Deutsche Bank AG Management Discusses Q2 2012 Results - Earnings Call Transcript
July 31, 2012 3:00 PM ET
Deutsche Bank AG (DB)
Q2 2012 Earnings Call
July 31, 2012 8:00 am ET
Jürgen Fitschen - Co-Chief Executive Officer and Member of Management Board
Anshuman Jain - Co-Chief Executive Officer and Member of Management Board
Stefan Krause - Chief Financial Officer, Member of Management Board and Member of Capital & Risk Committee
Derek De Vries - BofA Merrill Lynch, Research Division
Jeremy Sigee - Barclays Capital, Research Division
Jon Peace - Nomura Securities Co. Ltd., Research Division
Christopher Wheeler - Mediobanca Securities, Research Division
Kian Abouhossein - JP Morgan Chase & Co, Research Division
Philipp Zieschang - UBS Investment Bank, Research Division
Stuart Graham - Autonomous Research LLP
Kinner R. Lakhani - Citigroup Inc, Research Division
Fiona Swaffield - RBC Capital Markets, LLC, Research Division
Ladies and gentlemen, thank you for standing by. Welcome to the Second Quarter 2012 Conference Call of Deutsche Bank. [Operator Instructions] I would now like to turn the conference over to Joachim Müller, Head of Investor Relations. Please go ahead, sir.
Yes, good afternoon, and good morning to all of those calling from the Americas. This is Joachim Muller from Investor Relations. And on behalf of Deutsche Bank, welcome to our second quarter conference call.
Let me start by saying that our Co-CEOs Jurgen Fitschen and Anshu Jain, have decided to join this call to give you a first-hand update on our ongoing 100-day strategic review and discuss some of the key things emerging from that process.
To be clear, this is still work in progress. We will give you more detail of the results in September. Anshu and Jurgen will then hand over to our CFO, Stefan Krause, who will lead you through the Q2 results and take questions relating to those results, as usual. Please understand that if you have questions on the longer-term strategy, there will be an opportunity to put all of these in September, so we suggest focusing your questions today on the second quarter results.
Please note of cautionary statements with regard to forward-looking statements at the end of the presentation.
With that, let me hand over to our co-CEO, Jurgen Fitschen.
Second quarter results call. Anshu and I took charge 60 days ago. We are just over halfway through the 100-day strategy review, which we launched on June 1. The process is going extremely well. It has included broad involvement of employees and other stakeholders.
At the 100-day mark, on schedule, we'll have significant progress to report to you on many fronts. So today, we are pleased to announce an investor day on the 11th of September in Frankfurt, to which you are cordially invited. As you also know, Anshu and I have a division of labor of the CEO task between us. It is agreed that the CEO dialogue for the analyst and investor community will be led by Anshu. Accordingly, I suggested that Anshu gives you an interim progress report on our strategy review.
Let me now hand over to him. Anshu?
Thank you, Jurgen. Ladies and gentlemen, this our first communication with you since we took charge in June. This is obviously a critical relationship for us, and we take our responsibility towards you extremely seriously.
For me, personally, today marks the first step of a long-term partnership and dialogue with you. Jurgen talked about our 100-day strategy process, which is now just beyond the halfway stage. To be clear, our review is focused both on the need for a clear strategic direction and on immediate actions.
We've made a lot of progress. Today, out of the many themes you expect us to grapple with, we want to update you on 3 themes, which are foremost in our minds, and I daresay in yours as well. And those are: culture, operational efficiency and capital.
So let me start with the all-important theme of culture. We are aware of the need for a change of culture in the banking industry, especially in investment banking. That, to date, is intense and entirely justified. Let me be explicit.
We have recognized that change is imperative. The time for vague promises of cultural change in our industry is long gone. We understand that not only you and our investors, but also our clients, regulators, governments and the public want to see change. We don't underestimate the complexity of the task nor the time it will take. But Jurgen and I are totally determined to act quickly and decisively.
In our strategy review so far, we are focused on 2 key levers: the first is compensation. The need for cultural change has many dimensions. The need to change the compensation model is the most important of all. We've already reduced compensation significantly over the past few years. Now we need to further address both the absolute level of compensation and the relative balance between rewards for shareholders and also, for employees.Our compensation processes need to become less complex and more transparent, and compensation must be clearly and visibly aligned to sustainable performance.
We are confident that our strategy review and our drive for higher operating efficiency will decisively address all of these issues. Let me be clear, we will stay committed to attracting and retaining the best talent. Our clients expect that and so do you. But we firmly believe that the industry as a whole will have to change its compensation model, and we are absolutely committed to being at the forefront of that change.
Secondly, we will continue to emphasize that our practices and our codes of personal conduct must be in line with this bank's long tradition of doing business, to the highest standards. Those practices must also be oriented towards sustainable, long-term partnerships with our clients, other stakeholders and society at large. Standards are changing, and where we need to make adjustments we won't shy away from doing so.
In an organization of over 100,000 people, can we guarantee that there will not be slippages? Of course, not. But we can, and we will. In short, the tone at the top is crystal clear: maintain first-class compliance and risk management systems and do our best to root our bad behavior.
So then, let me turn to the issue of cost and operational efficiency. In our strategic review, we've been relentlessly focusing on the cost issue. Put simply, our cost base is too high. And at this interim stage, we have clear visibility of approximately EUR 3 billion of cost savings versus our run rate for the first half of 2012. That is net of investments we will make to support business growth.
While we go through our strategy review and focus on longer-term initiative, we have also identified immediate measures we need to take. Our EUR 3 billion target includes contributions from both. Of course, challenges exist. Regulation and legal issues put upward pressure on our cost base. It will also be a substantial cost to achieve these savings. However, we are determined and confident that we can achieve this target.
We'll make these savings in 4 ways: first, by making changes to our business and revenue model; second, by scaling back some of our business ambitions in certain regions and countries; third, by implementing a reengineering program aimed at achieving world-class operating performance with flexibility, quality and robust controls; and fourth, by completing the measures in Postbank we've already announced and which will contribute EUR 500 million of savings to the EUR 3 billion total.
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