Strategy

Significant achievements, challenges remain

In brief

  • Well on track in the third year of Strategy 2015+
  • Now a stronger and more stable bank
  • Costs ongoing key area of focus

Deutsche Bank is a leading global bank, with businesses encompassing a wide range of products and services in investment, corporate and retail banking as well as in asset and wealth management. Deutsche Bank is the leader among private banks in its home market, Germany, and enjoys an outstanding position in Europe. Furthermore, it has a strong competitive position in North America as well as in key emerging markets, particularly in Asia.

Corporate divisions
Corporate divisions (organigram)

2014 was the third year of the delivery of Strategy 2015+, Deutsche Bank’s strategic program launched in 2012. The bank made significant progress towards a number of its strategic aspirations in 2014, most notably strengthening its capital. In 2014, Deutsche Bank continued to focus on consolidating its unique global platform and home market position, further leveraging the integrated performance of its full-service banking model, building capital strength, achieving operational excellence and cost efficiency, and placing the bank at the forefront of cultural change in the banking industry. In 2014, Deutsche Bank reinforced its commitment to its full-service banking model, home market and global presence. Although challenges remain in several areas, 2014 saw further progress on all five elements of Deutsche Bank’s Strategy 2015+:

5,000

new commercial
clients gained

Clients. Deutsche Bank continued to align its organization more closely to its clients. During the reporting year, the bank started doing business with approximately 5,000 new corporate clients via a dedicated platform for Germany’s medium-sized companies launched in 2013. In terms of new initiatives, a commitment was made in May 2014 to invest € 200 million in the digital services for retail clients with the aim of providing a seamless branch and online experience. Furthermore, the cross-divisional initiative between Corporate Banking & Securities and Global Transaction Banking to better serve multinational corporations in the U. S. helped the bank obtain 66 new client mandates in 2014. Overall, the bank realigned its client coverage, deepened cross-divisional engagement with key clients, and implemented new metrics to enhance the measurement of client satisfaction.

Competencies. Deutsche Bank’s strategy is founded on the strength of its businesses, and it delivered a stronger and better balanced financial performance in 2014. The bank’s income before income taxes rose to € 3.1 billion (from € 1.5 billion in 2013). For the first time ever, each of the four core corporate divisions – Corporate Banking & Securities, Private & Business Clients, Global Transaction Banking and Deutsche Asset & Wealth Management – delivered more than € 1 billion in pre-tax profits. These results were achieved despite a challenging market in 2014, characterized by persistently low interest rates. As the operating environment is likely to remain demanding in 2015, the bank will continue to focus on sustaining profitability and strengthening shareholder returns in the future.

Capital. Deutsche Bank further reinforced its capital and leverage ratios in the reporting year through an € 8.5 billion capital increase in June and the raising of Additional Tier 1 capital of € 4.7 billion in June and November, which saw strong investor demand. These actions enhanced the safety and stability of Deutsche Bank as well as the financial system as a whole. Deutsche Bank comfortably passed the European Central Bank’s comprehensive assessment in 2014, which comprised an Asset Quality Review and a Stress Test. The assessment reaffirmed that Deutsche Bank’s capital base substantially exceeds regulatory requirements, even under severe market stress conditions, and underlined the quality of the bank’s asset base. Overall, the bank’s capital and leverage ratios have been strengthened significantly since the launch of Strategy 2015+. The Common Equity Tier 1 ( CET1 ) capital ratio improved to 9.7 % as of end 2013, before reaching 11.7 % on a fully loaded basis (Capital Requirements Directive IV, CRD4) at the end of 2014, well above the bank’s target of 10 %. At the same time, Deutsche Bank significantly reduced its leverage exposure to deliver a 3.5 % leverage ratio at year-end 2014 (based on revised CRD4 rules), achieving the Strategy 2015+ leverage ratio target. Going forward, as regulatory requirements on capital and leverage continue to become more stringent, the bank must be prepared to respond to final rules and specifications.

Costs. Deutsche Bank achieved the goals set for the Operational Excellence (OpEx) program in 2014. The OpEx program aims to increase quality and flexibility, reinforce controls and embed a culture of cost-efficiency in the bank. The objective of the program is to invest € 4 billion to achieve annual cost savings of € 4.5 billion by 2015. €1.3 billion of these cost savings were achieved in 2014. Overall, the program delivered cumulative savings of € 3.3 billion by the end of 2014, which is ahead of the € 2.9 billion target. Nevertheless, the bank continues to face challenges as cost reduction has not yet delivered the results the bank had aimed for. The adjusted cost base of € 23.8 billion increased 2 % in 2014, driven largely by higher regulatory spending of €1.3 billion. About 60 % of these costs were project-driven or permanent to meet stricter regulatory requirements. Furthermore, the bank made investments in business growth. Although expenses for litigation cases and enforcement matters declined in 2014, they are still too high. As a result, ongoing cost discipline will continue to be a key area of focus in the future.

Culture. Deutsche Bank advanced and further embedded its cultural transformation in 2014. The bank recognizes the need for cultural change in the financial sector and is committed to being at the forefront of this change. Cultural change is also a prerequisite for restoring public trust in the banking industry. Deutsche Bank emphasizes integrity above all and is committed to a culture that aligns risks and rewards, attracts and develops talented individuals, fosters teamwork and partnership, and is sensitive to the needs of the society in which it operates. As part of Strategy 2015+, the bank launched a broad cultural change program. In the context of that cultural change program the bank conducted 100 town hall meetings and around 4,700 workshops in 2014 that covered the way the bank does business every day as well as employee performance reviews and the compensation system.

To further strengthen Deutsche Bank’s ability to achieve its strategic and regulatory priorities in a challenging environment, some individual responsibilities of the Management Board were changed in November 2014. A critical new mandate focused on strategy and organizational development was established, and the responsibility for Deutsche Bank’s legal team was realigned.

The achievements of the bank to date and the ongoing challenges it faces form the backdrop for the next phase of Deutsche Bank’s strategy development. Management is conducting a rigorous internal and external strategic review and will present the results to the public soon. Despite the challenges of a difficult operating environment and increased regulation, the management team believes that Deutsche Bank will emerge as one of a handful of strong universal global banks and is well positioned to capture future opportunities.

71

Present in
71 countries worldwide

While management is undertaking a full strategic review of the Group, Deutsche Bank will continue to work towards the existing targets of Strategy 2015+ until revised strategic goals are fully embedded. The outlook presented in this report is based on existing targets and continued progress under Strategy 2015+.

Global presence (Welkarte)

Major regional hubs: Frankfurt am Main, London, New York, São Paulo, Dubai, Singapore, Hong Kong