Compete to win
Building on our foundation as a leading European Corporate Bank based in Europe's largest economy, we have transformed our business model. We operate where our clients want us to be and where we are competitive. As a result, we aim to become less complex and more profitable, improve shareholder returns and drive sustainable growth.
In the most important year of our transformation, we were able to more than offset transformation-related effects and elevated credit provisions – despite the global pandemic. We have built firm foundations for sustainable profitability, and are confident that this overall positive trend will continue in 2021, despite these challenging times.
Deutsche Bank is …
- … a leading European Corporate Bank based in Europe’s largest economy
- … with strong investment banking, private banking, wealth and asset management capabilities
- … aligned with the strengths of the German economy around trade and investment
- … at the centre of its corporate, institutional and private clients’ needs
- … the risk manager and trusted advisor to its clients
We have taken five decisive actions …
... and have a clear plan for each of our divisions.
We are moving into phase 3 of our transformation
Ensuring sustainable profitability
We started our transformation journey in 2018. In the first phase we stabilized our bank, for example by reducing risks and bolstering our capital position.
Then in July 2019 we started phase two – the most fundamental transformation of Deutsche Bank in two decades. This transformation includes a new strategy and a new setup for our bank: We exited non-strategic businesses and assets and focused our bank on market-leading businesses. We also set ambitious financial targets.
Within 18 months, we have put the bulk of the actual transformation and restructuring work behind us. Having successfully re-focused our business model, we are gradually moving into phase 3 of our transformation. We will focus on ensuring sustainable profitability by growing our businesses while remaining disciplined on costs and capital.
By the end of 2020, we have put 85% of the total transformation-related effects we anticipate between 2019 and 2022 behind us.
Four client-centric divisions, well-positioned to grow
We have created four client-centric businesses, competing to win – a Corporate Bank, an Investment Bank, a Private Bank and Asset Management – and have implemented new leadership teams across all businesses. Our results in the third quarter of 2020 demonstrated that our core businesses are stable and resilient, well-positioned to support our clients during challenging times like the COVID-19 crisis:
- In 2020, we achieved year on year revenue growth of 6% in the Core Bank. We have won market share in important business areas.
- For 2020, Core Bank profit before tax was up six-fold to 3.2 billion euros, versus 536 million euros in 2019
- In 2020, we helped our clients to raise 1.7 trillion euros in the debt capital market last year. That’s an increase of 43 percent over the previous year.
Each one of our four businesses is well positioned to respond to structural trends that will shape our economy and drive growth in for the years until 2022 and beyond:
- Economists expect an increase in demand for global financing due to high national debt levels as well as the immense investments in transforming the economy.
- In an aging society, wealth preservation will become more pressing, in particular in times of negative interest rates when there are far fewer risk-free returns available.
- Our deep local presence worldwide is more of an asset in a world of ‘glocalization’. International companies need a strong partner with intimate regional and local knowledge.
- Climate change and social tensions will lead to growing demand for sustainable finance products.
We have a strong market position in all core businesses.
We have now delivered twelve consecutive quarters of year-on-year reductions in quarterly adjusted costs (1) ex-transformation charges and bank levies. And we have achieved our 2020 target of reducing adjusted costs to 19.5 billion euros.
In 2020 alone we made cost reductions of 2 billion euros. On this basis, annual adjusted costs were almost 3.3 billion euros less than they were in 2018.
Furthermore, we have identified additional cost-saving opportunities that allow us to lower our 2022 target for adjusted costs excluding transformation charges to 16.7 billion euros, from an original target of 17.0 billion euros.
Investing in technology and growth
We are committed to investing in technology and will spend about 13 billion euros from 2019 through 2022.
We aim to invest in four areas:
- We will continue to invest in providing stable and secure technology solutions in order to maintain the resilience of our technology infrastructure.
- Equally important is maintaining a robust control environment. We plan to spend at least 4 billion euros in our control functions from 2019 through 2022, for example to further improve transaction monitoring.
- We will simplify and streamline our IT-landscape and focus investment to increase efficiency.
- We will develop innovative products and services that will help our clients and unlock future growth.
We will speed up this development thanks to our global strategic partnership with Google Cloud. It will enhance our IT infrastructure into a more efficient, cloud-based environment that will enable us to focus more on innovation and client applications.
IT strategy has been launched and is being executed with a new leadership team. We signed a strategic partnership with Google Cloud to drive a fundamental transformation of banking.
Managing and liberating capital
We are implementing our strategy on the basis of a strong and robust balance sheet. We aim to maintain a CET1 ratio of at least 12.5% throughout our transformation.
Despite the costs of the pandemic and our transformation, we have maintained our CET1 ratio at 13.6% at the end of 2020 – essentially unchanged versus year-end 2019 and well ahead of regulatory requirements.
The solid capital and liquidity position gives us scope to continue to deploy resources to support clients in these challenging conditions. We remain committed to return 5 billion euros of capital to shareholders from 2022.
The Capital Release Unit (CRU) has made an important contribution to our strong capital position. It has been a key facilitator for exiting non-strategic businesses and assets. As of end 2020, we have made further significant progress in deleveraging the CRU
- We reduced risk-weighted assets in the Capital Release Unit by more than half compared to 2018
- Leverage exposure in the CRU declined by almost three quarters from 281 billion euros at the end of 2018 to 72 billion euros at the end of Q4 2020.
Our Capital Release Unit reduced risk-weighted assets faster than expected while consuming fewer capital resources than anticipated.
Our capital ratio (CET1) stood at 13.6 percent at the end of 2020 – 316 basis points above regulatory requirements.
Our 2022 targets