- Revenue: EUR15.4 billion in the first half of 2024, on track to EUR30 billion for the year.
- Adjusted Cost Target: Quarterly run rate at EUR5 billion.
- Litigation Provision: EUR1.3 billion related to the acquisition of Postbank.
- Post-Tax Return on Tangible Equity: 7.8%, up from 6.8% in the first half of last year.
- Cost/Income Ratio: Improved from 73% to 69% year on year.
- CET1 Ratio: 13.5%.
- Pre-Provision Profit: Up 17% year on year to EUR4.7 billion.
- Noninterest Revenues: Up 14% year on year.
- Commissions and Fee Income: Up 12% year on year.
- Adjusted Cost: Reduced to EUR10.1 billion year on year.
- Corporate Bank Incremental Deals: 16% increase in the first half year.
- Origination & Advisory Market Share: Increased to 2.6% in the first half year.
- Private Bank Net Inflows: EUR19 billion in the first six months.
- Assets Under Management: Grew by EUR37 billion to EUR933 billion in the first half year.
- Operational Efficiency Program Savings: EUR1.5 billion realized, 60% of the target.
- Workforce Reductions: 2,700, including 700 FTEs in the second quarter.
- Provision for Credit Losses: EUR476 million in the second quarter.
- Net Profit: EUR52 million in the second quarter.
- Liquidity Coverage Ratio: 136%.
- Net Stable Funding Ratio: 122%.
- Corporate Bank Revenues: EUR1.9 billion in the second quarter.
- Investment Bank Revenues: 10% higher year on year in the second quarter.
- Private Bank Revenues: EUR2.3 billion in the second quarter.
- Asset Management Revenues: Increased by 7% year on year.
- Assets Under Management (AUM): EUR933 billion at the end of the second quarter.
- Group Revenues: EUR7.6 billion in the second quarter.
- Non-Interest Expenses: EUR6.7 billion in the second quarter.
- Adjusted Costs: EUR5 billion for the quarter.
- Provision for Credit Losses Guidance: Slightly above 30 basis points of average loans for the full year.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Deutsche Bank AG (DB, Financial) achieved a revenue of EUR15.4 billion in the first half of 2024, on track to meet the EUR30 billion target for the year.
- The bank's capital-light businesses, such as Corporate Bank and Origination & Advisory, are gaining market share.
- Adjusted cost targets were met, with a quarterly run rate of EUR5 billion.
- Excluding the Postbank litigation provision, the post-tax return on tangible equity improved to 7.8%, up from 6.8% in the first half of the previous year.
- The CET1 ratio remains solid at 13.5%, demonstrating capital strength and supporting capital distribution commitments.
Negative Points
- The results were impacted by a significant litigation provision of EUR1.3 billion related to the acquisition of Postbank.
- Non-interest expenses increased by 20% year on year, driven by higher litigation charges.
- Provision for credit losses was EUR476 million, reflecting an increase in stage 1 and 2 provisions and higher stage 3 provisions.
- The bank faced additional charges of approximately EUR220 million related to legacy items resolved in the quarter.
- Adjusted costs increased by 2% year on year due to higher compensation and benefits.
Q & A Highlights
Q: On revenues, the momentum is positive, but the mix is changing. Are you confident in achieving EUR30 billion this year and EUR32 billion next year? How do you see fees progressing both inside and outside of the Investment Bank?
A: Christian Sewing, CEO: Yes, we are confident in achieving those numbers. The first half results of EUR15.4 billion are promising, and we expect continued momentum in the Corporate Bank, Private Bank, and Asset Management. The Investment Bank also shows stability and growth potential, particularly in Origination & Advisory. We anticipate both NII and fee income to grow in 2025, supported by our diversified business mix and strategic investments.
Q: Can you provide an update on discussions with the ECB regarding additional capital requirements for your leveraged finance business?
A: Christian Sewing, CEO: We have had constructive discussions with the ECB, and we feel confident in our risk management practices. We previously had a 20 basis points capital add-on, which was reduced to 15 basis points last year. We believe our provisions are adequate, and we are optimistic about reaching a fair solution with the ECB.
Q: What is your total distribution target, and can we expect any share buybacks in the second half of the year?
A: Christian Sewing, CEO: We remain committed to distributing more than EUR8 billion from 2021 to 2025. After the Postbank provision, we aim to show two strong quarters of operating performance before resuming discussions on share buybacks. We are confident in our capital position and expect to continue our distribution plan.
Q: What should we expect regarding litigation provisions in the second half of the year?
A: James von Moltke, CFO: We have significantly reduced contingent liabilities and aim to address remaining legacy items by the end of the year. We expect lower litigation costs going forward, positioning us for a cleaner slate in 2025.
Q: Can you provide more details on the loan loss guidance for 2024 and the assumptions for commercial real estate (CRE) within that number?
A: James von Moltke, CFO: The revised guidance reflects events in the first half, including corporate defaults and an overlay. We expect stabilization in the broader US CRE sector, though US office remains a concern. Our full-year guidance for provisions is slightly above 30 basis points of average loans.
Q: How do you see the deposit mix and main trends developing in the second half of the year across the Corporate Bank and the Private Bank?
A: James von Moltke, CFO: We have seen encouraging deposit growth, particularly in the Corporate Bank. We expect healthy growth on both sides of the balance sheet, with loan growth starting to recover and deposit volumes remaining strong.
Q: Can you provide more color on the potential CET1 benefit from securitization (SRT) over the next year?
A: James von Moltke, CFO: We have a long history with SRT programs and continue to look for opportunities to optimize our balance sheet. The impact of CRR 3 and the output floor will create new opportunities for asset transfers, contributing to our capital efficiency measures.
Q: Can you give more detail on how quickly the fee line in the Private Bank can grow and the initiatives underway to drive this growth?
A: Christian Sewing, CEO: We expect continuous improvement in fee business growth, supported by constant inflows into assets under management and digitalization efforts in the personal banking business. We are also realizing cost reductions from IT integration, which will enhance profitability.
Q: What are the main drivers behind the valuation and timing differences in the corporate center?
A: James von Moltke, CFO: The main drivers are pull-to-par effects in the investment portfolio and swap funding book impacts. These differences are expected to moderate over time, but we do not see them disappearing immediately.
Q: Can you confirm there is no financial impact from the Russia case mentioned in the notes?
A: James von Moltke, CFO: Yes, we booked offsetting provisions and indemnification assets, reflecting the risk appropriately on the balance sheet. We are confident in our ability to enforce the indemnification claim.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
