Deutsche Bank Ag · XETR:DBK
Deutsche Bank — Q3 2004 Earnings Presentation
46 slides from Deutsche Bank's earnings presentation, Oct 29, 2004
Slide 1: 3Q2004 Results Analyst Conference Call
3Q2004 Results Analyst Conference Call Clemens Börsig, CFO 29 October 2004
Slide 2: Agenda
Agenda 1 Summary 2 Group results 3 Segment results 4 Risk and capital management 5 Strategy Investor Relations 10/04 · 2
Slide 3: Summary
Summary 3Q2004 January – September 2004 Net income EUR Net income EUR up 18% 0.7 bn up 145% 2.3 bn EPS (diluted) EUR EUR up 28% 1.28 EPS (diluted) up 166% 4.13 Total revenues EUR EUR down 2% Total revenues up 3% 5.1 bn 16.6 bn RoE (pre-tax return RoE (pre-tax return on average active equity) up 5ppt
Slide 4: Agenda
Agenda 1 Summary 2 Group results 3 Segment results 4 Risk and capital management 5 Strategy Investor Relations 10/04 · 4
Slide 5: 3Q2004 – record 3rd quarter
3Q2004 – record 3rd quarter Net income in third quarter, in EUR bn 0.7 0.6 0.6 0.5 0.2 0.2 0.1 0.1 (0.0) (0.3) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 IAS U.S. GAAP Investor Relations 10/04 · 5
Slide 6: Condensed income statement
Condensed income statement Jan-Sep Jan-Sep In EUR m 3Q03 3Q04 Change Change 2003 2004 Revenues 5,161 5,056 (2)% 16,060 16,605 3% Provision for credit losses (1) (191) (58) (69)% (874) (282) (68)% Operating cost base (4,175) (3,957) (5)% (12,912) (12,481) (3)% Compensation expense (2,584) (2,327) (10
Slide 7: Strong YoY profit growth, with reduced seasonal impact
Strong YoY profit growth, with reduced seasonal impact Underlying pre-tax profit, in EUR bn 16% 2.9 3.4 22% (41)% (22)% 1.2 1.4 1.1 1.0 0.9 0.7 0.7 1Q 2Q 3Q 4Q 1Q 2Q 3Q Jan-Sep Jan-Sep 2003 2004 2003 2004 0.2 1.1 0.8 0.7 1.6 1.2 1.0 2.1 3.7 Income before income taxes (reported) Note: Figures may not
Slide 8: Revenues stable versus 2003
Revenues stable versus 2003 Underlying revenues, in EUR bn 0%* (2)%* (16)% (8)%* 16.7 16.2 5.6 6.0 5.9 5.1 5.2 5.3 4.9 1Q 2Q 3Q 4Q 1Q 2Q 3Q Jan-Sep Jan-Sep 2003 2004 2003 2004 5.0 5.9 5.2 5.2 6.2 5.4 5.1 16.1 16.6 Total revenues (reported) * Adjusting for currency movements (calculating historical q
Slide 9: Continued cost discipline
Continued cost discipline Operating cost base, in EUR bn (3)% (5)% 12.9 (4)% 12.5 4.3 4.5 4.2 4.3 4.4 4.1 4.0 8.0 7.6 2.6 2.8 2.6 2.5 2.8 2.5 2.3 1.7 1.7 1.6 1.8 1.6 1.6 1.6 4.9 4.8 1Q 2Q 3Q 4Q 1Q 2Q 3Q Jan-Sep Jan-Sep 2003 2004 2003 2004 116 203 172 211 69 54 66 491 189 * Therein severance, in EUR
Slide 10: Return on equity – clear progress in 2004
Return on equity – clear progress in 2004 Return on equity (pre-tax), in % Reported(1) Underlying(2) 20 18 16 14 14 11 11 10 3Q Jan-Sep 3Q Jan-Sep 2003 2004 2003 2004 2003 2004 2003 2004 (1) Income before income taxes divided by average active equity (2) Underlying pre-tax profit divided by average
Slide 11: Stability of compensation ratio
Stability of compensation ratio Key cost ratios – reported basis, in % Cost / income ratio(1) 88 76 82 83 82 73 76 78 81 75 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q Jan-Sep 2003 2003 2004 03 04 Compensation ratio(2) Non-compensation ratio(3) 52 47 50 49 49 50 46 36 32 34 32 32 32 29 46 46 46 28 27 29 1Q 2Q 3Q 4Q FY
Slide 12: Agenda
Agenda 1 Summary 2 Group results 3 Segment results 4 Risk and capital management 5 Strategy Investor Relations 10/04 · 12
Slide 13: Revenues and pre-tax profit by business
Revenues and pre-tax profit by business Net revenues Income before income taxes In EUR bn 3Q03 2Q04 3Q04 3Q03 2Q04 3Q04 Corporate Banking & Securities 2.8 2.8 2.4 0.6 0.7 0.5 (1), (3) Global Transaction Banking 0.5 0.5 0.5 0.2 0.1 0.1 Corporate and Investment Bank 3.3 3.3 2.9 0.8 0.8 0.6 (2) Asset a
Slide 14: CIB results reflect differing performance by business
CIB results reflect differing performance by business Results at a glance (underlying) Condensed P&L (underlying) Pre-tax profit, in EUR m In EUR m 3rd quarter Jan - Sep Key ratios, in % (27)% 2003 2004 2003 2004 (20)% Revenues 3,236 2,858 10,596 10,096 1,142 938 Provisions* (136) (2) (616) (82) 854
Slide 15: Fixed income – strong YoY growth ...
Fixed income – strong YoY growth ... S&T (debt and other) – Net revenues Highlights In EUR m Focus remains on delivery of high-value customized products to clients, particularly in 10%* structured interest rate and credit derivatives (24)% (12)% and securitized products 1,769 1,756 1,894 1,640 M
Slide 16: ... but equities impacted by difficult market conditions
... but equities impacted by difficult market conditions S&T (equity) – Net revenues Highlights In EUR m (45)%* Strong performance from Equity Derivatives and Prime Services (18)% (25)% 910 862 Cash Equities challenged by margin 745 792 601 535 pressure 400 Continued pressure on proprietary tr
Slide 17: Origination / Advisory – robust performance
Origination / Advisory – robust performance Origination / Advisory – Net revenues Highlights In EUR m Origination (debt) 3%(1) Significant revenue growth driven by high yield / (2)% leveraged finance Maintained clear leadership in Europe / strength in 462 452 455 470 459 North America(2) 408 435
Slide 18: Loan Products – revenue decline since 3Q2003
Loan Products – revenue decline since 3Q2003 Loan products – Net revenues Highlights In EUR m Revenue decline due to: (32)%* – Continued reduction in average loan (13)% volumes as a result of active management of the loan book, and to some extent, 381 383 lower utilisation of credit commitments 30
Slide 19: PCAM – profit up 5% YoY
PCAM – profit up 5% YoY Results at a glance (underlying) Condensed P&L (underlying) Pre-tax profit, in EUR m In EUR m 3rd quarter Jan - Sep Key ratios, in % 5% 2003 2004 2003 2004 (10)% 410 380 344 Revenues 2,072 1,955 5,985 5,936 326 272 283 229 Provisions* (49) (55) (224) (184) Operat. cost base (
Slide 20: PBC – consistent delivery against full-year target
PBC – consistent delivery against full-year target Results at a glance (underlying) Condensed P&L (underlying) Pre-tax profit, in EUR m In EUR m 3rd quarter Jan - Sep Key ratios, in % 2003 2004 2003 2004 156% Revenues 1,065 1,126 3,291 3,376 (0)% Provisions* (53) (57) (221) (192) 255 244 243 Operat.
Slide 21: AWM – decline from exceptional levels in 3Q2003
AWM – decline from exceptional levels in 3Q2003 Results at a glance (underlying) Condensed P&L (underlying) Pre-tax profit, in EUR m In EUR m 3rd quarter Jan - Sep Key ratios, in % 2003 2004 2003 2004 (57)% Revenues 1,007 829 2,694 2,560 231 207 (26)% Provisions* 4 2 (3) 7 155 136 Operat. cost base
Slide 22: Invested assets report
Invested assets report Invested assets*, in EUR bn Net new money 31 Mar 30 June 30 Sep 2004 2004 2004 3Q2004 Asset and Wealth Management 756 742 722 (12) Asset Management 590 575 561 (11) Institutional funds 332 321 308 (13) Retail funds 204 202 199 (0) Real estate funds 46 45 46 1 Absolute return s
Slide 23: CI – continued reduction in exposure
CI – continued reduction in exposure Results at a glance Condensed P&L (reported) Income before income taxes, In EUR m 3rd quarter Jan - Sep Underlying pre-tax profit, in EUR m 2003 2004 2003 2004 179 Revenues 8 119 (981) 553 54 41 (162) 30 (62) (42) Provisions* (9) (1) (36) (16) 128 (61) Noninteres
Slide 24: Agenda
Agenda 1 Summary 2 Group results 3 Segment results 4 Risk and capital management 5 Strategy Investor Relations 10/04 · 24
Slide 25: Continued active management of loan book ...
Continued active management of loan book ... Loans(1), in EUR bn 172 (3)% 148 149 145 140 Non-German 52% 57% 56% 55% 56% German 31 Dec 31 Dec 31 Mar 30 Jun 30 Sep 2002 2003 2004 2004 2004 68 71 72 73 74 Retail / Commercial(2) 89 64 63 60 56 Corporate(3) 15 13 14 12 10 FIs / Public sector (1) Include
Slide 26: ... with the eighth consecutive quarter of declining risk provisions
... with the eighth consecutive quarter of declining risk provisions Total provision for credit losses, in EUR m 790* (69)% 511 423 384 350 333 (30)% 191 189 141 83 58 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2002 2003 2004 German 113 180 255 (26) 105 152 117 92 116 53 40 271 331 535 449 245 181 74 97 25 30
Slide 27: Continued progress on problem loans
Continued progress on problem loans Problem loans, in EUR bn Coverage ratio* 10.8 (25)% (7)% 7.2 6.6 6.3 5.9 5.4 47% 50% 48% 48% 48% 40% 31 Dec 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 2002 2003 2003 2004 2004 2004 Problem loans in % of total loans 6.3% 4.4% 4.5% 4.2% 4.0% 3.9% * Total on-balance sheet al
Slide 28: VaR is reverting back to levels in 1Q2004 …
VaR is reverting back to levels in 1Q2004 … VaR of CIB trading units (99%, 1 day), in EUR m ∅ 66.9 ∅ 81.7 ∅ 73.6 100 87.6 75.5 90 67.9 80 (23)% 70 60 50 1Q2004 2Q2004 3Q2004 Investor Relations 10/04 · 28
Slide 29: … driven by reduction of interest rate market risk
… driven by reduction of interest rate market risk Quarter-end VaRs of CIB trading units* (99%, 1 day), in EUR m (19.7) 100 (21.9) 87.6 30 Jun 2004 81.3 30 Sep 2004 80 67.9 59.4 60 (3.3) 40 33.0 (4.1) 1.8 29.7 20 13.2 9.1 7.1 8.9 0 Total Interest Equity Foreign Commodities VaR Rates Exchange * VaR a
Slide 30: Tier 1 ratio still above upper end of target range
Tier 1 ratio still above upper end of target range, after redemption of hybrid capital ... 10.0 10.0 10.1 9.6 9.5 9.4 9.2 9% Target range 239 8% 232 226 223 216 219 218 Tier 1 ratio, in % RWA, in EUR bn 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 2003 2004 22.9 23.2 21.6 21.6 22.1 20.9 19.9 Tie
Slide 31: ... and further share buybacks in 3Q2004
... and further share buybacks in 3Q2004 Total repurchases* 16.1 m In % of shares issued ~3% Capital consumption EUR 0.9 bn Systematic Share price, in EUR Number of shares, in ‘000 buybacks since AGM 64 1,500 62 Repurchase volume (shares) 60 1,000 Deutsche Bank 58 share price 56 500 54 52 0 Week sta
Slide 32: Agenda
Agenda 1 Summary 2 Group results 3 Segment results 4 Risk and capital management 5 Strategy Investor Relations 10/04 · 32
Slide 33: Realigning the Group Executive Committee …
Realigning the Group Executive Committee … Ackermann Börsig Lamberti von Heydebreck (Chairman) (CFO/CRO) (COO) (CAO) CIB PCAM Global Markets Global Banking(1) AWM PBC Jain Cohrs(2) de Weck, Parker(3) Neske Regions: Fitschen(4) Note: Hughes – Sabbatical (1) Includes Global Transaction Banking which i
Slide 34: … unlocking significant benefits for our clients
… unlocking significant benefits for our clients Examples Providing access to aligned Sales & Trading platform across Aligned full range of debt and equities products Sales & Trading Exploiting trading opportunities across products Improving orchestration of delivery across products Unified
Slide 35: Detailed execution plan is underway
Detailed execution plan is underway Lead Deliverables through 4Q2004 Sales & Trading A. Jain Organisational alignments Coverage M. Cohrs Evolved operating model Asset Cost and revenue synergies K. Parker Management Cost to achieve Regions / J. Fitschen Timetable for implementation
Slide 36: Summary
Summary 3Q2004 January – September 2004 Net income EUR Net income EUR up 18% 0.7 bn up 145% 2.3 bn EPS (diluted) EUR EUR up 28% 1.28 EPS (diluted) up 166% 4.13 Total revenues EUR EUR down 2% Total revenues up 3% 5.1 bn 16.6 bn RoE (pre-tax return RoE (pre-tax return on average active equity) up 5ppt
Slide 37: Additional information
financial transparency. Additional information A Passion to Perform. Deutsche Bank
Slide 38: Definitions used in this presentation
Definitions used in this presentation Underlying pre-tax profit Operating cost base Reported net revenues Reported noninterest expenses - Net gains / losses on securities available for sale / - Policyholder benefits and claims(2) industrial holdings incl. hedging - Restructuring activities - Signifi
Slide 39: Underlying cost ratios
Underlying cost ratios In % Underlying cost / income ratio(1) 77 74 82 84 79 74 77 81 77 77 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q Jan-Sep 2003 2003 2004 03 04 Underlying compensation ratio(2) Underlying non-compensation ratio(3) 46 46 51 49 48 48 47 47 48 47 30 27 31 35 31 27 31 33 30 30 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q J
Slide 40: Underlying operating ratios
Underlying operating ratios In % Underlying return on equity (pre-tax)(1) 22 18 17 18 13 13 14 14 11 11 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q Jan-Sep 2003 2003 2004 03 04 Underlying profit margin(2) Underlying equity turnover(3) 23 21 21 93 84 80 17 20 16 18 17 76 85 76 83 80 79 85 14 13 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q J
Slide 41: 3Q2004 segment results – reconciliation from reported to underlying results
3Q2004 segment results – reconciliation from reported to underlying results In EUR m P&L CIB PCAM CI C&A Group line item Income before income tax expense 557 362 41 46 1,006 Add (deduct) Net (gains) losses on securities afs / - - (26) - (26) Revenues industrial holdings incl. hedging Significant equ
Slide 42: Number of shares for EPS calculation
Number of shares for EPS calculation In million Average At end of period 31 Dec 30 Jun 30 Sep FY2003 2Q2004 3Q2004 2003 2004 2004 (1) (1) Shares issued 597 581 544 582 544 544 Total shares in treasury (20) (25) (11) (17) (1) (17) SFAS 150 effect (23) (64) (59) (44) (64) (56) Vested share awards(2) 5
Slide 43: Group headcount
Group headcount Full-time equivalents Sep 04 vs. Jun 04 31 Mar 30 Jun 30 Sep Total Net of de-/ 2004 2004 2004 change consolidation CIB 31,065 30,875 31,192 318 331 PCAM 34,792 33,852 33,152 (701) 99 Corporate Investments 66 61 61 1 1 Corporate Center 953 959 969 10 10 Total 66,877 65,746 65,374 (373
Slide 44: Continued reduction of alternative assets exposure
Continued reduction of alternative assets exposure Book values, in EUR bn Major sale in 3Q2004 9.7 Primary funds – U.S. 1.6 8.3 7.7 (48)% 1.7 1.6 6.4 3.5 2.1 1.3 1.8 4.3 1.2 4.0 1.1 3.5 3.3 1.7 1.7 1.8 1.0 CI - Private Equity funds 1.7 0.9 0.8 0.6 CI - Private Equity directs 0.9 0.7 0.7 2.6 2.5 0.9
Slide 45: Listed holdings – unrealised net gains of EUR 1.1 bn
Listed holdings – unrealised net gains of EUR 1.1 bn In EUR m Stake, in% Market Value 30 Sep 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 2004 2003 2003 2004 2004 2004 DaimlerChrysler AG 10.4 3,595 4,445 3,968 4,070 3,491 Allianz AG 2.5 725 965 857 858 780 Linde AG 10.0 420 509 513 539 553 Südzucker AG 4.8 11
Slide 46: Cautionary statement regarding forward-looking statements and non-U.S. GAAP financial measures
Cautionary statement regarding forward-looking statements and non-U.S. GAAP financial measures This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations. Any statement in