Deutsche Bank AG (DB)
Q4 2009 Earnings Call
February 4, 2010 08:00 a.m. ET
Josef Ackermann - Chairman and CEO
Stefan Krause - CFO
Gurdon Wattles - Head, Investor Relations
Dieter Hein - Fairesearch
Philipp Zieschang – UBS
Dirk Becker - Kepler Capital Markets
Matt Clark - KBW
Georg Kanders - WestLB
Derek De Vries - Bank of America Merrill Lynch
Huw van Steenis - Morgan Stanley
Kian Abouhossein - JP Morgan
Stuart Graham - Autonomous Research
Welcome to Frankfurt. Welcome to Deutsche Bank’s fourth quarter and full year 2009 analyst conference.
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Before we get started one very important request, please turn mobile phones and Blackberry's off. Not mute but off. You may not hear it but even if it is on mute it can interfere with the webcast. So thank you very much for your cooperation on that.
Secondly if we don’t get to a question; if questions exceed the time that we have available please except my apologies in advance, come back to IR and we will get an answer for you as soon as we can and follow up with you.
That's as far as I would like to go with opening remarks. I would now like to turn it over to the CEO Josef Ackermann to make some remarks about 2009. Joe.
Thank you, good morning and good afternoon where ever you are. Let me first say a few words about the financials of 2009 and then of course some words about the management agenda, just to keep you informed about what we said at the Investors Day, and then also talk a little bit about the regulatory changes how I see it. Everybody has probably a little bit different view. But coming back from Davos have some interesting and constructive discussions out here.
First the 2009. I think before and I read some of your comments, and to be honest this is a year of sensation and I think that’s the most important part to understand. We have one-offs on both sides and actually the net result of one-offs is a charge of EUR 3.5 billion pre-tax.
Now we can talk about the goodies or we can talk about the bad things. But important is that if these one-offs are behind us, we should be roughly EUR 3.5 billion better. That is a normalized level pre-tax and I think that is for me the key message I want give.
So you have seen the income before income taxes and net income and the RoE. I think what is important that we have been able to further strengthen our capital and our 12.6% and Core Tier 1 at 8.7%. That’s why we think we have to do more to strengthen the capital this year by not raising dividends too much.
To be honest this is also little bit what regulators are expecting from all of us. Actually our regulator are expecting two things, no bonus and no dividend. This was clearly… even more some politicians as was clearly communicated to all of us in Davos. I don’t want to provoke any negative reaction. We did pay bonus and we are increasing dividend, but all in a way hopefully that people can live with it without provoking a backlash which is too big and too negative for the industry for many years to come. In that sense we have also further reduced our leverage to now below 23.
Here we see the net revenues. We still have here some impairments and mark-downs by EUR 1.5 billion but the revenues are EUR 28 billion. So back to a level which most of us actually would have considered not realistic when the crisis started.
I remember we talked about receipts going back to ‘04, ‘05. Now we are back to ‘06 and not very far away from ‘07. And net income, above ‘05 not quite ‘06, ‘07 but shows that with these one-offs I mentioned we are getting close again to a more normalized level.
Assets. These are the U.S. GAAP pro-forma assets to EUR 891 billion and leverage ratio as a consequence 23. Capital ratio is now up to 12.6%, Core 8.7% and risk-weighted assets EUR 273 billion.
I think whatever we talk about going forward, it is just important to understand and I said that many times there is always a managed response though some of the calculations you are making more in a trend assumption. And I think that is proven here again.
Tier 1 capital, that’s up from EUR 28 billion the beginning of 2008 to a bit more than EUR 34 billion.
I don’t have to go into the different phases again. You have seen that at the Investor’s Day. But I just want to talk about how realistic some of these numbers are which we have presented to you in December.
Now CB&S. We have EUR 30.5 billion pre-tax number, which of course includes among others the payroll tax in the U.K. and some of the other mark-downs and things which we are going to talk about.
Key metrics. You see the massive reductions in assets and risk-weighted assets, and actually most importantly for me the value at risk number at a constant input which is down 57%.
So what we promised to you a year ago that we are going to lower the risk capital and you ask many questions whether we will be able to compensate for the lower risk and the lower proprietary trading revenues in other parts, we have been able to demonstrate that. And the dedicated proprietary trading is now down to a very low level. Actually it is below 2% of the Group’s revenues and even that is somewhat doubtful how you define proprietary trading.
So the Obama plan, which is somewhat and some think is highlighted as a big threat is certainly not a threat on a corporate level. I see more difficulties there in how much of this business is being transferred from our regulated sector to an unregulated one, and what does mean in terms of efficiency and liquidity in some of these markets. So that’s a broader impact I am talking about. But the corporate impact on Deutsche Bank is very small.
And by the way, it was clear in Davos from Larry Summers and others, it will affect U.S. banks globally. It will affect foreign banks only in United States. So that's in addition the correction of what I just said, a reduction of the impact.
Now revenue growth, and that is key that we were capable of growing in areas where we have some more where ‘flow’ businesses again and we could offset the reductions in revenues in the ‘flow’ businesses. And I think that is a very key message.
Maybe one word to CB&S which is important; you remember at the Investor Day and this was the biggest and the most intelligent question. The slow down which we have seen in the fourth quarter. Is that a trend or was it a transitional and temporary slow down? We are good at the time that this is more transitional slow down for a temporary phenomenon and our trend.
Now up till today I can confirm that our view was right, because we had very strong sales and trading results in January. It was so good that it doesn’t move on now.
GTB. Also here, gaining market share both, as we explained to you many times we are paying a price for low interest rates here. And this is true for the Bank as a whole. Now it is very often you hear from academics that banks are making a lot of money because of low interest rates and the noteworthy transformation. This has never been our attitude, we have always had a very disciplined Treasury and we don’t have this big mismatches. Now, does that mean that we are not making as much money as we could? Yes. But we don’t like the interest rate risk and we never did that.
So in that sense, our impact on GTB and retail from that philosophy is somewhat bigger than probably anticipated. That’s why we see of course a lot of upside potential if interest rates will start to normalize and of course recovery of the international traders fund.