Deutsche Bank : DB USA Corporation Biennial Stress Test Disclosure DFAST 2024

Deutsche Bank

DB USA Corporation

DB USA Corporation

2024 Stress Test Disclosure

Deutsche Bank

2024 Stress Test Disclosure

Table of Contents

1. Overview and Requirements	3
2. Risk Types	4 - 6
2.1	Credit Risk	4
2.2	Market Risk	4
2.3	Liquidity Risk	5
2.4	Strategic Risk	5
2.5	Reputational Risk	5
2.6	Non-Financial Risk	5
2.7	Model Risk	6
3. Methodology	6 - 9
3.1 Pre-Provision Net Revenue	6
3.2	Losses and Provisions	7
3.3 Changes in Capital Ratios	7
3.4 Capital Actions	8
4. DB USA Stress Test Results	9 -11
4.1 Pre-Provision Net Revenue, Provisions, Other Gains/Losses and Net	9
	Income before Taxes
4.2 Cumulative Loan Losses	9
4.3 Risk Weighted Assets	10
4.4 Capital Ratios	10
5. Drivers of DB USA Stress Test Results	10 - 12
5.1 Capital Ratios	10

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2024 Stress Test Disclosure

1. Overview and Requirements

DB USA Corporation ("DB USA", "we" or "our") is a U.S. bank holding company ("BHC") regulated by the Board of Governors of the Federal Reserve System ("FRB"), and is the primary U.S. intermediate holding company ("IHC") of Deutsche Bank Aktiengesellschaft ("DB AG", and together with its subsidiaries, "DB Group"). DB USA operates through its subsidiaries, including Deutsche Bank Trust Company Americas ("DBTCA"), a licensed New York State-chartered insured depository institution, as well as Deutsche Bank Securities Inc. ("DBSI"), a Delaware corporation and registered U.S. broker-dealer and investment adviser.

As of December 31, 2023, DB USA operates under three core business divisions in the U.S.: the Corporate Bank, Investment Bank and Private Bank (the International Private Bank operates under the Private Bank brand in DB USA). DB USA also provides service functions to both DB USA and affiliate businesses including infrastructure functions such as Technology, Operations, Risk, Finance and Treasury services. These service functions are together referred to as the "Corporate" division within DB USA.

Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") and the related regulations promulgated thereunder by the FRB require certain BHCs and IHCs, such as DB USA, to conduct stress tests, generally referred to as Dodd-Frank Act stress tests or "DFAST". Under the DFAST requirement pursuant to the FRB's regulations, DB USA is required to conduct and complete stress tests over a nine-quarter time horizon using a set of macroeconomic scenarios (Supervisory baseline and Supervisory severely adverse) provided by the FRB1. In addition to the macroeconomic scenarios, for the 2024 DFAST, DB USA was subject to market risk components including the global market shock ("GMS") and counterparty default scenario components to assess potential losses and capital impact in connection with its trading and counterparty activities2. The GMS is an instantaneous loss and a reduction in capital as of a specified point in time. These losses and related capital impact are included in projections for the first quarter of the planning horizon. The counterparty default scenario estimates the potential losses and related effects on capital associated with the instantaneous and unexpected default of the counterparty that would generate the largest losses across its derivatives and securities financing transactions, including securities lending and repurchase or reverse repurchase agreement activities.

The results of these stress tests are submitted to the FRB. For the 2024 DFAST, the forecast time horizon for the stress tests is the nine-quarter period beginning in the first quarter of 2024 (January 1, 2024) and continuing through the end of the first quarter of 2026 (March 31, 2026). The "as of" date for the GMS and counterparty default scenario component applicable to DB USA for the 2024 DFAST is October 13, 2023.

The DFAST rules require DB USA to publish a summary of our 2024 DFAST results under the Supervisory severely adverse scenario. The projections, which form the basis of the information provided in this report, represent hypothetical estimates that involve an economic outcome that is more adverse than expected and, as such, these estimates do not represent DB USA's actual expected losses, revenues, net income before taxes, or capital ratios. DFAST for DB USA was conducted in accordance with the Capital Plan Rule and Stress Test Rules, as required under the

• For more information with respect to the scenarios provided by the FRB, see Board of Governors of the Federal Reserve System 2024 Stress Test Scenarios, available at https://www.federalreserve.gov/publications/files/2024- stress-test-scenarios-20240215.pdf
  2 See the 2024 FRB Scenario Release, pages 10-17.

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2024 Stress Test Disclosure

Dodd-Frank Stress Test (DFAST) rules, implemented by the Board of Governors of the U.S. Federal Reserve System.

The results of DB USA's DFAST indicate that we would expect to have ample capital throughout a hypothetical severe and protracted economic downturn to allow us to continue operations, maintain ready access to funding, remain a financial intermediary, satisfy our obligations to creditors and counterparties, and meet the expectations of internal and external stakeholders.

2. Risk Types

DB USA has identified the following risks and risk drivers arising from its strategies and business activities under the Supervisory severely adverse scenario. Material risks, individually and in the aggregate, are incorporated into internally defined idiosyncratic events, in quantitative models, and non-model estimation approaches, and are projected to result in material balance sheet, income statement, or capital impacts.

2.1 Credit Risk

Credit risk arises from any transaction in which an actual, contingent or potential claim against a borrower, obligor, issuer or other counterparty exists. It captures the risk of loss due to a deterioration of a counterparty's creditworthiness, increase in DB USA's exposure to that counterparty or deterioration or lack of enforceability of any collateral mitigating such exposures.

Risk drivers for credit risk include, but are not limited to:

• Counterparty default risk related to loans, securities financing transactions and derivatives transactions;
• Loss severity due to a decline in collateral values or inability to utilize collateral; and
• Changes in commitment and exposure utilization.

2.2 Market Risk

Market risk is the risk of loss in the value of our inventory, as well as certain other financial assets and liabilities, due to changes in market conditions, such as changes in market prices, credit spreads, interest rates, and exchange rates across various asset classes.

Market risk in the trading book and fair value banking book is driven by the inventory DB USA holds and the impact of changes in market conditions on that inventory. DB USA holds inventory primarily for market making, capital market, investing and lending activities.

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2024 Stress Test Disclosure

2.3 Liquidity Risk

Liquidity risk is the risk arising from the potential inability to meet all payment obligations when they come due. The primary objective is to ensure that DB USA has the ability to fulfill its payment obligations at all times and can manage liquidity and funding risks within its risk appetite. To meet this objective, a comprehensive and conservative liquidity risk management framework was established considering relevant drivers of liquidity risk, whether on-balance sheet or off-balance sheet. Treasury manages its liquidity and funding risk utilizing tools such as internal liquidity stress testing. Risk is monitored and mitigated through the implementation of risk appetite limits, legal entity thresholds and early warning indicators. Primary drivers of liquidity risk within DBUSA include, but are not limited to:

• Corporate Bank and Private Bank deposit outflows - loss of funding sources; and
• Payment, Clearing and Settlement (PCS) - intraday payment obligations to clear cash securities, repo and derivatives.

2.4 Strategic Risk

Strategic risk is the risk of a shortfall in planned earnings (excluding other material risks) due to incorrect business plans, ineffective plan execution, and/or inability to effectively respond to material plan deviations. It covers:

• Positioning risk - a shortfall in planned earnings due to flawed assumptions and/or unanticipated changes in DB's operating environment and/or client needs;
• Execution risk - a shortfall in planned earnings due to inability to successfully execute strategy as a result of ineffective processes, technology and controls, insufficient staffing, and/or cost constraints; and
• Response risk - shortfall in planned earnings due to inability to effectively respond to plan deviations (e.g., through cost/revenue/balance sheet measures) and/or due to unanticipated consequences from actions taken.

2.5 Reputational Risk

Reputational risk is the risk of possible damage to DB USA's brand and reputation, and the associated risk to earnings, capital or liquidity, arising from any association, action or inaction by DB USA and/or its affiliates, which could be perceived by stakeholders to be inappropriate, unethical or inconsistent with DB USA's values and beliefs. Potential sources of reputational risk include, but are not limited to:

• Entering into transactions or products without substantive business or economic purpose, or with non-standard structures or terms;
• Associating with certain counterparties, industries, or sectors;
• Executing transactions with environmental or social issues; and
• Executing transactions or products perceived to be unethical, inappropriate or inconsistent with DB USA's values and beliefs.

2.6 Non-Financial Risk

Non-financial risk and associated legal and non-legal losses arising from "various sources, including inadequate or failed internal processes, people, and systems, or from external events, and can differ in frequency and severity" as the FRB states in Supervisory Letter SR 15-19. This includes the risk of reputational damage, but excludes business and strategy risk.

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2024 Stress Test Disclosure

The following ongoing, historically observed, or emerging operational risk-related loss types are covered by the operational loss projection:

• Qualitative analysis and scenario analysis help capture both macro economically driven and non-macro economically driven expected operational losses that can be observed historically.
• Idiosyncratic operational losses driven by firm-specific risk drivers, which may be exaggerated by economic downturn. These losses result from typically low frequency, high severity one-off, catastrophic (i.e., rare but plausible) events.

Non-financial risk may arise from mistakes, inadequate controls, or individual misconduct, and from various sources, including, but not limited to:

• Treatment of customers;
• Resiliency of technology and operations;
• Overly manual processes;
• Management of third parties;
• Information security;
• Compliance with laws, rules and regulations (including anti-financial crimes); and
• Employee lifecycle.

2.7 Model Risk

Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs. Model risk can lead to: financial loss, poor business or strategic decision making, or damage to our reputation. DB USA recognizes the use of models can affect other risk-types, and that model risk is a distinct risk that can increase or decrease aggregate risk across other risk-types.

3. Methodology

For purposes of DFAST, DB USA uses quantitative and qualitative estimation approaches to project asset and liability balances, revenues, expenses, losses, risk weighted assets ("RWAs") and capital over the nine-quarter planning horizon. All quantitative and qualitative estimation approaches undergo a thorough validation.

3.1 Pre-Provision Net Revenue

Net interest income ("NII") is the difference between interest revenue and expense, which are the products of projected assets/liabilities and their associated interest rates.

Asset and liability balance projections take into consideration, amongst other items, contractual maturity information, prepayments and business strategy. Product rates take into consideration generic rate environment, product margins and business strategy.

Non-interest income is projected for items such as fee income, trading gains/losses, other gains/ losses, and transfer pricing.

With respect to non-interest expense, DB USA uses estimation approaches that incorporate key drivers (e.g., spending strategy; historical information) and scenario inputs to project the subcomponents of non-interest expense, including: salary expense, benefits expense, other personnel expenses, premises and fixed assets, communication and data services, and intercompany expenses.

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2024 Stress Test Disclosure

3.2 Losses and Provisions

Credit Risk

DB USA projects credit losses under stress using an expected loss approach, where expected losses depend on the probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD"). These risk parameters are projected under stress and then utilized to estimate DB USA's potential net charge-offs ("NCOs"), allowance for credit losses ("ACL"), and provision for credit losses ("PCL") over the projection horizon under the current expected credit loss ("CECL") framework.

DB USA uses a suite of estimation approaches that reflect the characteristics and risks of each of DB USA's sub-portfolios. The estimation approaches link variables (which may include macroeconomic and loan level variables) to the scenario-dependent projections. The macroeconomic variables considered include, but are not limited to: Gross Domestic Product, the U.S. unemployment rate, House Price Index, and Commercial Real Estate Price Index.

Non-Financial Risk

DB USA's approach for projecting non-financial risk uses quantitative approaches, expert judgment, and scenario analysis to estimate losses from non-financial risk events under a variety of stressed conditions. Our methodology consists of five major components including risk identification, idiosyncratic scenario analysis, legal loss estimation, non-legal loss estimation, and material risk coverage.

It also incorporates business-as-usual processes for identifying non-financial risks for DB USA, using DB's non-financial risk taxonomy. It then examines the appropriate coverage of each risk type in the overall Operational Loss Projection and is thereby used to develop the forward-looking Operational Loss Projection.

Market Risk

DB USA incorporated market risk impacts into its 2024 DFAST results under the Supervisory severely adverse scenario through an instantaneous global market shock. The projected impact of the global market shock scenario is considered across trading mark-to-market, issuer default loss, counterparty default losses, and credit valuation adjustment components.

The impacts of the macroeconomic scenarios are incorporated in stressed market risk RWA projections, as discussed in Section 3.3.

3.3 Changes in Capital Ratios

Capital projections utilize a framework that is based upon exposure identification and data sourcing, risk-weight classification, exposure calculation, aggregation, and report line item mapping. As of December 31, 2023, capital supply, balances and pre-provision net revenue ("PPNR") projections were projected based on anticipated activity over the planning horizon under the Supervisory severely adverse scenario.

DB USA projects credit risk RWA using a model that forecasts stressed RWA for its portfolios in accordance with U.S. Basel III capital rules and supervisory guidance. The credit risk RWA projection approach takes into account scenario-specific macroeconomic variable projections, portfolio

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2024 Stress Test Disclosure

composition and balance sheet projections. Credit risk RWA components include counterparty credit risk for repo-style and derivative transactions, default fund contributions, equity exposures, unsettled transactions, and wholesale credit risk arising from lending activities. The projection approach applies tailored methodologies to address balance sheet positions, collateral, and off-balance sheet items.

Market risk RWA were projected using models for each market risk RWA component (i.e., value at risk, stressed value at risk, specific risk, and de minimis exposures). Specific risk is further segmented across securitized debt, non-securitizeddebt, and equity. Market risk RWA projections utilize macroeconomic scenario inputs and leverage models used for regulatory reporting.

3.4 Capital Actions

For purposes of DB USA's DFAST results and as required by 12 C.F.R. 252.56(b), standardized capital action assumptions were applied as follows:

1. The covered company will not pay any dividends on any instruments that qualify as common equity tier 1 capital;
2. The covered company will make payments on instruments that qualify as additional tier 1 capital or tier 2 capital equal to the stated dividend, interest, or principal due on such instrument;
3. The covered company will not make a redemption or repurchase of any capital instrument that is eligible for inclusion in the numerator of a regulatory capital ratio; and
4. The covered company will not make any issuances of common stock or preferred stock.

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Deutsche Bank

2024 Stress Test Disclosure

4. DB USA Stress Test Results3,4

4.1 Pre-Provision Net Revenue, Provisions, Other Gains/Losses and Net Income before Taxes

Figure 4-1: DB USA Projected Nine-Quarter Cumulative PPNR, Other Gains/Losses and Net Income before Taxes under the Supervisory Severely Adverse Scenario

Projected PPNR, PCL, Other Gains/Losses, and Net Income before Taxes - DB USA

$ millions	Cumulative	Percent of	5
	9-Quarters	Average Assets
PPNR	(231)	(0.2)%
Other Revenue	-	-
Less
Provision for Credit Losses	585	0.6%
Realized Losses/(Gains) on Securities (AFS/HTM)	-	-
Trading and Counterparty Losses	925	0.9%
Other Losses/(Gains)	-	-
Equals
Net (Loss)/Income Before Taxes	(1,742)	(1.6)%

4.2 Cumulative Loan Losses

Figure 4-2: DB USA Projected Nine-Quarter Cumulative Loan Losses by Loan Type under the Supervisory Severely Adverse Scenario

Projected Loan Losses - DB USA

$ millions	Cumulative	Portfolio Loss
9-Quarters	Rates (%)6
Loan Losses	486	3.5%
First Lien Mortgages	86	4.9%
Second / Junior Liens and Mortgages	6	2.3%
CRE Loan	256	7.5%
C&I Loans	33	1.1%
Credit Cards	-	-
Other Consumer	17	3.5%
Other Loans	87	1.8%

• These projections represent hypothetical estimates that involve an economic outcome that is more adverse than expected. These estimates are not forecasts of expected losses, revenues, net income before taxes, or capital ratios. 4 Numbers may not add due to rounding.
  5 Average assets are calculated as the nine-quarter average of total assets.
  6 Portfolio loss rates are calculated as cumulative nine quarter loan losses divided by the average nine quarter loan balance. Average loan balances used to calculate portfolio loss rates exclude loans held for sale and loans held for investment under the fair-value option and are calculated over nine quarters.

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2024 Stress Test Disclosure

4.3 Risk Weighted Assets

Figure 4-3: DB USA Projected Risk Weighted Assets under the Supervisory Severely Adverse Scenario

$ billions	Q4	PQ1	PQ2	PQ3	PQ4	PQ5	PQ6	PQ7	PQ8	PQ9
2023
Risk-Weighted Assets	37.3	36.1	36.5	36.7	37.7	36.7	36.6	36.9	37.1	36.7

4.4 Capital Ratios

Figure 4-4: DB USA Capital Results under the Supervisory Severely Adverse Scenario

Capital Ratios - DB USA

		Stressed Capital Ratios
Capital Ratios (%)	Actual - 4Q23	Ending - 1Q26	Projected - 9 Qtrs
Minimum
Common Equity Tier 1 Capital Ratio	27.8	22.3	22.3
Tier 1 Capital Ratio	35.1	29.7	29.7
Total Capital Ratio	35.1	30.0	30.0
Tier 1 Leverage Ratio	10.0	8.9	8.9
Supplementary Leverage Ratio	9.0	8.0	8.0

5. Drivers of DB USA Stress Test Results 5.1 Capital Ratios

As of December 31, 2023, DB USA had Common Equity Tier 1 ("CET1"), Tier 1 Capital, Total Capital, Tier 1 Leverage, and Supplementary Leverage Ratio of 27.8%, 35.1%, 35.1%, 10.0%, and 9.0%, respectively.

Regulatory capital ratios are calculated and reported under U.S. Basel III-based capital rules as in effect for a given quarter.

Throughout the projection horizon under the Supervisory severely adverse scenario, DB USA has capital ratios in excess of regulatory minimum CET1, Tier 1 Capital, Total Capital, Tier 1 Leverage and Supplementary Leverage Ratio requirements of 4.5%, 6.0%, 8.0%, 4.0% and 3.0%, respectively. DB USA results show post-stress minimums of 22.3%, 29.7%, 30.0%, 8.9% and 8.0%, for CET1, Tier 1 Capital, Total Capital, Tier 1 Leverage, and Supplementary Leverage Ratio, respectively.

The main drivers of the change in DB USA's regulatory capital ratios over the nine quarter planning horizon in the Supervisory severely adverse scenario, as illustrated in Figure 5-1 below, consist of:

• Lower PPNR projections (excluding operational losses), driven by reduced interest income resulting from lower rates and reduced non-interest income resulting from lower fee revenue;
• Non-financialrisk losses driven primarily by legal losses;
• Trading and counterparty losses;
• Payment of preferred dividends during the projection horizon;7
• Projected increase in PCL over the planning horizon; and
• The decrease in RWAs at trough relative to jump-off.

• DB USA's dividend projections on preferred stock reflect the application of the FRB's capital rules and required capital action assumptions, as described in Section 3.4.

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