I am here with Christian Saving, who is CEO and chair of Deutsche Bank, Germany's biggest lender, here in.
Washington, d C.
For the IIF, the IMF, the IRF, and everything else under the sun.
Christin, thank you.
So much for being here. It's really a treat to speak with you. And I want to go over a couple of the big themes that we see this week. The US election, the growing divide between US and European economies.
And geopolitical risks.
And I want to start with the US election. How different is it between US and European bank officials when they talk about the US election.
I think there is not so much difference. Obviously, we are all observing it. I mean, we had a year of elections throughout the world. Half of the world's population went to elections, so obviously everybody is focused on this one.
I think from a European or German point of view, it is in particular we are all focusing on what happens and what is the impact on the economic development, and in particular with we got to trade and tariff and in this regard there is obviously a lot of discussions and in Europe I'm always telling my clients, irrespective of the outcome, we all need to take into account that we have seen so many changes from a geopolitical point of view over the last five to six years
that we need to adapt either way, and it means that actually Europe needs to work on its home market. We need to make sure that our home market is becoming bigger, that we are really living one home market in Europe in order to be actually strong enough to compete with the US. Maybe that under present Trump, obviously from a tariff point of view, the situation will be even more challenging for europe In corporates. But we need
to take the right steps right now. We need to prepare and therefore not only watching, but making sure that we adopt. I think that is the right solution and that is the advice we as a bank give to our clients.
Do you see any signs that there is a willingness or ability of people, particularly in Germany to adapt at a time where there's a real question about the main industry, which is auto manufacturing and competition from China.
Look, it looks potentially from the outside that there is no willingness and that the urgency is not understood but I can tell you the willingness and also the understanding is clearly there. And obviously reports like the drug Ed report, but also the Letter Report earlier this year are helping.
Now we have a complicated system in Europe with twenty seven member states, and obviously it takes time, but I would say that the understanding in Europe that we need to move, that we need to rethink the way we are defining our European home market, that we need to think about what can we do about energy prices being competitive in this regard, that we need to think about actually reducing bureaucracies in order to allow investments. And finally,
and in this regard, I'm actually quite optimistic. The tone when you think about also the financial industry, the criticality of the financial industry, that Capital Markets Union is now on top of the agenda of Brussels, but also of the main European countries tells me that the message is understood.
Of course, we all wish that we execute quicker.
Okay, so let's go there. You're talking about the unification of financial union at the same time that there was a lot of dissent from German regulators about the idea of uncredit buying Commerce Bank and a real question about whether that could go through.
Do you think that there.
Is a necessity for consolidation in the European banking sector in order.
For that strength to really happen In general, I think yes there is, and we always said that. I have said that for the last six years that if we think about the European banking environment and the banking industry, we are kind of overbanked if you think about what is really needed when we think about the future, lots of investments into technology, if you think about the regulatory environment,
I do believe that scale is important. But we also always said from a Deutsche Bank point of view, first of all, some preconditions also on the regulatory side needs to be done. Sometimes, at least in where we are right now, sort of say, consolidation is not that easy from a regulatory point of view where we stand not finalized banking union and so on. And from a Deutsche Bank point of view, we always said, look, we have
a clear strategy for twenty twenty five. We want to increase our return on equity and we are on a very good way to above ten percent, and therefore we are focusing on ourselves, but industry wide it must come and it will come over the next years.
Do you think that that there would be a much bigger competitive advantage for Deutsche Bank to be a bigger bank, especially when facing off with the JP Morgans and the Bank of Americas and the city groups of the world.
Well, first of all, I'm very proud that in those businesses where we are today we can phase off also the American banks and we have a good market share if you think about the fig business and the investment banking in the corporate bank. Honestly, we are among the top banks, and I'm really.
Proud where we focus on.
We are among the leaders. And you know, it's all a matter of time. But for the time being and for the next years, Deutsche Bank has such a potential to grow its profitability by itself, to grow and look from where we were coming. I took over the bank with twenty four billion of revenues. Now we are heading thirty billion revenues in twenty twenty four.
We reduced the cost.
Why shall I look outside If I can do the next steps on my own, that's my whole focus. You know, I'm not talking about the years after the next years, but for the time being, only focused on ourselves.
In the recent earnings that you just reported right before flying out to Washington, DC, you reported a forty two percent gain on revenue, which is fantastic quarter over quarter. You also increased provisions for loan losses and this was uncommercial mortgage debt and a whole host of other assets. A lot of people are tying this to some of the slowdown that we've seen in the German economy. Do you think that's accurate?
No, I think we need to be very precise when it comes to the lonees's provision of dorshrank. First of all, to be honest, I think we are still a bank with a very low risk profile. Our loness provisions are over the last years somewhere between twenty five and thirty to thirty five basis points. If you compare that internationally and globally, it really shows that it's a low risk profile.
Now there are two or three.
Specific reasons why we have shown in increased loanness provisions in Q three. We still have some impacts from the backlock situation on the post bank integration that will go away.
Actually, we will even see.
Some reversals of Lona's provisions in twenty twenty five. Then there is a so say a little bit more complex items that for one or two exposures. Actually we had hatches in place, but we needed to build the gross loanness provision, but we got the hedge income via the revenue stream, so on a net basis very much controlled and on commercial real estate. To be honest, we saw in the third quarter for the first time. I'm really happy about that, a reduction in Lona's provision. So we
think we have seen the peak. Valuations are coming back. Obviously, reducing interest rates are helping. To be honest, I think Deutsche Bank has seen the peak of loaner's provisions in the third quarter from a quarterly number. I'm very very confident in our risk management. I've done that for twenty five years in this bank, so I think I know the book, so I have no doubts.
I think people are not as concerned about some sort of existential risk to Deutsche Bank or anything like that. The concern is really where is growth going to come from? Because right now the German economy is not showing it and you're seeing actually a contraction and you're seeing concern about businesses about how much production can be absorbed given some of the lack of spending.
How do you grow?
Do you move outside of Germany? Do you increase your exposure to places like Italy and Spain and France and the US or is there still an opportunity?
Well, there are a lot of opportunities, and that was always the recently, so why we decided as Toutchure Bank to be a global bank.
I love my home country.
We have approximately thirty eight or thirty nine percent of our revenues in Germany, but I think it is so important in this world which we are experienced, to be globally diversified, and the advantage of that we are seeing right now. Our growth rates in Asia in particular playing also the European Asian Bridge are really nice and the momentum I see it is simply growing. We have a nice business in the US. We're doing almost twenty percent
of our revenues in the US. We are not offering each and everything in the US, but there where we are offering we are actually even gaining market share, which
is good. And then look, we always said we want to be the global house bank to our corporate and private clients, in particular in a time of uncertainty of GEOPLI do uncertain you cannot imagine how many clients are coming back to us and are asking for our advice with regard to changing their networks, making sure that they are diversified, opening other markets and there we can help.
And therefore the situation as challenging as it is, for a global house bank like Deutsche Bank, it's actually an opportunity to advise their clients in this challenging situation, and that's what we are seeing.
The momentum of the revenue side very positive.
How much more are you seeing that from clients looking to diversify where they are or move away from certain countries.
It's a constant theme.
I would say, it's a constant theme since approximately.
Two or three years.
Of course, the COVID situation but also the awful invasion of Russia into Ukraine have really, in my view, sharpened the risk management muscle of our corporate clients and they are thinking far more about diversification than ever before. And in this regard they are looking actually for a bank with a global exposure, with a network in over sixty countries and Therefore, it's a constant theme which we've seen for the last two years, and actually it is still further growth.
What region is the best for you are the one that you're focused on for expansion.
Well, from expansion, I would say there is a lot of activity actually in Asia also there if you think about the diversifacation there, I will always say it's not about decoupling from China. It's all about diversifying. And we can see a lot of a lot of momentum actually and action happening in actually diversifying business opportunities from our corporate clients within Asia, going to Sausaea, outside of China,
going to India, going to the southeast of Asia. That is the reason why we are in more than seventeen markets in Asia. So that is clearly a gross market. Don't underestimate the Middle East. I think it is for the next years. It's a gross market. We invested heavily on the private wealth management site, but in particular also in the investment.
Bank on the Middle East.
And then from a product point of view, we took actually eighteen months ago, we took the clear decision to grow our fee business in the origination advisory business because we always thought at some point in time net interest income will reach its peak. We need to increase our fee business. That, combined with the advisory needs of our clients, is a real opportunity that we want to be stronger.
Christian saving. Thank you so much for being with us. It's Christian saving of Deutsche Bank.