Deutsche Bank’s 2025 Earnings Call Signals Confident Turnaround

Deutsche Bank AG ((DE:DBK)) has held its Q4 earnings call. Read on for the main highlights of the call.

Deutsche Bank Delivers Record 2025 Results and Sets Confident Course for 2026

Deutsche Bank’s latest earnings call struck an upbeat tone, with management emphasizing record 2025 profitability, solid revenue growth, disciplined cost control and a robust capital position that supports higher shareholder payouts. While executives acknowledged pockets of risk in commercial real estate, single-name credit events and ongoing regulatory and legal matters, they framed these as manageable against a backdrop of stronger asset quality, clear capital plans and a detailed roadmap through 2028. Overall sentiment was one of confidence that the bank has turned its restructuring gains into durable operating momentum.

Record Profitability and Return on Equity

Deutsche Bank reported a pretax profit of EUR 9.7 billion for 2025, an 84% increase year-on-year, and net profit of EUR 7.1 billion. This translated into a post-tax return on tangible equity (RoTE) of 10.3%, meeting its full-year target of above 10% and marking a key milestone on the way to its ambition of exceeding 13% RoTE by 2028. Management highlighted that this profitability uplift reflects not just rate tailwinds but also business-driven growth and structural changes, positioning the bank more firmly among Europe’s better-earning lenders.

Solid Revenue Growth Across the Franchise

Total revenues rose to EUR 32.0 billion in 2025, up 7% from the previous year and implying a 6% compound annual growth rate since 2021, right in the middle of the stated 5.5%–6.5% target range. Executives framed this as evidence that the bank’s diversified revenue engine is working: multiple divisions contributed to growth rather than reliance on a single product or market cycle, giving investors more confidence in the durability of earnings.

Cost Efficiencies Drive a Leaner Bank

Operational efficiencies of EUR 2.5 billion allowed Deutsche Bank to self-fund much of its growth and transformation investments. Noninterest expenses fell to EUR 20.7 billion, down 10% year-on-year, with adjusted costs broadly flat at EUR 20.3 billion despite inflation. The group cost/income ratio improved to 64%, already better than its target of below 65%. Management stressed that the cost base is structurally leaner and that efficiency gains are now being reinvested selectively to support growth and technology.

Capital Strength and Rising Shareholder Returns

Deutsche Bank closed 2025 with a Common Equity Tier 1 (CET1) ratio of 14.2%, comfortably above its operating range. The bank proposed a dividend of EUR 1.00 per share, worth around EUR 1.9 billion, alongside an authorized EUR 1 billion share buyback, taking total 2025 distributions to EUR 2.9 billion—roughly a 50% payout. Cumulative distributions for 2021–2025 reached EUR 8.5 billion, surpassing the prior EUR 8 billion goal. Management used these figures to underscore a shift toward a more shareholder-friendly capital allocation framework, with room for further buybacks as regulatory clarity improves.

Net Interest Income Momentum and 2026 Outlook

Banking net interest income (NII) remained a key earnings engine, with quarterly NII of EUR 3.4 billion and full-year banking NII of EUR 13.3 billion in 2025. Management guided to around EUR 14 billion of banking NII in 2026, driven by targeted portfolio growth and the roll-over of the structural hedge, about 90% of which is locked in via swaps. This visibility into NII was presented as a major support for near-term revenue, even if the broader interest-rate backdrop evolves.

Broad-Based Momentum Across Core Divisions

All major business lines showed notable progress. Corporate Bank revenues have risen more than 40% since 2021, generating a post-tax RoTE of 15.3% and attracting EUR 25 billion of deposit inflows in the quarter, underscoring the franchise’s renewed strength with corporate clients. The Investment Bank saw client activity up 11% in 2025 and a 6% rise in fixed income and currencies (FIC) revenues in Q4, despite a tough comparator. In retail, the Private Bank delivered 14% operating leverage, a RoTE of 10.5% and 10% NII growth year-on-year. Asset manager DWS crossed EUR 1.0 trillion in assets under management (EUR 1.08 trillion), with strong net inflows and significantly higher earnings per share and RoTE, enhancing the group’s fee-based income.

Improving Asset Quality and Credit Costs

Provision for credit losses fell 7% year-on-year to EUR 1.7 billion in 2025, with net releases in Stage 1 and 2 exposures, thanks to more favorable macroeconomic forecasts and portfolio improvements. While pockets of stress remain, management emphasized that overall asset quality trends are positive, and they expect provisions to trend moderately lower in 2026. For investors who remember Deutsche Bank’s past credit challenges, the more normalized and declining cost of risk is a key part of the turnaround story.

Sustainability and AUM Growth Support Fee Income

Sustainable finance volumes reached EUR 98 billion in 2025, including EUR 31 billion in the fourth quarter alone, bringing cumulative sustainable volumes to more than EUR 470 billion since 2020. Combined with strong net inflows and AUM growth at DWS, these activities are boosting fee income and supporting Deutsche Bank’s positioning with clients who are increasingly focused on ESG-oriented solutions. Management presented sustainability as both a growth and relationship driver across corporate and institutional client segments.

Temporary CET1 Dip from One-Off Capital Headwinds

The bank’s CET1 ratio dipped by 30 basis points quarter-on-quarter in Q4 2025, largely due to one-off effects rather than underlying weakness. The discontinuation of the transitional OCI rule reduced CET1 by 27 basis points, while an annual operational risk-weighted assets update cost another 17 basis points. Higher market risk-weighted assets took a further 9 basis points, partly offset by 21 basis points of capital generation. Management framed these effects as timing issues, stressing that the starting CET1 level remains solid and within the bank’s operating range.

CRE Exposure and Concentrated Credit Risks

Commercial real estate (CRE) remained a key area of investor focus. CRE-related provisions were a prominent driver of higher Stage 3 charges in both the Investment Bank and Corporate Bank in Q4. Management acknowledged a residual CRE “tail” that has not yet fully wound down, as well as a larger single-name event that impacted results. U.S. CRE average loan-to-value ratios rose in Q4, partly due to paydowns of lower-LTV exposures, highlighting ongoing stress in parts of the portfolio. The bank continues to manage down these risks but cautioned that CRE will remain a watchpoint.

Legal and Regulatory Overhangs

The call also addressed ongoing legal and regulatory issues. A public prosecutor visited Deutsche Bank’s offices in connection with historical suspicious activity reporting from 2013–2018. Management said the bank is cooperating fully and does not currently expect any impact on its financial or strategic plans, but acknowledged the reputational and legal uncertainty until the matter is resolved. More broadly, they noted that regulatory scrutiny remains an embedded part of the operating environment.

Corporate & Other Drag and Normalization Effects

The Corporate & Other (C&O) segment posted a pretax loss of EUR 109 million in Q4 2025, weighed down by shareholder-related expenses, legacy portfolios and other centrally managed items. Management signaled that revenue normalization in C&O will affect near-term year-on-year comparisons, particularly in early 2026, which investors should factor in when assessing underlying performance.

Higher 2026 Costs from Targeted Investments

After a year of notable cost reductions, management guided to higher noninterest expenses in 2026—slightly above EUR 21 billion versus roughly EUR 20.7 billion in 2025. Around EUR 900 million of incremental investments are earmarked for growth and efficiency initiatives as part of a three-year program. While this will act as a near-term headwind to operating leverage and margins, executives stressed that these investments are designed to unlock future productivity gains and help drive the bank toward its 2028 profitability and cost targets.

Regulatory Uncertainty Around Market Risk Rules

Management also highlighted ongoing regulatory uncertainty around market risk frameworks such as the Fundamental Review of the Trading Book (FRTB). The bank has taken conservative assumptions in its planning for these rules, acknowledging that eventual European regulatory decisions could change the capital impacts and timing. Investors were reminded that while Deutsche Bank’s market businesses are performing well, the final calibration of market risk capital requirements remains a moving part of the medium-term capital story.

Risk of Revenue Normalization in Early 2026

Looking into the first quarter of 2026, management set expectations for flat revenues year-on-year. This reflects both normalization in C&O and a very strong FIC performance in the prior-year quarter that creates a tough comparison. FX assumptions and seasonal effects may further dampen reported figures relative to underlying client activity, so the bank cautioned investors not to over-interpret any apparent top-line plateau in Q1.

Forward-Looking Guidance and 2028 Ambitions

For 2026, Deutsche Bank guided to revenues of around EUR 33 billion, with banking-book NII expected to rise to about EUR 14 billion, supported by structural hedge roll-over and moderate growth in deposits and loans, alongside modest fee income growth. Noninterest expenses are projected to be slightly above EUR 21 billion, including roughly EUR 900 million of incremental investments within a larger three-year program. The bank reiterated medium-term targets to improve the cost/income ratio from 64% in 2025 to below 60% by 2028 and to lift post-tax RoTE from 10.3% to above 13% over the same period. Provisions are expected to trend moderately down toward a roughly 30 basis point run-rate, with CET1 starting 2026 at 14.2% against an operating range of about 13.5%–14%. Management plans a payout ratio of around 60% in 2026 and indicated that further share buybacks could be considered in the second half of the year, subject to conditions.

Deutsche Bank’s earnings call painted the picture of a bank that has moved from restructuring to execution, combining record profits and a stronger balance sheet with a clear capital return story. While residual risks in CRE, legal inquiries and regulatory uncertainty remain, management’s guidance suggests confidence in maintaining revenue momentum, managing costs through a new investment phase and steadily improving returns through 2028. For investors, the message was one of cautious optimism: the turnaround is delivering tangible results, and the focus is now on sustaining and compounding those gains in the years ahead.