Deutsche Bank AG Q3 FY2026 earnings call

Christian Sewing highlighted that the bank is growing in targeted areas, with asset-gathering businesses performing strongly and the corporate bank delivering robust growth. He noted that Germany is beginning to deliver on its growth strategy, showing encouraging signs of economic improvement and political reform momentum. The firm has completed a large portion of its investments, largely self-funded by efficiency gains, maintaining cost discipline. Key operational milestones include the Private Bank’s technology transformation, moving from 15 platforms to two cloud-based systems, and the rollout of 'Farsight,' an AI-enabled tool in IBCM to enhance client insights. The firm continues to build business volumes, with assets under management rising nearly 250 billion euros year-on-year to just under 2 trillion euros. The franchise remains resilient despite fiscal uncertainty, with no meaningful adverse impact observed to date.

The firm reported total net revenues of 8.3 billion euros for the third quarter, with all divisions contributing to year-on-year profit growth. The Private Bank delivered strong performance with an ROTE of 13%, driven by an 8% revenue increase fueled by a 13% rise in net commission and fee income and a 9% increase in net interest income. Wealth Management revenues grew 10%, while Personal Banking revenues increased 6%. Asset Management saw revenues rise 4%, supported by a 14% increase in management fees, with Assets Under Management surpassing 1.2 trillion euros. The Corporate Bank achieved record quarterly revenues of approximately 2 billion euros, a 9% year-on-year increase, supported by double-digit growth in both net interest income and net commission and fee income. Investment Bank and IBCM revenues were broadly flat compared to the prior year, though FIG financing performed significantly better due to strong pipeline execution.

Management raised full-year 2026 revenue guidance, expressing confidence that revenues will clearly exceed the previous target of 33 billion euros, driven by momentum across all four business divisions. Total non-interest expenses are expected to remain around 21.3 billion euros, reflecting continued investment discipline and operating efficiencies. Loan loss provisions are expected to be broadly in line with prior guidance, slightly lower than the prior year when excluding proactive de-risking actions and idiosyncronic events. The firm reaffirmed its commitment to capital returns, including distributions in line with a 60% payout ratio and ongoing share buybacks. An updated strategic outlook and detailed cost trajectory will be provided at the full-year 2026 results in January.

The firm faces potential risks from heightened fiscal uncertainty across Europe and a challenging global economic backdrop, although no significant adverse impacts have been realized thus far. Commercial Real Estate (CRE) exposures remain a focus for risk management, with the high-risk CRE book declining materially since 2022; however, provisions reflect proactive de-risking measures and valuation updates on legacy defaulted positions. Idiosyncratic events in Asia impacted corporate bank provisions in the quarter. Regulatory changes, particularly regarding the EU legislative package and CR3 implementation, could introduce uncertainty regarding capital requirements and market integration.

Q: Tarek El-Mejad asked why management did not raise guidance earlier given consistent beats and sought clarity on cost reinvestment versus beating expense targets.

A: Christian Sewing explained that visibility improved as all four businesses fired on all cylinders, allowing them to raise revenue guidance above 33 billion euros. Raja Akram clarified that the 21.3 billion euro expense guidance includes all investments and efficiencies, noting they aim to undershoot this figure rather than artificially squeeze costs into Q4, with further details on cost trajectories to come in January.

Q: Kian Abouhossein questioned the timeline for achieving the 13%+ ROTI target and the drivers for accelerated CRE de-risking.

A: Christian Sewing stated that 13% is not the end goal and that upside exists through cost reductions, capital optimization, and revenue outperformance, particularly in Germany. Raja Akram added that de-risking CRE is intentional to free up capital for productive use, citing a 20% reduction in the high-risk CRE portfolio in one year as evidence that the 30 basis point provision run rate target by 2028 is achievable.

Q: Giulia Aurora Miotto asked about deposit competition in Germany, profitability of pension reform-related assets, and Q4 provision expectations.

A: Christian Sewing emphasized that trust and relationship depth outweigh price competition from new entrants, noting that new deposits often convert to long-term business. Raja Akram estimated that Q4 provisions would likely align with the first half's levels rather than Q3's higher spike, depending on further de-risking decisions, and confirmed that private bank margins remain stable due to operational leverage.

Q: Stefan Stalmann inquired if corporate bank growth reflected benefits from competitor exits (Commerzbank/UniCredit) and if cost control pressures exist against US peers.

A: Christian Sewing acknowledged increasing client discussions due to neighbor situations but noted the direct financial impact is still minimal, viewing it as an opportunity to establish Deutsche Bank as an alternative. Raja Akram explained that their cost base is rationalized for their specific business mix, focusing on capital-light advisory, and does not require the massive tech spend seen in US equity franchises.

Q: Jeremy Sigee asked about macro headwinds like bond market disruption and the key elements of the upcoming EU legislative package.

A: Christian Sewing stated that sovereign debt is not a major concern, but investors await concrete proof of reforms and coalition stability. Raja Akram highlighted that the legislative package should provide finality on CR3 output floors, advance single market integration, and address technical issues like securitization treatment, which would benefit Deutsche Bank significantly.