Deutsche Bank's Q3 2025 Earnings Call: Contradictions in Capital Allocation, German Fiscal Stimulus, Private Bank Strategy, and Dividend Policies

Date of Call: October 29, 2025

Financials Results

• Revenue: EUR 24.4B (first 9 months); on track to ~EUR 32B FY; Q3 reported revenue growth +7% YOY (+10% fx-adjusted)
• EPS: EUR 0.89 diluted EPS in Q3
• Operating Margin: 63% cost/income ratio (first 9 months), consistent with target <65%

Guidance:

• On track to meet/exceed 2025 targets: ~EUR 32B revenue (FY), RoTE >10%, cost/income <65%.
• Expect lower provisioning in H2 2025 versus H1 2025.
• Full-year tax rate guidance 28%–29%.
• Pro forma CET1 expected around ~14% at year-end after Article 468 and op-risk update.
• Capital distributions: completed EUR 1.0bn buybacks in 2025; aim to deliver >EUR 8bn (2022–2026) and distribute excess capital down to ~14%.

Business Commentary:

• Record Profitability and Revenue Growth:
• Deutsche Bank reported a significant rise in adjusted costs to EUR 15.2 billion, consistent with their guidance, and achieved a post-tax return on tangible equity of 10.9%.
• Revenue of EUR 24.4 billion was reported for the first nine months, aligning with their full-year target of around EUR 32 billion.

• The growth was driven by continued revenue momentum and strong operational efficiency, particularly in the Private Bank and Asset Management segments.

• Investment Bank Performance:

• The Investment Bank saw revenues increase by 18% year-on-year, with significant contributions from macro products and credit trading.
• FIC revenues increased by 19%, and debt origination was a major driver, especially in leveraged and investment-grade debt.

• This performance was attributed to an active macro environment, strong market activity, and strategic client engagement.

• Private Bank Transformation:

• The Private Bank reported a strong quarterly performance, with profit before tax doubling and a return on tangible equity rising to 12.6%.
• Growth was driven by a 9% increase in net interest income from deposits and lending, supported by solid momentum in discretionary portfolio mandates.

• The transformation was driven by cost efficiency initiatives and strategies focused on Wealth Management and Private Banking growth.

• Capital Management and Distribution:

• Deutsche Bank launched a second share buyback program of EUR 250 million, completing a total of EUR 1 billion in 2025.
• The company aims to achieve shareholder distributions well above EUR 8 billion by 2026, supported by strong capital generation and distributions from excess capital.
• The strategic focus is on maintaining a sustainable capital position to support future distributions and growth.

Sentiment Analysis:

Overall Tone: Positive

• Management: "delivered record profitability" and "tracking in line with our full year 2025 goals"; repeated statements of being "highly confident" and "on track to meet or exceed" targets; CET1 strong at 14.5% and completed EUR1bn buybacks support a constructive tone.

Q&A:

• Question from Tarik El Mejjad (BofA Securities): Can you run through probability of achieving 2025 targets and Q4 momentum vs downside; and how materially will German fiscal stimulus benefit your medium-term profitability?
  Response: Management is highly confident they will meet/exceed 2025 targets, expect Q4 momentum (potential upside) and see German fiscal stimulus as a meaningful tailwind for growth.

• Question from Joseph Dickerson (Jefferies LLC): Can you discuss private credit outlook and risks/opportunities, and confirm distribution policy to sustain CET1 at ~14% after OCI filter and op-risk update?
  Response: Private credit (~5% of loan book) is prudently underwritten and viewed as a measured growth opportunity; management confirms a 14% CET1 endpoint to underpin the distribution path.

• Question from Giulia Miotto (Morgan Stanley): Should we expect two buybacks next year and can you disclose average LTVs and concentration/ largest exposures in private credit?
  Response: Yes — expect an initial and a second buyback/application next year; ~75% of lender‑finance private credit has LTVs <60% and single‑asset/single‑lender exposures are very small.

• Question from Flora Benhakoun Bocahut (Barclays): Is the op‑risk annual update a recurring item and should we expect a Q4 rebound in Corporate Bank revenues?
  Response: The op‑risk standardized approach update is now a permanent annual item (3‑year averaging); Corporate Bank revenues are viewed as troughing with a modest rebound/continued momentum expected in Q4.

• Question from Andrew Coombs (Citigroup): Were higher IB provisions driven by one‑off model changes and how should we think about Private Bank operating leverage potential?
  Response: About €100m of Stage 1/2 provisioning was model‑driven and largely done for the year; Private Bank is delivering continued operating leverage and further cost efficiencies.

• Question from Stefan‑Michael Stalmann (Bernstein Autonomous): What revenue impact from the Lufthansa/Miles & More card transition and why quarter‑end trading P&L spikes?
  Response: The Lufthansa card transition is a multi‑digit percentage revenue increment for the Corporate Bank annually plus cross‑sell upside; quarter‑end trading spikes reflect reserve assessments, transaction timing and are not purely random.

• Question from Nicolas Payen (Kepler Cheuvreux): How will the structural hedge support NII and what drove Investment Bank loan growth sequentially?
  Response: The structural hedge is programmatic and will support NII as deposit balances (especially Private Bank, which modelled as longer tenored) grow; IB loan growth primarily reflects private‑credit deployments and O&A activity.

• Question from Thomas Hallett (KBW): Any underperforming/noncore assets planned for exit and will you run the business to cost/income or operating‑leverage metrics for capital allocation?
  Response: Management is applying SVA discipline and has begun portfolio and pricing actions to reallocate capital; detailed actions and metrics will be outlined at the Investor Deep Dive.

• Question from Anke Reingen (RBC): How much has private credit contributed to revenue and what lessons from the 2022–2025 plan?
  Response: Private credit contributes to FIC financing revenues and is seen as an attractive, bank‑style, predictable business to be grown in a measured, risk‑disciplined way; lessons include the success of the Global Hausbank strategy and need for more decisive portfolio actions.

• Question from Chris Hallam (Goldman Sachs): Any other Q4 CET1/RWA items to flag and how will Private Bank deposits vs loans evolve?
  Response: No material additional Q4 surprises flagged; expect steady organic capital generation (~25–30bps norm) supporting excess capital and distributions; Private Bank loan growth seen as flattish while deposits and AUM continue to grow.

• Question from Jeremy Sigee (BNP Paribas Exane): Will Private Bank cost saves be step changes or incremental and where is Corporate Bank trade‑finance growth coming from?
  Response: Cost savings in Private Bank are largely continuous (branch closures, STP and digital migration) rather than a single step change; Corporate Bank growth is concentrated in structured trade finance.

• Question from Julius Nimtz (UBS): What drove the ~€100m G&A step up in IB, update on CRE (Stage 3) and is Private Bank RoTE >10% sustainable?
  Response: G&A included a bank levy and typical professional services/market‑data costs; CRE stress is concentrated in a small number of loans and is in a late‑cycle, healing phase expected to decline; Private Bank RoTE >10% is sustainable with further upside from operating leverage.

• Question from Kian Abouhossein (JPMorgan): Are CRE Stage‑3 issues from a few loans and how should we think about RWA outlook?
  Response: CRE deterioration this quarter was driven by a concentrated handful (<10) of loans; RWA should grow with healthy business demand but management will offset via efficiency and portfolio optimization.

Contradiction Point 1

Capital Allocation and Distribution Policy

It involves differing statements on capital allocation and distribution policies, which can impact investor expectations and strategic direction.

Can you confirm future buybacks? Are there potential downgrades to the EUR 1.5 billion in buybacks expected for 2026? - Giulia Miotto (Morgan Stanley)

2025Q3: EUR 1 billion buybacks each for Q3 and Q4 expected. 50% payout from 2025 net income is accrued. Excess capital beyond 14% will support additional buybacks. Future capital generation is strong, supporting ongoing distributions. - James Von Moltke(CFO)

Is the payout ratio a minimum constraint for distribution policy? How does the 50% payout ratio and the 14% CET1 threshold affect the distribution numerator? - Flora A. Benhakoun Bocahut (Barclays Bank PLC)

2025Q2: The payout ratio is not an upper limit but a minimum floor. Above 50%, capital is funded from excess. If CET1 is sustainably above 14%, excess capital can be distributed. The 14% CET1 ratio is a cap and not just a floor. - James Von Moltke(CFO)

Contradiction Point 2

Impact of German Fiscal Stimulus

It involves differing statements on the impact of the German fiscal stimulus, which can influence growth expectations and competitive positioning.

How might Germany's fiscal stimulus affect DB's growth and competitive position? - Tarik El Mejjad (BofA Securities)

2025Q3: There's a mindset change, with a focus on growth and competitiveness. Deutsche Bank is well positioned, especially in defense financing and infrastructure. We expect a significant impact in '26 and beyond, with tailwinds already evident in '25. Germany will address pension reforms, which will further benefit Deutsche Bank. - Christian Sewing(CEO)

What gives you confidence to achieve the full-year revenue target of EUR 32 billion (above consensus) and expect H2 to match H1's strength? Is the German fiscal stimulus already impacting results, or will its effects be more pronounced in 2026 and beyond? - Flora A. Benhakoun Bocahut (Barclays Bank PLC)

2025Q2: The impact of the German fiscal stimulus is mostly for '26 and beyond, although some may start in '25. The bulk of the stimulus will happen in '26. - Christian Sewing(CEO)

Contradiction Point 3

Private Bank Loan Growth

It involves expectations for loan growth in the Private Bank, which is a key metric for assessing the bank's lending activities and revenue potential.

Are there additional significant cost savings in the Private Bank? What areas contributed to trade finance growth? - Jeremy Sigee (BNP Paribas Exane)

2025Q3: Private Bank to focus on asset gathering rather than loan growth, leveraging digital offerings. - James Von Moltke(CFO)

Can you clarify recent loan trends and asset quality in the Private Bank? - Daniele Brupbacher (UBS Investment Bank)

2022Q3: Loan growth is positive in Corporate Treasury Services, supported by higher interest rates. The Private Bank is stable, with no deterioration in quality. - Christian Sewing(CEO)

Contradiction Point 4

Capital Efficiency and Return on Equity (ROE)

It involves the expected capital efficiency and return on equity, which are critical for assessing the bank's profitability and capital management.

What are expectations for RWA position and capital allocation in Q4? What is the outlook for Private Bank loan growth? - Chris Hallam (Goldman Sachs Group, Inc.)

2025Q3: Expect capital to meet or exceed 14% with organic growth and buybacks. Private Bank to focus on asset gathering rather than loan growth, leveraging digital offerings. - James Von Moltke(CFO)

How would cost flexibility adjust under a severe downturn? What are the base case assumptions for provisions? - Kian Abouhossein (JPMorgan Chase & Co)

2022Q3: Revenue decline would lead to cost reduction, with targets like €4 billion improbable. Base case for provisions is around 25 basis points, reflecting normalized stress levels. - Christian Sewing(CEO)

Contradiction Point 5

Dividend and Return of Capital

It involves the bank's dividend and capital distribution policies, which are crucial for shareholders and investors.

Can you confirm future buybacks? Are potential downgrades expected for the at least EUR 1.5 billion in buybacks planned for 2026? - Giulia Miotto (Morgan Stanley)

2025Q3: EUR 1 billion buybacks each for Q3 and Q4 expected. 50% payout from 2025 net income is accrued. Excess capital beyond 14% will support additional buybacks. Future capital generation is strong, supporting ongoing distributions. - James Von Moltke(CFO)

Can you explain dividend and valuation/timing differences? - Anke Reingen (RBC Capital Markets)

2022Q3: The payout ratio for 2022 remains 50%, consistent with prior plans. Value adjustments improved in Q3, with potential to reverse losses over time. Additional tax pressure is a challenge, but Deutsche Bank is focused on supporting the economy. - James Von Moltke(CFO)