Deutsche Bank AG Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strategy and Performance: Resilient revenues grew 6% to EUR 16.3 billion in H1, in line with full-year goal; noninterest expenses down 15% y-o-y to EUR 10.2 billion; cost/income ratio 62%; return on tangible equity 11%; CET1 ratio 14.2%.
• Divisional Developments: Corporate Bank leading in Germany, focused on supporting clients with investment programs; Investment Bank focused on FIC franchise and growing O&A market share; Private Bank ongoing transformation with branch closures and workforce reductions; Asset Management with strong assets under management and net inflows.
• Operational Efficiency: Noninterest expenses down 15% y-o-y; cost/income ratio 62%; progress on cost efficiency measures offsetting business investments and inflation.

Segment Performance

• Corporate Bank: Revenues flat in Q2; net interest income stable; net commission and fee income up 6%; post-tax return on tangible equity 17.6%; cost/income ratio 60%.
• Investment Bank: Revenues up 3% y-o-y; FIC revenues up 11%; O&A revenues lower due to market uncertainty; provision for credit losses significantly higher y-o-y.
• Private Bank: Profit before tax up 56%; return on tangible equity 10.8%; net interest income up 5%; net commission and fee income up 1%; adjusted costs down 5%; cost/income ratio 69%; closed 25 branches and reduced workforce by 700 in H1.
• Asset Management: Profit before tax up 41%; revenues up 9%; assets under management above EUR 1 trillion; net inflows EUR 8 billion, fourth consecutive quarter of positive net flows.

Guidance

• Revenue: Full year target EUR 32 billion; confident of meeting target despite Q3 expected slowdown in Corporate Bank revenues, with strength in FIC and other segments expected to offset; FX rates impact considered but ingredients for outperformance present.
• Capital: CET1 ratio 14.2%; committed to surpass EUR 8 billion distribution target, applied for second share buyback; 50% payout ratio with flexibility to distribute excess capital above 14% CET1.
• Provisions: Expecting lower provisions in H2 compared to H1, particularly in CRE but still elevated due to ongoing valuation pressure on existing nonperforming exposures.

Risks

• Market Volatility: Impact on revenues and provisions, especially in segments affected by elevated volatility.
• Regulatory Changes: Impact of CRR3 and output floor on risk-weighted assets; potential RWA inflation and need for mitigation measures.
• Commercial Real Estate: Ongoing valuation pressure on existing nonperforming exposures, particularly on U.S. West Coast, affecting credit loss provisions.

Question and Answer

Q: On revenues, how confident are you of meeting the EUR 32 billion full-year target despite Q3 slowdown in Corporate Bank?

A: Confident due to strength in FIC, O&A expected to be stronger in H2, and outperformance in Asset Management and Private Bank offsetting potential softer Corporate Bank quarter; also benefits from German fiscal stimulus expected to impact '26 onwards.

Q: On distribution policy, how does the 14% CET1 ratio factor in?

A: 14% is the threshold for excess capital; distribution policy has flexibility to distribute above 50% payout ratio if capital is sustainably above 14% CET1, with 50% as a floor.