two years. Our leverage ratio was 4.6%. As I said, our liquidity metrics remain sound. The LCR was 143% above our target of around 130%, with a buffer of 63 billion euros above regulatory required levels. The net stable funding ratio was 120% at the high end of the group's target range of 115 to 120% and 100 billion euros above required levels. To summarize, we have solid foundations to navigate through the recent turbulent environment. And importantly, I view the European banking sector as stable thanks in part to the regulatory efforts of recent years. Moving to slide six. The current environment underlines the importance of our global house bank model, which positions us well to serve clients in volatile markets. 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 light of the geopolitical and macroeconomic upheaval since then. Our first quarter results demonstrate the progress we are making on the path toward our 2025 goals, benefiting from a strategy and business model which are well aligned to market trends. 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. We will also continue to benefit from the investments we are making in technology together with our strategic partners. The investments should accelerate our transition to a digital bank and the benefits should be seen in our efficiency and controls. These technology investments are also designed to create value for our clients. We believe we have the right strategy and the right focus on clients, which allow us to accelerate execution of our strategy, enhance our franchise, and drive returns. We see these opportunities on three dimensions, which we detail on slide seven. We have committed to self-fund our investments and increase operating leverage through efficiencies, and we now see additional scope to do that. We already indicated that we aim to deliver incremental operational efficiencies greater than the 2 billion euros identified at the 2022 investor deep dive. As discussed, we are in the process of identifying and executing on a further 500 million euros of benefits, which we will work to extract. The incremental benefits will come from a strategic review of our entire workforce, further optimizing the distribution networks in the private bank. We also expect to see benefits in operations and process automation, and we are excited about the opportunities that should emerge from artificial intelligence and machine learning. Second, we are focusing on capital efficiency. Deploying capital to increase shareholder value has always been our priority and we see opportunities to reallocate capital. We aim to free up 15 to 20 billion euros of risk-weighted assets from reduction in certain sub-hurdle lending and mortgage portfolios, greater utilization of securitization and hedging optimization. These actions are expected to have a minimal impact on revenues but will enable us to increase returns and reallocate resources to more capital-accretive businesses. We believe that the combination of cost and capital efficiency, together with additional opportunities across markets, should position us to outperform our existing growth objectives. To support this, we continue to invest into our platforms and to take opportunities created by current market conditions to attract talent to strengthen advisory capabilities in various business and regions, including Asia. We expect these actions to accelerate the execution of our strategy and, more importantly, increase returns to shareholders over time. Before I hand over to James, let me summarize our progress on slide eight. Our performance in the first quarter demonstrates the strengths of Deutsche Bank's franchise, earnings power, and balance sheet. Our transformation has given us a strong platform for growth with a diversified business model providing well-balanced earnings. This provides a strong step-off to accelerate our global house bank ambition through additional actions on the three dimensions we just discussed. We remain fully committed to our capital distribution plan With a successful first quarter behind us and strong capital, we have now initiated the dialogue with the supervisors about share buybacks, which are expected to take place in the second half of this year. This is in line with the promise we made last quarter that we initiate this step once we have greater clarity on a number of issues, including the macro environment. Everything we have seen this quarter supports our view that we are on the right path. The group is well positioned to capitalize on current trends to drive returns above the cost of equity. With that, let me hand over to James.