Deutsche Bank Aktiengesellschaft 2026 Q3 Earnings Call

Thank you, Silke, and good morning, everyone. Let me start with a few words on what we believe are the key takeaways today. We are growing, particularly where we want to grow. Our asset gathering businesses performed strongly. The Corporate Bank delivered strong growth, and our Investment Bank continued to perform well. Revenue mix is improving, with growing commissions and fees and record net inflows, and business mix continues to shift to a more sustainable and stable revenue base. In Germany, a vital element of our growth strategy is starting to deliver. With that, let's turn to where we stand on strategy execution on slide 2. We delivered record performance and strong momentum in the first nine months of 2026. We grew revenues to €25.5 billion, well on track to meet our full year ambition of around €33 billion.

We have now completed a large portion of this year's investments, and we continue to maintain cost discipline. As planned, we have largely self-funded incremental investments with efficiency gains. This enabled us to deliver a record profit before tax of €8.4 billion for the first nine months of the year, along with a record third quarter. Post-tax ROTE was 11.5%, and our cost-income ratio was 61.4%. Our CET1 capital ratio was 14.0%. We continue to drive business growth while making distribution deductions in line with our 60% payout ratio. We have already completed our second share buyback of the year, bringing total buybacks in 2026 to €1.5 billion. Now, a few words on our progress on scaling our Global Hausbank on slide 3. We made tangible progress on all three levers of our strategy in the first nine months of the year. We continued to deliver focused growth.

Revenues grew by 5% versus last year, in line with our planned growth trajectory through to 2028. Our focused growth areas contributed nearly 80% of the increase and grew by 6%. Franchise momentum was strong across all businesses, with growth rates above our IDD targets. Furthermore, we continued to build business volumes which support future revenue growth. Assets under management rose by nearly a quarter of a trillion euros year on year to just under €2 trillion, supported by record inflows across our asset gathering businesses. Loans and deposits grew year on year, supported by broad-based business activity. Second, we maintained strict capital discipline. Our capital initiatives included further capital accretive actions on non-performing exposures and progress with our securitization programs. And third, we made further progress on our scalable operating model. We continued to simplify our processes and made targeted investments in upgrading our infrastructure.

The Private Bank reached an important milestone in its technology transformation, selecting its first cloud-based platform as it is moving from 15 banking platforms to just 2. In IBCM, we have started to roll out Farsight, an AI-enabled tool designed to improve efficiency and provide more granular client insights, further supporting client experience and engagement. Across all 3 levers, we are driving strong performance across our businesses, investing in growth and efficiencies, and reinforcing connectivity between businesses. This allows us to deliver the bank to clients. For example, by combining coverage across financing, investment solutions, and product distribution. Turning to slide 4. All divisions delivered ROTE of 12% or higher, while each division increased profit before tax in every quarter of the year. Private Bank net flows reached €17 billion, a record for the Private Bank, with around two-thirds from wealth management.

Year to date, inflows have already exceeded the full year 2025 level. Client assets increased to €865 billion, up €75 billion year to date, and well on track toward our €1 trillion target by the end of 2028. Asset Management grew assets under management to over €1.2 trillion, with record net flows of €31 billion in the third quarter. The Corporate Bank delivered record quarterly revenues, with sustained growth in loans, deposits, and client activity across every client segment. We delivered strong revenue growth in Germany, underlining the strength of our home market franchise. The Investment Bank delivered strong results. FICC revenues were close to the record prior year quarter, despite less favorable market conditions, and in IBCM, we increased our EMEA market share by 160 basis points year on year.

We are also pleased that our global foreign exchange business was awarded World's Best FX Bank at the recent Euromoney Awards for the second consecutive year. Our 9 months performance strengthens my confidence yet further that we are on track to deliver on our 2026 objectives. Our franchise, business performance, and balance sheet have remained resilient despite heightened fiscal uncertainty across Europe in an already challenging global economic backdrop. We have seen no meaningful adverse impact to date. Path to our 2028 targets and objectives has become clearer as we make progress against our strategic priorities. This strengthen our view that an ROTE of above 13% represents a floor. Last quarter, I highlighted trends which support further upside to our 2028 targets. German reforms and fiscal stimulus, AI, Savings and Investments Union, and the regulatory environment.

In Germany, we see encouraging signs in the political and economic environment, reinforced by our client conversations. Reform progress continues with growth, competitiveness, and investment firmly on the political agenda. Exports, entrepreneurial activity, and foreign investment are showing signs of improvement. Corporate sentiment is improving and translating into investments, while the Mittelstand remains resilient. We expect German growth to come in ahead of consensus, but faster and more decisive government action is needed to sustain this momentum. On regulation, we are encouraged by plans for a legislative package in the first quarter of 2027 to further integrate Europe's banking sector and boost its competitiveness. We also continued to see further upside from initiatives that are largely in our control, particular technology and process simplification and AI-led productivity gains. We intend to provide further detail on these opportunities with our full year results in January.

With that, let me hand over to Raja.

Thank you, Christian, and good morning. We delivered another strong third quarter with net revenues of EUR 8.3 billion and a return on tangible equity of 10.6%. Profit before tax was EUR 2.6 billion, up 8% year-on-year with an improved cost income ratio of 62.4%. Importantly, all divisions contributed to the year-on-year profit increase. Revenues were up 4% year-on-year, making these 21 consecutive quarters of revenue growth. With non-interest expenses flat year-on-year, we delivered positive operating leverage. C&O once again contributed positively to the revenues this quarter, mainly due to valuation and timing differences, which we expect to partially reverse in the fourth quarter. Let me now turn to revenues in more detail, starting on slide seven. We saw strong growth in the Private Bank, materially benefiting from higher net commission and fee income. Asset Management also made a strong contribution, driven by higher management fees.

As promised, the Corporate Bank delivered both year-on-year and sequential revenue growth with business volume growth and higher revenues across businesses. Investment Bank revenues broadly matched a record prior year quarter. Looking at revenue composition, net interest income demonstrated a solid increase driven by volume growth and hedge rollover, with trading and other income down year-on-year. Net commission and fee income performance showed continued strength, benefiting from growth in discretionary mandates in Wealth Management, as well as stronger performance in the Corporate Bank. Overall, our non-investment banking business represented around 65% of group revenues and increased both sequentially and year-on-year. Let me now move to NII on slide eight. NII was solid at EUR 3.7 billion across the key banking book segments and other funding.

Deposit-related NII continued to benefit from underlying volume growth and the contribution from our hedge portfolio, while loan NII benefited from strong volume growth. For the full year, we continue to expect NII across key banking book segments and other funding to slightly exceed EUR 14 billion. As we said previously, benefits from recent rate decisions are expected to come gradually and sequentially, becoming more pronounced in 2027 and increasing even further in 2028 and beyond, reflecting our structural hedging approach. As always, you can find details on the benefits from long-term hedge portfolio rollover on slide 23 of the appendix. Turning to slide nine, non-interest expenses declined by 3% sequentially and were flat year-on-year.

Incremental investments included around EUR 80 million of workforce measures, mainly reflecting Private Bank operating model optimization, as well as infrastructure investments, ongoing hiring in Wealth Management and IBCM, and the expansion of Corporate Bank solutions to support our capital light growth agenda. Operating efficiencies, mainly through workforce and target operating model measures, continue to largely offset these incremental investments. The modest increase in volume-related costs included higher fixed pay, which was fully offset by lower litigation expenses and bank levies. As we continue to execute our investment plans and efficiency benefits accelerate, we expect positive jaws to become increasingly visible. With that, let me turn to Provisions for credit losses on slide 10. Provision for credit losses was EUR 501 million. We continue to take proactive, capital accretive actions to further de-risk our CRE portfolio, which is reflected in our provisions for the quarter.

In addition, provisions in the Corporate Bank were impacted by an idiosyncratic event in Asia. Underlying asset quality remains strong, with leading indicators showing a stable or improving picture across the majority of our portfolios. As shown in the appendix on page 25, CRE is the primary driver of the elevated group provision run rate. The run rate reflects the proactive de-risking measures and valuation updates on legacy defaulted positions. Our high-risk CRE portfolio has declined materially since 2022. In the U.S., where we have seen the majority of stress, the book is down 42% since 2022 and about 20% year-on-year, reflecting repayments and our proactive de-risking measures. There is no evidence of broader portfolio weakness with the Private Bank and Corporate Bank portfolios remain stable and resilient. Our medium-term expectations remain unchanged.