Deutsche Bank

Annual Report 2017

Deutsche Asset Management

Deutsche AM remains a core business for Deutsche Bank. Since the announcement in March 2017 that we intend to pursue a partial initial public offering of Deutsche AM, we have made considerable progress towards this goal. The rationale for the partial IPO is to unlock the potential of the business by fostering greater autonomy. As a standalone asset manager, we will introduce the DWS brand for our global business and enhance our external profile. The integration of our infrastructure partners will enable us to achieve further operating efficiencies across the platform, including process improvements to reduce costs and enhance the client experience.

We believe that Deutsche AM’s diverse investment capabilities and pending operational independence position us well to address industry challenges and capture opportunities. In 2018, we anticipate broadly positive equity markets based on global synchronous economic growth, and stable credit markets. Risks are however increasing through elevated valuations, a moderate reduction in monetary policy stimulus and continued political uncertainties. We expect growth in developed economies to remain healthy, while emerging markets continue to grow at a faster rate. These trends are expected to impact investor risk appetite and potentially also management fees and asset flows. By anticipating and responding to investor needs, Deutsche AM aspires to be the investment partner of choice for our global client base.

Over the medium term, the industry’s global assets under management are expected to substantially increase, driven by strong net flows in passive strategies, alternatives and multi-asset solutions, as clients increasingly demand value-for-money, transparency and outcome oriented products. We are optimistic that these industry growth trends will favor our capabilities in passive products, alternative investments, next generation active products and multi-asset solutions, product areas where we believe we can grow market share. Our digital capabilities are also opening new channels for us to distribute products and services. However, we expect bottom line results to be challenged by fee compression, rising costs of regulation and competitive dynamics. In the face of this challenge, we intend to focus our growth initiatives on products and services where we can differentiate, while also maintaining a disciplined cost base.

In 2018, we intend to undertake selective investments in client coverage and product and digital capabilities. This is coupled with the anticipated efficiency gains from an operating platform review primarily across the business support organization with the aim of simplifying business operations to enhance client service, business controls and efficiency.

In 2018, we expect revenues to be slightly lower than 2017, largely attributable to significantly lower performance and transaction fees reflecting the periodic nature of fund performance fees recognition and significantly lower other revenues driven by non-recurrence of the insurance recovery and the impact from disposal activity which took place in 2017. For the full year 2018, we expect slightly higher assets under management, driven by net inflows and favorable market outlook. Within 2018, we expect net flows, especially for cash and insurance related products, to remain volatile. In addition, we anticipate net outflows driven by the recently implemented US tax reform. Management fees are expected to be essentially flat driven by net inflows and stronger performance partly offset by margin compression. Deutsche AM intends to carefully manage its cost base with efficiency measures offsetting growth initiatives. The impact from disposals of non-strategic business in 2017 as well as significant decrease in separation costs are expected to result in slightly lower adjusted costs.

Risks to our outlook include the pace of global net flows growth, equity market development, currency movements, interest rates, exposure to global macroeconomic growth and the political developments including Brexit, and continued political uncertainty worldwide. In addition, unforeseen regulatory costs and possible delays in the implementation of our efficiency measures due to jurisdictional restrictions could have an adverse impact on our cost base.