Deutsche Bank AG

Welcome to the Deutsche Bank Q2 2024 analyst conference call and live webcast. I'm Moritz, the chorus call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ioana Patrinice, Head of Investor Relations. Please go ahead.

Thank you for joining us for our second quarter 2024 results call. As usual, our Chief Executive Officer, Krishna Saving, will speak first, followed by our Chief Financial Officer, James Von Mulca. 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, and a warm welcome from me. I'm delighted to be discussing our second quarter and first half results with you today. After another quarter where we made progress across the businesses on our strategic initiatives, we are on track to hit our financial targets. We generated revenues of 15.4 billion euros in the first half, on track to 30 billion euros of revenues this year. We have franchise momentum across all businesses, driving commissions and fee income. Our capital light businesses are gaining market share, such as our Corporate Bank and Origination & Advisory, which we expect to continue in the second half, alongside a more supportive NII environment. We also delivered on our adjusted cost target. Our quarterly run rate is at 5 billion euros in line with our commitment. Our results were impacted by the litigation provision of 1.3 billion euros related to the acquisition of Postbank, which we had to book this quarter. As said before, we strongly disagree with the changed and unexpected assessment of the Court and we are working hard to ultimately minimize the impact of this legal matter for our shareholders. But importantly, the bank's operational performance was not impacted. On the contrary, on an underlying basis, we delivered year-on-year improvements on our key target ratios. Excluding the post-bank takeover litigation provision, our post-tax return on tangible equity was 7.8%, up from 6.8%, in the first half last year, the best first half and second quarter since 2011, which demonstrates the continued momentum in our operating businesses. Our cost-income ratio also improved from 73% to 69% year-on-year. And finally, our CET1 ratio of 13.5% remained solid despite absorbing postbank and a number of legacy litigation matters which shows our capital strengths and gives us confidence to deliver on our capital distribution commitments. Let me now discuss in more detail some of the drivers of our first half results on slide two. Pre-provision profit was up 17% year-on-year to 4.7 billion euros, excluding the impact of the post-bank takeover litigation provision. We also demonstrated positive operating leverage, a core element of our strategy execution. We grew revenues in our core businesses by 3% year on year, while group revenues were up 2% on a reported basis. Our reported non-interest revenues were up 14% year on year, with strong growth in commissions and fee income of 12%, which demonstrates clearly that our strategy to grow our capital life business is working. And we continue to deliver better than expected NII performance in our banking books, which provides additional comfort to our revenue path for 2024 and in years thereafter. We reduced our adjusted costs to 10.1 billion euros year on year, and we continue to deliver savings through our operational efficiency program, which I will discuss in more detail in a moment. Now let's look at the franchise achievements across our businesses on slide three. In the first half year, the corporate bank delivered a 16% increase in incremental deals won with multinational clients compared to the prior year period. Our success with our clients were also rewarded with a series of high-profile awards. And we have continued to make investments to further strengthen our positioning with our clients. We are building out our structuring capabilities and our originate-to-distribute model, taking advantage of our broad investor base. All of that gives us confidence we can sustain our momentum. The investment bank made significant advances across the franchise over the first half of the year. Origination and Advisory increased its global market share to 2.6% in the first half year, a gain of more than 70 basis points over the full year 2023, and we raised our global ranking from the 11th to the 7th. The business continued to support clients through its multifaceted product offering, including M&A sell side advice, as well as debt issuance linked to the partnership between Grant Thornton and New Mountain Capital. Fixed income and currency revenues were up 3% year on year, supported by a 7% increase in financing revenues, even compared to a strong prior year period. The private bank also continued to build momentum with 19 billion euros of net inflows in the first six months, supporting growth and assets under management of 34 billion euros. We are also seeing recognition for our transformation and digitalization efforts in our retail personal banking franchise, with 13% more logins in Postbank's mobile app since end of 2023. We are also improving services for our ultra-high net worth clients and, for example, have established a dedicated team in Germany for ultra high net worth clients. We are leveraging our enhanced technology and product capabilities to expand into FX products, strategic asset allocation or lumbered lending to ultra high net worth clients in Europe. And we have further developed our key client relationships to boost asset gathering. In the first half year, asset management grew assets under management by 37 billion euros to 933 billion euros. This was boosted by continued strong inflows into passive in line with our strategy, which saw net inflows of 18 billion euros in the first six months and is expected to support future revenue generation. Now let me turn to our progress against our strategic objectives on slide 4. We continued to make progress on all three pillars of our global house bank strategy. Starting with revenue growth, we delivered a compound annual growth rate of 5.7% since 2021. This underscores the benefit of a well-diversified and complementary business mix. Stable NII in our banking book segments was supported by strong non-interest revenues following our investments in our growth initiatives. Looking at the drivers behind commissions and fee income strength in the first six months, we saw growth mainly in our capital-light businesses. We saw particular strong momentum in origination and advisory as the market recovered and our franchise is strengthening and gaining market share, a trend we expect to continue. Our initiatives in the corporate bank are also paying off. Commissions and fee income grew by 6%, with business growth across all regions, which is notably visible in trade finance and lending. We gained market share in our documentary trade business, and our structuring capabilities are expanding, which includes increasing contribution from larger transition financing deals. And in wealth management and private banking, we grew non-interest in revenues from investment products and lending by 11%. We will continue to build on these developments, and with business volumes growing, we are confident that our revenue trajectory will remain strong in the second half of the year. First, the impact from the expected NII normalization will be lower than initially anticipated, with full-year NII in our banking book segments broadly stable to the prior year level. And we will see continued commissions and fee income growth mainly in origination and advisory, corporate bank and asset management. This puts revenues of 30 billion euros clearly in sight. Additionally, we are highly focused on targeted resource allocation and on driving balance sheet velocity. We continue to deliver on our 2.5 billion euro operational efficiency program, having completed measures with delivered or expected gross savings of 1.5 billion euros, 60% of our target, with around 1.2 billion euros in savings already realized. As part of this program, we have made workforce reductions of 2,700, including 700 FTEs during the second quarter alone, reaching nearly 80% of the planned total through end 2024. In addition, we have reduced contract, external staff, by approximately 1,100 in 2024 to date. We have clear sight of the remaining savings yet to come from our operational efficiency program, which will offset inflation and our investments in business growth. Our optimization initiatives in Germany are expected to generate savings of around 500 million euros. Investments to reduce the complexity of our organization by improving technology and optimizing the workforce across infrastructure will deliver a further 550 million euros. And automation of processes alongside better alignment of our front-to-back setup, including the recent organizational changes, will deliver another 250 million euros. This gives us firm confidence that we are on track to deliver on our commitment of a quarterly run rate of adjusted costs of around 5 billion euros in 2024 and that we will further reduce this run rate closer to 4.9 billion euros by the end of the year to meet our non-interest expense objective of around 20 billion euros. Finally, on capital efficiency, we achieved a beneficial equal to a 4 billion euro RWA reduction in the second quarter through data and process improvements. As a result, cumulative RWA reductions from capital efficiency measures reached already 19 billion euros. We have a line of sight on further reductions coming in the second half and we are working towards meeting or exceeding our 25 to 30 billion euro target. Let me conclude with a few words on our strategy on slide five. Our first half results represent another milestone in the progress with our global house bank strategy and set a path to achieving our 2025 target of greater than 10% return on tangible equity. First, we saw strong momentum across all businesses in a more mixed operating environment than we had expected. With a better than expected NII trajectory, coupled with our complementary and growing global franchise, we are confident that our strong revenue momentum will deliver revenues of 30 billion euros this year. The investments we have made in our business give us confidence that this run rate will continue as around 75% of revenues come from more predictable businesses. And we are the go-to European bank for our clients and will continue to build on it by offering clients full service products and solutions. This builds our confidence that we can achieve our 2025 target of 32 billion euros. Second, we are delivering operational efficiencies which maintain our 5 billion euro run rate in 2024 and will translate into further cost savings achieving 20 billion euros of non-interest expenses in 2025. Simply put, our revenue growth combined with our cost reductions will ensure positive operating leverage. Third, we have put material legacy items behind us. And although this results in higher litigation charges this year, Progress we are making should position us to deliver without major surprises in 2025. Fourth, we will see normalization in credit costs next year, closer to the underlying run rate we have this year after overlays and hedging, which will further bolster higher net income. We remain dedicated to creating value for our shareholders. Our earnings power and the progress we have made with capital optimization give us full confidence that we can maintain our trajectory to increase distributions beyond our original goal of 8 billion euros in respect of the financial years 2021 to 2025. We completed the share repurchase program launched in March, bringing cumulative shareholder distributions through dividends and share repurchases to 3.3 billion euros since 2022. And we will continue to manage capital with the same discipline as over the past several years. To sum up, with our business momentum and all the progress made, we have a clear line of sight on our target for ROTE of greater than 10% for 2025. With that, let me hand over to James.