Speaker 1: Bloomberg Audio Studios, podcasts, radio News. I am here with
Speaker 1: Christian Saving, the CEO of Deutsche Bank, And before we
Speaker 1: get started, I want to say we booked this weeks ago.
Speaker 1: This was not necessarily booked to talk about the credit
Speaker 1: issues that are emerging to stave off any concerns that
Speaker 1: might be percolating out. But I do want to start
Speaker 1: there this idea that this morning we're all focused on
Speaker 1: what are we missing? Have things gotten too frothy and
Speaker 1: have there been some issues of fraud or easy financing conditions?
Speaker 1: Do you see that anywhere in your book?
Speaker 2: Good morning, Liza, I know, actually not. I mean there
Speaker 2: is a lot of volatility in the market. We have
Speaker 2: seen that actually over the last weeks and months. Whenever
Speaker 2: something is supposed to be the market is reacting. In
Speaker 2: our books, I can tell you no, there is no
Speaker 2: detioration we have. Actually, we are very confident with our
Speaker 2: credit portfolio and that across the world, whether it's in Germany,
Speaker 2: whether it's in Europe, whether it's in the US, in
Speaker 2: the different asset classes corporate bank, private bank, and in
Speaker 2: this regard, I think the market is reacting quite heavily,
Speaker 2: but I think you always have to see it over
Speaker 2: the long term, and so far, to be honest, I
Speaker 2: see no credited.
Speaker 1: Duration long term. Your shares are up more than eighty
Speaker 1: percent so far this year, so a couple percent here
Speaker 1: there is sort of you know, okay, it's tough, but
Speaker 1: we can manage through it. I am just wondering though,
Speaker 1: whether it's indicative of people's mood that people are looking
Speaker 1: for a reason to sell because they're getting nervous about
Speaker 1: how good things are getting and how far valuations have gone.
Speaker 1: Do you see that with any executives and the confidence
Speaker 1: that you're hearing from them in terms of what they're
Speaker 1: seeking to do or how much they're extending to planning
Speaker 1: to expand.
Speaker 3: No, actually confidence is quite good.
Speaker 2: I mean, there's obviously always the risk in case in
Speaker 2: case a recession would come, then obviously the confidence would
Speaker 2: go down. You would also see then a situation in
Speaker 2: the credit portfolio. But this is not a topic at all. Also,
Speaker 2: in the whole week here in Washing, we haven't discussed
Speaker 2: the topic of recession at all. People are seeing growth,
Speaker 2: seeing employment. We talk a lot about what is happening
Speaker 2: in Germany and in Europe and how we can actually
Speaker 2: grow competitiveness, and the economic output. So therefore I wouldn't
Speaker 2: say that people are concerned. Of course, the geopolitical uncertainties still,
Speaker 2: trade discussions, other issues are also dominating, dominating the discussions,
Speaker 2: but I wouldn't say that there is a concern of
Speaker 2: the executives. We are watching the market, but there is
Speaker 2: nothing out where I would say people are concerned of
Speaker 2: a detailation given the.
Speaker 1: Fact that there are so many uncertainties still outstanding. Are
Speaker 1: you surprised by how much optimism you've been hearing.
Speaker 2: Yes, because we have talked for the last two years,
Speaker 2: given all the instabilities and uncertainties, when when is actually
Speaker 2: a potential down downturn in the market's coming. But again,
Speaker 2: there is a lot of liquidity in the market people.
Speaker 2: We have seen it, for instance in the in the
Speaker 2: second quarter when there was a stimulus program in Germany,
Speaker 2: how much liquidity came to Europe. And you see that
Speaker 2: people really want to deploy their money. And therefore, I
Speaker 2: think you always have to see if there is a
Speaker 2: slight decrease in market prices, liquidity immediately comes in again.
Speaker 2: And therefore I'm still optimistic actually that we are not
Speaker 2: talking about an overvaluation.
Speaker 3: We have some stretch valuations.
Speaker 2: No doubt, but I wouldn't say that the whole market
Speaker 2: is overvalued.
Speaker 1: Let's talk about Germany and European banks in general have
Speaker 1: been on a terear this year, and it's been driven
Speaker 1: by this idea that maybe there will be deregulation and
Speaker 1: maybe there will be actual fiscal spending to support the region.
Speaker 1: Are you seeing any actual tangible signs of deregulation that
Speaker 1: you think could unleash, whether it's bank mergers, whether it's
Speaker 1: just more dynamism in the European banking sector.
Speaker 3: Well, at least we have toscussions.
Speaker 2: I mean, look, there are also some tangible items like
Speaker 2: the delay in the implementation of fr to B. We
Speaker 2: have also in certain national buffers. When it comes to
Speaker 2: capital buffers, we have seen some movements of the national regulators,
Speaker 2: but also of the ECB. I think we have a
Speaker 2: constructive discussion with the ECB. We are obviously talking about that.
Speaker 2: We as European banks, are demanding a level playing field.
Speaker 2: We see the developments here in the US, we see
Speaker 2: developments in the UK, and therefore I think there are
Speaker 2: constructive discussions with our regulators, so there is some movement. Nevertheless,
Speaker 2: I think It's not only about regulation. I think the
Speaker 2: most important is how can we ensure that Europe over all,
Speaker 2: but also Germany is actually increasing the competitiveness and growth,
Speaker 2: and therefore we need to do more on the structural
Speaker 2: reform SAT, which goes way beyond bank regulations. That is
Speaker 2: actually the topic which we need to push for, because
Speaker 2: at the end of the day, regulation is important, we
Speaker 2: need a level playing field, but the most important is
Speaker 2: the underlying growth, and therefore we need structural reforms in Europe.
Speaker 1: Is that fiscal spending. Are you saying that you hope
Speaker 1: that they increase it more and that you're already seeing
Speaker 1: stimulative effects from that?
Speaker 2: I suppose I personally think that the debt break alignment
Speaker 2: and adjustments which we have seen in Germany was the
Speaker 2: right step to do. But only doing this is not
Speaker 2: the right thing. Just increasing debt is not the right thing.
Speaker 2: What you need to do is in parallel work on
Speaker 2: structural reforms that it makes sense for corporate's private individuals
Speaker 2: to invest, and that has all about to do with
Speaker 2: tackling the problem of energy prices in Germany, reducing bureaucracy,
Speaker 2: making sure that we are doing bigger investments into infrastructure,
Speaker 2: that the approvals for new investments are not taking that
Speaker 2: long as it did before. All that needs to be done,
Speaker 2: so aligning or just growing by a stimulus program will
Speaker 2: not be sufficient. We need imperilel structural reforms, and there
Speaker 2: I can see that actually the German government is taking
Speaker 2: the first step.
Speaker 3: So what about businesses?
Speaker 1: How much are businesses in Germany moving away from places
Speaker 1: like China in terms of sources of business? How much
Speaker 1: are you seeing those fissures just in the companies that
Speaker 1: you work with.
Speaker 3: Well, it's the result already of the COVID.
Speaker 2: I think after COVID people really thought far more about diversification.
Speaker 2: We can see that German corporates, European corporates are very
Speaker 2: active in diversifying their supply chains, their production chains, and
Speaker 2: are also trying to invest more globally and less concentrated.
Speaker 2: You can also see actually that business are confident actually
Speaker 2: to really reinvest in Germany. You may have heard about
Speaker 2: the initiative which is running in Germany, the Made for
Speaker 2: Germany initiative, where more than one hundred corporates are actually
Speaker 2: committed to invest over seven hundred billion euros in Germany
Speaker 2: over the next three years. That shows actually there is
Speaker 2: confidence in the business and at the same time that
Speaker 2: corporals are really redistributing their supply chains.
Speaker 1: Are you seeing any clients trying to shift away from
Speaker 1: dollar exposure right now?
Speaker 3: Look, there was clearly a trend in Q two.
Speaker 2: About reallocation, but I wouldn't join the core of saying, well,
Speaker 2: that is the end of the US dollar as the
Speaker 2: reserve currency.
Speaker 3: The US dollar will be the reserve currency.
Speaker 2: But I think that a lot of investors actually are
Speaker 2: trying to reallocate, and in particular with what happened in
Speaker 2: the second quarter in Germany but also in Europe, you
Speaker 2: could see a shift to Europe and that's actually the
Speaker 2: momentum which we need to retain and where we need
Speaker 2: to build on.
Speaker 1: And this move away from the dollar has been largely
Speaker 1: in derivative's markets. I mean, how much has that just
Speaker 1: been on fire this year in terms of hedging any
Speaker 1: exposure to the dollar not necessarily getting out of dollar
Speaker 1: denominated assets.
Speaker 2: Well, I think it's both. It's not only in the
Speaker 2: derivative market. We really have seen real flows and therefore
Speaker 2: or it has been it has been a trend in
Speaker 2: Q two. It is a little bit reversing in Q three,
Speaker 2: and therefore it is so important in particular for Europe
Speaker 2: that they really continue with structural reforms. If this is
Speaker 2: not going through, if we are not continued with structural reforms,
Speaker 2: then obviously grows and therefore so the inflow in European
Speaker 2: assets will not further increase.
Speaker 1: How does that effect just whether there will be reforms
Speaker 1: or not, How does that affect where you want your
Speaker 1: footprint to be dominant? Right? Do you want to be
Speaker 1: more in Germany? Do you want to be more in
Speaker 1: the United States? Do you want to expand more in
Speaker 1: one place or another based on your faith, hope, et
Speaker 1: cetera that there will be reform in Europe versus what
Speaker 1: actually is happening elsewhere.
Speaker 2: Look for me, it is that from a bank's point
Speaker 2: of view, the most importance is to be diversified, and
Speaker 2: we as Deutsche Bank, have taking a clear decision to
Speaker 2: be a global bank and to make sure that we
Speaker 2: are not too concentrated in any one of the regions.
Speaker 2: Of course, when you have your home market in Germany
Speaker 2: with forty percent of the revenues, you have a great
Speaker 2: interest that this country is growing, that you have the
Speaker 2: right structural reforms, that fiscal stimulus is kicking in. But
Speaker 2: at the same time, despite all the talks about the
Speaker 2: end of globalization, globalization will not end. Globalization will be
Speaker 2: different going forward, but that needs actually global banks with
Speaker 2: local nohow and that is actually where we are focusing
Speaker 2: in from a Deutsche Bank point of view, stronghome market,
Speaker 2: but being an international player because what we see from
Speaker 2: our clients, they would like to have the bank with
Speaker 2: an international exposure, with an international expertise, and that with
Speaker 2: a global network. And that's exactly what we want to be.
Speaker 2: So diversified and a global setup is I think the
Speaker 2: key to success.
Speaker 1: Are you interested in any acquisitions or is this going
Speaker 1: to be a very organic process going forward?
Speaker 2: So very organic process. Look, I'm very happy with the
Speaker 2: development which we have taken. You were just talking about
Speaker 2: our share price. I think overall the bank has done
Speaker 2: very well over the last three four years. The turnaround
Speaker 2: has been completed and now it's really bringing the bank
Speaker 2: from a ten percent hour to the next stage. And
Speaker 2: all leavers for that are leavers which are sort of
Speaker 2: say within our own hands. It's about a better capital management,
Speaker 2: it's about focus growth, it's further about investing into technology
Speaker 2: to get further efficiencies out.
Speaker 3: All that is in our hands.
Speaker 2: And as long as I have the chance to further
Speaker 2: increase my return on equity with sort of say homework,
Speaker 2: that is always the preferred option.
Speaker 1: So not interested in any local banks that are nearby
Speaker 1: that you might bring on your As.
Speaker 2: I said again, if you can focus on yourself, if
Speaker 2: you can improve your return on equity by applying this homework, honestly,
Speaker 2: it's always the first option.
Speaker 1: There's also a big question here about artificial intelligence and
Speaker 1: how much it's going to alter the size of the staff,
Speaker 1: the way of doing business going forward. Have you seen
Speaker 1: any material changes or advantages from using and adopting artificial
Speaker 1: intelligence of late that have really materially improved profitability or
Speaker 1: decrease staff.
Speaker 2: Well, we have many use cases and you can apply
Speaker 2: that across the bank. And the interesting part is actually
Speaker 2: it actually applies to revenues II, customer satisfaction, interaction with clients.
Speaker 2: It applies to efficiency and cost management, and also it
Speaker 2: applies to something which is very important for banks, control
Speaker 2: and regulatory compliance. And in each of these three areas
Speaker 2: we have seen great use cases. If you think about
Speaker 2: also our research department, they started actually applying AI. If
Speaker 2: you think about the precision of research reports, with the
Speaker 2: help of AI got far better. Of course, that has
Speaker 2: an impact in terms of the speed and turnaround of
Speaker 2: research reports. Same actually in other areas when you think
Speaker 2: about operations. The way we can apply AI. Now, the
Speaker 2: really important thing is now that we have a structural
Speaker 2: approach to all these use cases and that we have
Speaker 2: a clear priority. Where do we prioritize it at first?
Speaker 2: Because you can imagine that every body in this bank
Speaker 2: wants to apply now AI, we need to have a
Speaker 2: clear priority of investments. But I think it will be
Speaker 2: a game changer going forward and it will be one
Speaker 2: of the key leavers how to increase profitability of banks.
Speaker 1: Christian Saving, thank you so much for being with us
Speaker 1: this morning. Christian Saving there of Deutsche Bank, the CEO
Speaker 1: here in New York, and John. It really is a
Speaker 1: tale for the Europeans of looking to what levers can
Speaker 1: be pulled going forward, given some of the concerns and
Speaker 1: challenges facing the region.