WEBVTT - Deutsche Bank CEO Christian Sewing Talks Growth Opportunities 0:00:00.200 --> 0:00:02.800 I am here with Christian Saving, who is CEO and 0:00:02.880 --> 0:00:06.440 chair of Deutsche Bank, Germany's biggest lender, here in. 0:00:06.519 --> 0:00:07.240 Washington, d C. 0:00:07.480 --> 0:00:10.840 For the IIF, the IMF, the IRF, and everything else 0:00:10.880 --> 0:00:11.440 under the sun. 0:00:11.680 --> 0:00:12.400 Christin, thank you. 0:00:12.360 --> 0:00:14.159 So much for being here. It's really a treat to 0:00:14.200 --> 0:00:16.239 speak with you. And I want to go over a 0:00:16.239 --> 0:00:18.360 couple of the big themes that we see this week. 0:00:18.480 --> 0:00:23.600 The US election, the growing divide between US and European economies. 0:00:23.000 --> 0:00:24.440 And geopolitical risks. 0:00:24.480 --> 0:00:26.800 And I want to start with the US election. How 0:00:26.840 --> 0:00:31.480 different is it between US and European bank officials when 0:00:31.480 --> 0:00:32.800 they talk about the US election. 0:00:34.800 --> 0:00:38.040 I think there is not so much difference. Obviously, we 0:00:38.080 --> 0:00:40.080 are all observing it. I mean, we had a year 0:00:40.479 --> 0:00:44.560 of elections throughout the world. Half of the world's population 0:00:45.560 --> 0:00:48.920 went to elections, so obviously everybody is focused on this one. 0:00:49.640 --> 0:00:53.240 I think from a European or German point of view, 0:00:53.479 --> 0:00:56.320 it is in particular we are all focusing on what 0:00:56.480 --> 0:00:59.160 happens and what is the impact on the economic development, 0:00:59.160 --> 0:01:02.280 and in particular with we got to trade and tariff 0:01:03.320 --> 0:01:06.040 and in this regard there is obviously a lot of 0:01:06.120 --> 0:01:11.240 discussions and in Europe I'm always telling my clients, irrespective 0:01:11.280 --> 0:01:13.880 of the outcome, we all need to take into account 0:01:13.880 --> 0:01:16.720 that we have seen so many changes from a geopolitical 0:01:16.760 --> 0:01:18.919 point of view over the last five to six years 0:01:19.560 --> 0:01:23.200 that we need to adapt either way, and it means 0:01:23.240 --> 0:01:26.200 that actually Europe needs to work on its home market. 0:01:26.600 --> 0:01:28.920 We need to make sure that our home market is 0:01:29.080 --> 0:01:31.920 becoming bigger, that we are really living one home market 0:01:31.959 --> 0:01:35.120 in Europe in order to be actually strong enough to 0:01:35.200 --> 0:01:39.840 compete with the US. Maybe that under present Trump, obviously 0:01:40.120 --> 0:01:42.520 from a tariff point of view, the situation will be 0:01:42.840 --> 0:01:46.119 even more challenging for europe In corporates. But we need 0:01:46.160 --> 0:01:48.000 to take the right steps right now. We need to 0:01:48.000 --> 0:01:52.480 prepare and therefore not only watching, but making sure that 0:01:52.560 --> 0:01:55.080 we adopt. I think that is the right solution and 0:01:55.160 --> 0:01:57.400 that is the advice we as a bank give to 0:01:57.440 --> 0:01:58.040 our clients. 0:01:58.240 --> 0:02:01.520 Do you see any signs that there is a willingness 0:02:01.640 --> 0:02:05.480 or ability of people, particularly in Germany to adapt at 0:02:05.520 --> 0:02:08.120 a time where there's a real question about the main industry, 0:02:08.360 --> 0:02:10.959 which is auto manufacturing and competition from China. 0:02:12.400 --> 0:02:14.800 Look, it looks potentially from the outside that there is 0:02:14.840 --> 0:02:18.960 no willingness and that the urgency is not understood but 0:02:19.000 --> 0:02:22.320 I can tell you the willingness and also the understanding 0:02:22.360 --> 0:02:25.519 is clearly there. And obviously reports like the drug Ed report, 0:02:25.560 --> 0:02:28.840 but also the Letter Report earlier this year are helping. 0:02:28.960 --> 0:02:32.400 Now we have a complicated system in Europe with twenty 0:02:32.440 --> 0:02:36.560 seven member states, and obviously it takes time, but I 0:02:36.560 --> 0:02:39.280 would say that the understanding in Europe that we need 0:02:39.320 --> 0:02:43.120 to move, that we need to rethink the way we 0:02:43.160 --> 0:02:46.280 are defining our European home market, that we need to 0:02:46.400 --> 0:02:49.880 think about what can we do about energy prices being 0:02:49.960 --> 0:02:53.000 competitive in this regard, that we need to think about 0:02:53.720 --> 0:02:57.880 actually reducing bureaucracies in order to allow investments. And finally, 0:02:57.919 --> 0:03:01.959 and in this regard, I'm actually quite optimistic. The tone 0:03:02.000 --> 0:03:05.359 when you think about also the financial industry, the criticality 0:03:05.400 --> 0:03:08.320 of the financial industry, that Capital Markets Union is now 0:03:08.360 --> 0:03:11.320 on top of the agenda of Brussels, but also of 0:03:11.440 --> 0:03:16.360 the main European countries tells me that the message is understood. 0:03:16.440 --> 0:03:18.840 Of course, we all wish that we execute quicker. 0:03:19.000 --> 0:03:21.880 Okay, so let's go there. You're talking about the unification 0:03:22.240 --> 0:03:25.640 of financial union at the same time that there was 0:03:25.880 --> 0:03:28.600 a lot of dissent from German regulators about the idea 0:03:28.600 --> 0:03:31.799 of uncredit buying Commerce Bank and a real question about 0:03:31.800 --> 0:03:32.840 whether that could go through. 0:03:32.880 --> 0:03:33.840 Do you think that there. 0:03:33.800 --> 0:03:37.720 Is a necessity for consolidation in the European banking sector 0:03:37.760 --> 0:03:38.480 in order. 0:03:38.600 --> 0:03:41.760 For that strength to really happen In general, I think 0:03:41.880 --> 0:03:44.600 yes there is, and we always said that. I have 0:03:44.720 --> 0:03:47.000 said that for the last six years that if we 0:03:47.040 --> 0:03:51.520 think about the European banking environment and the banking industry, 0:03:52.520 --> 0:03:55.440 we are kind of overbanked if you think about what 0:03:55.560 --> 0:03:59.000 is really needed when we think about the future, lots 0:03:59.040 --> 0:04:02.760 of investments into technology, if you think about the regulatory environment, 0:04:03.320 --> 0:04:07.160 I do believe that scale is important. But we also 0:04:07.200 --> 0:04:09.760 always said from a Deutsche Bank point of view, first 0:04:09.800 --> 0:04:12.840 of all, some preconditions also on the regulatory side needs 0:04:12.840 --> 0:04:16.760 to be done. Sometimes, at least in where we are 0:04:16.839 --> 0:04:21.520 right now, sort of say, consolidation is not that easy 0:04:22.240 --> 0:04:25.040 from a regulatory point of view where we stand not 0:04:25.160 --> 0:04:28.719 finalized banking union and so on. And from a Deutsche 0:04:28.720 --> 0:04:30.400 Bank point of view, we always said, look, we have 0:04:30.400 --> 0:04:33.320 a clear strategy for twenty twenty five. We want to 0:04:33.320 --> 0:04:35.200 increase our return on equity and we are on a 0:04:35.320 --> 0:04:38.400 very good way to above ten percent, and therefore we 0:04:38.440 --> 0:04:42.479 are focusing on ourselves, but industry wide it must come 0:04:42.520 --> 0:04:44.039 and it will come over the next years. 0:04:44.120 --> 0:04:45.880 Do you think that that there would be a much 0:04:45.960 --> 0:04:49.359 bigger competitive advantage for Deutsche Bank to be a bigger bank, 0:04:49.680 --> 0:04:53.479 especially when facing off with the JP Morgans and the 0:04:53.520 --> 0:04:55.599 Bank of Americas and the city groups of the world. 0:04:55.920 --> 0:04:58.240 Well, first of all, I'm very proud that in those 0:04:58.279 --> 0:05:01.440 businesses where we are today we can phase off also 0:05:01.480 --> 0:05:03.839 the American banks and we have a good market share 0:05:04.080 --> 0:05:06.719 if you think about the fig business and the investment 0:05:06.760 --> 0:05:09.919 banking in the corporate bank. Honestly, we are among the 0:05:09.960 --> 0:05:11.360 top banks, and I'm really. 0:05:11.160 --> 0:05:13.200 Proud where we focus on. 0:05:13.640 --> 0:05:17.560 We are among the leaders. And you know, it's all 0:05:17.600 --> 0:05:20.040 a matter of time. But for the time being and 0:05:20.120 --> 0:05:24.360 for the next years, Deutsche Bank has such a potential 0:05:24.800 --> 0:05:30.080 to grow its profitability by itself, to grow and look 0:05:30.120 --> 0:05:31.680 from where we were coming. I took over the bank 0:05:31.720 --> 0:05:33.960 with twenty four billion of revenues. Now we are heading 0:05:33.960 --> 0:05:35.800 thirty billion revenues in twenty twenty four. 0:05:35.839 --> 0:05:36.799 We reduced the cost. 0:05:37.320 --> 0:05:39.720 Why shall I look outside If I can do the 0:05:39.720 --> 0:05:42.920 next steps on my own, that's my whole focus. You know, 0:05:43.040 --> 0:05:46.360 I'm not talking about the years after the next years, 0:05:46.600 --> 0:05:49.039 but for the time being, only focused on ourselves. 0:05:49.080 --> 0:05:51.559 In the recent earnings that you just reported right before 0:05:51.640 --> 0:05:55.000 flying out to Washington, DC, you reported a forty two 0:05:55.040 --> 0:05:58.039 percent gain on revenue, which is fantastic quarter over quarter. 0:05:58.480 --> 0:06:02.800 You also increased provisions for loan losses and this was 0:06:02.920 --> 0:06:06.240 uncommercial mortgage debt and a whole host of other assets. 0:06:06.440 --> 0:06:08.160 A lot of people are tying this to some of 0:06:08.200 --> 0:06:10.680 the slowdown that we've seen in the German economy. Do 0:06:10.680 --> 0:06:11.600 you think that's accurate? 0:06:13.160 --> 0:06:15.440 No, I think we need to be very precise when 0:06:15.440 --> 0:06:17.599 it comes to the lonees's provision of dorshrank. First of all, 0:06:17.720 --> 0:06:20.520 to be honest, I think we are still a bank 0:06:20.560 --> 0:06:23.520 with a very low risk profile. Our loness provisions are 0:06:24.320 --> 0:06:27.800 over the last years somewhere between twenty five and thirty 0:06:27.800 --> 0:06:30.760 to thirty five basis points. If you compare that internationally 0:06:30.760 --> 0:06:34.080 and globally, it really shows that it's a low risk profile. 0:06:34.800 --> 0:06:36.440 Now there are two or three. 0:06:36.440 --> 0:06:39.800 Specific reasons why we have shown in increased loanness provisions 0:06:39.800 --> 0:06:44.520 in Q three. We still have some impacts from the 0:06:44.560 --> 0:06:47.880 backlock situation on the post bank integration that will go away. 0:06:47.920 --> 0:06:49.640 Actually, we will even see. 0:06:49.400 --> 0:06:52.800 Some reversals of Lona's provisions in twenty twenty five. Then 0:06:52.839 --> 0:06:55.160 there is a so say a little bit more complex 0:06:55.240 --> 0:06:58.760 items that for one or two exposures. Actually we had 0:06:58.760 --> 0:07:00.840 hatches in place, but we needed to build the gross 0:07:00.880 --> 0:07:04.440 loanness provision, but we got the hedge income via the 0:07:04.440 --> 0:07:07.600 revenue stream, so on a net basis very much controlled 0:07:07.839 --> 0:07:10.080 and on commercial real estate. To be honest, we saw 0:07:10.080 --> 0:07:12.280 in the third quarter for the first time. I'm really 0:07:12.280 --> 0:07:15.120 happy about that, a reduction in Lona's provision. So we 0:07:15.200 --> 0:07:18.600 think we have seen the peak. Valuations are coming back. Obviously, 0:07:19.000 --> 0:07:22.120 reducing interest rates are helping. To be honest, I think 0:07:22.160 --> 0:07:24.680 Deutsche Bank has seen the peak of loaner's provisions in 0:07:24.720 --> 0:07:27.960 the third quarter from a quarterly number. I'm very very 0:07:28.000 --> 0:07:31.480 confident in our risk management. I've done that for twenty 0:07:31.480 --> 0:07:33.400 five years in this bank, so I think I know 0:07:33.480 --> 0:07:35.440 the book, so I have no doubts. 0:07:35.560 --> 0:07:37.880 I think people are not as concerned about some sort 0:07:37.920 --> 0:07:40.240 of existential risk to Deutsche Bank or anything like that. 0:07:40.520 --> 0:07:42.800 The concern is really where is growth going to come from? 0:07:43.080 --> 0:07:45.280 Because right now the German economy is not showing it 0:07:45.640 --> 0:07:48.400 and you're seeing actually a contraction and you're seeing concern 0:07:48.600 --> 0:07:52.040 about businesses about how much production can be absorbed given 0:07:52.320 --> 0:07:53.600 some of the lack of spending. 0:07:54.000 --> 0:07:54.840 How do you grow? 0:07:54.880 --> 0:07:57.120 Do you move outside of Germany? Do you increase your 0:07:57.120 --> 0:08:01.000 exposure to places like Italy and Spain and France and 0:08:01.280 --> 0:08:04.560 the US or is there still an opportunity? 0:08:05.200 --> 0:08:07.560 Well, there are a lot of opportunities, and that was 0:08:07.600 --> 0:08:10.800 always the recently, so why we decided as Toutchure Bank 0:08:10.800 --> 0:08:11.680 to be a global bank. 0:08:12.080 --> 0:08:13.200 I love my home country. 0:08:13.280 --> 0:08:15.480 We have approximately thirty eight or thirty nine percent of 0:08:15.520 --> 0:08:19.040 our revenues in Germany, but I think it is so 0:08:19.120 --> 0:08:22.120 important in this world which we are experienced, to be 0:08:22.360 --> 0:08:26.680 globally diversified, and the advantage of that we are seeing 0:08:26.760 --> 0:08:29.600 right now. Our growth rates in Asia in particular playing 0:08:29.640 --> 0:08:33.440 also the European Asian Bridge are really nice and the 0:08:33.440 --> 0:08:37.599 momentum I see it is simply growing. We have a 0:08:37.679 --> 0:08:40.040 nice business in the US. We're doing almost twenty percent 0:08:40.040 --> 0:08:42.199 of our revenues in the US. We are not offering 0:08:42.320 --> 0:08:45.080 each and everything in the US, but there where we 0:08:45.120 --> 0:08:48.400 are offering we are actually even gaining market share, which 0:08:48.440 --> 0:08:52.640 is good. And then look, we always said we want 0:08:52.640 --> 0:08:55.000 to be the global house bank to our corporate and 0:08:55.040 --> 0:08:59.440 private clients, in particular in a time of uncertainty of 0:08:59.520 --> 0:09:03.400 GEOPLI do uncertain you cannot imagine how many clients are 0:09:03.400 --> 0:09:06.600 coming back to us and are asking for our advice 0:09:06.679 --> 0:09:10.400 with regard to changing their networks, making sure that they 0:09:10.400 --> 0:09:14.280 are diversified, opening other markets and there we can help. 0:09:14.320 --> 0:09:17.560 And therefore the situation as challenging as it is, for 0:09:17.679 --> 0:09:20.000 a global house bank like Deutsche Bank, it's actually an 0:09:20.000 --> 0:09:24.520 opportunity to advise their clients in this challenging situation, and 0:09:24.600 --> 0:09:25.520 that's what we are seeing. 0:09:25.520 --> 0:09:27.760 The momentum of the revenue side very positive. 0:09:27.880 --> 0:09:30.320 How much more are you seeing that from clients looking 0:09:30.400 --> 0:09:34.640 to diversify where they are or move away from certain countries. 0:09:35.120 --> 0:09:36.000 It's a constant theme. 0:09:36.320 --> 0:09:41.160 I would say, it's a constant theme since approximately. 0:09:40.520 --> 0:09:41.480 Two or three years. 0:09:42.000 --> 0:09:46.920 Of course, the COVID situation but also the awful invasion 0:09:46.960 --> 0:09:50.520 of Russia into Ukraine have really, in my view, sharpened 0:09:50.640 --> 0:09:54.280 the risk management muscle of our corporate clients and they 0:09:54.280 --> 0:09:58.280 are thinking far more about diversification than ever before. And 0:09:58.720 --> 0:10:01.280 in this regard they are looking actually for a bank 0:10:01.360 --> 0:10:04.520 with a global exposure, with a network in over sixty 0:10:04.559 --> 0:10:07.920 countries and Therefore, it's a constant theme which we've seen 0:10:07.960 --> 0:10:10.880 for the last two years, and actually it is still 0:10:11.040 --> 0:10:11.720 further growth. 0:10:12.000 --> 0:10:15.000 What region is the best for you are the one 0:10:15.000 --> 0:10:16.520 that you're focused on for expansion. 0:10:17.640 --> 0:10:20.760 Well, from expansion, I would say there is a lot 0:10:20.800 --> 0:10:25.160 of activity actually in Asia also there if you think 0:10:25.200 --> 0:10:28.960 about the diversifacation there, I will always say it's not 0:10:29.040 --> 0:10:33.200 about decoupling from China. It's all about diversifying. And we 0:10:33.280 --> 0:10:37.199 can see a lot of a lot of momentum actually 0:10:37.720 --> 0:10:44.000 and action happening in actually diversifying business opportunities from our 0:10:44.080 --> 0:10:48.840 corporate clients within Asia, going to Sausaea, outside of China, 0:10:49.080 --> 0:10:51.520 going to India, going to the southeast of Asia. That 0:10:51.600 --> 0:10:53.720 is the reason why we are in more than seventeen 0:10:53.720 --> 0:10:57.400 markets in Asia. So that is clearly a gross market. 0:10:57.440 --> 0:11:00.880 Don't underestimate the Middle East. I think it is for 0:11:00.920 --> 0:11:03.959 the next years. It's a gross market. We invested heavily 0:11:04.200 --> 0:11:06.640 on the private wealth management site, but in particular also 0:11:06.640 --> 0:11:07.640 in the investment. 0:11:07.320 --> 0:11:09.600 Bank on the Middle East. 0:11:10.200 --> 0:11:13.800 And then from a product point of view, we took 0:11:14.120 --> 0:11:18.920 actually eighteen months ago, we took the clear decision to 0:11:19.040 --> 0:11:22.600 grow our fee business in the origination advisory business because 0:11:22.600 --> 0:11:25.000 we always thought at some point in time net interest 0:11:25.080 --> 0:11:27.520 income will reach its peak. We need to increase our 0:11:27.600 --> 0:11:31.520 fee business. That, combined with the advisory needs of our clients, 0:11:31.880 --> 0:11:35.360 is a real opportunity that we want to be stronger. 0:11:35.640 --> 0:11:37.600 Christian saving. Thank you so much for being with us. 0:11:37.640 --> 0:11:39.800 It's Christian saving of Deutsche Bank.