Deutsche Bank AG Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a transition year with crucial building blocks for business model transformation. Pre-provision profit increased by 19% compared to 2023 when adjusted for certain items.
• Revenue over €30 billion in 2024, well above initial targets. Expenses delivered adjusted cost guidance of €5 billion per quarter excluding exceptional items.
• Improved risk profile in 2024 despite €1.7 billion in litigation costs. Expect cost-income ratio below 65% in 2025.
• Progress on efficiency program with €1.85 billion in gross savings towards €2.5 billion goal. Removed 3,500 roles, focusing on nonclient-facing and high-cost locations.
• Business segments showing momentum: Corporate Bank strengthened client franchise and technology investments; Investment Bank outperforming revenue targets; Private Bank transforming with branch closures; Asset Management surpassing €1 trillion AUM.

Segment Performance

• Corporate Bank: In 2024, incremental deals won with multinational clients increased by ~40% since 2022. Outperformed revenue growth ambition, had a return on tangible equity of 13% in 2024. Revenues expected to grow by ~5.5% or €400 million in 2025, largely from scaling commissions/fee income and repricing of existing clients.
• Investment Bank: Outperformed revenue growth target, delivered an RoTE of 9% in 2024. Fixed income and currencies revenues increased by 26% in Q4 2024. Origination & Advisory revenues significantly higher with market share gains. Revenues expected to grow by around 8% in 2025.
• Private Bank: Revenues of €2.4 billion in Q4 2024, noninterest revenue growth 6% y-o-y. Attracted net inflows into assets under management of €2 billion. Continued branch closures and head count reductions. Revenue growth of around €400 million or about 4% expected in 2025.
• Asset Management: Surpassed €1 trillion of assets under management in Q4 2024. Revenues increased 22% y-o-y. Passive products strong with net inflows of €42 billion in 2024. Expected compound revenue growth rate to turn positive in 2025.
• Corporate & Other: Pretax loss of €621 million in Q4 2024 due to provision increase for foreign currency mortgages. Risk-weighted assets reduced by €6 billion since prior year quarter.

Guidance

• Expect 2025 revenue of around €32 billion before FX benefits, translating to ~€32.8 billion at year-end FX rates.
• Aim for cost-income ratio below 65% in 2025.
• Provision for credit losses expected to ameliorate in 2025 as transitory headwinds subside.
• Announced €750 million share buyback program and dividend per share of $0.68 for 2024. Expect to surpass €8 billion total shareholder distribution target.

Risks

• Uncertainty around litigation outcomes and potential impacts on financial results.
• Regulatory risks related to Basel IV, FRTB implementation, and potential competitive disadvantages in global markets.
• Macroeconomic risks affecting asset quality, especially in commercial real estate and global market conditions.

Question and Answer

Q: Elaborate on the bridge to €32 billion revenue target and confidence in reaching it.

A: Christian Sewing stated confidence comes from business momentum, client feedback, and growth in various segments like Corporate Bank (€400 million revenue growth), Private Bank (higher NII and noninterest income), and Asset Management (AUM growth).

Q: On share buyback, can we expect more throughout the year?

A: Christian Sewing mentioned a prudent approach, starting with €750 million, and will review distributions based on performance throughout the year.

Q: On cost guidance increase, how much is due to revenue expectations and future investments?

A: James Von Moltke explained drivers include inflation, business investments in areas like Corporate Bank and Investment Bank, controls, technology, and progress on the efficiency program.

Q: On ROE target for Private Bank, what actions to boost RoTE?

A: Christian Sewing and James Von Moltke discussed transformation efforts, cost reductions, revenue growth, and portfolio rebalancing in the Private Bank to improve RoTE.