Deutsche Bank AG(DB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The post-tax return on tangible equity for 2025 was 10.3%, meeting the full-year target of above 10% [3] - Revenue for 2025 reached approximately EUR 32 billion, a 7% increase year-on-year and a 26% increase since 2021 [4] - Non-interest expenses were EUR 20.7 billion, down 10% year-on-year, with a nearly EUR 1 billion reduction in the cost base since 2021 [4][5] - The pre-provision profit was EUR 11.4 billion, up threefold since 2021, with an operating leverage of 17% in 2025 [5] Business Line Data and Key Metrics Changes - The Corporate Bank experienced revenue growth of over 40% since 2021, benefiting from a normalized interest rate environment and increased fee income [5][6] - The Investment Bank saw an 11% increase in client activity in 2025 compared to the previous year, with targeted investments leading to market share gains [7] - The Private Bank improved its cost-income ratio to 70% and achieved returns above 10% in 2025 [7] - DWS, the asset management arm, attracted EUR 85 billion of net new assets since 2021, surpassing EUR 1 trillion in assets under management in 2025 [8] Market Data and Key Metrics Changes - Net interest income (NII) for the fourth quarter was EUR 3.4 billion, totaling EUR 13.3 billion for the full year, in line with plans [9] - The loan book grew by EUR 5 billion in the fourth quarter, with strong underlying quality [11] - Deposits increased by EUR 29 billion during the fourth quarter, with significant growth in the Corporate Bank [12] Company Strategy and Development Direction - The company aims to increase return on tangible equity from over 10% in 2025 to greater than 13% by 2028, with plans to improve the cost-income ratio to below 60% [8] - The strategy focuses on scaling the global house bank model through focused growth, strict capital discipline, and a scalable operating model [8][22] - The company is positioned to become a European champion by achieving market leadership in key segments and improving returns compared to European peers [32][34] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the commercial real estate sector, indicating that they are closely monitoring new appraisals and market conditions [40][42] - The company anticipates a moderate downward trend in provisions for credit losses in 2026, with an expected average run rate of around 30 basis points through 2028 [22] - Management highlighted the importance of maintaining a strong liquidity position, with a liquidity coverage ratio of 144% [14] Other Important Information - The common equity tier one ratio was 14.2%, reflecting a decrease of 30 basis points due to one-off effects [15] - The company plans to reduce Senior Non-Preferred issuance volumes in light of anticipated deposit growth and to optimize its funding composition [19][20] Q&A Session Questions and Answers Question: Impact of not defending the LGF notch for senior non-preferred - Management explained that the decision was made to optimize funding composition and align with European peers, allowing for a managed reduction in outstanding senior non-preferred issuances [27][29] Question: Definition of becoming a European champion - Management clarified that becoming a European champion involves achieving market leadership in key segments and leading returns compared to European peers, with a focus on gradual improvement in financial metrics [32][34] Question: Commercial real estate provisions - Management indicated that new appraisals and lease activity are influencing the need for additional provisions, particularly in the office sector, but expressed hope for stabilization in the market [40][41] Question: Expectations for lumpiness in commercial real estate resolution - Management stated that while some lumpiness may occur due to larger single exposures, they do not expect significant lumpiness overall [50][52] Question: Impact of the German yield curve on balance sheet funding - Management noted that credit spreads are more critical for funding, and a steeper yield curve could be beneficial for their interest rate strategy [53][55]