Lee Street

Lee Street from Citigroup inquired about Deutsche Bank's strategic decision to no longer defend the Advanced Loss Given Failure (LGF) notch for its senior non-preferred debt, seeking clarification on the timing, cost implications, and its impact on the bank's liability stack. Additionally, he asked how Deutsche Bank plans to measure its progress towards becoming a "European champion" by 2028, specifically regarding peer group comparison and return targets.

Answer

Richard Stewart, Group Treasurer, explained that the decision to drop the LGF notch was made as the bank's transformation phase is complete, ratings have improved, and it aligns Deutsche Bank with European peers, allowing for optimization of funding composition and a rebalancing of the capital market stack. Raja Akram, CFO Designate, outlined that becoming a European champion involves achieving a 13% return on tangible equity by 2028, market-leading positions in key segments (FIC, wealth, asset management), leading returns versus European peers, and becoming a destination of choice for talent, with progress markers including deposit growth and market share evolution.

Lee Street from Citigroup inquired about Deutsche Bank's decision to no longer defend the LGF notch for senior non-preferred debt, asking about the implications for the end-state liability stack and the timing/cost drivers. He also asked how to measure Deutsche Bank's aspiration to become a 'European champion' by 2028, given current return and cost-income targets relative to peers.

Answer

Richard Stewart (Group Treasurer) explained that the LGF notch was beneficial during the transformation phase, which is now complete, and removing it optimizes funding composition and cost base, aligning with European peers. He noted it allows for a rebalance from senior non-preferred to senior preferred debt, leading to a managed reduction in TLAC/MREL headroom while maintaining appropriate buffers. Raja Akram (CFO Designate) clarified that becoming a 'European champion' means achieving market-leading positions in key segments (FIC, wealth management, asset management), leading returns versus European peers, and becoming a destination of choice for talent, with progress markers provided between now and 2028.

Lee Street from Citigroup asked about Deutsche Bank's future profitability, specifically if a 10% return on tangible equity (RoTE) should be considered a floor for annual performance. Additionally, he inquired about other areas on the bank's watch list for potential risks, beyond private credit and commercial real estate (CRE).

Answer

CFO James von Moltke responded that the structural profitability has risen to make a 10% RoTE entirely possible, with PPNR and capital providing robust loss absorption. Regarding watch list items, Mr. von Moltke noted that private credit is a watch item but not a concern, CRE remains a soft spot with expected healing, and previous reviews of automotive/manufacturing sectors in Germany showed resilience. Geopolitical risks are also continuously stress-tested.

Lee Street asked if a 10% return on tangible equity (ROTE) should be considered a floor for Deutsche Bank's annual performance in the coming years, and inquired about other credit watch list areas beyond private credit and commercial real estate.

Answer

CFO James von Moltke stated that the structural profitability has risen, making numbers like 10% ROTE entirely possible, supported by increasing pre-provision profit (PPNR) and capital. He noted that commercial real estate (CRE) remains a soft spot, while automotive and manufacturing sectors in Germany have held up well. Geopolitical risks are continuously stress-tested, with little direct portfolio exposure.

Asked about the bank's new capital operating range and its implications for shareholder distributions, the outlook for credit ratings, and the potential for M&A activity in the next 18 months.

Answer

The bank's capital distribution policy remains unchanged, with flexibility for additional distributions if the CET1 ratio is sustainably above 14%. They are confident in further positive rating revisions and see limited impact from regulatory reviews. M&A is not an immediate priority as the focus remains on internal strategy and execution.

Lee Street of Citigroup asked about Deutsche Bank's capital framework, specifically if the 14% CET1 ratio is a floor for shareholder distributions. He also inquired about the outlook for credit ratings and the bank's potential involvement in M&A over the next 18 months.

Answer

Group Treasurer Richard Stewart clarified that the bank's distribution policy of returning 50% of earnings is unchanged, with flexibility for additional distributions above a 14% CET1 ratio. He noted the MDA buffer is strong at around 300 basis points. On ratings, he expressed confidence in further positive revisions over time and does not expect negative impacts from Moody's methodology review or CMDI. CFO James von Moltke reiterated that the bank's primary focus remains on its own strategic execution ('self-help') before considering any M&A, highlighting the current political resistance to both domestic and cross-border consolidation in Europe.

Lee Street of Citigroup asked about Deutsche Bank's capital framework, specifically if 14% CET1 is the new floor for shareholder distributions. He also inquired about the future direction of credit ratings following recent upgrades and the potential impact of Moody's methodology changes and CMDI. Finally, he asked about the bank's potential involvement in European M&A over the next 18 months.

Answer

Richard Stewart, Group Treasurer, clarified that the distribution policy of returning 50% of earnings remains unchanged, even at the low end of the 13.5%-14% CET1 target range, with flexibility for more above 14%. On ratings, he expressed confidence in further upgrades and stated the bank does not expect negative repercussions from Moody's review or CMDI. James von Moltke, President and CFO, addressed M&A by reiterating the bank's current focus on its own strategy ('self-help') before considering consolidation, noting political hurdles exist for both domestic and cross-border deals in Europe.

Lee Street from Citigroup asked about the strategic fit and synergies of the U.S. Consumer Bank within the broader Barclays group, and whether the target CET1 ratio would decrease if regulatory capital requirements were lowered.

Answer

Anna Cross, Group Finance Director, explained that the U.S. Consumer Bank is a partnership business with strong corporate client connections, providing diversification for CCAR results and sharing capabilities with the UK card business. Both Anna Cross and Daniel Fairclough, Group Treasurer, stated that the CET1 target is based on multiple factors including regulatory expectations, investor views, and peer comparisons, not just a simple link to minimum requirements.

Lee Street from Citigroup asked about the strategic fit and synergies of the U.S. Consumer Bank within the broader Barclays group and inquired if the target CET1 ratio would decrease if regulatory capital requirements were lowered.

Answer

Anna Cross, Group Finance Director, explained that the U.S. Consumer Bank is a partnership business that provides diversification, CCAR benefits, and shares capabilities with the UK card business, targeting a >12% RoTE. Regarding the CET1 ratio, she stated the 13-14% target is appropriate for now, pending regulatory clarity. Daniel Fairclough, Treasurer, added that peer comparisons and stress scenarios also influence the target, making it more than a simple function of regulatory minimums.