On July 7th 2019, Deutsche Bank announced the most fundamental transformation in decades and a profound restructuring of its businesses. The bank is reshaped into four, strong, client-centred businesses, including the newly created Corporate Bank which sits at the centre of Deutsche Bank going forward and works in close cooperation with the focused Investment Bank, the market-leading Private Bank and the asset manager DWS. In this setup Deutsche Bank aims to become more profitable, improve shareholder returns and drive long-term growth:
- The newly created Corporate Bank as hub for corporate and commercial clients. At the core of the new division is the Global Transaction Banking (GTB) business which is an established market leader in Europe, with on the ground presence in 60 countries
- The Investment Bank focuses on its traditional strengths in financing, advisory, fixed income and currencies. It continues to provide strategic advice to corporate clients including a focused equity capital markets business
- The Private Bank covers private clients across all segments as well as business clients. It will build on its position as market leader in Germany, as a focused bank in Europe and a highly competitive wealth manager
- Asset Management, which operates under the well-known brand DWS, continues to pursue its objective of becoming one of the top 10 asset managers globally
Our core bank comprises the four operating businesses as well as our ‘Corporate & Other’ segment.
Our decisive actions:
- Exit businesses: Discontinue Equities Sales &Trading, resize the capital consumption in Fixed Income, in particular Rates, and accelerate the wind-down of nonstrategic assets
- Cut costs: Overhaul our processes and infrastructure leading to significant cost reductions
- Invest in technology & growth: Invest in our leading businesses, further improve our technology and control framework
- Manage and liberate capital: Create a Capital Release Unit to free-up resources to return capital to shareholders over time
- Reorganize leadership structure closer aligned to business and clients
Our near-term objectives and our long-term targets
Our principle target is to generate an 8% return on tangible equity at group level by 2022. To reach this target, and in conjunction with our capital reallocation and return approach, we’re now targeting a cost income ratio for the group of 70% in 2022 with adjusted costs of 17 billion euros. In addition, we defined short-term financial objectives set as guideposts as we execute towards our long-term targets.
With our new strategy, we aim to improve the return on tangible equity materially. We expect to achieve a Group RoTE of 8% by 2022.
To reach our profitability target, Deutsche Bank will refocus its business activities and become more resilient. We will focus on those areas where we can grow and where we have competitive advantage. We intend to grow the more recurring revenue businesses that we are able to control. We exit businesses which cannot sustainably deliver acceptable return. We target to allocate the liberated resources to areas where we have a strong market position and to create client and shareholder value.
By improving our revenue and earnings quality, Deutsche Bank will become more competitive and resilient. We plan to grow revenues by approximately 2% per year in our core bank.
Further contribution to achieve our ROTE target should come from continued cost cutting. We are committed to reduce adjusted costs to 17 billion euros in 2022. We plan to reduce adjusted costs without impacting our growth trajectory. Several structural measures support the adjusted cost reductions:
- Execute on previously announced 1 billion euros cost reductions in 2019
- Reduce costs in Capital Release Unit and from previously announced disposals
- Benefit from reductions in Private Bank including German retail integration
- Reengineer processes, remove duplications and centralize functions
We will free up capital through a Capital Release Unit (CRU) which will focus on efficiently exiting our non-strategic positions and low yielding assets. Compared to 2018, we will transfer RWA of approximately 74 billion euros and leverage of about 288 billion euros or 20% of Deutsche Bank’s leverage exposure into the CRU. We expect to reduce the CRU RWA by at least 40 billion euros and leverage exposure by approximately 280 billion euros by 2022. However, the majority of the planned reduction will be achieved by 2020 already. In addition, it is our intention to return 5 billion euros of excess capital to shareholders starting in 2022. We expect to fund the transformation within our existing resources.
Infrastructure and Technology
We will overhaul our front-to-back processes and infrastructure to deliver what we really need for our client business while further strengthening controls. 4 billion euros will be spend on our key control functions by 2022. We expect absolute annual spend to decline slightly from 2020 reflecting benefits of prior investments, organizational efficiencies and more focused business perimeters.
We want to embrace technology as an enabler for better service delivery and efficiency in everything we do. We will create a separate Technology function and invest 13 billion euros into our operating infrastructure, control framework and the development of innovative products and services by 2022. Across the bank, we will deploy technology and digital solutions in a substantially more comprehensive manner.
To achieve our ambitions we have to transform the way we work
To deliver our transformation, we will redesign the way we work. This includes introducing a new leadership structure and greater empowerment for decision-makers to improve agility and boost entrepreneurial freedom.
- Reorganization of leadership structure closer aligned to business and clients
- CEO & Deputy CEO both assume direct responsibility for businesses
- ‘One team’ with clear accountability to speed up decision making and live ‘one bank approach’
"On July 7, 2019 we have announced the most fundamental transformation of Deutsche Bank in decades. We are tackling what is necessary to unleash our true potential: our business model, costs, capital and the management team. We are building on our strengths. This is a restart for Deutsche Bank – for the long-term benefit of our clients, employees, investors and society.”
“In refocusing the bank around our clients, we are returning to our roots and to what once made us one of the leading banks in the world. We remain committed to our global network and will help companies to grow and provide private and institutional clients with the best solutions and advice for their respective needs – in Germany, Europe and around the globe. We are determined to generate long-term, sustainable returns for shareholders and restore the reputation of Deutsche Bank."
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on the plans, estimates and projections currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which Deutsche Bank derives a substantial portion of its revenues and in which the bank holds a substantial portion of its assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of strategic initiatives of the bank, the reliability of the bank’s risk management policies, procedures and methods, and other risks referenced in the bank’s filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in the bank’s SEC Form 20-F of 22 March 2019 under the heading “Risk Factors”. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir.