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ISSUER COMMENT Deutsche AG 4 February 2021 Q4 2020: Strong Investment Bank and stable Core Bank results evidence success

All comparisons in this report are made to Q4 2019, unless otherwise indicated.

In Q4 2020, AG (DB, A3/A3, stable, ba11) reported a net profit of €189 Contacts million, following a net loss of €1.5 billion one year ago. Continued strong generation Michael Rohr +49.69.70730.901 in its ‘Core Bank’ and strong cost containment boosted the bank's operating leverage2 to Senior Vice President [email protected] 12%. DB's 'Core Bank' reported an adjusted net return on tangible of 5.8%, showing continued progress towards DB's 2022 8% target. Loan loss charges were sustained near the Yana Ruvinskaya +33.1.53.30.33.93 Associate Analyst prior-year and prior-quarter levels, bringing the total charge-off ratio to 41 basis points (bps) [email protected] of gross loans for the full year, in-line with the 35-45 bps guidance range. Restructuring and 3 Peter E. Nerby, CFA +1.212.553.3782 transformation charges of €379 million in the quarter declined 64% year-over-year. At group Senior Vice President level4, DB reported an adjusted net return on shareholders' equity of 3.4%, a net return on total [email protected] of 0.13% and a net return on risk-weighted assets (RWAs) of 0.51%. Once again, these Laurie Mayers +44.20.7772.5582 results underscore DB's success in executing on its strategic repositioning. Associate Managing Director [email protected] Strong Investment Bank boosts revenue as costs remain well contained. DB reported Ana Arsov +1.212.553.3763 total group of €5.5 billion5 in Q4 2020, up 4% year-over-year. This was largely driven MD-Financial Institutions by strong Investment Bank (IB) revenues growing 28%6 on the back of strong client flows in [email protected] and high FX and Emerging Market revenues driven by increased volatility. The Private

CLIENT SERVICES Bank (PB) reported virtually flat revenue year-over-year, again offsetting the negative effects of the persistently ultra-low interest-rate environment. At the same time, group adjusted costs7 1-212-553-1653 declined 8% to €4.7 billion, reaping the benefits of workforce reduction, lower IT costs and Asia Pacific 852-3551-3077 lower professional service fees. As a result, all 'Core Bank' segments were profitable, supporting Japan 81-3-5408-4100 a 111% growth in DB’s 'Core Bank' adjusted pretax profit year-over-year to €1.0 billion8. EMEA 44-20-7772-5454 DB maintained its high balance-sheet liquidity and solid capital metrics. The bank's Common Equity Tier 1 (CET1) capital ratio stood at 13.6% in the quarter, flat year-over-year (see Exhibit 1 below) and up 30 bps sequentially. DB further reported a 10 bps year-over-year improvement in its CET1 ratio to 4.3%9. Group RWAs increased €4 billion sequentially and 2% year-over-year to €329 billion. Leverage exposures fell slightly to €1,163 billion10 (Q4 2019: €1,168 billion). In addition to its solid capitalization metrics, high balance-sheet liquidity remains a comparative, credit-positive strength of DB. The bank's €243 billion liquidity reserve stands well above requirements stipulated by the liquidity coverage ratio (LCR), which stood at 145% as of Q4 2020 (net buffer: €66 billion). Despite being down €10 billion sequentially, DB's strong liquidity buffers increased €21 billion year-over-year and continue to provide strong shock absorbers in a highly uncertain and challenging macroeconomic environment, safeguarding its credit profile. MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Detailed considerations DB improved its CET1 capital ratio despite ongoing reserve build DB managed to increase its CET1 risk-based capital ratios by 30 bps sequentially (Exhibit 1). Further safeguarding its capital position well above the ECB's current CET1 regulatory requirement of 10.4%11, DB will also not pay a for this year and will also not buy back any of its own shares.

Exhibit 1 Common Equity Tier 1 (CET1) ratio and Tier 1 Leverage Ratio for Global Investment , as of 31 December 2020

CET1 ratio Tier 1 Leverage ratio Median CET1 ratio (13.4%) Median leverage ratio (5.4%) 21.0%

17.7% 18.0% 15.6% 14.6% 15.0% 13.8% 13.8% 13.6% 13.4% 13.2% 13.0% 12.9% 12.6% 12.5% 12.0% 11.8%

9.0% 7.4% 7.0% 6.9% 7.2% 7.0% 5.2% 5.4% 5.6% 6.0% 5.4% 4.3% 4.5% 4.4% 4.8% 3.0%

0.0% baa1 a2 baa2 a2 a3 ba1 baa1 baa2 baa1 a3 baa1 a3 baa1 MS HSBC^ BCS** JPM UBS* DB*** GS SG^^ CS* BAC BNP RBC CITI

(1) As of Q3 2020 for (BCS), BNP Paribas, Group, HSBC Holdings and Société Générale; Q4 2020 for the rest; (2) III fully phased in advanced approach for all US banks; (3) Tier 1 leverage ratio for US banks is the supplemental leverage ratio (SLR). *UBS and CS leverage ratio reflect Common Equity Tier plus Low Trigger Additional Tier 1 and High-Trigger Additional Tier 1 securities. For the computation of the leverage ratio, the Swiss regulator allowed for a temporary exclusion of cash held at central banks until 1 January 2021. The ratios shown here do not include this benefit. **BCS leverage is reflective of the spot UK leverage ratio. ***DB Q4 2020 leverage exposure includes certain balances (“Euro-based exposures facing Eurosystem central banks”) that could normally be excluded following the European Central Bank's decision (EU) 2020/1306 until 27 June 2021. Excluding these items, DB's leverage ratio would have been 4.7%. ^HSBC's Q3 2020 leverage exposure already excludes the aforementioned items since the bank did not provide sufficient disclosures to perform a similar adjustment. Source: Company reports, Moody's Investors Service

Despite approximately €20 billion of regulatory-driven RWA inflation expected during the first half of 2021, we anticipate DB will be able to largely maintain its solid capitalization and liquidity metrics going forward, which will allow it to withstand this period of extremely high macroeconomic uncertainty caused by the coronavirus pandemic. However, should economic conditions not improve into 2021 and 2022, the shock to DB’s and its peers’ profitability and overall creditworthiness would likely be more pronounced. Supported by better- than-anticipated underlying profitability in its 'Core Bank', as well as by its higher-than-anticipated CET1 ratio, we continue to believe DB is entering and likely passing through this period from a meaningfully improved position.

Credit loss expenses decline substantially as DB's diversified loan book helps shield the bank from undue losses As an IFRS reporter, DB’s Q4 2020 loan loss charges totaled €251 million, down significantly from the €506 million and €761 provided for in the first two quarters of 2020, and virtually unchanged sequentially as well as from the prior year's €247 million. The decline was partly driven by releases of €101 million in Stage 1 and 2 (see Exhibit 2 below), reflecting an improved macroeconomic outlook that remained offset by a retained management overlay to account for ongoing outlook uncertainties. Cost of risk came in close to the middle of the guidance range of 35-45 bps of loans for the full year and stood at 41 bps for 2020 and at 23 bps in the fourth quarter.

For 2021, DB expects loan loss charges to decline slightly from the 2020 charge-off level (we estimate a range of 30-40 bps of gross loans) before dropping towards 25-30 bps in 2022, still above the 2019 level (17 bps). We believe these targets are realistic in light of the banks diversified and -focused loan book. Moreover, as of 31 December 2020, DB has built almost €4.8 billion in allowance for potential loan losses.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

2 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

However, and as the full effects of the pandemic on the global economy unfold and become more visible into 2021 and – potentially – 2022, we believe it is likely that pressure on profitability could increase again as a result of higher loan loss charges.

Exhibit 2 Loan loss charges decline sequentially, but will only recede gradually into 2021 (EUR million) DB's risk pockets appear manageable at this stage

Stage 1+2 Stage 3 Total LLC 900 900

800 800 700 700 600 600 500 400 500

300 400 200 300 100 200 0 -100 100 -200 0 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Source: Company reports, Moody's Investors Service

Segmental results commentary Unless indicated otherwise, figures displayed below are on a DB reported basis and comparisons are made versus Q4 2019. The Corporate Bank reported a pretax income of €162 million compared with a pretax loss of €121 million during the same period last year. Revenues of €1.2 billion adjusted for translation effects and negative impact from the sale of Postbank Systems (€16 million) were broadly flat in the quarter.

Global Transaction Banking (GTB) revenues adjusted for currency translation effects declined 3%. revenues were flat in the quarter as interest rate headwinds were only partly offset by deposit repricing and management initiatives. and Lending revenues also remained flat, supported by a solid Lending performance in Germany and EMEA. Securities Services and Trust Agency Services revenues declined, mainly owing to the lower interest-rate environment. Adjusted Commercial Banking revenues12 were up 6%, largely supported by deposit repricing.

The segment benefitted from lower loan loss charges of €73 million in the quarter, down 30% year-over-year but up 75% sequentially, mainly reflecting a small number of idiosyncratic events. Adjusted costs excluding transformation charges declined 6%, reflecting lower non-compensation expenses, headcount reductions and a favourable FX translation.

The Investment Bank reported a pretax income of €596 million compared with a small loss of €60 million during the same period last year, driven by very strong positive operating leverage of 37%13. Revenues increased 24% year-over-year to €1.9 billion (+28% excluding specific items), reflecting higher revenue (+21% excluding specific items) and very strong equity origination (up more than threefold over Q4 2019) and solid origination (+21%) revenue, further supported by meaningfully higher advisory revenues (+70%). Adjusted costs excluding transformation charges declined 9% (down 19% reported) driven by lower restructuring expenses and continued strong cost discipline.

DB managed to match the solid performance of its US peers in fixed income sales and trading (+26% in USD terms versus US peers' average of +10%), and also outperformed its US peers in equity origination (+240% in USD terms versus US peers' average of +124%, yet coming from a meaningfully smaller base), as well as debt origination (+30% in USD terms versus US peers' average of -3%), the latter driven by market share gains in investment-grade credit and continued client re-engagement. Total revenue development was in- line with peers, reflecting DB's a less favourable business mix under current market conditions (no equity sales and trading and a focus on Credit and Leveraged Finance).

3 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

The reported a pretax profit of €9 million in the quarter compared with a €261 million pretax loss last year. Revenues excluding specific items14 were up 1% driven by business growth and higher fee income that was able to offset deposit margin compression and the ongoing negative impact from the COVID-19 pandemic. Adjusted costs excluding transformation charges declined 10% owing to the execution of earlier cost reduction initiatives. Provisions for credit losses increased to €173 million (Q4 2019: €119 million) or 29 basis points of loans, reflecting negative impacts from the COVID-19 pandemic as well as lower beneficial impacts from portfolio sales.

Asset Management reported another strong pretax profit of €157 million (€165 million adjusted) compared to €177 million for the same period last year. Revenues were down 11% to €599 million, mainly reflecting non-recurrence of more significant performance fees earned in Q4 2019. increased 3% to €793 billion driven by positive market performance and strong net inflows of €14 billion, offsetting negative FX movements. Adjusted costs were down 7% reflecting cost initiatives and reduced activity due to the pandemic.

Exhibit 3 Core profitability continues to improve as restructuring gains traction Adjusted quarterly pretax profits by business line (excluding litigation, impairments, DVA and one-offs), EUR million

Corporate Bank Investment Bank Private Bank Management 1,500 1,500

1,000 1,000

500 500

- -

(500) (500)

(1,000) (1,000)

(1,500) (1,500) Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Source: Company reports, Moody's Investors Service

The Capital Release Unit (CRU), DB's non-core wind-down segment, reported negative revenue of €65 million, following a negative €180 million in the prior-year quarter. Albeit at a slower pace, the downsizing of the segment continued during Q4 2020, in particular with regard to deleveraging (leverage exposures declined to €72 billion from €90 billion in Q3 2020, and were down 43% year-over- year). Risk-weighted assets declined 25% to €34 billion, including €24 billion of -weighted assets.

Rating Considerations Deutsche Bank has a BCA of ba1 and is rated A3 for deposits, A3 for senior unsecured debt, Baa3 for junior senior unsecured debt and is assigned a Counterparty Risk Assessment of A3(cr)/P-2(cr) and Counterparty Risk Ratings of A3/P-2. The outlook on its deposit and senior unsecured ratings is stable.

4 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Moody's Related Research Credit Opinion

» Deutsche Bank AG, November 2020

Issuer In-Depth Reports

» Rapid restructuring progress and clean balance sheet set bank on stable course to complete strategic overhaul

» Deutsche Bank AG: Sweeping revamp of business model will be credit positive when and if achieved

» Scenario analysis: Deutsche Bank AG and AG

» Cleaner balance sheet buys time to execute deep reengineering

Issuer Comments

» Franchise stability and continued cost control will help support DB's credit profile

» Q3 2020: Positive operating leverage boosts 'Core Bank' profitability as restructuring progress gains traction

» Restructuring progress supports DB's asset performance

» Continued strong execution and client retention will help support DB's credit profile

» Discontinuation of merger talks with Commerzbank resets the focus to standalone execution and strategic options

Latest Rating Action

» Moody's affirms Deutsche Bank AG's ratings, changes outlook to stable, November 2020

Sector In-Depth Report (Global Investment Banks Peer Group)

» Global Investment Banks - US: Q4 2020 Update - Solid finish to a turbulent year keeps banks on steady footing for 2021, January 2020

» Moody's - Global Investment Banks’ 2021 Outlook is stable – diversification, strong capital and liquidity counter pandemic effects, December 2020

» Global Investment Banks - US: Lower regulatory capital surpluses are credit negative, will draw banks’ close attention, June 2020

» Global Investment Banks' strong liquidity helps insulate creditors, May 2020

» Global Investment Banks: Estimated profit hit in coronavirus shock scenario should not take toll on capital, April 2020

» Fintech: GIBs can keep pace with fintechs, but is most at risk of a digital divide, February 2020

Rating Methodology

» Banks, November 2019

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

5 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Endnotes 1 The ratings shown in this report are DB’s deposit rating/senior unsecured debt rating, outlook, and Baseline Credit Assessment (BCA). 2 Excluding specific revenue and cost items as disclosed by DB. 3 During 2020, DB booked €688 million and €490 million of restructuring- and transformation-related charges, respectively. 4 Excluding litigation, impairments, DVA and one-offs related to DB's restructuring and transformation. 5 Excluding specific items as defined by DB. 6 All segment figures here exclude specific items. 7 As defined by DB. 8 Adjusted as disclosed by DB. 9 As displayed here, DB's leverage exposure includes certain central bank balances (“Euro-based exposures facing Eurosystem central banks”) that would normally be excluded following the European Central Bank's decision (EU) 2020/1306. Excluding these balances, the Q4 2020 leverage ratio would have been 4.7%. 10Also including the aforementioned items. Excluding, leverage exposures would have been €1,078 billion. 11 This has been lowered from 11.6% as of 1 January 2020 owing to the removal of the counter-cyclical capital buffer and the early adoption of CRD V Article 104(a). 12 Excluding €16 million negative impact of the sale of Postbank Systems. 13 Excluding specific revenue and cost items as disclosed by DB. 14Excluding €88 million negative impact of the sale of Postbank Systems.

6 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

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REPORT NUMBER 1262707

7 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

CLIENT SERVICES

Americas 1-212-553-1653 Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454

8 4 February 2021 Deutsche Bank AG: Q4 2020: Strong Investment Bank and stable Core Bank results evidence restructuring success