Outlook

The following section should be read in conjunction with the Outlook section in the Management Report provided in the Financial Report 2013 that outlined our expectations for 2014 and 2015.

The Global Economy

Driven by a significant upturn in the U.S. economy, we expect global economic growth to accelerate to 3.2 % this year and to reach nearly 4 % next year. In 2015, growth will probably therefore be above the average for the past ten years. The extreme weather conditions in the U.S. in the first quarter 2014 led to a significant decline in economic output, over the course of the rest of the year we expect strong growth rates, resulting in a prospective rise of 1.9 % in real GDP in the U.S. In 2015 growth should accelerate to around 3.5 %.

The eurozone is expected to retain its moderate growth, supported by the continuation of expansive monetary policies and somewhat less restrictive fiscal policies, with projected to grow by 1.1 % in 2014. In 2015, we expect a growth rate of 1.5 %. Among the large eurozone countries, Germany should see the strongest expansion, driven by growth in the domestic economy of 1.8 % in 2014 and 2.0 % in 2015. The economic recovery in the United Kingdom is likely to continue this year, and the economy should grow by 3.1 %. Next year however, growth there will probably slow down to 2.5 %, which is about the average for the past ten years. The expansive approach taken in Japan’s fiscal and monetary policies provided a strong boost to its economy. However, the value added tax increase carried out in April, probably had a significant temporary negative impact on consumer spending, with a decline in growth in the second quarter. In 2014, the Japanese economy will grow by an estimated annualized average of 1.2 %. For 2015, we expect a slight recovery in economic growth to 1.5 %. In industrialized countries, we project overall growth accelerating to 1.7 % in 2014 and continuing to rise to 2.5 % in 2015.

We expect growth in emerging market and developing countries to only rise marginally, to 4.7 % in 2014 and 5.2 % in 2015. This moderate growth in emerging market and developing countries is due in particular to the economic slowdown in Brazil, where the economy is projected to expand in 2014 and 2015 by only 1.2 %. The Russian economy is also expected to expand more slowly this year. Here we project growth of only 0.8 % in 2014, picking up to 2.4 % in 2015. Economic growth in China, at 7.8 % in 2014, should be marginally above last year’s level and is expected to rise moderately, to 8.0 % in 2015. Among the BRIC countries, India is the only country we expect to experience a strong acceleration in growth, namely to 5.8 % in 2014, with a further increase to 6.1 % in 2015.

There are various geopolitical risks that could have an impact on our projections. A deterioration of the Ukraine crisis, which could lead to a spiral of sanctions from Western countries and Russia’s reactions, poses a risk to the development of the European economy, in particular if there is a restriction or even a discontinuation of Russia’s oil and natural gas deliveries. Furthermore, there is the risk that conflicts in the Middle East, above all in Iraq, could lead to a significant rise in oil prices and hence dampen the global economic activity.

The Banking Industry

In Europe, the lending and deposit business with the private sector is expected to stabilize further over the next twelve months. The decline in lending to companies in the eurozone looks set to gradually come to an end, but significant growth is not expected yet. Retail lending, particularly mortgages, will probably see growth in Germany, among other places, while the market contraction in some of the countries hit hardest by the crisis in recent years could get progressively slower. The moderate expansion in deposit volumes is likely to continue, driven by rising incomes and corporate profits and in spite of the low-interest rate environment.

In the U.S., lending growth should find a broader base and no longer be predominantly driven by traditional corporate loans. A recovery in the mortgage business seems possible, as well as a stronger expansion in consumer loans and commercial real estate loans. On the deposit side, the pace of growth could continue to slow.

In core investment banking, the prospects are very good, especially in the Merger & Acquisition (M&A) business. Given the sustained economic recovery, high corporate liquidity reserves and the very positive performance of equity markets, firms’ willingness to pursue M&A deals may rise. The issuance of debt and equity as well as the syndicated loan business should profit from this development. At the same time, trading volumes and therefore bank revenues could suffer from a lack of client activity if volatility in financial markets stays low.

Against this backdrop, the outlook for asset management is also mixed. On the one hand, the favorable capital market environment and the rise in stock prices are supporting revenues from the management of client funds and are creating incentives for increased investment in higher-risk asset classes that also offer potentially higher returns. On the other hand, the asset turnover in investor portfolios tends to fall in markets that are largely calm and favorable so that trading intensity also decreases – and with it the banks’ commission income.

In general, European banks should succeed in increasing their bottom-line profitability over the next twelve months, from an extraordinarily low level. Nonetheless, legal disputes, which often involve extensive litigation charges and other costs, will probably continue to have a significant impact on banks’ overall performance.

With regard to the regulatory and supervisory system for the banking industry, the next few quarters will focus on the completion of the ECB/EBA Asset Quality Review and Stress Test for the major banks in the euro area, followed in November 2014 by the ECB taking over banking supervision as part of the Single Supervisory Mechanism (SSM). In addition, the beginning of 2015 will see the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM) take effect. Furthermore, once the new European Commission has taken office in autumn, legislative action is expected for example with regard to the so-called bank structure reform and the financial transaction tax. In the U.S., the authorities may pass further regulations to implement the Dodd-Frank Act. Moreover, reforms tackling housing finance, money market funds and the repo market, among others, remain on the agenda.

The Deutsche Bank Group

In 2012, Strategy 2015+ was announced and five levers were identified as key to Deutsche Bank in order to achieve our vision. These levers are; Capital, Clients, Costs, Culture and Competencies. Additionally, several financial targets were announced by the Group to highlight our financial objectives of Strategy 2015+. Since then we have progressed in our move towards our Strategy 2015+ aspirations. However, macroeconomic and market conditions and the regulatory environment have remained much more challenging than originally anticipated in 2012. In particular, low interest rates, increased regulatory and litigation costs, and margin pressures have made it more challenging to meet some of our Strategy 2015+ targets under the original timelines.

In May 2014, we announced a series of measures to build up our capital strength, enhance our competitiveness and invest in our client franchises. To achieve this, we increased our capital to improve our capital ratios and also to provide a buffer against future regulatory uncertainty and potential macroeconomic headwinds. In this context, we have reaffirmed our commitment to Strategy 2015+ and have updated our financial aspirations which can be found in the table below. The aspirations reflect the completion of the capital increase with proceeds of € 8.5 billion, including an ex-rights issue of € 1.7 billion placed with an anchor investor and a fully underwritten rights issue raising € 6.8 billion of new equity, along with the planned issuance of approximately € 5 billion of CRR/CRD 4 compliant Additional Tier 1 capital by the end of 2015 (€ 3.5 billion of which already took place in May 2014).

Group Key Performance Indicators1

Jun 30, 2014

Target for 2015

Target for 2016

1

The adjusted and reported Post-tax return on average active equity, the adjusted and reported Cost/Income ratio, and the adjusted CRR/CRD 4 Leverage Ratio presented in the table above are non-GAAP financial measures. Descriptions of these non-GAAP financial measures and the adjustments made to the most directly comparable financial measures under IFRS or CRR/CRD 4, can be found in Risk Report.

6

The fully loaded CRR/CRD 4 Leverage Ratio represents our calculation following the publication of CRR/CRD 4 on June 27, 2013 as amended. Further detail on the calculation of this ratio is provided in the Risk Report.

Post-tax return on average active equity2

(adjusted) 7.3 %

~ (adjusted) 12 %

~ 12 %

Cost/income ratio

(adjusted) 72.1 %

~ (adjusted) 65 %

~ 65 %

Cost savings3

€ 2.6 bn per annum

€ 4.5 bn per annum

€ 4.5 bn per annum

Costs to achieve savings4

€ 2.4 bn

€ 4 bn

€ 4 bn

CRR/CRD 4 fully loaded Common Equity Tier 1 ratio5

11.5 %

Greater than 10 %

Greater than 10 %

Fully loaded CRR/CRD 4 Leverage Ratio6

3.4 %

3.5 %

3.5 %

Our updated aspirations are based on a number of key assumptions. We have assumed that new regulations, such as the CRD 4 and EBA guidance, will be implemented in line with our expectations, that global gross domestic product growth will stabilize in the range of 2 % to 4 % per annum over the relevant period, that there will be no major increases in interest rates before 2016 in the markets in which we operate and that central bank intervention in the U.S. financial markets will continue to recede.

While we recalibrated our financial ambitions, we remain committed to Strategy 2015+.

The completion of the capital increase is a substantial and integral part of our updated aspirations. With our increased CRR/CRD 4 fully loaded Common Equity Tier 1 capital position we are confident that we can face upcoming regulatory challenges and still have a substantial buffer. Additionally, the capital will allow us to expand our risk-weighted assets selectively while boosting our fully loaded CRR/CRD 4 Leverage Ratio target.

Through the Operational Excellence (OpEx) program we continue to target annual cost savings of € 4.5 billion by 2015 and to achieve an adjusted Cost/Income ratio of 65 % in 2015. We expect higher cost for regulatory compliance through our investments in new control capabilities, platform integration and process enhancements as well as through strengthening our regulatory framework. We are committed to counterbalance the effects of incremental investments in regulatory compliance through the ongoing Operational Excellence (OpEx) program, cost discipline and management action and we expect to remain on track towards our Strategy 2015+ aspiration.

In May 2014, in addition to reaffirming Strategy 2015+, we also reconfirmed our aspiration to be the leading client-centric global universal bank. Several investments have been announced to support this aim. We are accelerating a focused investment in the U.S. market where we see opportunities to boost our market share. We will be launching accelerated investments in digital banking across Europe as we see significant opportunities with the digitalization of retail banking whether it is growth in electronic trading, the rise of mobile payments or the shift from branch banking to online banking. We will also commit additional resources to our multinational corporation coverage efforts. The growth of private wealth in the emerging markets is a huge opportunity for us, particularly in Asia. To capture this opportunity, we will leverage our existing product offering and geographic footprint and expand our relationship manager numbers in key markets by 15 % over the next three years.

Our values and beliefs lie at the heart of our goal of long-term cultural change. They guide our behaviors with clients, shareholders, colleagues and the communities we serve. A new ‘Living the Values’ award has been implemented to enable recognition of employees who exemplify our values and beliefs in their day to day activities. This and other initiatives including bank-wide training programs will continue our drive to embed cultural change and will enable the continuous improvement of our processes and platforms by embracing new and better ways of operating.

Our outlook and performance expectations are based on various economic and operational assumptions. Positive market movements, competitor withdrawals and the implementation of our Strategy 2015+ program, which set the client in the center of our activities and ensure strict cost discipline, may enable us to increase revenues, restrict costs, enhance customer satisfaction, increase margins, enhance capital positions and expand market share beyond our assumed levels and therefore provide further opportunities for growth for the Group.

However, the ability to meet our revised aspirations is based on a number of key assumptions regarding the future economic environment, the regulatory landscape, and anticipated interest rates and central bank action. A reignition of the European sovereign debt crisis, weakness in global, regional and national economic conditions, regulatory changes that may further increase our costs or restrict our activities, or further tightening of margins’ could also negatively affect our ability to implement our strategy or realize the benefits from it. Additionally, due to the nature of our business, we are involved in litigation, arbitration and regulatory proceedings and investigations in Germany and in a number of jurisdictions outside Germany, especially in the U.S. and in the United Kingdom. Such matters are subject to many uncertainties. Although we have resolved a number of important legal matters and made significant progress on others, we continue to expect the litigation and regulatory environment to remain very challenging.

The Business Segments

Corporate Banking & Securities (CB&S) in line with the investment banking industry continued to face a challenging environment in the first half of 2014. Despite a slightly more positive market outlook for the second half of the year, the industry will continue to face headwinds from changing regulations, pressure on resources, ongoing emerging market uncertainty and the gradual withdrawal of central bank support for the global economy. We will continue to consolidate our strengths through ongoing platform investments and dynamically allocating resources across the portfolio. In 2014, we are broadly on track to deliver on our updated Strategy 2015+ objective of an adjusted post-tax return on average active equity of 13 % to 15 %, but challenges and uncertainties remain.

For Private & Business Clients (PBC) the overall macroeconomic outlook for countries in which we operate has improved in 2014, but is expected to continue to be challenging going forward. Our aim is to strengthen our core German credit business by further expanding margins, whilst maintaining strict risk discipline and carefully optimizing capital use. A near-term relief from the low interest rate environment is not expected and might continue to impact our deposit revenues. The development of investment product revenues is particularly dependent on movements in the European macro-economic environment and the recovery of customer confidence in Germany. We will continue to focus on realizing potential from our Private & Commercial Banking business unit by leveraging our integrated commercial banking coverage model for small and mid-sized corporate clients, a joint venture between PBC and GTB. Additionally we are looking to further strengthen our advisory banking business in other important European markets, and optimize the benefits generated from our growth investments in key Asian countries. Furthermore we plan to invest approximately € 200 million over the next three years to improve digital capabilities in Germany and Europe. The ongoing integration of Postbank will enable us to realize additional synergies and cost savings. The quarterly cost-to-achieve costs for the Postbank integration and other measures of our OpEx program are variable dependent on the milestones of individual projects. For the full year, however, cost-to-achieve are expected to be in line with initial targets. In 2015 we expect to achieve our updated Strategy 2015+ objective of generating income before income taxes of € 2.5 billion to € 3 billion, once the full benefits from Postbank integration are achieved.

In Global Transaction Banking (GTB), difficult market conditions with low interest rate levels, a highly competitive environment and geopolitical challenges will continue to impact our performance. Furthermore, cost-to-achieve related to the OpEx program as well as other expenses in relation to the execution of our Strategy 2015+ may adversely impact the 2014 performance. However, volume growth in trade finance and cash management transactions may offset these potentially negative factors. For 2015, we anticipate a notable increase in profitability with an income before income taxes target of € 1.6 billion to € 1.8 billion as growth initiatives should start to yield results.

Deutsche Asset & Wealth Management (DeAWM) continues to make progress toward its 2015+ aspirations. We will further expand our offering in order to provide clients with a full range of investment products and customized solutions. In asset management, this includes new products based on active, passive, systematic, liquid alternative and real asset investment strategies. In wealth management, a strategic focus of the division remains expanding services to ultra high net worth clients worldwide. We will also further develop our relationships with CB&S, PBC and GTB to expand the distribution of our products and explore additional joint initiatives to better serve our clients. We will continue to execute our investment program for our operational and technology platform, with the goal of generating efficiencies and upgrading systems to enhance the client experience. Our financial performance will depend in part on the successful execution of these initiatives but we expect to remain on track to deliver our Strategy 2015+ aspiration of € 1.7 billion of income before income taxes by the end of next year.

The strategy and mandate of Non-Core Operations Unit (NCOU) are aligned with the Bank’s overall objectives and concentrate on de-risking activity as well as balance sheet reduction. The aim is to free up capital, reduce balance sheet size as measured under CRD 4 and protect shareholder value by reducing risks from remaining assets and business activities. In addition there is focus on resolving high-profile contingent risks and reducing the underlying cost base of the NCOU division as de-risking progress. Challenges remain for the successful execution of our de-risking strategy. The NCOU includes significant investments in individual companies and carries other assets that are not part of our core business. These investments and assets are exposed to the opportunities and risks arising from changes in the economic environment and market conditions. Such changes may make the associated timeline for de-risking activity less certain and may also impact future results. The pace of de-risking is expected to slow as the portfolio reduces in size, while this will also lead to lower portfolio revenues and a heightened sensitivity to volatility in risk-weighted asset calculations. Our de-risking strategy remains focused on a combination of impacts with capital, leverage, risk reduction, and associated IBIT being the main considerations. In addition to the uncertainty, which arises from the NCOU de-risking strategy, we also expect that the litigation environment will continue to be challenging.