Deutsche Bank AG - Analyst/Investor Day

Deutsche Bank AG (DB)

September 11, 2012 9:00 am ET


Juergen Fitschen - Co-Chief Executive Officer and Member of Management Board

Anshuman Jain - Co-Chief Executive Officer and Member of Management Board

Stefan Krause - Chief Financial Officer, Member of Management Board and Member of Capital & Risk Committee


Kinner R. Lakhani - Citigroup Inc, Research Division

Derek De Vries - BofA Merrill Lynch, Research Division

Dieter Hein - Fairesearch GmbH & Co KG

Fiona Swaffield - RBC Capital Markets, LLC, Research Division

Stuart Graham - Autonomous Research LLP

Kian Abouhossein - JP Morgan Chase & Co, Research Division

Philipp Zieschang - UBS Investment Bank, Research Division

Jernej Omahen - Goldman Sachs Group Inc., Research Division


Unknown Executive

Good afternoon, and welcome to Deutsche Bank's 2012 Investor Day. It's a great pleasure to have you all here. And on behalf of the entire GEC, I would like to welcome you all to this Investor Day, both everyone who's in the room, but also everyone who's joining us on the webcast.

Today marks the first day after our 100-day strategic review. We promised to you that we'd come back, have our management presenting to you the vision, the financial aspirations we have for the bank. Our Co-Chairmen are here to do that today to present that for 2015 and beyond. We will do the follow-up session basically tomorrow on how we are going to deliver against our ambitions.

First of all, before we start with the Co-Chairman, I'd like to remind you about the cautionary statements regarding forward-looking statements at the presentations as usual. And with that, I think we go straight into a presentation with Co-Chairman, Juergen Fitschen.

Juergen Fitschen

Thank you very much. Good afternoon, ladies and gentlemen. It's a pleasure to relay to you what we have come up with over the last 100 days. It started right after the new management team took its seat. And we felt that given the almost unprecedented situation that we are faced with regarding the changes in the external environment, we need some time, and you are the second audience that we now like to share our results with.

Anshu and myself, we have divided the work. I will like to carry you through our thought process, what is it that we identify as the drivers for what is significant in our industry, how to position ourselves. And then Anshu is filling it with real life on the operational front and also shares with you the ultimate result of all our deliberations. At the end, we'll meet again when we talk about a very topical issue, the culture theme.

I did already indicate that it's no exaggeration of mine that we are faced with unprecedented challenges because there's hardly anything that remains unchanged going forward. First of all, we have seen the worst financial crisis, and our industry has to respond to that. Now it is obvious that response will not come from the hope we can pin on an earlier recovery. We have looked at macroeconomic developments. We're at home in the one continent that gives probably more concerns to us than any other region. But we also have to state in the rest of the world, there's a noticeable slowdown in economic development.

Against that background, we are privileged to have a home here in this country that is still doing fairly well compared to the rest of Europe, will not stay unharmed by what happens in our neighborhood but gives us certainly an advantage to base our future on. We will not neglect Europe, but we'll have to address the reduced opportunities in the way we conduct our business. And Anshu is going to give you details on that. At the same time, we still believe that in Germany, we can strengthen our presence in the marketplace, also with regard to the weakness that our colleagues in other institutions are suffering from.

We have unchanged confidence in an early recovery in the States despite the fact that we are aware of the unresolved issues [indiscernible] the term deficit, the fiscal cliff come to mind. And yet our ambitions are unchanged in establishing ourselves firmly in what is going to be the most significant single market for our industry for a long time to come. Obviously, we are still in line with most observers that the emerging market world is going to show above average growth. However, we have to be aware that adjustments will also occur in certain regions.

Taking all of this together, it is no exaggeration to say that we are faced with fundamental challenges, which we are prepared to accept. As a result, we have to go through quite dramatic adjustments in order to become one of the winners as the crisis is unfolding.

We have looked at other megatrends, as we call them, that paint a slightly different picture, that give us more hope going forward. And while we adjust to the prevailing fundamentals, we do not want to lose sight of the fact that there's life after the 3-year period, which we address. We chose that period to make sure that we have a fairly good grasp of what we might have to anticipate. And at the same time, it's long enough to effect changes as they come through.

So some of these megatrends will give us new opportunities. Urbanization will mean that a new class is emerging in a limited number of places around the globe that will foster the development of new financial markets, which will give us opportunities unheard of in the past. Something that raises eyebrows and creates problems from a different perspective, i.e., the demographic changes, will also provide us new opportunities as the wealth creation and the preservation are proving to be challenging for our clients, and we will have to offer solutions.

Given all of that, we have to strike a fine balance. And actually, I believe that it's wise to describe the next chapter that we're opening now as an interim period. But we have a clear objective to address the changes that we cannot influence, but at the same time, elevate ourselves to a platform from which we can enjoy increased optionality once we are prepared to open the next page, i.e., 2016 and further on.

I don't have to go into detail here. You are very familiar with the regulatory environment and its implications on our industry. We have no option but to cope with what regulators are giving us as a framework under which we operate. We are very comfortable so far that we are not put into any disadvantageous situation here, but we are also cognizant of the implications the regulatory framework is having and is bound to have even further as we move forward and see them unfolding in the full scope.

So we have to be aware of depressed business volumes in certain categories because the client behavior is changing. We have to reckon for the capital requirements and the implications resulting from that. We also are aware of the fact that margins will be depressed and cost of funds are going to be higher than we're used to in the past.

As a result of that, we have reviewed the situation at a level of granularity that allows us to differentiate going forward. And as you see in the upper left-hand corner, there is a need to do that because even at regional level, not everything will be the same. We have also seen that as a result of that, there is some long-term trends that will change the pattern of the earnings mix for various institutions, and all of that will clearly demonstrate that there's an interesting mix waiting for us between these near-term charges and long-term opportunities that I'll try to address too.

Let me jump to the next conclusion, what does it mean to our industry? What does it mean to Deutsche Bank at the end of the day? We'll see here that on the right-hand side, the implications can be brought into various categories, some write it as pressure, unprofitability, which in turn, results in the need to address the way we use resources in order to maintain the sufficient level of profitability given the lack of growing on the revenue fund across the board.

We will also have to look at the need to look at fundamental business structures, i.e., we have to answer at the end of the day how, given this environment, we can still develop a client-centric model and retain an attractive level of profitability and, by doing so, maintain at any point in time adequate capitalization and liquidity levels.

To make matters worse, our industry is faced with an unprecedented negative judgment the public at large has arrived at. This is something that is of great concern to us because it's very obvious that our future is very much dependent on enjoying the trust and confidence of our client base, in particular, but of the public at large as well. Without that, you will see all sorts of sentiments coming up. And maybe particularly here in Germany, we are seeing witnesses for that attitude emerging every day. And we'll have to fight that development because it's going to be detrimental in the long run.

So against this environment, I think it's wise to anticipate that we'll see history repeating itself. Because whenever we had crisis in the past decades, we can go back to 1928, we have seen that the number of participants is shrinking dramatically. And at the same time, we see consolidation efforts that will produce winners and losers. The most recent examples, not to follow obviously, are in Japan. The Asian financial crisis has produced similar developments.

And already we can witness that in the Eurozone, some banks that until very recently were head-on competing with us have basically given up. They had to surrender. Some were merged. Some went under and dissolved. There is no end to this yet, and we believe that this in itself is also producing opportunities for us as long as we get our act together. That's what we are determined to do. We will move on to benefit from this development and turn out to be the winner in the category of banks that we like to compare ourselves with.

During the crisis, you have already seen that some have been acting, and by doing so, strengthened their relative market position. In our case, this happened particularly here in our home market. We are not yet at the end. We do believe that the time ahead of us is giving us unprecedented opportunities to even further our leadership position in our home market despite what you might read about competitiveness, difficulties to emerge as a winning team. We have every hope that we'll distance ourselves from our competitors to an extent Deutsche Bank has never seen in its history. We'll come up with more details next month when we produce our detailed plans for our coverage here in Germany.

As a result of that, we would also benefit, as the chart suggests, from a development that is giving the winners an ever-increasing market share. That's exactly what we associate with our ambitions to be one of: the winners, the leaders in our category. We do believe as we maintain this aspiration, this ambition, we are well advised to base all our actions around our clients. That is quite normal for what tries to be known as a client-centric institution. It's not that difficult. After all, we have stated and we restated time and again, that proprietary trading is no longer there to make a contribution to our bottom line.

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