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

We see the different blocs of the global economy moving at different speeds with increasing headwinds in Europe’s economy which is likely to impact business conditions. We expect global economic growth to increase slightly from 3.0 % to 3.2 % in 2014 and then to accelerate to 3.7 % next year. Global growth in 2015 will probably be somewhat below the average of the past ten years. Real GDP in the U.S. is estimated to rise by 2.4 % in 2014, thus expanding at around the same pace as in 2013. In 2015, we expect growth will accelerate to 3.6 % in the U.S., even if the Federal Reserve’s monetary policies are likely to be less expansive next year.

The eurozone economy, noticeably buoyed by the expected even more expansionary monetary policy is expected to continue on its moderate and yet still fragile growth trajectory, expanding by 0.7 % in 2014. Next year, we expect a growth rate of 1.0 %. However, over the last weeks, we have seen several signs indicating additional uncertainties for the near-term outlook. Among the large eurozone countries, Germany should see the strongest expansion, driven by growth in the domestic economy of 1.5 % in both 2014 and 2015. The economic recovery in the UK 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 still above the average of the past ten years. In Japan, despite the dampening impact from the consumption tax increase in April, the economy is expected to grow at an annual average of 1.0 % in 2014. For 2015, we expect a slight acceleration in the pace of economic growth there to 1.3 %. In industrialized countries, we project overall growth will accelerate to 1.8 % in 2014 and continue rising to 2.4 % in 2015.

In contrast, economic growth of the developing and emerging market economies in 2014 is expected to slow down to 4.4 % in 2014. However, an acceleration to 4.9 % growth is expected next year. The merely moderate growth in emerging market and developing countries is due to, in particular, the economic slowdown in China and Brazil. Economic growth in China, at 7.3 % in 2014, below last year’s level and the expectation is this will weaken to 7.0 % in 2015. The Brazilian economy is projected to expand by only 0.3 % in 2014, compared to 2.5 % in 2013. For 2015, we anticipate the Brazilian economy will expand by 1.0 %. The Russian economy is also expected to expand more slowly this year. Here, we project growth will only come to 0.5 % and may rise in 2015 to 1.0 % at the most. Among the BRIC countries, India is the only country we expect to experience a strong acceleration in growth, namely from 4.4 % to 5.5 % in 2014, with a further increase to 6.5 % in 2015.

There are various geopolitical risks that could have an impact on our projections. A further 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 could lead to a significant rise in oil prices and could thus dampen global economic activity.

The Banking Industry

With economic prospects overshadowed by recent weakness, banks’ business in Europe may also struggle to pick up substantial speed. Still, the contraction in corporate lending in the euro area is likely to moderate further, while household lending could continue to stagnate. In the U.S., the core loan and deposit-taking business with the private sector looks set to perform well in the next few quarters.

Overall, restructuring in the European banking sector may not be quite over as financial results so far are unsustainably weak. In the U.S., by contrast, bank profitability could well increase further from a very good level, though loan loss provisions may have to rise moderately. Particularly for individual institutions in both regions, litigation costs remain an important tail risk.

The outlook for investment banking is brighter, as companies on both sides of the Atlantic may increasingly aim to put their large cash reserves to work and financial markets seem willing to provide abundant and extremely cheap funding for projects seen to be attractive.

Similarly, investor demand due to the low interest rate environment may continue to drive capital market valuations, not just in equity but even in some bond markets, with the U.S. fixed income market probably being the exception. Here the impact of the Fed’s approaching exit from its ultra-expansive monetary policy may be felt most significantly and potentially quite suddenly. In Europe, large-scale asset purchases by the ECB could counter upward pressure on bond yields stemming from the developments in the U.S.

With regard to financial regulation and supervision, in Europe the main topics for the rest of this year and 2015 are likely to be the ECB’s takeover of large-bank supervision in the euro area in November, the entry into force of the Bank Recovery and Resolution Directive (BRRD) in January 2015, the start of the implementation of the Liquidity Coverage Ratio (LCR) in January, too, and legislative proposals regarding e.g. the so-called bank structural reform and the financial transaction tax. In the U.S., even higher capital and liquidity requirements could be imposed especially on large institutions, in addition to other measures possibly targeting housing finance, money market funds or the repo market.

The Deutsche Bank Group

In 2012, as part of our Strategy 2015+, five levers have been identified as key to Deutsche Bank in order to achieve our vision: Capital, Cost, Clients, Culture and Competencies. Additionally, financial targets have been announced by the Group to highlight the financial objectives of Strategy 2015+. In May 2014, we announced a series of measures, including the launch of a capital increase which has since raised € 8.5 billion of fresh capital, to reinforce Strategy 2015+. In this context, we have updated our financial aspirations. The financial Key Performance Indicators (KPIs) of the Group are detailed in the table below.

Group Key Performance Indicators1

Sep 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 fully loaded 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 “Other Information: Non-GAAP Financial Measures” of this report.

2

Assuming a Group tax rate between 30 % and 35 %.

3

Cost savings (gross) resulting from the implementation of the OpEx program.

4

Costs to achieve (CtA) savings are costs which are directly required for the realisation of savings in the OpEx program.

5

The CRR/CRD 4 fully loaded Common Equity Tier 1 ratio represents our calculation of our Common Equity Tier 1 ratio without taking into account the transitional provisions of CRR/CRD 4. Further detail on the calculation of this ratio is provided in the 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) 8.2 %

~ (adjusted) 12 %

~ 12 %

Cost/income ratio

(adjusted) 73.6 %

~ (adjusted) 65 %

~ 65 %

Cost savings3

€ 2.9 bn per annum

€ 4.5 bn per annum

€ 4.5 bn per annum

Costs to achieve savings4

€ 2.7 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

3.3 %

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.

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 build a strong capital base which underpins our commitment to our global universal banking model and reinforces our ability to address future regulatory challenges. Additionally, the capital will allow us to manage our risk-weighted assets while improving our fully loaded CRR/CRD 4 Leverage Ratio.

Under the OpEx program we continue to strive for greater cost efficiency. We are ahead of our plan to achieve € 4.5 billion in cumulative savings by 2015. Cost savings enable us to address increasing costs to meet new regulations. The program is also transforming how we do business and how we work with each other. We plan to replace our ageing IT systems with new standard, scalable platforms that have better controls. We intend to become more disciplined when buying goods and services, putting the right people in the right places, taking a fresh look at our processes and flattening our structure to reduce bureaucracy and promote faster decision-making. After two years of OpEx, we are a stronger bank thanks to our commitment to deliver on our promises and our partnership with colleagues all over the world and we are confident to stay on track regarding our target of € 4.5 billion in annual savings by the end of 2015.

Client centricity is one of our core values. We have launched a Group-wide project to enhance our understanding of our clients and better gauge their needs and satisfaction levels. Under the Client Centricity program, we also plan to introduce a new mechanism to encourage greater cross-divisional collaboration, creating a more seamless experience for our customers when they work with different parts of the Group. We are driving a holistic transformation of our technology estate to provide an agile, reliable environment that meets the needs of our business partners and clients more effectively. After the capital-raising in May 2014, we are now well-placed to increase market share and reinforce our leading position through targeted investments in our businesses.

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. As an important step on the journey of cultural change, we recently launched the updated Deutsche Bank Code of Business Conduct and Ethics. It will help us turn our values and beliefs into action as it sets out the standards of ethical business conduct required from every employee. This and other initiatives including bank-wide training programs continue our drive to embed cultural change and is intended to 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 may enable us to increase revenues, restrict costs, enhance customer satisfaction, increase margins, enhance capital positions and expand market share beyond our current levels and therefore provide further opportunities for growth for the Group.

There are also risks 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. Following the financial crisis, the frequency of legal and regulatory proceedings, governmental and regulatory examinations, investigations and inquiries, and the weight of resolutions of such proceedings has increased dramatically. These matters expose Deutsche Bank to substantial financial damages and legal defense costs, and possible regulatory restrictions. It is likely that the Group will incur significant expense in connection with all or some of the proceedings, regardless of the ultimate outcome. For an overview on current proceedings as well as contingent liabilities please refer to section ‘Other Contingencies’ of this report.

The Business Segments

Corporate Banking & Securities (CB&S) along with the rest of the investment banking industry saw improved revenues in the third quarter 2014, reflecting an increase in volatility towards the end of the quarter and positive conditions for corporate finance. Going forward a slightly more positive outlook for Debt Sales & Trading reflects a potential return to more normalized levels of volatility due to diverging central bank policies. However, the industry continues to face significant headwinds from the changing regulatory environment, ongoing pressure on financial resources, and ongoing macroeconomic uncertainty. Building on improved revenue momentum in 2014 we will continue to consolidate our strengths through ongoing platform investments, complying with new regulatory requirements and dynamically allocating resources across both the business and client portfolio in order to deliver sustainable returns. For 2014 and 2015, 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 improved in 2014 and is expected to remain on its moderate growth path in 2015. However, the entire market environment is likely to continue to be challenging. A near-term relief from the low interest rate environment after continued deterioriation in 2014 is not expected and might continue to impact our deposit revenues. Our aim is to strengthen our core German credit business by further expanding margins, whilst maintaining strict risk discipline and carefully optimizing capital use. The development of investment product revenues is particularly dependent on movements in the European macroeconomic 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 in systems 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, costs-to-achieve are expected to be largely in line with initial targets. For 2015 we maintain our updated Strategy 2015+ ambition 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), market conditions are likely to remain challenging following recent cuts of already low interest rates, a highly competitive environment and geopolitical risks. In addition, cost-to-achieve related to the OpEx program as well as other expenses in relation to the execution of our Strategy 2015+ may impact our 2014 results. This may be offset by volume growth in cash management and trade finance transactions when we see continued stabilization and growth in the global economy. For 2015, we maintain our ambition to grow income before income taxes to € 1.6 billion to € 1.8 billion as growth initiatives should start to yield results.

Deutsche Asset & Wealth Management (Deutsche AWM) expects to remain on track to deliver its Strategy 2015+ aspiration of € 1.7 billion of income before income taxes by the end of next year. Achieving this aspiration will depend in part on the successful execution of a number of initiatives aimed at enhancing our client offering and further strengthening our operating and technology platform. In respect of the former, in wealth management a key focus is to expand the services we provide ultra high net worth clients worldwide. In asset management, we will develop additional products based on active, passive, systematic, liquid alternative and real asset investment strategies, in response to evolving client requirements. Additionally, we plan to broaden 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. The investment program for our operating and technology platform continues to progress. We anticipate that it will generate further efficiencies, while delivering improved systems that enhance the client experience. Uncertainties exist that may impact future performance. Falls in client transactional activity, could impact wealth management revenues, particularly with respect to equities and foreign exchange and careful management of the cost base will be crucial in light of rising regulatory expenditure.

The strategy and mandate for the Non-Core Operations Unit (NCOU) is aligned with the Bank’s overall objectives namely freeing up capital and balance sheet through de-risking and reducing leverage across the remaining assets and business activities. Challenges remain for the successful execution of this strategy. The NCOU includes significant investments in individual companies and carries other assets that are no longer part of our core business. These investments and assets are exposed to 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 has slowed as the portfolio size has reduced. This is expected to create a heightened sensitivity to volatility in risk-weighted asset calculations and thereby impact overall capital delivery in the near term. 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.