deutsche bank client & creditor presentation · 2019-07-25 · deutsche bank investor relations...

Deutsche Bank – Client & Creditor PresentationJuly 2019

(including financials as of 30 June 2019)

Deutsche Bank

Deutsche BankInvestor Relations

Summary

2

Creditor / Counterparty

considerations

— German bail-in law provides greater protection for various creditors, such as depositors, derivative counterparties, beneficiaries of guarantees and letters of credit (LoCs), holders of structured notes and money market instruments

— Trading of Deutsche Bank’s senior preferred CDS allows for a better comparison with peers and better hedging of counterparty risk

— All rating agencies now have separate counterparty obligation ratings, covering - depending on the agency - products such as deposits, derivatives and guarantees/LoCs

Transformation progress

— Refocus on business activities where Deutsche Bank is competitive, can grow and deliver sustainable value to clients and shareholders

— Exit loss making Global Equities and resize Rates business

— Creation of Capital Release Unit to run down RWA and leverage exposure, allowing capital return to shareholders over time

Balance sheet strength

— Strength of the balance sheet gives flexibility to execute the transformation and resources to invest into our core client relationships

— Deutsche Bank is well positioned to meet all current and future regulatory requirements

— Cash and high quality liquid assets account for ~25% of Deutsche Bank’s funded balance sheet, negatively impacting returns but providing further support

— ~75% of the balance sheet is funded by long-term, diversified sources


3

Agenda

1

Creditor / counterparty considerations 2

Deutsche Bank today


4

Deutsche Bank is …

at the center of our corporate, institutional and private clients’ needs

the risk manager and trusted advisor to our clients

the leading German bank with strong European roots and a global network

aligned with the strengths of our home market economy around trade and investment

Our mission


5

Four client-centric businesses positioned to growNew divisional structure to be reported from Q3 2019

One of the leading corporate banks globally

Corporate Bank

CorporateBank

Asset Management

Private Bank

Investment Bank

Market leader in Germany with a global presence and a broad product offering

Leading retail bank in Germany and focused in Europe. Global wealth manager

Asset Management

Private Bank

Investment BankA focused financing, advisory and capital

markets bank

— Leader in 4th largest economy globally

— Trusted advisor to loyal clients

— A leader in digital banking

— Leverage domestic leadership to

expand internationally

— Diversified products with consistent

performance

— Suitable client solutions based on

innovation and investment excellence

— Leading global platform with long-

lasting client relationships

— Our transaction banking services,

financing and lending, and risk

management products are key to

our clients’ every day success

— Globally competitive in our core

markets

— Leading financing business

— Global fixed income offering

— Trusted advisor providing advice

on M&A and debt issuance

5%

2018

>12%

2022

Return on

Tangible Equity

Return on

Tangible Equity

Return on

Tangible Equity

9%

2018 2022

>15%

18%>20%

2018 2022

2%

2018 2022

>6%

Return on

Tangible Equity


Our decisive actions

6

Focus on market leading

businesses with attractive

growth and return profiles

Exit Equities Sales & Trading,

resize Fixed Income, in

particular Rates, and

accelerate the wind-down of

non-strategic assets

Invest in our leading

businesses, further improve

our technology and control

framework

Exit

businesses

Create four client-

centric divisions

Invest in

technology &

growth

Put the Corporate Bank at

the heart of our business

Cut associated RWA by

approximately 40%(1)

Invest € 13bn in

technology by 2022

Create a Capital Release

Unit(3) to free-up resources

to return capital to

shareholders over time

Manage and

liberate capital

Transfer € 74bn in RWA and

€ 288bn of leverage ex-

posure to the Capital Release

Unit to enable capital

distribution

Overhaul our front-to-back

processes and infrastructure

leading to significant cost

and workforce reductions

Cut

costs

Reduce adjusted costs(2)

by € 6bn by 2022

Note: Divisional figures in this presentation showing the pro-forma effect of resegmentation are preliminary, unaudited and subject to change. Throughout this presentation totals may not sum due to rounding differences(1) Excludes operational risk RWA associated with Fixed Income(2) Throughout this presentation, adjusted costs defined as total noninterest expenses excluding the impairment of goodwill and other intangibles, litigation expenses and restructuring and severance


Our near-term objectives and long-term financial targets

7

8% for GroupReturn on Tangible Equity

€ 17bnAdjusted Costs

70%Cost Income Ratio

At least 12.5%CET1 Ratio

2022

~5%Leverage Ratio (fully-loaded)

2019 2020

4.5%4%

€ 21.5bn(1) € 19.5bn

n/a

n/a


8

Deutsche Bank at a glance€ bn, unless otherwise stated

IFRS assets 1,436

Common Equity Tier 1 capital

47

Risk-weightedassets

347

Liquidity reserves 246

Liquidity coverageratio

147%

CET1 ratio 13.4%

Leverage ratio 3.9%

Note: Throughout the presentation figures may not add up due to rounding differences. CIB: Corporate & Investment Bank, PCB: Private & Commercial Bank, AM: Asset Management(1) All figures, except IFRS assets are on a CRR / CRD 4 fully loaded, pro forma basis(2) Q2 2019 revenues of € 6.2bn included revenues for Corporate & Other of € 182m and CIB other of € (103)m that are not included for the calculation of the percentages(3) 30 June 2019 leverage exposure of € 1,304bn included Corporate & Other exposure of €26bn (2%) that are not included for the calculation of the percentages

PCB

41%

AM

10%

GTB

15%

O&A

7%

S&T

27%

Key figures(1) Leverage exposure by business(3)Revenues by business(2)

AWM6%

Q2 2019 30 June 2019

PCB

28%

AM

0%

CIB

72%

Group € 6.2bn

Group € 1,304bn

More controllable revenues 65%

30 June 2019

CIB

(G

TB

, O

&A

an

dS

&T

)


9

86

28

2007 Q2 20192007 Q2 2019

88

24

2007 Q2 2019

Most stable funding(2)

A safer and more secure organization€ bn, at period end, unless otherwise stated

(1) Liquidity reserves include cash, highly liquid government, agency and government guaranteed bonds and other Central Bank eligible securities(2) Most stable funding as a proportion of the total external funding profile. Most stable funding is defined as funds from Capital Markets & Equity, Retail, Transaction Banking and

Wealth Management deposits(3) Value-at-risk (VaR) is the average risk of loss for Deutsche Bank‘s trading units based on a 99% confidence interval and a one-day holding period (4) Level 3 assets tend to be less liquid instruments where fair value cannot be determined directly by reference to market-observable pricing. Examples would include more-complex

OTC derivatives, distressed debt and highly-structured bonds

2007 Q2 2019

Shareholders’ equity

2007 Q2 2019

Liquidity reserves(1) Avg. Value-at-Risk(3)

In € m

Level 3 assets(4)

Materially higher capital, liquidity and stable funding Risk at record-low levels

1.6x 3.8x 2.4x

37

59

65

246

30%

73%

(67)% (73)%


10

(1) Transformation related charges comprise deferred tax asset (DTA) valuation adjustments, goodwill impairments and impairments on software and provision for existing service contracts

(2) Requirement for Minimum Requirement for Eligible Liabilities (MREL) set at 9.14% of Total Liabilities and Own Funds of € 1,105bn

As of 30 Jun 2019

Common Equity Tier 1 capital ratio 13.4%Prudent management

of capital resources

Loss-absorbing capacity € 121bnExcess above MREL

requirement: € 20bn(2)

Liquidity coverage ratio 147%Excess above LCR requirement

of 100%: € 66bn

Loans as a % of deposits 73%High quality loan portfolio

against stable deposits

Average Value-at-Risk € 28mTightly controlled

market risk

Provision for credit losses as a % of loans 14bpsReflects strong underwriting

standards and low risk portfolios

Comment

Strong balance sheet with prudent risk management despite upfront transformation-related charges1)


11

A smaller, simpler, less market-sensitive balance sheetFunded balance sheet(1) in € bn, unless otherwise stated

— Smaller balance sheet and

changed business mix driven

by exit/reduction of loss making

businesses

— As a consequence, funding

costs are expected to reduce

— 85-90% of balance sheet

planned to be funded by most

stable sources(3), including

~70% from deposits

— Loan to deposit ratio(4) around

80% to support business

growth

(1) Throughout the presentation the funded balance sheet is defined as IFRS balance sheet adjusted to reflect the funding required after recognizing legal netting agreements, cash collateral received and paid and offsetting pending settlement balances

(2) Trading Assets defined as mark-to-market Derivatives, Non-Derivatives Trading Assets, Cash Margin Receivables, Prime Brokerage Receivables, Reverse Repos(3) Most stable funding as a proportion of the total external funding profile. Most stable funding is defined as funds from Capital Markets & Equity, Retail, Transaction Banking and Wealth

Management deposits(4) Defined as gross accrual loans versus total deposits

26%

24%

41%

35%

Q2 2019Assets

2022 PlanAssets

20%

53%

22%

56%

16%

6%

1,022

Q2 2019Liabilities

12%

67%

13%

7%

2022 PlanLiabilities

~820

1,022

~820

Loans

Liquidity Reserves

Trading and other

assets(2)

Long-termfunding

Trading andother liabilities

Deposits

Equity


12

IFRS derivative trading assets and the impact of netting and collateral

Derivatives exposure – headline numbers materially overstate the economic risk

Comments

Note:(1) Excludes real estate and other non-financial instrument collateral (2) Master Netting Agreements allow counterparties with multiple derivative contracts to settle through a single payment

€ bn, as of 30 June 2019

— Gross notional derivative exposure amounts are not

exchanged and relate only to the reference amount of all

contracts. It is no reflection of the credit or market risk

run by a bank

— IFRS balance sheet derivatives trading assets are the

present value of future cash flows owed to DB and as a

result represent the credit risk to the Bank

— Unlike US GAAP, IFRS accounting does not allow for all

Master Netting Agreements(2) to reduce derivative assets

shown on the balance sheet

— DB’s reported IFRS derivative trading assets of €366bn

would fall to €21bn on a net basis, after considering the

Master Netting Agreements in place and collateral

received

— In addition, DB actively hedges its net derivatives trading

exposure to further reduce the economic risk

IFRS

(289)

(8)

Impact of Master Netting

Agreements

Cash Collateral

(47)

22

Financial Instrument Collateral

Net amount

366

Interest Rate

Credit / Other

Currency

Equity/index

(1)


Loan book compositionIFRS loans at amortized cost, 30 June 2019

34%

10%

7%6%

4%

6%

6%

16%

Consumer Finance

Germanmortgages

Wealth Management

Business Finance

International mortgages

1%

PCB other(1)

PCB non-strategic(2)

1%

CommercialReal Estate(3)

CIB Other(4)

1%

1%

Leveraged DebtCapital Markets

Asset backed securities

Global Transaction Bank

Other

Private & Commercial Bank

Corporate & Investment Bank

13

— Well diversified loan portfolio

— ~2/3rd of the loan portfolio is in PCB,

mainly including German retail mortgages

and Wealth Management

— ~1/3rd of the loan portfolio is in CIB,

around half are loans to Global

Transaction Banking counterparties

predominantly investment grade rated

— The remainder comprises well-secured,

mainly asset backed loans, commercial

real estate loans and collateralized

financing as well as relationship loans

managed within a concentration risk

framework

— Deutsche Bank has high underwriting standards

and a defined risk appetite across PCB and CIB

Portfolios

7%

Note: Figures may not sum due to rounding off difference. Loan amounts are gross of allowances(1) PCB other predominantly includes Postbank recourse CRE business and financial securities(2) PCB non-strategic includes a FX-mortgage portfolio in Poland(3) Commercial Real Estate Group in CIB and Postbank non-recourse CRE business(4) CIB Other comprises CIB relationship loans, FIC (excl. ABS & CRE) and Equities (Collateralized financing)

Other


Litigation update€ bn, period end

14

Litigation provisions(1)

Contingent liabilities(1,2)

— Provisions increased by € 0.1bn predominately due to

additional charges relating to the Vestia matter, which

settled on 12 July 2019

— Provisions include approximately € 0.3bn related to

settlements already achieved or agreed in principle,

including Vestia

— Contingent liabilities decreased by € 0.5bn QoQ,

mostly due to a favorable court decision in the

Postbank appraisal proceedings, as well as matters in

which provisions have been taken

Note: Figures reflect current status of individual matters and are subject to potential further developments(1) Includes civil litigation and regulatory enforcement matters(2) Includes possible obligations where an estimate can be made and outflow is more than remote but less than probable for significant matters

2.0

1.2 1.1 1.2

Q2 2019Q4 2017 Q4 2018 Q1 2019

2.7 2.7 2.72.2

Q4 2017 Q4 2018 Q1 2019 Q2 2019


15

Agenda

1

Creditor / counterparty considerations 2

Deutsche Bank today


German insolvency law strengthens position of depositors and counterparties € bn

16

(1) Insured deposits and deposits by credit institutions and investment firms with original maturity <7 days are excluded from bail-in(2) Deposits >€ 100k of large caps, all remaining deposits of financial institutions and the public sector(3) Includes all plain-vanilla senior notes issued on or after 21 July 2018, the terms of which do not indicate that they are non-preferred(4) Includes (i) all plain-vanilla senior notes issued before 21 July 2018 and (ii) all plain-vanilla senior notes issued on or after 21 July 2018 the terms off which explicitly refer to the non-

preferred rank(5) Regulatory capital under fully loaded rules; includes AT1 and T2 capital issued out of subsidiaries to third parties which is eligible until YE 2021. Includes adjustments reflecting TLAC

eligible capital instruments that do not qualify as fully loaded regulatory capital; add-back of regulatory maturity haircut for T2 instruments with a maturity >1 year, G-SIB TLAC holding deduction

— Creditors, including depositors, derivative

counterparties, beneficiaries of guarantees and

LoC’s, structured note holders and money market

instruments sit above € 61bn of equity, Tier 1 and

Tier 2 instruments and also € 59bn of senior non-

preferred debt liable for bail-in

— Deutsche Bank has € 120bn of Total Loss Absorbing

Capacity (TLAC). Senior plain-vanilla debt < 1 year

will not qualify as TLAC but still represents loss-

absorbing capacity47

14

59

€ 120bn of TLAC

Loss participation

only if TLAC is exhausted

Plain-vanillasenior non-preferred notes and Schuldscheine >1 year (unless qualified as preferred deposits)(4)

AT1 / Tier 2 / Adjustments(5)

CET1(5)

Other deposits(2), structured notes, MM instruments, operating liabilities, new plain-vanilla senior preferred notes(3)

Deposits ≤ €100k / short-term liabilities(1)

Deposits > €100k of natural persons / SMEs

30 June 2019


17

— A new CDS framework for

German banks was introduced

in May 2019, allowing for

standardized trading of senior

preferred CDS contracts for DB

— The new CDS reflects the actual

risk faced by clients and

counterparties. It reduces cost

of doing business with DB as

well as hedging exposure

exclusively at the senior

preferred-level

— Two month after the inception

of DB’s senior preferred CDS,

spread has gradually tightened

Limited correlation with DB’s cost of funding or issuance plans

Historic CDS spreads do not reflect Deutsche Bank’s counterparty risk or funding costs

Note: Data as of 25 July 2019(1) Referencing non-preferred senior instruments(2) Based on the 4-week moving average issuance spread vs. 3-month Euribor. AT1 instruments excluded from spread calculation(3) Deposits >€ 100k of large caps, all remaining deposits of financial institutions and the public sector

DB 5yr EUR Senior Preferred CDS in bps(1) (lhs)

DB average issuance spread, in bps(2) (lhs)

DB debt issuance, in € bn (rhs)

Comments

DB 5yr EUR Senior Non-preferred CDS in bps(1) (lhs)

10.92.9 4.5 1.2 7.8 1.2

18Q1 18Q2 18Q3 18Q4 19Q1 19Q2

0

10

20

30

40

50

60

0

50

100

150

200

250

New senior preferred CDS

bps € bn


18

All rating agencies view the successful execution on transformation agenda as creditor positive

— Following our strategic update, all

rating agencies affirmed their

ratings

— All agencies argue that execution

of the plan would lead to rating

updates

— At this early stage they focus on

the execution risk involved and

therefore expect evidence of quick

progress

Note: Further information on Deutsche Bank ratings (including the latest reports) can be obtained on the homepage: https://www.db.com/ir/en/current-ratings.htm

https://www.db.com/ir/en/current-ratings.htm


19

Note: Ratings as of 25 July 2019(1) The Issuer Credit Rating (ICR) is S&P‘s view on an obligor‘s overall creditworthiness. It does not apply to any specific financial obligation, as it does not take into account the nature of

and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation(2) Defined as senior unsecured debt rating at Moody‘s and S&P, as preferred senior debt rating at Fitch and as senior debt at DBRS

BBB+(1) BBB+A3 A (high)

Tier 2

Senior unse-cured

Ba2

A3

Counterparty obligations(e.g. Deposits / Structured

Notes / Derivatives / Swaps)

AT1

Legacy T1 B1

B1

BB+

BBB+

B+

B+

BBB-

BBB+

BB-

B+

-

A (low)

-

-

Preferred(2)

Non-preferred Baa3 BBB- BBB BBB (high)

Short-term P-2 A-2 F2 R-1 (low)

Lo

ng

-te

rm

Outlook Negative Stable Evolving Negative

senior to loss-absorbing capacity

part of loss-absorbing capacity

Current Ratings


20

Rating landscape – senior debt ratings

Note: Data from company information / rating agencies, as of 17 July 2019. Outcome of short-term ratings may differ given agencies have more than one linkage between long-term and short-term rating

(1) Senior debt instruments that are either issued out of the Operating Company (US, UK and Swiss banks) or statutorily rank pari passu with other senior bank claims like deposits or money market instruments

(2) Senior debt instruments that are either issued out of the Holding Company (US, UK and Swiss banks) or statutorily rank junior to other senior claims against the bank like deposits or money market instruments (e.g. junior senior unsecured debt classification from Moody’s and senior subordinated from S&P)

Holding company / Non-preferred Senior(2)

Moody‘s S&P

Operating company / Preferred Senior(1)

Rating scale EU Peers Swiss Peers US Peers

Short-term Long-term BAR BNP HSBC SOC CS UBS BoA Citi GS JPM MS

P/A-1 Aa2/AA

P/A-1 Aa3/AA-

P/A-1 A1/A+

P/A-1 A2/A

P/A-2 A3/A-

P/A-2 Baa1/BBB+

P/A-2 Baa2/BBB

P/A-3 Baa3/BBB-


Cautionary statements

21

This presentation 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 and projections as they are currently available to the management of

Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no

obligation to update publicly any of them in light of new information or future events.

By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could

therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors

include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which

we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the

development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the

implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods,

and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described

in detail in our SEC Form 20-F of 22 March 2019 under the heading “Risk Factors.” Copies of this document are

readily available upon request or can be downloaded from www.db.com/ir.

This presentation also contains non-IFRS financial measures. For a reconciliation to directly comparable figures

reported under IFRS, to the extent such reconciliation is not provided in this presentation, refer to the Q2 2019

Financial Data Supplement, which is accompanying this presentation and available at www.db.com/ir.

deutsche bank client & creditor presentation · 2019-07-25 · deutsche bank investor relations...

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