Q1 2021 Deutsche Bank AG Earnings Call
[music].
Ladies and gentlemen, thank you for standing by I am Haley your chorus call operator.
Welcome and thank you for joining the Deutsche Bank Q1, 2021 analyst call.
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The presentation will be followed by a question and on session.
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And I would now like to turn the conference over to Oh net patronage head of Investor Relations. Please go ahead.
Thank you for joining us from first quarter 2021 results cool as usual, our Chief Executive Officer Christian saving will speak first followed by Chief Financial Officer, James von Moltke.
And as always is available for download and the Investor Relations section of our website DB Dot com.
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 on materials with that let me hand over to Christian.
Thank you Donna and warm welcome from me as well.
It's a pleasure to be discussing our first quarter 2021 results with you today.
We gave on myself 14 quarters, two trends from Deutsche Bank, and seven quarters and now behind us.
Half way through our time frame.
We have already completed much of the transformation journey.
We have continued to deliver against our transformation milestones.
We are on or ahead of our expected timeline on all key measures.
We said at the Investor Deep dive in December we would focus on delivering sustainable profitability.
With revenue growth and the quarter up 14%.
And 272 billion euros, we demonstrating what this franchise is capable of.
We generated $1 6 billion euros of pre tax profit and 1 billion euros of profit after tax.
That's our best quarter in seven years, despite our now smaller footprint.
That enabled us to generate meaningful capital from net income.
Which helped us strengthen our capital ratio and the quarter.
Excluding the bank Levy our pretax profit.
Is $2 2 billion euros, demonstrating our strong operating performance.
We also made progress on costs.
Our adjusted costs, excluding transformation charges and bank levies.
And from $4 90 to $4 6 billion euros year on year in line with the POS we provided.
With our fourth quarter 2020 results.
We remain disciplined on capital risk and balance sheet management, and we successfully navigated several market events during the quarter.
We are delivering on our path to a higher return on tangible equity for the group was progress to a sustainable profitability.
This quarter, we generated a seven 4% return on tangible equity, including full recognition of the annual Bank Levy.
Progress across all business in the first quarter.
Reinforces our confidence that our strategic path is the right one.
Now let me take you through some of the highlights from this quarter on slide two.
We continue to remain fully focused on executing our transformation strategy.
And delivering on our 'twenty 'twenty two targets and ambitions.
Our progress this quarter shows that they are well within reach.
Refocusing our business around cost strength is paying off.
Our revenues of $7 2 billion euros fully support our trajectory for the 2020 two revenue growth.
Our adjusted costs, excluding transformation charges and bank levies and.
Reduced by roughly 4% year on year in line with our cost and ambition for 2020 two as we outlined at the Investor deep dive.
We continue to benefit from our leading risk management capabilities.
Provision for credit losses was 69 million euros this quarter.
Dow and 86% from the first quarter of 2020.
We have seen a more constructive credit environment than we initially expected.
Which has allowed us to lower our expectations for provisions for 2021, although we continue to see uncertainties in the operating environment.
We improved our cost to income ratio 277 per cent for the quarter, which leaves us well positioned to meet our 2022 target of 70 per cent.
The call Bank achieved a 71% cost income ratio.
With a post tax return on tangible equity of over 7% for the group our 8% target for 2022 is within reach.
Our first quarter return on tangible equity for the core bank is in fact higher than our 2022 gold and.
And nearly 11%.
Now let me take you through the progress we have made executing on our strategy across our core businesses on slide three.
The corporate bank continues to offset interest rate headwinds through repricing strategies and growth initiatives.
We made progress and clearing payments by and expansion of our partnership with Mastercard.
The investment bank continued to benefit from our refocused business model was another.
Strong performance and FIC and market share gains and origin nation and advisory.
We continue to expect markets to normalize and the remainder of 2021.
But we feel reassured and our view that a substantial portion of our investment bank growth since 2019 is sustainable.
We now expect our revenues for 2021 to be very close to 2020 levels.
The private bank was also successful and offsetting interest rate headwinds with continued business growth.
And with growth of 15 billion euros across net new client loans and net inflow inflows to assets under management.
The private bank as well in line with its ambition to attract more than 30 billion euros of business growth as we discussed and the investor deep dive last year.
We also made progress on our cost plans and the private bank, Germany, We agreed the balance of interest for our distribution network with the Workers' Council.
And this will lead to the closure of approximately 150 branches across both brands and Germany by the end of the year as we outlined last September.
And asset management.
And it's under management grew by 28 billion to 820 billion euros and.
A new record high.
The business continued to generate net inflows and the quarter.
And so these were partly offset by outflows of cash and its investors return to risk assets.
And short.
The dynamics in all four core businesses showed that our refocused business model is paying off.
Successful execution is increasingly visible in our revenue performance and so.
You can see on slide four.
We have grown revenues and our call bank by 12% this quarter to $7 1 billion euros, excluding specific items.
This growth is principally come from our investment bank, which has delivered strong performance and both FIC particular, and credit and origination and advisory.
Our corporate and private banks successfully offset headwinds.
With the combination of deposit repricing and volume growth as we just discussed.
And we see continuing momentum and these businesses.
Asset management delivered revenue growth boosted by transaction and performance fees.
Over the last 12 months that takes our core bank revenues to 25 billion euros.
A 7% increase from the previous 12 months period.
Ahead of our 'twenty 'twenty two ambition.
In summary, all our core businesses have proven the strength of their franchises and putting our 'twenty 'twenty two objectives well within reach.
Now, let me turn to costs on slide five.
In line with our plan and expectations, we reduced adjusted costs, excluding transformation charges bank levies and the unexpected deposit protection premium to $4 6 billion for the quarter down year on year.
As we outlined at our Investor deep dive in December we are advocating strongly for a stable target size for the single resolution fund.
Which would result in lower bank levies.
However.
For the first quarter of 2021 we have booked roughly 600 million euros, that's around 300 million euros higher than we had expected based on the increased target size of the single resolution fund communicated by the single resolution Board.
We continue to advocate for change in 2022.
And as it relates to cost within our control we remain committed to our $16 7 billion target for 2022.
And we are working towards it every day.
Executing on cost saving measures as we planned.
We see scope for further efficiencies for example from alignment of infrastructure functions supporting the corporate bank and investment Bank.
And let's now turn to profitability on slide six.
Our relentless focus on delivering our transformation agenda is reaching the bottom line.
We have seen a 75% year on year increase and our adjusted profit before tax and the call bank for the last 12 months to the first quarter.
And all four core businesses contributed.
At the same time, we continued to Derisk and the capital release unit, which nearly half its pretax loss compared to the first quarter of last year.
Since we started our transformation strategies seven quarters ago.
We have substantially reduced the capital release unit losses.
We remain committed to minimizing the P&L impact of Derisking efforts by the unit and to our cost reduction plans.
Let me now turn to risk management on slide seven.
Strong risk discipline is the central pillar of our strategy across credit market liquidity and nonfinancial risks.
Provisions for credit losses was 69 million euros this quarter.
Or six basis points of average loans on an annualized basis, principally due to the improved macroeconomic environment.
We continue to manage a high quality and well diversified low book with strong underwriting standards are robust and proactive risk management framework as well as dynamic collateral management.
We have also remain vigilant on concentration risk striked on risk appetite per meters, and proactive and risk identification and management.
Our market risk management benefits from a dynamic hatching framework.
With daily stress testing and monitoring.
Our comprehensive nonfinancial risk controls and contribute to a robust crisis management practices.
These capabilities have not only helped us achieve consistently contain credit and market risk losses.
But have also helped us avoid negative impact from external events, such as the ones, we saw and the quarter.
And we continue to strengthen nonfinancial risk management tightening our control environment and continuing to work on strengthening our anti financial crime and capabilities.
Now, let us turn to capital and balance sheet on slide eight.
Our common equity tier one ratio is marginally increased to 13, 7%.
The 300 basis points above regulatory requirements.
Our liquidity reserves also remained stable at 243 billion euros as we.
To improve the quality and reduce the cost of our funding base.
Our liquidity coverage ratio is 146% 70 billion euros above regulatory requirements.
As a result, we can deploy our capital and liquidity strength to support clients and what is still an uncertain environment.
Before I hand over to James Let me summarize our progress this quarter on slide nine.
As we promised you at the Investor Deep dive our focus remains on executing our transformation agenda, while staying focused on our clients.
Our first quarter results this year, very clearly reinforce our confidence and this pause.
We have made clear progress in terms of client momentum.
Which is visible through our revenue and the macro economic backdrop has improved relative to our earlier outlook.
We continue to make progress on our key deliverables to support cost and control improvements.
The management board changes this quarter on a further alignment of our business and our cross divisional strategic priorities to drive efficiency.
We have also continued to focus on sustainability.
We made further progress towards our sustainable financing and investment targets.
This cumulative volumes of 71 billion euros.
We'll say more about this and our sustainability deep dive on May 20.
Finally.
At the end of the quarter.
And at the halfway point of our journey.
87% of the expected transformation related effects are already behind us.
And short.
We are well on our way to meeting our 'twenty 'twenty, two strategic and financial ambitions.
With that let me hand over to James.
Thank you Christian.
Let me start with a summary of our financial performance for the quarter compared to the prior year on slide 10 and that's.
As Christian said, we remain focused on delivering sustainable profitability.
We generated a profit before tax of $1 6 billion euros or $1 8 billion euros on an adjusted basis.
Total revenues for the group was $7 2 billion euros up 14% versus the first quarter 2020, and 33% versus the prior quarter.
Noninterest expenses were down 1% year on year.
As we indicated in mid March and line with the latest guidance from the single resolution Board. The S. R. F is expected to be expanded to over 70 billion euros and our estimated assessment has been adjusted accordingly to approximately 600 million euros.
We also saw and unexpected market event, which led to an additional contribution of 28 million euros to the German statutory deposit guarantee scheme and the quarter.
As Christian mentioned before we saw a decrease and our provision for credit losses to 69 million euros or six basis points of loans.
Risks remain and the environment, but we now expect full year provisions to be substantially below last year.
Our CET one ratio saw a small increase to 13, 7% up nine basis points quarter on quarter.
However, significant regulatory impacts are still expected to come and the first half of the year.
Tangible book value per share was 23 euros, and 86 cents up 3% year on year.
The tax rate for the quarter was <unk> 35 per cent.
Let's now turn to page 11 to look at our core bank more closely.
Core bank revenues rose, 12% year on year, and 30% sequentially net.
Net interest income for the group increased by roughly 235 million euros versus the prior quarter driven by the recognition of the T. L. T. R O three incentive and FX translation effects.
Net interest income and our corporate bank has proven resilient over the last 12 months, even when excluding the first quarter effect of T. L. T. R O three.
Deposit charging remains a priority for the corporate bank and together with expected loan growth will help to offset the ongoing margin pressure from the interest rate environment. This year.
And the private bank net interest margin will remain under pressure from deposit margin compression. Despite T. L. T. R O three effects on.
And the charging rollout and ongoing loan growth will help to mitigate this as the business continues to focus on growing other sources of revenue.
Overall, we expect and net interest margin at group level to remain broadly stable at slightly over 1%, excluding one off effects.
Business mitigation, such as increased charging as well as continued balance sheet optimization will mostly offset the drag from low interest rates.
Noninterest expenses were up 3%, mainly driven by the higher allocated bank Levy.
And it takes our profit before tax to 2 billion euros more than double the same quarter last year.
We have delivered a six percentage point year on year increase and our post tax return on tangible equity for the quarter to 10, 9%.
And were 13, 5% if adjusted for Bank levies.
We've also seen a substantial improvement and our cost to income ratio to 71%.
We achieved profit growth with disciplined management of our balance sheet resources.
Our risk weighted assets and our leverage exposure have remained stable.
We now turn to costs on slide 12.
And the first quarter, we reduced adjusted costs by 2% year on year, largely due to lower compensation and benefits given work force reductions.
We saw a modest decrease and our it costs, resulting from lower it services and hardware.
We also achieved a reduction and professional service fees as we continued to internalize the and the <unk>.
External workforce and we achieved further reductions in categories, such as travel and marketing expenses.
Our first quarter adjusted costs, excluding transformation charges and reimbursements related to Prime finance were $5 2 billion euros, including the higher bank Levy charges, we discussed earlier.
Transformation charges were 116 million euros up 38%.
As I mentioned earlier unforeseen market events have also resulted in an increased contribution to the German statutory deposit guarantee scheme, which we expect to incur on a quarterly basis going forward.
We expect this incremental contribution to be roughly 70 million euros in 2021, and approximately 60 million euros per year thereafter until 2024.
It is too early to determine the level of incremental contributions to the voluntary scheme or whether any additional contributions will be necessary.
Importantly, the German bankers Association has decided to consider additional reforms to the voluntary scheme.
Together with bank Levy assessments. These expenses are largely out of our control and the underlying expenses reduction this quarter would have been greater absent these charges.
As discussed in December and in March we do not believe it is sensible to further constraint investment spending to offset these uncontrollable expenses and the near term.
However, we believe it is too early to adjust our cost expectation of $16 7 billion euros for 2022.
Let us now move to slide 13 to discuss our provision for credit losses.
This quarter provision for credit losses is significantly below the previous quarters and lower than our most recent guidance at six basis points of loans.
Our stage three provisions were down materially reflecting releases and fewer impairment events.
Stage, one and two provisions benefited from a strong macroeconomic environment supported by model based releases driven by forward looking indicators.
We retained a portion of the management overlay, we established in 2020 to account for future uncertainties and the outlook and made further conservative model and methodology refinements.
We will continue with our focus on prudent risk management, and we now guide to provisions and a range of around 25 basis points of loans for 2021.
Turning to capital on Slide 14.
Our CET one ratio rose to 13, 7% during the quarter benefiting from our strong first quarter net income.
And its effect was offset by dividend and a T. One accruals equity compensation effects and higher regulatory prudent valuation deductions.
Risk weighted assets rose from 329 billion euros to 330 billion euros during the quarter, but were 3 billion euros down excluding FX effects.
Notably a digital additional hedging led to lower market risk <unk>, while operational risk RW way benefited from further improvements and the internal loss profile.
These reductions outweighed higher credit risk or to be way, including a 4 billion euro impact for large corporates. Following the receipt of a final trim decision from the ECB.
Further risk weighted asset increases from regulatory and supervisory changes are expected to negatively impact the CET one ratio by approximately 80 basis points and the upcoming quarter.
Here, we see three main drivers.
First we expect the ECB to conclude its targeted review of internal models by issuing final decisions regarding leverage lending and banks and financial institutions.
Second we are expecting final ECB clearance of our implementation of the EBITDA like guideline on definition of default.
Third we will implement revised RW and calculations and response to see our our two becoming effective at the end of the second quarter 2021 for example in relation to the standardized approach for counterparty credit risk.
Our fully loaded leverage ratio decreased by eight basis points to four 6% this quarter on.
This decrease four basis points came from FX translation effects three basis points from increased trading volumes and net loan growth.
And one basis point from negative capital effects.
Our pro forma leverage ratio, including ECB balances was four 2%.
And the second quarter of 2021, we expect an increase and leverage exposure of roughly 20 billion euros from the introduction of the standardized approach for counterparty credit risk as part of <unk>.
With that let's now turn to performance in our businesses starting with the corporate bank on slide 16.
Profit before tax and the corporate bank was 229 million euros versus 121 million euros and the prior year quarter, while adjusted profit before tax rose, 69% to 266 million euros.
This equates to a 7% adjusted post tax return on tangible equity for the quarter and 6% on a reported basis.
Revenues were $1 3 billion euros, and the quarter, 2% higher year on year, excluding the effects of currency translation and 1% lower on a reported basis.
Sequentially revenues, excluding specific items grew by 6% compared to the fourth quarter 2020.
The corporate bank offset year over year interest rate revenue headwinds from of 120 million euros through benefits from the T. L. T. R. O three program charging agreements portfolio rebalancing actions and business momentum.
Based on the current interest rate curves. This revenue pressure should gradually diminish over the course of the remainder of this year and should effectively neutralize next year.
At the end of the first quarter charging agreements were in place on accounts with approximately 83 billion euros of deposits.
And the current quarter corporate bank generated revenues of 74 million euros from these charging agreements.
On an annualized basis, that's around 100 million euros ahead of the guidance, we provided at the Investor deep dive last year.
In addition, we continued working towards doubling the fees, we generate from platforms Fintech and e-commerce clients over the next two years.
We detailed our strategy for clearing payments via online marketplaces and expanded our partnership with Mastercard to achieve these targets and this area.
Noninterest expenses and adjusted costs ex transformation charges increased by 1% year on year, mainly driven by higher bank Levy allocations.
This was partly offset by head count reductions and non compensation initiatives as well as benefits from currency translation.
Compared to the fourth quarter 2020 loans grew by 2% to 117 billion euros as deposits also grew by 2% to 258 billion euros.
While the increase and RW, a mainly reflects regulatory inflation related to the Ecb's targeted review of internal models.
Loan volumes and the prior year quarter were driven by client drawdowns of committed facilities, which were subsequently largely repaid.
We released 20 million euros of credit loss provisions in the quarter, driven by an improving macro outlook and releases related to specific exposures.
Turning to revenues by business segment, and the first quarter on slide 17.
As announced by Stefan hoops at the Investor Deep dive in December we have revised our presentation of corporate bank revenues to be more aligned along client categories.
We provide further details on this on page 45 of the presentation.
Corporate Treasury services revenues, which includes corporate cash management and trade finance and lending increased by 2% year over year, excluding currency effects and were 1% lower on a reported basis.
Interest rate headwinds were offset by benefits from the T. Alterra three program charging agreements and portfolio rebalancing actions.
Institutional client services revenues, which includes cash management for institutional clients Trust and agency and security services group.
Grew by 3% excluding effects from currency translation, but were 3% lower on a reported basis.
Fee income growth and trust and agency services, offset a decrease and security services due to interest rate reductions and key markets.
Lastly, business banking, which covers small and entrepreneurial clients and Germany was essentially flat year over year as interest headwinds were offset by charging agreements and benefits from T. L. T. R O three.
I'll turn now to the investment bank on slide 18.
Revenues for the first quarter of 2021, excluding specific items increased by 34% year over year, driven by strong business performance and good progress on our strategy implementation.
This is the sixth consecutive quarter of double digit year on year revenue growth for the investment bank with continued market share gains and debt and equity capital markets.
Noninterest expenses increased 9% driven by higher bank Levy allocations.
Excluding these noninterest expenses were essentially flat.
The investment bank generated a pretax profit of $1 5 billion euros, and the first quarter more than double the prior year period, and a post tax return on tangible equity of 19% with a cost to income ratio of 52%.
Year on year reductions and loans and risk weighted assets reflected the repayment of revolving credit facilities.
Leverage exposure was impacted by materially lower pending settlements due to a change and regulatory treatment that took place in 2020.
Provisions for credit losses fell to zero this quarter.
And improved macroeconomic outlook drove forward looking indicator releases for stage, one and two performing loans, which offset modest stage three provisions predominantly and commercial real estate and transportation.
Turning to the revenues by business segment on slide 19.
Revenues, excluding specific items and fixed income currencies sales and trading increased by 33 per cent.
Financing and credit trading revenues were significantly higher driven by strong performance across products with our distressed business performing particularly well.
Year on year performance also benefited from the non repeat of prior year mark to market losses.
As expected revenues declined across our rates FX and emerging markets businesses as a result of lower market activity when compared with the exceptional levels seen in the first quarter of 2020.
However, we were pleased with the underlying business performance.
And FX, our derivative business continued with strong performance, despite the lower levels of volatility.
The decline in rates was driven by normalization and market activity. However, pockets of the business outperformed year over year and overall franchise performance is ahead of our strategic ambitions.
And emerging markets the normalization of revenues in Asia, and Latin America was partially offset by growth and this EMEA region on the back of increased client activity.
Revenues and origination and advisory were up 40% with our global market share, increasing 30 basis points year on year.
Debt origination revenues increased net of hedging activities driven by elevated fee pools, and the high yield and leverage loans and continued strong supernational sovereign and agency activity.
We also saw significantly higher equity origination revenues from the continued strength and spec activity as well as growth and Ipos and follow ons.
Advisory revenues were lower year on year, although excluding the net impact of hedging activities revenues increased.
Turning to the private bank on slide 20.
The private bank achieved a 43% year on year growth and adjusted profit before tax to 297 million euros and a post tax return on tangible equity of $6 three per cent.
Business volumes rose by 15 billion euros, a substantial step towards delivering on our ambition to attract more than 30 billion euros of net new business across assets under management and client loans by year end.
Revenues were $2 2 billion euros, essentially flat or up 2% year on year, if adjusted for FX translation effects.
Significant year over year quarterly interest revenue headwinds of slightly above 100 million euros were mitigated by growth predominantly and fee income from investment and insurance products.
Revenues in the quarter also benefited from loan growth and T. L. T. R O three.
The quarterly year over year revenue pressure from the low rate environment will remain meaningful for the rest of the year as the impact will moderate more slowly than for the corporate bank.
However, this pressure will be substantially less next year less than half based on the forward rate curves.
Adjusted costs, excluding transformation charges declined by 3%, primarily reflecting savings from transformation initiatives, including continued synergies from the German merger work force reductions and continued strict cost discipline.
Our cost to income ratio improved to 83%, reflecting flat revenues and continued cost reductions per.
Revision for credit losses were 98 million euros, or 16 basis points of loans.
The decline mainly reflects releases driven by and include macroeconomic outlook.
However provisions for credit losses continued to be impacted by the COVID-19 environment.
As shown on slide 21 revenues and the private bank and Germany were up 1% as continued headwinds from deposit margin compression were more than offset by growth and fee income from investment and insurance products as well as higher loan revenues and the aforementioned T. L. T. R O three benefits.
Private bank, Germany originated net new client loans of 2 billion euros, mainly and mortgages and attracted 2 billion euros net inflows and investment products and the quarter in part reflecting successful deposit conversion.
And the international private bank net revenues, excluding specific items and FX translation effects were up 1% outperforming our strong prior year results.
Personal banking revenues were up 4%, mainly from higher loan and investment product revenues.
Private banking and wealth management revenues, excluding specific items and FX translation effects remained stable.
Sustained business growth and investment products and loans as well as benefits from T. L. T. R O three offset headwinds from lower interest rates.
International Private bank attracted net inflows of 7 billion euros and investment products and 2 billion euros of net new client loans in the quarter.
Growth was especially strong in Asia and Germany.
As you will have seen and their results dws had a successful first quarter.
To remind you the asset management segment on page 22 includes certain items that are not part of the dws stand alone financials.
Adjusted profit before tax of 190 million euros, and the quarter increased by 61% over the same period last year driven by improved revenues.
Revenues increased by 23% versus the prior year, primarily due to a favorable change and the fair value of guarantees and higher performance fees.
Management fees were stable at 547 million euros, as improvements and equity market levels and consecutive quarters of net inflows offset the impact of continued industry wide margin compression.
Noninterest expenses increased by 31 million euros, or 8% with adjusted costs, excluding transformation charges up 9%.
The increase in costs was driven by higher variable compensation, resulting from dws share price increase and platform investments.
Other general and administrative expenses declined versus the prior year.
The divisional cost and <unk> cost to income ratio improved by eight percentage points to 64 per cent.
Assets under management of 820 billion euros have grown by 28 billion euros and the quarter driven by positive market performance and FX impact.
Net inflows were 1 billion euros and the quarter.
Inflows, excluding cash were around 10 billion euros predominantly into passive and alternatives offset by outflows and low margin and cash products as investors returned to risk assets and favorable financial markets.
The business also attracted 4 billion euros into ESG products during the quarter.
Corporate and other reported a pretax loss of 178 million euros, and the first quarter versus a pretax loss of 40 million euros and the prior year quarter.
The higher loss was mainly driven by the non recurrence of a positive valuation and timing effect recorded and the prior year period.
Funding and liquidity charges not allocated to the businesses were 36 million euros and the quarter.
Consistent with our prior guidance, we expect the funding costs held and corporate and other to remain at around 250 million euros and 2021.
We can now turn to the capital release unit on Slide 24.
The capital release unit recorded a loss before tax of 410 million euros and the quarter a significant improvement to the prior year quarter result of negative 765 million euros.
Revenues were positive 81 million euros, and the quarter up from negative 57 million euros and the prior year.
Derisking impacts and this quarter were offset by positive revenues from gains on asset sales and reserve releases, reflecting market conditions and from operating income.
Risk weighted assets were 34 billion euros at the end of the first quarter of 24% reduction from the prior year quarter.
And the current quarter the impact on <unk> from Derisking was $1 5 billion euros, which was partly offset by model impacts and CVA inflation.
Leverage exposure was 81 billion euros at the end of the first quarter declining by 31% compared to the prior year quarter.
Compared to the prior quarter leverage exposure increased by 9 billion euros.
As mentioned at the Investor Deep dive, we recorded an additional allocation of central liquidity reserves to see our U of 13 billion euros.
The higher allocation combined with higher prime finance leverage more than offset the $9 4 billion euros of Derisking and other impacts.
Noninterest expenses declined by 28%, reflecting lower adjusted costs, including lower transformation spend.
Adjusted costs, excluding transformation charges declined by 239 million euros or 36% from the prior year quarter, reflecting lower service cost allocations low.
Your bank Levy allocations and lower compensation costs.
For 2020, one we will continue to execute towards the risk weighted assets and leverage exposure plans that we laid out at the investor deep dive, including the transition of our Prime finance platform.
We expect this transition to conclude by the end of 2021.
Migrations of client balances are already underway and will accelerate over the summer.
For the remainder of the year, we expect negative revenues and the capital release unit and we are on track to hit the cost reduction targets that we set out in the investor deep dive.
Christian talked about the continued execution of our strategic agenda and the progress we have made this quarter as we look to our 2022 targets.
On revenues the improved trajectory and the core bank shows that we are operating at a level that puts our goal is well within reach and we see continued momentum and our client franchise.
We are actively managing our cost to income ratio to our 2022 target of 70%. Despite the unforeseen and uncontrollable items this quarter, which have raised our baseline cost plan for 2021.
We do see pressures on costs that are volume related tied to better than expected performance and we are working to offset these where we can with new initiatives.
However, our 2020, one and pre tax profit expectations have improved despite higher expenses, reflecting stronger revenues and lower credit provisions.
It is too early to comment on the likely impact of our recent performance and the uncontrollable items on 2022, but we remain committed to our strategic and financial targets and ambitions for 2022.