Deutsche Bank Credit Overview

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Transcription:

Credit Overview August 2018 (including reported financials as of 30 June 2018)

Summary Right-sizing of our Corporate & Investment Bank to focus on more stable revenue sources New strategic measures Near-term targets of return on tangible equity of greater than 4% in 2019 supported by Commitment to reduce adjusted costs to below 23bn for 2018 and below 22bn in 2019 Headcount reduction to 93,000 at the end of 2018 and well below 90,000 in 2019 Balance sheet strength Strength of the balance sheet gives time and flexibility to execute the strategic plan and pursue targeted growth opportunities DB is well positioned to meet all current and future regulatory requirements Cash and high quality liquid assets account for more than 25% of s funded balance sheet, negatively impacting returns but providing further support Over 75% of the balance sheet is funded by long-term, diversified sources 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 Issuance of preferred senior benchmark notes should result in an additional CDS instrument on, allowing better comparison with peers and hedging of counterparty risk (current CDS references to non-preferred instruments ranking lower in the creditor hierarchy) All rating agencies now have separate counterparty obligation ratings, covering - depending on the agency - products such as deposits, derivatives and guarantees/locs 1

Agenda 1 2 today Creditor / counterparty considerations 2

at a glance bn Key figures (1) (30 June 2018) Revenues by business (2) Leverage exposure by business (3) IFRS assets 1,421 Leverage exposure Risk-weighted assets Common Equity Tier 1 capital 1,324 348 47.9 Tier 1 capital 52.5 Total capital 61.7 CET1 ratio 13.7% Leverage ratio 4.0% H1 2018 30 June 2018 PCB 38% AM 8% Germany 34% CIB 55% AWM 6% AM 0% PCB 26% CIB 73% 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) H1 2018 revenues of 13.6bn included revenues for Corporate & Other of (145)m that are not included for the calculation of the percentages (3) 30 June 2018 leverage exposure of 1,324bn included Corporate & Other exposure of 8bn (1%) that are not included for the calculation of the percentages 3

A safer and more secure organization bn, at period end, unless otherwise stated Shareholders equity Liquidity reserves (1) Most stable funding (2) Avg. Value-at-Risk (3) In m Level 3 assets (4) 1.7x 4.3x 2.6x 77% 279 63 86 (70)% (75)% 88 37 65 30% 26 22 2007 Q2 2018 2007 Q2 2018 2007 Q2 2018 2007 Q2 2018 2007 Q2 2018 Materially higher capital, liquidity and stable funding Risk at the lowest recorded levels (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 948bn 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 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 4

MREL TLAC Well positioned for long-term regulatory requirements 30 June 2018 Regulatory ratios Buffer 30 June 2018 Group targets CET1 ratio 13.7% 11bn above SREP requirement (1) CET 1 ratio 13.7% above 13% Liquidity coverage ratio (2) 147% 77bn above 100% requirement Leverage ratio 4.0% (5) 4.5% Total loss absorbing capacity 36% RWA / 9% Leverage exposure 9.14% TLOF (4) 40bn above 2019 minimum requirements (3) 18bn above requirement (1) Represents capital above the CET1 requirement contained in the ECB 2018 SREP letter (2) Liquidity coverage ratio is designed to promote the short-term resilience of the liquidity risk profile of banks by ensuring an adequate stock of unencumbered high-quality liquid assets that can be converted in private markets into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. Based on EBA Delegated Act (3) Based on final FSB term sheet requirements of higher of: 16% RWA (plus buffers) and 6% leverage exposure from 2019 and 18% RWA (plus buffers) and 6.75% leverage exposure from 2022 (4) Total Liabilities and Own Funds: IFRS total liabilities (excluding equity) plus total regulatory capital (own funds) (5) On a fully loaded basis 5

Conservative loan book IFRS loans at amortized cost, 30 June 2018 Corporate & Investment Bank Private & Commercial Bank Global Transaction Bank 15% Leveraged Finance (5) CIB non-strategic ABS CIB Other (4) 5% 1% 1% 6% 6% Commercial Real Estate (3) 2% PCB non-strategic 4% International mortgages 6% PCB other (2) 9% 10% 34% Consumer Finance (1) German mortgages Wealth Management Well diversified Loan Portfolio Over 2/3rds of the loan portfolio in the Private & Commercial Bank and ~50% in retail mortgages and Wealth Management Global Transaction Banking counterparties predominantly investment grade rated DB has high underwriting standards & a defined risk appetite across CIB portfolios Overall, strong quality of the loan portfolio evident from only ~40bps of credit loss provisions on average since 2007 Note: Loan amounts are gross of allowances (1) Consumer and small business financing per external reporting (2) PCB other predominantly includes (a) Postbank Commercial and Corporate Loans (b) Individual loans above 1 million (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) (5) Leveraged Debt Capital Markets 6

Level 3 assets part of our core business bn, as of 30 June 2018 Assets (total: 22bn) (1) Transfers, mark-to-market, IFRS 9 (2) Additional value adjustments deducted from CET 1 capital pursuant to Article 34 of Regulation (EU) No. 575/2013 (CRR) Mortgage backed securities Equity securities 1 1 Other 2 8 Derivative Assets Debt securities 3 Movements in balances 26 31 Dec 2016 (11) Sales/ Settlements 6 Purchases/ Issuance 0 Other (1) 6 Loans 22 31 Dec 2017 (4) Sales/ Settlements 4 Purchases/ Issuance 0 [8] Other (1) 22 30 Jun 2018 Level 3 assets arise as a consequence of the bank being active in various markets, some of which are less liquid Assets are mainly booked in core businesses only 1.4bn are part of CIB non-strategic book Level 3 classification is not an indicator of risk or asset quality, but rather an accounting indicator of valuation uncertainty due to lack of observability of at least one valuation parameter Variety of mitigants to valuation uncertainty: Many valuation inputs are observable Exchange of collateral with derivative counterparties Uncertain input often hedged e.g. in Level 3 liabilities Prudent valuation capital deductions (2) specific to Level 3 balances of approximately 0.4bn 0.5bn deferred Day 1 profit on Level 3 derivative balances Portfolio is not static, as evidenced by significant inflows and outflows relative to the starting balances 7

Derivatives exposure headline numbers materially overstate the economic risk IFRS derivative trading assets and the impact of netting and collateral bn, as of 30 June 2018 Interest Rate Currency Equity/index Credit / Other 348 IFRS (276) Impact of Master Netting Agreements (40) Cash Collateral (9) Financial Instrument collateral (1) 23 Net amount Comments 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 348bn would fall to 23bn 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 (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 8

Agenda 1 2 today Creditor / counterparty considerations 9

German insolvency law strengthens position of depositors and counterparties bn Creditors, including depositors, derivative counterparties, beneficiaries of guarantees and LoC s, structured note holders and money market instruments sit above 62bn of equity, Tier 1 and Tier 2 instruments and also 57bn of senior non-preferred debt liable for bail-in has 119bn of Total Loss Absorbing Capacity (TLAC). Senior plain-vanilla debt < 1 year will not qualify as TLAC but still represents lossabsorbing capacity CDS & senior non-preferred bond yields are no appropriate risk proxies for the entire Group, given the lower ranking of plain-vanilla senior non-preferred bonds under the German bail-in law Loss participation only if TLAC is exhausted 119bn of TLAC 57 14 48 30 June 2018 Deposits 100k / short-term liabilities (1) Deposits > 100k of natural persons / SMEs Other deposits (2), structured notes, MM instruments, operating liabilities, new plain-vanilla senior preferred notes (3) Plain-vanilla senior non-preferred notes and Schuldscheine >1 year (unless qualified as preferred deposits) (4) AT1 / Tier 2 / Adjustments (5) CET1 (5) (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 nonpreferred 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 according to the FSB term sheet. Includes 0.6bn of 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 10

Rating methodologies reflect new resolution regime and therefore require more differentiation Counterparty obligations (e.g. Deposits / Derivatives / Swaps / Trade Finance obligations) A3 BBB+ (1) A- Reflecting their position in the resolution hierarchy, the deposit and counterparty ratings are the relevant rating for >95% of s clients Long-term preferred senior unsecured (2) A3 BBB+ A- Non-preferred senior unsecured Baa3 BBB- BBB+ Short-term P-2 A-2 F2 Outlook Negative Stable Negative Note: Ratings as of 3 August 2018 (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 at Moody s and S&P, senior preferred debt at Fitch 11

Rating Agencies reflect bail-in risk of senior instruments Moody s S&P Operating company / Preferred senior (1) Holding company / Non-preferred senior (2) 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 P/A-1 P/A-1 P/A-1 P/A-2 P/A-2 P/A-2 P/A-3 Aa2/AA Aa3/AA- A1/A+ A2/A A3/A- Baa1/BBB+ Baa2/BBB Baa3/BBB- Note: Data from company information / rating agencies, as of 3 August 2018. Outcome of short-term ratings may differ given agencies have more than one linkage between long-term and short-term rating (1) Senior unsecured 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 unsecured 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 12

Structures complicate credit rating and CDS comparisons DB ratings are broadly in-line with peers when adjusted for the differences in corporate structure Holding Company Bank A- / BBB- A+ / A Holding Company / Bank A- / BBB- Counterparties of UK, US and Swiss banks typically face the bank entity which comes with higher credit ratings Benchmark debt is typically issued out of the lower rated non-operating holding company German (and French) banks operate from a combined operating bank and holding company structure which rating agencies rate on a holding company level Counterparties of face DB AG, which is both the operating bank and the holding company Note: Reference ratings are taken from the following peer group: MS, GS, C, JPM, BoA, UBS, CS, SOC, BNP, BAR, DB 13

CDS spreads do not reflect s counterparty risk or funding costs CDS spreads have had limited correlation with DB s cost of funding or issuance plans 300 250 200 150 100 50 0 DB 5yr EUR-CDS in bps DB average issuance spread, in bps (1) DB debt issuance, in bn 9.1 11.1 2.8 8.8 8.5 4.8 6.0 5.5 10.8 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3.0 Comments Single-name CDS trading volumes are lower than they used to be making movements in prices more erratic The movement in CDS spreads since early 2016 reflects the introduction of the German bail-in law on 1 January 2017 As a result of the lower volumes and bail-in law, there has been limited correlation between s CDS spreads and the Bank s funding costs The introduction of holding company level CDS contracts on Swiss and UK banks allows a direct comparison with s CDS spreads given the similar position in the capital structure Harmonization of German creditor hierarchy with European law should result in an additional CDS instrument on referencing to preferred senior notes (1) Based on the 4-week moving average issuance spread vs. 3-month Euribor. AT1 instruments excluded from spread calculation 14

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. 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 16 March 2018 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 2018 Financial Data Supplement, which is available at www.db.com/ir. 15