Stefan Stalmann

Stefan Stalmann from Autonomous Research asked about Deutsche Bank's competitive position in capital markets, given the potential for U.S. banks to receive substantial capital relief. He also questioned the recurring positive contribution from valuation and timing differences in C&O, asking if the cumulative €2.5 billion benefit since 2018 is expected to reverse.

Answer

CEO Christian Sewing addressed competition by stating that European authorities are now more open to discussing the level playing field and that global clients increasingly seek a strong European alternative, which benefits Deutsche Bank. CFO James von Moltke explained the C&O gains are largely a 'pull to par' of derivative hedging losses from 2022-23, which will continue over time but with the near-term excess benefit washing out.

Stefan Stalmann of Autonomous sought clarification on whether FIC trading was up year-on-year for the month of April or year-to-date. He also asked about the hedging of share-price-related compensation costs and the bank's U.S. dollar Net Stable Funding Ratio (NSFR).

Answer

CFO James von Moltke confirmed that FIC revenues were up year-on-year for both the month of April and year-to-date. He explained that while the group provides a hedge benefit to DWS on compensation, the expense impacts the consolidated group. Regarding the dollar NSFR, he stated the bank's position is very strong, with over 90% of dollar assets funded by dollar liabilities, and would be well over 100% including cross-currency funding.

Stefan Stalmann of Autonomous Research inquired about the accounting treatment for the Banco BPM stake (fair value through P&L vs. equity), a discrepancy in the reported purchase of Crédit Agricole shares by regional banks, and the reason for a 12% decline in insurance distribution fees in regional banks.

Answer

Executive Jerome Grivet clarified that the 19.8% BPM stake is now split: half is accounted for through P&L (partially hedged) and the new half is accounted for through OCI (equity), not impacting P&L directly. He explained the regional banks' share purchase program of up to €500 million was not yet complete at quarter-end. The drop in insurance fees was attributed to a positive one-off base effect in Q1 2024; underlying fees actually grew around 7%.

Stefan Stalmann asked about the accounting treatment for the Banco BPM stake, sought clarification on the regional banks' purchase of Crédit Agricole shares, and inquired about the reason for a decline in insurance distribution fees.

Answer

Executive Jerome Grivet explained that the Banco BPM stake is now accounted for in two parts: half through P&L (partially hedged) and the newer half through OCI. He clarified that the share purchase program by SAS Rue La Boétie was ongoing and not completed by quarter-end. The decline in insurance fees was attributed to a one-off positive adjustment in the prior year's quarter, with underlying fees actually growing about 7%.

Stefan Stalmann from Autonomous Research questioned if recent net inflows into Eurolife policies signaled a permanent client shift and its potential solvency impact, and asked for clarification on the dividend accrual rate.

Answer

Executive Jerome Grivet explained that the dividend accrual is precisely 50% of the distributable result, with any perceived difference likely due to non-P&L items like AT1 coupon effects. Regarding insurance, he noted that higher rates have made Euro products more attractive, driving inflows, but the volume is modest and does not pose a threat to the solvency of the insurance business.

Stefan-Michael Stalmann asked for an explanation of the 'NIM ceiling' mentioned for CA Italia. He also questioned the divergence in cost of risk trends, with LCL's trending up while the regional banks' remained stable.

Answer

Jerome Grivet, an executive, explained that the 'NIM ceiling' for CA Italia refers to the expected pressure on net interest margin as anticipated ECB rate cuts will lower yields in the rate-sensitive Italian market. Regarding the cost of risk, he attributed the increase at LCL to random effects on a smaller portfolio and noted that regional banks have a larger buffer of IFRS 9 provisions to absorb losses.

Stefan-Michael Stalmann asked for the reason behind the 60 basis point drop in the parent bank's CET1 ratio and questioned the strategic impact of the group's lower risk density, which appears to be constrained by the leverage ratio rather than risk-weighted assets.

Answer

Todd Tuckner, Group Chief Financial Officer, explained the parent bank's CET1 ratio decline was due to an accrual for a future dividend. He acknowledged that the group is more constrained by the leverage ratio, as RWA offers more optimization potential, but affirmed that the ~14% CET1 capital ratio remains their binding target.

Stefan-Michael Stalmann of Autonomous Research asked about the strategic rationale for shifting the U.S. wealth management business towards lower wealth brackets and sought confirmation on whether the announced share buybacks were deducted from year-end CET1 capital.

Answer

CFO Todd Tuckner clarified the U.S. strategy is a "rebalancing" rather than a shift, aiming to increase penetration in the more profitable high-net-worth and affluent segments while maintaining strength in the ultra-high-net-worth segment. He confirmed the planned $1 billion buyback for H1 is accrued, but the additional $2 billion for H2 is not.

Stefan Stalmann from Autonomous Research inquired about the composition of the Lombard loan book, asking for the split between funds used for leveraged investments versus other purposes. He also questioned whether there was any regulatory appetite in Switzerland to change liquidity requirements like LCR and NSFR.

Answer

CFO Evie Kostakis estimated that approximately 80% of the Lombard book is used for reinvestment purposes. Regarding regulation, she stated there is currently no formal information on changes, but reforms are a reasonable expectation. She emphasized that Julius Baer, while not a too-big-to-fail bank, applies its own conservative liquidity stress tests, resulting in a high LCR of over 300%.

Stefan Stalmann requested clarification on the 'other factors' benefit in the CET1 waterfall and asked for color on the reduction in client deposits since June, questioning if it was due to disintermediation and if the trend would continue.

Answer

CFO Evie Kostakis directed the question on CET1 details to an appendix slide. Regarding deposits, she noted a significant FX translation effect on the decline and commented that future trends are hard to predict, as Julius Bär is often seen as a 'Safe Harbor' for deposits in risk-off environments.

Stefan Stalmann of Autonomous Research asked about the practicality of the 11% CET1 target, the strategic ambitions for the new investment management division, and the potential for legal liabilities beyond the resolved U.S. case.

Answer

CFO Dieter Enkelmann explained the firm would only consider going below the 11% CET1 target for a large acquisition, with the regulatory minimum as an absolute floor. He also stated that provisions are taken for likely legal cases, and the other disclosed cases are viewed as less likely to result in payment. CEO Boris Collardi clarified the new division is a spin-off of an internal unit to sharpen focus on investment performance for Julius Baer's clients, not a return to third-party asset management.