Deutsche Bank AG

Welcome to the Q3 2025 Fixed Income Conference Call and Live Webcast. I'm Moritz, the course 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 Philipp Teuschner, Investor Relations. Please go ahead.

Good afternoon or good morning and thank you all for joining us today. On the call, our group treasurer Richard Stewart will take us through some fixed income specific topics. For the subsequent Q&A session, we also have our CFO James Vermoltke with us to answer your questions. The slides that accompany the topics are available for download from our website at db.com. After the presentation, we will be happy to take your questions. Before we get started, I just want to remind you that the presentation may contain forward-looking statements which may not develop as we currently expect. Therefore, please take note of the precautionary warning at the end of our materials. With that, let me hand over to Richard.

Thank you, Philip, and welcome from me. We delivered record profitability in the first nine months of 2025. We are tracking in line with our full-year 2025 goals on all dimensions. Nine-month revenues at €24.4 billion are fully in line with our full-year goal of around €32 billion before FXFX. Adjusted costs are consistent with our guidance. Post-tax return on tangible equity is 10.9%. meeting our full-year target of above 10%, and our cost-income ratio at 63% is also consistent with our target of below 65%. Operating leverage drove our profit growth. Pre-provision profit was €9 billion in the first nine months of 2025, up nearly 50% year-on-year, or nearly 30% if adjusted for the impact of post-bank litigation impacts in both periods. We saw continued revenue growth of 7% with momentum across all businesses. Net commission and fee income was up 5% year on year, while net interest income across key banking book segments and other funding was essentially stable. 74% of revenues came from the more predictable revenue streams, the corporate bank, prior bank, asset management and financing businesses in FICC. Cost discipline remained strong. Non-interest expenses were down 8% year-on-year, with significantly lower non-operating costs, largely due to the non-repeat of post-pac litigation provisions, while adjusted costs were flat. And our asset quality remained solid. Provisions were in line with expectations, and we had no exposure to recent high-profile cases. Let me now turn to our progress on the pillars of strategy execution on slide 3. We are on track to meet or exceed all our 2025 strategy goals. The compound annual revenue growth rate since 2021 was 6%, in the middle of our range of between 5.5% and 6.5%. In a changing environment, we are benefiting from a well-diversified earnings mix. Operational efficiencies stood at €2.4 billion, either delivered or expected from measures completed. In other words, 95% of our €2.5 billion goal. Capital efficiencies have already reached €30 billion in RWA reductions, the high end of our target range, and we continue to see scope for further efficiencies through year-end. During the quarter, we launched our second share buyback programme of 2025 with a value of €250 million, which we completed last week. This brings cumulative distributions since 2022 to €5.6 billion. Let us now turn to some remarks on our businesses on slide 4. We are delivering strength and strategic execution across all four businesses in our Global House Bank. All businesses have delivered double-digit profit growth and all four have delivered double-digit ROTE in the first nine months. The Corporate Bank continues to further scale the Global House Bank model and delivers strong fee growth of 5% in the first nine months and was recognised as the best trade finance bank. Our investment bank has been there for clients through challenging times this year and has seen an increase in activity across the whole client spectrum. The private bank has made tremendous progress with its transformation so far this year, with 9 months profits up 71%. Our growth strategy in wealth management is paying off. Asset centre management has grown by 40 billion euros year to date, with net inflows of 25 billion euros. And in asset management, the combination of fee-based expansion with operational efficiency drives sustainable returns of 25%. We are benefiting from our strengthened European ETFs and are expanding our offering in that area. Turning now to net interest income on slide 5. NRI across key banking book segments and other funding was €3.3 billion in the quarter. Private Bank continues to deliver steady NII growth, supported by the ongoing rollover of our structural hedge portfolio, as well as deposit inflows. Board Bank NII is slightly down quarter on quarter, principally driven by lower one-offs, while it continues to be supported by underlying portfolio growth, as well as hedge rollover benefits. With respect to the full year, we are on track to meet our plans on a currency-adjusted basis. Turning to slide 6, which reflects market implied forward rates as of quarter end, we can see that our hedge portfolio positions as well. In the third quarter, the total volume invested long term staged around €245 billion, or around €200 billion excluding equity hedges. The result of our hedge approach is that a large proportion of our future NII is now locked in. In addition, the absolute NII contribution of the hedge portfolio grows steadily, as new hedges are executed above the rate of maturing hedges. In the appendix, you can also see that our NII sensitivity remains contained, with little change quarter over quarter. Looking at the development of the loan book on slide 7, we can see that during the third quarter, loans grew by €3 billion, adjusted for FX effects. The underlying quality of the loan book remains strong. Around two-thirds of our clients are located in Germany and Europe. loan portfolio in the investment bank shows sustained growth driven by FIC as well as encouraging momentum in O&A. In the private bank we continue to deliver on our strategic commitment to a capital efficient balance sheet through further targeted mortgage reductions while we also saw encouraging growth in wealth management. In the corporate bank client demand remains muted this quarter as geopolitical uncertainties continue to persist however Looking ahead, we expect lending in the core bank to benefit from the fiscal stimulus in Germany and to accelerate over the course of 2026. The lending outlook also remains strong and thick, and reflects our strategic focus on growing the franchise and expanding market share. Moving now to deposits on slide 8. Our well-diversified deposit book has grown by €10 billion during the third quarter, adjusted for FXFX. Our portfolio continues to be of high quality, supported by a strong domestic footprint and a substantial level of insured deposits. Deposit growth has been most pronounced in the private bank, where we saw continued momentum and strong inflows from our retail campaigns in Germany. The corporate bank portfolio has also grown during the quarter, driven by inflows in site deposits on the back of high client engagement. For the remainder of the year we expect further inflows from deposit campaigns in the private bank, while we also see opportunities for growth and portfolio optimisations in the Corporate Bank. On slide 9, we highlight the development of our key liquidity metrics. We managed our liquidity coverage ratio to 140% at quarter end, thereby demonstrating the inherent strength and resilience of our balance sheet. The surplus above the regulatory minimum increased by about €5 billion due to slightly higher HQLA and reduced net cash outflows. we continue to maintain a high-quality liquidity buffer and hold about 95% of HQLA in cash and level 1 securities. The net stable funding ratio slightly decreased to 119%, with a surplus above regulatory requirements of 101 billion euros. This reflects our stable funding base, with more than two-thirds of the group's funding sources coming from our global deposit franchise. Turning to capital on slide 10, Strong third quarter earnings led to an increase in the CT1 ratio to 14.5%, up 26 basis points sequentially. RDOA remained flat during the quarter, as an increase in credit risk RDOA, driven by higher loans and commitments, was offset by a reduction in market risk . As we head into the fourth quarter, let me remind you of the 27 basis points CT1 benefit we still have from the adoption of the Article 468 CRR Transitional Rule for unrealised gains and losses, which will expire at the end of the year. Also following revised EBA guidance from June 2025, regarding the calculation of operational risk RDOA under the new standardised approach, we must now perform the annual update of operational risk RDOA already by the end of 2025, which is expected to lead to a 19 base points drawdown in CT1 ratio terms. All else equal, Applying these two items to our third quarter CET1 ratio will result in a pro forma CET1 ratio of approximately 14%, which is also roughly where we expect Cymru to finish the year. Our capital ratios remain well above regulatory requirements, as shown on slide 11. The CET1 MDA buffer now stands at 325 basis points, or 11 billion euros of CET1 capital. The 25 basis points quarter on quarter buffer increase reflects our higher C2-1 ratio buffer. The buffer to total capital requirement decreased by 8 basepoints, and now stands at 362 basis points. Moving to slide 12, our third quarter leverage ratio was 4.6%, down 11 basis points, principally from higher loans and commitments, alongside increased settlement activities at quarter end. Tier 1 capital was essentially flat in the quarter, as a derecognition of the $1.25 billion A tier 1 instrument, that we called in September, materially offset the quarter-on-quarter increase in CDT1 capital. We continue to operate with significant loss-absorbing capacity, well above all requirements, as shown on slide 13. The MREL surface, our most binding constraint, increased by €2 billion to €26 billion. Our surface thus remains at a comfortable level, which continues to provide us with the flexibility to pause issuing new eligible liabilities instruments for at least one year. Moving now to our issuance plan on slide 14. Credit markets developed constructively in the third quarter, and our spreads also benefited from this trend. Our senior non-preferred bonds tightened by around 20 basis points on average in the quarter, allowing us to issue at attractive funding costs. With year-to-date issuance of 15.1 billion euros, we have already reached the lower end of the range of our full year guidance. we reaffirm our target range of €15-20 billion for the full year. Since the last fixed income call in July, we issued €4.2 billion, primarily in senior non-preferred format, across euros and dollars. Residual funding for the year 2025 will be focused on the senior preferred instruments. Such instruments typically take the form of private placements or retail targeted instruments, as opposed to public benchmarks. We expect 2026 requirements to be in a similar, possibly slightly lower range as compared to 2025. As usual in the fourth quarter, we may consider pre-funding 2026 requirements depending on market conditions. To summarise on slide 15, we are on track to meet our full year 2025 targets and remain confident in our trajectory to deliver a return on tangible equity of above 10%, and a cost-income ratio of below 65%. Our year-to-date performance supports our revenue and expense objectives. Our asset quality remains solid, and despite uncertainty from developments around commercial real estate, as well as the macroeconomic environment, we continue to anticipate lower provisioning levels in the second half of the year. Our strong capital position and third quarter profit growth provide a solid foundation as we head into 2026. With year-to-date issuance of €15 billion, we have substantially met our issuance needs for the year. With that, let us turn to your questions.