Deutsche Bank AG · XETR:DBK

Deutsche Bank — Investor Day (September 2003)

36 slides from Deutsche Bank's investor day presentation, Sep 4, 2003

  1. Slide 1: Dr. Clemens Börsig, Deutsche Bank Investor Day

    Dr. Clemens Börsig Chief Financial and Risk Officer Member of the Group Executive Committee Deutsche Bank Investor Day London, 4 September 2003

  2. Slide 2: Agenda

    Agenda 1 Credit risk management 2 Market risk management 3 Corporate investments 4 Capital management Investor Day · September 2003 · 2

  3. Slide 3: DB's current credit risk objectives to enhance shareholder value

    DB‘s current credit risk objectives to enhance shareholder value „ Reduce loan exposure „ Reduce concentration risk „ Improve asset quality „ Reduce use of regulatory capital „ Increase profitability Investor Day · September 2003 · 3

  4. Slide 4: Credit losses have peaked in 2002 with provisions getting closer to expected levels

    Credit losses have peaked in 2002 with provisions for credit losses getting closer to expected levels In EUR bn Total provision for 2.1 credit losses Change in measurement of other inherent loss 1.1 allowances 1.0 0.9 20 largest specific 0.8 0.7 provisions 0.6 0.4(2) Expected loss(1) 2000 2001 2002

  5. Slide 5: 38% loan book reduction through exposure management and disposals

    38% loan book reduction through exposure management and disposals In EUR bn Loans 265 253 (38)% 192 172 171 165 Deconsolidation Deconsolidation of EUROHYPO 56 of DFS 6 31 Dec 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 2001 2002 2002 2002 2003 2003 Investor Day · September 2003 · 5

  6. Slide 6: Reduced concentration risk in the international loan book

    Reduced concentration risk in the international loan book through limit reduction and credit hedges In EUR bn Reduction of concentration risk(1) Development of loan hedge portfolio(2) 107 7.3 (40)% 151% 69 64 2.9 1.3 0.0 Dec Dec Jun Dec Jun Dec Jun 2001 2002 2003 2001 2002 2002 2003 (1) Reduction of

  7. Slide 7: 34% decrease of problem loans with further reduction to come

    34% decrease of problem loans with further reduction to come in 3rd quarter Problem loans, in EUR bn Coverage ratio(2) 12.7 (34)% 10.8(1) One time effects in Q32003 due 9.3 to refinements of processes 8.4 and procedures relating to the 7.7 homogeneous portfolio: 46% 47% „ EUR 460 m reduction in 44%

  8. Slide 8: 29% reduction of regulatory capital usage

    29% reduction of regulatory capital usage through lower loans, commitments, guarantees and disposals In EUR bn Risk positions 305 288 268 237 239 232 231 (29)% 219 193 171 169 164 Deconsolidation Deconsolidation of EUROHYPO 23 of DFS 6 31 Dec 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 2001 2002 2002 2002 20

  9. Slide 9: Reduction in loan book leading to increasingly profitable client relationships

    Reduction in loan book leading to increasingly profitable client relationships Corporate Banking & Securities (CB&S), indexed: 2001 = 100 100% 100% 95% 82% 77% 64% CB&S Loans Sales & Trading Origination and Advisory(1) Loan Products Revenues (2,5) Loans Revenues(5) Loans Revenues (3,4,5) Loans 2001

  10. Slide 10: Improved loan book mix

    Improved loan book mix Total loan book 100% 100% 56% Commercial loans, 74% other Commercial loans, 7% small business clients Retail loans* 4% 37% 22% 31 Dec 2001 30 Jun 2003 * Principally smaller balance standardised homogeneous loans Investor Day · September 2003 · 10

  11. Slide 11: Retail loan book including Small Business Clients

    Retail loan book including Small Business Clients „ Grow business and „ Stable margin at above manage credit spread Small business 200 bp (as with consumer lending) clients: primarily „ Increasing loan loss „ Implement new decision Germany provisions at ~100 bp engine and increase margins in 2H2003

  12. Slide 12: Commercial loan book: MidCap Germany

    Commercial loan book: MidCap Germany „ Slowly increasing margin „ Leverage strong position at ~150 bp of our loan book by 19% „ Increasing loan loss intensified cross-selling provisions at ~100bp. efforts Whereas construction, „ Reduce concentration risk MidCap Germany real estate and trade cause „

  13. Slide 13: Commercial loan book (continued)

    Commercial loan book (continued) „ Reallocate loan book to profitable relationships International „ Align loan book in „ Stable margin at ~ 60bp Emerging Markets with loan book: GM and GTB businesses 22% 83% Developed „ Declining loan loss „ Minimize capital / risk via Markets, provisions at below 7

  14. Slide 14: Summary: Ongoing steps to improved loan book profitability

    Summary: Ongoing steps to improved loan book profitability „ Grow and develop consumer and lombard lending „ Improve margins in German MidCap book „ Reallocate international book to more profitable relationships „ Complete wind-down of project finance and corporate investments loan book „ Use hedgin

  15. Slide 15: Agenda

    Agenda 1 Credit risk management 2 Market risk management 3 Corporate investments 4 Capital management Investor Day · September 2003 · 15

  16. Slide 16: Continued prudent and active market risk management

    Continued prudent and active market risk management „ Overall VaR low in absolute terms „ Risk taking and risk reductions depending on market opportunities CIB trading units: VaR since 1 July 2002, in EUR m 80 VaR limit Value at Risk Max: 58.3 60 Min: 31.6 Daily average: 40.3 40 VaR utilisation 20 J

  17. Slide 17: CIB trading units - distribution of daily revenues

    CIB trading units - distribution of daily revenues 2001 2002 1H2003 Days 2001 Average daily revenues 41.8 32.1 41.7 2002 Losing days 1 10 1 35 1H2003 Average daily VaR* 41.0 42.4 39.7 Average revenues / VaR 102% 76% 105% 30 25 20 15 10 5 0 -10 0 10 20 30 40 50 60 70 80 90 100 Daily revenues in EUR m

  18. Slide 18: Agenda

    Agenda 1 Credit risk management 2 Market risk management 3 Corporate investments 4 Capital management Investor Day · September 2003 · 18

  19. Slide 19: CI objectives

    CI objectives „ Reduce the principal private equity exposure „ Manage DB’s principal investment portfolio as a unified business „ Preserve value and minimise P&L impact of exposure reduction „ Protect DB Group’s P&L against significant losses and earnings volatility resulting from the CI portfolio „

  20. Slide 20: 46% reduction of CI alternative assets exposure since end of 2001

    46% reduction of CI alternative assets exposure since end of 2001 At month-end, in EUR bn Private Equity directs 8.2 Private Equity indirects 6.8 (46)% Real Estate 5.5 5.2 4.4 (71)% (40)% 29% 31 Dec 31 Dec 31 Mar 30 Jun Pro-forma* Change 2001 2002 2003 2003 * Reflects further reduction of EUR 0.4 bn

  21. Slide 21: Private Equity: 36% reduction in CI alternative assets in 2003

    36% reduction in CI alternative assets in 2003 As of 30 June 2003, in EUR bn Dec Mar Jun Pro Other equity exposure Dec Mar Jun Pro CI alternative assets 2002 2003 2003 forma 2002 2003 2003 forma Indirects 1.6 1.7 1.6 1.2 Core industrial holdings* 5.1 4.8 4.8 4.8 therein primary US 1.3 1.2 1.2 0.8 Eu

  22. Slide 22: Listed holdings: unrealised net gains of EUR 1.4 bn

    Listed holdings: unrealised net gains of EUR 1.4 bn In EUR m Stake Market value (in %) 29 Aug 31 Dec 31 Mar 30 Jun 29 Aug 2003 2002 2003 2003 2003 DaimlerChrysler 11.8 3,403 3,223 3,619 4,191 Allianz 2.5 753 402 695 780 Linde 10.0 401 346 383 457 Südzucker 4.8 126 120 124 119 HeidelbergCement - 189

  23. Slide 23: Agenda

    Agenda 1 Credit risk management 2 Market risk management 3 Corporate investments 4 Capital management Investor Day · September 2003 · 23

  24. Slide 24: Various notions of capital

    Various notions of capital Types of capital Basis Purpose Deutsche Bank 30 June 2003, in EUR bn Book equity Accounting standards Shareholders’ Financial equity (US-GAAP) and reporting 29.9 accounting practices Shareholders’ equity, Value-based Active equity two adjustments* management 28.7 Regulator

  25. Slide 25: Composition of shareholders' equity

    Composition of shareholders’ equity As of 30 June 2003, in EUR bn Common shares 1.5 Additional paid-in capital 11.2 Retained earnings 19.4 Common shares in treasury (0) Share awards, net 1.2 „ Common shares issuable 2.8 „ Deferred compensation (1.6) Accumulated other comprehensive income (3.4) „ Unr

  26. Slide 26: Reconciliation of book equity with BIS core capital

    Reconciliation of book equity with BIS core capital As of 30 June 2003, in EUR bn 29.9 28.7 (0.8) (0.4) 2.8 23.2 (0.2) (8.1) Total Unrealised Dividend Active Goodwill, Hybrids Others* BIS core shareholders’ gains on accrued book intangibles capital equity securities for 2003 equity AfS * I.e. minori

  27. Slide 27: Capital development in 1H2003

    Capital development in 1H2003 In EUR bn Shareholders' BIS core equity Active equity capital (Tier I) 31 Dec 2002 30.0 29.0 22.7 Net income 0.4 0.4 0.4 Dividends paid (0.8) - - Dividends accrued - (0.4) (0.4) Shares retired (1.9) (1.9) (1.9) Treasury shares, net 1.5 1.5 1.5 Obligation to purchase com

  28. Slide 28: SFAS 150 background

    SFAS 150 background „ Shares granted under the Bank’s equity compensation plans are delivered to employees after they satisfy vesting requirements (generally 3-5 years after the grant date) „ Compensation expense for these retention plans is recorded: a) ratably over the vesting period b) at the sto

  29. Slide 29: Strategies to mitigate SFAS 150 impact

    Strategies to mitigate SFAS 150 impact Situation Financial impact Alternatives (under new accounting rules) „ Significant equity risk „ Buy shares (difference of share price between at vesting date No grant and vesting) hedge „ Issue new shares „ Dilution at vesting date „ Significant equity risk St

  30. Slide 30: Accounting for stock awards after adoption of SFAS 150

    Accounting for stock awards after adoption of SFAS 150 Example: Retention awards with a value of EUR 100 m and a vesting period of four years / hedging with forward contracts (physical settlement) Previous New accounting accounting Stock compensation Forwards Forwards accounting P & L: Equity: Tempo

  31. Slide 31: Capital impact of SFAS 150 (pro-forma)

    Capital impact of SFAS 150 (pro-forma) In EUR bn Shareholders' BIS core equity Active equity capital (Tier I) 30 June 2003 29.9 28.7 23.2 Net income Dividends paid Dividends accrued Shares retired Treasury shares, net Obligation totopurchase Obligation purchaseshares common shares (2.9) (2.9) (2.9)

  32. Slide 32: Protects our capital! Maintains the capacity to buy back stock!

    Our application of SFAS 150... Avoids P&L volatility! Protects our capital! Maintains the capacity to buy back stock! Investor Day · September 2003 · 32

  33. Slide 33: Backup

    Backup Deutsche Bank

  34. Slide 34: Allocation of equity to businesses

    Allocation of equity to businesses Principles of capital allocation 1. Basis: Active equity 3. Application of two criteria: 2. Full allocation (i) Risk profile Æ Economic capital; (ii) Consumption of regulatory capital Æ Intangibles / Goodwill 1H2003 average, in EUR bn Economic Intangibles / Allocat

  35. Slide 35: RWA by division

    RWA by division At month-end, in EUR bn Dec Jun Sep Dec Mar June 2001 2002 2002 2002 2003 2003 Corporate Banking & Securities(1) 167 156 159 142 141 136 CIB Global Transaction Banking 18 17 16 13 15 14 Total CIB 185 173 175 155 156 150 Private & Business Clients(2) 46 46 47 48 49 50 PCAM Asset and W

  36. Slide 36: Cautionary statement regarding forward-looking statements and non-U.S. GAAP financial measures

    Cautionary statement regarding forward-looking statements and non-U.S. GAAP financial measures This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Any statement in thi

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