Deutsche Bank Ag · XETR:DBK
Deutsche Bank — Merrill Lynch Wholesale Banking Risk Seminar (September 2007)
10 slides from Deutsche Bank's conference presentation, Sep 12, 2007
Slide 1: Navigating through difficult waters
Navigating through difficult waters Dr. Hugo Banziger Chief Risk Officer Merrill Lynch Wholesale Banking Risk Seminar London, 12 September 2007
Slide 2: Sub-prime mortgage woes unfold in three phases
Sub-prime mortgage woes unfold in three phases Concerns have moved beyond sub-prime, causing wider market dislocation Phase 1: Market sees sub-prime problem as largely Phase 2: Knock-on effects on lev. Phase 3: Spill over into money contained, concerns over related markets grow slowly loans. Credit
Slide 3: Crisis started in sub-prime and leveraged loan markets…
Crisis started in sub-prime and leveraged loan markets… Significant, but limited credit losses started to affect other credit markets Phase 1: Sub-prime & growing contagion fears Sub-prime share is small but Alt-A may be affected too Total outstanding: approx. USD 10 tr Various estimates put credi
Slide 4: …and spread over into money markets
…and spread over into money markets Extreme risk aversion hits money markets, spurring central banks to provide liquidity Phase 3: IKB marks watershed ABCP outstanding and recent spread increases IKB proved to be a watershed event on large losses US commercial paper market Source: Federal Reserve
Slide 5: Sub-prime risks are manageable
Sub-prime risks are manageable Sub-prime crisis is manageable … … in context of the major capital markets Outstanding volume (in USD tn) Capitalisation (in USD tn)(2) ~50 ~85 ~35 ~10 ~7 ~1.2 ~1.0 ~1.5 (3) (4) (5) US sub- US asset- (1) CDOs US MBS US Quoted shares Debt securities Total capitalisation
Slide 6: Deutsche Bank exposures
Deutsche Bank exposures DB is not exposed to further deterioration in US sub-prime mortgages across its books US sub-prime Exposure to US mortgage originators tightly managed and largely hedged Total assets in DB-sponsored conduits of EUR 32 bn Substantially all of which consolidated on bala
Slide 7: A good risk management framework needs more than one metric to assess the risks
A good risk management framework needs more than one metric to assess the risks – being bi- or tri-focal is best! Understanding the risks inherent in particular products and developing sensitivities for the particular risk factors used in the product valuation. E.g. Example • PV01’s - interest rate
Slide 8: Stable unsecured funding base due to broad diversification
Stable unsecured funding base due to broad diversification Capital market issues are well diversified Total unsecured funding EUR 511bn As of 30 June 2007, in EUR bn Î Use of wholesale short-term liquidity 119 107 limited to funding of liquid assets 86 59 61 23% 21% 33 17% 19 17 10 11% 12% 3% 6% 2%
Slide 9: Conditions for market confidence to return
Conditions for market confidence to return Increased transparency on losses - Upcoming reporting seasons will bring some clarity - More proactive approach would be desirable Restoration of trust in ratings Central bank must continue to provide liquidity until market confidence returns Return
Slide 10: Cautionary statements
Cautionary statements This presentation also contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates an
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