Deutsche Bank : Q2 Releases

Media Release

Frankfurt am Main	29 July 2020

Deutsche Bank reports pre-tax profit of 158 million euros in second quarter of 2020 with transformation fully on track

2nd-quarter profit despite restructuring and rise in credit loss provisions

• Group pre-tax profit of 158 million euros, versus pre-tax loss of 946 million euros in 2nd quarter of 2019
• Net profit of 61 million euros, versus net loss of 3.1 billion euros in the prior year quarter which included transformation-related effects
• Provision for credit losses of 761 million euros, consistent with management expectations; re-affirming full year guidance of 35-45 basis points of loans

Core Bank earnings momentum in the quarter

• Pre-taxprofit of 753 million euros, versus loss in prior year quarter
• Net profit of 489 million euros, post-tax return on tangible equity of 3.4%1

Revenue growth year on year

• Group net revenues up 1% to 6.3 billion euros despite exit of Equities
• Core Bank net revenues up 6% to 6.4 billion euros, up 8% to 6.3 billion euros ex-specific items1
• Investment Bank net revenues up 46%, up 52% ex-specific items1

Sustained progress on costs

• Noninterest expenses down 23% year-on-year to 5.4 billion euros
• Adjusted costs ex-transformation charges1 down 10% to 4.8 billion euros excluding reimbursement-eligible Prime Finance expenses

Significant progress on transformation

• Completed legal entity merger of Private Bank in Germany
• Created International Private Bank by combining Wealth Management and Private & Commercial Business International
• Completed Integration of Corporate Bank in Germany
• Set 200 billion euro target for sustainable financing and investment
• Announced agreement to form partnership with Google Cloud

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1 For a description of this and other non-GAAP financial measures, see 'Use of non-GAAP financial measures' on pp 17-18

Issued by the media relations department of Deutsche Bank AG	Internet:db.com/news
Taunusanlage 12, 60325 Frankfurt am Main	Email: [e-mail]
Phone [phone], Fax [phone]

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Christian Sewing, Chief Executive Officer, said: "In a challenging environment we grew revenues and continued to reduce costs, and we're fully on track to meet all our targets. This enabled us to more than offset higher provision for credit losses and remain profitable while supporting clients through difficult conditions. Our strong capital position not only demonstrates our resilience, but also gives us scope for growth."

Deutsche Bank (XETRA: DBKGn.DB / NYSE: DB) reported revenue and profit

growth and remains on track with its ambitious transformation announced in July 2019, despite ongoing restructuring and the impact of the COVID-19 pandemic. Core Bank revenue growth, combined with continued progress on cost reduction, was sufficient to offset a rise in provision for credit losses to 761 million euros in the quarter, in line with management expectations and driven primarily by the impact of the COVID-19 pandemic. The CET1 capital ratio increased to 13.3% in the quarter, 283 basis points above regulatory requirements.

Profit growth driven by core businesses

Pre-taxprofit was 158 million euros in the quarter, after transformation- related effects of 280 million euros and 124 million euros of bank levy charges. This compares with a pre-tax loss of 946 million euros in the second quarter of 2019 which included goodwill impairments and other transformation-related effects.

Net profit was 61 million euros in the quarter. This contrasted to a net loss of 3.1 billion euros in the prior year quarter which included transformation-related effects of 3.4 billion euros, predominantly comprising Deferred Tax Asset (DTA) valuation adjustments, goodwill impairments and software impairments. Current quarter results include transformation related effects of 310 million euros.

For the first six months of 2020, pre-tax profit was 364 million euros, versus a pre-tax loss of 654 million euros in the prior year period. Net profit was 126 million euros, versus a net loss of 2.9 billion euros in the prior year which was primarily due to the aforementioned transformation-related effects.

Provision for credit losses was 761 million euros in the quarter, 69 basis points (annualised) of loans, up from 506 million euros and 44 basis points (annualised) of loans in the first quarter of 2020. This was in line with management expectations and reflects the weaker macro-economic outlook relative to March 31st, a management overlay to account for uncertainties in the outlook as well as downgrades to client credit ratings.

Deutsche Bank reaffirms its guidance for full year 2020 provision for credit losses of between 35-45 basis points of loans.

The Core Bank, which excludes the Capital Release Unit, reported second- quarter profit before tax of 753 million euros, versus pre-tax loss of 180 million euros in the prior year quarter. This was driven by revenue growth of 6% and a 19% reduction in noninterest expenses.

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Core Bank adjusted profit before taxes1 rose 11% to 935 million euros. This excludes specific revenue items with a net positive impact of 41 million euros, transformation charges of 41 million euros and restructuring and severance charges of 182 million euros in the quarter. On this basis, the Core Bank generated a post-tax return on tangible equity1 of 4.3% in the quarter.

For the first six months, Core Bank profit before tax more than doubled to 1.7 billion euros. Adjusted profit before tax1 rose 21% to 2.0 billion euros, and post-tax return on tangible equity1 on this basis was 5.1%.

The Capital Release Unit reported a loss before tax of 595 million euros, down by 22% versus the prior year quarter. Revenues were down from 221 million euros to negative 70 million euros, reflecting businesses exited or discontinued and the impact of de-risking costs. Noninterest expenses were down by 50% to 496 million euros, and adjusted costs ex-transformation charges were 30% lower at 430 million euros. This was due to lower internal service cost allocations and lower compensation costs, reflecting headcount reductions, and lower non- compensation costs.

The Capital Release Unit further reduced leverage exposure to 102 billion euros in the quarter, down by 16 billion euros. Risk weighted assets (RWAs) were 43 billion euros, down 4% in the quarter and down 34% since the second quarter of 2019. Progress on de-risking in the quarter was partly offset by a rise in Market Risk RWAs driven by volatile financial market conditions.

For the first six months, the Capital Release Unit reported a loss before taxes of

1.4 billion euros, 4% higher year-on-year, and reduced leverage exposure by 25 billion euros. The Unit remains on track to meet its 2022 de-risking targets.

Capital and balance sheet strength

The CET1 ratio was 13.3% at the end of the quarter, up from 12.8% in the first quarter of 2020. The quarter-on-quarter increase of 42 basis points was driven by several positive factors. These included: the net positive impact of COVID-19 related effects, including the repayment of credit facilities by customers; the benefit of the accelerated implementation of the EU's 'Quick Fix' to Capital Requirement Regulation 2 (CRR2); and further de-risking by the Capital Release Unit during the quarter.

The leverage ratio rose by 20 basis points to 4.2% (fully loaded) in the quarter, primarily reflecting changes to the treatment of pending settlement balances following implementation of the aforementioned 'Quick Fix' to CRR2. On a pro forma basis, excluding cash deposits with the European Central Bank, the fully- loaded leverage ratio rose to 4.4% at the quarter-end. On a phase-in basis, the leverage ratio rose from 4.1% to 4.3% in the quarter.

Liquidity reserves rose by 28 billion euros to 232 billion euros in the quarter, driven by the aforementioned reversal of client drawdowns and higher Core Bank

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deposits. The Liquidity Coverage Ratio rose to 144% in the quarter, a surplus to regulatory requirements of 64 billion euros.

Sustainable Finance: new targets and progress on policies

Deutsche Bank published quantifiable targets for sustainability metrics on May 12, 2020, for the first time. By the end of 2025, it aims to increase its volume of ESG financing plus its portfolio of sustainable investments under management to at least 200 billion euros in total.

The bank strengthened its policy framework in key areas: Fossil Fuels and Equator Principles. As part of its new Fossil Fuels Policy, Deutsche Bank this week announced its commitment to end its business activities in coal mining worldwide by 2025 at the latest. It will also stop financing, with immediate effect, oil and gas projects in the Arctic region or oil sand projects and will review all its existing activities in the oil and gas sector by the end of 2020.

Deutsche Bank also signed the collective commitment on Climate Action of the German financial sector, pledging to align its credit portfolios with the goals of the Paris Agreement. This includes a commitment to introduce methods of measuring their climate impact by the end of 2022 and then regulate them in accordance with national and international climate targets.

Core Bank revenue growth

In the second quarter, Core Bank net revenues were up 6% year-on-year to 6.4 billion euros, or 8% excluding specific items. These items included debt valuation adjustments, a change in the valuation of an investment in the Investment Bank, and Sal. Oppenheim workout activities in the Private Bank.

Corporate Bank net revenues were 1.3 billion, up 3% year-on-year. Global Transaction Banking revenues rose 4% to 965 million euros, while Commercial Banking revenues of 363 million euros were essentially flat. Excluding credit loss recoveries and the impact of portfolio re-balancing actions, Corporate Bank revenues were slightly lower year-on-year as interest rate headwinds were partly offset by progress in deposit repricing loan volume growth and balance sheet management.

Investment Bank net revenues were up 46% year-on-year to 2.7 billion euros, or up 52% ex-specific items. Revenues in Fixed Income & Currencies (FIC) Sales & Trading were 2.1 billion euros, up 39%, or 46% ex-specific items. Revenues in the FIC Sales & Trading business, excluding Financing and specific items, increased by more than 75%. Rates recorded its best second-quarter revenues for a decade, while both Foreign Exchange and Emerging Market revenues also saw significant year-on-year growth, while Financing was broadly flat versus the prior year. Origination & Advisory revenues were up 73% to 639 million euros due to strong growth in Debt and Equity Origination. Advisory revenues were down significantly, reflecting lower levels of market activity.

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Private Bank net revenues were 2.0 billion euros, down 5% year-on-year. The decline reflected certain items related to the execution of strategic objectives. Revenues were also impacted by COVID-19 and ongoing deposit margin compression which offset the positive impact of continued growth in volumes. Revenues in the Private Bank Germany were 1.2 billion euros, down 5%, in part reflecting impacts from the German legal entity merger. Revenues in the Private and Commercial Business International were down 12% to 324 million euros, partly reflecting the impact of COVID-19 in Italy and Spain. Wealth Management revenues declined 1% to 424 million euros, with business growth largely offsetting headwinds from COVID-19 and interest rates.

As economies re-opened after the initial impact of COVID-19, business volumes in some key areas recovered. The Private Bank made net new client loans of 3 billion euros and attracted net inflows from investment products of 5 billion euros, versus 1 billion euros in the prior year quarter.

Asset Management net revenues were down 8% to 549 million euros, primarily due to the non-recurrence of periodic performance fees relating to an infrastructure fund in the prior year quarter.

Assets under Management rose by 45 billion euros to 745 billion euros in the quarter, including net inflows of 9 billion euros which more than reversed outflows of 2 billion euros in the previous quarter and were more than double the net inflows of the prior year quarter.

For the first six months, Core Bank net revenues grew by 7% to 12.8 billion euros, and by 7% to 12.7 billion euros excluding specific items.

Further progress on cost reduction

Noninterest expenses were 5.4 billion euros in the quarter, down 23% year on year. This reduction was partly driven by the non-recurrence of 1.0 billion euros of impairments of goodwill in the prior year quarter and a decline in transformation charges to 95 million euros, versus 351 million euros in impairments on software and provision for existing service contracts in the prior year quarter.

Adjusted costs ex-transformationcharges were down 8% year-on-year to 4.9 billion euros in the quarter, and down 10% to 4.8 billion euros if adjusted for 92 million euros in expenses eligible for reimbursement related to Prime Finance. This represents the tenth successive quarter of year-on-year reductions in adjusted costs excluding bank levies and transformation charges. Deutsche Bank re-affirmed its full-year 2020 target of 19.5 billion euros of adjusted costs ex-transformation charges and the aforementioned expenses eligible for reimbursement, down from 21.5 billion euros in 2019.

Compensation and benefits expenses excluding transformation charges were down 192 million euros year-on-year. This was due to headcount reductions of over 4,000 full-time equivalents (FTEs) since the second quarter of 2019, and a net

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positive impact of changes to deferred compensation expense including the effect of a change in estimate related to service periods. IT costs were reduced by 146 million euros, mainly due to lower software amortization; spending on IT was broadly stable and in line with target range as the bank continued its investment programme. Professional service fees were cut by 41 million euros, reflecting disciplined external spend management.

These reductions were partly offset by bank levies of 124 million euros, including 118 million euros not included in the first quarter and arising from changes in input assumptions made by the Single Resolution Board.

For the first six months, noninterest expenses were 11.0 billion euros, down 15%. Adjusted costs ex-transformation charges and expenses eligible for reimbursement relating to Prime Finance were 10.2 billion euros, down 10%, and included bank levies of 627 million euros not expected to recur in the second half of 2020.

Group Results at a glance

		Three months ended						Six months ended
in € m.	Jun 30,		Jun 30,		Absolute		Change	Jun 30,		Jun 30,		Absolute		Change
(unless stated otherwise)		2020		2019		Change		in %		2020		2019		Change		in %
Net revenues:
Of which:
Corporate Bank (CB)	1,328	1,294	34	3		2,653	2,636	18	1
Investment Bank (IB)	2,654	1,823	831	46		4,993	3,811	1,182	31
Private Bank (PB)	1,981	2,087	(106)	(5)		4,142	4,212	(70)	(2)
Asset Management (AM)	549	594	(45)	(8)		1,068	1,119	(51)	(5)
Capital Release Unit (CRU)	(70)	221	(291)		N/M	(129)	608	(737)		N/M
Corporate & Other (C&O)		(154)		184		(338)		N/M		(91)		168		(259)		N/M
Total net revenues		6,287		6,203		84		1		12,637	12,554		84		1
Provision for credit losses		761		161		600		N/M		1,267		301		966		N/M
Noninterest expenses:
Compensation and benefits		2,645		2,813		(168)		(6)		5,334		5,679		(345)		(6)
General and administrative expenses		2,599		3,089		(490)		(16)		5,474		6,159		(685)		(11)
Impairment of goodwill and other
intangible assets		0		1,035	(1,035)		N/M		0		1,035	(1,035)		(100)
Restructuring activities		123		50		74		148		197		33		164		N/M
Total noninterest expenses		5,367		6,987	(1,620)		(23)		11,006	12,906	(1,901)		(15)
Profit (loss) before tax		158		(946)		1,104		N/M		364		(654)		1,018		N/M
Income tax expense (benefit)		97		2,204		(2,107)		(96)		238		2,295		(2,057)		(90)
Profit (loss)		61	(3,150)		3,210		N/M		126	(2,949)		3,075		N/M
Profit (loss) attributable to noncontrolling
interests		32		40		(8)		(20)		56		63		(7)		(12)
Profit (loss) attributable to Deutsche
Bank shareholders and additional equity
components		28	(3,190)		3,218		N/M		71	(3,012)		3,083		N/M
Profit (loss) attributable to additional
equity components		105		82		23		28		190		162		28		17
Profit (loss) attributable to Deutsche
Bank shareholders		(77)	(3,272)		3,195		(98)		(120)	(3,174)		3,055		(96)
Common Equity Tier 1 capital ratio		13.3 %		13.4 %		(0.2) ppt		N/M		13.3 %		13.4 %		(0.2) ppt		N/M
Leverage ratio (fully loaded)		4.2 %		3.9 %		0.2 ppt		N/M		4.2 %		3.9 %		0.2 ppt		N/M
Loans (gross of allowance for loan
losses, in € bn)1		442		419		23		5		442		419		23		5
Deposits (in € bn)1		573		577		(4)		(1)		573		577		(4)		(1)
Employees (full-time equivalent)1		86,824	90,866	(4,042)	(4)		86,824	90,866	(4,042)	(4)

N/M - Not meaningful

Prior year segmental information have been restated to the current structure.

1 As of quarter-end.

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