Deutsche Bank AG Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Global Hausbank Strategy: Disciplined execution driving improved performance. Pre-provision profit grew 17% in first nine months. Revenues grew 3%, 75% from predictable streams. Non-interest revenues up 14%, commissions/fee income up 9%.
• Cost Management: Completed €1.7 billion in gross savings from Operational Efficiency program (€1.5 billion realized). Workforce reductions: 600 FTEs in Q3, over 90% of 2024 year-end target.
• Capital Position: CET1 ratio 13.8%, strong organic capital generation. Seeks ECB authorization for share buyback.
• Credit Quality: Provisions for credit losses increased but expected to normalize. Commercial real estate provisions reducing. Stable asset quality with tight underwriting standards.

Segment Performance

• Corporate Bank: Q3 revenues €1.8 billion, essentially flat y-o-y. Commissions & fee income grew 5% in first nine months. Deposits up €7 billion in Q3. Provision for credit losses €126 million. Post-tax RoTE 13.1%, cost/income ratio 64%.
• Investment Bank: Q3 revenues 11% higher y-o-y. FIC up 11%, O&A revenues significantly higher. Provision for credit losses €135 million.
• Private Bank: Q3 revenues €2.3 billion, essentially flat. Non-interest revenue grew 7%. Net inflows into assets under management €8 billion. Still includes €40 million of Postbank integration effects.
• Asset Management: Profit before tax up 54% y-o-y. Revenues up 11% driven by management fees. Assets under management €963 billion. Cost/income ratio 67%, RoTE 18.9%.
• Corporate & Other: Pre-tax profit €424 million vs. loss €202 million in Q3 2023, driven by Postbank litigation provision release.

Guidance

• Revenue: Confident in reaching €30 billion for 2024, aiming for €32 billion in 2025. Continued momentum in commissions, fee income, and capital light businesses.
• Costs: Expected non-interest expenses to be around €20 billion in 2025, supported by operational efficiencies.
• Provisions: Expect credit costs to reduce towards normalized levels in 2025, driven by CRE provisions and interest rate effects.
• Share Buyback: Seeks ECB authorization for next share buyback, with confidence in distributing capital to shareholders.

Risks

• Postbank Litigation: Ongoing analysis of court ruling, but fully provisioned for current plan.
• Credit Provisions: Transitory headwinds like Postbank integration and corporate events, but expected to normalize.
• Interest Rate Risk: Hedging strategy positions well for declining rate environment, but rollover of hedges and rate movements could impact NII.
• Regulatory Changes: Impact of Basel IV, FRTB, and other regulatory changes on capital and RWA.

Q: On loan losses and 2025 normalization, A: Christian Sewing discusses Postbank integration, commercial real estate provisions, and normalized run rate of loan loss provisions.

Q: On share buybacks and capital, A: Christian Sewing talks about ECB authorization and capital distribution plans.

Q: On NII and cost guidance, A: James von Moltke discusses NII trajectory and cost reduction efforts.

Q: On M&A and O&A market share, A: Christian Sewing and James von Moltke address M&A impact and O&A market share trends.

Q: On Postbank integration and private credit, A: James von Moltke discusses Postbank integration progress and private credit opportunities.

Q: On fourth quarter guidance and CRE portfolio, A: James von Moltke talks about Q4 guidance and CRE portfolio sale details.

Q: On hedges and capital filters, A: James von Moltke explains hedge benefits and OCI filter usage.

Q: On Basel IV and leverage reviews, A: James von Moltke provides updates on Basel IV and leverage review status.