Q4 2020 Deutsche Bank AG Earnings Call

[music].

Ladies and gentlemen, thank you for standing by I'm Stuart Your chorus call operator, welcome and thank you for joining the Deutsche Bank Q4, 2020 analyst call.

Today's recorded presentation, all participants will be in a listen only mode presentation will be followed by a question and answer session. If you'd like to ask a question you May press star followed by one on your Touchtone telephone. Please press the star key followed by zero for operator assistance I would now like to turn the conference.

<unk> over to James Rivett head of Investor Relations. Please go ahead.

Thank you all for joining us for our preliminary fourth quarter results call.

As usual on our call.

Christian saving will speak first followed by our Chief Financial Officer, James von Moltke.

The presentation as always is available for download in the Investor Relations section of our website DB don't call.

Before we get started let me just remind you that the presentation contains forward looking statements, which may not develop as we currently expect.

We therefore ask you to take notice of the precautionary warning at the end of all materials with that let me hand over to Christian.

Thank you Jamie.

Warm welcome from me as well, it's a pleasure to be discussing our fourth quarter and full year 2020 results with you.

This is an important milestone.

In our transformation journey.

On July 2019, we said that execution.

For the first six quarters would be critically important.

We hit all our targets and key milestones in 2020.

And over the last 18 months, despite the challenges of COVID-19.

We are now moving into phase III of our transformation.

Delivering sustainable profitability.

That means growing our business, while remaining disciplined on cost and capital.

Our performance in the fourth quarter and the full year confirms and strength in this picture.

We told you we saw sustainable growth in our investment bank as clients have re engaged and our strong performance in January flows on supports this.

The private bank and corporate bank have successfully offset the interest rate headwinds they're facing.

We delivered 12 consecutive quarters of year on year reductions in adjusted costs, excluding transformation charges and bank levies.

And despite the challenges we faced.

We were profitable on a pre and post tax basis in the fourth quarter and the full year.

For the full year at group level, we have reported pretax profit.

On 1 billion euros, and net income of $624 million.

The improved profitability on the call bank offset the continuing transformation effects higher provisions for credit losses and continued derisking in the capital release unit.

We have also put aside any doubt that we can self fund our transformation.

And while the environment is likely to remain challenging our strong capital and liquidity ratios.

Position us well to continue to support clients.

Let me now go through these items in more detail starting with the delivery of our 2020 milestones on slide two.

We hit our $19 5 billion adjusted cost target of.

A $3 3 billion euro of reduction in two years.

This was in part driven by head count reductions with our workforce down by 8% over this period.

We have demonstrated our strong risk management.

Revision for credit losses of 41 basis points of loans.

The middle of the range that we estimated in April at the start of the pandemic.

We aimed for a year end 2020 leverage ratio of four 5% and we ended the year at four 7%.

At the Investor Deep dive, we said, we expected a CET one ratio of around 13% at year end in <unk>.

<unk> our ratio is stronger at 13, 6%.

The stronger ratio reflects in part a delay in certain regulatory items.

And in particular outperformance against our Derisking plants in the capital release unit.

The capital release unit ended the year with 34 billion euros of RW, a below the 38 billion target.

We have made good progress against our sustainability targets with over 40 billion euros of financing and investment volumes at year end compared to our $20 billion target.

Simply put.

We have continued to deliver against all our financial targets and milestones in 2020.

Delivery against these targets is supported by the ongoing disciplined execution of our strategic agenda as we detail on slide three.

In July 2019, we identified the transformation effects that we would take by the end of the 2022 and with 85% of these already behind US we continue to make progress.

Most recently, we signed a multiyear partnership with Google Cloud, which will elevate our it infrastructure to a more efficient cloud based environment.

We also signed and closed the sale of Postbank system.

Which helps accelerate our costs and work force reduction.

And the private bank, we agreed balances of interest with our employee representatives.

Which will allow us to further rationalize our head office and operations in Germany.

We also extended our insurance partnerships with talent and Zurich insurance.

Which would generate additional fee income.

The creation of our German business banking in the corporate bank.

We'll drive greater focus on serving our 800000 small business clients.

Overall.

We have achieved more than 300 key milestones and over 100% of the cost savings anticipated from our core transformation initiatives in 2020.

Being on track or ahead of our objectives. So far gives us the confidence that we will achieve our 'twenty 'twenty two growth.

Our businesses have also made considerable progress against their strategic objectives.

As we show on the next slide.

The corporate bank is working to offset interest rate headwinds in several ways as we discussed with you in December.

On deposit repricing, we are well ahead of target.

By the end of 2020, we had charging agreements related to accounts with a value of 78 billion up from 68 billion in the third quarter.

These agreements generated an annualized positive revenue impact.

Of more than $200 million.

We also grew business volumes for example, 20% growth in payment volumes with our Fintech ecommerce and platform clients.

And we captured.

A 4% increase in the Asia Pacific region.

The investment bank grew revenues by 32% in 2020.

Strong performance in both FIC and origination and advisory.

In the second half of the year, we have outperformed the industry and the average of our U S peers in year on year growth terms.

Yes markets have been favorable but.

But we see our growth to be more market driven.

We refocused our business around areas of strength and clients have engaged well with this model.

As a result, we saw double digit year on year growth in FIC.

And this trend has continued in January.

Client Reengagement and it's also helped underpin the strength in revenue performance in FIC.

As we explained at the Investor Deep dive, we see a substantial portion of investment bank growth is sustainable even as markets normalize as we expect in 2021.

The private bank.

Also successful in offsetting interest rate headwinds with growth in volumes and fee income, including benefits from repricing initiatives.

Combination of higher account fees and other repricing initiatives.

It added 100 million euros to 'twenty 'twenty revenues.

In 2020.

We grew net new client loans by 13 billion euros and achieved 16 billion euros of net inflows in investment products, including converting 5 billion of deposits.

These conversions are part of our strategy to grow fee and commission revenues.

In asset management Dws delivered 30 billion of net inflows in the full year.

Of which 9 billion euros, where an ESG assets.

Assets under management Rose to 793 billion at year end.

25 billion higher.

And then pre crisis levels at the end of 2019.

In short.

The dynamics in all four core businesses show that our refocused business model is paying off.

This execution is increasingly visible in our revenue performance as you can see on slide five.

When we launched our transformation in July 2019.

We set out to stabilize.

Then grow revenues.

And Thats, what we did.

We've increased group revenues by over 850 million euros in 2020.

As growth in our core businesses more than offset the exit from equities trading.

Core bank revenues have increased by 6% to $24 2 billion.

This puts us close to the plan of $24 4 billion euros that we laid out at the investor deep dive as part of our path to the 8% return on tangible equity target in 2022.

As discussed earlier this.

This growth is principally come from our refocused investment bank.

Which was able to capitalize on favorable market conditions.

And to deliver on the strategic transformation of our FIC business.

The corporate bank and private bank successfully offset headwinds primarily lower interest rates.

To keep revenues essentially stable year on year, and we would expect underlying growth to feed through the top line.

Net interest rate headwinds softened consistent with the current forward curve.

Asset management was slightly lower.

Due to the non recurrence of certain performance fees in 2020.

In summary, all our businesses executed on our strategic objectives.

Slide six shows the progress we have made in reducing adjusted costs.

Excluding transformation charges and bank levies.

We have reduced suggested costs year on year for 12 consecutive quarters and.

In 2020, we reduced adjusted costs, excluding transformation charges.

And expenses eligible for reimbursement rely related to prime finance by 9%.

This puts us on a good path.

Our 2022 target of $16 7 billion euros, including targeted investments this year.

Disciplined execution is becoming increasingly visible in our results and you can see on slide seven.

As I said earlier, the next phase of our transformation is to improve sustainable profitability.

That means generating positive operating leverage by growing revenues and at the same time reducing cost.

We have generated positive double digit operating leverage in 2020 at both group and call bank levels.

The operating leverage has driven significant improvements in core bank profitability.

Adjusted for transformation charges specific revenue items goodwill impairments as well as restructuring and severance.

Pre tax net profit.

In the core bank is up 52% in 2020 to $4 2 billion.

The improved core bank performance.

Increasingly offset the negative impact of the wind down of the capital release unit.

And over time.

More on the call bank profitability should flow to the group's bottom line as we continue to make progress on our transformation agenda and provisions for credit losses normalize.

The strength of our balance sheet at year end, which we discussed on slide eight also positions us well to further grow our businesses.

Our common equity tier one ratio was 13, 6% flat year on year, and approximately 315 basis points above regulatory requirements.

Our liquidity reserves were 243 billion.

Our liquidity coverage ratio.

Also had 145%.

Which is equivalent to a buffer of 66 billion euros above requirements.

As a result.

We can deploy our capital and liquidity strength support clients.

And what is still an uncertain environment.

Finally, as we explained both in December and at our risk deep dive in June last year.

We have benefited.

From a high quality loan book and a disciplined risk framework.

That enabled us to deliver within guidance on provisions for credit losses.

Our transformation is fully on track on every key dimension and our performance in 2020 gives us good visibility towards our 2022 targets.

Before I hand over to James let.

Let me sum up where we stand after six quarters and our outlook for 2021.

Yeah.

Our refocused strategy is clearly paying off.

Clients are re engaging and our employees are motivated.

Trust by our clients is at the highest level since 2012.

This allows us to navigate well through the operating environment, which we expect to remain challenging and volatile.

This also offers opportunities, which we will continue to make use of.

At the Investor deep dive.

We highlighted that our business set up positions us well to benefit from the fundamental trends, we expect to see in the coming years.

These trends include the increase of global financing demand.

Wealth preservation increased localization and sustainable financing.

And they are already visible in January.

Momentum is strong and points to sustainability of revenues.

Our focus on cost reduction remains a top priority.

Delivery against our cost targets alone.

We'll put us close to our 2022 return on tangible equity target.

As our restructuring and transformation costs fall away.

For 2021, the cost reduction.

Combined with our planned investments are consistent with our 2022 group adjusted cost target of $16 7 billion.

Our plans assume provisions for credit losses declined this year compared to 2020.

But will remain elevated compared to the pre COVID-19 period.

We will continue to manage our balance sheet conservatively.

Our strong capital and liquidity position us well to meet any challenges.

As a result, we.

We feel well placed to achieve our 8% return on tangible equity target in 2022 and capital distribution to shareholders.

With that let me hand over to James.

Thank you Christian let me start with a summary of our financial performance compared to the prior year on slide 10.

As Christian said, we are focused on delivering sustainable profitability by growing revenues and reducing costs.

Operating leverage was strong in the fourth quarter at 23% on a reported basis.

Revenues increased by 2% on noninterest expenses declined by 21%, principally reflecting lower transformation and restructuring and severance charges.

Results in the fourth quarter included a negative impact of 120 million euros related to the sale of Postbank systems.

Had a negative 104 million euro impact on revenues and 16 million euros of restructuring and severance charges.

Consistent with our comments at the Investor Deep dive, we believe that this transaction helps to accelerate the decommissioning of our legacy infrastructure and reduces the risk of stranded costs in the long term.

Adjusting for specific revenue and cost items, which are detailed on slide 32 of the appendix operating leverage was 12%.

On this basis, we grew revenues by 4% and reduce costs by 8%.

Provisions for credit losses were 251 million euros in the quarter equivalent to 23 basis points of loans.

We generated a pretax profit of 175 million euros or $6 $21 million, excluding transformation charges restructuring and severance and specific revenue items.

The tax benefit of 14 million euros in the quarter was mainly driven by the release of non tax deductible litigation provisions and share based payment related tax effects due to positive share price movements.

Our adjusted core Bank return on tangible equity for the fourth quarter was five 8% and five 7% for the full year.

Tangible book value per share was 23 euros and 19.

A 1% decrease.

This reduction is driven by negative OCI, mainly due to FX translation effects, partially offset by a lower share count.

For the full year, we generated a pretax profit of 1 billion euros or $2 2 billion, excluding transformation charges restructuring and severance and specific revenue items.

Provision for credit losses was $1 8 billion euros for the full year in line with our expectations at 41 basis points of average loans.

The full year effective tax rate was 39%.

Now, let's turn to page 11 to look at the specific drivers of adjusted cost reductions.

In the fourth quarter, we reduced adjusted costs, excluding transformation charges by 413 million euros or 8% versus the prior year.

Adjusted costs include $81 million of expenses eligible for reimbursement related to Prime finance and 207 million euros of transformation charges, which are excluded from our targets.

On this basis adjusted costs were $4 6 billion euros in the fourth quarter and $19 5 billion euros in the full year.

We continued to make progress in reducing costs across all major categories.

Continuing to invest in our I T and controls.

Now, let's move to slide 12 to discuss our provisions for credit losses.

Consistent with our prior guidance provisions for credit losses remained at more normalized levels in the fourth quarter.

Provisions were 251 million euros in the quarter equivalent to 23 basis points of loans on an annualized basis.

The decline for the fourth quarter is driven by releases in COVID-19 related stage, one and two provisions reflecting positive changes in consensus macroeconomic outlook since the third quarter.

Stage three provisions declined by 14% in the quarter, but remain more elevated in the private bank and the investment bank.

We retained the management overlay, we established in the third quarter given continued uncertainties in the macroeconomic environment.

Including the provisions taken in the fourth quarter. We ended the period with $4 8 billion euros of allowance for loan losses equivalent to 111 basis points of loans.

Turning to capital on Slide 13.

As Christian highlighted our CET one ratio was 13, 6% at the end of 2020 above the guidance of 13% that we provided at the investor deep dive.

Approximately 20 basis points came from lower risk weighted assets, notably faster than anticipated reductions in the capital release unit and slightly slower the appointment for deployment in the core bank.

A further 20 basis points of the outperformance came from a series of numerator benefits, including higher than expected net income and higher than expected benefits from regulatory changes relating to software intangibles and other items.

The balance of 20 basis points came from delays in regulatory inflation, principally the targeted to review of internal models, which we expected to conclude in the fourth quarter.

4 billion euros of RW, a inflation related to trim is now expected to occur in the first quarter of 2021, which increases our full year regulatory inflation assumption to approximately 20 billion euros.

Nearly all of this are to be weighted inflation is expected to occur in the first half of 2021 equivalent to approximately 80 basis points of CET one capital.

This takes our pro forma CET, one ratio to approximately 12, 8%.

With this inflation behind us in the first half of the year, we expect to see a much more moderate impact from regulatory items in the second half of 2021 and for the full year 2022.

Our leverage ratio improved by 24 basis points to four 7%, reflecting the positive regulatory driven and other capital effects I just described.

Our pro forma leverage ratio, excluding including ECB balances was four 3%.

This puts us well on track to meet our leverage ratio target of four 5% by year end 2022.

Taking into account a further 10 basis points from the transfer of our Prime finance business, which we will finalize later this year.

With that let's now turn to performance in our businesses starting with the corporate bank on slide 15.

Profit before tax was 561 million euros for the full year.

Excluding specific items transformation charges and restructuring and severance the adjusted profit before tax was 714 million euros with stable quarterly contributions, including 200 211 million euros in Q4.

This equates to a five 8% adjusted post tax return on tangible equity for the quarter.

Excluding specific items and the impact of FX translation full year revenues of $5 2 billion euros, we're flat on 2019.

The corporate bank offset interest rate headwinds largely through charging agreements.

At year end charging agreements were in place on accounts with approximately 78 billion euros of deposits generating revenues of more than $200 million euros on an annualized basis.

Noninterest expenses declined by 13% for the full year and 24% in the quarter, principally reflecting lower transformation charges and restructuring expenses.

Adjusted costs, excluding transformation charges declined by 2% for the full year and 6% in the quarter, reflecting cost initiatives head count reductions and FX translation benefits.

This produced operating leverage of 1% for 2020.

Loans were flat year on year on an FX adjusted basis, while deposits were slightly lower reflecting management actions to optimize the deposit base.

Provisions for credit losses were 73 million euros for the quarter and $366 million for the full year driven by a small number of idiosyncratic events.

We're pleased with the relative performance in the corporate bank in 2020, and the trajectory of our 2022 objectives. Although performance in 2021, we'll be closer to 2020.

Turning to revenues in the fourth quarter on slide 16.

Global transaction banking revenues declined by 6% or 3% on an FX adjusted basis cash.

Cash management revenues were essentially flat, excluding the impact of FX translation as interest rate headwinds offset deposit repricing and balance sheet management initiatives.

We saw positive underlying momentum in this business with corporate cash management volumes, improving both sequentially and year on year.

Trade finance and lending revenues were also essentially flat, excluding FX translation with solid business performance in lending, particularly in Germany and day ma'am.

Security services and Trust and agency services revenues declined as a result of interest rate reductions in key markets.

Commercial banking revenues, excluding the impact of the sale of Postbank systems increased by 6% supported by the further rollout of deposit repricing and net movements and episodic items.

Turning to the investment bank on slide 17.

Full year revenues, excluding specific items increased by 32% driven by strong market activity and the benefits of our strategic transformation as well as strong client engagement.

Noninterest expenses declined by 15% in the full year and 19% in the fourth quarter, reflecting lower adjusted costs reduced restructuring and severance and lower litigation.

Adjusted costs, excluding transformation charges declined by 9% in the full year and in the fourth quarter, reflecting lower allocations disciplined expense management and FX translation benefits.

As a result, the investment bank cost income ratio declined to 58% in 2020 with operating leverage of 41%.

The investment bank generated a pretax profit of $3 2 billion in the year and a post tax return on tangible equity of 10%.

Loan balances declined reflecting disciplined risk management across the portfolio.

Leverage exposure increased compared to the prior year, principally driven by activity in fixed income sales and trading to support clients.

Risk weighted assets were higher year on year, principally due to regulatory inflation.

Provisions for credit losses increased in 2020 to 688 million euros or 89 basis points of average loans, primarily reflecting higher COVID-19 related impairments.

Turning to fourth quarter revenue performance, excluding specific items compared to the prior year period, and the investment bank on slide 18.

Revenues, excluding specific items in fixed income sales and trading increased by 21%.

The investment bank continued to benefit from client Reengagement following our strategic repositioning.

Credit trading revenues were significantly higher driven by strong client engagement and constructive market conditions.

Our FX business performed well, reflecting higher volatility and strengthen on derivatives businesses.

Rates revenues, excluding specific items were flat year on year as the strong performance in Europe was offset by a general reduction of client activity in the U S.

Emerging market revenues were higher across all three regions driven by continued improvements in the macro flow business.

Financing revenues were essentially flat, excluding the impact of FX translation.

Revenues in origination and advisory increased by 52% the fourth consecutive quarter, where our revenue growth has outperformed the fee pool.

Importantly, we regained the number one rank in our home market.

Growth in debt origination reflected increased activity and market share gains in investment grade debt.

Equity origination revenues were significantly higher driven by a strong performance in special purpose acquisition company activity.

Finally advisory revenues revenues were also significantly higher driven by increased activity mainly in EMEA.

Turning to the private bank on slide 19, we.

We made substantial progress in 2020 on our objectives with revenues, excluding specific items broadly stable and a continued reduction in costs.

The private bank generated a pretax loss of 124 million euros in the full year absorbing approximately 650 million euros of transformation related effects.

Adjusted pre tax profit was 493 million euros stable compared to 2019, despite a more challenging market environment.

Full year revenues, excluding specific items were flat as we grew volumes and fee income, including benefits from repricing to offset ongoing deposit margin compression and negative impacts from COVID-19.

Noninterest expenses declined by 7% driven by operational improvements as well as higher transformation related effects and litigation charges that largely offset the goodwill impairment in the prior year.

Adjusted costs, excluding transformation charges declined 6% year on year, primarily reflecting ongoing synergies from the German integration and other structural and organizational measures, including workforce reductions to below 30000 debt year end.

Consistent with our previous planning the cost synergies from the German merger reached 400 million euros for the year.

We also agreed balances of interest with our employee Representatives, which will allow further rationalization of our head office and operations in Germany.

Flat revenues and cost reductions led to operating leverage of 6% in 2020.

We achieved the fourth core consecutive quarter of net inflows with 16 billion euros and investment products and we originated net new client loans of 13 billion euros.

Provisions for credit losses were 711 million euros, or 31 basis points of loans.

The increase year on year, mainly reflects impacts from the pandemic.

The prior year included higher beneficial impacts from portfolio sales and model Recalibration.

For the fourth quarter revenues, excluding specific items were broadly flat, while adjusted costs, excluding transformation charges declined by 10%.

We now turn to the revenue details on slide 20.

Revenues in the private bank in Germany increased by 4% in the quarter, including a negative impact of 88 million euros related to the sale of Postbank systems I highlighted earlier.

Growth in lending revenues on higher commission and fee income from investment and insurance products offset negative impacts from deposit margin compression.

Business growth continued with net new client loans of 3 billion euros, and 1 billion euros net inflows in investment products in the quarter.

In the international private bank net revenues increased by 2% on a reported basis and declined by 4% excluding revenues related to sell Oppenheim workout activities.

Private banking and wealth management revenues, excluding specific items declined by 2% on an FX adjusted basis as the impact of COVID-19, and lower interest rates was partly offset by business growth and relationship manager hiring in prior periods.

In personal banking revenues declined by 3%, mainly reflecting headwinds from continued deposit margin compression and the impact of the pandemic on business activity.

The international private bank attracted net flows of 2 billion euros on investment products and granted 1 billion euros of net new client loans in the quarter.

As you will have seen in their results dws performed well and had a successful year.

To remind you the asset management segment on page 21 includes certain items that are not part of the dws stand alone financials.

Adjusted profit before tax of 586 million euros in the full year increased by 9% as management actions to reduce costs more than offset the reduction in revenues.

Revenues declined by 4% versus the prior year predominantly due to the absence of performance fees from multi asset and alternatives earned in 2019.

Management fees were stable at $2 1 billion euros as improvements in flows offset the continued industry wide margin impression compression.

Noninterest expenses declined by 185 million euros, or 11% with adjusted costs, excluding transformation charges down 10%.

The reduction in costs was driven by lower variable compensation and ongoing efficiency initiatives combined with a reduction in certain operating costs due to the reduced travel and marketing activity as a result of the pandemic.

Asset management posted operating leverage in 2020 or 5%.

Assets under management of 793 billion euros have grown by 25 billion euros in the year, driven by net inflows and positive market performance, which more than offset the negative FX impact.

Net inflows were 30 billion euros for 2020, reaching record highs for dws, including 9 billion euros into ESG products.

Net inflows in passive cash alternatives and active equity were partly offset by outflows in other active businesses.

With that let me turn to corporate and other on slide 22.

Corporate and other reported a pretax loss of 930 million euros in 2020 versus a pre tax loss of 246 million euros in the prior year.

The higher loss was driven by a negative contribution from valuation and timing differences compared to a positive result in the prior year from Mark to market moves associated with the bank cross currency funding arrangements.

Corporate and other reported a pretax loss of 333 million euros in the quarter.

The performance reflected higher than planned infrastructure costs, principally technology, which have not been charged to the divisions.

The results were also impacted by higher funding and liquidity charges, which are also not allocated to the business divisions as we've discussed in prior calls.

Consistent with our prior guidance, we expect these funding costs held in corporate and other to remain at around 250 million euros in 2021.

Shareholder expenses as defined on the OECD transfer pricing guidelines were around 100 million euros in the fourth quarter and approximately $400 million in the full year and are likely to remain at similar levels in future periods.

We can now turn to the capital release unit on Slide 23.

The capital release unit finished the year by delivering another quarter of sequential reductions in risk weighted assets leverage exposure and costs outperforming our 2020 targets.

Risk weighted assets decreased to 34 billion euros 4 billion below our year end target.

We reduced credit and market risk <unk> by 48% to 10 billion euros at year end with a balance in operational risk.

The division decreased leverage exposure by 55 billion euros or 43% in 2020 to 72 billion euros 8 billion below the year end guidance.

Loss before tax of $2 2 billion euros improve by 1 billion compared to the prior year as reductions in costs more than offset the loss of revenues from the exited <unk> equities trading.

Noninterest expenses in 2020 declined by $1 5 billion euros, or 43%, reflecting lower adjusted costs as well as lower restructuring and severance and litigation charges.

Adjusted costs, excluding transformation charges declined by 861 million euros, or 33%, reflecting lower service cost allocations lower compensation and lower non compensation costs.

Negative revenues on the capital release unit, where 225 million euros in 2020.

This was significantly better than the guidance, we gave at our 2019 investor deep dive principally reflected reflecting outperformance against our original derisking expectations.

For 2020, we will continue to execute towards the risk weighted asset and leverage exposure plans that we laid out in December.

We expect risk weighted assets in 2021 to decrease year on year and leverage exposure to be significantly lower.

However, compared to the fourth quarter of 2020, we expect leverage exposure in the capital release unit to increase in the first half from 2021.

This increase reflects an approximate 10 billion euro allocation of central liquidity reserve as we outlined at the Investor Deep dive plus a further increase from the implementation of the standardized approach for counterparty credit risk.

These increases do not impact our 2022 leverage target.

The transition of our prime finance and electronic equities clients and the associated leverage exposure and risk weighted assets is on track to complete by the end of 2021.

Christian talked about the outlook for 2021, which when combined with the performance in 2020.

Lets us on a solid path to our 2022 targets.

We remain committed to our 8% group return on tangible equity target and our cost reduction trajectory leaves us well positioned to achieve this.

Consistent with the targeted investments the Christian discussed we would not expect cost reductions to follow the same linear path in 2021.

These investments combined with our disciplined focus on costs put us on a path to reach the 70% cost to income ratio and $16 7 billion euros of adjusted costs in 2022.

We remain prudent in how we manage our capital and our CET one target remains greater than 12, 5%.

And as with 2020, we will aim for our leverage ratio to remain at approximately four 5%.

Before I conclude with another we have another important disclosure today.

Our head of Investor Relations, James Rivett will be moving to another leadership role within Finance Hill.

He'll be succeeded as head of IR by you on a patronage a senior member of our debt capital markets team in London.

You Wanna has been at Deutsche Bank for 11 years and brings a wealth of experience to her new role.

She will continue to be based in London and will take up her new responsibilities with immediate effect.

I hope, you'll all take the opportunity to get to know you on a in the very near future.

James joined the IR team in 2014, and he became head of IR in 2018.

In that role he has steered us through the launch of our transformation strategy, our first ever virtual AGM and two investor deep dives not to mention on our regular reporting investor conferences, and many investor meetings.

That's an impressive set of achievements on all the more so in the past year against the backdrop of a global pandemic.

James has seen the company through multiple challenges over the last few years and that's no easy task for nigh on for IR Officer.

And speaking personally I've dependent on his advice more times than I care to admit.

So Christian I wanted to say a huge thank you to James for all his support and guidance.

James This force many good relationships on both buy side and sales side and with many fixed income investors.

That includes a lot of you on the call now.

I know you'll want to join with us and wishing James every success in his new role with that let me hand back to James and we look forward to your questions.

Operator, let's open the line for questions.

Ladies and gentlemen at this time, we will begin the question and answer session.

Who wishes to ask a question.

Star followed by one on their Touchtone telephone Jewish.

If you wish to remove yourself from the question queue. You May press star followed by two.

Using speaker equipment today, please lift the handset before making your selection.

One who has a question you May press star followed by one at this time.

On a moment for the first question. Please.

First question is from the line of Andrew Lim from Society Generale. Please go ahead.

Yeah.

Hi, good afternoon, thanks for taking my questions.

What wasn't in investment banking and the.

The ECM I was wondering if you could talk a bit more about our snacks business.

But you see that.

As our being in a net.

Structural growth trend or whether we've just seen them, maybe one or two quarters of strength.

And then also with that business is that purely a fee business on.

Or does Deutsche Bank, Investor loan balance sheet and snacks.

And then secondly.

It might have missed this earlier about zone.

Why the CET one capital increased as much as it did I think it was a $1 7 billion increase which called me fully accounts full by by net earnings.

Explain the booth on Sir Thank you.

Well, Thanks, Andrew let me start with the <unk> business are clearly a business, which in 2020.

Grew and.

<unk> has shown a strong strong growth also with US we have an excellent expertise in that business.

And therefore, we took opportunity the opportunity of the margin.

To help our clients to advice our clients I think in the spec business. It's all about.

Actually working with the right sponsors in this regard we can say for us that we work with high quality sponsors SSA.

As I said, a lot of expertise and yes to your question.

In particular, obviously a fee business, but what we can see it's not only the initial spec business Theres a lot of add on business with the <unk> was also some financing behind that and therefore, it turns actually into a business, where there is a lot of incremental and cross selling.

We are monitoring debt business quite closely.

Clearly the market has grown.

<unk> also always means that you need to stay close to it and that's exactly what we're doing not only from a business point of view, but also from a risk management point of view.

And that's that's what I would add to this.

And Andrew it's James on the CET, one capital the driver was overwhelmingly.

On the <unk>.

Software intangibles rule change that was implemented in the quarter.

So that was in total about $1 6 billion of CET. One capital there was an offset from the N. P. E Backstop, which is also implemented in the fourth quarter. So there is a netting effect but.

But by far the biggest single driver was with software intangibles represented about 43 basis points on the ratio.

Sounds great. Thank you very much.

Yeah.

Okay.

Next question is from the line of Jon Peace from Credit Suisse. Please go ahead.

Yes. Thank you.

First question. Please is on costs, sorry, if I missed it but did you give a figure for adjusted cost in 2021 always the indication adjusted it wouldn't necessarily be linear between 2020 in 2022.

And then question. Please on capital return I saw a headline on Bloom that you intended to pay dividends. This year does that mean that you would be accruing something in capital to pay out in 2022.

And then I'll feel 5 billion of capital return for 2022.

What's your thinking there at the moment between dividends and buybacks and how quickly that 5 billion might actually come back to shareholders. Thank you.

John Thanks for the questions starting with adjusted costs look where we're not going to tie ourselves to the mask on a on a target for 'twenty one.

But we did provide in the Investor day, a what I'll call. The planned number of $18 5 billion same.

The same definition as as this year.

And of course, we're going to work to to meet or improve on that number.

And as you as you say, we've been trying to indicate not linear meaning of the $2 8 billion distance that we need to travel between 2020 in 2022 of course less of that is achieved you know call.

Call It $1 billion in 'twenty one than than is in 'twenty. Two one other thing I. Just note on that on that point is that does assume or build in the assumption on the single resolution fund assessment this year, which we called out as a as an assumption.

We're advocacy was still ongoing in December and remains true today.

On the capital return, yes, we would need to accrue for that for that expected dividend over the course of 'twenty one.

At this point, it's too early to say exactly the path or the ramp up of our capital distributions of course, we want to implement a dividend and then where there is some flexibility.

We would we would certainly look at stock buybacks, particularly given where our share is today the.

The $5 billion is somewhat open ended but as we said in December you know.

We see that as achievable within the five year planning window that we have.

And we'd certainly hope and expect that it will ramp up.

Starting in respect of 'twenty one.

Yeah.

Great. Thank you.

The next question is from the line of Shar Nay on line from Goldman Sachs. Please go ahead.

So good afternoon from.

From my side as well.

And thank you James Rivett for all your help.

You've given us over the years as well.

I have a I think a number of questions, but a limited on to two.

So the first question I'd like to ask is.

When all is said and done.

In about the 2020.

The bank made.

A return of 0.2%.

And I was just wondering so.

When one thinks about the opportunity set which was clearly challenging on credit risk side, but the very favorable on.

On the revenue side.

So what levers are available to Deutsche Bank in fixed income revenue swing back to a level to where they were for example in 2019.

Because I guess it potentially.

It's all good to look at the structural improvements that they're undeniable that you've achieved on costs.

Revenues, I guess I'm not that much within your control.

And then the second question I want to ask is on this on these 5 billion buyback that you've mentioned.

<unk> five.

Billing is roughly 10% of.

Deutsche Bank total shareholder equity tangible equity per day.

In Deutsche Bank Kids, the 8% return on tangible target.

<unk> built on return of capital to shareholders, I guess with equal around 60.

60% plus of those profits over the course of two years.

And I was just wondering.

To what extent do you think various stakeholders like the rating agencies.

How they would react to a potential reduction of the capital base of of that magnitude.

And perhaps just finally this is really short.

James You mentioned that the tax was positive because there was a release of a non tax deductible litigation reserve can you just please let us know.

On what that relates to wet weather was a positive resolution. Thank you very much.

Yeah.

Yeah, Let me start with you.

Your first question first of all obviously.

The way to our 8%, which youre indirectly Oscars is a function of further stabilizing and growing our revenues. It is clearly our delivery, which I think we have shown quite well over the last 12 consecutive quarters. The debt, we can manage and reduce cost and we will do this going forward and.

And then I think and.

Everybody will also buy in debt, we will see a normalization of credit losses.

And I think we have shown in 2020 and not only that we are in control of that but that we are also spot on with our with our forecasting now to your key question revenues.

I'm very confident that we can deliver the growth rates, which we showed you and demonstrate to you and the so-called Stabler business corporate bank and private bank as well as Dws. If you think about dws with I think and expected revenue in 2022 of $2 4 billion. If I look at the run rate right now then.

We are very close if not already there shows me that there is underlying business. The momentum is clearly there we have hit all internal targets in our plan in 2020 for those business, which had the interest rate headwinds and we have the underlying measures on action taken in the private bank as well as in.

The corporate bank to further boost our revenues there in the corporate bank in particular on the payment area.

The more you know that we are.

Continuing to charge the deposit rates to our corporates.

At the end of the third quarter in the fourth quarter, we added another $13 billion of charging which obviously helps US and then you may also have seen our initiatives for the German business banking, where in my view, we under service that in the past and we clearly came out with another initiatives. So all of the revenue initiatives and the stable business and I could go on for.

The private bank.

Our ongoing now to your question on the investment Bank.

First of all.

I hope that we have shown extensive disclosure last month in December.

On our FIC business and how we see that.

I think page eight of Robyn IX presentation is telling the story and that really gives us the confidence that a good part of the outperformance, which we have seen in 2020 is sustainable I mean, we are clearly at the end of the day benefit from the execution work, we are doing in the rates business ramp talked to.

Debt, we are the house, which is I think benefiting very much from the recovery in credit.

Sustainability and funding cost is clearly there and also that we said so simply saying we fault block the default back to 2019 levels is is in my view is something which we don't see and where we see simply from the evidence from the Reengagement of the clients and also rating upgrades of outlook upgrade.

Which we have seen are helping us obviously, we don't believe that this is happening and therefore, our internal plan that a good part of the outperformance.

Is sustainable.

We firmly believe in and to be honest you on a this exactly the momentum we see also now in the new year I mean, if you if I look at the last five weeks exactly that what we described to you four weeks ago six weeks ago is happening and I can see the momentum in the business so falling back to 2019 levels.

Is in my view is something which is.

More than a downside and hence I can only tell you from the initiatives, we took that our base case in this regard.

Is it somewhat.

Yeah on the dividend payout. It's an interesting question you know I am reminded of the U S. Banks you know in the middle early part middle of the last decade, where there was a similar debate.

Ken payout ratios rise.

You know a 30 $60 50 or 100% over time and it is a dynamic of is the industry generating profit that goes beyond its asset growth in our modeling.

We need to build in.

In anticipation of the Basel three final framework effects.

And so that's really the main constraint.

In terms of of our of our payout and that's built into the model.

But we think the assumptions are reasonable of course, theyre going to be subject to regulatory approval and all of those discussions that go with it but we think they're reasonable expectations.

With me on the tax item it was a $14 million benefit on the tax line.

Driven by really three things litigation as you mentioned share based payments and also a true up true up on the tax rate during the year I don't want to go into the specifics of the litigation item, but what I'd give you kind of for color is very clear event.

The drove that release and it's a partial release associated with the item and it was in Europe. If that's helpful to your line of thinking.

Okay. Thank you very much.

Next question is from the line of Daniela <unk> from UBS. Please go ahead.

Yes, good afternoon, and thank you.

I actually on day, two smaller clarification questions James.

James when you talked to that's slide.

15, the corporate Bank, you said that the performance this year from 'twenty to 'twenty, one probably will be more like 2020.

Just to be clear is that referring to the top line or pretax.

That's one and then on costs.

I mean, obviously you expect costs to go towards the 18th size of around 18, five T shirt.

First down next year is there anything we should be aware of in terms of quarterly pattern and also in the past I think you made reference to how much of that expected cost cutting has already.

Let's call it in the bag, so kind of decided and it's will it will almost automatically well it never happens automatically but it is kind of decided on and it should come through with a very high likelihood.

Yes, that's the two questions. Thanks.

Yeah Daniela. Thank you for the questions look we it was really mostly the top line I was referring to and it's and it's the dynamic that we described also in December of relatively good underlying growth both in the corporate bank and the private bank from the drivers that you would expect transaction.

<unk> flows and the private bank some degree of loan growth.

Which.

In the recent past is being offset by the impact of of the interest rate curve or deposit margin compression, we see that as we've said abating in 'twenty, one and also more dramatically declining in 'twenty, two and so that's sort of what you'd think of as a bit of a hockey stick that Stephane described is really a function of.

Relatively consistent underlying growth more of which is showing through in our reported income or revenues over time on the cost line and equally I think we would expect some improvement this year and then a more dramatic improvement.

In 'twenty, two so I would expect to see the operating leverage.

Go from 1% to something a little bit better this year, and then quite a lot better next year and the corporate bank.

In terms of costs on a run rate youll see in the in the quarterly chart that we show we have been working hard to generate about 100 million sequential benefit.

Each quarter.

Over the last several years, we think that slows down a little bit I'm not sure I would commit to a specific set of quarterly pattern. Our goal remains to keep it at least flat if not.

Somewhat down.

As the year goes by and as you point out at a run rate of $4 6 billion you annualize that and you quickly arrive at a fair amount of the work for the overall reduction were planning for this year is already done.

But as we've said we've got a lot of work to do we're focused on the technology path.

And on building and a sense of the momentum on the actions. This.

This year to ensure that we had hit our goals for next year.

Thank you very true.

Thanks, Dan next question next question is from the line of Adam <unk> from Mediobanca. Please go ahead.

Yes, thanks for the questions I had one on NII.

Clarification on the on capital on accruals on NOI clearly, there's been a step down Q on Q in both the private bank.

And the corporate bank.

I was wondering if there's any sort of episodic items why balance in that whether you can pull those out for both businesses, but also kind of the outlook from here clearly youll be pricing deposits faster than soft but.

On loan growth hasn't been enough to defend the core NII right. So whether the kind of the revenue mix going forward is going to be more skewed towards fees as we've seen in this quarter.

And then on the capital side I just want to sit.

Also on the <unk> is that now fully accrued for the year in tactical in the in the year and print or is that a catch up accrual to come through on that get paid.

May or whenever it is this year. Thank you.

Thanks, Adam.

So on NII, it's an interesting line, there's more noise in the NII line than one would normally expect.

Youre right.

If I look at it on an annualized basis, we've looked at it essentially instead of adjusted and reported and interestingly. The the compression you had in both the private bank and corporate Bank is about the same whether it's adjusted or or as reported.

Without having to walk you through all of the ins and outs.

On the direction or the quantum of travel if you like is is more or less as you see in.

In the financials.

Looking forward there is still some compression ahead, but I would but I think it slows in part because take the example of the corporate bank.

We sort of lap the movement in U S dollar rates after the first quarter and as I say, we're slowing somewhat in the in the private bank and of course NIM stabilization as part of the goal of our of our hedging strategies in.

In 2021, there will be again, some noise I would call out in particular, the timing of the <unk> revenue recognition.

As being one item that will introduce a little bit of volatility into the line.

On capital fully accrued is the short answer the ATM on coupons.

Alright on the TLC all right can you give any guidance.

On the private bank.

Yeah.

Off the top of my head no.

Both participate.

I think it's a little bit weighted to private bank given the low cost of the of the euro deposits.

To give you a little sense of timing we recorded.

We sort of had a catch up in Q4 to record at a 50 basis point rate.

We've been working with with our auditors on the revenue recognition, which requires virtual certainty that youll achieve the loan balances that.

The scheme that the incentive scheme provides.

We think that as we said last year that will have a catch up in Q1.

This year.

Is $125 million that we would see in Q1.

And then in our in our expectations. The next point, where we have a catch up would be Q3 again as we as we believe we'll get to appoint a virtual certainty. So that's where the lumpiness is.

In the quarters and back to the recognition I think more or less 50 50.

Is what you'd expect to see in the businesses in terms of how they participate.

But let's be clear, there's no LIBOR interest rate in the Q4 run rate.

There was a catch up not a not a bonus we we had not accrued at the 50 basis points in in Q3. So there was a there was a catch up in Q4.

To get to the 50 basis points, but not the 100 basis point inducement.

The Q on Q is less than the one <unk> catch up you're talking about.

Thank you.

The Q on Q would be a little less than that then that would be sort of more of the 85 range.

Of an increment in recognition and then a step down.

Thank you.

<unk> stepped down in Q2 back up in Q3, alright, so complicated.

And a lot more noise.

And NII. Thank you.

Next question is from the line of Stuart Graham from Autonomous Research. Please go ahead.

Thanks for taking my questions on purpose.

Thank you for me because range of it.

He's done a fantastic over the last two years.

On a few questions. Please.

Christian you mentioned the client trust is at its highest level since 2012, how do you measure that please.

And then my second question is on the EBIT stress test.

You can see the macros on pizza toppings.

Germany.

We felt extremely tough.

On the commercial real estate prices.

So on your business mix from the stuff at close to something doesn't know if he was on right.

So my question, therefore is whether the stress test and risks to fly and then capital return on vision and then the final question as I show on within your guidance is slightly low provisions and full year 2000.

Are you assuming any further releases in stage one stage two provisions. Please thank you.

Okay.

Yes sure to your first question very quickly. This is a monthly survey, we are doing with our private clients and corporate clients in Germany.

And there we can see that we have now achieved a trust level in both segments of corporate clients as well as the retail or private clients. As we had last seen in 2012 and debt was what I was referring to.

Yes.

And Stuart.

On your two other questions. It's early days on the EBITDA stress tests, we've been looking at last week at the assumptions that were published on the 29th we agree with you. They are it is a severely adverse case stepping off as it does from a from already a.

As a recessionary environment and as you say the commercial real estate in a couple of other portfolio assumptions.

Are quite severe.

That said very early days and being able to get a sense of how we come out of that stress test. There are as you know a lot of of rules and.

And methodologies the depart from our typical stress testing. So we do essentially have to go through the process.

I think its even earlier to speculate how the ECB will incorporate.

The the stress test results in there and their assessments of the banks given of course, the severity of the scenario and that we were obviously in an unusual environment as we'd all recognize.

In terms of stages, one and two.

At this point very early in the year, but our planning would assume.

More or less flat in stages, one to two maybe either a slight build or a slight release in.

In the year I will say that we don't yet know if and when we would reverse the overlay that we've talked about so there's there's at least some uncertainty on that path based on the overlay we feel good that it's conservative to carry that forward, but.

But at a point in time, when we see.

More certainty and clarity in the macroeconomic outlook would have to revisit that decision and that is in essentially stages, one and two provisions.

Thanks for taking my questions.

Next question is from the line of Pearce Brown from HSBC. Please go ahead.

Yes, good afternoon I've got two questions. Please first of all on.

Revenues I wonder whether I can just TJ.

So from revenue commentary out of you for 'twenty one.

I mean, we've talked about the cost.

Trajectory nothing linear to 'twenty to 'twenty, two I mean should we be thinking about the revenue side being the same as that.

Lower year over year revenues 'twenty, one over 'twenty before rebuild after the 24 target for.

For 2022.

That's the first question on and then secondly.

On the investment Bank I'm just thinking.

In terms of the cost income ratio of 58%.

For full year 'twenty.

What do you think we should be thinking all thats a sustainable ratio. Thanks.

Well on the revenue outlook I think.

Again with also with respect to our Investor deep dive in December we show a stable development.

In the corporate bank private bank and asset management.

We do think that the initiatives we are working on.

Will show slight increases.

At least our being able to fully offset the interest rate headwind we have.

And on the investment Bank I think we said very clearly that obviously.

'twenty 'twenty, one will not see an outperformance overall on revenues, which we have seen in 2020, but.

That are in the trading business, but also in the origination advisory we clearly see that we gained market share that we made momentum and debt all the structural changes we did to the businesses sub business like rates credit trading.

The emerging market business they.

Starting to pay off they started to pay off in 2020 and with the Reengagement with the clients. We are very confident that a very good part of that outperformance is sustainable for 2021.

And then obviously also explains an hour our run rate for the year and then for 2022 again January in this regard clearly supports this and in this regard we are confident to achieve our plan for 2021.

It appears on the cost income ratio, if I think back to the to the model that we described in December.

The implication of the numbers that Rob and Mark went through would give you a cost income ratio between say, 55% to 60%.

We think is realistic again, given the initiatives that we've been we've been discussing around the technology involved investments reengineering and simplification of our processes.

And and also efficiencies in the infrastructure areas that support the investment bank. So that's the that's the ballpark that we're working to and again.

Reflected in all of our initiatives and plans.

That we're executing on as we speak.

Do you mind, if I just ask a follow up on the on the IV I'm just thinking.

Just as on global Resourcing, I mean, youre, 30% up year on year.

On our revenues in the head count is only up 3%.

On some of the big wins on the fourth quarter coming in areas, where we might not have expected them.

Namely equity origination I mean, do you think there's areas of the franchise, where you would need to add.

Additional resource on the head count side.

I guess I'm thinking, particularly of the equity business.

Well, let me put it this way I think we have done on the front office side, the adjustments, which we committed to one and a half years ago. We always said that the further structural cost changes must income in particular come from the back office side and from the infrastructure. Therefore, we invest heavily into technology.

Into the FIC reengineering in order to gain the efficiency here.

We are well set up for the volume we have right now in which we have seen in Q4.

And hence we feel comfortable with the level of resources, which we have given to the investment bank and again, no further cuts where plant.

Because we think we have now the right the right platform to act from.

Okay.

Mr. Brown are you finished with your question.

Yeah, sorry, no that's great. Thank you. Thank you very much very clear answers.

Next question is from the line of Magdalena Stoklosa from Morgan Stanley. Please go ahead.

Hi, Good afternoon, do you actually hear me well.

We can hear you 10 by 10 Mcmahon.

Okay great.

Thanks, very much I've got two I've got two questions and of course, a huge thank you to them.

Mr Vets, as well and all the bank E future wells as well.

Okay.

First is the deposit charging because I think that's on quickly in the 85 Indian but you've done this year.

Yeah of course, the vast majority of debt in the corporate bank and of course it does.

A big part of the kind of defense on the NOI.

Question on any how far.

Good day repricing from here on how.

How much more all today, either corporate or maybe kind of wealth deposits do you think you can continually pricing into 2021. So that's my first question on line.

The next question is mainly about the costs in the investment bank, but more on from a geographical perspective.

Thank you Robert.

Total significant currency mismatch in your investment bank. Similarly.

Similarly to other global institutions.

In U S dollars in Europe, you've got costs in Sterling and the line.

I think if you if you look on that the structure of debt.

Operationally, two or three years average well how low T E U.

You will concentrate more on the investment bank in the Continental Europe, particularly also given the stocks to debt you know financial services ended up with the bank to be very little comfort in the Brexit via telephone.

Thank you.

Yes.

Let me take the first question on your deposit question.

Youre right with 85 billion.

Actually we have done more in 2020 than we initially expected.

And that gives us all the confidence that obviously, we couldn't continue both on the corporate side, but also on the private banking side.

In order to selectively grow debt ratio you will not see a development like we have seen in 2020 that it simply doubled from 85 to 170 debt would be unrealistic, but if I compare our deposit strategy.

Now with debt, what we actually wanted to achieve at the beginning of 2020, we are far beyond that point and we have the confidence that we can further increase debt would be done selectively in both businesses. Because you always have to look then also at the overall relationship and hence I cant give you a definite.

Mount but I can tell you that it's both in the private bank and corporate strategy to follow up there.

Maybe I'll just add we showed in the in the Investor Deep dive my deck in the appendix page 32, an update of the Euro current account.

Volumes.

Our site accounts and by business and what you'll see.

If we've repriced now accounts, representing 78 billion and corporate bank that was against a $128 billion in total of call. It addressable deposits, which is a relatively high percentage, so which underscores Christians point about sort of more modest benefits from here.

If you then look at the same schedule on by the way the number hasn't changed a great deal to December if you look at the same schedule for the private bank at or around eight or $9 billion.

Deposits in client accounts against which they're charging agreements you can see it's a much smaller percentage.

But Christians point. The question. There is is how you advance through the various cheering levels.

And also the interesting thing in both businesses, especially in the commercial bank and the private bank side of it.

A granular discussion with the client around the overall relationship whether theres a tearing level, whether there are other other business opportunities or the clients can move from deposits into investment products. So it's a relatively rich dialogue.

On your current which is why by the way.

<unk> $100 million that we talk about and repricing and private bank.

A relatively small portion of that is actually interest revenues most of it's in the broader relationship.

Currency risk in the in the IV is is a feature you're correct, we're not alone by the way and having a mismatch, particularly in in the Sterling expense base relative to Sterling revenues.

I don't see a dramatic shift.

Necessarily.

In that in that relationship of course, with Brexit, where you know we've been slowly migrating activities to the continent and that will continue.

But I don't see there being a.

Our wholesale our.

Noticeable shift in the near future.

Great. Thank you.

Next question is from the line of Jeremy <unk> from Exane BNP Paribas. Please go ahead.

Thank you.

Firstly, a clarification when we're talking about capital planning you said that you need to retain some of the earnings to fund the Boswell four step up in 2024 I was just wondering whether you expect to fund the whole of that <unk> increase and need capital for all of that or whether you can offset partly by easing down the ratio debt.

Moving to apply in a post Basel four world. So that's my first question.

Second question was on costs in the private bank you talked about the year on year reduction, but there was also a lot of reduction during the quarters on the <unk> run rate was quite a lot lower that sort of 16 12 million cars.

So on Q3 Q. So I just wondered if that's a representative run rate coming into 2021 can we based off that for Q cost level and the private bank.

Yeah.

Great question, Jeremy so on the on the first.

We do not assume a change in our ratio target over the again projection period I think it's conceivable.

And in the medium term that one might look at it depending on what changes there are in the environment around us but for for our purposes. The 12, 5% remains the.

The planning assumption.

As it relates to the private bank expenses, we do call out that there was a sort of a onetime pension benefit in the quarter.

So if I were to give you a run rate I'd, probably add back about $40 million.

To give you the step off into into 'twenty one.

Fantastic that's very helpful. Just kind of throw in another clarification I feel like Youre itching to be more specific about your January investment banking revenue performance. You mentioned that the trend has continued I wondered what you meant by that do you mean the trend of growth. So we're also up again year on year in January or do you mean.

The trend level that it's at a similar level to last year.

No.

I would be.

Be more precise in what are referred the word trend to growth and you have seen a growth in the fourth quarter and if I say the trend continued in January.

Then I referred to that and.

Potentially on even a bit more positive.

Fantastic, that's very helpful and congratulations to James until you're on there as well. Thank you.

Next question is from the line of Andrew Coombs from Citi. Please go ahead.

Thank you three co pack.

James it's possible.

Coming back to the adjusted costs in the $18 billion I think the caveat you right. It was around the single resolution fund assessment on.

On a previously when you talked about that you mentioned that if the fund size with guy from $55 to $70 billion and might be an extra 300 million for yourselves.

The next two years, so can I just clarify what's in your base case $18 5 billion is that assuming the fund size stays as it is or it is upside.

That's the first question second question very quick one but on the corporate center V in key differences or we see some lumpy numbers.

During 2020.

I know that link directly to your credit spreads I think you can give us some sensitivities there would be helpful.

And then my final question just on the C are you I know you talked about leverage expense coming in $8 billion ahead of guidance.

You mentioned in your target.

Billion before you changed it.

You've also talked about another change in the perimeter in the first half, adding another 10 billion as well, perhaps you can just elaborate a bit more on the perimeter changes we've seen based on 2020 on to expect impact up 'twenty one.

Yes.

Sure Andrew let.

Let me take those.

So the assumption on the S. RF assessment is in a ballpark of of $300 million for 2021 that would assume a change in the assessment basis from from what the current expectations are which is why we wanted to call it out.

And it's by the way more consistent with the assumptions that we used.

A year ago.

We had always assumed that where they are.

Declining and simplifying balance sheet that would over time be reflected in our assessment of course, we didn't expect that the assessment would begin to float up based on higher levels of liquidity in the system.

And hence the reason we called it out what we don't want to do is make sort of radical changes and harm the company by attempting to offset that additional 300.

And as I mentioned, we continue to engage on advocacy steps.

Because we think that it would be.

On the policy.

It does take a lot of capital out of the banking system at a time when when I think the authorities would like to see it's still in the banking system. So, we'll see where that where that comes out.

It would add we think about 300 to the assessment this year.

If it were to move to the 70 or stay at the $70 billion and the multiplier there was applied in 2020.

Viente.

Sensitivity really isn't to own credit spreads and actually most of the own credit spread sensitivity is in the businesses. The viente sensitivity for the most part is actually.

FX basis, and that was what drove the year on year swing and Viente to some degree interest rates, but that is hard to give you kind of a D V O on on because it does depend on the curve and the shape of the curve.

As it relates to the CR you leverage exposure perimeter.

We sort of reset the target in December given all the things that we've learned over the course of the year 2020, including by the way just an allocation change and central liquidity reserves, but it included as we mentioned 'twenty or 'twenty being more focused on risk weighted assets.

A decision that they that the economic choice was to allow more of the leverage exposure to run off.

And so that was really that was the true up in December to new targets. The last thing we called out in the prepared remarks were SA CCR our soccer.

That does have an impact on leverage exposure in the second quarter, we believe.

We're still working through some of the estimates of what that could imply for the group of which of which the CRE you would take a piece.

But both of those changes were baked into our 2022 target for leverage from leverage exposure.

Hope that helps.

Thank you.

Next question is from the line of Amit <unk> from Barclays. Please go ahead.

Hi, Thank you and I will say, thank you to that.

<unk> as well.

To help you.

So you had two questions maybe a bit more follow up.

I just wanted to come back on the.

NII translate in the private bank and in particular in the quarter.

So I just wanted to check in terms of the day final thankful it's.

So there was I guess, a little bit of a catch up for part of that catch up.

In Q3.

On the 50 Bips.

In terms of I'm, sorry in Q4 and Q.

Sorry, how much benefit was there because it just seems like quite a big step down on.

Quite a big change in kind of reported trend.

NII, so I, just trying to understand the dynamics a bit better.

And then the second question.

Oh, sorry, yes, just coming back to the true.

I think on the Investor Day, you also gave some color on year on year.

<unk> trends.

For each month of that 'twenty 'twenty I think January you said at that time was up 49%, but we don't have the.

Specific kind of starting point as such and.

So just trying to get a sense of how significant January lesson on the context of Q1 2020.

Thank you.

If I go in reverse order.

The.

The first quarter saw a relatively strong performance in January and February and of course March was then.

Heavily impacted by the crisis environment that we've found ourselves in.

I don't want to go into specific client product by product area.

Analysis of those months.

But the comparison at this point is too low a point in time, where the franchise improvement was beginning to show as it was already.

Partially in Q4 of 2019.

So again, we feel like there has been an ongoing improvement in the franchise that's visible to us and I think Ron spoke to in his in his monthly comparisons.

In the PB margin there actually wasn't.

Much in the way of <unk>, we were accruing at a rate of I think blended rate of about 17 basis points at that time. So so the bump isn't G. L. T. Rowe I'd have to come back to you on on what was sort of.

Not straight line about the development that you see the quarterly development and the PB line as I mentioned, it's a it's on a reported basis a noisier line than you might expect but we can follow up with you on what specifically fell in Q3.

Yes.

Thank you.

Next question is from the line of uncle, Ryan Goodman from RBC. Please go ahead.

Okay.

Yeah. Thank you very much of my taking my question and thanks, James and John All the best for the future.

So my follow up questions first is on the provisioning line why you gave us the guidance of 25 to 30 basis points in 2022.

No I understand that this is quite hard to know.

Who are 21 comes and by the way you currently stand.

Is it more of like a glad decline or should you be opportunistic on top is more on day 25 basis points, what does he expecting my expectations for 'twenty one on on the corn basis, and then secondly about your bad compensation and just looking at the investment bank on placebo had strong revenues.

But compensation from that that just one other if he can shed some light about.

I think you said at the Investor day.

<unk> Zeitung staffs on performance and maybe or not or is that any change in the way.

The Voyager and stuff in terms of day. So okay. So I think just one that would be the message gets on behalf of compensation and performance. Thank you very much.

Thanks for the questions on cash.

So on provisioning.

You may have thought it's odd to give a range for 'twenty, two and not for 2021, but you know it reflects that frankly the outlook is still quite uncertain in 'twenty. One as we say we do think there is an improvement sequentially year on year, whether that's I'll go back to the use of the word linear.

From from 'twenty on the way to the normalized level.

Remains to be seen as I mentioned earlier I think we're looking at it more cautiously optimistic perhaps in even a month or two ago.

I will point out the fourth quarter provision was was just 23 basis points of CRP, which although we were in a pandemic environment and I think some of the the <unk>.

<unk>.

Can still be attributed to two <unk>.

Covid environment.

That already as we've.

<unk> is trending towards a normalized level for us.

So all of which is to say at this point hard to really judge exactly where.

We're 'twenty one will be.

But as I say cautiously optimistic on the on the improvements relative to 2020.

Look on co on the compensation Nike.

Unlike the standard process here.

Were finalizing that over the next weeks when.

When the final final numbers for 2020 than published including the compensation report.

But of course, we stick to that what we said that we obviously must compare ourselves to the compensation development in the industry and to pay for performance I think the financial performance as we all see as being significantly better than last year.

And in this regard.

On the one hand, we will make sure that we pay for performance and on the other hand as we have done in the past.

We are very attentive and responsible also to find the right balance.

We think are also on this regard we on the right path, but again the final decision needs to be taken over the next the coming weeks.

Thank you Amit.

There are no further questions at this time and I would like to hand back to James Rivett for closing comments. Please go ahead.

Thank you Christian Thank you James and thank you everyone for your kind remarks.

Joanna.

Investor Relations table Geneva.

On that hurts to speak to you very soon thank you bye bye.

Yes.

Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.

Yeah.

[music].

[music].

Thank you all for joining us for our preliminary fourth quarter results call.

As usual on our call our CEO Christian saving will speak first followed by our Chief Financial Officer, James von Moltke.

The presentation as always is available for download in the Investor Relations section of our websites day, but you don't call the.

Before we get started let me just remind you that the presentation contains forward looking statements, which may not develop as we currently expect.

We therefore ask you to take notice of the precautionary warning at the end of all materials with that let me hand over to Christian.

Thank you James a warm welcome from me as well, it's a pleasure to be discussing our fourth quarter and full year 2020 results with you.

This is an important milestone.

In our transformation journey.

July 2019, we said that execution over the first six quarters would be critically important.

We hit all our targets on key milestones in 2020.

And over the last 18 months, despite the challenges of COVID-19.

We are now moving into phase III of our transformation.

Delivering sustainable profitability.

That means growing our business, while remaining disciplined on costs and capital.

Our performance in the fourth quarter and the full year confirms and strength in this picture.

We told you we saw sustainable growth in our investment bank as clients have re engaged and our strong performance in January so it was on supports us.

The private bank and corporate bank have successfully offset the interest rate headwinds they're facing.

We delivered 12 consecutive quarters of year on year reductions in adjusted costs, excluding transformation charges and bank levies.

And.

Despite the challenges we faced.

We were profitable on a pre and post tax basis in the fourth quarter and the full year.

For the full year at group level, we have reported pre tax profit.

On 1 billion euros, and net income of $624 million.

The improved profitability on the call bank offset the continuing transformation effects higher provisions for credit losses, and continued derisking on the capital release unit.

We have also put aside any doubts that we can self fund our transformation.

And while the environment is likely to remain challenging our strong capital and liquidity ratios.

Position us well to continue to support clients.

Let me now go through these items in more detail starting with the delivery of our 2020 milestones on slide two.

We hit our $19 5 billion adjusted cost target of <unk>.

$3 3 billion Euro reduction in two years.

This was in part driven by head count reductions with our work force down by 8% over this period.

We have demonstrated our strong risk management.

Provisions for credit losses of 41 basis points of loans are in the middle of the range that we estimated in April at the start of the pandemic.

We aimed for a year end 2020 leverage ratio of four 5% and we ended the year at four 7%.

At the Investor Deep dive, we said, we expected a CET one ratio.

Around 13% at year end.

In fact, our ratio is stronger at 13, 6%.

The stronger ratio reflects in part a delay in certain regulatory items and in particular outperformance against our derisking clients in the capital release unit.

The capital release unit ended the year with 34 billion euros of RW, a below the 38 billion target.

We have made good progress against our sustainability targets with over 40 billion euros on financing and investment volumes at year end compared to our 20 billion target.

Simply put.

We have continued to deliver against all our financial targets and milestones in 2020.

Delivery against these targets.

Important by the ongoing disciplined execution of our strategic agenda as we detail on slide three.

In July 2019, we identified the transformation effects that we would take by the end of the 'twenty 'twenty, two and with 85% of these already behind US we continue to make progress.

Most recently, we signed a multiyear partnership with Google Cloud, which will elevate our it infrastructure to a more efficient cloud based environment.

We also signed and closed the sale of Postbank system.

Which helps accelerate our costs and work force reduction.

And the private bank, we agreed balances of interest with our employee representatives, which will allow us to further rationalize our head office and operations in Germany.

We also extended our insurance partnerships with talents and Zurich insurance.

Which would generate additional fee income.

The creation of our German business banking in the corporate bank will.

It will drive greater focus on serving our 800000 small business clients.

Overall.

We have achieved more than 300 key milestones and over 100% of the cost savings anticipated from our core transformation initiatives in 2020.

Being on track or ahead of our objectives so far.

US the confidence that we will achieve our 'twenty 'twenty two goats.

Our businesses have also made considerable progress against their strategic objectives.

As we show on the next slide.

The corporate bank is working to offset interest rate headwinds in several ways as we discussed with you in December.

On deposit repricing, we are well ahead of target.

By the end of 2020, we had charging agreements related to accounts with a value of 78 billion euros up from 68 billion euros in the third quarter.

These agreements generated an annualized positive revenue impact.

Of more than 200 million euros.

We also grew business volumes for example, 20% growth in payment volumes with our Fintech ecommerce and platform clients.

And we captured.

A 4% increase in the Asia Pacific region.

The investment bank grew revenues by 32% in 2020.

Strong performance in both FIC and origination and advisory.

In the second half of the year, we have outperformed the industry and the average of our U S peers in year on year growth terms.

Yes markets have been favorable but.

But we see our growth to be more market driven.

We refocused our business around areas of strength and clients have engaged well with this model.

As a result.

We saw double digit year on year growth in FIC.

This trend has continued in January.

Client Reengagement and it's also helped underpin the strength in revenue performance in FIC.

As we explained at the Investor Deep dive, we see a substantial portion of investment bank growth as sustainable.

Even as markets normalize as we expect in 2021.

The private bank was also successful in offsetting interest rate headwinds with growth in volumes and fee income, including benefits from repricing initiatives.

Combination of higher account fees and other repricing initiatives.

Edit 100 million euros to 'twenty 'twenty revenues.

In 2020.

We grew net new client loans by 13 billion euros and achieved 16 billion euros of net inflows in investment products, including converting 5 billion euros of deposits.

These conversions are part of our strategy to grow fee and commission revenues.

In asset management Dws delivered 30 billion of net inflows in the full year.

Of which 9 billion euros were on ESG assets.

Assets under management Rose to 793 billion euros at year end.

25 billion higher than pre crisis levels at the end of 2019.

In short.

The dynamics in all four core businesses show that our refocused business model is paying off.

This execution is increasingly visible in our revenue performance as you can see on slide five.

When we launched our transformation in July 2019.

We set out to stabilize and then grow revenues.

And Thats, what we did.

We've increased group revenues by over 850 million euros in 2020.

As growth in our core businesses more than offset the exit from equities trading.

Core bank revenues have increased by 6% to $24 2 billion euros.

This puts us close to the plan of $24 4 billion euros that we laid out at the investor deep dive as part of our path to the 8% return on tangible equity target in 2022.

As discussed earlier this.

This growth is principally come from our refocused investment bank.

Which was able to capitalize on favorable market condition.

And to deliver on the strategic transformation of our Fig business.

The corporate bank and private bank successfully offset headwinds primarily lower interest rates.

To keep revenues essentially stable year on year, and we would expect underlying growth to feed through the top line.

The interest rate headwinds softened consistent with the current forward curve.

Asset management was slightly lower.

Due to the non recurrence of certain performance fees in 2020.

In summary, all of our businesses executed on our strategic objectives.

Slide six shows the progress we have made in reducing adjusted costs.

Excluding transformation charges and bank levies.

We've reduced adjusted costs year on year for 12 consecutive quarters.

In 2020, we reduced adjusted costs, excluding transformation charges and.

And expenses eligible for reimbursement rely related to prime finance by 9%.

This puts us on a good Pos.

Our 'twenty 'twenty two target of $16 7 billion euros, including targeted investments this year.

Disciplined execution is becoming increasingly visible in our results and you can see on slide seven.

As I said earlier, the next phase of our transformation is to improve sustainable profitability.

That means generating positive operating leverage by growing revenues and at the same time reducing costs.

We have generated positive double digit operating leverage in 2020 at both group and call bank levels.

The operating leverage has driven significant improvements in core bank profitability.

Adjusted for transformation charges specific revenue items goodwill impairments as well as restructuring and severance.

Pre tax profit.

In the core bank is up 52% in 2020 to $4 2 billion.

The improved core bank performance.

Increasingly offset the negative impact of the wind down of the capital release unit.

And over time.

More of the call bank's profitability should flow to the group's bottom line as we continue to make progress on our transformation agenda and provisions for credit losses normalize.

The strength of our balance sheet at year end, which we discussed on slide eight also positions us well to further grow our businesses.

Our common equity tier one ratio was 13, 6% flat year on year, and approximately 315 basis points above regulatory requirements.

Our liquidity reserves were 243 billion euros.

Our liquidity coverage ratio.

We also had 145%.

Which is equivalent to a buffer of 66 billion euros a buffer requirements.

As a result.

We can deploy our capital and liquidity strength support clients.

And what is still an uncertain environment.

Finally, as we explained both in December and at our risk deep dive in June last year.

We have benefited.

From a high quality loan book and a disciplined risk framework.

That enabled us to deliver within guidance on provisions for credit losses.

Our transformation is fully on track on every key dimension and outperformance in 2020.

There's good visibility to what's our 'twenty 'twenty two targets.

Before I hand over to James.

Let me sum up where we stand after six quarters and our outlook for 2021.

Yeah.

Our refocused strategy is clearly paying off.

Since our re engaging and our employees are motivated.

Trust by our clients is at the highest level since 2012.

This allows us to navigate well through the operating environment, which we expect to remain challenging and volatile.

This also offers opportunities, which we will continue to make use of.

At the Investor Deep dive we.

We highlighted that our business set up positions us well to benefit from the fundamental trends, we expect to see in the coming years.

These trends include the increase of global financing demand.

Wealth preservation increased localization and sustainable financing.

And they are already visible in January.

Momentum is strong and points to sustainability of revenues.

Our focus on cost reduction remains a top priority.

Delivery against our cost targets alone.

It put us close to our 2022 return on tangible equity target as.

As the restructuring and transformation costs fall away.

For 2021, the cost reduction.

Combined with our planned investments are consistent with our 'twenty 'twenty two group adjusted cost target of $16 7 billion euros.

Our plans assume provisions for credit losses declined this year compared to 2020.

But will remain elevated compared to the pre COVID-19 periods.

We will continue to manage our balance sheet conservatively.

Our strong capital and liquidity position us well to meet any challenges.

As a result, we feel well placed to achieve our 8% return on tangible equity target in 2022 and capital distribution to shareholders.

With that.

Let me hand over to James.

Thank you Christian let me start with a summary of our financial performance compared to the prior year on slide 10.

As Christian said, we are focused on delivering sustainable profitability by growing revenues and reducing costs.

Operating leverage was strong in the fourth quarter at 23% on a reported basis.

Revenues increased by 2% and noninterest expenses declined by 21%, principally reflecting lower transformation and restructuring and severance charges.

Results from the fourth quarter included a negative impact of 120 million euros related to the sale of Postbank systems.

This had a negative 104 million euro impact on revenues and 16 million euros of restructuring and severance charges.

Consistent with our comments at the Investor Deep dive, we believe that this transaction helps to accelerate the decommissioning of our legacy infrastructure and reduces the risk of stranded costs in the long term.

Adjusting for specific revenue and cost items, which are detailed on slide 32 of the appendix operating leverage was 12%.

On this basis, we grew revenues by 4% and reduce costs by 8%.

Provisions for credit losses were 251 million euros in the quarter equivalent to 23 basis points of loans.

We generated a pretax profit of 175 million euros or $621 million, excluding transformation charges restructuring and severance and specific revenue items.

The tax benefit of 14 million euros in the quarter was mainly driven by the release of non tax deductible litigation provisions and share based payment related tax effects due to positive share price movements.

Our adjusted core Bank return on tangible equity for the fourth quarter was five 8% and five 7% for the full year.

Tangible book value per share was 23 euros and 19th.

A 1% decrease.

This reduction is driven by negative OCI, mainly due to FX translation effects, partially offset by a lower share count.

For the full year, we generated a pretax profit of 1 billion euros or $2 2 billion, excluding transformation charges restructuring and severance and specific revenue items.

Provision for credit losses was $1 8 billion euros for the full year in line with our expectations at 41 basis points of average loans.

The full year effective tax rate was 39%.

Now, let's turn to page 11 to look at the specific drivers of adjusted cost reductions.

In the fourth quarter, we reduced adjusted costs, excluding transformation charges by 413 million euros or 8% versus the prior year.

Adjusted costs include $81 million of expenses eligible for reimbursement related to Prime finance.

207 million euros of transformation charges, which are excluded from our targets.

On this basis adjusted costs were $4 6 billion euros in the fourth quarter and $19 5 billion euros in the full year.

We continue to make progress in reducing costs across all major categories.

While continuing to invest in our I T and controls.

Now, let's move to slide 12 to discuss our provisions for credit losses.

Consistent with our prior guidance provisions for credit losses remained at more normalized levels in the fourth quarter.

Provisions were 251 million euros in the quarter equivalent to 23 basis points of loans on an annualized basis.

The decline for the fourth quarter was driven by releases in COVID-19 related stage, one and two provisions reflecting positive changes in consensus macroeconomic outlook since the third quarter.

Stage three provisions declined by 14% in the quarter, but remain more elevated in the private bank and the investment bank.

We retained the management overlay, we established in the third quarter given continued uncertainties in the macroeconomic environment.

Including the provisions taken in the fourth quarter. We ended the period with $4 8 billion euros of allowance for loan losses equivalent to 111 basis points of loans.

Turning to capital on Slide 13.

As Christian highlighted our CET one ratio was 13, 6% at the end of 2020 above the guidance of 13% that we provided at the investor deep dive.

Approximately 20 basis points came from lower risk weighted assets, notably faster than anticipated reductions in the capital release unit and slightly slower department put deployment in the core bank.

A further 20 basis points of the outperformance came from a series of numerator benefits, including higher than expected net income and higher than expected benefits from regulatory changes relating to software intangibles and other items.

The balance of 20 basis points came from delays in regulatory inflation, principally the targeted to review of internal models, which we expected to conclude in the fourth quarter.

4 billion euros of RW, a inflation related to trim is now expected to occur in the first quarter of 2021, which increases our full year regulatory inflation assumption to approximately 20 billion euros.

Nearly all of this are to be weighted inflation is expected to occur in the first half of 2021 equivalent to approximately 80 basis points of CET one capital.

This takes our pro forma CET, one ratio to approximately 12, 8%.

With this inflation behind us in the first half of the year, we expect to see a much more moderate impact from regulatory items in the second half of 2021 and for the full year 2022.

Our leverage ratio improved by 24 basis points to four 7%.

Afflicting, the positive regulatory driven and other capital effects I just described.

Our pro forma leverage ratio, excluding including ECB balances was four 3%.

This puts us well on track to meet our leverage ratio target of four 5% by year end 2022.

Taking into account a further 10 basis points from the transfer of our Prime finance business, which we will finalize later this year.

With that let's now turn to performance in our businesses starting with the corporate bank on slide 15.

Profit before tax was 561 million euros for the full year.

Excluding specific items transformation charges and restructuring and severance the adjusted profit before tax was 714 million euros with stable quarterly contributions, including 200 million 211 million euros in Q4.

This equates to a five 8% adjusted post tax return on tangible equity for the quarter.

Excluding specific items and the impact of FX translation full year revenues of $5 2 billion euros, we're flat on 2019.

The corporate bank offset interest rate headwinds largely through charging agreements at.

At year end charging agreements were in place on accounts with approximately 78 billion euros of deposits generating revenues of more than 200 million euros on an annualized basis.

Noninterest expenses declined by 13% for the full year and 24% in the quarter, principally reflecting lower transformation charges and restructuring expenses.

Adjusted costs, excluding transformation charges declined by 2% for the full year and 6% in the quarter, reflecting cost initiatives head count reductions and FX translation benefits.

This produced operating leverage of 1% for 2020.

Loans were flat year on year on an FX adjusted basis, while deposits were slightly lower reflecting management actions to optimize the deposit base.

Provisions for credit losses were 73 million euros for the quarter and $366 million for the full year driven by a small number of idiosyncratic events.

We're pleased with the relative performance in the corporate bank in 2020, and the trajectory of our 2022 objectives. Although performance in 2021, we'll be closer to 2020.

Turning to revenues in the fourth quarter on slide 16.

Global transaction banking revenues declined by 6% or 3% on an FX adjusted basis cash.

Cash management revenues were essentially flat, excluding the impact of FX translation as interest rate headwinds offset deposit repricing and balance sheet management initiatives.

We saw positive underlying momentum in this business with corporate cash management volumes, improving both sequentially and year on year.

Trade finance on lending revenues were also essentially flat, excluding FX translation with solid business performance in lending, particularly in Germany and day ma'am.

Security services and Trust and agency services revenues declined as a result of interest rate reductions in key markets.

Commercial banking revenues, excluding the impact of the sale of Postbank systems increased by 6% supported by the further rollout of deposit repricing and net movements in episodic items.

Turning to the investment bank on slide 17.

Full year revenues, excluding specific items increased by 32% driven by strong market activity and the benefits of our strategic transformation as well as strong client engagement.

Noninterest expenses declined by 15% in the full year and 19% in the fourth quarter, reflecting lower adjusted costs reduced restructuring and severance and lower litigation.

Adjusted costs, excluding transformation charges declined by 9% in the full year and in the fourth quarter, reflecting lower allocations disciplined expense management and FX translation benefits.

As a result, the investment bank cost income ratio declined to 58% in 2020 with operating leverage of 41%.

The investment bank generated a pretax profit of $3 2 billion euros in a year and a post tax return on tangible equity of 10%.

Loan balances declined reflecting disciplined risk management across the portfolio.

Leverage exposure increased compared to the prior year, principally driven by activity in fixed income sales and trading to support clients.

Risk weighted assets were higher year on year, principally due to regulatory inflation.

Provisions for credit losses increased in 2020 to 688 million euros or 89 basis points of average loans, primarily reflecting higher COVID-19 related impairments.

Turning to fourth quarter revenue performance, excluding specific items compared to the prior year period, and the investment bank on slide 18.

Revenues, excluding specific items in fixed income sales and trading increased by 21%.

The investment bank continued to benefit from client Reengagement following our strategic repositioning.

Credit trading revenues were significantly higher driven by strong client engagement and constructive market conditions.

Our FX business performed well, reflecting higher volatility and strengthen our derivatives businesses.

Rates revenues, excluding specific items were flat year on year as the strong performance in Europe was offset by a general reduction of client activity in the U S.

Emerging market revenues were higher across all three regions driven by continued improvements in the macro flow business <unk>.

Financing revenues were essentially flat, excluding the impact of FX translation.

Revenues in origination and advisory increased by 52% the fourth consecutive quarter, where our revenue growth has outperformed the fee pool.

Importantly, we regained the number one rank in our home market.

Growth in debt origination reflected increased activity and market share gains in investment grade debt.

Equity origination revenues were significantly higher driven by a strong performance in special purpose acquisition company activity.

Finally advisory revenues revenues were also significantly higher driven by increased activity mainly in EMEA.

Turning to the private bank on slide 19.

We made substantial progress in 2020 on our objectives with revenues, excluding specific items broadly stable and a continued reduction in costs.

The private bank generated a pretax loss of 124 million euros in the full year absorbing approximately 650 million euros of transformation related effects.

Adjusted pre tax profit was 493 million euros stable compared to 2019, despite a more challenging market environment.

Full year revenues, excluding specific items were flat as we grew volumes and fee income, including benefits from repricing to offset ongoing deposit margin compression and negative impacts from COVID-19.

Noninterest expenses declined by 7% driven by operational improvements as well as higher transformation related effects and litigation charges that largely offset the goodwill impairment in the prior year.

Adjusted costs, excluding transformation charges declined 6% year on year, primarily reflecting ongoing synergies from the German integration and other structural and organizational measures, including workforce reductions to below 30000 debt year end.

Consistent with our previous planning the cost synergies from the German merger reached 400 million euros for the year.

We also agreed balances of interest with our employee Representatives, which will allow further rationalization of our head office and operations in Germany.

Flat revenues and cost reductions led to operating leverage of 6% in 2020.

We achieved the fourth core consecutive quarter of net inflows with 16 billion euros and investment products and we originated net new client loans of 13 billion euros.

Provisions for credit losses were 711 million euros, or 31 basis points of loans.

The increase year on year, mainly reflects impacts from the pandemic.

The prior year included higher beneficial impacts from portfolio sales and model Recalibration.

For the fourth quarter revenues, excluding specific items were broadly flat, while adjusted costs, excluding transformation charges declined by 10%.

We now turn to the revenue details on slide 20.

Revenues in the private bank in Germany increased by 4% in the quarter, including a negative impact of 88 million euros related to the sale of Postbank systems I highlighted earlier.

Growth in lending revenues on higher commission and fee income from investment and insurance products offset negative impacts from deposit margin compression.

Business growth continued with net new client loans of 3 billion euros, and 1 billion euros net inflows in investment products in the quarter.

In the international private bank net revenues increased by 2% on a reported basis and declined by 4% excluding revenues related to sell Oppenheim workout activities.

Private banking and wealth management revenues, excluding specific items declined by 2% on an FX adjusted basis.

As the impact of COVID-19, and lower interest rates was partly offset by business growth and relationship manager hiring in prior periods.

In personal banking revenues declined by 3%, mainly reflecting headwinds from continued deposit margin compression and the impact of the pandemic on business activity.

The international private bank attracted net flows of 2 billion euros and investment products and granted 1 billion euros of net new client loans in the quarter.

As you will have seen in their results dws performed well and had a successful year.

To remind you of the asset management segment on page 21 includes certain items that are not part of the dws stand alone financials.

Adjusted profit before tax of 586 million euros in the full year increased by 9% as management actions to reduce costs more than offset the reduction in revenues.

Revenues declined by 4% versus the prior year predominantly due to the absence of performance fees from multi asset and alternatives earned in 2019.

Management fees were stable at $2 1 billion euros as improvements in flows offset the continued industry wide margin impression compression.

Noninterest expenses declined by 185 million euros, or 11% with adjusted costs, excluding transformation charges down 10%.

The reduction in costs was driven by lower variable compensation and ongoing efficiency initiatives combined with a reduction in certain operating costs due to the reduced travel and marketing activity as a result of the pandemic.

Asset management posted operating leverage in 2025%.

Assets under management of 793 billion euros have grown by 25 billion euros in the year, driven by net inflows and positive market performance, which more than offset the negative FX impact.

Net inflows were 30 billion euros for 2020, reaching record highs for dws, including 9 billion euros into ESG products.

Net inflows in passive cash alternatives and active equity were partly offset by outflows in other active businesses.

With that let me turn to corporate and other on slide 22.

Corporate and other reported a pretax loss of 930 million euros in 2020 versus a pretax loss of 246 million in the prior year.

The higher loss was driven by a negative contribution from valuation and timing differences compared to a positive result in the prior year from Mark to market moves associated with the banks cross currency funding arrangements.

Corporate and other reported a pretax loss of 333 million euros in the quarter the.

Our performance reflected higher than planned infrastructure costs, principally technology, which have not been charged to the divisions.

The results were also impacted by higher funding and liquidity charges, which are also not allocated to the business divisions as we've discussed in prior calls.

Consistent with our prior guidance, we expect these funding costs held in corporate and other to remain at around 250 million euros in 2021.

Shareholder expenses as defined on the OECD transfer pricing guidelines were around 100 million euros in the fourth quarter and approximately $400 million in the full year and are likely to remain at similar levels in future periods.

We can now turn to the capital release unit on Slide 23.

The capital release unit finished the year by delivering another quarter of sequential reductions in risk weighted assets leverage exposure and costs outperforming our 2020 targets.

Risk weighted assets decreased to 34 billion euros 4 billion below our year end target.

We reduced credit and market risk <unk> by 48% to 10 billion euros at year end with a balance in operational risk.

The division decreased leverage exposure by 55 billion euros or 43% in 2020 to 72 billion euros 8 billion below the year end guidance.

Loss before tax of $2 2 billion euros improve by 1 billion compared to the prior year as reductions in costs more than offset the loss of revenues from the exit of equities trading.

Noninterest expenses in 2020 declined by $1 5 billion euros, or 43%, reflecting lower adjusted costs as well as lower restructuring and severance and litigation charges.

Adjusted costs, excluding transformation charges declined by 861 million euros, or 33%, reflecting lower service cost allocations lower compensation and lower non compensation costs.

Negative revenues in the capital release unit, where 225 million euros in 2020.

This was significantly better than the guidance, we gave at our 2019 investor deep dive principally reflected reflecting outperformance against our original derisking expectations.

For 2020, we will continue to execute towards the risk weighted assets and leverage exposure plans that we laid out in December.

We expect risk weighted assets in 2021 to decrease year on year and leverage exposure to be significantly lower.

However, compared to the fourth quarter 2020, we expect leverage exposure in the capital release unit to increase in the first half of 2021.

This increase reflects an approximate 10 billion euro allocation of central liquidity reserve as we outlined at the Investor Deep dive plus a further increase from the implementation of the standardized approach for counterparty credit risk.

These increases do not impact our 2022 leverage target.

The transition of our prime finance and electronic equities clients and the associated leverage exposure and risk weighted assets is on track to complete by the end of 2021.

Christian talked about the outlook for 2021, which when combined with the performance in 2020 puts us on a solid path to our 2022 targets.

We remain committed to our 8% group return on tangible equity target and our cost reduction trajectory leaves us well positioned to achieve this.

Consistent with the targeted investments the Christian discussed we would not expect cost reductions to follow the same linear path in 2021.

These investments combined with our disciplined focus on costs put us on a path to reach the 70% cost to income ratio and $16 7 billion euros of adjusted costs in 2022.

We remain prudent in how we manage our capital and our CET one target remains greater than 12, 5%.

And as with 2020, we will aim for our leverage ratio to remain at approximately four 5%.

Before I conclude we another we have another important disclosure today.

Our head of Investor Relations, James Rivett will be moving to another leadership role within Finance Hill.

He'll be succeeded as head of IR by you on a patronage a senior member of our debt capital markets team in London.

One that has been at Deutsche Bank for 11 years and brings a wealth of experience to her new role.

She will continue to be based in London, and will take up our new responsibilities with immediate effect.

I hope, you'll all take the opportunity to get to know you on are in the very near future.

James joined the IR team in 2014, and he became head of IR in 2018.

In that role he has steered us through the launch of our transformation strategy, our first ever virtual AGM and two investor deep dives not to mention on our regular reporting investor conferences, and many investor meetings.

That's an impressive set of achievements and all the more so in the past year against the backdrop of a global pandemic.

James has seen the company through multiple challenges over the last few years and that's no easy task for an eye on from IR Officer.

And speaking personally I've dependent on his advice more times than I care to admit.

So Christian I wanted to say a huge thank you to James for all his support and guidance.

<unk> is force many good relationships on both buy side and sell side and with many fixed income investors that includes a lot of you on the call know I know, you'll want to join with us and wishing James every success in his new role.

With that let me hand back to James and we look forward to your questions.

Operator.

Two questions.

Ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question press star followed by one on the Touchtone telephone.

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On one who has a question you May press star followed by one at this time one moment for the first question. Please.

First question is from the line of Andrew Lim from Society Generale. Please go ahead.

Hi, good afternoon, thanks for taking my questions.

What was on an investment banking and.

The ECM I was wondering if you could talk a bit more about the snacks business.

But you see that.

As our being in a net.

Structural growth trends or whether we've just seen them, maybe one or two quarters of strength.

And then also with that business is that purely a fee business or the Deutsche Bank Investor.

Balance sheet and specs.

And then secondly, I think I might have missed this earlier.

Could you explain why.

Why the CET, one capital increased as much as it did I think it was.

One 7 billion increase which called me fully accounts full by earnings.

I'd say, if you could display.

Blayne, the booth and say thank you.

Well, Thanks, Andrew let me start with the <unk> business are clearly in business, which in 2020 grew and has shown a strong strong growth also with US we have an excellent expertise in.

That business.

And therefore, we took office need the opportunity of the margin.

To help our clients to advice our clients.

And the spec business, it's all about.

Actually working with the right sponsors in this regard we can say for us that we work with high quality sponsors SSA.

As I said, a lot of expertise and yes to your question.

In particular, obviously a fee business, but what we can see it's not only the initial spec business Theres a lot of add on business with the day specs was also some financing behind that and therefore, it turns actually into a business, where there is a lot of incremental and cross selling.

We are monitoring that business quite closely.

Clearly the market has growth.

<unk> also always means that you need to stay close to it and that's exactly what we're doing not only from a business point of view, but also from.