Deutsche Bank CFO on Debt Trading Boost, Bonuses, Diversity

by birtanpublished on November 4, 2020

James fake revenue at deutsche bank has risen by 47 in the third quarter has this good momentum continued in the fourth quarter as well look we're continuing to see client engagement uh in in the business uh as the environment as we always expected normalizes a little bit um but obviously there's still uncertainty in the outlook there's still events ahead of us whether it's the u.s election or brexit that causes there to be some volatility in the market and and still events um we're we've done very well as

You say 47 year on year and that's been quite consistent over the last four quarters we're up in our fake business in high double digits we've basically doubled rates revenues now for four quarters in a row and so for us the sustainability of of these revenues is a key factor and we think a significant amount of it will will stick okay so has it slowed down a bit in october or is it is it at this continue to moderation for sure but um

But i would say the environment is still supportive okay that's great um you've beaten your u.s peers actually with the 47 rise which uh according to our calculation have on average 25 percent uh in fig so where have you actually gained market share on the u.s peers it's actually across the board i think all of our four core businesses in rates credit emerging markets and fx all performed well this quarter and so we're seeing

I think as i say a broad level of engagement by clients with our platform we've been consistently able to support them with with prices and of course for those businesses a big part of it is is specific transactions that we can help them on so it's it's both a strong flow performance as well as a strong sort of transaction driven and client engagement driven performance okay and if you look at the fourth quarter

And well it's october really the first month of the fourth quarter how has it started across all of the businesses and do we already see an impact of the resurgent pandemic well first of all in the other businesses we're expecting stable conditions more or less in the in the fourth quarter relative to the third so we continue to trade well despite some of the headwinds in the environment of course two of our businesses the private bank and the corporate bank are fighting through the interest rate headwinds but they're doing quite well

In executing on their strategies and offsetting that that headwind of course their uncertainties as you say in the macroeconomic environment and that is something that we factor in as we manage our businesses as we manage as our manage our risks importantly but we remain quite quite confident in in our outlook and the way we're managing through this pandemic and importantly as we've talked about consistently it's supporting clients supporting the economy

As we all navigate a very very unexpected unusual environment okay as you said you're you're you're managing the risks um how hard would deutsche bank be hit if there would be another wave of lockdowns across europe and elsewhere well look we've built in some conservatism into our numbers um we've taken an overlay as we call it an adjustment more conservative in our provisions and we think that prepares us well for for the uncertainties that lie ahead

We're not seeing um a deterioration in the portfolio beyond what we expected in this environment and while we're all of course subject to to the direction of the economy and and potential impact of of more um sort of distancing and and and protection measures in the economy we think the the the second quarter experiences showed us that um that the households and corporates are relatively resilient and governments are in a position to support the economy through

Through this period of uncertainty okay you uh throughout the year you continue to say that you you expect a pre-tax profit in the full year which most analysts for for for a long time didn't believe uh the bank uh now you're at 846 million in the first nine months in terms of pre-tax profit so so the question now is how big is the pre-tax profit going to be will it exceed 1 billion well look we're continuing to

Work through our restructuring so this quarter we had pre-tax profits of almost 500 million and that was burdened by about 350 million of restructuring and severance charges and what we call transformation charges as well as a burden from the the cru the capital release unit wind down obviously we expect that to continue into the fourth quarter um as we continue to execute with discipline on this transformation of the company but of course 850 million of pre-tax profit over the first nine months

Puts us in a good position to deliver on our our objective of of being profitable in the pre-tax line for this year okay um and again in terms of the revenues the core bank has now a uh eight percent growth in revenues in the first nine months so what does this mean for you for your goal um for the full year will you know will you be able to will that be in line with what we've seen in the first nine months so look i'll be eight percent or more

Than that of course cautious about forward-looking statements we provide some outlook in our earnings report but look the core bank uh generated revenues of six billion euros in the quarter um and it's showing a little bit above 24 billion euros in the last 12 months so assuming the fourth quarter of 2020 is no weaker than the fourth quarter of of 2019 we should be in and around that level of 24 billion what's important of course is is our

Continued progress towards our 2022 targets and as we laid out last december at that time in the conditions we expected we our model suggested we needed about 24 and a half billion to achieve our rot targets and so being within about 500 million of that target at this point is comforting we're ahead of our internal plans and while we're aware there are headwinds in the environment around interest rates and the normalization of the investment bank we really think we're executing well on

Our strategy and that puts us in a strong position to continue to deliver on our financial commitments i would also add that our expenses remain on track against our objectives so we've had a steady decline over the last almost three years of quarterly sequential improvements and year-on-year improvements and that's a pattern we need to continue as we as we manage this company with with great discipline okay um let's talk briefly about

London's provisions you've reported 273 million for the third quarter what will will we see in the in the remainder of the year will it be roughly at the same level or so our guidance would be exactly that roughly at the same level for the for the fourth quarter um we called very early on um for a range this year of 35 to 45 basis points of provisions relative to loans we've been consistent with that guidance um and as you can see the third quarter is in line with that year to date it's 47 basis points uh and

With a fourth quarter in line with the third at about 25 basis points that weighted average will come you know well into the range that we that we laid out all the way back in april okay and it reflects frankly a really good handle on our risks in the portfolio and i want to commend our risk colleagues under stuart lewis's leadership um they've had a a real granular view of the of the the you know exposures in the portfolio how we thought it would perform in this

Environment and it's tracked very much in line with our expectations okay um we have reported that you're currently in talks with uh tata consultancy to sell post bank systems how are the talks progressing and are you confident that you'll come to a deal by year end well we've seen the reporting and i don't want to comment on on on things that uh that haven't been publicly announced but um all i'd say really is that we've we're focused

On execution against all the strategies that we laid out in december last year one important element of our strategy is the is the integration of the german banks and that means technology it means operations you've seen that we've taken some actions this year this quarter uh announcing further reduction in our distribution network as we deliver on our cost promises and so across a range of initiatives we're working hard to deliver on on

Those sets of promises okay we're nearing the end of the year so the topic of bonuses uh creeps up the agenda once again um how much do you expect to pay bonuses for this year will you keep the bonus pool overall flat or will it change in any meaningful way well look it's too early to say of course um and i'd say a few things one is we've been accruing of course to pay variable compensation in line with performance and that performance as we've mentioned

Has been ahead of our plans for this year and as a consequence naturally we've accrued for variable compensation that is that is beyond what we'd originally planned for for the year and that's great news i think a company like ours needs to be able to pay competitively for performance such as was delivered this year in the year to date we're mindful of the balance that we need to strike between prudence as we navigate through a very uncertain environment and again rewarding people

For for the strong performance this year i think one of the critical things daniel in this regard is is we have have superb talent in the company we are able to deploy that talent to support our clients to support the economy and also to manage the risks of a major bank through through an environment like this and i think it's it's sensible to be able to protect that franchise by being able to co to compensate our employees in line with that performance

So the top performance will be rewarded higher that's what we've been aiming to do and building accruals throughout the year to do and i would add that you know the capital ratio of 13.3 percent as we reported in the quarter i mean the prudence is of course is measured against against the the the balance sheet strength that we can we can show and and carry forward and and so that's been a critical um objective also in our minds yeah um one completely different topic that i

Briefly like to touch on is deutsche bank has made commitments to improve gender diversity um when when the at the bank yet there's only one woman sitting on the management board at this stage what steps is the bank taking to increase that number well look i can't speak to the management board that's outside of my responsibility but as we manage the the company as a whole it has a a huge degree of focus in fact one thing i'll tell you is i'm responsible for managing performance

In the company and that also means scorecards and and gender diversity and goals that we set for gender diversity is on the scorecard and it means that there's just a focus on understanding what the levers are um how we retain promote um train top female talent um and and do it as an ordinary part of our business you know rather than uh something that is um that is an extraordinary part of the business we're really proud of the steps that we've taken we're proud of

Of of the the social engagement we have inside the company of which gender diversity is just one facet but i can assure you it has a lot of attention in the boardroom

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