Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's bring you right now our interview and conversation with
Speaker 2: the CFO of Deutsche Bank, James von Moltke, who's been
Speaker 2: speaking to balloom Bugs.
Speaker 1: Oliver Crow, take us through a little bit the composition
Speaker 1: of why where that our performance was.
Speaker 2: Sure, absolutely so. Investment bank and FAKE both up eleven
Speaker 2: percent year on year, and that's against what was already
Speaker 2: a good quarter last year. We think it's it's across
Speaker 2: the board. Frankly, there's really only the rates complex has
Speaker 2: been down given the market environment. Even there, we think
Speaker 2: we've been winning market share. But our credit complex, emerging
Speaker 2: markets and also FX all performed well this quarter. I
Speaker 2: think it's the cumulative impact of investment that Rob Nayak
Speaker 2: and his team have been making over the past several years.
Speaker 2: So we're very pleased with that performance.
Speaker 1: And Harry's developing in now in the fourth quarter. And
Speaker 1: are you're expecting that to sort of ramp up? We
Speaker 1: have a sort of knife edge US election, you know,
Speaker 1: very hard to call. Is that going to sort of
Speaker 1: be a boon to trading?
Speaker 2: Well, Well, look we're off to a good start in
Speaker 2: the quarter, so that's encouraging. We think the conditions of
Speaker 2: the third quarter have carried through without the volatility, incidentally,
Speaker 2: that we saw in August. Usually we see strength around
Speaker 2: a US election, you know, as investors and also corporates
Speaker 2: need to position and react to changes in the markets
Speaker 2: and expectations, and so that's what we'll expect to see
Speaker 2: really once we get past the milestone number of fifth right.
Speaker 1: And also this year was marked by sort of a
Speaker 1: lot of provisioning for the post bank situation that you're
Speaker 1: still dealing with. There still awaiting a court ruling. We
Speaker 1: got some of that money back.
Speaker 2: Is it enough to.
Speaker 1: Justify a buyback this year? I know that now you've
Speaker 1: asked for the authorization or is it going to be
Speaker 1: more into next year? Can you U clarity on it?
Speaker 2: Yeah, so we have applied for authorization for a further
Speaker 2: buyback which would be executed in twenty twenty five. The
Speaker 2: postbank provision we've seen a release this quarter which is
Speaker 2: good on the basis of settlements that we were able
Speaker 2: to finalize. We have a court case today actually this morning,
Speaker 2: so we're expecting more news on that. Hard to say
Speaker 2: what the direction is, but it's certainly been supportive we
Speaker 2: think we've reacted well to the setback that was the
Speaker 2: court's sort of expression back in April, and it's gratifying
Speaker 2: to have gotten through that with strong capital and now
Speaker 2: with settlements behind us, a mitigation of the income statement impact, and.
Speaker 1: Looking at that buyback into twenty twenty five. What sort
Speaker 1: of size are you aiming for.
Speaker 2: Well, we won't speak directly to size, but we've laid
Speaker 2: out a sort of a capital plan which is which
Speaker 2: is of increasing levels of return to our investors, representing
Speaker 2: a normalization in some respects of catchup which we expect
Speaker 2: to achieve over the next couple of years relative to peers.
Speaker 1: And also noticing that provisions were up but interestingly down
Speaker 1: massively in commercial real estate. Can you talk us through
Speaker 1: that a little bit.
Speaker 2: Well, yes, So provisions have been influenced this year by
Speaker 2: a few transitory effects, all of which we expect to
Speaker 2: either ameliorate or cease next year. One has been the
Speaker 2: impact of the Pustbank integration, second HA being a couple
Speaker 2: of larger corporate in Europe, which in our case we're hedged.
Speaker 2: So the impact to shareholders if you like, was moderate.
Speaker 2: But as you say, commercial real estate has been going
Speaker 2: through a cycle that we've been living with. We'd actually
Speaker 2: called relatively early for a stabilization in that credit environment.
Speaker 2: We've seen that continue in the third quarter. Whether that's
Speaker 2: driven by interest rates, the economy now, interestingly, lease activity,
Speaker 2: and of course the indices that you can see publicly,
Speaker 2: all of those things tell us there's a stabilization for us.
Speaker 2: We were down by over thirty four percent or so
Speaker 2: in provisions in commercial real estate, and actually that included
Speaker 2: a sort of an acceleration based on a sale that
Speaker 2: we're contemplating of some valuation adjustment. So we feel that
Speaker 2: trend is well established now.
Speaker 1: And talking of sales, it's been a big core also
Speaker 1: for M and A within Germany, your origination advisory business
Speaker 1: up twenty five percent. You've been able to capitalize on that.
Speaker 1: Then we have sort of our market share this year.
Speaker 2: I mean, we're up significantly over fifty percent this year
Speaker 2: in last year's revenues. With that a market share gain
Speaker 2: to around two and a half two point six percent
Speaker 2: so far this year. That's encouraging. The wallet was a
Speaker 2: little bit softer in Q three, but we think that
Speaker 2: was sort of seasonal and temporary. The momentum is there.
Speaker 2: And we look forward with the investments that we've made
Speaker 2: in Origination advisory franchise to participating and further improving our
Speaker 2: market share.
Speaker 1: And I wonder what it tells us more broadly about
Speaker 1: the German economy, because a lot of this M and
Speaker 1: A has been incoming to Germany and not sort of
Speaker 1: going out. Is there sort of a sense of Germany
Speaker 1: for sale a little bit, particularly with the weakness in
Speaker 1: the economy.
Speaker 2: I don't see that at all, and I think it's
Speaker 2: actually both ways. And whether it's M and A or
Speaker 2: just the foreign direct investment that's taking place, we see
Speaker 2: certainly two way flows. I mean, Germany always has some
Speaker 2: sort of interesting features around sort of private middle market
Speaker 2: companies sometimes selling strategically or to private equity, and then
Speaker 2: our large industrial companies making investments abroad. That has been
Speaker 2: the trend. I don't see that necessarily changing.
Speaker 1: And also question of M and A obviously will not
Speaker 1: have escaped your attention. What's been going on to Commerce
Speaker 1: Bank and down the street, And obviously there's been a
Speaker 1: lot of talk through the years about Deutsche Bank commerce
Speaker 1: Bank potentially getting together. You obviously observed what's been going on,
Speaker 1: You considered getting involved opted not to. I'd just like
Speaker 1: to get from you kind of the sort of process
Speaker 1: of what you observed and where you ended up into
Speaker 1: sort of the decisions you made.
Speaker 2: Well, look, we were always looking at our option set
Speaker 2: as any sort of well managed company should, and domestic
Speaker 2: consolidation is clearly on the list of things that you
Speaker 2: would look at as you observe your option set. We've
Speaker 2: been i think, pretty consistent in saying the industrial logic
Speaker 2: for bank mergers makes sense, but that we needed time
Speaker 2: to be fully ready, and that time hasn't come, and
Speaker 2: so we're focused on executing our strategy, focused on delivering
Speaker 2: against promises we've made to our shareholders and stakeholders, and
Speaker 2: it's sometimes nice not to be distracted by by other
Speaker 2: things and just execute as I think the third quarter
Speaker 2: and the year to date showed that we've been focused
Speaker 2: on execution.
Speaker 1: And I guess you know, if this were to go
Speaker 1: through with UniCredit and commerce market would make an entity
Speaker 1: larger than Deutsche Bank. We've obviously had consolidation in the
Speaker 1: Swiss market. We also have BBVA Sabadel, so this is
Speaker 1: really a moment for European consolidation. I imagine that makes you
Speaker 1: sort of reflect on your position not only within Germany
Speaker 1: but within Europe. Where does Deutsche Bank want to what
Speaker 1: spaces they want to occupy in that landscape and a
Speaker 1: landscape that is more consolidated with bigger banks.
Speaker 2: Well, let me start by saying, we intend to remain
Speaker 2: number one in Germany and we think that consolidation here
Speaker 2: doesn't really change our competitive landscape. Germany is a very
Speaker 2: competitive market as it stands, and we compete against both
Speaker 2: huperfeiens Bank that is UniCredit and Commerce Bank in our
Speaker 2: home market, so that doesn't change much. But your point
Speaker 2: is one that we agree with. We think Deutsche Bank
Speaker 2: is positioned to play a leading role in European consolidation.
Speaker 2: We think that scale in banking, especially in the regulatory
Speaker 2: environment we live in today, is something that's important and
Speaker 2: something we observe again in competition with our US competitors
Speaker 2: as a strength. So in time, absolutely we see that.
Speaker 2: So that's taking place, and sometimes the first few transactions
Speaker 2: sort of set off a wave, and I think that's
Speaker 2: what you're getting at, and we certainly believe that that begins.
Speaker 1: So when do you think the moment is ready for
Speaker 1: Deutschemak to sort of exit this kind of turnaround mode
Speaker 1: into a sort of slightly more aggressive, more maybe acquisitive,
Speaker 1: more sort of proactive mode.
Speaker 2: Well, look, I don't want to set a clock because
Speaker 2: it's it's always hard to say, but look, twenty five
Speaker 2: is an important milestone year for us. I mean, we've
Speaker 2: been working hard over the years through the transformation of
Speaker 2: the company to position us as exceeding in terms of performance,
Speaker 2: exceeding our cost of capital, showing a sustainable picture to
Speaker 2: our shareholders, resolving the remaining control, and other investments that
Speaker 2: we needed to do to make being on the front
Speaker 2: foot competitively. We think we're well on our way to that,
Speaker 2: and next year is an important milestone.
Speaker 1: And from the sort of uncertainty around commerce, like have
Speaker 1: you been able to sort of acquire clients over the
Speaker 1: last couple of months and expect that to happen if
Speaker 1: there is in fact a takeover.
Speaker 2: Look, we it's always helpful competitively when two competitors are
Speaker 2: distracted by corporate events, that creates opportunity. We're ready to
Speaker 2: capitalize on that opportunity. As you'd expect discussions take place,
Speaker 2: but I'd say it's early days. We think we're very
Speaker 2: well equipped as the leading Bank of Germany with our capabilities,
Speaker 2: our international network, our product capabilities and also our relationships
Speaker 2: to support the German economy and to be the leading
Speaker 2: bank in Germany.
Speaker 1: And there's also a new commission within the within Europe
Speaker 1: being led by Mario Draggy and his Competitive Competitiveness Report.
Speaker 1: It seems like policymakers are more receptive to advice on
Speaker 1: how to make things more competitive. So if James von
Speaker 1: Malka were able to bring sort of one change at
Speaker 1: the EU level to make banking in Europe more competitive,
Speaker 1: what would you suggest.
Speaker 2: Well, what's now called the Savings and Investment Union and
Speaker 2: the Banking Union. We've been advocating for years and I
Speaker 2: personally believe in it because the the size of the
Speaker 2: market and again given all of the industrial logic we
Speaker 2: talked about a moment ago about m and A is
Speaker 2: furthered by those types of changes. And we all see
Speaker 2: the need of in the economy for financing of the
Speaker 2: green transition, of the digital transition, of infrastructure investment, public deficits,
Speaker 2: and these are things that the banking industry would be
Speaker 2: better equipped to be able to serve if those reforms
Speaker 2: came through. So we're pleased with what we see both
Speaker 2: in the new Commission, in the Mission letter for Commissioner
Speaker 2: Albuquerque or Commissioner Designate, and also in the Draggi Report.
Speaker 2: This is an important moment for Europe to sort of
Speaker 2: grasp the nettle and move.
Speaker 1: Forward, and an important moment also for the United States.
Speaker 1: An election just a couple of weeks away. What are
Speaker 1: clients telling you about how they're preparing themselves for the outcome?
Speaker 2: Look almost any way the the American election comes out,
Speaker 2: I think there's a recognition in Europe that we need
Speaker 2: to be more agile, more dynamic, more competitive, not just
Speaker 2: against the United States but also against arising Asia. And
Speaker 2: that's I think that's very clear. You know, our clients
Speaker 2: are reading the newspapers and and understand some of the
Speaker 2: policy differences that are likely to come out of an
Speaker 2: election one way or the other. Of course, the congressional
Speaker 2: election is important too in this context. So so I
Speaker 2: think people are aware of the change, getting ready for
Speaker 2: what lies ahead. I think most importantly trat tariffs, and
Speaker 2: we've been through that before in Europe, and so so
Speaker 2: that the trade relationship that we have with the United
Speaker 2: States but also with China is going to be an
Speaker 2: important feature of the post election period.
Speaker 1: And just a final word. Obviously, we've been waiting for
Speaker 1: the comeback in the German economy for what feels like
Speaker 1: more than two years now. Do you have any sort
Speaker 1: of reason to be optimistic that that is imminent or
Speaker 1: do you think that we are kind of going to
Speaker 1: be slogging through for a bit long?
Speaker 2: Look, we've been We've been frustrated and that the recovery
Speaker 2: has has taken so long. You know, the the transition
Speaker 2: that the German economy is going through around exports, currency,
Speaker 2: energy prices of these things is significant. However, we had
Speaker 2: been expecting growth to begin to accelerate in the second
Speaker 2: half of this year and that doesn't seem to be
Speaker 2: the case. Our economists are calling for about one percent
Speaker 2: growth next year in Germany, and I think that's still
Speaker 2: still a fair case to expect, but that transition has
Speaker 2: been has been longer and tougher than we might have
Speaker 2: hoped for. Again, it ties back to I think there
Speaker 2: is a policy mix that can help unlock some of
Speaker 2: the growth potential and accelerate this adjustment.
Speaker 1: And what are those kind of you think those policy
Speaker 1: points that would help do that well?
Speaker 2: I think the first of all the burdens of bureaucracy.
Speaker 2: I think most most, not just financial institutions, but corporates
Speaker 2: would tell you that there needs to be a moderation
Speaker 2: of that. There are fiscal incentives that can be put
Speaker 2: in place. There is support for a venture capital and
Speaker 2: some of the investing. Securitization is a big item within
Speaker 2: the within the financial sector reforms that we would advocate.
Speaker 2: So there's lots to do without asking taxpayers for more money,
Speaker 2: so that very often things get get stuck on government funding.
Speaker 2: But we think there's a there's a whole lot that
Speaker 2: can be growth stimulus without the need for additional fiscal.
Speaker 1: Support and budget neutral things that could happen to really
Speaker 1: turn on the German.
Speaker 2: Beneficial as far as it generates tax revenues. Okay, don
Speaker 2: you might see a fire. James Wilkos speaking to Bloomberg's
Speaker 2: Oliver cro