Want to dig deeper on Deutsche Bank AG and thousands of companies?
Rapidly search an extensive universe of public and private content — earnings transcripts, company filings, equity research, trade journals, and more.
Request a Free TrialCompanies by industry
Aerospace & DefenseAutomobile ComponentsAutomobilesBanksBeveragesBiotechnologyBroadline RetailCapital MarketsChemicalsCommunications EquipmentConsumer FinanceConsumer Staples Distribution & RetailContainers & PackagingElectric UtilitiesElectronic Equipment, Instruments & ComponentsEnergy Equipment & ServicesEntertainmentFinancial ServicesFood ProductsGround TransportationHealth Care Equipment & SuppliesHealth Care Providers & ServicesHotels, Restaurants & LeisureHousehold DurablesHousehold ProductsIT ServicesIndustrial ConglomeratesIndustrial REITsInsuranceInteractive Media & ServicesLife Sciences Tools & ServicesMachineryMediaMetals & MiningMulti-UtilitiesOil, Gas & Consumable FuelsPersonal Care ProductsPharmaceuticalsSemiconductors & Semiconductor EquipmentSoftwareSpecialized REITsSpecialty RetailTechnology Hardware, Storage & PeripheralsTextiles, Apparel & Luxury GoodsTobaccoWireless Telecommunication Services
Deutsche Bank AG Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Investment Bank revenues are expected to grow by around 8%, due to encouraging trends in the market, good levels of corporate activity and confidence, solid financing conditions, and pent-up private equity demand.
- Capital efficiencies have delivered cumulative RWA-equivalent reductions of €24 billion, close to the end-2025 goal of €25 billion to €30 billion. In Q4, the company delivered €2 billion of RWA-equivalent reductions from data and process improvements.
- NII across key banking book segments and other funding was strong at €3.3 billion, up sequentially and broadly flat from the prior-year quarter.
- The company has made good progress on its issuance plan with around €2 billion issued in January.
- The company's well-diversified portfolio grew by €5 billion compared to the previous quarter, driven by substantial growth from general retail clients, driven by deposit campaigns.
- The surplus above regulatory requirements decreased to €110 billion.
- The company has moved past a number of legacy items, absorbing a series of non-operation costs, predominantly litigation matters which have masked the underlying strength of the business.
- Corporate Bank deposits have reduced modestly during Q4.
- The company is looking into alternatives in the market for the temporary write-down clause.
- The company expects the net interest income from the hedge book to grow by several hundred million euros each year as it rolls maturing hedges.
- The company expects to add more than 2 percentage points to its 2025 RoTE by reaching its €32 billion revenue target.
- The company expects an additional contribution of around 60 basis points from the reduction in non-interest expenses.
- The company expects investment bank revenues to grow by around 8%.
- The company expects to normalize back through Q1 and going forward, given the robustness of the Investment Banking franchise.
Q&A Highlights from Deutsche Bank AG Earnings Call Q4 2024
- Analyst asked about Deutsche Bank's target level of Tier 2 capital and whether they have a preference for the AT1 bucket over the Tier 2 bucket.
- Deutsche Bank has a preference for the AT1 bucket over the Tier 2 bucket, but their target level of Tier 2 capital will depend on the needs of their balance sheet at any given point in time. They are focused on investor expectations and aim to communicate clearly to their investors, but their ability to do so is limited due to regulatory approval.
- Deutsche Bank has a preference for the AT1 bucket over the Tier 2 bucket, but their target level of Tier 2 capital will depend on the needs of their balance sheet at any given point in time. They are focused on investor expectations and aim to communicate clearly to their investors, but their ability to do so is limited due to regulatory approval.
- Analyst asked about Deutsche Bank's internal cost of capital for their business and whether they have to think it gets there.
- Deutsche Bank views their Investment Bank as a critical part of their company and their overall offering. They have come a long way in transforming and restructuring their Investment Bank to meet hurdle rates under the new post-crisis regulation. Their Investment Bank has a blended cost of capital of 9% and is well on its way to meeting and exceeding its cost of capital over time. They are working on each of the business units within the Investment Bank to improve those that are below their cost of capital. They apply a firm-wide cost of capital across all businesses to look at exceeding hurdle rates for shareholder value-add, but their expectations aren't limited to the cost of capital of the group. Many of their businesses operate in markets and product areas that should be well above the group's cost of capital.
- Deutsche Bank views their Investment Bank as a critical part of their company and their overall offering. They have come a long way in transforming and restructuring their Investment Bank to meet hurdle rates under the new post-crisis regulation. Their Investment Bank has a blended cost of capital of 9% and is well on its way to meeting and exceeding its cost of capital over time. They are working on each of the business units within the Investment Bank to improve those that are below their cost of capital. They apply a firm-wide cost of capital across all businesses to look at exceeding hurdle rates for shareholder value-add, but their expectations aren't limited to the cost of capital of the group. Many of their businesses operate in markets and product areas that should be well above the group's cost of capital.
- Analyst asked about the company's thinking on its core strategy, given the constraints it faces.
- Richard Stewart, the company's CEO, explained that the company's core strategy is a work in progress and that it takes into account various factors, including the constraints it faces.
- Richard Stewart, the company's CEO, explained that the company's core strategy is a work in progress and that it takes into account various factors, including the constraints it faces.
- Analyst asked about the possibility of hedging against the FX getting worse and avoiding extra hits.
- Richard Stewart, the company's CEO, explained that hedging against the FX getting worse is something the company has considered, but the trade-off is between economic impact through capital and generating mark-to-market P&L. The company has to consider the nature of IFRS accounting for this equity accounting, which sets the FX rate at inception.
- Richard Stewart, the company's CEO, explained that hedging against the FX getting worse is something the company has considered, but the trade-off is between economic impact through capital and generating mark-to-market P&L. The company has to consider the nature of IFRS accounting for this equity accounting, which sets the FX rate at inception.
- Analyst asked about the company's plan for AT1 going forward, including the impact of market risk RWA consumption and liability raising.
- Richard Stewart, the company's CEO, explained that the company expects market risk RWA consumption to normalize through Q1 and going forward, given the robustness of the Investment Banking franchise. The company also expects to raise deposits in both its Corporate Bank and Private Bank, which will bring cash onto the balance sheet and require a decent weighting in the AT1 bucket. However, the company expects the mix between AT1 and Tier 2 to change over time, and the current planning suggests that the company will need to maintain a decent weighting in the AT1 bucket through 2025.
- Richard Stewart, the company's CEO, explained that the company expects market risk RWA consumption to normalize through Q1 and going forward, given the robustness of the Investment Banking franchise. The company also expects to raise deposits in both its Corporate Bank and Private Bank, which will bring cash onto the balance sheet and require a decent weighting in the AT1 bucket. However, the company expects the mix between AT1 and Tier 2 to change over time, and the current planning suggests that the company will need to maintain a decent weighting in the AT1 bucket through 2025.
- Analyst asked about the economic rationale for the core and the non-core transactions, specifically if it's a full cap stack economic rationale for the core or a deal-by-deal approach.
- Richard Stewart explained that the company considers the economic impact of each transaction on a deal-by-deal basis, taking into account factors such as credit spreads, interest rates, volatilities, and FX losses. Additionally, the company also considers the overall portfolio impact, as some deals have different FX losses. He clarified that the company does not have a target for the leverage ratio, but aims to keep it above 4.5% and eventually reach 5%.
- Richard Stewart explained that the company considers the economic impact of each transaction on a deal-by-deal basis, taking into account factors such as credit spreads, interest rates, volatilities, and FX losses. Additionally, the company also considers the overall portfolio impact, as some deals have different FX losses. He clarified that the company does not have a target for the leverage ratio, but aims to keep it above 4.5% and eventually reach 5%.
