Deutsche Bank : Q2 Release

Media Release

Frankfurt am Main

28 July 2021

Deutsche Bank reports profit before tax of € 1.2 billion in the second quarter of 2021

Net income of € 828 million with post-tax return on tangible equity (RoTE)1 of 5.5% Transformation drives second-quarter profit growth

• Core Bank: profit before tax rises 90% to € 1.4 billion

• 1. Post-taxRoTE1 of 7.8% with cost/income ratio1 of 76%
• Capital Release Unit reduces quarterly loss before tax by 56% to € 258 million

Net revenues of €6.2 billion, down 1% as markets normalise in second quarter Further progress on costs in the quarter

• Noninterest expenses down 7% year on year to € 5.0 billion
• Adjusted costs ex-transformation charges1 of € 4.6 billion, down 6%

Continued capital, balance sheet and risk discipline

• Common Equity Tier 1 (CET1) ratio of 13.2%, down from 13.7% quarter on quarter, reflecting anticipated regulatory effects on risk weighted assets (RWAs)
• Provision for credit losses of € 75 million, down 90% year on year
• Capital Release Unit further reduces RWAs to € 32 billion, in line with end-2022 target, and cuts leverage exposure by € 10 billion to € 71 billion

Business growth includes record net inflows of € 27 billion into investment products

• Asset Management: record net inflows of € 20 billion help lift Assets under Management by € 39 billion to € 859 billion
• Private Bank: net new business volumes of € 14 billion include net inflows into investment products of € 7 billion

Sustainability: outperformance driven by a record quarter

• Record quarterly ESG financing and investment volumes of € 27 billion
• Cumulative volumes rise to € 99 billion, on path to end-2023 target of € 200+ billion

First half-year 2021: progress toward 2022 ambitions

• Net revenues up 7% to € 13.5 billion year on year
• Provision for credit losses down 89% to € 144 million, or 7 basis points of loans
• Adjusted costs ex-transformation charges and reimbursable expenses related to Prime Finance1 down 4% to € 9.8 billion
• Group profit before tax of € 2.8 billion, up seven-fold, with net profit of € 1.9 billion o Post-tax RoTE1 of 6.5% with cost/income ratio reduced to 78%
• Core Bank profit before tax of € 3.4 billion, up 99%

1. Post-taxRoTE1 of 9.3%, in line with 2022 target, and cost/income ratio of 73%

1 For a description of this and other non-GAAP financial measures, see 'Use of non-GAAP financial measures' on pp 17-25 of the second quarter 2021 Financial Data Supplement

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Strictly Confidential

Christian Sewing, Chief Executive Officer, said: "Our pre-tax profit of € 1.2 billion in the second quarter demonstrates that we're well on the path toward our goal for a post-tax RoTE1 of 8% next year. All our businesses have contributed to the year-on-year profit growth, gained further relevance for our clients and continued to capture market share. Once again, our cost and risk management provided us with firm foundations. Our priority now is to continue with our disciplined execution of transformation, quarter by quarter."

Deutsche Bank (XETRA: DBKGn.DB / NYSE: DB) today reported its best second quarter and best first half year since 2015. Significant year on year profit improvement across all businesses was driven by resilient revenues, sustained progress on cost reduction and substantial year on year improvements in provision for credit losses.

Across the board profit improvement

Group profit before tax was € 1.2 billion in the second quarter of 2021, versus € 158 million in the second quarter of 2020. Net profit was € 828 million, up from € 61 million in the prior year quarter. Post-tax return on average shareholders' equity was 4.9% and post-tax RoTE1 was 5.5% in the quarter. The cost/income ratio was 80%, down from 85% in the prior year quarter.

The quarter reflected a negative impact on profit before tax of € 226 million from the ruling by the German Federal Court of Justice (Bundesgerichtshof or 'BGH') in April 2021 requiring active customer consent for pricing changes on current accounts (for more information on this ruling, please see the 'Provisions' section of the Interim Report). This included an impact of € 96 million in foregone revenues, of which € 93 million was in the Private Bank Germany with the balance in the International Private Bank and Corporate Bank. The cost impact was € 130 million in litigation expenses, also predominantly in the Private Bank.

For the first six months of 2021, profit before tax was € 2.8 billion, up from € 364 million in the same period of 2020. Net profit was € 1.9 billion, up from € 126 million in the prior year period. Post-tax RoTE1 was 6.5%, and 7.6% if adjusted for transformation-related effects1 and specific revenue items. The cost/income ratio was 78%, down from 87% in the first six months of 2020.

In the Core Bank, which excludes the Capital Release Unit, second-quarter profit before tax rose 90% to € 1.4 billion. All four core businesses contributed to this year on year improvement in profitability. Post-tax RoTE1 was 7.8%, up from 3.4% in the prior year quarter, while the cost/income ratio was 76%. Adjusted profit before tax, which excludes specific revenue items, transformation charges, impairments of goodwill and intangibles and restructuring and severance, rose 72% to € 1.6 billion.

For the first six months, Core Bank profit before tax near-doubled to € 3.4 billion. Post-tax RoTE1 was 9.3%, in line with the Core Bank's full-year 2022 target, and 10.5% if adjusted for transformation-related effects1 and specific revenue items. The cost/income ratio was 73%, down from 77% in the prior year period.

Capital Release Unit: significant loss reduction

The Capital Release Unit reported a loss before tax of € 258 million in the quarter, down by 56% from a loss of € 591 million in the second quarter of 2020. The adjusted loss before tax

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was € 236 million, down 54% year on year. This improvement was driven primarily by cost reduction: noninterest expenses were down 48% year on year to € 259 million, while adjusted costs ex-transformation charges1 were down 45% to € 236 million. Net revenues were negative €24 million, an improvement versus negative € 66 million in the prior year quarter.

The Capital Release Unit further reduced RWAs and leverage exposure. RWAs were reduced from € 34 billion to € 32 billion during the quarter, in line with the Unit's end-2022 target, and a reduction of 24% over the past twelve months. The Unit reduced leverage exposure by € 10 billion to € 71 billion during the quarter, and by 30% versus the end of the second quarter of 2020.

For the first six months, the Capital Release Unit reported a loss before tax of € 668 million, a reduction of more than half versus the € 1.4 billion loss before tax in the first six months of 2020. This improvement was driven largely by a 36% year on year reduction in noninterest expenses to € 757 million, while adjusted costs ex-transformation charges were reduced by 40% to € 658 million. Net revenues were € 57 million for the first six months, an improvement of € 180 million versus the first six months of 2020.

Revenues: resilience despite market normalisation and specific effects

Group net revenues were € 6.2 billion, down 1% versus the second quarter of 2020. Revenue development in the quarter reflected the normalisation of financial markets compared to the prior year quarter, continued low interest rates, and the impact of foregone revenues due to the BGH ruling. Revenues in the Core Bank were € 6.3 billion, down 1%.

For the first six months, Group net revenues grew 7% to € 13.5 billion, while Core Bank net revenues grew 5% to € 13.4 billion.

Second quarter revenue development in Deutsche Bank's core businesses was as follows:

• Corporate Bank net revenues were € 1.2 billion, down 8% year on year, or down 6% if adjusted for currency translation effects. Net revenues were essentially unchanged versus the prior year quarter if adjusted for episodic items, including recoveries related to credit protection and portfolio rebalancing actions, which were substantially lower than in the second quarter of 2020. Interest rate headwinds were offset by the positive effects of business growth and further progress on deposit re-pricing, which covered accounts with deposits of € 87 billion, up from € 83 billion at the end of the previous quarter and contributing € 85 million in quarterly net revenues. Deutsche Bank also recaptured the No. 1 position for German Corporate Banking in FINANCE- Magazin's annual survey. For the first six months, net revenues were € 2.5 billion, down 5% year on year, reflecting the aforementioned factors impacting the second quarter.
• Investment Bank net revenues were € 2.4 billion, down 11%. Revenues in Fixed Income & Currencies (FIC) were € 1.8 billion, down 11%. This development largely reflected the anticipated normalisation of financial market activity compared to the second quarter of 2020, which impacted revenues in Rates, Emerging Markets and FX. This was partly offset by strong year on year growth in Credit, both Trading and Financing. Origination & Advisory revenues were 2% higher at € 624 million. Advisory revenues were more than double the prior year quarter, driven by higher M&A activity, while lower levels of Investment Grade Debt issuance in normalising markets more than offset growth and market share gains (source: Dealogic) in Leveraged Debt Capital Markets. Deutsche Bank returned to the No. 1 position in Origination &

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Advisory in Germany in the quarter (source: Dealogic). For the first six months, Investment Bank net revenues were up 9% to € 5.5 billion.

• Private Bank net revenues were € 2.0 billion, up 3% versus the prior year quarter, and up 8% if adjusted for the impact of the BGH ruling. Continued business growth in improved market conditions more than offset pressure on deposit margins from low interest rates. New business volumes of € 14 billion in the quarter included € 4 billion in net new client loans and € 7 billion in net inflows of investment products, the sixth consecutive quarter of net inflows into investment products. Revenues in the Private Bank Germany were down 1%, and up 7% if adjusted for the € 93 million impact of the BGH ruling. Revenues in the International Private Bank grew by 9%, or 8% excluding specific items. For the first six months, Private Bank net revenues rose to € 4.2 billion, up 2% year on year or up 4% if adjusted for the € 94 million impact of the BGH ruling. This increase was supported by continued new business growth, with net new business volumes of € 29 billion in the first half of 2021 including net new client loans of € 9 billion and net inflows in investment products of € 16 billion.
• Asset Management net revenues were € 626 million in the quarter, up 14%. Growth was driven primarily by 15% growth in management fees, as five consecutive quarters of client inflows and supportive market performance more than offset continued industry-wide margin pressure. Net inflows were a record € 20 billion in the quarter, driven by positive flows across asset classes in all regions, and including € 3.8 billion in Environmental, Social and Governance (ESG) assets. These record inflows and strong investment performance contributed to € 39 billion growth in Assets under Management to € 859 billion in the quarter, a new record level, and € 114 billion or 15% higher than at the end of the prior year quarter. For the first six months, net revenues grew 18% to € 1.3 billion, total net inflows were € 21 billion, and Assets under Management grew by € 67 billion.

Further cost reduction

Noninterest expenses were reduced by 7% to € 5.0 billion in the quarter, despite pressure from several external factors including the aforementioned € 130 million in litigation provisions relating to the BGH ruling. Adjusted costs ex-transformationcharges were reduced by 6% year on year to € 4.6 billion.

The workforce was reduced by an additional 592 full-time equivalents (FTEs) to 83,797 during the quarter, and by approximately 3,000 FTEs over the past twelve months. At the end of the quarter, Deutsche Bank had recognised 90% of the total transformation-related effects1 anticipated through the end of 2022.

For the first six months, noninterest expenses were down 4% to € 10.6 billion. Adjusted costs ex-transformation charges1 and reimbursable expenses related to Prime Finance were down 4% to € 9.8 billion, including € 547 million in bank levies.

Sustained year on year improvement in provision for credit losses

Provision for credit losses was € 75 million in the quarter, equivalent to 7 basis points of average loans on an annualised basis, and down by 90% compared to € 761 million in the second quarter of 2020. Provisions for non-performing loans (Stage 3) were € 111 million in the quarter, down 33% on the previous quarter and down by 78% compared to the second

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quarter of 2020. Stage 3 provisions were offset by releases of € 36 million in provisions for performing loans (Stage 1 and 2) which reflected a positive macro-economic outlook.

For the first six months, provision for credit losses was € 144 million, or 7 basis points of average loans annualised, down from € 1.3 billion, or 57 basis points of average loans annualised, in the prior year period.

Conservative capital and balance sheet management

The Common Equity Tier 1 (CET1) capital ratio was 13.2% in the quarter, a decline of 55 basis points compared to 13.7% in the previous quarter. This development reflects a negative impact of approximately 70 basis points from the regulatory-driven increases in RWAs relating to the ECB's Targeted Review of Internal Models (TRIM) and Capital Requirements Regulation (CRR) amendments taking effect in the quarter as expected. The TRIM decisions reflected in the second quarter conclude the multi-year TRIM programme for Deutsche Bank. These factors were partly counterbalanced by a positive impact of 12 basis points from organic capital generation through net income, after deductions for dividends, of € 274 million, and for coupons for Additional Tier 1 (AT1) instruments in the quarter. As at June 30, Deutsche Bank had deducted € 575 million for dividends from first-half 2021 earnings.

Risk Weighted Assets (RWAs) rose from € 330 billion to € 345 billion during the second quarter. This development was almost entirely due to the impact of the aforementioned TRIM decisions and CRR amendments.

The Leverage Ratio (fully-loaded) rose to 4.8% in the second quarter, up from 4.6% in the previous quarter. On a phase-in basis, the Leverage Ratio rose to 4.9%, from 4.7% in the previous quarter. These ratios exclude certain central bank balances under applicable rules. Including these balances, the fully-loaded Leverage Ratio would have been 4.3% in the quarter.

Liquidity Reserves rose € 11 billion to € 254 billion during the quarter, including High Quality Liquid Assets of € 224 billion, up by € 4 billion during the quarter. The Liquidity Coverage Ratio was 143%, a surplus over regulatory requirements of € 67 billion.

2022 ratio targets reaffirmed; guidance updated

Deutsche Bank reaffirmed its 2022 ratio targets in the light of progress made in its transformation, namely: a post-tax RoTE1 of 8% at Group level and over 9% for the Core Bank; a cost/income ratio of 70%; a Common Equity Tier 1 capital ratio of at least 12.5% and a leverage ratio (fully-loaded) of approximately 4.5%. With Deutsche Bank's transformation significantly advanced and having evidenced sustainable profitability in the first half of 2021, management is updating cost guidance to focus on the cost/income ratio. This more accurately reflects the sustainable margin which the bank is targeting. Accordingly, the bank will no longer disclose an absolute cost target, previously € 16.7 billion, for 2022.

Deutsche Bank also provided updated guidance on the drivers of these target ratios as transformation advances. Management expects net revenues to be ahead of guidance provided at the Investor Deep Dive on December 9, 2020. The bank sees a substantial portion of its revenue growth in recent quarters as sustainable, as underpinned by strong business growth in 2021 to date and the expected gradual easing of interest rate headwinds in future quarters. Additionally, provision for credit losses is expected to be lower than previous guidance, in a range of around 20 basis points of average loans.

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