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Speaker 1: We've got a lot of earnings coming out this morning.

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Speaker 1: We've already had Deutsche Bank for the second quarter. Management

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Speaker 1: had warned of a possible twenty percent drop in fixed

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Speaker 1: income trading revenue for the period, and you have had

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Speaker 1: a beat there. We can now go to an interview

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Speaker 1: with the Deutsche Bank CFO, James von Moltke from Oliver Crook.

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Speaker 2: This year was sort of characterized with a lot of

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Speaker 2: clouds on the horizon. You said that as the year

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Speaker 2: has gone on, those have cleared up. Kind of what

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Speaker 2: is the outlook going for what are you seeing in

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Speaker 2: the next couple quarters.

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Speaker 3: Well, it has been a very sort of interesting in

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Speaker 3: some ways mixed environment this year so far, but one

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Speaker 3: that I think we've been trading through quite well as

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Speaker 3: an organization. You know, we're delivering revenue growth eleven percent

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Speaker 3: on the top line. We're executing on our expense agenda

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Speaker 3: and that's helping us to deliver operating leverage.

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Speaker 4: We had three.

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Speaker 3: Positive ratings actions in the quarter, and we're delivering on

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Speaker 3: our capital return story. We're having announced a four hundred

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Speaker 3: and fifty million buy back yesterday. So we think in

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Speaker 3: this environment, the profile we're putting together is pretty.

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Speaker 2: Strong and getting into kind of these specific silos of

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Speaker 2: that business. Training was always going to be toughest quarter.

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Speaker 2: We've seeing that.

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Speaker 5: Across the industry.

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Speaker 2: It's actually come in a bit better than you had

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Speaker 2: guided towards. You said that there's going to be a

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Speaker 2: bounce back in the second half. What does a bounce

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Speaker 2: back mean and are you seeing it already now that

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Speaker 2: we're in the third quarter.

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Speaker 4: Well, I'd say two things.

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Speaker 3: One is, we came in down ten percent off a

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Speaker 3: really good quarter last year, so we think a decent

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Speaker 3: performance in this environment. Volatility has clearly declined versus where

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Speaker 3: we were last year. Again, last year was the war

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Speaker 3: was still sort of in the markets and the uncertainty

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Speaker 3: about the energy path.

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Speaker 4: We've gotten to a.

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Speaker 3: Place now where I think the market sees the forward

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Speaker 3: on interest rates, and you know, we do see the

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Speaker 3: potential for a pickup as we get into the sort

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Speaker 3: of the downside of the cycle, if you like, you know,

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Speaker 3: as an investors start to position for the timing and

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Speaker 3: the extent of policy rate declines. I think that's early yet,

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Speaker 3: but it's it's something that we do believe lies ahead.

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Speaker 2: And in terms of the revenue outlook, what is that

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Speaker 2: looking like for the rest of you, are you confident

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Speaker 2: in kind of guiding either higher or towards the upper

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Speaker 2: end of your range for the rest of the year.

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Speaker 3: Look, there's, first of all, in our range which we

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Speaker 3: said at the beginning of the year twenty eight to

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Speaker 3: twenty nine billion, we're now saying that we think we're

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Speaker 3: solidly in the middle, probably the upper end of that range,

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Speaker 3: which is which is really encouraging.

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Speaker 4: Now.

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Speaker 3: Of course, a lot of that story this year, and

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Speaker 3: in the banking industry, not just s Deutsche Bank, has

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Speaker 3: been a rate story, and that's not just the rate rises,

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Speaker 3: but also questions about about you know, deposit rate passed

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Speaker 3: through into the you know, for the banks, you know

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Speaker 3: what's interesting and especially for us, given our sort of

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Speaker 3: business profile, business mix, we do see as that as

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Speaker 3: that rate story abates somewhat, it's it's normalizing and it's

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Speaker 3: it will normalize I think at.

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Speaker 4: A healthy level.

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Speaker 3: We think there's a story developing in terms of the

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Speaker 3: non interest income revenue sources that we have, you know,

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Speaker 3: financial markets over the past you know, four or five

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Speaker 3: quarters have been sort of more difficult, but we see

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Speaker 3: that starting to come back, and we think we're very

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Speaker 3: well positioned to take advantage of.

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Speaker 2: That, and I thinks have gone a little bit better

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Speaker 2: in trading than we had anticipated, you know, rates maybe

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Speaker 2: topping out a little bit going forward. Where do you

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Speaker 2: think the growth really comes from? What parts of the

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Speaker 2: business are really going to drive growth?

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Speaker 3: Well, look, there are parts of the investment world that

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Speaker 3: have been you know, have been quite difficult. I take

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Speaker 3: wealth management as an example where investors have been sort

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Speaker 3: of reticent to your point earlier, you know, in the

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Speaker 3: uncertainties that have lain ahead, whether it's the rate, the

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Speaker 3: direction of the economy, some of the geopolitical events that

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Speaker 3: we've been living through. As those things clear up and

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Speaker 3: the direction of travel becomes more clear, you'd expect that

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Speaker 3: that individual investor, that wealth investor to begin to re engage.

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Speaker 4: The other area, By the way.

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Speaker 3: Corporate finance activity be notably slow over the last four quarters,

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Speaker 3: and we do expect that to pick up as well.

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Speaker 2: And that all to do with the ECB. So, you know,

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Speaker 2: the market is twenty five basis points. Are you with

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Speaker 2: the market?

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Speaker 3: Yeah, we agree with the market that both the FED

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Speaker 3: and the ECB are likely to move by this week.

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Speaker 3: The twenty five basis points question of what the step

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Speaker 3: after that is. Our sense is that the ECB may

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Speaker 3: have one more move to make, and that the EAT

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Speaker 3: and that the FED may stay pat you know, to us,

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Speaker 3: the real question now isn't what's the terminal rate? But

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Speaker 3: how long will it persist for? How long will it

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Speaker 3: take to bring core inflation out of the system. I

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Speaker 3: think that's the question that's still outstanding. And at what cost?

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Speaker 2: I think is the other one we saw yesterday the

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Speaker 2: ECB saying that corporate loan demand is off of a cliff.

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Speaker 2: You know, we've had manufacturing manufacturing in recession, quarter of

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Speaker 2: smmes according to survey saying that they're considering packing up

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Speaker 2: and selling. You are the lender to Germany Incorporated. What

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Speaker 2: are you seeing in the economy?

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Speaker 3: Well, look, I think to let me start with, you know,

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Speaker 3: the case for a soft landing. And I have to

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Speaker 3: confess that we were sort of more pessimistic in our

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Speaker 3: outlook at the beginning of the year, but the case

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Speaker 3: for the for a soft landing seems to be improving.

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Speaker 3: That entails though that and that's what the central banks

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Speaker 3: have to achieve, is that that there is some slow

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Speaker 3: down the economy and the and the mechanism for for

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Speaker 3: putting you know, the impact of policy rates through the

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Speaker 3: economy is is bank lending. And while you've seen a

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Speaker 3: decline in Europe and also in the in the US,

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Speaker 3: and you've seen that in our books, so loans are

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Speaker 3: down in certain of our businesses. I'm not sure it's

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Speaker 3: it's a dramatic or a long lasting impact that's likely

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Speaker 3: to take place. I think there's an adjustment to this

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Speaker 3: rate rate environment and then and then we'll find a

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Speaker 3: level and begin to grow from that level.

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Speaker 2: But we notice sort of a large or a kind

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Speaker 2: of at least notable increase in provisions in kind of

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Speaker 2: this quarter.

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Speaker 5: What are you kind of expecting there?

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Speaker 2: Are you expecting kind of that portfolio to soften a

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Speaker 2: little bit?

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Speaker 3: What are you saying, Look, we have seen some softening,

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Speaker 3: but it's it's it's not at all broad based, and

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Speaker 3: and so we're still basically comfortable with the credit environment

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Speaker 3: that we're living through. You know, there, as I say,

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Speaker 3: there have been some some pockets to real estate has

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Speaker 3: been an area of focus. We've seen some softening in

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Speaker 3: our home economy in the MidCap space, but it remains

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Speaker 3: sort of pockets of weakness and nothing that we see

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Speaker 3: as more pervasive, and.

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Speaker 2: I want to touch the buyback as well, four hundred

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Speaker 2: and fifty million. As you had sort of steered the market,

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Speaker 2: the market got that information, and so of course the

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Speaker 2: market wants to know what comes next. And obviously this

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Speaker 2: is part of a broader plan from Deutsche Bank to

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Speaker 2: give back some money to shareholders. Can we expect this

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Speaker 2: as a kind of more less of a one off

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Speaker 2: and more of a something that we build in, and

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Speaker 2: can we expect increments of that kind of quantity one

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Speaker 2: hundred and fifty million something like that? What are you

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Speaker 2: seeing for the plans for the buyback?

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Speaker 4: Well, I guess too.

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Speaker 3: Think first of all, we've been very clear about our

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Speaker 3: goal to return eight billion over four years to our shareholders,

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Speaker 3: and so with the buyback announcement yesterday, we have another

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Speaker 3: installment and we're pleased to have taken that step. We've

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Speaker 3: got a very clear dividend policy or path that we

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Speaker 3: laid out in March of last year, a fifty percent

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Speaker 3: increase per year over several years, bringing us back to

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Speaker 3: a much more normalized and at this level I think

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Speaker 3: very competitive dividend yield.

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Speaker 4: Obviously, SHERI purchase a big.

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Speaker 3: Part of our return story as well, and so this

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Speaker 3: year we've been able to keep pace fifty percent higher

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Speaker 3: than last year's repurchase. Too early to say what we'll

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Speaker 3: do next year and the years after, but we aim

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Speaker 3: to continue on this trajectory and deliver on that eight billion.

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Speaker 2: And then in terms of cost cuts, obviously, this is

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Speaker 2: the other long term project for Deutsche Bank is getting

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Speaker 2: those costs down. We saw some of them come up

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Speaker 2: this quarter or something one off. But then you know,

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Speaker 2: one of the things I grabbed my attention, one hundred

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Speaker 2: millions annually in savings on job reductions. Let's put a

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Speaker 2: little bit of some contours around that.

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Speaker 5: What does that really mean?

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Speaker 3: Sure, well, listen, it's part of a program. What we've

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Speaker 3: said last March was we want to deliver two billion

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Speaker 3: of savings based on some programs and initiatives that offset

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Speaker 3: the impact of inflation, the impact of investments that we

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Speaker 3: need to make.

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Speaker 4: We actually up that target to two and a half.

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Speaker 3: Billion, this just recently in April, and we're working on

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Speaker 3: measures and delivering on measures that achieved that for us.

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Speaker 4: As you say, a reduction force was part of that.

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Speaker 3: Five percent of what we say is non client facing

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Speaker 3: senior staff amounts to about eight hundred people, and we've

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Speaker 3: made really good progress on that, so a little over

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Speaker 3: eighty percent of those people have either been informed or

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Speaker 3: have left the platform, and that should add in that

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Speaker 3: towards that goal of two and a half billion, about

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Speaker 3: one hundred million into the run rate by the end

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Speaker 3: of the year. I think the important thing is just

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Speaker 3: how we execute on these saves and essentially balance saves

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Speaker 3: with investments that we know we need to make. We've

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Speaker 3: been working hard on our control environment, hard on sort

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Speaker 3: of renewing the technology estate that we work with, and

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Speaker 3: also investing in the businesses for future growth, and working

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Speaker 3: therefore hard on delivering these initiatives to offset those pressures.

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Speaker 3: We've delivered now three quarters in a row against the

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Speaker 3: guidance that we had of essentially flat costs four point

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Speaker 3: nine billion in run.

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Speaker 4: Rates set of operating costs.

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Speaker 3: That's something that looking towards the end of the year,

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Speaker 3: we would see increasing a little bit as we bring

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Speaker 3: Numus on board and see the impact of some of

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Speaker 3: of the first, you know, the frontline investments that we've

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Speaker 3: been making. But we're very confident about our delivery on

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Speaker 3: those savings initiatives. You know, it feels a little bit

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Speaker 3: as though we're starting to run downhill, if you like,

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Speaker 3: with the delivery giving us sort of more confidence in

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Speaker 3: our momentum.

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Speaker 2: There, and you think that that combination is the recipe

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Speaker 2: to kind of help with, for example, of the valuation

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Speaker 2: of Deutsche.

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Speaker 5: Bank and kind of getting more of the value.

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Speaker 3: Absolutely, you know, for us, it's an operating leverage story.

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Speaker 3: We've now delivered over the last four years pretty consistently

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Speaker 3: five percent operating leverage year on year, quarter on quarter,

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Speaker 3: and if you take out those the non operating sort

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Speaker 3: of higher than normal litigation charges this quarter. On an

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Speaker 3: underlying basis, that's again what we're doing. Our revenues are

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Speaker 3: growing ahead of our plans and if you know, as

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Speaker 3: we as we deliver on the expenses, the expense agenda

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Speaker 3: we have, it produces really strong operating leverage and.

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Speaker 2: More broadly kind of on the on the macro in

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Speaker 2: the second half of the year, are there are reasons

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Speaker 2: to be kind of optimistic within the German economy? You know,

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Speaker 2: again we've been awaiting the tailwind of the great China

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Speaker 2: reopening story where we have stimulus coming into China, but

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Speaker 2: is there is there a reason to be optimistic kind

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Speaker 2: of working there is.

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Speaker 4: Yeah, look, it's it's sort of a mixed picture, as

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Speaker 4: I said earlier.

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Speaker 3: But but in part what I mean there is Germany

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Speaker 3: and Europe more broadly has been somewhat stagnant in terms

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Speaker 3: of its growth these past several quarters, sort of at

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Speaker 3: around zero. We do expect that to be a little

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Speaker 3: better in the second quarter. But what you're seeing is

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Speaker 3: the effect of certain sectors, so building, for example, in

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Speaker 3: real estate being in a recessionary territory.

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Speaker 4: Other sectors like services, you know, growing quite strongly. So

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Speaker 4: there's a mix going on.

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Speaker 3: And to your question, you know that what is the

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Speaker 3: dynamic going forward of recovery in those areas that are recessionary,

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Speaker 3: what's going to happen with sort of the industrial order

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Speaker 3: books and the export market, All of those things are

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Speaker 3: in play. But I think the conditions are in place

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Speaker 3: to see sort of steady growth starting, you know, either

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Speaker 3: late this year or into twenty four and.

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Speaker 2: Just very quickly, because we have not much time left.

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Speaker 2: When we just think about the balance of risks for clients,

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Speaker 2: what are they most worried about now? Originally, you know,

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Speaker 2: is inflation and recession and kind of geopolitics, What.

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Speaker 5: Do you think is the kind of guide right now is.

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Speaker 4: I think geopolitics is front and center.

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Speaker 3: I think, as I say, I think the direction of

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Speaker 3: rates probably more clear. People are getting more comfortable with

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Speaker 3: the direction of the economy and that really leaves sort

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Speaker 3: of geopolitics as the big unknown that we're dealing with.

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Speaker 3: So as more of these clouds begin to clear, as

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Speaker 3: I say, the conditions are there for a growing economy

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Speaker 3: and then a normalized rate environment, which should be good

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Speaker 3: for the banks.

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Speaker 1: So that was the Deutsche Banks CFO James von Moltke.

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Speaker 4: There