Deutsche Bank AG

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Deutsche Bank Q2 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'd like to ask a question, you may do so by pressing star followed by one on your telephone keypad. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Zirka Chupa, Deputy Head of Investor Relations.

Thank you for joining us for our second 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 at 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 a warm welcome also from my side. It's a pleasure to be discussing our second quarter and first half results with you today. These results provide a vital perspective of the progress we are making towards our objectives. For me, a few key points stand out. First, we have strong growth momentum. Revenues in the first half year were up 8% to 15.1 billion euros, putting the upper end of our guidance range of 28 to 29 billion euros within reach. We also captured net inflows of 28 billion euros across the private bank and asset management. We are reaping the benefits of a complementary and well-balanced earnings mix. We are delivering strong growth in our private bank and corporate bank franchises and resilience in key areas of our investment bank. Second, we have proven our earnings power. We generated profit before tax of 3.3 billion euros in the first six months, up 2% over last year, and the highest first half since 2011 after absorbing more than 700 million euros in non-operating costs, including restructuring related to operational efficiencies. Excluding these non-operating costs, pre-tax profit would have been 4 billion euros, 21% higher than in the first half of 2022 on a comparable basis. Our post-tax ROTE was 6.8% and would have been above 9% excluding non-operating costs and with bank levies apportioned equally across the year, very close to our 2025 target of above 10%. Third, our balance sheet and capital position are resilient. Our CET1 ratio has risen to 13.8%, driven by strong organic capital generation. We have sound liquidity and a solid deposit base, which we slightly increased in the second quarter. Fourth, we are delivering on our promise to distribute capital to shareholders. As announced yesterday evening, we have received supervisory approval to start share buybacks of up to 450 million euros, 50% higher than last year. Together with the dividend we paid in respect of 2022, we aim to distribute more than a billion euros of capital to shareholders this year. This will bring total distributions across 2022 and 2023 to around 1.75 billion euros And of course, it is our clear aim to continue on that trajectory in 2024 as part of our 8 billion euro distribution promise. Fifth, we are accelerating the execution of our global house bank strategy. We are already making good progress in driving operational efficiency, boosting capital efficiency and outperforming our revenue growth target. Let me now discuss the franchise strengths across our businesses in the first half year on slide two. Starting with the corporate bank, we delivered 30% revenue growth with strong momentum across all business areas. With non-interest expenses up 6%, operating leverage in this business was 24% in the first half of 2023. that enabled us to deliver an ROTE of nearly 17%. In the Investment Bank, we demonstrated the stability of our financing business and resilience of our FIG franchise overall after the exceptionally strong levels of the same period of last year. And we are further diversifying our Investment Bank by strengthening our O&A business both organically and inorganically. We announced the acquisition of Numis and seized opportunities to add revenue generators through selective hiring. Turning to the private bank. We grew revenues by 10% in the first half of 2023. These are the best six-month revenues since the formation of the private bank with double-digit year-on-year growth in both the first and second quarters of the year. We also generated net inflows of 13 billion euros in the first half year. This helped us grow assets under management by 23 billion euros to 541 billion euros during the first six months of 2023. Finally, we also grew volumes in asset management. We captured net asset inflows of 15 billion euros or 19 billion euros ex-cash Driven by passive and alternatives, both focus areas for us. That enabled us to grow assets under management by 38 billion euros to 859 billion euros in the first half year. And these business are strongly complementary, which drives sustained revenue growth as we show on slide three. Over the past two years, we have seen steady growth in first half revenues. We see ourselves well on track to deliver at the higher end of our full year guidance of 28 to 29 billion euros. We achieved this despite significant shifts in the operating environment over the past 24 months, as a strong post-COVID recovery in 2021 gave way to inflationary headwinds and economic uncertainties driven by the war in Ukraine. We maintain our growth trajectory in a changing environment, thanks in a good measure to a complementary business portfolio. As mentioned, we delivered strong revenue growth in our corporate and private banks, which took full advantage of rising interest rates and new client mandates. We expect that momentum to continue into the second half of 2023. This, together with the stable contribution from the investment bank's financing business, more than offset normalizing conditions in our more market-sensitive businesses. That reflects a well-balanced revenue mix in line with our global house bank ambition. As we anticipate some normalization of interest rates, we aim to further complement our earnings mix. We are making investments in capital-light businesses, including origination and advisory and wealth management, together with technology-enabled high-return businesses in the corporate bank. Finally, across all business, we continue to make progress towards our sustainability targets. We added ESG financing and investment volumes of 17 billion euros in the second quarter bringing our cumulative total to 254 billion euros since January 2020. And our business growth has further increased our underlying earnings power as we set out on slide four. As I said earlier, our first half profit before tax of 3.3 billion euros was up 2% compared to the first half of 2022. And as you can see, Pre-provision profit was up 8% at 4 billion euros after absorbing significantly higher non-operating costs than in the prior year. Non-operating costs were 744 million euros comprising litigation charges to settle mainly long-standing matters and restructuring and severance as we realize operational efficiencies. Revenues were up 8% while adjusted costs, which exclude non-operating items, were up only 2%, below inflation despite continued investments in our platform. And with prorated bank levies, adjusted operating leverage was 5%. This earnings power is reflected in the progress we are making on our key target ratios. Postex, ROTE, excluding non-operating costs and with bank levies apportioned equally over the four quarters of the year, would be over 9% in the first half of 2023, while our cost-income ratio would be 67%. In other words, we are on a clear path towards achieving our 2025 targets. Before I hand over to James a few words on the progress we are making to accelerate delivery of our global house bank strategy, as we discussed with you in April on slide five. We aim to accelerate delivery on three dimensions, operational efficiency, capital efficiency, and revenue growth, where we aim to outperform our original targets. We have already made progress in all of these. Turning first to operational efficiencies. We raised our ambition for incremental efficiencies from 2 billion euros to 2.5 billion euros as we said. We have already delivered more than 600 million euros through a range of measures such as branch closures in the private bank, standardizing loan processing in the corporate bank and investment bank, and simplifying our technology infrastructure. We anticipate 300 million euros of savings by 2025 from the successfully completed migration of 12 million postbank clients onto the Deutsche Bank technology platform. And we expect more than 100 million euros from the announced redundancies in senior non-client facing roles as more than 80% of affected staff have either been informed or left the platform. In other words, a total of around 1 billion euros in savings are either already achieved or are expected from measures now implemented. We have a series of other measures in flight. For example, streamlining our mortgage business and further branch closures in the private bank, re-engineering more front-to-back processes in the corporate bank and investment bank, further application decommissioning, and additional workforce measures. These are some examples of a wider program of initiatives underway. Based on our progress on these and realized achievements so far, we reaffirm our 2.5 billion euro goal. In respect of capital efficiencies, as you know, our aim is to reduce risk-weighted assets by 15 to 20 billion euros by 2025 relative to our baseline assumptions with a modest revenue impact. In the second quarter, we accelerate securitization transactions, which delivered RWA relief of around 3 billion euros. In addition, credit risk RWAs were reduced as part of the trade finance and lending optimization efforts. Overall, We proved our revenue strengths with the business delivering revenue growth while our FX-adjusted RWAs decreased by 5 billion euros compared to the prior year quarter. We have further optimization measures in preparation for the second half of 2023, including secularization of consumer finance loans and reductions in sub-hurdle lending. All this gives us confidence that we will deliver on our capital optimization goals. Turning finally to revenue growth, we are fully on track to outperform on our revenue growth targets of 3.5% to 4.5% compound annual growth against 2021 levels. On a last 12-month basis, we delivered compound annual revenue growth versus 2021 of 7.5% well ahead of that target with revenue growth of 8% in the first half of this year. We expect the interest rate environment to continue to drive sustainable performance in our stable businesses. We anticipate added momentum from our organic and inorganic investments, including the NUMIS acquisition or the new partnership with Lufthansa and Malz and more, and from hiring of some 50 senior O&A bankers. This enables us to take advantage of an expected pickup in corporate finance activity. We are already seeing signs of this in our backlog. We have also hired around 30 wealth managers. And we expect the growth in our assets under management and net asset inflows to drive fee income in future quarters. To sum up, We are delivering revenue and business growth of a strong franchise. Our well-balanced, complementary business mix enables us to drive continued revenue momentum. We are increasing our earnings power year by year, and we see a clear path to achieving our 2025 profitability targets, among others, an ROT of larger than 10% in 2025. And we are delivering on two key promises, distributing 8 billion euros to shareholders and accelerating execution of our global house bank strategy. With that, let me hand over to James.