Deutsche Bank Ag · XETR:DBK
Deutsche Bank — Q4 2018 Earnings Presentation
47 slides from Deutsche Bank's earnings presentation, Feb 1, 2019
Slide 1: Q4 and FY 2018 results
Deutsche Bank Q4 and FY 2018 results 1 February 2019
Slide 2: Executing on our strategic plan
Executing on our strategic plan Achieved first full-year net profit since 2014 with increased pre-tax profit Delivered on adjusted cost and headcount targets for 2018 while further strengthening controls Executed on strategy. Lowered costs by more than revenues declined (positive operating leverage)
Slide 3: First full-year profit since 2014
First full-year profit since 2014 Profit (loss) before tax(1) (€ bn) Net income(2) (€ bn) Post-tax return on tangible equity 1.3 1.2 0.3 0.5% (1.4)% (0.8) (2.7)% (0.8) (1.4) (6.1) (6.8) (12.3)% 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 Note: Throughout this presentation totals may
Slide 4: Delivered on targets in 2018
Delivered on targets in 2018 2018 target 2018 Adjusted costs(1) € 23bn € 22.8bn Employees(2) <93k 91.7k CET1 capital ratio >13% 13.6% (1) Throughout this presentation adjusted costs are defined as total noninterest expenses excluding impairment of goodwill and other intangible assets, litigati
Slide 5: Reached important strategic milestones
Reached important strategic milestones Key strategic achievements in 2018 — Refocused client perimeter Corporate & Investment Bank — Reduced leverage exposure mainly in Equities and US – Reshaped around core strengths rates — Measured and deliberate cost reductions — German legal entity merger com
Slide 6: Maintained strong balance sheet
Maintained strong balance sheet As of 31 Dec 2018 Comment Common Equity Tier 1 capital ratio 13.6% Above >13% target Excess above MREL Loss-absorbing capacity € 118bn requirement: € 21bn(1) Reflects strong underwriting Provision for credit losses as a % of loans(2) 13bps standards and low risk portf
Slide 7: Accelerated cost reductions
Accelerated cost reductions € bn, adjusted costs — Lower compensation costs from 2018 headcount actions — Disposals — Non-compensation reductions, e.g. vendor rationalization (0.8) 24.7 (1.1) 23.9 (1.0) 22.8 21.8 — Targeted headcount reductions — German retail merger synergies — Further non-compensa
Slide 8: Increasing balance sheet productivity
Increasing balance sheet productivity € bn Deploy liquidity reserves Optimize liquidity composition Grow loans(2) Highly liquid securities(1) (7)% Cash and cash equivalents 280 280 5% 259 259 402 58 31% 76 381(3) 222 (17)% 184 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Reduced excess liquidity
Slide 9: Investing in targeted growth areas
Investing in targeted growth areas Investing in areas of core strengths — Continue to grow revenues in Global Transaction Banking and FX to bolster our core franchise Corporate & Investment Bank — Targeted hiring in fixed income and debt origination — Integrating capital markets sales forces to grow
Slide 10: Path towards improving returns to shareholders
Path towards improving returns to shareholders Post-tax return on tangible equity, in % Includes: — Adjusted cost reductions (€ 1bn) — Balance sheet and liquidity optimization (>€ 300m) >4% — Growth in stable businesses (including YoY loan growth in 2018 of 5%) — Tax rate normalization (to ~35%) >1%
Slide 11: Continue to focus on our near-term targets
Continue to focus on our near-term targets 2018 2019 Post-tax return on tangible >4% equity Updated Adjusted costs € 23bn € 21.8bn Employees(1) <93,000 <90,000 Common Equity Tier 1 capital ratio >13% >13% (1) Internal full-time equivalents, end of period Deutsche Bank Q4 and FY 2018 results 11
Slide 12: Q4 and FY 2018 Group financial highlights
Q4 and FY 2018 Group financial highlights € m, unless stated otherwise Higher / Higher / (lower) in % (lower) in % Q4 2018 vs. Q4 2017 FY 2018 vs. FY2017 Revenues 5,575 (2) 25,316 (4) Revenues of which: Specific items(1) 199 157) 691 n.m. Noninterest expenses 5,642 (19) 23,461 (5) Costs of which: Ad
Slide 13: Adjusted costs
Adjusted costs(1) € m, FX adjusted(2) (3)% / FY 2018 YoY comments (803) 23,612 46 (354) 22,810 — 2018 adjusted costs below (192) (303) € 23bn target — Compensation and benefits: lower salary expenses reflecting headcount reductions and lower variable compensation FY 2017 Compensation IT costs Profes
Slide 14: Employees
Employees ‘000s, full-time equivalents(1) 97.5 — Met 2018 year-end headcount target of <93,000 employees — Reduction of ~1,900 from disposals primarily related to retail business in Poland (~1,400) and Trust Services in Global Transaction Banking (~300) (3.1) — Excluding disposals, reduced employees
Slide 15: Key control functions
Key control functions € bn, unless stated otherwise Adjusted costs Investments: 1.0 — ~20% compound growth from 2016-18 in 0.9 adjusted costs in key control functions (~30% Non-Financial Risk 0.7 compound growth in AFC and KYC functions) Management — ~€ 700m total investment in upgrading our Cyber G
Slide 16: Litigation update
Litigation update € bn, unless stated otherwise Litigation provisions(1) ― Deutsche Bank has now partly or wholly resolved 7.6 19 of the 20 most significant matters as measured by financial risk at the beginning of 2016 5.5 ― The bank made further progress on litigation matters in Q4 2018 including:
Slide 17: Provisions for credit losses
Provisions for credit losses € bn, unless stated otherwise Provision for credit losses (% of loans)(1) Corporate & Investment Bank (CIB) Private & Commercial Bank (PCB) — Continued low level of provisions for credit losses (2018: 13bps as a % of loans) highlights our strong underwriting standards, t
Slide 18: Capital ratios
Capital ratios CRD4, fully loaded, € bn except movements (in basis points) CET1 ratio — Higher risk-weighted assets (RWA) driven by: 14.0% — Market Risk RWA of € 7bn in CIB, as a result of higher 13.6% VaR and Stressed VaR and a temporary increase in the (29) (2) (11) Incremental Risk Charge — Credi
Slide 19: Balance sheet data
Balance sheet data Net balance sheet assets(1) after netting, in € bn, as of 31 December 2018 1,010 Liquidity — € 184bn in cash and equivalents, of which ~€ 100bn is with the ECB 259 Reserve (26%) — € 76bn in highly liquid securities — Trading and related assets are held at fair value, with the exce
Slide 20: Segment results
Segment results Deutsche Bank Q4 and FY 2018 results 20 Investor Relations 1 February 2019
Slide 21: Corporate & Investment Bank (CIB)
Corporate & Investment Bank (CIB) € m, unless stated otherwise Higher / Higher / (lower) in % (lower) in % vs. vs. Q4 2018 Q4 2017 FY 2018 FY 2017 FY 2018 YoY comments — Strategic repositioning completed Revenues 2,597 (5) 13,046 (8) Revenues — Achieved adjusted cost, headcount of which: Specific it
Slide 22: Q4 2018 CIB business unit performance
Q4 2018 CIB business unit performance € m, revenues X% Excluding specific items(1) Change YoY Q4 2018 YoY revenue drivers Global Transaction Banking: 5% 5% — Higher revenues in all businesses Global Transaction Banking 996 driven by higher net interest income and transaction growth Origination & Adv
Slide 23: Private & Commercial Bank (PCB)
Private & Commercial Bank (PCB) € m, unless stated otherwise Higher / Higher / (lower) in % (lower) in % vs. vs. Q4 2018 Q4 2017 FY 2018 FY 2017 FY 2018 YoY comments Revenues 2,458 6) 10,158 (0) — PCB generated a ~5% RoTE Revenues supported by specific items; Revenues of which: Specific items(1) 75
Slide 24: Q4 2018 PCB business unit performance
Q4 2018 PCB business unit performance € m, revenues X% Excluding specific items(1) Change YoY Q4 2018 YoY revenue drivers Private and Commercial Business 1,645 2% 2% Private and Commercial Business (Germany): (Germany) — Growth in mortgage and consumer finance loans as well as smaller asset 5% 5% sa
Slide 25: Asset Management (AM)
Asset Management (AM) € m, unless stated otherwise Higher / Higher / (lower) in % (lower) in % vs. vs. FY 2018 YoY comments Q4 2018 Q4 2017 FY 2018 FY 2017 Revenues Revenues 514) (17) 2,186) (14) — Revenues were impacted by negative net flows, lower performance fees and the Noninterest expenses 427)
Slide 26: Corporate & Other (C&O)
Corporate & Other (C&O) € m, unless stated otherwise Higher / Higher / Profit before tax (lower) (lower) vs. Q4 vs. FY Q4 2018 FY 2018 (13) 2017 2017 (97) (163) Profit before tax (97) 66) (396) 670) (40)% (396) Funding & liquidity (68) (71) (97) 17) Valuation & Timing 98) 46) 111) 62) differences(1)
Slide 27: 2019 Outlook
2019 Outlook Focus on improving return on tangible equity to >4% Continue to manage balance sheet conservatively and improve its productivity Updated adjusted costs target to € 21.8bn in 2019 Provisions for credit losses expected to remain very manageable Estimated tax rate of ~35% Deutsche Bank Q4
Slide 28: Appendix
Appendix Deutsche Bank Q4 and FY 2018 results 28 Investor Relations 1 February 2019
Slide 29: Specific items – Q4 2018
Specific items – Q4 2018 €m Q4 2018 Q4 2017 Q3 2018 CIB PCB AM C&O Group Group Group Revenues 2,597 2,458 514 6 5,575 5,710 6,175 DVA (CIB) 67 - - - 67 (19) (58) Change in valuation of an investment (CIB) 56 - - - 56 - - Revenues Sal. Oppenheim workout (PCB) - 35 - - 35 43 42 Gain from property sale
Slide 30: Specific items – FY 2018
Specific items – FY 2018 €m FY 2018 FY 2017 CIB PCB AM C&O Group Group Revenues 13,046 10,158 2,186 (73) 25,316 26,447 DVA (CIB) 126 - - - 126 (348) Change in valuation of an investment (CIB) 140 - - - 140 - Gain on sale in GTB (CIB) 57 - - - 57 - Valuation of legacy RMBS portfolio (CIB) - - - - - (
Slide 31: Adjusted costs trends – Q4 2018
Adjusted costs(1) trends – Q4 2018 € m, unless stated otherwise YoY YoY ex FX(2) Q4 2017 Q4 2018 Q4 2017 abs in % abs in % ex FX(2) Compensation and benefits(3) 2,824 3,348 (523) (16)% 3,365 (541) (16)% IT costs 957 1,005 (48) (5)% 1,009 (53) (5)% Professional service fees 389 503 (114) (23)% 506 (1
Slide 32: Adjusted costs trends – FY 2018
Adjusted costs(1) trends – FY 2018 € m, unless stated otherwise YoY YoY ex FX(2) FY 2017 FY 2018 FY 2017 abs in % abs in % ex FX(2) Compensation and benefits(3) 11,611 12,130 (519) (4)% 11,965 (354) (3)% IT costs 3,822 3,816 6 0% 3,776 46 1% Professional service fees 1,530 1,750 (220) (13)% 1,723 (1
Slide 33: Indicative regional currency mix Q4 2018
Indicative regional currency mix Q4 2018 Net revenues Total noninterest expenses 8% 6% 9% 4% Other (1) 14% Other (2) 15% 20% 4% 19% 4% 17% 1% 0% 27% 16% USD 18% 12% 32% USD 27% 0% 19% 20% GBP 1% 88% 86% GBP 32% 62% 65% EUR 53% 50% 49% EUR 21% CIB PCB AM Group CIB PCB AM Group Note: Classification is
Slide 34: Preliminary Additional Tier 1 (AT1) payment capacity
Preliminary Additional Tier 1 (AT1) payment capacity €m 2018 unaudited 2017 2016 Comments Final ADI subject to Management Board’s decision to allocate Available Distributable ~1,100 397 514 ~ € 500m of ADI to general reserves. Remaining ADI sufficient Items (ADI) to pay proposed € 0.11 per share com
Slide 35: Loan book
Loan book € bn Under IAS 39 Under IFRS 9 414 406 405 403 400 395 398 392 Corporate & 147 137 134 138 132 135 Investment Banking 127 128 Wealth Management 40 39 37 37 37 39 39 40 PCB (International) 30 30 30 30 31 31 31 32 PCB (Germany) 187 187 189 190 190 191 193 195 PCB (Exited)(1) 9 10 9 10 7 7 2
Slide 36: Loan book composition
Loan book composition IFRS 9 loans at amortized cost, 31 December 2018 Corporate & Investment Bank Private & Commercial Bank — Well diversified, low-risk loan portfolio — 2/3rd of the loan portfolio is in PCB, Global Transaction Bank mainly including German retail 16% mortgages and Wealth Management
Slide 37: Level 3 assets
Level 3 assets € bn, as of 31 December 2018 Assets (total: € 25bn) — Level 3 assets arise from the bank’s activities in Mortgage backed securities various markets, some of which are less liquid Equity securities 1 1 — Level 3 assets are mainly booked in core Other 3 businesses 9 Derivative Assets —
Slide 38: Provision for credit losses and stage 3 loans under IFRS 9
Provision for credit losses and stage 3 loans under IFRS 9 Provision for credit losses € m Stage 3 at amortised cost under IFRS9 € bn Corporate & Investment Bank (CIB) Purchased or Originated Credit Impaired assets (POCI) Private & Commercial Bank (PCB) CIB (ex-POCI) PCB (ex-POCI) 525 Group Stage 3
Slide 39: Net interest income sensitivity
Net interest income sensitivity € bn, hypothetical +100bps parallel shift impact First year Second year 1.9 1.7 0.9 0.9 1.0 0.8 PCB CIB Group PCB CIB Group > 3M 0.3 0.1 0.4 > 3M 0.6 0.1 0.7 EUR EUR ≤ 3M 0.5 0.6 1.1 ≤ 3M 0.4 0.6 1.0 > 3M 0.0 0.0 0.1 > 3M 0.0 0.1 0.1 USD USD ≤ 3M 0.0 0.1 0.1 ≤ 3M 0.0
Slide 40: Leverage exposure and Risk-weighted assets
Leverage exposure and Risk-weighted assets CRD4, fully loaded, € bn Leverage exposure Risk-weighted assets 350 350 64 92 Operational Risk RWA 92 64 1,305 1,273 Trading assets 155 153 42 Market Risk RWA 38 CVA 8 Derivatives(1) 185 184 25 Lending 250 395 401 104 Lending commitments(2) 98 Credit Risk R
Slide 41: Value at Risk (VaR)
Value at Risk (VaR) € m, unless stated otherwise, DB Group, 99%, 1 day Average VaR Stressed VaR(1) € 1.4bn Sales & Trading revenues € 1.2bn 140 120 100 80 60 40 20 0 ∅ 25 ∅ 28 ∅ 26 ∅ 25 ∅ 30 ∅ 67 ∅ 87 ∅ 81 ∅ 74 ∅ 95 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 (1) Stressed Value-at-Risk is calculated on
Slide 42: Non-strategic legacy assets in CIB
Non-strategic legacy assets in CIB € bn Risk weighted assets excluding operational risk Background (32)% ― Non-strategic portfolio created to facilitate the run- 10 down of residual ex-CIB assets from Non-Core Operations Unit and also other inventory not 7 consistent with the current CIB strategy 20
Slide 43: Reconciliation of AM reported segment to DWS standalone
Reconciliation of AM reported segment to DWS standalone € m, unless stated otherwise Perimeter adjustments AM reported Sold & discontinued Other perimeter DWS reported Q4 2018 business(1) adjustments(2) Q4 2018 Revenues 514 0 35 549 Noninterest expenses (427) 14 (4) (417) Noncontrolling interests (2
Slide 44: Reconciliation of AM reported segment to DWS standalone
Reconciliation of AM reported segment to DWS standalone € m, unless stated otherwise Perimeter adjustments AM reported Sold & discontinued Other perimeter DWS reported FY 2018 business(1) adjustments(2) FY 2018 Revenues 2,186 3 70 2,259 Noninterest expenses (1,735) 39 20 (1,676) Noncontrolling inter
Slide 45: Assets under Management / Client Assets – PCB
Assets under Management / Client Assets – PCB € bn Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Assets under Management 508 504 505 506 497 503 499 474 Assets under Administration (1) 198 201 206 217 217 220 220 223 Client Assets 706 705 711 722 715 723 719 696 Private and Commerc
Slide 46: Employees
Employees Full-time equivalents YoY ∆ Of which 31 Dec 2018 31 Dec 2017 Absolute 30 Sep 2018 30 Jun 2018 31 Mar 2018 disposals CIB 16,373 17,687 (1,314) (129) 16,461 16,565 17,508 PCB 41,706 43,951 (2,244) (1,449) 43,471 43,619 43,790 AM 4,024 4,013 11 (25) 4,025 4,020 4,049 C&O 29,634 31,884 (2,250)
Slide 47: Cautionary statements
Cautionary statements The figures in this presentation are preliminary and unaudited. Our Annual Report 2018 and SEC Form 20-F are scheduled to be published on 22 March 2019. This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical fact