Deutsche Bank AG (DB) Earnings

Management highlights

- **Overall Financial Performance • The bank delivered 20 consecutive quarters of year-on-year revenue growth, with first half 2026 revenues reaching €17.2 billion, on track to hit the full-year 2026 revenue ambition of ~€33 billion. • First half 2026 post-tax profit hit a record €4.1 billion, with post-tax ROTE of 11.9% and an improved cost-income ratio of 60.9%. The CET1 capital ratio was 13.9%, in line with the bank's operating range of 13.5% to 14%. • Management announced a new €500 million share buyback funded from 2026 net income, marking the first time the bank has executed a buyback from the current year's earnings. - **Strategic Progress • Management delivered 5% half-year revenue growth, maintained strict capital discipline (including the announced sale of the private bank India franchise, expected to be SVA-positive at closing in 2027), and progressed the scalable operating model. • Group-wide assets under management grew 16% year-on-year to €1.92 trillion, driven by record net inflows of €56 billion in the first half. Group loans grew 4% year-on-year, and deposits grew 7% year-on-year, with strength across corporate and private banking. • The private bank completed its 2026 planned 100 branch closures and has already onboarded 116 of its targeted 250+ wealth management coverage hires, ahead of schedule. • The investment bank expanded EMEA market share in IBCM and FICC trading, and reinforced its position as a trusted gateway for investing in Europe. - **Long-Term Structural Trends • **German Structural Reforms**: New government health, pension, and infrastructure/defense spending plans are taking shape, creating growth opportunities for the bank's corporate and investment bank and asset gathering businesses, driven by growing demand for private pension investment solutions. • **AI Integration**: AI adoption is progressing faster than expected, with ongoing embedding across workflows to boost productivity, enhance client experience, deepen coverage, and capture incremental revenue and efficiency upside. • **European Savings and Investment Union**: Building momentum alongside European pension reforms, positioning the bank's asset gathering, corporate, and investment banking businesses to capture growing cross-border investment flow opportunities. • **Level Regulatory Playing Field**: European policymakers are increasingly focused on improving bank competitiveness, with upcoming proposals to address unintended consequences of CRR3, provide FRTB relief, and streamline EU macroprudential requirements, creating long-term upside for European bank competitiveness.

Guidance

- Full-year 2026 group revenue is expected to hit ~€33 billion, with management noting there is a high probability of slightly exceeding this target, driven by stronger than expected first half performance across all divisions. - Full-year 2026 net interest income (NII) across key banking segments and other funding is now expected to slightly exceed the prior guidance of ~€14 billion, with the majority of future benefits from structural hedge rollovers expected to materialize in 2027 and 2028. - Full-year 2026 non-interest expenses are guided to be slightly above €21 billion, unchanged from prior guidance, with incremental 2026 investments of ~€200 million largely offset by ~€200 million in annual operating efficiencies from model and workforce optimization. Management expects to come in at or slightly below this full-year cost target. - Underlying provision for credit losses is expected to be lower in 2026 versus 2025, with a normalized average annual provision rate of ~30 basis points targeted through 2028. Management will continue pursuing targeted, capital-accretive portfolio de-risking actions on an opportunistic basis. - Management reaffirmed confidence in achieving the 2028 target of ROTE greater than 13%, noting that positive developments in structural trends (AI, regulatory reform, German pension reform) create considerable upside to this target. - The bank maintains a 60% payout ratio for shareholder distributions, with additional share buybacks expected to be considered once CET1 capital is sustainably above 14%.

Segment performance

1. **Private Bank**: Revenues grew 8% year-on-year, driven by 10% net interest income growth and 8% net commission/fee income growth. Reported Return on Tangible Equity (ROTE) was 11% (13% excluding India divestiture impacts), with a reported cost-income ratio of 70% (66% excluding divestiture impacts). Client assets rose 7% year-on-year to €850 billion, with €9 billion in net AUM inflows. Deposits increased 4% year-on-year, and underlying loan growth (exiting India franchise and targeted portfolio reductions) was 2% year-on-year. It contributes ~21% of total group revenue. 2. **Asset Management**: Quarterly revenues increased 4% year-on-year, with management fees up 13% year-on-year on higher average AUM. Non-interest expenses rose 7% year-on-year aligned to growth initiatives. The segment recorded record net inflows of €25 billion in Q2, bringing total AUM to almost €1.2 trillion, up 18% year-on-year. It contributes ~13% of total group revenue. 3. **Corporate Bank**: Delivered a strong ROTE of 16.4% with a 62% cost-income ratio. Q2 revenues were €1.9 billion, up 1% year-on-year against a strong prior-year quarter, and up 5% sequentially. Average loans and deposits grew year-on-year, driven by growth in corporate cash management deposits and trade finance loans. Provisions for credit losses remained well contained, reflecting strong underlying portfolio quality. It contributes ~22% of total group revenue. 4. **Investment Bank**: Q2 revenues were 19% higher year-on-year, driven by a record quarter for fixed income trading (strength in rates and credit, particularly distressed products) and 36% year-on-year growth in Investment Banking and Capital Markets (IBCM) revenues (17% sequentially). Non-interest expenses were 6% higher year-on-year driven by higher performance-related compensation. Provisions of €174 million included planned capital-accretive non-performing commercial real estate (CRE) portfolio exits. It contributes ~44% of total group revenue, and overall non-investment banking businesses contribute more than 60% of total group revenue.

Risks & headwinds

- Uncertainty remains around the timing and final form of German structural reforms and European regulatory changes, with policy and legislative progress taking longer than initially expected in some cases. - Ongoing geopolitical volatility and macroeconomic uncertainty create potential for market disruption that could impact trading revenue and loan portfolio performance, though management notes the bank's portfolio remains resilient and well positioned for volatility. - The bank is executing targeted de-risking of non-performing commercial real estate (CRE) exposures, though the portfolio remains subject to market risks that could impact exit timelines and valuations. - Revenue from CNO (Corporate & Other) is subject to quarterly valuation differences that are expected to normalize in the second half of 2026, creating near-term earnings volatility. - Pacing of investment spending and technology projects can vary from planned cadences, though management maintains flexible cost structures to offset any unplanned spending.

Analyst Q&A

• Q: What is the balance of tailwinds and headwinds for H2 2026 performance, and what is management's conviction on hitting the >13% 2028 ROTE target? /

  A: Management expects revenue momentum to continue across all four divisions in H2: private bank and asset management are seeing sustained inflows boosted by early demand from German pension reform, corporate bank revenue growth is already accelerating ahead of previous forecasts and will continue improving sequentially, and investment bank IBCM pipelines point to a stronger H2 than H1. Management reaffirmed full-year guidance of ~€33 billion revenue and slightly above €21 billion costs, and noted it would not be surprised to slightly exceed the 33 billion revenue target. For 2028, faster than expected progress on German reforms, EU regulatory changes, and AI integration increases confidence that the >13% ROTE target will be achieved, with meaningful upside to the target if reforms progress as currently proposed. (712 chars)

• Q: What magnitude of additional de-risking loan losses could we see in 2026, and how should we model sequential cost trends for the full year? /

  A: The ~100 million charge taken in Q2 was a targeted, opportunistic de-risking action for the commercial real estate portfolio that frees up capital earlier than a standard exit. Management still expects full-year 2026 provisions to be lower than 2025, with any additional opportunistic actions of similar size unlikely to change this overall trend. For costs, ~€400 million in additional productivity gains will offset incremental investment spending in H2, leaving management confident full-year expenses will not exceed guidance, and may even come in slightly below. (538 chars)

• Q: What opportunity would a Commerzbank-Unicredit merger create for Deutsche Bank in Germany, and what ROTE upside could come from EU regulatory reforms? /

  A: Management has prepared for potential client dis-synergies from the merger, with active client outreach already underway in the corporate bank and wealth management, while retail client flows would likely materialize after deal closure. Management estimates the merger could create a meaningful medium-term revenue opportunity over the next three years. It is too early to quantify the ROTE upside from regulatory changes, but management noted that proposed reforms to CRR3, FRTB, and capital buffers could create meaningful upside, particularly for 2027 and 2028 results. (462 chars)

• Q: What is driving private bank hiring progress and what does it mean for flows, and why is corporate bank revenue growth accelerating despite apparent margin pressure? /

  A: Private bank is ahead of schedule on wealth management advisor hiring, with new advisors bringing in assets faster than initially expected. The division is also delivering consistent cost reductions from retail branch optimization and digital transformation, creating strong operating leverage as investment-focused revenue grows, driven by German pension reform tailwinds. For the corporate bank, FX and interest rate headwinds are diminishing, and fee income is growing at a mid-single digit pace. Most NII upside from hedge resetting will materialize in 2027 and 2028, but underlying loan growth (3% in Germany this quarter) and trade finance expansion are already driving accelerating revenue growth, with the division on track to hit its long-term growth targets. (619 chars)