deutsche bank client & creditor presentation€¦ · note: throughout the presentation figures...
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Investor RelationsDeutsche Bank
Deutsche Bank – Client & Creditor PresentationMay 2020
Deutsche Bank
Investor RelationsDeutsche Bank
A German bank with a global network
EMEA26%
Americas20%
Germany41%
APAC13%
Regional revenue split(1)
Note: Throughout the presentation figures may not add up due to rounding differences(1) Source: 2019 Annual Report(2) Includes Private Bank and Asset Management, source: Q1 2020 analyst presentation
Deutsche Bank is present in 59 countries(1)
Largest bank in Germany with approx. 20m clients(1)
Managing over € 1.1tn of wealth for clients(2)
1,931 branches worldwide, of which 1,332 in Germany(1)
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Investor RelationsDeutsche Bank
Executing on our transformation
Creditor / Counterparty
considerations
— € 109bn of total loss-absorbing capacity and the German bail-in law provide protection for depositors and counterparties of the Bank
— Senior preferred Credit Default Swap as reference risk faced by derivative clients and trading counterparties
Transformation progress
— Robust group performance with significant increase in Core Bank revenues and profitability
— Strategic transformation ahead of plan and beneficial in current environment
— 9th consecutive quarter of annual adjusted cost reductions – outperformance versus internal expectations
— Clear client-led strategy and position as Germany’s leading bank enable us to be a vital part of the solution
Balance sheet and
fundamental strength
— Strong balance sheet and conservative risk levels allow us to navigate stressed environment
— Capital and liquidity ratios well above regulatory requirements
— Credit loss provisions compare well versus peers - well diversified loan portfolio with limited exposure to focus industries
— Low risk levels reflecting conservative business model and strong risk management
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Investor RelationsDeutsche Bank
Agenda
1
Balance sheet and fundamental strength2
Transformation progress despite COVID-19 challenges
Creditor / counterparty considerations 3
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Investor RelationsDeutsche Bank
We have reacted quickly to the challenges
How we are supporting our clients
Asset Management
PrivateBank
Corporate Bank
Investment Bank
>5k loan applications to KfWscheme with a volume of € 4.4bn; ~15% funded in the first 2 weeks
Helped corporates and governments raise € 150bn of debt since mid-March; ~40% share of European corporate issuance
50% increase in retail inbound sales calls to DWS Direct
25% more visits on DWS websites
120% increase in securities transactions and 30% in call center interactions
Kept most branches open
Flexible resourcing across bank to manage client demand
Crisis hotline for health and mental wellbeing
Resources to help staff with closure of public services
Donated 575k protective masks
Doubled all employee contributions to our food & shelter charities
1m free meals to homeless and daily wage workers in India
Specific support for the elderly (free cash withdrawals, delivery services)
How we are working How we are helping
>70% of employees working from home with operational stability and high quality of service
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Investor RelationsDeutsche Bank
Well positioned in this crisis as Germany’s leading bank
Source: DB Research, Bundesbank, IMF, Bruegel
5969
7582
122
155
UKITGY SUS FR
Corporate debt(% of GDP as of 2019)
Announced government measures(% of GDP)
Household debt(% of GDP as of 2019)
Government debt(% of GDP as of 2019)
39
60
85
99109
135
CH USGY ITUK FR
22
14
12
86
5
UK SGY IT FR US
41
5461
7584
132
FRIT GY SUS UK
Access point to state sponsored lending as ‘Hausbank’ to ~900k
corporate and commercial clients
Leading German corporate finance franchise – 14%
market share year-to-date
Reinforced position as leading German retail bank
Provided liquidity and solutions as the #1 domestic
retail asset manager
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Investor RelationsDeutsche Bank
Stabilizing the Core BankIn € bn, unless stated otherwise
Exit loss making businesses
Focus on market leading businesses and more predictable revenues
Enhance client focus
Refocus
(1) Excludes transformation charges and transformation-related effects (incl. goodwill impairments, restructuring and severance). Reconciliation available under https://www.db.com/ir/en/download/Deutsche_Bank_Q1_2020_results.pdf
(0.5)(0.8)
Q1 2019 Q1 2020
CapitalReleaseUnit
CoreBank0.8
1.1
Adjusted profit (loss) before tax(1)
0.4
Q1 2019
CoreBank
-0.1
Q1 2020
CapitalRelease
Unit
6.3 6.3
5.9 6.4
Revenues ex. specific items
8%
6
38%
Investor RelationsDeutsche Bank
Growing revenues in our market-leading businessesCore Bank revenues(1) excluding specific items, in € bn
Asset Management
— Net inflows in core focus areas including through strategic partners and ESG funds
— Number of funds rated 4/5 star by Morningstar increased by 40% since IPO in 2018
PrivateBank
— Wealth management revenue growth reflecting relationship manager hiring in 2019
— Net inflows of € 4bn into investment products
Corporate Bank
— Current crisis reinforces our leading domestic position
— Good momentum on strategic priorities to develop platform, FinTech and ecommerce payments solutions
Investment Bank
— Encouraging development in Rates, FX and EM businesses
— Regained market share in German and EMEA Origination & Advisory
1.3
Q1 2019
IB
Q1 2020
2.1
AM
CB
PB
1.3
6.4
5.9
0.5
2.0
0.5
2.1
2.3
+7%
(1)%
15%
3%
(1)%
(1) Revenues in Corporate & Other (Q1 2019: € (16)m, Q1 2020: € 63m) are not shown on this chart but are included in Core Bank totals
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Investor RelationsDeutsche Bank
Improving efficiency and infrastructureIn € bn
4
ITControl
13
Preserve investments in controls and technology
Reduce adjusted cost to € 17bn in 2022
Front-to-back cost reductions reflecting business exits
5.25.3
4.9
Q4 2019Q1 2019
5.3
Q2 2019 Q3 2019 Q1 2020
5.1
Restructure
Ad
just
ed
co
st(1
)2
01
9-2
02
2 c
um
ula
tiv
e I
T &
C
on
tro
l sp
en
d(2
)
(1) Excluding transformation charges and bank levies
(2) As presented in the strategic transformation announcement on 8 July 2019
8
73% of transformation-related effects already absorbed
Investor RelationsDeutsche Bank
Agenda
1
Balance sheet and fundamental strength2
Transformation progress despite COVID-19 challenges
Creditor / counterparty considerations 3
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Investor RelationsDeutsche Bank
Maintained strong balance sheet
CommentQ1 20202019
12.8%239bps above current regulatory
requirementsCommon Equity Tier 1 capital ratio
13.6%
€ 43bn above requirementsLiquidity Coverage Ratio 133%141%
Liquidity Reserves € 205bn€ 222bnMaintained a strong liquidity profile
while supporting client demand
€ 24m Tightly controlled market riskAverage Value at Risk € 28m
Increase reflects deteriorating macroeconomic outlook
44bpsProvision for credit losses as a % of loans
17bps
€ 112bn€ 18bn above most binding MREL
requirement Loss-absorbing capacity (MREL) € 115bn
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Investor RelationsDeutsche Bank
23563
201459
995
267
65
205
2007
Loans(3)
LiquidityReserves
Q1 2020
1,495
994
Other
Trading and related assets(2)
(1) Net balance sheet of € 994bn is defined as IFRS balance sheet € 1,491bn adjusted to reflect the funding required after recognizing (i) legal netting agreements (€ 353bn), cash collateral received (€ 51bn) and paid (€ 43bn) and offsetting pending settlement balances (€ 51bn)
(2) Trading and related assets along with similar liabilities, includes debt and equity securities (excluding highly liquid securities), derivatives, repos, securities borrowed and lent, brokerage receivables and payables, loans measured at fair value
(3) Loans at amortized cost, gross of allowances
Significantly reduced and transformed balance sheetAfter netting(1), in € bn
20% of our balance sheet held in Liquidity Reserves
Trading assets significantly reduced to less than 30% of net balance sheet
Derivative book benefits from netting / collateral and strong stress testing capabilities
Almost half of assets in high quality loan portfolios
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Investor RelationsDeutsche Bank
Solid capital and leverage metricsQ1 2020, in %
CET1 ratio peer comparison
Leverage ratio
12.312.6
15.3 14.612.8 12.312.8 12.7 12.1
11.2 11.1
— Sizeable buffers above future regulatory requirements
— Potential of 2022 requirement to be delayed based on proposals by the European Commission
G-SIB
Pillar 1 requirement
4.0%
3.00%
Q1 2020 2022 target 2021 leverage ratio requirement(1)
3.0%
2022 leverage ratio requirement
~5.0%
3.75%
0.75%
(1) Based on CRR II, from 28 June 2021
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Investor RelationsDeutsche Bank
Maintaining a sound liquidity profile
— Investments in technology and processes allow for better resource allocation
— Switch from cash towards securities, supporting revenue generation
— Reduction of overall liquidity reserves, but maintaining a ratio of ~20% of funded balance sheet
— Liquidity coverage ratio is € 43bn above 100% requirement
— Commitment to support clients may result in temporary LCR decline
— LCR will be maintained comfortably above 100%
Deutsche Bank’s liquidity reserves (in € bn)
Q1 2020 Liquidity Coverage Ratio (LCR, in %)
Highly liquid and other securitiesCash and cash equivalents
71% 67%
33%29%
Q2 2019
55%64%
Q1 2019
36%
Q3 2019
60%
40%
Q4 2019
45%
222
Q1 2020 Target
260 246 243
205 >200Temporary
operating range
13
100
182
156 155144 139 133 131 130 127
115 115 114
Investor RelationsDeutsche Bank
Conservative market and credit risk managementQ1 2020
— Value at Risk measures the potential loss of Fair Value positions due to market movements that should not be exceeded with a defined likelihood during a period of time
— Reduced Value at Risk by 2/3 since 2007, at the lower end peers
Value at Risk (in € m)(1)
Credit Loss Provisions (CLP)(2)
(1) Applying a 99% confidence level and a one day holding period
(2) Annualized, in bps vs gross loans
— Strong track record in managing credit risk evidenced by low credit loss provisions as a % of loans
— Historically good quality of credit portfolios proved resilience through the cycle, specifically versus US peers
— Macro outlook leads to CLP forecast for 2020 of 35-45bps, well below peer average
1724 26
34 3743 48 51
73
104
31 4461
114148
180
228
324
387
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Investor RelationsDeutsche Bank
Low risk, well diversified loan portfolioLoans at amortized cost, in € bn, period end
230
87
131
459
11
Investment Bank
Q1 2020
Corporate Bank
Private Bank
Note: Loan amounts are gross of allowances for loan losses. LTV = Loan to Value(1) Mainly Corporate & Other and Capital Release Unit
(2) Based on Deutsche Bank internal rating assessment
(3) Applicable to DB SpA
Other(1)
— Trade Finance and working capital, mainly short-term to German midcaps and
global multinationals
—Commercial Banking loans to midcap and SME clients in Germany
—Concentration risk subject to strict hedging framework
—Asset backed loans (iA- median rating(2)) collateralized with diverse range of assets
—Commercial real estate loans (~60% LTV), positioned to withstand downside risks
—Conservative underwriting standards across leveraged loans
—Dynamic hedging of bridge commitments
— ~50% of total loan portfolios in the Private Bank
— ~60% of Private Bank loans in low risk German mortgages – median LTV 64%
—Wealth Management portfolio 99% collateralized
— Italian portfolio best in class with gross non-performing loans below 2.5%(3)
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Investor RelationsDeutsche Bank
Key focusindustries:~11%
Note: Loan amounts are gross of allowances for loan losses. LTV = Loan to Values(1) Comprise of Commercial Real Estate Group and APAC Commercial Real Estate exposures in the Investment Bank as well as non-recourse Commercial Real Estate business in the Corporate Bank
(2) Net credit limits is the maximum credit risk appetite after risk mitigation, it also includes other non-loan cash, derivative and contingent exposures as well as unutilized credit facilities approved
(3) Retail industry loan exposures exclude clients in more stable Food industry subsegment
Loan book compositionLoans at amortized cost, period end
Commercial Real Estate(1)
(€ 33bn)
— Well diversified across high quality properties
— Largely first lien, 60% average loan to value
— Manageable exposure to hotels and retail mitigated by low
LTVs and strong sponsors
Oil & Gas(€ 8bn)
— Focused on Oil majors and national players
— More than 80% net credit limits(2) to Investment Grade names
— Limited exposure to higher cost US shale producers following
reductions over last years
Retail industry(3)
(€ 5bn)
— Focused on strong global names
— More than 70% net credit limits to Investment Grade names
— Limited exposure to non-food, apparel and textiles retailers
Aviation(€ 4bn)
— 2/3rds secured aircraft financing, 70% average LTV, biased
towards newer / liquid aircrafts
— Unsecured portfolio focused on developed market flag
carriers
Leisure(€ 2bn)
— Focused portfolio on industry leaders in hotels and casinos
— Limited exposure to cruise lines and tour operators
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Investor RelationsDeutsche Bank
(1) Latest EU-wide stress test from 2018(2) For banks that did not disclose loan split details for Q1 2020, assumption that loan mix equals Q4 2019(3) Unsecured retail loans defined as retail loans excluding mortgages and excluding loans collateralized by securities
Strong credit quality versus peers
Loan Loss Reserves(2) consistent with peers given our lower unsecured retail exposureIn %
Stressed credit losses vs. European peersEBA/ECB stress test(1) net credit losses in adverse scenario. Impact on CET1 ratio, in bps
220
307
334
339
459
495
511
573
767
17
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0%L
oa
n lo
ss r
ese
rve
s /
Gro
ss lo
an
s
Unsecured retail loans(3) / Gross loans
Investor RelationsDeutsche Bank
IFRS
(345)
Impact of Master Netting
Agreements
30
(50)
Financial Instrument Collateral
Cash Collateral
(9)
Net amount
434
IFRS derivative trading assets and the impact of netting and collateral
(1)
(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
— 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 € 434bn would fall to € 30bn 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
Derivatives exposure – headline numbers materially overstate the economic risk31 March 2020, in %
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Investor RelationsDeutsche Bank
Level 3 assets – a small but natural part of our business € bn, Q1 2020
Level 3 asset composition
— Increase in the quarter almost all related to higher derivative market values driven by market volatility, expected to largely reverse over time
— The Capital Release Unit accounted for approx. € 8bn of the Level 3 Asset balance
— Level 3 classification is an accounting indicator of valuation uncertainty due to lack of observability of at least one valuation parameter
— Variety of mitigants to valuation uncertainty (e.g. exchange of collateral, prudent valuation capital deductions, hedging of uncertain input)
— A significant portion of the portfolio is turning over on a regular basis
1,493
28
Total assets
1.9% oftotal
assets
13 DerivativeAssets
8
1
4
Loans
Debtsecurities
2Other
Equity securities
0
Mortgage backed securities
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Investor RelationsDeutsche Bank
Agenda
1
Balance sheet and fundamental strength2
Transformation progress despite COVID-19 challenges
Creditor / counterparty considerations 3
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Investor RelationsDeutsche Bank
Depositors and counterparties are protected by € 109bn loss-absorbing capacity(1)
44
13
52
€ 109bn of TLAC
Loss participation
only if TLAC is exhausted
Plain-vanillasenior non-preferrednotes and other(5)
AT1 / Tier 2 / Adjustments
CET1
Other deposits(3), operating liabilities, senior preferred notes and other(4)
Deposits ≤ €100k / short-term liabilities(2)
Deposits > €100k of natural persons / SMEs
(1) Total loss-absorbing capacity (TLAC) is the amount of equity and bail-in debt available to absorb losses in order to protect counterparties and depositors
(2) Insured deposits and deposits by credit institutions and investment firms with original maturity <7 days are excluded from bail-in
(3) Deposits >€ 100k of large caps, all remaining deposits of financial institutions and the public sector
(4) Other includes structured notes money market instruments and LOC’s
(5) Other includes Schuldscheine >1 year (unless qualified as preferred deposits)
47
41
33 32 31 3128
25 24 2422
Loss absorbing capacity as a % of RWA Q1 2020
Q1 2020
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Investor RelationsDeutsche Bank
Tier 2
Counterparty obligations (e.g. Deposits / Structured Notes /
Derivatives / Swaps / Trade Finance obligations/ LOC‘s)
AT1
Legacy T1
Senior unse-cured
Preferred(2)
Non-preferredLo
ng
-te
rm
BBB+(1) BBB+A3 A (high)
Ba2
A3
B1
B1
BB+
BBB+
B+
B+
BB+
BBB+
BB-
B+
-
A (low)
-
-
Baa3 BBB- BBB BBB (high)
Short-term P-2 A-2 F2 R-1 (low)
Outlook Negative Negative Negative Negative
Moody‘s Investors Services
S&P Global Ratings
Fitch Ratings DBRS
Current Ratings
Note: Ratings as of 29 May 2020
(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
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Investor RelationsDeutsche Bank
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-
Rating landscape – senior debt ratings
Note: Data from company information / rating agencies, as of 29 May 2020. 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)
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Investor RelationsDeutsche Bank
Cautionary statements
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 20 March 2020 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 Q1 2020
Financial Data Supplement, which is accompanying this presentation and available at www.db.com/ir.
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