Deutsche Bank (NYSE:DB) Q4 2025 Earnings call January 30, 2026 09:00 AM ET Company ParticipantsCorinne Cunningham - Partner of Credit ResearchJames von Moltke - CFOLee Street - Vice President and Distressed Debt Trading StrategistPhilip Teuchner - Head of Investor RelationsRaja Akram - CFO DesignateRichard Stewart - Group TreasurerRobert Smalley - Managing DirectorOperatorLadies and gentlemen, welcome to the Q4 2025 Fixed Income Conference Call and Live Webcast. I'm Moritz, the call operator. I would like t ...

Core Viewpoint - State-owned banks in India are expressing concerns to the Reserve Bank of India (RBI) regarding the ineffective transmission of rate cuts to deposits, leading to a strain on their balance sheets as lending rates decrease more rapidly than deposit rates [1][4]. Group 1: Rate Transmission Issues - State-owned bank chiefs highlighted that external benchmark-linked loans allow for immediate repricing of assets with repo rate changes, while existing deposits are repriced at a slower pace [2][5]. - The disparity in repricing has resulted in a compression of net interest margins, with banks passing on 100 basis points of cuts on the asset side but only managing to reduce deposit rates by 30 basis points, creating a 70-basis point spread compression [4][8]. - Approximately 63% of floating-rate loans are linked to external benchmarks, while existing deposits only adjust when older, higher-cost deposits mature [5][7]. Group 2: Deposit Growth Challenges - Public sector banks have a higher proportion of floating loans linked to the marginal cost of funds-based lending rate (MCLR), while private sector banks have nearly 88% of their floating loans tied to external benchmarks, affecting their sensitivity to policy changes [6]. - Competition for household savings has intensified, with mutual funds now accounting for over one-third of bank deposits, compared to just 12.6% a decade ago, leading to a decline in deposit growth [8]. Group 3: Regulatory and Liquidity Factors - Regulatory factors, such as high runoff assumptions under the liquidity coverage ratio (LCR) framework, are exacerbating the issue by increasing liquidity buffers and funding costs [9][10]. - Economists suggest that RBI could enhance transmission by infusing liquidity into the banking system, which was in surplus of ₹2.58 trillion as of December 1 [11][12]. Group 4: Recommendations for Improvement - To improve deposit growth and transmission, a reduction in small savings interest rates is recommended, as these rates currently exceed bank term deposit rates [14][15]. - Suggestions include exploring floating-rate deposits and market-linked retail liabilities that could adjust in line with benchmark rates, facilitating faster transmission [16].

Financial Data and Key Metrics Changes - Record profitability was achieved in the first nine months of 2025, with revenues at EUR 24.4 billion, aligning with the full year goal of around EUR 32 billion before FX effects [3] - Adjusted costs remained consistent with guidance, with a post-tax return on tangible equity of 10.9%, meeting the target of above 10% [3][4] - The cost-income ratio stood at 63%, consistent with the target of below 65% [3] - Pre-provision profit increased to EUR 9 billion, up nearly 50% year on year, or nearly 30% when adjusted for Postbank litigation impacts [3] Business Line Data and Key Metrics Changes - Net commission and fee income rose by 5% year on year, while net interest income across key banking segments remained stable [4] - All four business lines delivered double-digit profit growth and return on tangible equity in the first nine months [6] - The Corporate Bank saw strong fee growth of 5% and was recognized as the best trade finance bank [7] - The Private Bank's profits surged by 71%, and assets under management in Wealth Management grew by EUR 40 billion year to date [7] Market Data and Key Metrics Changes - Loans grew by EUR 3 billion adjusted for FX effects during the third quarter, with strong underlying quality [9] - The deposit book expanded by EUR 10 billion in the third quarter, with significant growth in the Private Bank [10][11] - The liquidity coverage ratio was managed to 140%, demonstrating the strength of the balance sheet [11] Company Strategy and Development Direction - The company is on track to meet or exceed all 2025 strategy goals, with a compound annual revenue growth rate of 6% since 2021 [4][5] - Operational efficiencies of EUR 2.4 billion have been delivered or are expected, nearing the EUR 2.5 billion goal [5] - A second share buyback program of EUR 250 million was launched, bringing cumulative distributions since 2022 to EUR 5.6 billion [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a return on tangible equity above 10% and a cost-income ratio below 65% for the full year [17] - Despite uncertainties in commercial real estate and the macroeconomic environment, lower provisioning levels are anticipated in the second half of the year [17] - The company remains focused on growing its franchise and expanding market share, particularly in the Corporate Bank [10] Other Important Information - The CET1 ratio increased to 14.5%, with a surplus above regulatory requirements [12][14] - The MREL surplus increased by EUR 2 billion to EUR 26 billion, providing flexibility for future issuance [15][16] Q&A Session Summary Question: Future Return on Tangible Equity - Management indicated that a 10% return on tangible equity could be a reasonable floor for future performance, emphasizing structural profitability improvements [20][21] Question: Private Credit and Commercial Real Estate Exposures - Management noted that private credit is not a concern, while commercial real estate remains a watch item, particularly in California and Washington State [22][23] Question: Receivables Financing Exposure - Management acknowledged some exposure in trade finance and ABS but emphasized it is not significant [28][29] Question: Tier 2 Capital Stack - Management confirmed that Tier 2 instruments remain valuable, but the focus has been on Tier 1 capital needs [32] Question: Sustainability Competitive Disadvantage - Management does not view the sustainability landscape in Europe as a competitive disadvantage, highlighting progress in their sustainability agenda [30][31] Question: Commercial Real Estate Issues - Management detailed that issues are concentrated in West Coast exposures, with ongoing efforts to work with sponsors for value preservation [36][39]