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% and setting a foundation for a target of greater than 13% by 2028 [3] - Revenue for 2025 reached approximately EUR 32 billion, reflecting a 7% year-on-year increase and a 26% increase since 2021 [4] - Non-interest expenses decreased to EUR 20.7 billion, down 10% year-on-year, with a nearly EUR 1 billion reduction in the cost base since 2021 [4] 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] - The Investment Bank saw an 11% increase in client activity in 2025 compared to the previous year, with a focus on deepening and broadening the franchise [7] - The Private Bank improved its cost-income ratio to 70% and achieved returns above 10% in 2025 [7] 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 when adjusted for FX effects [9] - The loan book grew by EUR 5 billion in the fourth quarter, with strong underlying quality and growth in asset-backed financing and infrastructure lending [11] - The deposit book grew by EUR 29 billion in the fourth quarter, with significant growth in sight deposits from corporate clients [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 includes focused growth, strict capital discipline, and a scalable operating model to achieve these goals [8] - The company is positioning itself to become the European champion in its sector, with aspirations to improve market share and returns compared to European peers [32] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the commercial real estate sector, indicating that while there have been challenges, they hope to see stability in appraisals and leasing behavior [41][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] - The management team emphasized the importance of maintaining a strong liquidity position and a diversified funding base to navigate the current economic environment [14][15] Other Important Information - The company closed 2025 with a total issuance volume of EUR 18.7 billion, aligning with its target range of EUR 15 billion to EUR 20 billion [20] - The common equity tier one ratio was reported at 14.2%, with a decrease of 30 basis points compared to the previous quarter due to one-off effects [15] - The company plans to issue EUR 10 billion to EUR 15 billion in 2026, with significantly lower funding requirements compared to 2025 [20] Q&A Session Summary Question: Impact of not defending the LGF notch for senior non-preferred - Management explained that the decision was made to optimize funding composition and cost base, aligning with European peers and allowing for a more efficient balance sheet [29][30] Question: Measuring the goal of becoming a European champion - Management indicated that achieving market-leading positions in key segments and leading returns compared to European peers will be critical metrics for success [33][34] Question: Concerns regarding commercial real estate provisions - Management acknowledged ongoing challenges in the commercial real estate sector, particularly in office spaces, and indicated that new appraisals and tenant activity are influencing provisions [40][41] Question: Expectations for lumpiness in commercial real estate resolutions - Management stated that while some lumpiness may occur, they do not expect significant volatility in the portfolio adjustments, barring larger single exposure events [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]