pohlen cheuvreux tsy seminar 11 dec 2007 final
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Cheuvreux Treasury SeminarLondon, 11 December 2007
Knut Pohlen, Deputy Group Treasurer andGlobal Head of Funding & Liquidity Management
Treasury Managementat Deutsche Bank
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Investor Relations 12/07 · 2
3 Funding strategy
4 Summary
2 Asset & liability management
1 Organizational set-up
Agenda
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Investor Relations 12/07 · 3
3 Funding strategy
4 Summary
2 Asset & liability management
1 Organizational set-up
Agenda
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Investor Relations 12/07 · 4
Organizational set-up
RichardFerguson
Group TreasurerChris Whitman
Functions Regions
Capital & BalanceSheet Liquidity & Funding
Rainer Rauleder
Americas Asia /Pacific Europe
GunarSchramm
RainerRauleder
Treasury
PolicyCommittee
Knut Pohlen(Deputy Treasurer)
Chief Risk OfficerHugo Banziger
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Investor Relations 12/07 · 5
Investment
Treasury & Capital Management fully integrated into corporategovernance process
Functional Committees
Finance Compliance
Human Resources IT & Operations
Management Board
Group Executive Committee(includes Business Heads & Regions)
Divisional Committees
Corporate andInvestment Bank Corporate Investments Private Clients and Asset
Management
Regional Committees(includes Regional Capital & Liquidity Risk Mgmt.)
Operating Executive Legal Entity
Group-widefunctional
committees
Regionalmanagementcommittees
indicates Treasury & Capital Mgmt involvement and discussion/ decision on issues directly impacting the capital base
Capital and Risk
Risk Executive
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Investor Relations 12/07 · 6
Strategic functions in Treasury & Capital Management
Capital & Balance Sheet Management
Regulatory, economic, and shareholder dimension of capital
Group-wide and local managementRWA/ Balance Sheet planning [no interest rate risk mgmt]
FX Hedging of Capital, Share Buybacks, Capital Allocation,Investment Committee, Pension Fund Mgmt
Liquidity Management
Liquidity Risk Management to safeguard the ability of the bankto meet all payment obligations when they come due
Framework to identify, measure, monitor, and control liquidityrisk under normal market conditions and under stress
Liquidity Toolbox, Transfer Pricing, Inter-branch Funding & Country Risk Limitation Funding / Issuance Management
Global funding requirements and liquidity risk appetite guide theissuance activities of Deutsche Bank liability products
One credit to all markets, public or private, and across allcurrencies
Senior Benchmark & Innovative Structured Issuance, Issue ofContingent Capital & Regulatory Capital Instruments
+
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Investor Relations 12/07 · 7
3 Funding strategy
4 Summary
2 Asset & liability management
1 Organizational set-up
Agenda
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Investor Relations 12/07 · 8
Issuance of senior & junior instrum.
Treasury Global Markets
GM Global Capital Markets
Securitizations /Secondary market trading GM Global Credit Trading
Share buybacks GM Equities
FX hedging of capital GM Global FX / Structured Capital Mkts.
Treasury and Global Markets – partnering on various fields
Banking book risk Transferred into trading books
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Investor Relations 12/07 · 9
Deposit bucketing as effective asset & liability management tool
Empirical stability of retail core depositsserves as natural hedge for interest rate &liquidity risk of retail loans
Duration of deposit bucketing to reflectcorrelation of customer rates to marketrates
Matching duration reduces structuralhedging costs and results in stable incomemargins
Any residual interest rate risk is hedged
Virtually no interest rate risk in bankingbook
Businessscenarios
Stochasticalprojections
t im e
v o l u m e
balancecore volume
Stabilizationof yield
Revolvinginvestmentstrategy
0%
2%
4%
6%
8%
10%
0 5 10 15 20 25 30 35 40
moneymarket-rate
rolling average (10y)
Determine “core balance“ and duration
Reduction of earnings risk
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Investor Relations 12/07 · 10
80-week horizon
Cash inflows
Cash outflows
Cumulativecash flowprofile
Net cash flowprofile
8-week horizon
Daily cash flow projection and limits for the first 8 weeks
Daily cash flow projection based on contractual maturity
Modelling of liabilities and loan assets with non-contractual maturities
Cash flow limits for the first 8 weeks consider the impact from predefined stress events
Framework includes limit for short-term wholesale funding
8 Week Limit
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Investor Relations 12/07 · 11
Illustrative
Profile includes all assets and all liabilities with their contractual maturityAssets and liabilities are included based on maturity modelling if a behavioural maturity better reflectstheir effective liquidityEquity is included as a permanently available source of liquidity
Residual exposure at short end is limited to our tolerance for liquidity risk
Structural Funding Profile
1y 2y 3y 4y 5y 6y 7y 8y 9y 10y
0
50
10 0
15 0
20 0
25 0
30 0
35 0
40 0
45 0
50 0Assets
Equity
Liabilities
Mismatch
Further improvement due to long-term capital market issues and stable retail deposits
Structural Funding Profile
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Investor Relations 12/07 · 12
3 Funding strategy
4 Summary
2 Asset & liability management
1 Organizational set-up
Agenda
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Investor Relations 12/07 · 13
Balance sheet structure boosted since IFRS implementation
Assets Liabilities
Other assets
Loans (net)
Cash / Bank /Central bank (1)
Financialassets
Unsecuredfunding
Securedfunding
Equity
Otherliabilities (3)
Total EUR 1.9 tn Total EUR 1.9 tn
Other (2)
Illustrative
Note: Indicative figures as per 30 Sep 2007(1) Includes Cash and due from banks, Interest-earning deposits with banks, Central bank funds sold and securities purchased under resale agreement(2) Includes Securities borrowed, Equity method investments, Premises and equipment (net), Intangible Assets, Income tax assets(3) Difference between total balance sheet and equity plus the non-accounting driven categories of secured, unsecured funding for the purpose of thispresentation (i.e. mainly non-cash items)
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Investor Relations 12/07 · 14
0
5
10
15
20
Frankfurt New York London Asia/Pac
0%
20%
40%
60%
80%
100% AsiaPacific
Europe
Americas
Repo Triparty Repo
Repo diversification by region and type
Regional split of liquidity portfolios, in EUR bn
Repo market:Deutsche Bank is a significant player in bilateraland tri-party repo and stock loan market.A substantial portion of the trading assets arefunded on a secured basis, some of whichthrough Central Bank tender operations
Central bank access:DB is clearer in many currencies (including
USD, EUR, GBP, and JPY) and has centralbank access across the regions.
Liquidity portfolio:DB maintains liquidity portfolio as for centralbank pledge across major hubs and time zones
Unencumbered trading assets:Significant portion of remaining unsecuredfunded trading assets are highly liquid and readyavailable for secured funding
Secured funding
Note: Illustrative distribution based on internal management information systems
Note: Illustrative distribution based on internal management information systems
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Investor Relations 12/07 · 15
Stable & other deposits
10%6%
9%5%
21%19%
24%
2%4%23 10 24
4729
51
106
81
18 11
102
14
39 33
61
122107
98
13%
7%8%3%2%
4%
17%23%
22%
RetailDeposits
CapitalMarkets
FiduciaryDeposits
Small / MidCap
Other Non-Bank
Deposits
InstitutionalClearing
Balances
CD-CP CentralBank
Deposits
BankDeposits
Broad and stable unsecured funding base
3Q2007 total: 510 4Q2006 total: 465
Total unsecured funding diversification year-to-date, in EUR bn
+51 Short-term wholesale funding-6
The bank’s unsecured funding base is well diversified over a broad range of products and marketsFunding mix further strengthened by increase of stable deposit base and capital market issuanceswhile reducing reliance on short-term wholesale fundingFurther significant growth in stable funding sources in 4Q2007
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Investor Relations 12/07 · 16
Integrated long-term issuance
strategy
Integrated long-term issuance
strategy
Deutsche Bank’s issuance strategy
Internal drivers
Fundingrequirements
External drivers
Spread management
Capital planning
Diversification Investor demand
Market opportunities
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Investor Relations 12/07 · 17
Distribution by type Distribution by currency
Capitalinstruments Senior plain
vanilla
Seniorstructured
36%
49%15%
* Includes all Debt evidenced by paper, with original maturity greater than 1 yr, as per 3Q2007
39%
46%
15%
Capital markets issues are well diversifiedTotal outstanding of EUR 98 bn*
39%
46%5%
JPY
CHF
GBP
CAD
Other
USD
EUR
5%4%3%
46%39%
1%
2%
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Investor Relations 12/07 · 18
Orig. funding plan largely completed by end-July – ~ EUR 19bn based upon leading the cycle strategyTreasury revised long-term funding plan in light ofthis summer’s liquidity squeeze: – Diversify away from dislocated money markets – Prepare for market headline risk – Provide additional funding for business opportunitiesRaised EUR 24 bn mid-August to mid-October: – Range of currencies and maturities (avg. 6 yrs) – Competing with banks-and-brokers for limited
opportunities – ‘Reopened’ numerous ‘closed’ marketsSignificant issues – Debut issuance in fixed rate US mkt with 5 and 10 yrs – Largest EUR-denominated senior issuance by a
financial institution (EUR 3 bn 5yr issue) – Largest AUD issue by DB to date – Largest Samurai issuance by DB to date – Continued issuance in niche ccy, eg. CHF, SEK, SGD
Review of issuance plan 2007
Volatility in DB credit spreads in line with market
Issuance activity year-to-date, in EUR bn
0 5 10 15 20 25 30 35 40 45
Capital: 2.1
Initial Plan 2007: 23.0
Actual: 42.8
Plain Vanilla: 29.2
By product:
Structured: 11.5
74
5455
0
20
40
60
80
100
Apr2007
May2007
Jun2007
Jul2007
Aug2007
Sep2007
Oct2007
Nov2007
Junior DB 5y CDS
Senior DB 5y CDS
Itraxx Senior Finan. 5y
(as of November 2007)
(in bps)
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Investor Relations 12/07 · 19
0
50
100
150
200
I T R A X X
B N P
C S
H S B C
D e u t s c h e
U B S
R B S
B a r c l a y s
J P M
B o f A
G S
C i t i
W a c h o v i a
M S
M L
L e h m a n
B e a r
15 Jun
16 Aug
05 Dec
Key demand drivers for issuance plan – Business growth – Diversify away from dislocated money markets – Funding of 2008 maturities and partial pre-funding
of 2009 maturities
Key figures for base case – Issuance plan of EUR 38 bn increases capital
markets outstandings to around EUR 130 bn at2008 year-end
– Average duration at 5 to 6 yearsLow/high scenarios reflect uncertainty withregard to
– Business demand – Market / spread development
– Plan will be reviewed regularly to reflect supply anddemand changes
We do not expect a rapid correction in therecent spread widening over 1Q2008 – Deutsche Bank has performed well vs. peers
Issuance plan 2008Total issuance at EUR 38 bn
Capital markets issuance plan 2008, in EUR bn
Market & peer credit spreads, 5yr CDS in bps
Low Base High
1.5 2.0 2.5
31.5 36 41.5
33 38 44
Senior debt
Case
Capital instruments
Total volume
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Investor Relations 12/07 · 20
3 Funding strategy
4 Summary
2 Asset & liability management
1 Organizational set-up
Agenda
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Investor Relations 12/07 · 21
Summary
Virtually all banking book rate risk transferred into trading books
Significant duration extension in 2007
Strong growth in stable deposit base in 2007
Continuation of duration extension & stable deposit growth in 2008
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Investor Relations 12/07 · 22
Cautionary statementsUnless otherwise indicated, the financial information provided herein has been prepared under the InternationalFinancial Reporting Standards (IFRS). It may be subject to adjustments based on the preparation of the full set offinancial statements for 2007. The segment information is based on IFRS 8: ‘Operating Segments’. IFRS 8, whilstapproved by the International Accounting Standards Board (IASB), has yet to be endorsed by the European Union. Thesegment information in our Interim Report provides a reconciliation to IAS 14, which is the EU-endorsed standard
covering this topic.This presentation also contains forward-looking statements. Forward-looking statements are statements that are nothistorical facts; they include statements about our beliefs and expectations and the assumptions underlying them. Thesestatements are based on plans, estimates and projections as they are currently available to the management ofDeutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake noobligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors couldtherefore cause actual results to differ materially from those contained in any forward-looking statement. Such factorsinclude the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which wederive a substantial portion of our trading revenues, potential defaults of borrowers or trading counterparties, theimplementation of our management agenda, the reliability of our risk management policies, procedures and methods,
and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are describedin detail in our SEC Form 20-F of 27 March 2007 on pages 9 through 15 under the heading “Risk Factors.” Copies of thisdocument are readily available upon request or can be downloaded from www.deutsche-bank.com/ir .
This presentation contains non-IFRS financial measures. For a reconciliation to directly comparable figures reportedunder IFRS refer to the 3Q2007 Financial Data Supplement, which is accompanying this presentation and available onour Investor Relations website at www.deutsche-bank.com/ir.