Deutsche Bank Credit Overview

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Transcription:

Credit Overview December 2016

Summary Successful execution of the strategic plan over the next few years will simplify and further de-risk the bank and improve efficiency and the service we provide to our target clients today Strength of the balance sheet gives time and flexibility to execute the strategic plan Capital ratios in excess of regulatory minima today and well-positioned to meet all future requirements Cash and high quality liquid assets account for more than 20% of DB s funded balance sheet, negatively impacting returns but providing further support Over 70% of the balance sheet is funded by long-term, diversified sources Creditor / Counterparty considerations German bail-in law will provide greater protection for various creditors, such as depositors, derivative counterparties, beneficiaries of guarantees and letters of credit (LoC s), holders of structured notes and money market instruments by subordinating plain vanilla senior unsecured debt As a result, senior unsecured ratings and CDS prices are no longer a good reflection of the credit worthiness of a bank All Rating Agencies have separate counterparty obligation ratings, covering - depending on the Agency - products such as deposits, derivatives and guarantees/loc s 1

Agenda 1 2 today Creditor / Counterparty considerations 2

at a glance In EUR bn Key figures (3Q 2016) Revenues by business (2) Leverage exposure by business (3) Total IFRS assets 1,689 Leverage Exposure 1,354 Risk-weighted assets (1) 385 Common Equity Tier 1 capital (1) 42.9 Tier 1 capital (1) 47.4 Total capital (1) 59.8 CET1 ratio (1) 11.1% 9M 2016 30 Sep 2016 AM 10% PW&CC 23% Postbank 11% CIB 25% GM 34% Germany 34% AM 0% AWM PW&CC 6% 15% Postbank 11% CIB 20% NCOU 1% GM 52% Leverage ratio (1) 3.5% Note: Figures may not add up due to rounding differences. GM Global Markets, CIB Corporate & Investment Bank, PW&CC - Private Wealth & Commercial Clients, AM Asset Management, NCOU Non-Core Operations Unit (1) CRR / CRD 4 fully loaded. On a phase-in basis in 3Q2016: Risk-weighted assets: EUR 385bn, Common Equity Tier 1 capital: EUR 48.5bn, Tier 1 capital: EUR 55.8bn, Total capital: EUR 62.2bn, Common Equity Tier 1 ratio: 12.6%, Leverage ratio: 4.1% (2) 9M16 revenues of EUR 22.9bn include revenues for the Non-Core Operations Unit of EUR (524)m and for Consolidations & Adjustments of EUR (132)m that are not shown in this chart (3) 30 Sept 2016 leverage exposure of EUR 1,354bn includes Consolidations & Adjustments exposure of EUR 15bn (1%) that are not shown in this chart 3

A safer and more secure organization In EUR bn, at period end, unless otherwise stated Shareholders equity Liquidity reserves (1) Most stable funding (2) Avg. Value-at-Risk (3) In EUR mn Level 3 assets (4) 1.7x 3.1x 2.4x 72% 62 200 86 (61)% (71)% 88 37 65 30% 34 26 2007 3Q16 2007 3Q16 2007 3Q16 2007 9M16 2007 3Q16 Materially higher capital, liquidity and stable funding Risk at the lowest recorded levels (1) Liquidity reserves include cash, highly liquid government, agency and government guaranteed bonds and other Central Bank eligible securities (2) Most stable funding as a proportion of the total EUR 957bn funded balance sheet. Most stable funding is defined as funds from Capital Markets & Equity, Retail, Transaction Banking and Wealth Management deposits (3) Value-at-risk (VaR) is the average risk of loss for s trading units (excluding Postbank) based on a 99% confidence interval and a one-day holding period (4) Level 3 assets tend to be less liquid instruments where fair value cannot be determined directly by reference to market-observable pricing. Examples would include more-complex OTC derivatives, distressed debt and highly-structured bonds 4

Well positioned for long-term regulatory requirements Group targets Other regulatory metrics Fully loaded 3Q16 2018 2020 3Q16 Comments CET 1 ratio 11.1% 12.5% Liquidity coverage ratio (LCR) (1) 122% 70% minimum in 2016, increasing to 100% by 2018 Leverage ratio 3.5% 4.5% 5.0% Total loss absorbing capacity (TLAC) (2) 29% RWA / 8.2% Leverage FSB minimum requirements From 2019: 20.5% of RWA (3) and 6% Leverage From 2022: 22.5% of RWAand 6.75% Leverage (1) LCR is designed to promote the short-term resilience of the liquidity risk profile of banks by ensuring an adequate stock of unencumbered high-quality liquid assets that can be converted in private markets into cash to meet their liquidity needs for a 30 calendar day liquidity stress scenario. Based on EBA Delegated Act. (2) TLAC includes instruments issued by DB AG or DB-related trusts with time to maturity or time to call > 1 year; nominal values. Includes all non-callable plain-vanilla senior debt (including Schuldscheine and other domestic registered issuance) > 1 year, irrespective of issuer jurisdiction and governing law (3) Includes RWA buffers of 2.5% for capital conservation and 2% for s SIB classification 5

ECB stress test validates DB s progress and strength DB improved results versus 2014 stress test CET1 ratio, fully loaded Net stress delta CET1 ratio under the adverse scenario Starting stress test CET1 ratio: (215)bps 9.2% 11.1% (332)bps DB s stressed CET1 ratio in-line with peers 2018 adverse scenario CET1 ratio, fully loaded 8.1% 8.8% 8.5% 8.2% 7.0% 2014 Stress Test 7.8% 2016 Stress Test 7.8% 7.5% 7.4% 7.3% 7.1% s result ~80bps above regulatory requirements (1) s CET1 ratios improved in the 2016 test by 80bps to 7.8% versus the 2014 exam despite harsher market risk assumptions and the first time inclusion of operational risk losses (OpRisk stress loss assumption of 220bps) Test based on 2015 financials giving no benefit for the Bank s restructuring efforts in 2016/2017 (1) Although the stress test is not a pass / fail exercise, ECB is expected to benchmark results in the adverse scenario against a December 2018 CET1 ratio threshold o f 7%, including a phase-in buffer for systemic institutions of 1.5% 6

Strong credit quality versus peers ECB stress test net credit losses best in class ECB stress test net credit losses in adverse scenario. Impact on CET1 ratio, in bps 287 288 309 Credit loss provisions (1) well below US peers In bps DB DB average 700 US peers US peer average 600 572 500 325 358 470 505 530 s credit loss provisions of 28bps in 9M16 are amongst the best in class reflecting the solid credit quality of the portfolios and the ongoing de-risking efforts DB s credit loss provisions materially below US peers reflecting the lower return / lower risk nature of the credit portfolio Retail portfolio is predominantly mortgage driven (>80%) of which the 84% is to Germany ~70% of corporate exposure (2) to Investment Grade counterparties Source: Company reports (1) Credit loss provisions divided by gross loan book. US Peers: Bank of America, Citigroup and JPMorgan (2) Corporate exposure includes loans, irrevocable lending committments, contingent liabilities, OTC derivatives and debt securities 876 400 300 200 100 0 06 07 08 4.72x 100 09 10 11 12 13 14 15 9M16 7

Derivatives exposure headline numbers materially overstate the economic risk IFRS Derivative trading assets and the impact of netting and collateral In EUR bn, as of 30 Sept 2016 Interest Rate 542 400 94 23 26 IFRS Impact of Cash Financial Net amount Master Collateral Instrument (1) Netting collateral Agreements (435) Currency (59) Equity/index (13) Credit / Other 36 Comments Note: Figures may not add up due to rounding differences (1) Excludes real estate and other non-financial intrument collateral (2) Master netting agreements allow counterparties with multiple derivative contracts to settle through a single payment Gross notional derivative exposure amounts are not exchanged and relate only to the reference amount of all contracts. It is no reflection of the credit or market risk run by a bank IFRS balance sheet derivatives trading assets are the present value of future cash flows owed to DB and as a result represent the credit risk to the Bank Unlike US GAAP, IFRS accounting does not allow for all master netting agreements to reduce derivative assets shown on the balance sheet DB s reported IFRS derivative trading assets of EUR 542bn would fall to EUR 36bn on a net basis, after considering the master netting agreements (2) in place and collateral received 84% of DB s net exposure is to Investment grade counterparties 64% of net exposure relates to interest-rate products, 24% related to currency, 9% related to Equity/index In addition, DB actively hedges its net derivatives trading exposure to further reduce the economic risk 8

Strong decline in Level 3 assets In EUR bn, at period end, unless otherwise stated NCOU disposals significant driver in recent past 4.3% % of DB Group assets 1.5% 88-71% Comments Level 3 classification does not explicitly imply an asset is more risky Level 3 assets are instruments where the fair value of one or more parameters cannot be determined directly by market information and where pricing techniques must be employed Level 3 assets include Commercial Real Estate loans, some municipal bonds as well as OTC derivatives 38 14 26 2 25 24 NCOU Core Bank Level 3 assets only account for 1.5% of DB assets Sensitivity analysis around the uncertainty of unobservable market parameters (consistent with prevailing market evidence) shows limited downside of EUR 1.1bn (~20 bps pro-forma impact on 3Q16 CET1 ratio) versus a potential increase in asset valuations of EUR 1.6bn (~30 bps pro-forma impact on 3Q16 CET1 ratio) 2007 2012 3Q16 As of 30 Sept 2016, ~70% of Level 3 assets are financial assets available for sale and trading securities - with the intention for sale within the next 12 months 9

Agenda 1 2 today Creditor / Counterparty considerations 10

Changes to German insolvency law strengthen position of depositors and counterparties In EUR bn, as of 1 January 2017 Various creditors, such as depositors, derivative counterparties, beneficiaries of guarantees and LoC s, holders of structured notes and money market instruments sit above EUR 59bn of equity, Tier 1 and Tier 2 instruments and also EUR 52bn of senior plain vanilla debt liable for bail-in has EUR 111bn of Total Loss Absorbing Capacity (TLAC). Senior plainvanilla debt < 1 year will not qualify as TLAC but still represents loss-absorbing capacity CDS & senior unsecured bond yields are no longer appropriate risk proxies for the entire Group, given the lower ranking of plain-vanilla senior unsecured bonds under the German bail-in law Loss participation only if TLAC is exhausted EUR 111bn of TLAC 52 6 10 43 30 Sep 2016 Deposits 100k EUR and short-term liabilities (1) Deposits EUR>100k of natural persons /SMEs Other deposits (2), structured notes, MM instruments, operating liabilities Plain-vanilla senior notes and Schuldscheine (unless qualified as deposits) (3) Tier 2 AT1 (4) CET1 (fully loaded) Note: Figures may not add up due to rounding differences (1) Insured deposits and deposits by credit institutions and investment firms with original maturity <7 days are excluded from bail-in (2) Deposits >EUR 100k of large caps, all remaining deposits of financial institutions and the public sector (3) Includes all plain-vanilla senior debt (including callable bonds, Schuldscheine and other domestic registered issuance) > 1 year, irrespective of issuer jurisdiction and governing law (4) Includes legacy Tier 1 instruments issued by DB AG or DB-related trusts; time to maturity or time to call > 1 year; nominal values; reflects contractual deep subordination 11

Rating methodologies increasingly reflect new resolution regime and therefore require more differentiation Loss participation only if other sources exhausted Counterparty obligations (e.g. Deposits / Structured Notes / Derivatives / Swaps) A3(cr) (1) BBB+ (2) A (3) A(high) Senior unsecured Long-term Baa2 BBB+ A- A (low) Short-term P-2 A2 F1 R-1(low) Loss absorbing capacity Tier 2 Ba2 BB+ BBB+ - Legacy T1 B1 B+ BB+ - AT1 B1 B+ BB - The counterparty rating is the relevant rating for >95% of DB s clients Note: Ratings as of 15 December 2016 (1) Moody s Counterparty Risk Assessments are opinions on the likelihood of default by an issuer on certain senior operating obligations, including payment obligations associated with derivatives, guarantees and letters of credit. Counterparty Risk assessments are not explicit ratings as they do not take account of the expected severity of loss in the event of default (2) The issuer credit rating is S&P s view on an obligor s overall creditworthiness. It does not apply to any specific financial obligation, as it does not take into account the nature of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability of the obligation (3) A assigned as long-term deposit rating, A(dcr) for derivatives with third-party counterparties, A(emr) for certain senior unsecured structured notes with embedded market risk 12

s senior unsecured ratings reflect the German bail-in law treatment of senior unsecured debt Operating company Holding company Moody s S&P Rating scale EU Peers Swiss Peers US Peers Short-term rating Long-term rating BAR BNP HSBC SOC CS UBS BoA Citi GS JPM MS P/A-1 Aa2/AA P/A-1 P/A-1 A1/A+ P/A-1 A2/A P/A-2 P/A-2 Baa1/BBB+ P/A-2 Baa2/BBB P/A-3 Aa3/AA- A3/A- Baa3/BBB- Note: Data from company information / rating agencies, as of 15 December 2016. The chart shows current senior unsecured ratings. S&P s US operating companies are under credit watch positive. Outcome of short-term ratings may differ given agencies have more than one linkage between long-term and short-term rating 13

CDS spreads do not reflect s risk or funding costs CDS spreads have had limited correlation with DB s cost of funding or issuance plans 300 250 200 150 100 50 DB 5yr EUR-CDS in bps DB average issuance spread, in bps (1) DB debt issuance, in EUR bn 0 10.4 6.3 9.1 11.1 2.8 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 Comments Single-name CDS trading volumes are lower than pre-crisis making movements in prices more erratic The movement in CDS spreads since early 2016 reflects the introduction of the German bail-in law from 1 January 2017 Senior unsecured debt (which CDS spreads reference) will be legally subordinated to deposits and operational liabilities CDS can no longer be viewed as a proxy for the probability of default for the entire Bank As a result of the lower volumes and bail-in law, there has been limited correlation between s CDS spreads and the Bank s funding costs (1) Based on the 4 week moving average issuance spread. AT1 instruments excluded from spread calculation. As of January 2016, all non-euro funding spreads rebased to a spread vs. 3 month Euribor and reported accordingly. 4Q15 spreads would have been on average ~10bps lower if reported on that basis 14

Cautionary statements This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of 11 March 2016 under the heading Risk Factors. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir. This presentation also contains non-ifrs financial measures. For a reconciliation to directly comparable figures reported under IFRS, to the extent such reconciliation is not provided in this presentation, refer to the 3Q2016 Financial Data Supplement, which is accompanying this presentation and available at www.db.com/ir. 15