Q2 2021 Deutsche Bank AG Earnings Call

[music].

Ladies and gentlemen, thank you Ruth standing by.

And your chorus call operator, welcome and thank you for joining the Deutsche Bank's Q2, 2021 analyst call throughout 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 1 on your Touchtone telephone.

Please press the Star key followed by zero for operator assistance and now I'd like to turn the conference over to you on our patronage and head of Investor Relations. Please go ahead.

Thank you for joining us for our second quarter 2021.

That's cool.

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

The presentation as always is available to download and the Investor Relations section of our website DB Dot com.

Before we get started and let me just remind you.

A result presentation contains forward looking statements, which may not develop as a current do you expect we therefore ask you to take notice of the precautionary warning at the end of on materials with that let me hand, you over to Christian.

Thank you your honor and warm welcome from me as well, it's a pleasure.

And you that I'll be discussing our second quarter 2020.1 results with you today.

We are now over halfway through our transformation journey and.

We have continued to deliver against our milestones.

For the second consecutive quarter. This year, we have delivered significant profit improvement driven.

And by growing strength across our businesses.

We generated $1.2 billion euros of pretax profit.

And 828 million euros of profit after tax.

And that's including and negative impact of around 230 million euros from.

And German Federal Court ruling on bgh ruling on content for changes to consumer contracts, which we will discuss later in further detail.

Despite a more normalized market environment and the quarter revenues remained robust at $6.2 billion euros down.

From the 1% compared to the previous year. This demonstrates regained franchise strengths at Deutsche Bank.

We also continue to make progress on costs.

We reduced our adjusted costs, excluding transformation charges and reimbursements for Prime finance.

From 482 for 5.

And only euros year on year.

And we continue to invest and the execution of our transformation agenda with more than 90 per cent of our transformation projects now and the implementation phase.

They are key contributors to our cost reduction progress.

Risks are well under control.

And we continue to make progress towards achieving sustainable profitability.

This quarter, we generated a 5.5% return on tangible equity.

The headway, we made across all business and the second quarter reinforces our confidence that we will be able to meet our profitability.

Finally, we delivered another quarter of progress towards the goals, we outlined at our sustainability deep dive and me.

Now let me take you through the highlights of what we have achieved and.

And the first half of this year on slide 2.

Our performance over these past.

And so months shows that our 2022 targets and ambitions are well within reach.

Refocusing our business and around cost strength is paying off.

Revenues of $13.5 billion for the first half of 2020, 1 fully support our trajectory to the 'twenty and.

<unk> revenue growth.

We've reduced adjusted costs, excluding transformation charges.

By roughly 4% year on year.

Coupled with provisions for credit losses down, 89% on the year to 144 million or 7 basis points of average loans.

<unk> thousand and continue to see and improvement in our operating environment.

We also reduced our cost income ratio to 78% from 87 per cent for the same period last year.

Which represents significant progress towards our 2022 target of 70 per cent.

Scent and in the core bank the cost income ratio is even lower at 73 per cent.

That's and I'll turn to profitability on slide 3.

Our relentless focus on delivering transformation is reaching the bottom line.

We delivered and 92% year on year increase and our adjusted.

We couldn't the profit before tax in the call bank for the last 12 months to the second quarter and once again.

All 4 core businesses contributed and are either in line.

All ahead of the plan so far.

At the same time, we have substantially reduced the capital release.

Adjusted losses, and the cost of our transformation.

Once again, we are ahead of our plan for Derisking.

And we remain committed to minimizing the P&L impact of deleveraging efforts by the unit.

Let me now turn to underlying shareholder returns on slide 4.

Units and remain committed to our 8% return on equity target for 2022.

And we see a clear path to that goal.

For the first half of 2021 the group reported a $6.5.

Post tax return on tangible equity.

This would be 7.6.

And when adjusted for transformation related effects and 9.2%, excluding the impact of certain external factors outside our control.

Such as the bgh ruling and the decision to increase the size of the single resolution fund.

And the core bank.

Mix per se ready and line was our 'twenty 'twenty 2 target was the 9% post tax return on tangible equity on a reported basis and 10% on adjusted basis.

Even before the impact of the unforeseen factors.

This level of profitability combined with a robust capital position.

We all gives us confidence that we are on the right path towards our ambition to return capital to shareholders from 'twenty to 'twenty 2 onwards.

Now, let me to take you through some divisional highlights on slide 5.

The corporate bank continues to offset interest rate headwinds through.

And pricing strategies and growth initiatives.

We also regained the position of Germany's number 1 corporate bank and the recent poll published by Finance magazine.

This demonstrates the regain trust of corporate clients and provides a very good basis to grow over the next 2 years.

And we'll reap investment bank continued to benefit from our refocused business model was another strong quarter of performance and FIC.

And we've made market share gains in origination and advisory.

Yeah, we were number 1 in Germany and the quarter.

We expect markets to continue to normalize and the remainder of 2020.

Yeah.

But we remain confident that a substantial portion of our investment bank growth since 2019 is sustainable.

And as a result, we are keeping our full year outlook to show a 2021revenue number in line with 2020.

The private bank.

And what was also successful and offsetting interest rate headwinds with continued business growth.

And was 14 billion euros of net new business across assets under management and client loans in the quarter and 29 billion euros and the first half year.

Close to its full year target.

And of more than 30 billion euros.

The private bank also completed its first try and migration of a set of postbank customers onto Deutsche Bank systems.

Implementation is running in line with plan.

In asset management assets under management grew by 13.9 billion euros.

<unk>, 2.859 billion euros, and new record high including a record quarterly net inflows of 20 billion euros.

In short the dynamics in all 4 core businesses showed that our refocused business model is paying off and that our clients.

And a supportive and belief in our capabilities.

Successful execution is increasingly visible in our revenue performance and the call Bank and you can see on slide 6.

Revenues and the call bank for the second quarter of the year sent at $6.2 billion euros.

Line down only 1% on the year.

As we guided to at our first quarter results. This is in line with the market normalization and seasonality we expected. Despite an additional impact of approximately 100 million euros from the B T H ruling.

Revenue in the investment bank.

$2.4 billion down from the same period and 2020 as the strong performance and credit trading and financing, partly offset more normalized volumes and call rates emerging markets and ethics.

Both our corporate and private bank successfully offset headwinds with.

With either continued.

Our deposit repricing all business growth. Despite some unexpected items for the private bank in particular.

Asset management delivered revenue growth for yet another quarter boosted by management fees and strong inflows.

On a half year basis core bank revenues have grown by 13%.

Since the beginning of our transformation strategy in 2019, showing significant revenue improvement.

In summary.

All our core businesses have proven the strength of their franchises, putting our 'twenty 'twenty 2 objectives well within reach.

Now, let me turn to costs on slide 7.

Sent.

We reduced adjusted costs, excluding transformation charges and the reimbursements for Prime finance for another quarter or 2 for 5 billion euros.

We continue to strongly advocate for a reduction and the size of the single resolution fund.

Which would result.

For a bank levies. However, we now expect this to remain unchanged for next year.

Together with higher than expected contributions to the German deposit protection scheme.

This unforeseen external items and are expected to add approximately 400 million euros to our expense base.

And as previously discussed we do not believe it is sensible to further constrained investment spending to offset these externally driven expenses.

On the cost items, we can control.

We are keeping.

Our absolute cost discipline and focus and the second quarter share.

And we are in full control.

Despite the fact that volume driven expenses and investments and controllers represents some pressure.

To offset this pressure we are introducing a series of new cost reduction initiatives, including for the workforce optimization and accelerating real estate reductions.

And there are other systems rationalization and streamlining internal processes.

Against this background, we reaffirm our commitment to the 70% cost income ratio target.

Supporting our cost income ratio target.

We now expect revenues to be better than we discussed at the investor deep.

Based on the resilience, we have delivered and the first half of the year.

Business growth and and easing of the interest rate headwinds.

Moreover, we now see provision for credit losses, and a range of around 20 basis points of average loans in 2020..1 ahead of our previous guidance.

And we expect some.

This benefit to carry over into 2020.2.

The bottom line impact of these factors helps us offset the cost headwinds from the unforeseen items and we continue to remain committed to and 8% return on tangible equity in 2020.2.

With that let me now turn to risk management on slide 8.

And as you know strong risk discipline is a central pillar of our strategy across credit market liquidity and non financial risks.

And as discussed provision for credit losses was 144 million this half.

7 basis points of average loans on an annualized basis.

We continue to manage a high quality and well diversified loan book with strong underwriting standards and we remain vigilant.

Both of our market and liquidity risk controls and contribute to robust risk management practices.

Importantly.

We continue to strength nonfinancial risk management.

This is of the highest priority for management and we have made significant investments and improving our controls over recent years.

At the same time.

And the demands on anti financial crime continue to grow not just for Deutsche Bank, but for the entire.

Banking sector, therefore, we announced a fundamental reorganization of our F C function to become more effective more flexible and more holistic.

Now, let us turn to capital and balance sheet on slide 9.

In line with the guidance we provided.

With our first quarter results.

We did see a reduction and our common equity tier 1 ratio to 13, 2% this quarter.

Similarly, due to the impact of around 70 basis points from regulatory items.

We maintain a buffer of over 270 basis points above regulatory requirements.

Our leverage ratio increased.

For 8% and the quarter, reflecting actions, we took to strengths and our cabinet positions.

Our liquidity coverage ratio is at 143%.

67 billion euros above for regulatory requirements.

As a result.

We can deploy our capital and liquidity strength.

And to support clients and what is still a somewhat uncertain environment.

Let me now give you an update on our progress towards our sustainability targets on slide 10.

And our sustainability deep dive and made.

We outlined a series of targets for the group and for each business.

And as we accelerated our target of over 200 billion euros, and cumulative ESG financing and investments from 2025 to 2023.

And we set a target of at least 100 billion euros for the end of this year.

I'm very pleased to report that at the half year stage.

H, we are already approaching our 2021 and 4 year plan.

We have been able to generate 19.9 billion euros of volumes across our businesses.

And all 3 of our other wholly owned businesses.

Contributed to this total.

As a reminder, this excludes asset management.

Mendes dws as a separate entity with its own sustainability targets.

Nevertheless, asset management captured more than 3 billion euros and inflows of ESG investments in the quarter.

And finally and April Deutsche Bank became a founding member of the net zero banking Alliance.

Before I hand over.

Back to James.

And I will summarize our progress this quarter on slide 11.

As we promised you at the Investor Deep dive our focus remains on executing our transformation agenda, while supporting our clients.

Our top priorities on.

Turning to a 70% cost income ratio and to deliver 8% return on tangible equity in 2020.2.

Our first half results this year reinforce our confidence in our path.

We have made clear progress and client momentum.

Which is visible through our revenues and the macroeconomic backdrop has improved relative to the outlook. We gave you and our annual report.

Strengthening our operating environment.

We continue to advance on our key deliverables to support our cost reductions despite the impact of.

External factors.

We remain strict and conservative with our risk management framework.

And we are absolutely committed to further strengthening our control environment.

Last but certainly not least we're making strong progress on our path toward.

And our accelerated sustainability targets.

In short for.

For 2 years, we are well on our way to meeting our 2020, 2 strategic and financial ambitions.

With that.

Let me now 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 12.

We generated a profit before tax of $1.2 billion euros or $1.4 billion euros on on an adjusted basis.

Total revenues for the group was $6.2 billion euros down 1% versus the second quarter of 2020.

Net.

Net interest income has declined by 143 million euros versus the prior quarter as the 1 offs I flagged and April have normalized.

The resulting net interest margin held broadly steady at 1.2%, but we expect this to trend down slightly as the remaining rate pressures feed through.

We expect.

Net interest margin to stabilize at slightly over 1%.

While rates have been volatile in recent months, we planned on a conservative basis and still see a modest tailwind to the numbers, we shared with you at the Investor deep dive in December.

Turning to costs noninterest expenses were down 7% year on.

And on year.

Our provision for credit losses stood at 75 million euros or 7 basis points of loans for the quarter.

In line with our previous guidance, we saw a decrease and our CET 1 ratio to 13, 2%, which was mainly driven by regulatory items, notably the impact of the final targeted review of.

Of internal models assessments, partially offset by net income generated in the second quarter.

Leverage ratio has increased to 4.8% up 15 basis points compared to the previous quarter.

Tangible book value per share was 24 euros and <unk> up 86 cents.

Or 4% and the.

Year to date.

The tax rate for the quarter was 29%.

Let's now turn to page 13 to look at our core bank second quarter performance more closely.

Core bank revenues are $6.3 billion euros for the quarter down 1% on the prior year quarter.

For the first half of the year.

Here, our revenues and the core bank were $13.4 billion euros up 5% compared to the same period and 2020.

Noninterest expenses were down 3%, mainly driven by lower litigation expenses as well as reduced restructuring and severance costs.

This takes our profit before tax to $1.4 billion euros.

And 90% on the prior year.

We have delivered a 4% year on year increase and our post tax return on tangible equity for the quarter to 7.8%.

Our cost income ratio for the quarter stands at just under 76%.

Let me turn to costs for the group on Slide 14.

And the second quarter adjusted costs decreased by 6% year on year with reductions across all major cost categories.

We saw lower compensation and benefits costs, reflecting wharf work force reductions.

Although this was partially offset by a prior year 1 off credit from a change in estimate for certain deferred compensation.

On 14 boards.

We saw a decrease and it costs largely from lower hardware expenses.

We also achieved a reduction and professional service costs, primarily reflecting lower legal fees.

The decline and other costs was largely driven by lower bank levies as changes and the input assumptions made.

And a single resolution board led to additional charges and the prior year quarter.

Our second quarter adjusted costs, excluding transformation charges and reimbursements from private finance were $4.5 billion euros.

Transformation charges were 99 million euros down 15% sequentially could sequentially.

<unk> bye.

As we mentioned and the first quarter, we faced and unexpected increase and our contribution to the German statutory deposit guarantee scheme, which we will continue to incur on a quarterly basis going forward.

As we indicated in April we expect this incremental contribution to be roughly $70 million and 2021.

And approximately 60 million euros per year thereafter until 2024.

It remains too early to determine if incremental contributions to the voluntary scheme will be necessary.

As Christian mentioned earlier, we will continue to retain our cost discipline to manage tightly all the components, we can control as.

<unk> and committed to the cost income ratio target of 70% for 2022.

Let us now move to slide 15 to discuss our provision for credit losses.

Our stage 3 provisions reduced more than expected this quarter compared to our previous guidance to 111 million euros, reflecting releases.

We remain per bank and fewer impairment events across all our businesses.

These were offset by 36 million euros of net releases and our stage, 1 and 2 provisions from portfolio improvements.

While and improved macroeconomic outlook would have resulted in a further release of provisions and stages, 1 and 2.

And the complemented a conservative management overlay that more than offset this release.

In addition, as in the first quarter of this year, we retained a portion of the management overlay. We established in 2020 to account for future uncertainties and the outlook, particularly for the private bank portfolio.

We will continue to be focused on.

We risk management and as Christian mentioned, we would now guide to provisions and a range of around 20 basis points of average loans for 2021 lower than our previous guidance with positive scope for improvement for the balance of the year if current trends persist.

Let me now turn to capital on Slide 16.

On prudent our CET 1 ratio decreased to 13, 2% during the quarter broadly in line with the expectations we outlined in April.

This reflects a decrease of approximately 70 basis points due to risk weighted asset inflation from trim decisions and see our our 2 go lives 10 basis points less than.

Previous guidance.

Looking at the balance of the year, we now see it remaining net impact of approximately 20 basis points on the CET 1 ratio from further regulatory items, such as the new EPA guidelines on the definition of default the implementation of which was delayed and is now expected to follow and the second half of the year.

And then our pre within this 20 basis points guidance. We also reflect benefits expected from completing our remediation efforts on certain historical ECB findings.

As before the ultimate timing and magnitude of these regulatory items remains uncertain and subject to final ECB decisions, but we see no deviation from our long term.

Trajectory and we remain committed to our CET 1 ratio greater than 12, 5%.

All in all we expect to end the year with a CET 1 ratio of around 13%.

The second quarter's CET 1 ratio includes a deduction of an additional 275 million euros of common share dividend.

For the 300 million euros, we deducted last quarter.

Our fully loaded leverage ratio increased by 15 basis points to 4.8% this quarter.

The increase was largely driven by additional tier 1 capital into issuance and net income.

On a pro forma leverage ratio, including ECB balances was for.

On top of 3%.

With that let's now turn to performance and our businesses starting with the corporate bank on slide 18.

Profit before tax and the corporate bank was 246 million euros and more than 3 fold increase versus the 78 million euros and the prior year quarter.

While adjusted.

For profit before tax rose to 274 million euros.

This equates to a 6.5% reported and a 7.4% adjusted post tax return on tangible equity for the quarter.

Revenues were $1.2 billion euros, and the quarter, 8% lower on a reported basis and 6.

Percent lower year on year, excluding the effects of currency translation.

And the current quarter the impact of episodic items was approximately 98 million euros lower than in the prior year evenly split between lower benefits from recoveries related to credit protection and portfolio rebalancing actions.

Adjusting.

Adjusted these effects and currency translation.

Underlying corporate bank revenues would've been essentially flat as deposit repricing and other business initiatives offset interest rate headwinds of approximately 80 million euros.

At the end of the second quarter charging agreements were in place on approximately 87 billion euros of deposits.

<unk> for which resulted in revenues of 85 million euros, well on track to generate around 300 million euros on an annualized basis.

We continue to expect the combined effects of the moderation of interest rate headwinds based on current interest interest rate curves, the increasing quarterly contribution of deposit repricing as well as.

This momentum to support our revenue outlook for subsequent quarters.

For the full year 2021, we expect revenues to remain essentially flat compared to the prior year, which was our expected jump off point for 2020, 2 as we guided and our fourth quarter results.

Noninterest expenses decreased by 10%.

Sent adjusted costs, excluding transformation charges declined by 5%, reflecting head count reductions non compensation and initiatives and benefits from currency translation.

Offset by the non recurrence of a benefit from a change and the estimate related to certain deferred compensation awards and the prior year.

Business current quarter included significantly lower litigation charges compared to the prior year quarter.

Compared to the first quarter loans and deposits remained essentially flat, while the year on year increase and RW way, mainly reflects regulatory inflation related to trim.

We released 20 million euros of provisions.

Credit losses, and the quarter driven by unusually low impairment events compared to provisions of 144 million euros and the prior year quarter.

Turning to revenues by business segment, and the first quarter on slide 19.

Corporate Treasury services revenues were 10% lower year over year on a reported.

<unk> for <unk> or 9%, excluding currency effects, mainly driven by lower benefits from episodic items.

Interest rate headwinds were partly offset by chartering agreements and other business initiatives.

Institutional client services revenues were essentially flat, excluding the effects from currency translation, but were 4%.

Based on our on a reported basis.

Institutional cash management and Trust and agency services grew on an underlying basis, while security services declined.

Business banking was 7% lower year on year with underlying business growth more than offset by a revenue decline and contributions from episodic.

<unk> items and interest rate headwinds.

I'll now turn to the investment bank on slide 20.

Revenues for the second quarter of 2021, excluding specific items decreased by 10%.

Our trading businesses were impacted by the reduced market activity during the quarter compared to the heightened levels.

For scent line in the second quarter of 2020.

Compared to the second quarter of 2019 investment Bank revenues are up 31% with both FIC and Owen a significantly higher.

Noninterest expenses were essentially flat year over year as were adjusted costs excluding transformation charges.

For the investment bank generated a pretax profit of 1 billion euros and a return on tangible equity of 12, 5% and our second quarter, both and increase on the prior year period.

Our cost income ratio for the quarter was 56% and continues to be well ahead of our full year expectations.

Our loan.

So it has reduced year on year, primarily driven by the repayment of revolving credit facilities How's.

However versus the prior quarter, they are up driven by activity and our financing businesses.

The average exposure was higher impacted by increased lending commitments.

The year on year increase and a risk weight.

And balance reflects the impact of regulatory inflation, primarily from trim with underlying business growth essentially flat.

The improving credit environments, and near absence of impairment events led to materially lower provisions across businesses compared to the elevated levels of the second quarter of 2020.

Weighted asked turning to revenues by business segment on slide 21.

Revenues, excluding specific items and fixed sales and trading decreased by 9% for.

Financing and credit trading revenues were significantly higher driven by a strong performance across financing and within trading our distressed business continued to perform very well.

As expected revenues declined across our rates FX and emerging markets businesses as market conditions normalize when compared with the heightened level seen in the second quarter of 2020.

And FX revenues were significantly reduced to low levels of volatility due to low levels of volatility and compressed spreads.

However, our franchise strength was evidenced in the recent euromoney 2021 FX survey, which saw Deutsche Bank ranked ranked number 3 globally up from fourth the previous year.

And emerging markets revenues and Asia were impacted by lower client activity, specifically and the first half for the quarter.

This was partially offset by growth and both the semi and Latin America regions as those refocused businesses continued to perform well.

And May we also launched our new institutional client coverage model, starting and European rates and European investment grade credit.

The new model is underpinning and driving our.

Current quarter electronic market share gains and those 2 businesses.

Revenues and origination and advisory were essentially flat versus prior year, while in our home market, we regained our number 1 rank.

Debt origination revenues were lower.

Materially higher leveraged debt capital markets revenues were more than offset.

Net by a reduction in investment grade related revenues as issuance levels normalized versus the extreme levels of the second quarter 2020.

ESG continues to be a focused area. We ranked third globally for the year to date on ESG related debt products.

Equity origination revenues.

Our core slightly lower year on year predominantly driven by lower follow on activity, which reached record levels and the second quarter of 2020.

Significantly higher advisory revenues reflected the continued growth and M&A activity.

Turning to the private bank on slide 22.

The private bank reported.

<unk> worth of tax loss of 11 million euros, reflecting a negative impact of 222 million euros related to the bgh ruling and April 2021, essentially disallowing negative consent related to fee changes and consumer contracts in Germany.

The 222 million Euro effect reflects 2 components.

And 128 million euros of litigation provisions, mainly for potential client reimbursements as well as forgone revenues of 94 million euros related to suspended fees of which 93 million euros and private bank Germany.

We expect this temporary revenue impact to continue into the third quarter and to.

Secondly, and lesser extent and the fourth quarter. When we expect the majority of pricing agreements to have been accepted.

Adjusted for this and specific revenue items as well as transformation and restructuring and severance expenses of 133 million euros. The private bank would've achieved a profit before tax of 300.

Significant million euros.

And on an adjusted cost income ratio of 80%.

On the same basis, the adjusted post tax return on tangible equity of 7% would have been in line with the last quarter.

Reported revenues were 2 billion euros up 3% year on year or up 8.

Wondered if adjusted for the Bgh ruling as interest rate headwinds of approximately 100 million euros were more than offset by continued business growth it and improved market environment.

The prior year quarter also included negative impacts related to our strategy execution.

Business volumes grew by 14 billion euros and.

Per center with 10 billion euros of inflows and assets under management and 4 billion euros of net new client loans.

With this the private bank attracted 29 billion euros after only 6 months into the year against our full year target of greater than 30 billion euros.

Adjusted costs excluding transform.

<unk> charges declined by 4% across both compensation and non compensation costs, including savings from the execution of our strategic plan.

Provisions for credit losses were 19 basis points of loan or 117 million euros and reduced by 48% year on year, reflecting tight.

Risk management, the extension of Moratoria, and Italy, and Spain, as well as the high quality of our loan book.

The prior year quarter was also impacted by the macroeconomic outlook at the peak of the COVID-19 pandemic.

As shown on slide 23 revenues and private bank, Germany declined by 1%.

Adjusted for the temporary impact of 93 million euros from the bgh ruling revenues and PB, Germany would have increased by 7% year on year.

The prior year quarter included negative impacts of approximately 45 million euros arising from the German legal entity merger.

Continued headwinds from deposit margin compression.

And we're more than compensated by growth and loan revenues and fee income from investment and insurance products and recovering markets.

The business achieved net new client loans, and net inflows and investment products of 2 billion euros, each and the quarter.

And international private bank net revenues increased by.

9% despite headwinds from continued deposit margin compression and negative FX translation effects, reflecting continued business growth and recovery markets.

Net new business volumes were 8 billion euros, including 5 billion euros of net inflows into investment products.

Growth was especially pronounced in Germany.

And Asia.

Private banking and wealth management revenues increased by 10%, excluding specific items and FX translation effects.

Sustained momentum and investment products and loans and part supported by previous hiring of relationship managers offset headwinds from lower interest rates.

Personal.

On the banking revenues increased by 6% if adjusted for the 1 off rehashing charge and Italy and the prior year.

Growth was supported by higher investment product revenues and the current quarter.

And you will have seen and their results dws had another successful quarter compared to the previous year.

To remind you the asset management segment on page 24 includes certain items that are not part of the dws stand alone financials.

Assets under management of 859 billion euros have grown by 39 billion euros and the quarter driven by positive market performance and positive net flows and.

Net flows and the quarter.

There were a record 20 billion euros, driven by substantial inflows across all product pillars and regions.

Positive flows continued and targeted areas of passive and alternatives with cash reversing some of the outflows observed and the first quarter.

The business also attracted $3.8 billion euros into ESG.

Products during the quarter.

Profit before tax of 180 million euros, and the quarter increased by 59% over the same period last year driven by improved revenues.

Revenues grew by 14% versus the prior year, primarily due to a strong increase and management fees of $76 million.

As improvements and equity market levels and consecutive quarters of net flows more than offset the impact of continued industry wide margin compression.

Noninterest expenses decreased by 5 million euros, or 1% with adjusted costs, excluding transformation charges up 3%.

The.

And costs was driven by higher variable compensation, resulting from the dws share price increase platform investments and higher asset servicing costs due to the increase and assets under management.

Non operating costs reduce significantly as the prior year included severance and restructuring charges for organizational.

And the executive Board changes.

The divisional cost income ratio improved by 10 percentage points to 63%.

Turning to corporate and other on slide 25.

Corporate and other reported a pretax loss of 39 million euros, and the quarter compared with a pretax loss of 165 million euros.

Increase and the same period last year.

The loss included 60 million euros of funding and liquidity charges not allocated to the businesses consistent with our prior guidance to remain at around 250 million euros in 2021.

The year on year improvement and valuation and timing differences was driven by non recurrence of.

It's movements and interest rates and the prior year period.

This was partly offset by a smaller benefit from a lower than planned infrastructure costs that have not been charged to business divisions.

We can now turn to the capital release unit on Slide 26.

The capital release unit recorded a loss before tax of 200.

Adverse 8 million euros, and the quarter, a significant improvement to the prior year.

Revenues were negative 24 million euros this quarter down from negative 66 billion euros and the same period last year.

De risking risk management and funding impacts were partly offset by positive revenues from the prime finance cost recovery.

And from reserve releases, reflecting market conditions.

Adjusted costs, excluding transformation charges declined by 45%, reflecting lower service costs. The absence of incremental bank levies that were recorded in the second quarter for the prior year and lower compensation costs.

Paired to the second.

Quarter of 2019 adjusted costs, excluding transformation charges have been reduced by 61% ahead of our internal plan.

Leverage exposure was 71 billion euros at the end of the second quarter down 30% compared to the prior year quarter, and reflecting a $10 billion reduction from the previous quarter.

These reductions were primarily driven by Derisking and lower per Prime finance leverage.

In addition, we saw a lower than expected impact from the implementation of a standardized approach for counterparty credit risk.

Our W ways, where 32 billion euros at the end of the second quarter of which 23 billion euros were from operational risk.

And we saw reductions and credit CVA and market risk, bringing us to a 24% decrease versus the prior year quarter.

We continue to make good progress on de risking the portfolio and the second quarter focusing in particular on complex or illiquid positions that we were successful and eliminating.

Risks since the second quarter of 2019, the division has reduced leverage exposure by 71% or 178 billion euros, and RW way by 50% or 33 billion euros.

Looking forward, we expect to be at or ahead of our 2020.2 targets for <unk> and leverage exposure.

Year end 2021.

This includes completing the transition of our Prime finance platform.

We expect this transition to release, approximately 25 billion euros of leverage by year end.

Migrations of client balances are already underway and will accelerate over the third quarter.

For the remainder of the year, we expect negative.

By Us and the capital release unit.

We are on track to hit the cost reduction targets, we set out and the investor deep dive.

Turning to the outlook on slide 27.

Christian talked about the continued execution of our strategic agenda and the progress we've made this quarter as we look to our 2022 targets.

Other revenue on the improvements to our and control environment mentioned earlier, our top priorities remain managing to the 8% return on tangible equity ambition and a 70% cost income ratio.

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.

We see continued momentum and our client franchise.

We remain focused on diligent cost management, notwithstanding the unforeseen and uncontrollable items, which led to our target adjustment for 2022.

We do not think it is prudent to starve the company of investments to offset these items.

However, our 2.

And when he won and pretax profit expectations have improved over the course of the year, despite higher expenses, reflecting stronger revenues and lower credit provisions.

We have been and will be disciplined on risk management, and we will continue to manage the balance sheet conservatively.

As discussed we have revised our guidance for.

<unk> thousand and tuned for credit losses to around 20 basis points of loans for the full year 2021, and we see a positive trajectory if current trends persist.

We reiterate our target of a CET 1 ratio greater than $12, 5% and we continue to target a leverage ratio of approximately 4.5 per cent.

We remain focused on our capital return objectives, we have deducted 575 million euros for dividends from first half 2020.1 earnings under standard ECB rules and the consolidated CET 1 capital calculation.

We will continue to assess capital distribution options for 2022.

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

Thank you James Operator, we are now ready to take questions.

Thank you, ladies and gentlemen at this time well begin the question and answer session.

And anyone who wishes to ask a question and the press star followed by 1 on their touch tone telephone.

You wish to remove yourself from the question queue and you May Press Star followed by 2 if you're using speaker equipment today. Please lift the handset before making your selections.

Anyone who has a question you May press star followed by 1 at this time.

1 moment for the first question please.

First question is from Tom Hallett from K BW. Please go ahead.

Hi, guys. Thanks for taking my questions. So firstly could you just walk us through the building blocks for the incremental $600 million and revenue by.

Division please.

And how old that recent current developments are being incorporated into your planning for it. So and then secondly, a 8% per ton target has remained flat and when I factor on the bump in revenue and moderate provision for more I would get for an increase in your <unk> target even after adjusting for the rising costs.

I'll say.

Is that something 1 off or something and we should be considering.

And any commentary around that would be great and I'm gonna be skincare and ask us that question, but you are guiding towards a lower risk shops, even for next year now, but the majority of the better performance is being from the release of prior period reserve build.

And it looks like you've not released a significant portion of days made last day, what strikes me is quite high versus your peers and you also see a supervisor and remaining pretty cautious on credit risk to say.

And what gives you the confidence on moving guidance already.

Thank you.

Well, thank you Tom and for.

Your question and let me start to answer that and then and James just to chip in for additional comments.

To your revenue question, let me go through the building blocks is as you're saying and I'm doing it business by business, but overall, our confidence and our higher revenue as Tom really goes.

And the positive development, which we have not only seen now for the last quarter or the first quarter, but actually for the last 4 quarters and all 4 core businesses.

And what we can do it and we can go back to our for business and compare our 2022 revenue targets, which we outlined.

And back the Idd and December and compare this now with our view after.

The first 6 months, but also after looking at the transformation over the last 12 to 18 months.

So let me start with the private bank.

First of all let me say that I'm really happy with what we see there.

There is clear growth.

And investment business and on the credit side.

Remember the prepared remarks, we sent.

And almost all we actually reached our full year target in new investment business. After 6 months time, and obviously that will spark. The revenue is also going forward same on the credit.

<unk> really good momentum in particular on the market shot with good margins.

Don't forget that we are selectively repricing deposits in that business. So actually we see our sales fully on track to achieve the euro 8.3 billion revenue number which.

Which we gave to you on the Idd I would even say there is upside because.

And the business, we see right now I do believe that we are.

Ending this year with and $8.2 billion number with the growth rates, which we see right now in the last 6 months, but also the momentum and the.

I think $8.3 billion is a conservative pick.

Same actually goes for asset management, you'll remember our plans for asset management and the Idd was at I think $2.3 billion for the year end 2022.

And given the development, which we have seen so far.

And we will outperform this looking at Q1 Q2 the inflows.

Which we are seeing and it's it's actually continuous inflows business momentum is very good and it's actually excellent. The run rate. We see now in this business points to almost 10% higher than the plan, which.

Which we have for the year 2.

2022, so clear outperformance on debt side on.

On the corporate banking side is.

The underlying business in this segment has grown steadily since 2019 and actually as a result of for measures, which we have implemented and which we are working on.

Labor day, its a the core initiatives such as the business was flat firms fintech and ecommerce providers, we see the growth rates there.

Very successful.

Our growth and the Asia Pacific business, but also in the German business banking, you will remember that we launched a specific.

On the business banking initiatives last year and October really goes well.

We have further positive development on the charging agreements, which we have in place now for I think $87 billion of deposits and I can tell you. We are not stopping here, obviously, we won't see those kind of jumps anymore like we have seen over the last 15.

And Jim, but it will further increase but even these 87 billion of deposits will bring us on an annual basis $300 million of revenues.

And we put even more focus and thats, what Fabrizio and Stefan hoops are doing more focus on the lending business and finally, we can see and we could already see that and June but also.

Months July debt lending business also in Germany, and the corporate bank is gaining momentum and we are putting more cash.

<unk> and focus on debt.

Furthermore, James always set and the last quarter's debt the headwinds from interest rates is getting lesser in particular and the corporate bank. So in this regard with a jump off.

Now and which we estimate this year of $5.2 potentially even slightly better and then the underlying growth we have and all the items. We have told you for.

And 5.5% is definitely achievable. So we're confident about debt.

And.

Let's talk about the IV as the force business.

I think also here we have shown now for the last 4 quarters that we can gain market share there, where we want to play and where we think we are relevant and debt even in a normalized market environment. I think Q2 is nothing else and the best evidence for that.

And also we are seeing debt, what we have told you in particular and the idd and.

And in the first quarter.

And that we see a very good degree of sustainable earnings from.

From 3 or 4 items client reengagement looking at our Cds price and looking at the overall.

Momentum and also robustness of the bank clients are re engaging coming back to us and simply are doing.

More trades.

And it's our really good financing franchise, which obviously also.

Contributed a lot to Q2, so now looking at the number which we have given you for 2022 of $8.5 billion of and your revenues as the target for 2022 and taking into per.

Where we are right now what we see these 8.5 billion is clearly a conservative number we will be north of 9 billion for this year, we see the momentum we have the market share.

And therefore, I think 8.5 is again conservative and there is upside.

Next to all of these items.

Respect to either for businesses, which I try to describe and and again James can give you more details on this we have further upside and some treasury positions in particular on the interest rate curve, but also on our funding costs.

That again is the smaller 3 digit million amount, which you can add and.

At the end of the day.

We are highly confident that we can outperform the number which we gave to you on the revenue side in December 2028, and in 2020 and I believe that we have for an absolute credit will pass to go to 25 billion or actually 2.

And therefore 25 billion.

On the <unk> side.

Let me, let me answer that.

That first of all you can imagine on I'm very happy with the risk management, which we have shown now for years, but in particular also throughout the Covid crisis.

And it's simply.

Club on both levels and outstanding risk management, I E on portfolio level, but as well as an individual level. When you take into account some happenings and particular in Q1, which we avoided at Deutsche Bank.

So and the first 6 months as James said, we hit on.

On an annualized basis 7 basis points of course.

This number is too low, but we should also remember what we said at the beginning of the year, Tom and debt was approximately.

30 basis points of loan loss provision expectation for 2020..1 we believe now with looking at the portfolio looking at the economic development that.

And that we believe looking at the App.

Great downgrades and the portfolio that 20 basis points as a conservative pick for 2021, you will know that for 2022 actually we.

Plant something between 25, and 30 basis points again at a time in December 2020, when the economic outlook was more vague.

Bake than it is right now looking at the portfolio behavior, the robustness of our clients I can see upside to that number which.

Which we haven't yet even planned for so clear upside on the revenue and on the CERP side now to your last question why are they not even though higher than 8% look at the end of the day.

<unk>.

I firmly believe debt coming to 8% is our target we want to achieve that this management team is laser focused on this 1.

And therefore, let's only talk about the upside to debt when we already achieved the 8% and there is a way to go for the next 18 months.

Clearly with the comment on revenues.

Our clear discipline, which we have on cost and the risk discipline and I'm confident to get there.

Tom I have very little add to add to Christians answer I would just say on the curve look it's moving every day, we obviously update and refresh our.

But hopes constantly as well.

As of the end of the second quarter, we would've had upside of as much as $150 million and revenues cons.

Constant balance sheet to our to our plan assumptions for the curve, that's probably halved in the month of July so far and little bit more than halved and as Christian mentioned.

<unk> have about $100 million of benefit coming through on funding.

You do to sort of balance sheet efficiency and also improved.

Spreads and our unsecured funding so we have a bit of a tailwind there as well.

On the <unk> again, very little to add we think the allowance.

We are prudent.

We've taken the right actions in terms of overlays.

We don't think there is.

A lot of.

You know overbuild.

To still release.

Which as you know has perhaps been a characteristic of some of our peers, where where we've been very clear.

And throughout the crisis that we've taken we think appropriate steps methodologically and otherwise to ensure we had a prudent and appropriate allowance at all times.

Just focus you on page 14 of the supplement where we have the asset quality details and and carrying and allowance of almost $5.9 billion for.

<unk> 1 billion and I apologize in total.

Is I think a very comfortable level for for us.

Okay. Thank you and frankly.

Next question is from uncle on getting from RBC. Please go ahead.

Good afternoon, and thank you balance for taking on.

For nice.

And on cost.

Just 1 other thing can you give us some comfort zone, not losing focus on costs.

We're running on a cost income ratio 8.7.

76% core bank.

Let's just for some layoffs this doesn't keep us on target.

Hi.

Tell me about cutting the absolute cost.

<unk>.

Sure and then just on came about.

And you come on at the trend for both plentiful painful.

And what we won't be back to the 16.7 day, 1 cost target.

Oh, yes.

And the cadence because 17 point.

And then lastly, just coming back to what you just mentioned on.

Can you just comment on the corporate bank.

<unk> 20.

'twenty, 1 'twenty look on it.

Turns on and based on the Q2 run rate.

EPS in the corporate.

How would you have tough on day.

Yes.

And from Q2.

Thank you very much.

Well, let me start and then I hand over to James So look.

Very fair question on the cost such but with everything I have I can tell you our folks.

On costs.

And of course in particular on the controllable part of the cost is unchanged.

We will not change.

Change anything in terms of our attitude on costs.

And so therefore, you have the full commitment and passion of the management board and the leadership team to actually.

<unk> reduced our cost youre completely right in order to get to 70% cost income ratio. There was a way to go and therefore, we are always working on the 3 for items, which we have for set before.

Number 1 is obviously the normal cost reduction, which are in particular and supported by our key deliverables.

Further Joe overseen by the Chief transformation Officer.

There is a big part to come from all the initiatives, which we already obviously kicked off and which will pay and reduce our costs and 'twenty, 1 and 'twenty 2.

And number 2 you will see that we have other operating costs and lower restructuring and severance costs.

And next year, which will also be part of the reduction and the cost income ratio.

And number 3 James said it of course, you have some with.

The really positive for the positive momentum we see on the revenue side do you have some volume related cost, where we now decided and the <unk>.

Second quarter that we have for them.

Further cost measures and kicked off further cost measures in order to actually compensate for that and we have done it quite successfully in the second quarter, otherwise we wouldn't have been able despite the overall increase in revenues in Q1, and Q2 to actually reduce the cost of $4.5 billion.

And in Q2. So therefore, there is nothing like loosening on the cost not at all the full focus and and I do believe with debt.

And I E. The cost reduction and the normal operating basis, lower litigations, lower restructuring and severance and we.

We will get to the 70% and everything.

Everything what is volume related we try to offset and we've been very successful and in.

In Q2 about it.

With that I would hand over to James for sure. Thank you.

I can only underscore what Christian just said look every measure that was part of the of the targeting to $16.7.

$7 billion is underway and on track as we sit here today.

And so theres no sort of loss of focus on execution and as Christian mentioned, we've initiated a set of additional cost measures.

In order to offset what we see is volume and control and related related costs, so and in a sense.

We are redoubling.

On our on our efforts here.

There's always uncertainty about a revenue environment, but I think our our outlook is certainly skewed to the upside relative to the $24 for that we shared with you in December as Christian has gone through.

And and we always have to be.

Be prepared for a downturn of course.

And there I think the volume related cost that we've called out would certainly help.

But we think there's a fair amount of <unk>.

Support if you like and the revenue outlook that we intend to invest against the revenue outlook that we provided.

On the corporate bank run rate I would say we're.

With with what we have planned to do of course, it's been.

You know, it's been heavy sledding for the corporate bank.

Facing the headwinds that it has on interest rates and what have you, but as Christian outlined they've been very successful under Stefan hopes his leadership just executing on the plans that we.

On trout for you and 19 and again in 'twenty.

To drive growth, both if you like organically from the existing portfolio.

And based on new initiatives going forward, and we're making the right investments, we think to underscore that.

So from our perspective, we do understand it's a it's a.

We laid out higher growth rates.

And then perhaps some of the other businesses have.

2021into 'twenty 2.

But we see the underlying momentum that supports that and as we've said for some time as the interest rate headwind falls away that underlying momentum should simply go through the top line.

And and 1 last comment.

Supporting James but to your specific question, yes, I do think we have seen.

And the low revenue number in Q2, so all we can see from the forecast is that Q3 and Q4.

Turning around.

Thank you on it.

Next question.

That's from the line of Stuart Graham from Autonomous Research. Please.

Please go ahead.

Hello, and thanks for taking my questions 2 please it quite geeky and can.

Can you say how much of Q on Q2 revenues and investing.

And from that same distressed trade and whether there are for the unrealized gains and assumed second half.

Question and then the second question is on the Bgh ruling and how many complaint so requests for addressing you received so far and can you say what percentage of clients signed up till Lucent matter and.

Inviting them to consent to paying on that please thank you.

Sure I'll start and Christian may wish to add.

On Zim, obviously, we're happy with the developments around them integrated shipping.

As you may be aware a position that was built up over several years and the distress debt trading business.

And that arose from making markets and the debt instruments of that company.

But over time, we built a zero basis position also in the equity of them.

Together, the debt and equity revenues from from Zim.

In the first half have represented $300 million of revenues approximately $170 million.

Of that.

And the second quarter.

And so it's certainly been b and a help for the revenues but.

It really doesn't change directionally the story around outperformance and.

And both the first and second quarters.

And FIC driven of course by very strong results and credit also outside.

That that 1 position.

Looking to the future.

You continue to hold a significant equity stake.

And we're subject to liquidity restrictions on that equity stake.

We have a significant reserve to reflect the lack of marketability.

And don't necessarily expect that to change in the near term.

Of course, we would seek and orderly exit and realization over time that liquidity reserve would come down.

But it's too early to say when over what period that would that was likely to take place.

Turning to the bgh item that you mentioned.

We're tracking obviously very careful.

Over time the customer responses.

And let's start with.

The outreach if you like the re papering exercise that commenced at the beginning of July we're working hard to bring as many of those customer agreements to completion during the third quarter on.

Obviously, it's on our interest too.

To have the foregone revenue impact for a shorter time as possible on that on that on those current accounts, so as isolated as possible to Q2 and Q3.

There is a possibility of small amount may still dribble into Q4, but we do expect.

In and around the first of all.

Careful for her to have.

Closed off the lion's share of the customer acceptance of <unk>.

A revised fee schedules.

On the question of the of the restitution cost as you saw we booked a slightly higher reserve in the quarter than we'd initially called for as it happen.

For October we've also booked.

And that litigation the.

On the cost of operationally executing on the restitution and the repay per ring.

So theres a significant amount of that reserve that is restitution and cost and then an additional amount that represent represents the operational costs. We think that reserve is appropriate.

And perhaps even conservative and.

<unk> prior experience dealing with similar situations.

And and as of today I won't give you the precise numbers, but the actual customer inquiry for restitution is running below the level that we would've expected.

Happens supporting that that reserve impact.

So hopefully that's that's clarity for you on those questions.

That's great.

Because I think youll stages with $500 million, but you're saying the market and do you have a reserve against so we shouldn't just be assuming that the $500 million gains come on the second half of that line.

That's right I mean, so it is it is partially the.

The market value of the equity position is partially already recognized.

And revenues, but there is a significant risk.

<unk> for illiquidity.

That is held against it so future revenues at the current stock price of course.

It'll it'll depend on both the stock price development and.

The reserve release, but that is now mark daily including the.

The reserve amount.

Thank you for taking my questions.

Next question is from the line of Kian <unk> Hussain from J P. Morgan. Please go.

Yes, thanks for taking my questions for.

First question is related to slide 40 for just more detailed question around <unk>.

Should we should see how we should think about loan growth and particularly on the financing business.

Highlights lending growth and the investment bank and.

And how do I square.

Clear that is a U S wholesale funding growth target.

So that takes us to together.

Net contacts.

And what kind of financing exposures.

For PB thinking off.

And in context of ongoing growth. So if you can talk about ongoing growth, but also.

Also what are your financing.

And if I'm, putting 1 and 1 together correctly.

Secondly.

On <unk>.

<unk> expenses.

And you're running at around Florida for $4 billion.

And I'm just wondering how we should think about the future of <unk> expense.

And just beyond <unk>.

'twenty 1 into into the future is this a number that you're seeing will be continuously creeping up.

As you are improving your our east or is he thinks this is a level that you're happy in terms of investment levels going forward.

Thanks Kian.

It's James I'll start and and Christian May want to add I'm not sure exactly the connection that you're seeking to make about the loan volumes and what it sounded like dollar funding. So you may need to.

<unk> me, but.

Overall I think the comments we'd make on page 44 is we were pleased with.

Loan growth developments as you can see and private bank and investment Bank corporate Bank as you may have seen and also from other peers.

Has been a little bit slower to develop than we would've expected.

And although late in the quarter and I think the trajectory.

We're still confident about about growth coming back into.

And that market the.

And the investment banking loan balances are a mix of things, but as you say a relatively significant amount of structured lending.

That is split between dollars and other currencies.

All of the dollar piece of that is of course built into our overall.

Dollar funding base and so it doesn't present.

A significant burden and frankly it's.

It's been relatively speaking steady as she goes in terms of dollar fundings.

On the.

Expenses, it's an area we've been looking very very carefully at <unk>.

<unk> heard I think over the years.

<unk>.

For 1 thing there has been what I would called deferred investment that we've had to catch up on and we've been talking about that for a while we're making very good progress on a series of relatively large scale investments that we've been building and over time those investments should result.

And significant savings in terms of applications data.

And generally our technology estate.

We'd obviously like to accelerate as much as we can the realization of benefits and technology. So the short answer to your question is we do believe that we will be able and time and it's part of our.

Planning for 'twenty, 2 and beyond to reduce our technology expenses.

All the while preserving and investment budget and technology that we think is appropriate.

For a company of our of our size scope and scale.

And in fact, 1 of the benefits of the investments we've been making whether that's in.

And data or now in the transition to cloud and also elsewhere is that the the efficiency of investments is accelerating in terms of just more value.

Our investments per Euro spent.

And impact, especially on the front and with clients and.

And so that's been that's.

Our urging lots of work to do as you know, but I think the next 18 months.

A really critical are really critical period for for that execution and really then delivering the benefits that we've been working on now for several years.

Key and 1.1 more word.

On the corporate bank lending I think it in particular comes now from from 2 directions and number 1 you can see and particularly in Europe that the uncertainty of our corporate clients with regard to the economic development.

Development.

Is it slightly reduce it so people start to invest again in particular.

And so to invest into making their business greener. So the transformation part and the ESG part of trends from a of our financing us is getting more and more traction here, that's our number 1.

And number 2 you can also see that during the crisis a lot of the German corporate clients have actually used their own day.

Quiddity their own capital to go through this crisis and and.

And did not really rely on the banking facilities. So that is changing.

And therefore, we could already see and the last months of the second quarter that there is starting momentum on the corporate line side to increase lending.

And hence we are quite optimistic for Q3 and Q4 in this regard.

And thank.

Thank you that's very good very clear and for US just in terms of the lending level and in the investment bank shall we think.

But similar.

Growth rates that we saw in the second quarter and.

And in terms of financing cost, there's a lot of the things like structured credit on a dollar related.

Is it any headwind coming from dollar related financing considering you mentioned the funding improvement going forward.

Yeah, I guess, let me let me take that.

1 thing you need to understand is that the investment bank quarter and loan balances can be quite volatile based on just which transactions have closed versus in the pipeline at a point in time. So the direction of travel Kian. We think is up we do we do see loan growth opportunities opportunities.

To put the balance sheet to work.

But the.

The comparisons on any given quarter it can move around given given the episodic nature of.

Some of this.

On the financing costs.

Obviously, it's all blended in and this sort of percentage of dollar versus euro and.

And our funding cost is blended in and interestingly as we've called out before the geography of a portion of that funding cost that is based on swaps.

Is asymmetric as to whether it's in net interest income versus versus versus other income.

So.

It's a little bit harder just to pull out for you.

Impact on funding would be of of a rising dollar balance sheet, but as I said earlier, we don't see.

Our mix shift.

As likely and in that balance sheet growth as it comes it's likely to be steady from a mixed perspective with where we've been in the past.

Thank you very much.

Next question is from Andrew Lim of Society Generale. Please go ahead.

Hi, Thanks for taking my questions.

Let's just let's circle back for revenues again, you've talked a lot about 2022 revenues.

But on.

'twenty 1.

And Gary case, they'll still guiding to.

Group revenue is being flat at 24 billion.

And this is despite the fact that the first half is tracking nearly 1 billion higher on revenue versus the second line versus the first half of nausea.

And I'm just wondering how you are looking towards the second half is it something untoward that we.

And revenue that should cause that needs to be 1 billion lower.

Or should the conclusion be that 24 billion and as a local guidance there from yourself and.

And then my second question is on.

On the prime brokerage business that goes.

Transfer later on this year.

Could you remind us what the revenue.

You should expect cost impacts would be.

And once the transfer takes place things.

So look the the guidance is.

Reflects really seasonality.

And that is typical and and also some conservatism about the outlook in terms of.

Revenue and of the growth that is still to be captured this year.

And without taking anything away from the momentum that we've talked about.

And I wouldn't want to go into low ball or otherwise given that obviously are our disclosure and best view.

But we certainly see as I say, it's a strong year this year.

Especially relative to the outlook, we had at the beginning of the year and especially in light of some of the headwinds that we faced this year that were unexpected and.

Prime brokerage.

As I mentioned the balances are beginning to transition over to BNP <unk>. We're obviously pleased about that.

Given it's a significant undertaking both on the technology.

And the client management side and have and.

People are also transitioning over to BNP powerbar as I.

And the leverage exposure impact would be about $25 billion from where we are now.

On the expenses.

That $100 million ballpark little less and 100 million debt, we pull out.

<unk> of our of our numbers is the amount that would simply go away and once the transition is complete there's a little bit more of that as you know that is stranded debt.

And we're working on separately to.

And to take out around the prime brokerage business, but but 1 of the benefits of this transaction is it's given us obviously much more time.

To work on that and on preparation of removing the stranded costs and that's been built into our view of <unk> into next year.

And are there any associated revenues.

PV business.

And I'm, sorry, what kind of revenue Andrew.

And any associated revenue that we should be.

Yeah.

The revenues are passed to BNP parvo is part of the transaction what we do recognize as revenue is that expense recovery, which exactly offsets.

Call it $100 million less little less and 100 million debt that we show you on on in our expense disclosures.

Got.

Thanks.

Yeah.

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

And thank you very much and and congratulations on the quarter I forgot I've got 2 questions 1 on the investment bank and 1 on your assets.

Gathering business and so really when we look forward in the in the I B.

Where would you like to see your wallet gains from here. So you talked about capital markets and advisory and Germany in your prepared comments, but where else would you.

Got it thanks, and your position to strengthen.

So that's question number 1 and question number 2 BD.

When you look at share kind of integrated.

Model between Dws and.

On the well.

What do you see the biggest opportunities from growth perspective, and how do you think about the scale and this business.

Business and also.

And also because of course as we've seen very strong kind of net new money momentum on both sides.

Yes.

Thanks for let me take.

The first question.

Number 1.

And.

With the focus and the investment bank, which we.

We've given ourselves 2 years ago, obviously, we want to grow in those spots, where we are now playing so it's.

And it would be the wrong attitude of Deutsche Bank, If we now say and out of these.

Segments, where we are now playing and the investment bank. There is only 1 or 2 where we want to grow and take market share and and therefore I think.

It's a clear focus.

On a on the financing business, where we had a track record of.

And having the right process from origination and Oh.

Credit to distribution.

And secondly, I do think we have focus in the O&M business regionally, but also for industries and those where we.

And think we have for relevant market share, we're very happy with regaining certain positions and particularly obviously in our home market.

But obviously, we can also see and in other industries globally.

And that we play a meaningful a meaningful role and thirdly. It is next to the financing business and.

In the and.

They are a leading business in those disciplines, where we have been for years.

Think leading b at ethics bid rates and emerging markets. We're doing a lot of investments that is actually where we invest into people, where we invest into technology and this has started to pay off for them I well remember that I've told you since.

And the third quarter of 2019 that I do believe that with that focus on those 3 or 4 businesses was making the right people choices and the right investments we can grow and this we have done now for 5 or 6 quarters in a row and they are actually.

I I I don't see that this is coming to an and but that actually.

We are very competitive for bank in that area and we obviously use our chances to further outperform again other items like the overall robustness of the bank Cds price is now playing to our favor that clients are re engaging and obviously again, our clients are looking for and I'll.

<unk> to the U S banks, and particularly in Europe, and and that's what we're playing for and the IV. So I would say a clear a clear mandate in all businesses of the IV.

And the focus which we have given ourselves helps tremendously.

Just a just briefly 1 thing to add on that and if you.

Look at the at.

The wallets and FIC and the development over time of that wallet, we think a reasonably sort of conservative view of 2022 and the development.

Of this normalization and the FIC wallet.

And relatively stable.

Market share numbers for us would support.

The number and our model that supports the low end of the range that Christian talked about earlier, the 8 and a half for IP. The fifth contribution within that so we think we're still looking at reasonably.

Reliable assumptions about about the wallet and market share for for our company next year.

On dws.

Wealth business, it's a really interesting question.

And we think we are pursuing a a very unique strategy.

Around particularly wealth in Europe, where we're able to serve entrepreneurs and a different way for many of our peers.

So in markets, where we're present.

And as a retail bank as.

As a corporate bank for small and medium sized corporates and also with with larger corporate capabilities risk management heavier.

Alongside wealth management, we're able to serve the wealthy entrepreneurial family and a very different way from peers.

And.

And enable also to offer dws products, obviously that platform is open architecture, but we do sell dws products.

And Dws has a cross sell also into that same client base and the corporate client base and capabilities like pension and and money funds.

So.

And to your question, we do see.

A strong sort of.

Value in and.

Pursuing those strategies alongside 1 another and we have been making investments and those businesses, including in particular and wealth management and Europe.

Yeah.

Current.

Okay, and could you kind of venture into kind of where would you like that business to be.

And even on a combined level so from a perspective of your asset growth.

For the gathering business.

2 or 3 year view.

Bigger it.

It would be the 2 or 3 years.

And we are we are making.

And investments and working hard on that and I think you'll see the the results of that as we execute on the strategy were quite bullish on that strategy.

And seriously and I assume kind of both organically and inorganically.

Well, we said Magdalena and then of course.

Organically is that what we are focusing on day by day, but we have also said that in particular and the asset management. If there is the right opportunity with the maturity.

<unk> and his team has achieved if there is the right target, where we maintain obviously the majority and consolidated because asset management is the key.

Key business and will always be a core ingredient of Deutsche Bank. We would also look into those alternatives, but that must be carefully reviewed but we are not shy of doing something.

Perfect. Thank you very much.

Next question is from Andrew Coombs from Citi. Please go ahead.

Good afternoon, and a couple of follow ups for me. Please 1 on costs and 1 on revenues.

Back on the cost and my hair.

Everything is saying about.

Nothing has changed on your plan on costs.

Thanks, Chris.

On your controllable part of the costs and your view that is on.

But I guess it leads me back to the question why did you choose to remove the absolute cost targets rather than just the men debt from 16, 7% to $17.1.

Is it the case that you wanted more flexibility to pursue revenue opportunities.

See a risk and more external factors.

On my simply just reading too much into it.

And that would be my first question.

The second 1 on revenue as Christian gave a great walk through a whole core divisions and 2022.

Wanted to pick up a bit to say are you and CNS division and <unk>.

And tell you you talked.

On checkpoint and expense.

Vasco for 100 million and could you just clarify when you exactly expect that dropout, which quarter.

Do you expect that.

Could you walk away and then like quite for 250 million internal transfer pricing change that will hit C&I can you just give us a feel for how much of that total is that previous.

Yeah.

Thank you.

Thank you, Andrew and and let me take your phrase now, but I'll explain it and yes, you are reading too much into it so number 1 and the 400 million I think which you are quoting.

We've already signaled debt since December and the idd.

For the market.

That these are external costs not controllable for us and by the way we will not give up fighting this increased srs, but I think we also should be reasonable at this point and time, we think we have to pay more next year debt is now taking into account and we always signaled debt for debt.

And we're not constrained investments into our core businesses, which are actually at the end of the day also supporting efficiency, but also revenue growth and in this regard and we are obviously with the <unk> revenue is also increasing as I said there are certain volume expenses volume linked expenses, which we need.

Mt, we'd get to account.

James and I have done.

Everything and initial everything to counterbalance debt.

And therefore, we are confident that we can.

Compensate for this volume linked to expenses, but I also do think after now being 3 years in the transformation 2.

<unk> and the project cargo we are now at a point, where actually more and more we invest into sustainable profitability and debt. Turning point also means that there is obviously also in managing this bank to a certain margin I think the cost income ratio requires also that we are managing it.

From the Kpis towards the key 2 Kpis, which is 8% return on equity and 70% cost income ratio. That's how we're doing it the editors of this bank.

We'll not change controllable costs will be reduced as.

As much as we said in the initial plan, but I think.

I think we also need to recognize the overall progress we have done and to which these revenues going into the direction, which we said.

We obviously need to also take that into account.

And if I look further to 2022 now obviously, it's turning into a deep dive into our 'twenty 2 plan today, but.

On.

The CR U revenues, we'd be working to keep as close to zero frankly as possible. There are some positive revenues that the that the portfolio throws off and then there is funding cost hedging costs that offset it and.

And the impact of that.

That revenue recapture will fall away.

Which isn't to.

Say, we won't continue to derisk, but as we talked about and December it will be.

Rump that we would only Opportunistically day.

The risk or deleverage and otherwise allow it to run off.

And the CMO area there it's.

The treasury impacts as you say, obviously hard to predict valuation and timing differences. So we just.

And that they're neutral, but there we control them as much as we can within the hedging and hedge programs that we can but there is some hedge and effectiveness that can go either way as you mentioned there is the held liquidity costs and.

And the aftermath of the funds transfer pricing.

That should be below.

A few hundred 50 that we're expecting for this year sort of trending towards 200 and over time.

That sort of advertisers or bleeds away I.

I hope that helps Andrew.

Thank you very much guys.

Next question is from Amit <unk> from Barclays.

The 2 go ahead.

Hi, Thank you.

And so my first question is just I guess, maybe more of a follow up on on the same theme on costs and revenues.

So I just wanted to I guess be completely clear.

In terms of do you believe that you can.

Generate more than <unk> 5 billion of revenues and costs.

And $17.1 billion and.

Which obviously it would be slightly better on the 70% cost to income ratio.

Or if we were to pencil and 25 billion of revenues should we anticipate costs closer.

These 17.

2017, and a half billion.

And so that's the first question and the second question.

And.

Just relating to the similar with detailed line on the corporate bank this quarter it looked like.

The net interest income trucks and other small other income was that just more of this technical.

Thanks for taking interest work so.

And.

What exactly was driving that thank you.

Thank you Amit.

And those questions look on the costs.

You can take it here the way to think about it as the following at the 70% efficiency ratio.

And moving from the $16.7 million to 17, 1 adding.

Adding and some non operational costs.

We would have to achieve the 25 billion or a little bit last $24.9 to make that math work and what youre hearing from us. It's early to be talking in detail about 'twenty, 2 but what youre hearing from us is.

A high degree of confidence that we're on track to achieve that.

If it were to be higher for a significantly higher than that it would probably carry some additional volume related costs with it and so could see us going above but thats in the case, where again mathematically revenues have begun to exceed that 25 billion level. So.

Again, it's a mathematical exercise, but underneath that I think youre hearing.

Our strong view about the extent of the revenue trajectory that at least affords us the ability to offset these <unk>.

Uncontrollable expenses in <unk> and cost income ratio.

And the rest.

As time goes on and we get into the more detailed planning and the back half of the year to bring home 22.

On the CV item, it's it's a detailed point, but a good spot.

We've I think mentioned before there are CLO recoveries that are recognized and revenue so.

We'll see and Ah.

And a default situation, where the where there is insurance.

We have bought credit insurance, we will recognize revenue for the compensation and revenues at a point and time.

And that happened last year, but in 1 instance, this year.

There was a recovery and it was therefore reversed.

And so part of the movement you here, you see and Thats part of the $90 million we've called out.

<unk> is really a swing.

Relative to last year.

Taken place.

Okay. Thank you.

Next question is from Mr Day, Oman from Goldman Sachs. Please go ahead.

Good afternoon from my side as well.

And I have a lot of questions but on.

I understand we're limited to so zooming on the issue of these zim.

Can.

And I ask you.

First of all how do you think about.

This gain and the context of your recurring business.

And recurring revenue. So I was just wondering what is the threshold to classify something as a 1 off.

And is leaving net in the core revenue.

Revenue and PBT line I think Thats question number 1 and then question number 2.

You very kindly pointed out James what the contribution was on the revenue line is it fair to say that those absolute numbers apply to.

For the pre tax line as well and I'm assuming.

There's not much cost associated with these dispositions.

Because there I think it makes a very very significant impact and.

And in that context, and I just wanted to check with you on page 21.

And you're flagging the first bullet of your presentation.

Youre flagging, the first bullet debt Deutsche <unk> had significant.

With higher credit revenues.

Debt is at odds with every single.

Of your global competitors reporting so far this quarter.

And I was wondering does that statement still hold true if you adjust for the Zimmer contribution.

Thank you very much.

Yes, thanks for the questions. So I believe the answer to that is the last part of the question is yes.

We had a tough quarter last year and credit.

As I think you saw on Ron's presentation in December so so it was a difficult environment and by the way is some of that had to do with the.

The.

The hedging and in Q1, and so you have you had a swing in Q1 to Q2.

That was a burden on revenues last year and Q2.

And why what's the 1 off versus recurring business look we see this transaction as being part of the ordinary course business.

And in distressed debt trading it's not at all unprecedented 2 to accumulate and an equity investment like this under the circumstances, we do at our peers do it.

What is unusual of course is the size of it.

Which of course is why we're prepared to to to disk.

And the amount so that you're able to look at the business without that and it as we say direction of travel is the same our FIC revenues would've been down 19% reported rather than the 11% that we showed.

But still a significant outperformance relative to peers.

And on your pre tax profit, yes, I mean for the.

Closed largest part other than an operating.

<unk> costs and compensation and the.

The revenues will have will have fallen and fallen.

Fallen to pretax again, it's part of a larger business the business.

It's not a it's an unusually sized.

Benefits.

But it is part of the ordinary course of business to engage and transactions like this much as again our peers do.

Regularly sure Tim just very short follow up so when we think about the <unk>.

And from here to the 8% return on tangible target next year.

For the.

I guess that we shouldnt be stripping out these and contribution.

It is a non repeat for 2020.2.

Well, that's the thing that's hard to say Youre and 8 because as I say, the we do have a significant reserve and it's not clear at this point that the time over which that reserve would be released.

And then we ultimately.

Exit from the position as I mentioned earlier, we aim to do it over time and a way that is that is.

Responsible given the size of the stake.

And the timing of that is at this point are uncertain.

Thank you and I just don't forget.

Forget what.

James just said I mean, it's.

It's a 1.2 business and I'm, not saying more in GCT, which we have done for years, and where zimmer so to say not the only position we have and we have done that for years and therefore.

Always take this into account when you think about our future.

Revenue profile.

Thank you and I want a distinction and maybe a distinction to draw that might be helpful is trade web we have called out as a specific item consistently since we first started recognizing gains on it precisely because we don't see that as part of the operating performance of the business So perhaps that.

Contrast, and will help you.

And <unk>.

You see the accounting distinction we make.

Is it fair to say that there are no other similarly sized positions and debt portfolio as it stands though.

No no and that wouldn't be fair at similarly sized for the balance sheet size of that today, it's a large position.

<unk>.

But again, it's not out of the ordinary that we would have have gains to recognize from time to time and that distress business is again, it's part of the business.

Thank you very much.

Next question is from Nicholas Pie and from.

Couple of several.

That's per head.

Definitely and thanks for taking my question and ask too.

The first 1 and will be on the west and instruments, because you just mentioned and your European and wealth management strategy and I wanted to know how do you. How do you see your current setup in Europe, and then how do you seats and Italy. In particular do you think you have there.

Besides there to compete and also in comparison to Asia, because you mentioned a lot of.

Our European operation, but are your radial sits between investing there in Asia.

The second question will younger the risk weighted assets in investment banking.

Just wanted to know what part of the component of the.

Please go on inflation, and what you want or and do anyway. There you get a bit of treme of lending growth for is there anything else. There. Thank you very much.

And it could take me let me take the first question on on wealth management. There there was a clear difference between the a our wealth management and Europe and in particular and in Italy or Spain.

And.

2 to Asia and Asia. It is a more capital markets oriented.

Very successful.

Boeing.

But in Europe, It goes to the point to which James made and in his previous response.

We are actually very well placed in particular and those.

The countries, where we have corporate banking activities wealth management and private banking activities that we have seen as the bank for entrepreneurialism and hence we see a very nice line of growth and.

In Italy in Spain.

And Germany, where we can play this Scott that we have the corporate banking exposure.

But at the at the same time, we are banking the entrepreneur or the owner of the company and in this regard. We have made also from a coverage point of view tailored investments into Italy, but also into Spain too.

To increase our coverage and our relationship management our base in order to.

Secure more market share and we have seen the growth also on the second quarter, which I'm very happy with our in the wealth management and Europe.

Okay.

And the brief answer on the question of <unk> and IV is it was really all trim.

Almost all terrain trim.

Sort of portfolio movements were relatively neutral.

A total of $10 billion was added in the investment bank, both from trim and the <unk> implementation at the end of June.

Very clear thanks.

Next question is from Daniela Abubakr from UBS.

Please go ahead.

Good afternoon, and thank you.

For me a clarification. Please on the coasts from I mean, we talk a lot about 16, 7 and 71 probably.

Probably missed it but have you made any statement regarding to $18.5 billion target.

For this year, whether we should lift it up by the 400 million.

S and then in this context can you tell us in which division and we will see those 400 million showing up.

Thank you.

Daniela so.

And we talked about a little bit on April I think you can do similar math to to what we were talking about earlier, so 18.5.

And as well is 280.917, 1 has to assume.

And 60.

<unk> and 7% to 17, 1 and that's certainly what we're working towards and what we should be measured against.

In terms of the second part of your question and I'm, sorry remind me of Daniela.

By Division and it's probably too early to.

A lot in it but we've got the.

And we can come back to you on that question and answer obviously S. RF is and allocation that we would know for the businesses.

At this point the step off would be last year's and balance sheet.

There by the way, you'll see a fair amount of the benefit and see our U because cause that deleveraging will then.

<unk> and its allocation of the RF, so less of a benefit and the in the core businesses and then you would see and the.

In the C are you on the deposit insurance, it's mostly and private bank.

Got it thank you very much.

Thank you.

And the interest of time, we have to stop the Q&A session and I would like to hand back to you on other patronage. Please go ahead.

Thank you for joining us for our second quarter call and for your questions. Please don't hesitate to reach out to the Investor relations team with any follow up questions, particularly.

Those who have not been able to get to due to time and with that we look forward to speaking to you that our third quarter call. Thank you.

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

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