Speaker 1: I am here with Christian Saving, who is CEO and
Speaker 1: chair of Deutsche Bank, Germany's biggest lender, here in.
Speaker 2: Washington, d C.
Speaker 1: For the IIF, the IMF, the IRF, and everything else
Speaker 1: under the sun.
Speaker 2: Christin, thank you.
Speaker 1: So much for being here. It's really a treat to
Speaker 1: speak with you. And I want to go over a
Speaker 1: couple of the big themes that we see this week.
Speaker 1: The US election, the growing divide between US and European economies.
Speaker 2: And geopolitical risks.
Speaker 1: And I want to start with the US election. How
Speaker 1: different is it between US and European bank officials when
Speaker 1: they talk about the US election.
Speaker 3: I think there is not so much difference. Obviously, we
Speaker 3: are all observing it. I mean, we had a year
Speaker 3: of elections throughout the world. Half of the world's population
Speaker 3: went to elections, so obviously everybody is focused on this one.
Speaker 3: I think from a European or German point of view,
Speaker 3: it is in particular we are all focusing on what
Speaker 3: happens and what is the impact on the economic development,
Speaker 3: and in particular with we got to trade and tariff
Speaker 3: and in this regard there is obviously a lot of
Speaker 3: discussions and in Europe I'm always telling my clients, irrespective
Speaker 3: of the outcome, we all need to take into account
Speaker 3: that we have seen so many changes from a geopolitical
Speaker 3: point of view over the last five to six years
Speaker 3: that we need to adapt either way, and it means
Speaker 3: that actually Europe needs to work on its home market.
Speaker 3: We need to make sure that our home market is
Speaker 3: becoming bigger, that we are really living one home market
Speaker 3: in Europe in order to be actually strong enough to
Speaker 3: compete with the US. Maybe that under present Trump, obviously
Speaker 3: from a tariff point of view, the situation will be
Speaker 3: even more challenging for europe In corporates. But we need
Speaker 3: to take the right steps right now. We need to
Speaker 3: prepare and therefore not only watching, but making sure that
Speaker 3: we adopt. I think that is the right solution and
Speaker 3: that is the advice we as a bank give to
Speaker 3: our clients.
Speaker 1: Do you see any signs that there is a willingness
Speaker 1: or ability of people, particularly in Germany to adapt at
Speaker 1: a time where there's a real question about the main industry,
Speaker 1: which is auto manufacturing and competition from China.
Speaker 3: Look, it looks potentially from the outside that there is
Speaker 3: no willingness and that the urgency is not understood but
Speaker 3: I can tell you the willingness and also the understanding
Speaker 3: is clearly there. And obviously reports like the drug Ed report,
Speaker 3: but also the Letter Report earlier this year are helping.
Speaker 3: Now we have a complicated system in Europe with twenty
Speaker 3: seven member states, and obviously it takes time, but I
Speaker 3: would say that the understanding in Europe that we need
Speaker 3: to move, that we need to rethink the way we
Speaker 3: are defining our European home market, that we need to
Speaker 3: think about what can we do about energy prices being
Speaker 3: competitive in this regard, that we need to think about
Speaker 3: actually reducing bureaucracies in order to allow investments. And finally,
Speaker 3: and in this regard, I'm actually quite optimistic. The tone
Speaker 3: when you think about also the financial industry, the criticality
Speaker 3: of the financial industry, that Capital Markets Union is now
Speaker 3: on top of the agenda of Brussels, but also of
Speaker 3: the main European countries tells me that the message is understood.
Speaker 2: Of course, we all wish that we execute quicker.
Speaker 1: Okay, so let's go there. You're talking about the unification
Speaker 1: of financial union at the same time that there was
Speaker 1: a lot of dissent from German regulators about the idea
Speaker 1: of uncredit buying Commerce Bank and a real question about
Speaker 1: whether that could go through.
Speaker 2: Do you think that there.
Speaker 1: Is a necessity for consolidation in the European banking sector
Speaker 1: in order.
Speaker 3: For that strength to really happen In general, I think
Speaker 3: yes there is, and we always said that. I have
Speaker 3: said that for the last six years that if we
Speaker 3: think about the European banking environment and the banking industry,
Speaker 3: we are kind of overbanked if you think about what
Speaker 3: is really needed when we think about the future, lots
Speaker 3: of investments into technology, if you think about the regulatory environment,
Speaker 3: I do believe that scale is important. But we also
Speaker 3: always said from a Deutsche Bank point of view, first
Speaker 3: of all, some preconditions also on the regulatory side needs
Speaker 3: to be done. Sometimes, at least in where we are
Speaker 3: right now, sort of say, consolidation is not that easy
Speaker 3: from a regulatory point of view where we stand not
Speaker 3: finalized banking union and so on. And from a Deutsche
Speaker 3: Bank point of view, we always said, look, we have
Speaker 3: a clear strategy for twenty twenty five. We want to
Speaker 3: increase our return on equity and we are on a
Speaker 3: very good way to above ten percent, and therefore we
Speaker 3: are focusing on ourselves, but industry wide it must come
Speaker 3: and it will come over the next years.
Speaker 1: Do you think that that there would be a much
Speaker 1: bigger competitive advantage for Deutsche Bank to be a bigger bank,
Speaker 1: especially when facing off with the JP Morgans and the
Speaker 1: Bank of Americas and the city groups of the world.
Speaker 3: Well, first of all, I'm very proud that in those
Speaker 3: businesses where we are today we can phase off also
Speaker 3: the American banks and we have a good market share
Speaker 3: if you think about the fig business and the investment
Speaker 3: banking in the corporate bank. Honestly, we are among the
Speaker 3: top banks, and I'm really.
Speaker 2: Proud where we focus on.
Speaker 3: We are among the leaders. And you know, it's all
Speaker 3: a matter of time. But for the time being and
Speaker 3: for the next years, Deutsche Bank has such a potential
Speaker 3: to grow its profitability by itself, to grow and look
Speaker 3: from where we were coming. I took over the bank
Speaker 3: with twenty four billion of revenues. Now we are heading
Speaker 3: thirty billion revenues in twenty twenty four.
Speaker 2: We reduced the cost.
Speaker 3: Why shall I look outside If I can do the
Speaker 3: next steps on my own, that's my whole focus. You know,
Speaker 3: I'm not talking about the years after the next years,
Speaker 3: but for the time being, only focused on ourselves.
Speaker 1: In the recent earnings that you just reported right before
Speaker 1: flying out to Washington, DC, you reported a forty two
Speaker 1: percent gain on revenue, which is fantastic quarter over quarter.
Speaker 1: You also increased provisions for loan losses and this was
Speaker 1: uncommercial mortgage debt and a whole host of other assets.
Speaker 1: A lot of people are tying this to some of
Speaker 1: the slowdown that we've seen in the German economy. Do
Speaker 1: you think that's accurate?
Speaker 3: No, I think we need to be very precise when
Speaker 3: it comes to the lonees's provision of dorshrank. First of all,
Speaker 3: to be honest, I think we are still a bank
Speaker 3: with a very low risk profile. Our loness provisions are
Speaker 3: over the last years somewhere between twenty five and thirty
Speaker 3: to thirty five basis points. If you compare that internationally
Speaker 3: and globally, it really shows that it's a low risk profile.
Speaker 2: Now there are two or three.
Speaker 3: Specific reasons why we have shown in increased loanness provisions
Speaker 3: in Q three. We still have some impacts from the
Speaker 3: backlock situation on the post bank integration that will go away.
Speaker 2: Actually, we will even see.
Speaker 3: Some reversals of Lona's provisions in twenty twenty five. Then
Speaker 3: there is a so say a little bit more complex
Speaker 3: items that for one or two exposures. Actually we had
Speaker 3: hatches in place, but we needed to build the gross
Speaker 3: loanness provision, but we got the hedge income via the
Speaker 3: revenue stream, so on a net basis very much controlled
Speaker 3: and on commercial real estate. To be honest, we saw
Speaker 3: in the third quarter for the first time. I'm really
Speaker 3: happy about that, a reduction in Lona's provision. So we
Speaker 3: think we have seen the peak. Valuations are coming back. Obviously,
Speaker 3: reducing interest rates are helping. To be honest, I think
Speaker 3: Deutsche Bank has seen the peak of loaner's provisions in
Speaker 3: the third quarter from a quarterly number. I'm very very
Speaker 3: confident in our risk management. I've done that for twenty
Speaker 3: five years in this bank, so I think I know
Speaker 3: the book, so I have no doubts.
Speaker 1: I think people are not as concerned about some sort
Speaker 1: of existential risk to Deutsche Bank or anything like that.
Speaker 1: The concern is really where is growth going to come from?
Speaker 1: Because right now the German economy is not showing it
Speaker 1: and you're seeing actually a contraction and you're seeing concern
Speaker 1: about businesses about how much production can be absorbed given
Speaker 1: some of the lack of spending.
Speaker 2: How do you grow?
Speaker 1: Do you move outside of Germany? Do you increase your
Speaker 1: exposure to places like Italy and Spain and France and
Speaker 1: the US or is there still an opportunity?
Speaker 3: Well, there are a lot of opportunities, and that was
Speaker 3: always the recently, so why we decided as Toutchure Bank
Speaker 3: to be a global bank.
Speaker 2: I love my home country.
Speaker 3: We have approximately thirty eight or thirty nine percent of
Speaker 3: our revenues in Germany, but I think it is so
Speaker 3: important in this world which we are experienced, to be
Speaker 3: globally diversified, and the advantage of that we are seeing
Speaker 3: right now. Our growth rates in Asia in particular playing
Speaker 3: also the European Asian Bridge are really nice and the
Speaker 3: momentum I see it is simply growing. We have a
Speaker 3: nice business in the US. We're doing almost twenty percent
Speaker 3: of our revenues in the US. We are not offering
Speaker 3: each and everything in the US, but there where we
Speaker 3: are offering we are actually even gaining market share, which
Speaker 3: is good. And then look, we always said we want
Speaker 3: to be the global house bank to our corporate and
Speaker 3: private clients, in particular in a time of uncertainty of
Speaker 3: GEOPLI do uncertain you cannot imagine how many clients are
Speaker 3: coming back to us and are asking for our advice
Speaker 3: with regard to changing their networks, making sure that they
Speaker 3: are diversified, opening other markets and there we can help.
Speaker 3: And therefore the situation as challenging as it is, for
Speaker 3: a global house bank like Deutsche Bank, it's actually an
Speaker 3: opportunity to advise their clients in this challenging situation, and
Speaker 3: that's what we are seeing.
Speaker 2: The momentum of the revenue side very positive.
Speaker 1: How much more are you seeing that from clients looking
Speaker 1: to diversify where they are or move away from certain countries.
Speaker 2: It's a constant theme.
Speaker 3: I would say, it's a constant theme since approximately.
Speaker 2: Two or three years.
Speaker 3: Of course, the COVID situation but also the awful invasion
Speaker 3: of Russia into Ukraine have really, in my view, sharpened
Speaker 3: the risk management muscle of our corporate clients and they
Speaker 3: are thinking far more about diversification than ever before. And
Speaker 3: in this regard they are looking actually for a bank
Speaker 3: with a global exposure, with a network in over sixty
Speaker 3: countries and Therefore, it's a constant theme which we've seen
Speaker 3: for the last two years, and actually it is still
Speaker 3: further growth.
Speaker 1: What region is the best for you are the one
Speaker 1: that you're focused on for expansion.
Speaker 3: Well, from expansion, I would say there is a lot
Speaker 3: of activity actually in Asia also there if you think
Speaker 3: about the diversifacation there, I will always say it's not
Speaker 3: about decoupling from China. It's all about diversifying. And we
Speaker 3: can see a lot of a lot of momentum actually
Speaker 3: and action happening in actually diversifying business opportunities from our
Speaker 3: corporate clients within Asia, going to Sausaea, outside of China,
Speaker 3: going to India, going to the southeast of Asia. That
Speaker 3: is the reason why we are in more than seventeen
Speaker 3: markets in Asia. So that is clearly a gross market.
Speaker 3: Don't underestimate the Middle East. I think it is for
Speaker 3: the next years. It's a gross market. We invested heavily
Speaker 3: on the private wealth management site, but in particular also
Speaker 3: in the investment.
Speaker 2: Bank on the Middle East.
Speaker 3: And then from a product point of view, we took
Speaker 3: actually eighteen months ago, we took the clear decision to
Speaker 3: grow our fee business in the origination advisory business because
Speaker 3: we always thought at some point in time net interest
Speaker 3: income will reach its peak. We need to increase our
Speaker 3: fee business. That, combined with the advisory needs of our clients,
Speaker 3: is a real opportunity that we want to be stronger.
Speaker 1: Christian saving. Thank you so much for being with us.
Speaker 1: It's Christian saving of Deutsche Bank.