Deutsche Bank Q4 and FY 2025 Earnings Call - Met 2025 targets, record profits and a push to scale the global house bank while raising payout to 60%

Joanna, Moderator/Investor Relations, Deutsche Bank: Thank you for joining us for our fourth quarter and full year 2025 preliminary results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first, followed by Chief Financial Officer, James von Moltke. The presentation, as always, is available to download in the investor relations section of our website, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

Christian Sewing, Chief Executive Officer, Deutsche Bank: Thank you, Joanna, and good morning from me. Let me start with the key message. We delivered on all our 2025 targets. Thanks to strong momentum across all our businesses, we reported revenues of EUR 32 billion. This represents compound annual revenue growth of 6% since 2021, the midpoint of our target range of 5.5%-6.5%. We self-funded this growth by achieving EUR 2.5 billion of operational efficiencies and delivered a cost-income ratio of 64%, in line with our target of below 65%. Asset quality remains solid. Credit loss provisions at EUR 1.7 billion are down year-on-year and in line with our most recent expectations.

We delivered record profits in 2025, with pre-tax profit of EUR 9.7 billion and net profit of EUR 7.1 billion. Post-tax return on tangible equity was 10.3%, meeting our full year target of above 10%. We see this as a great start towards our commitment of greater than 13% by 2028. We are also delivering on our capital objectives. We finished the year with a strong CET1 ratio of 14.2%, even after a number of capital headwinds absorbed in the fourth quarter. James will detail these shortly. Thanks to our robust organic capital generation and delivery of our capital efficiency program, we again raised distributions to shareholders.

With a proposed EUR 1 dividend per share and an authorized share buyback of EUR 1 billion, distributions in respect of 2025 will represent EUR 2.9 billion, in line with our 50% payout commitment. As a result, cumulative distributions for 2021 to 2025 would reach EUR 8.5 billion, exceeding our original EUR 8 billion target. We will be looking to do a further share buyback this year. Importantly, over these last few years, we have significantly strengthened our foundations. We have positioned Deutsche Bank to further increase value creation in the years ahead by scaling our global house bank. Let’s look at how we delivered the improved profitability. As we explained at our investor deep dive in November, we have transformed Deutsche Bank into a simpler, more focused business with a significantly improved financial profile.

We delivered on our revenue ambition of around EUR 32 billion this year, an increase of 7% compared to the prior year, or 26% since 2021, due to our diversified business mix and revenue composition. Cost discipline remained strong in 2025. Non-interest expenses came in at EUR 20.7 billion, down 10% year-on-year. We kept adjusted costs broadly flat and achieved a material reduction in non-operating costs, reflecting lower litigation expenses. Our 2025 cost base is nearly EUR 1 billion lower than in 2021, a reduction of around 4% over this period. Operational efficiencies enabled us to self-fund foundational investments in our technology architecture, control environment, and client franchise. This cost reduction, combined with our strong revenue growth, created significant operating leverage.

In 2025 alone, we delivered operating leverage of 17%, and our pre-provision profit was EUR 11.4 billion, up threefold since 2021. This resulted in record profits in 2025, with pre-tax profit of EUR 9.7 billion, up by 84% year-on-year. The improvement in our profitability was delivered through the successful execution of our global house bank strategy across all our divisions, as you can see on slide 4. All four businesses have delivered a reduction in their cost-income ratios and substantial improvement in profitability since 2021, leading to double-digit returns in 2025. Corporate Bank delivered revenue growth of more than 40% since 2021. The revenue mix benefited from a normalized interest rate environment and importantly, from our actions to increase fee income.

This helped us to deliver stable revenues in 2025, despite lower rates and FX pressures. Going forward, the action we took in recent years mean the corporate bank is well positioned to scale the global house bank model by further leveraging our global network, product capabilities, and client relationships. Our investment bank has transformed over the past few years.... In fact, our efforts were focused on deepening and broadening the franchise with targeted investments into existing and adjacent businesses, reinforcing our world-class franchise. As a result, we gained market share and client activity increased by a further 11% in 2025 compared to the previous year. We are also repositioning investment banking and capital markets, or IBCM, building on our German leadership and focused offering, investing in sector and product expertise to expand our advisory and ECM capabilities while maintaining the strength of our debt franchise.

Private Bank has made tremendous progress with its transformation, creating a more focused, efficient, and connected franchise, with a cost-income ratio below 70% and returns above 10% in 2025. The Private Bank’s two complementary businesses attracted EUR 110 billion of net inflows since 2021, setting a strong foundation for the next stage of our plan. Our asset management arm, DWS, attracted EUR 85 billion of net new assets in the last four years, with assets under management surpassing EUR 1 trillion in 2025. DWS, as a leading German and European asset manager with strong capabilities across asset types, is uniquely positioned to offer clients a gateway to Europe. We also delivered on our sustainability agenda across divisions.

Sustainable finance volumes were EUR 98 billion in 2025, the highest annual volume since 2021, with EUR 31 billion raised in the fourth quarter alone. We have achieved a cumulative total of over EUR 470 billion since 2020. Together with significantly improved ESG ratings, our sustainable finance business activity sets a strong base to further strengthen and scale our sustainability agenda in years ahead. Delivering on our strategy has created significant shareholder value, as you can see on slide 5. First, improved profitability contributed to a 25% increase in our tangible book value per share since 2021 to almost EUR 31. Second, we have consistently increased shareholder distributions. For the financial year 2025, we plan to propose a dividend of EUR 1 per share, or around EUR 1.9 billion in total at the AGM in May.

We were pleased to have received supervisory authorization for EUR 1 billion share buyback. The resulting distributions of EUR 2.9 billion are consistent with our goal of a payout ratio of 50% for 2025. Including these proposed distributions, we would reach cumulative distributions of EUR 8.5 billion in respect of the financial years 2021 to 2025. And as I mentioned earlier, we will evaluate the possibility of an additional share buyback in the second half of 2026. Before I hand over to James, I want to briefly address the next phase of our strategy on slide 6. We have built a firm foundation for the next phase of our strategic agenda, which is all about scaling our global house bank.

At the Investor Deep Dive in November, we set out a roadmap to increase post-tax return on tangible equity from 10% in 2025 to greater than 13% over the next three years. We also set out our plans to further improve our cost-income ratio to below 60% from 64% in 2025. We plan to achieve this via three levers: focused growth, strict capital discipline, and a scalable operating model. Disciplined execution will accelerate value creation for our shareholders, including further increased capital distributions. As we guided, we are increasing our payout ratio to 60% this year. As we made clear in November, we have all the levers to achieve our goals in our hands today. We have planned prudently, and we see upside to our targets if the environment develops positively.

2026 is about taking the next steps to successfully deliver our strategy, and we are encouraged by the strong start to the year we have made so far. Delivering on our 2028 agenda will enable us to reach our long-term goal to become the European champion in banking, as measured by a clearly defined set of criteria. A truly global bank domiciled in Germany, the largest economy in Europe, and the number 3 economy in the world. A champion for our clients as their trusted partner in a world which remains uncertain. A champion for shareholders, reflecting the value we create for them, and a great home for our talented people. A final thought before I hand over to James. Today’s results mark the end of an era in more ways than one.

This will be the last quarter in which I sit down together with my colleague, James von Moltke, to discuss our results with you. James joined us in 2017, and as you know, I was appointed CEO the following year. Since then, James has been a fantastic partner and a trusted counselor on Deutsche Bank’s journey of transformation.... It would be impossible for me to put into words everything James has contributed to what we have achieved on that journey. But there is one thing I can tell you, the successes we are discussing with you today owe a great deal to James’ professionalism and his outstanding dedication to our bank. And in the past few months, I have witnessed a seamless transition to our incoming CFO, Raja Akram, who had a great start. Raja, it is a joy working with you.

Thank you, James, for all you have done for Deutsche Bank.

James von Moltke, Chief Financial Officer, Deutsche Bank: Christian, thank you for the kind words. Indeed, this is the last time I will present the bank’s results before handing over the CFO role to my successor, Raja Akram. Doing this from a position of strength is something I’m particularly proud of. The management team and the entire bank have put tremendous effort into turning the bank around and achieving this milestone. As I said in November, we have significantly strengthened our foundations, rebuilt stakeholder confidence, and positioned the bank for sustainable value creation above our cost of capital in the years ahead. Let me now turn to page eight, the slide we have consistently shown since we made commitments to accelerate our global house bank strategy, and which shows the development of our key performance indicators.

With a strong finish to the end of the year and continued execution, we successfully delivered against all broader objectives and targets we set for ourselves for 2025. We maintained a strong capital foundation, and our liquidity metrics are robust. The liquidity coverage ratio finished the year at 144%, and the net stable funding ratio was 119%. Let me add, the proposed EUR 2.9 billion of capital for dividends and share buybacks, which complete our distributions in respect of 2025, are already deducted from our CET1 capital, such that the 14.2% CET1 ratio represents an excellent starting point going into 2026. With that, let me now turn to the fourth quarter and full year highlights on slide 9.

Our diversified and complementary business mix enabled us to generate revenue growth of 7% year-over-year, both in Q4 and for the full year. With normalized non-operating costs this year and adjusted costs broadly flat, fourth quarter and full year non-interest expenses were 15% and 10% lower, respectively, year-over-year. Our full year tax rate was 27%, benefiting from the German tax reform and the geographical mix of income. We expect the 2026 full year tax rate to be around 28%. In the fourth quarter, diluted earnings per share was EUR 0.76, bringing the full year to EUR 3.09, while tangible book value per share increased 4% year-over-year to EUR 30.98.

Before I move on, let me share my usual remarks on corporate and other, with further information in the appendix on slide 37. CNO generated a pre-tax loss of EUR 109 million in the quarter, primarily driven by shareholder expenses, legacy portfolios, and other centrally held items, partially offset by positive revenues in valuation and timing differences. Let me now turn to some of the drivers of these results, starting with net interest income on slide 10. NII across key banking book segments and other funding was EUR 3.4 billion for the quarter and EUR 13.3 billion for the full year, in line with our plans when adjusted for FX effects.

The private bank continued to deliver steady NII growth and improved its net interest margin by around 30 basis points year-on-year, reflecting higher deposit revenues and the ongoing rollover of our structural hedge portfolio. Momentum continued in FICC financing, with sequential growth in NII supported by loan growth. Corporate bank NII was slightly up quarter-on-quarter, reflecting a significant deposit increase, which positions us strongly going into 2026. Overall, for 2026, we expect NII across key banking book segments and other funding to increase to around EUR 14 billion. We expect this increase to be supported by targeted portfolio growth in both deposits and loans, but the largest contributor will be structural hedge rollover, of which around 90% is locked in through swaps. You can find details on the benefit from the long-term hedge portfolio rollover on slide 25 of the appendix.

Turning to slide 11, we maintained strict cost discipline throughout the year and delivered adjusted costs in line with our guidance at EUR 5.1 billion for the fourth quarter and EUR 20.3 billion for the year. As in prior quarters, compensation costs were up on a year-on-year basis, primarily reflecting higher performance-related accruals. For the full year, higher deferred equity compensation and the impact of increasing Deutsche Bank and DWS share prices also played a role. Non-compensation costs were down across categories, both in the fourth quarter and the full year. Similar to last year, fourth quarter bank levies were mainly driven by the UK levy. With that, let me turn to provision for credit losses on slide 12. Overall, provision for credit losses was stable in the fourth quarter, as an increase in Stage 3 was offset by releases in Stages 1 and 2.

Full year provisions stood at EUR 1.7 billion, 7% lower than in 2024, despite elevated macroeconomic and geopolitical uncertainty and ongoing headwinds in commercial real estate. Net releases in Stage 1 and 2 provisions were mainly driven by improved macroeconomic forecasts, with additional benefits from portfolio effects, partially offset by a net increase in overlays. Key Stage 3 drivers were higher provisions in the corporate bank and CRE related provisions in the investment bank, including one larger single name event. Private bank provisions returned to a more normalized level. Wider asset quality remains resilient, and we continue to expect provisions for credit losses to trend moderately downwards in 2026 relative to 2025.

Turning to capital on slide 13, our fourth quarter Common Equity Tier 1 ratio came in at 14.2%, a decrease of 30 basis points compared to the previous quarter, with a 44 basis point reduction related to one-off effects, as discussed last quarter. These effects included the discontinuation of the transitional rule for unrealized gains and losses on sovereign debt, and the annual update of operational risk-weighted assets, impacting the ratio by 27 basis points and 17 basis points, respectively. Higher market risk-weighted assets reduced the ratio by 9 basis points as trading activity picked up to more normalized levels in the quarter, while credit growth was offset by a securitization benefit.

The impact of these items on the ratio was partially offset by 21 basis points of capital generation, reflecting our strong fourth quarter earnings net of AT1 coupon and dividend deductions. Our fourth quarter leverage ratio remained flat at 4.6%. The discontinuation of the aforementioned transitional OCI filter had an impact of 6 basis points. The 10 basis points reduction relating to an increase in cash and reverse repo was more than offset by a 13 basis points increase due to our EUR 1 billion AT1 issuance in November and the other CET1 capital increase drivers. Now let us turn to performance in our businesses, starting with the corporate bank on slide 15.

Corporate Bank closed 2025 with a solid financial performance, delivering a full year post-tax return on tangible equity of 15.3% and a cost-income ratio of 62%, providing a strong foundation for growth in 2026. In the fourth quarter, Corporate Bank revenues remained stable sequentially as strong deposit volume growth offset the impact of lower deposit margins. Compared to the prior year quarter, revenues were essentially flat. Margin normalization and FX headwinds were largely offset by interest rate hedging, higher average deposits, and a 4% increase in net commission and fee income. Deposit volumes increased significantly by EUR 25 billion in the quarter, driven by strong growth in sight deposits towards year-end. This underscores the strength of our client relationships and product capabilities.

Adjusted for FX movements, loans grew by EUR 2 billion sequentially and by EUR 7 billion year-on-year, driven by both flow and structured transactions in our trade finance business. Non-interest expenses were essentially flat sequentially, reflecting disciplined cost management and down year-on-year due to the non-recurrence of a litigation matter. After low levels in prior quarters, higher provision for credit losses reflect a few Stage 3 events in the middle market. However, we do not see the most recent quarter as evidence of a pattern. For the full year 2026, we expect a modest increase in corporate bank revenues, with accelerating sequential growth as the year progresses. Remaining interest rate and foreign exchange headwinds will impact the year-on-year comparisons in the first half of the year, temporarily masking the underlying business momentum. As these effects diminish in the second half, we expect the year-on-year growth to be more pronounced.

I’ll now turn to the investment bank on slide 16. Revenues for the fourth quarter increased 5% year-on-year, driven by ongoing strength in FIC. FIC revenues increased 6%, representing the strongest fourth quarter on record, despite lower levels of volatility, driven by continued outperformance in FIC markets, specifically foreign exchange and emerging markets. FIC financing revenues were slightly higher, reflecting ongoing momentum and targeted balance sheet deployment seen throughout 2025. Client engagement continued to be strong, with full year activity increasing across both institutional and corporate clients. Moving to IBCM, revenues were slightly lower, driven by a reduction in advisory compared to a very strong prior year quarter. Capital markets performance was broadly flat as higher equity origination revenues were offset by slightly lower debt origination, with reduced LDCM revenues broadly mitigated by strength in investment-grade debt.

For the full year, the IBCM revenue decline of 6% was driven by mark-to-market losses on LDCM exposures early in the year, and the business would have been essentially flat, excluding these losses. Looking ahead to the first quarter, the IBCM pipeline is the strongest it has been at this point for a number of years. Non-interest expenses were essentially flat year-on-year, despite higher variable compensation and irrespective of favorable FX, reflecting continued cost discipline seen throughout the year. Provision for credit losses was EUR 97 million, essentially flat to the prior year. Increased Stage 3 provisions, including one larger single name event, were offset by lower Stage 1 and 2 provisions. Let me now turn to Private Bank on slide 17. In the private bank, disciplined strategy execution delivered 14% operating leverage....

Driving significantly higher quarterly profit, profitability, supporting the delivery of a post-tax return on tangible equity of 10.5% for the full year. Revenues of EUR 2.4 billion include NII growth of 10% year-on-year, driven by higher deposit revenues, including benefits from hedge rollover, while the prior year quarter was affected by the impact of certain hedging costs. Net commission and fee income was essentially flat year-on-year, with growth in discretionary portfolio mandates offset by lower income from cards and payments. Personal banking revenues were essentially flat. Continued growth in deposit revenues was offset by the non-recurrence of smaller episodic items and by lower lending revenues, reflecting our strategic focus on value-accretive products totaling approximately EUR 80 million. Excluding these impacts, revenues would have grown by 5%.

Wealth management revenues also grew by 5% year-on-year, adjusted for the aforementioned hedging costs and 10% on a reported basis, driven by higher deposit revenues and continued momentum in discretionary portfolio mandates. Non-interest expenses declined by 11%. The cumulative impact of transformation-driven efficiencies and lower restructuring and severance costs was partially offset by higher performance-related compensation. The private bank advanced its strategy with additional branch closures in the quarter, bringing the total closures to 126 for the year and contributing to workforce reductions of nearly 1,600, with further net reductions expected this year. Net inflows into assets under management for the full year were EUR 27 billion. This was supported by EUR 12 billion of inflows in investment products, as well as deposit campaigns in Germany.

Provision for credit losses improved year-on-year, with the prior quarter impacted by a small number of legacy cases in wealth management and residual transitory effects from operational backlogs. Provisions in the third quarter benefited from model updates. Turning to Slide 18, DWS is showing a significantly improved financial profile, overachieving its financial targets for 2025, as communicated three years ago, notably by reporting an EPS of €4.64 for the full year. In Deutsche Bank’s asset management segment, profit before tax in the fourth quarter improved significantly by 73% from the prior year period, driven by higher revenues and resulting in an increase in return on tangible equity of 20 percentage points to 41% for this quarter. Revenues increased by 25% versus the prior year quarter.

Higher management fees reflected an increase in average assets under management, with higher fee levels from almost all asset classes. Performance fees saw a significant increase from the prior year period, primarily due to the recognition of fees from an infrastructure fund. Other revenues also improved significantly compared to the prior year period, reflecting a small gain from guaranteed product valuations compared to a loss reported in the prior year quarter. Non-interest expenses and adjusted costs were essentially flat, as higher variable compensation costs were effectively offset by lower general and administrative expenses, resulting in a decline in the cost-income ratio to 55% for the quarter. Quarterly net inflows totaled EUR 10 billion, with positive inflow flows across passive, including Xtrackers, active and alternatives, and reflected sustained long-term inflows across all regions and client types.

The total inflows also include EUR 5 billion of net inflows in cash products, which were partially offset by EUR 2 billion of net outflows from advisory services. Total assets under management increased to EUR 1.08 trillion in the quarter, driven by positive market impact and the aforementioned net inflows. As you may have seen in DWS’s disclosure materials this morning, DWS upgraded its ambitions for 2028, raising its EPS growth target to 10%-15% per year and setting a performance and transaction fee contribution of 4%-8% per year of net revenues. DWS now also targets a cost-income ratio of below 55% for 2027 and has aligned its net flow ambitions with the targets we communicated at our IDD in November. For further details, please have a look at DWS’s disclosure on their investor web relations website.

Turning to the outlook on Slide 19. Looking ahead, the delivery of all of our 2025 targets and objectives provides a firm basis for the next phase of our strategy until 2028, scaling the global house bank. Business momentum going into 2026 has been good and sets us up well as we start scaling our franchise and benefit from the investments we are making. As we said at our Investor Day in November, we plan to show improvements in operating performance every year, including in 2026. We expect full year revenues to increase to around EUR 33 billion, aided by banking book NII growing to EUR 14 billion, as well as growth in net commission and fee income. As I said earlier, we expect a modest increase in full year corporate bank revenues, with accelerating sequential growth as the year progresses.

In the investment bank, we expect revenues to be slightly higher compared to 2025, with growth in IBCM revenues in line with the overall growth strategy of the business and essentially flat FICC revenues. We also expect continued growth in the private bank, with full year revenues slightly higher. Likewise, asset management should also see a modest increase in revenues. Looking at the first quarter, in light of a normalization in C&O revenues and against a very strong FICC performance in the prior year quarter, our baseline expectation is for revenues to be flat year-on-year. Nonetheless, we are encouraged by the very good start we’ve seen in January. Non-interest expenses in 2026 are expected to increase to slightly above EUR 21 billion, in line with the trajectory provided in November.

This includes around EUR 900 million of incremental investments in 2026 to unlock growth and efficiencies as early as this year. Our asset quality remains solid, and as I said earlier, we continue to expect provision for credit losses to trend moderately downwards in 2026, as commercial real estate provisions ameliorate and other portfolios normalize, bringing us closer to the lower expected average run rate of around 30 basis points through 2028. The EUR 2.9 billion of capital distributions proposed in respect of 2025 bring us above our EUR 8 billion euro target for cumulative distributions in respect of 2021 to 2025. We also want to deliver attractive capital returns going forward, which is why we’re increasing our payout ratio to 60% starting this year, with modest but continuous growth in the dividend per share, complemented by share buybacks.

In short, our strong capital position and full-year profit growth provide a firm foundation as we head into 2026, and we aim to deliver additional shareholder distributions in the second half of this year, subject to customary authorizations. As Raja rightly said in November, we are ready to scale Deutsche Bank with focused growth, strict capital discipline, and a scalable operating model at its core. For me, personally, being able to hand over the CFO role at a moment when the bank stands on strong foundations, enjoys business momentum and strong client engagement, and is able to execute with discipline and purpose, is deeply meaningful.

With that, I’d like to conclude my last set of quarterly remarks for Deutsche Bank with a heartfelt thank you to all employees globally for their hard work over the years to support the transformation of the bank and the delivery of our 2025 goals. I also want to thank our analyst and investor community for the high level of engagement over the years as you have followed the story and supported this management team in a myriad of ways. Lastly, I want to take a moment to thank Raja for his partnership and efforts to ensure a smooth transition and to wish him every success as he assumes the CFO role. Christian, Raja, and I look forward to the Q&A session. With deep dedication, thank you, and I’ll now hand back to Ilana.