Q3 2022 Deutsche Bank AG Earnings Call

Ladies and gentlemen, thank you for standing by him Stewart the chorus call operator, welcome and thank you for joining at the Deutsche Bank Q3, 2022 analyst call.

Throughout today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question and answer session.

We'd like to ask a question you May press Star followed by one on your Touchtone telephone. Please press the star key followed by zero for operator assistance would now like to turn the conference over to Yamana patronage head of Investor Relations. Please go ahead.

Thank you for joining us for our third quarter 2022 adult call as usual, our Chief Executive Officer Christian savings or Pizza, followed by our Chief Financial Officer that James I'll note that the presentation as always is available to download in the investor relation.

<unk> section of our website DB com.

Can we get started let me just remind you that the presentation contains forward looking statements, which may not develop as its harmony expect we therefore ask you to take notice of the precautionary warning at the end of our materials.

With that let me hand over to Christian.

Thank you your honor a warm welcome from me as well, it's a pleasure to be discussing our third quarter and nine months results with you today.

We continue to operate in a difficult and uncertain environment.

We are mindful that the economic impact of the war in Ukraine at the energy crisis.

Yet to be fully fee.

However, despite these challenges we are progressing towards completion of our transformation strategy.

Our efforts continue to be recognized by our stakeholders as we saw with the rating upgrade from Moody's earlier this month.

And we believe our progress is reflected in our third quarter and nine months results we.

We delivered our highest third quarter pre tax profit since 2006 and.

And our best nine months result.

<unk> thousand 11, as we work toward our 2022 financial goals.

Turning first to our purple.

The positive trends, we saw in the first half of the year continued in the third quarter.

We delivered group revenues of $20 9 billion in the first nine months, an increase of 7% year on year.

We also achieved average revenue growth of 10% year on year across the four core businesses.

Driven by business volume growth market share gains improving interest rate and business investments.

All of which will support sustainable growth in future years.

And the first nine months of 2022, we generated an 8% return on tangible equity in line with our target and up from four 8% in the first nine months of 2021.

This is the result of increased profitability and efficiency.

Post tax profit for the first nine months was $3 7 billion up 68% year on year, reflecting our improving pre provision profit.

Our cost income ratio was 73% for the first nine months down from 82% in the prior year period.

We also proved our resilience.

We maintain strong risk management in this challenging business environment.

Provision for credit losses was higher but contained at 24 basis points of average growth.

We are well capitalized we finished the third quarter with a common equity tier one capital ratio of 13, 3% up from 13% in the second quarter.

And above our target minimum of 12, 5%.

Now let me take you through the progress in our core businesses on slide two.

All four core businesses delivered strong post tax return on tangible equity in the first nine months.

This gives us confidence that our 2022 targets and ambitions are well within reach.

And the corporate bank revenues are up 20% year to date, thanks to the further improving interest rate environment and higher fee income supported by volume growth in loans and deposits.

Return on tangible equity was 11%.

Four percentage point increase year on year.

In the investment Bank continued client engagement and strong risk management in our leading <unk> franchise growth revenue growth of 8% with particular strength in our macro trading businesses.

The investment bank delivered a return on tangible equity of 12%, despite lower origination and advisory activity as markets became more volatile.

The private bank boosted its return on tangible equity to 95% by delivering a more than threefold rise in pretax profit in the first nine months.

7% revenue growth.

Was backed by net new business of 36 billion with year to date.

Including net inflows into assets under management.

And loan growth.

In addition, the business continued to optimize its distribution channel with the closure of more than 130 branch.

Asset management delivered revenue growth of 4% year on year.

Moving its resilience in a much tougher market environment.

The business achieved a 20% return on tangible equity, while continuing to invest in growth initiatives and platform transformation.

This strong performance across all core businesses enabled the call bank to deliver nine months profit before tax of $5 6 billion up.

Up 29% year on year.

On slide three you can see in more detail the positive operating leverage.

We achieved in the first nine months.

Group revenues were the highest since 2016.

Up 7% year on year.

Across all our core businesses.

Growth is in line with or ahead of the growth rates, we foresaw at the launch of our strategic transformation three years ago.

Despite absorbing some items outside of our control noninterest expenses were down 5% year on year.

This was mainly driven by lower transformation charges and restructuring and severance as we approach the completion of our transformation program.

Our adjusted costs, excluding transformation charges and bank Levy increased by 1%.

Excluding FX our cost base was down 2% as we successfully offset current cost pressures with our savings initiatives.

This improvement in operating leverage drove our cost income ratio down to 73% in line with our full year guidance of mid to low <unk>.

Turning to slide four we believe the strong profitability positions us well.

In the face of a tougher macroeconomic outlook in more challenging credit environment.

The core bank delivered a return on tangible equity of 10% in the first nine months up from seven 5% in 2021 and in line with our 2022 target of greater than 9%.

As a result.

Core bank pre provision profit rose, 40% year on year to $6 4 billion in the first nine months.

And pre provision profit is not only higher but also better diversified across our franchise.

The contribution from our stable businesses has increased significantly.

Corporate Bank private bank and asset management now account for over 60% of pre provision profit.

And with the turn in the interest rate cycle, we expect the contributions from our corporate bank and private bank to remain sustainably strong in future periods.

Let me now spend some time talking to our risk management and balance sheet strength on slide five.

As always we remain extremely focused on disciplined risk management.

We constantly monitor and manage risk through our early identification system.

Notable downside analysis stress debt and selective limit reduction.

We proactively responded to the escalating war in Ukraine, and the broader European energy crisis by a focused hedging and selectively reducing risk appetite and are focused portfolios.

Our underwriting standards standards remained robust even as we continue to support clients through these challenging times.

We are engaged with our key clients on their liquidity needs and we are also working closely with <unk> Avenue and the government on support programs.

Our approach and our resilient balance sheet mean, we have seen limited impact on our risk profile so far.

Our key risk and balance sheet metrics have remained stable since the fourth quarter of 2021 before.

Before the start of the war in Ukraine.

Our CET one capital ratio is now at 13, 3% and our liquidity coverage ratio is at 136%.

Our provision for credit losses increased to 24 basis points of average loans for the first nine months compared to eight basis points for the same period last year.

This is the normalization, we expected following a less benign macroeconomic environment compared to the previous year.

Nonetheless.

We still expect the full year provision to be in line with our earlier guidance at around 25 basis points.

Overall, our credit portfolio quality is broadly stable and despite the volatility we have seen.

Our market risk is managed within our appetite pyramid and we are taking measures to address high risk.

Given the uncertainties in the outlook, we are continuously reviewing our risk appetite and updating our downside analysis to ensure that we remain well prepared for potential further negative development.

Let me now turn to page six in the third quarter ESG related financing and investment volumes grew by 6 billion euros net and the cumulative total since 2020 is 197 billion euros for the group excluding dws.

This compares to a year end 2022 target of 200 billion.

The volume development seen in the quarter reflect the implementation of the new Mifid II ESG reporting standards introduced in August .

We also made significant progress in implementing our commitment to reduce our carbon footprint.

On October 21, we published our net zero target for finance submissions in key industry sectors in the corporate loan book.

These targets seek specific reductions by 2030, and 2050 in full particularly carbon intensive sector, namely upstream oil and gas power generation.

Automotive and steel.

We aim to achieve these targets by supporting clients on their transition strategies on the path to net zero emissions by 2050 in accordance with the Paris agreement on climate change.

And are focusing the dialogue on the topic of mirrors, where we see a high concentration of final submission.

Our methodology envisions, a progressive and orderly phaseout of fossil fuel usage, while incentivizing the financing of lower carbon intensive technologies for clients with credible transition plan.

We look forward to discussing this with you in more detail at our sustainability deep dive in March 2023.

And now before I hand over to James.

Let me summarize our progress to date this year on slide seven.

Our improved profitability in the first nine months of 2022.

Despite a very challenging environment.

Our transformation at position Deutsche Bank on the right track strategically.

This transformation resulted in the strong business performance, we have seen and we are on track to meet our 2022 goals.

Our core bank revenues are rising, reflecting strong momentum across all businesses and the execution of strategic management actions.

Our private bank and corporate bank will in particular benefit from this which will further support our franchise.

We continue to deliver positive operating performance.

This is driven by our improved profitability and built our pre provision profit providing better protection to shareholders.

We continue with our disciplined risk management.

Our third quarter risk profile remains contained supported by a high quality loan book.

Market risk discipline, and solid capital and liquidity.

And we will continue to stay focused on this in light of the environment.

The transformation phase we began in 2019 is nearing completion.

And we have laid strong foundations for the next phase of our strategy to 2025.

We aim to further improve our operating margins as we continue to focus on cost in light of the inflationary pressures.

We are executing on a number of tactical measures to offset these near term pressures and then as we progress with our strategy.

The four key initiatives, which we communicated at our Idd in March would support our cost trajectory.

While enabling further investment.

To be clear.

We stick to our 2025 financial and strategic targets, including our capital distribution plan.

With that let me now hand over to Jay.

Thank you Christian.

Let me start with a summary of our financial performance for the quarter on slide eight.

Total revenues for the group was $6 9 billion euros up 15% on the third quarter of 2021.

Noninterest expenses of 5 billion euros were down 8% year on year due to lower restructuring and severance and lower transformation charges as the prior year quarter included contract settlements and software impairments related to our migration to the cloud cloud.

I will talk about adjusted costs in more detail later on.

Our provision for credit losses was 350 million euros, or 28 basis points of average loans for the quarter.

We generated a profit before tax of $1 6 billion euros and a net profit of $1 2 billion euros and increase of more than three fold year on year.

We reported diluted earnings per share of <unk> 57 for the quarter, which brings the year to date total to one euro and 46.

Our cost to income ratio came at 72% down 17 percentage points compared to the prior year period.

Tangible book value per share was <unk> 26 euros and <unk> 47.

Up 79 on the quarter and 8% year on year.

The return on tangible equity for the group was eight 2%.

The effective tax rate was 23% for the quarter and 24% for the first nine months of the year.

Let's now turn to the core bank performance on slide nine.

Core bank revenues were $6 9 billion euros for the quarter up 14% on the prior year quarter on.

Noninterest expenses declined 6% year on year with adjusted costs down 5% for the same period and 9% if adjusted for FX.

We reported a profit before tax of $1 8 billion euros twice the prior year quarter.

Our core bank post tax return on tangible equity for the quarter was 10% in line with our full year target of above 9%.

And our cost income ratio came in at 68% down from 83% in the prior year period.

Let me provide some detail on the evolution of our net interest margin on slide 10.

The increase in NIM continued to be supported by U S dollar and euro interest rate rises with euro rates now starting to play a bigger role.

It was also supported by approximately five basis points and what positive one off effects predominantly driven by buybacks offsetting the non recurrence of the second quarter one off effects.

We've seen the first rate rises in euro client rates, but for the time being these remained muted compared to our assumptions.

While we expect client pass through to increase somewhat over time. The overall picture remains consistent with the guidance. We have previously shared at this early stage.

Given this we expect the trend for NIM to remain favorable given ongoing rate rises however, possible ECB action regarding deposit remuneration may provide some offset.

Our average interest, earning assets were up reflecting U S dollar strengthening and underlying loan growth.

Before I move onto costs, let me briefly comment on our updated NII guidance.

Interest rate tailwind have increased significantly since the second quarter with effects now well above 3 billion euros in 2025% relative to 2021, however, wider funding spreads were partially offset this benefit if they persist at these levels.

The net impact remains materially better than the impact we flagged to you at the Idd in March.

Let's now turn to costs on slide 11.

Adjusted costs, excluding transformation charges and bank levies increased by 177 million euros or 4% year on year, but declined 1%, excluding FX movements as we manage to offset investments in inflationary pressures with our cost initiatives.

Compensation and benefits costs increased by 185 million euros, or <unk> 92 billion euros, excluding FX effects.

We saw an increase in performance related compensation and further one off costs associated with the establishment of our Berlin Tech Center as discussed in the second quarter.

Non compensation costs remained essentially flat as adverse FX effects and higher business driven costs were compensated by lower deposit protection cost and other cost measures.

If we look at the nine month comparison on slide 12, adjusted costs, excluding transformation charges and bank levies increased by 112 million euros up 1% compared to the prior year or down 2% excluding ex FX.

The year on year increase was driven by higher compensation costs as we discussed in the second quarter, which is partially offset by a reduction in non compensation expense.

Compensation and benefits movement was predominantly driven by the FX impact on salaries, coupled with increases in performance related compensation and one off costs associated with the establishment of our Tech center in Berlin.

Reductions in non compensation expense reflect the bank's ongoing cost management efforts.

Turning to provisions for credit losses on slide 13.

Provision for credit losses in the third quarter was 28 basis points of average loans on an annualized basis or 350 million euros.

The year on year increase reflects a certain degree of normalization in impairments, especially after unusually low levels in the prior year period.

Stage, one and two provision of 13 million euros compared to a net release of 82 million euros in the prior year quarter were predominantly driven by the further deterioration of macroeconomic parameters, but largely compensated by a reduction of the overlays applied in previous periods and otherwise improved portfolio parameters.

Stage, three provision increased to 337 million euros compared to 199 million euros in the prior year quarter.

The increase reflects higher impairment events, but we have not observed material trends emerging and in particular the impact of higher energy prices on provisions is not yet visible.

Moving to capital on page 14.

Our common equity tier one ratio ended at 13, 3%.

37 basis points higher compared to the previous quarter.

CET, one capital increased in the quarter, adding 13 basis points.

<unk> organic capital generation net of deductions for dividend and additional tier one coupon payments added 24 basis points. This was offset by nine basis points from slightly higher other deductions.

The second element driving the strong ratio lower risk weighted assets contributing around 24 basis points.

Almost half of this is attributable to market risk, where we have seen very low var and <unk> levels early in the quarter, which picked up towards the end of the quarter with increased client activity.

The rest is attributable to credit risk and operational risk and credit risk. The reduction was driven by modest growth in stable businesses, which was more than offset by a securitization of leveraged loans and further optimization.

Our leverage ratio was four 3% unchanged over the quarter increase.

Increased tier one capital added four basis points, driven by strong third quarter earnings net of deductions for dividends and 81 coupons.

One basis pinpoint came from essentially flat leverage exposure for.

For the quarter FX translation effect effects led to a three basis point reduction in our tier one leverage ratio.

The combined the corresponding effect year to date was nine basis points.

With that let's now turn to the performance of our businesses starting with the corporate bank on slide 16.

Corporate bank revenues in the third quarter were $1 6 billion euros, 25% higher year on year.

Continued revenue growth was driven by further improvements in the rate environment Commission and fee growth and FX movements. Despite current macroeconomic uncertainties.

Noninterest expenses of 1 billion euros increased by 2% year on year as a positive contribution from non compensation initiatives was more than offset by FX movements.

Corporate bank grew loans to 129 billion euros up by 10 billion euros compared to the prior year quarter, mainly in corporate Treasury services, driven by FX and volume growth.

Provision for credit losses was driven by a small number of stage three events compared to recoveries in the prior year quarter.

Corporate bank profit before tax was 498 million euros in the quarter up by 68% year on year.

Tangible return on tangible equity was 11, 9% and the cost income ratio came in at 63%.

I will now turn to revenues by business segment in the third quarter on slide 17.

Corporate Treasury services revenues of 963 million euros increased by 28% year on year, driven by further improvements in the interest rate environment and a strong operating performance, reflecting higher commission and fee income and volume growth in loans and deposits.

Institutional client services revenues of 400 million euros rose by 22% benefiting from the improving interest rate environment and FX movements.

Banking revenues of $200 million euros grew by 15% year on year, reflecting the transition to a positive interest rate environment in Germany.

I'll now turn to the investment bank on slide 18.

Revenues for the third quarter were slightly higher year on year on a reported basis and essentially flat excluding specific items.

We saw strong revenue growth and rates emerging markets foreign exchange and financing.

This was partially offset by significantly lower revenues in origination and advisory and credit trading.

Noninterest expenses were essentially flat versus prior year adjusting for the impact of FX translation.

Our loan balances increased year on year, primarily driven by higher loan originations across the financing businesses and the continuing impact of U S dollar appreciation versus the euro.

We continue to maintain a well diversified portfolio across regions and industries.

Leverage exposure was higher reflecting increased lending commitments and trading activity to support client flows.

A year on year increase in risk weighted assets predominantly reflects the impact of FX movements.

Provision for credit losses was 132 million euros, or 52 basis points of average loans.

The year on year increase was driven by an increase in stage three impairments.

Turning to revenues by segment on slide 19.

Revenues in fixed sales and trading increased by 38% in the quarter.

When compared with the prior year, the highest third quarter revenues since 2012.

Very strong performance across the majority of the franchise was partially offset by significantly lower revenues and credit trading.

Rates revenues more than doubled with emerging markets and FX revenues significantly higher.

The strong performance was driven by heightened market activity and client flows while also benefiting from effective and disciplined risk management across the franchise.

Financing revenues were higher year on year, driven by increased net interest margin and strong pipeline execution during the quarter.

Credit trading revenues were significantly lower due to the non recurrence of the contribution from our concentrated distressed credit position and the prior year quarter and a market environment that continues to be challenging.

In origination and advisory reported revenues were down 85%, but this includes mark to market losses in our leveraged debt capital markets business. Excluding these revenues declined 63%.

Debt origination revenues were significantly lower due to materially reduced leveraged debt capital markets revenues.

This was driven by a significant industry fee pool decline along with the impact of loan markdowns.

In the quarter of the realized and unrealized markdowns equated to approximately 110 million euros, while we reduced our commitment pipeline by approximately 50%.

Investment grade debt revenues were solid decreasing less than the industry average.

Equity origination revenues were significantly lower reflecting an industry fee pool reduction of approximately 50% and mark to market losses on our residual equity position.

Revenues in advisory decreased by 23% and an industry fee pool declined by 32% year on year. According to Dealogic.

During the quarter, we also booked a gain of 91 million euros relating to the impact of debt valuation adjustments. This was driven by market factors, principally credit spread widening and interest rate volatility.

Turning to the private bank on slide 20 <unk>.

Revenues were $2 3 billion euros up 13% year on year or 5% if adjusted for the net impact of the bgh ruling and specific items.

Higher net interest income continued business volume growth and FX movements more than compensated lower commission and fee income and a more challenging financial market environment.

Noninterest expenses declined by 5% year on year, reflecting a benefit in the quarter from deposit protection cost lower internal service cost allocations as well as incremental salary savings from workforce reductions and branch closures, partially offset by negative FX movements.

Profit before tax increased almost threefold to 447 million euros Stu.

Strong operating leverage improved cost income ratio to 73% and post tax return on tangible equity to nine 5%, which puts the private bank on track to achieve its full year 2022 targets.

Assets under management recorded net inflows of 8 billion euros as well as positive effects from FX movements of 7 billion euros, which were offset by 14 billion euros from market depreciation.

Provision for credit losses of 24 basis points of average loans increased as the prior year quarter benefited from a release of an overlay related to expiring moratoria.

Excluding this impact provision for credit losses remains stable, reflecting our high quality loan book and tight risk discipline in a declining macroeconomic environment.

Turning to revenues by segment on slide 21.

Revenues in the private bank, Germany were up 8% or stable if adjusted for the net impact of the bgh ruling.

Higher net interest income compensated for lower fee income, which was impacted by a decline in client activity in more challenging markets.

The private bank, Germany attracted net new client loans of 1 billion euros.

Revenues in the international private bank were up 22% or 14% excluding specific items.

Revenues, excluding specific items in wealth management and bank for entrepreneurs increased by 24% driven by continued loan growth and higher revenues from deposits supported by rising interest rates.

FX movements also had a positive impact on revenue growth, especially in APAC and the Americas.

Premium banking revenues declined by 8% as higher deposit revenues were more than offset by lower revenues from consumer loans mortgages and investment products.

Continued business volume growth with net inflows in assets under management of 7 billion euros, mostly in Germany in APAC and net new client lows of 3 billion euros, mainly in EMEA.

In the Americas.

The international private bank continues to execute on its strategy to strengthen the bank for entrepreneurs and has successfully closed the sale of the financial advisors business in Italy on October 17th.

We have recorded a pre tax gain on sale of approximately 310 million euros in the fourth quarter 2022.

As you will have seen in their report Dws reported a resilient result, compared to the prior year. Despite the continued market turbulence.

The usual reminder, the asset management segment on Slide 22 includes certain items that are not part of the dws stand alone financials.

Revenues grew by 1% versus the prior year in part supported by FX movements.

Management fees grew by 3%, reflecting higher fees from alternatives, partly offset by a negative market impact and active and passive.

Performance fees were also higher than the prior year, partly offset by lower transaction fees.

Other revenues declined on lower gains from co investments higher treasury funding costs and less favorable fair value of guarantees.

Noninterest expenses in adjusted costs increased by 15%, including FX movements.

The increase in non compensation cost was mainly attributable to professional service fees and costs, resulting from further investments into platform transformation, whereas compensation costs increased due to strategic hirings and higher carried interest costs.

Profit before tax of 141 million euros in the quarter declined by 27% over the same period last year.

For the first nine months of 2022, the cost income ratio was 67% and post tax return on tangible equity was 20%.

Assets under management were stable in the quarter quarterly net inflows of 8 billion euros predominantly in cash in alternatives and 23 billion euros of beneficial impact from FX movements.

Offset 31 billion euros of market depreciation.

Moving to corporate and other on slide 23.

Corporate and other reported a pretax loss of 68 million euros in the quarter.

Compared with a pretax loss of 605 million euros in the prior year quarter.

The improvement in pretax loss was driven by in part by the absence of transformation charges recorded in the prior year quarter, which was principally triggered by the banks migration to the cloud.

The improvement was also driven by valuation and timing impacts, which resulted in a benefit of 199 million euros in the quarter, partially reversing the trend from the first half of this year.

We can now turn to the capital release unit on Slide 24.

The capital release unit recorded a loss before tax of 216 million euros in the quarter, an improvement of 128 million euros from the prior year period.

Revenues for the quarter were negative 17 million euros and improvement of $19 million from the prior year period.

This improvement was due to lower derisking and funding impacts that more than offset the non recurrence of the prime finance cost recovery in the prior year.

Noninterest expenses declined by 33%, primarily driven by a 40% reduction in adjusted costs, reflecting lower internal service charges and non compensation as well as compensation costs.

CRE you reduced leverage exposure by 36 billion euros year on year, driven by the completion of the Prime finance transfer and continued progress on deleveraging.

Risk weighted assets reduced by 6 billion euros year on year, driven by lower operational risk and Derisking.

In the third quarter <unk> decreased by 1 billion euros compared to the second quarter, primarily from lower market risk <unk>.

Looking through to the final quarter of 2022, the capital release unit remains ahead of its year end 2022 targets for both leverage exposure and <unk> reduction and we're confident of achieving the full year target for adjusted costs. Excluding transformation charges of 800 million euros that was reaffirmed at the investor.

Deep dive in 2022.

However markets remain volatile and this could have an impact on financial resources and revenues in the fourth quarter.

Turning finally to the group outlook for 2022 on slide 25.

We believe our strong operating performance in the core bank in the past nine months is a testament to the quality of our businesses and the strength of our franchise.

Reflecting on this performance, we now see upside to our 2022 revenue guidance of 26 to 27 billion euros, particularly given the trends we see in our stable businesses.

Business momentum in the past nine months combined with improving operating leverage makes us even more confident in the delivery of our 2022 strategy and financial goals and that we have the right foundations for our path to 2025.

As Christian noted, we continue to adhere to strict risk management principles, particularly in this continued uncertain environment.

We are very focused on managing our resilient balance sheet, and we reaffirm our expectations for a provision for credit losses at around 25 basis points of average loans for the full year.

And finally, we remain committed to supporting the economy during these difficult times.

Other directly responding to the needs of our clients or working with the government on support programs.

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

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

Thank you ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question you May press star followed by one on their touch tone telephone.

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

Using speaker equipment today, please lift the handset before making your selection anyone who has a question you May press star followed by one at this time.

One moment for the first question please.

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

Hi, good afternoon, thanks for taking my questions.

Like to talk about revenues and then return on <unk>.

So looking to slide 10.

The net interest margin.

You talked about NIM support plus five so one off.

The bulk of this is due to.

Coding.

Yes.

Now you called this one off but I'm just wondering whether we should think about this as a permanent step down in the funding costs.

Steve.

It's an ongoing benefit.

The NIM going forward, so that $1 47.

That will put 47% NIM actually keeps on rising through 2023, rather than taking a step down and then go up again.

And then more broadly could you talk about how you see your revenues putting out full for 'twenty two I know you've given an upgrade.

More specifics on that piece and then how that pans out for 2023.

And then on the return on Peanuts.

As Gordon said, Paul I'll get that.

8% for the past three quarters.

But how achievable is that 8% full for 'twenty two.

Given that in the fourth quarter, but tends to be seasonally weak, sometimes you have a true up in costs.

How confident do you feel about the 8% for this year and again, how do you see that panning out for 2023.

Couple of recession and higher.

There are not sufficient thank you.

Thank you Andrew This question, let me start and.

For the NIM question.

I hand over to Jameson, obviously, he will add to my comments.

On the fourth quarter in terms of revenues.

Based on the trajectory, which we have seen in the first three quarters.

Sure.

Im very optimistic in particular for the corporate bank and the private bank.

What we can see is that the momentum in the corporate bank, but also in the private bank in terms of the interest rate environment, but also in terms of the business volume we see.

We are clearly on the trajectory of further increasing revenues also in the fourth quarter.

Particularly for the corporate bank.

Again for the private bank no stoppage of the momentum.

In the investment Bank. Obviously, there is always seasonality also in Q4, we have seen that from the previous year, but.

Looking at that where we are also in October .

I think we would be around the number which we have seen in Q4 of last year.

And asset management personally I think we expect to be flat. So if I take that all together.

It's another robust quarter on the revenue side.

And.

Then.

If I then go even into 'twenty three actually.

That kind of foundation, which we have built in terms of the.

The revenue growth again in the state of their business and real continuous clearly continues.

While the corporate bank, we expect a similar momentum like in 'twenty two to continue into 'twenty three again, obviously backed by the interest rate curve, but also again and again, but the client volume, we see and also increasing client volume.

Again also here the Moody's upgrade helped we see declines are turning to us wanting to do more business.

In the private bank again, we expect continued revenue growth in 2023.

Further supported by the interest rate environment, we always said that from an interest rate environment. The private bank is lagging a bit the corporate bank. We said that last year you saw it in 'twenty two and exactly is now coming then in 'twenty, three which is <unk>.

Positive.

In the investment bank.

First of all.

Sushi proud of what the investment Bank has shown is showing in 2022, but I do believe we.

We can really say this is quite a diversified business in the meantime, we have three legs to stand on we expect for 2023 and the investment bank.

Obviously.

A better year, and therefore, a better year in the <unk> business very stable financing business.

We've seen the macro business.

A slight reduction versus 2022, because it was an extraordinary good here, but on the other hand I think.

Volatility will not go away and this is exactly what we said in the IBD in March 2022, and we said this volatility we will see for the next couple of years and therefore to be honest rising revenues in private bank and corporate bank.

Clearly rising revenues in both those businesses I think at least a flattish revenues to 2022 and 2023 in the investment bank.

Thank you so to say in asset management. So all what we can see is the revenue number now and we'll get more guidance on chicken in February when we present, our full year numbers, but all I can see us and Jameson Ics is a number which is clearly also a 28 billion in revenues next year.

You also ask on the 8% for the full year.

So with regard to potentially seasonality in Q4.

I revert back to my initial comments on revenues in Q4, very very solid so I think a good set of numbers in terms of revenues also in James May allude to that we have an extraordinary 300 million revenue item in the private bank, which is coming through from the Italian sale and we should not forget that.

Cost all we can see in our targeted Q4 will be lighter than Q3, so slightly lighter.

And then we May also have the one or the other impact James referred to but that makes us very comfortable that the 8% for the year.

Absolutely in reach and that's what we targeted for that was we said three years ago, and Thats, where we will end James Thank.

Thank you Christian and so within that Andrew you'd asked about the NIM. The direction of travel is clearly up we called out items in the second quarter and now in the third quarter that were sort of I'll call them. One offs. It's often a noisy line item last quarter. It was more related to <unk> and sort of technical accounting thing.

This quarter it had to do with the buybacks.

We wouldn't expect a repetition of that but I would expect given the tailwind we have now into Q4 that we would grow over and probably still increase our NIM in Q4 relative to the $1 47, we showed so where exactly it will be in the rounding.

Around that one 5%.

It remains to be seen but where we feel that that tailwind here, especially with with central bank actions still expected in the quarter, we'll clearly be positive.

In terms of the seasonality point that Christian referred to yes, I mean, there's a lot still to happen in Q4, we've got to manage revenues and expenses towards the goals that we set out as kristian alluded to and we've been talking with you through the year.

We're always working towards the gain on sale, we expected from the Italian <unk>.

Transaction the financial advisor transaction. In addition, we do expect our DTA benefit.

Later this year hard to say exactly what that'll be that'll depend on lots of assumptions and input factors, but we sort of called out for something not less than the level. We recorded last year. So those two items helped to offset the seasonality, which quite rightly you would expect in the fourth quarter.

That's great. Thank you very much for that.

The next question is from the line of Tom Hallett from K B W. Please go ahead.

Yes, Hi, guys a couple questions from me. Please so firstly on the cost income ratio guidance, you announced the upside to your revenue forecast for the year.

I'd like to think that would mean better placed within your mid to late seventies cost income range.

So is there any reason to believe that that cost income ratio should not land under the 74% consensus coming out plugged in and then maybe looking towards 2023.

I mean does that range change until given obviously a tailwind some rates and then maybe sticking with cost coming out of it from maybe a slightly different angle. How should we look at 2020 story because on one side that should be significant benefits coming from IPO path caution is initiatives, but then on the flip side you have some shuttle cost pressures coming through.

So maybe if you could just walk us through some of the.

Big ticket cost items that are expected to roll off next year that'd be great and then is it will take that to Ashish I don't know.

Maybe a 3% inflation rate on the underlying cost base.

The next day or do you see that kind of cost precious data. Thank.

Thank you.

Sure Tom It's James I'll start and there's a lot to go into here. So let me just start with the range for the year based on where we come out in Q4.

Absolutely that's what we're working to when we set the mid to low.

So your cost income ratio range. Our hope is to is to achieve something in the low area.

But theres always some variability both on cost and on revenues given we're managing to a ratio.

But with the step off into Q4.

We would certainly target closer to the low end in the middle.

Now there are decisions, we still need to make whether thats.

I think Andrew mentioned events in Q4.

Take place seasonality compensation decisions also restructuring and severance decisions, but our goal would be to be more lower than mid.

Looking forward to 2023, what I'll, what I'll focus you on is the investor deep dive narrative that we talked with you about in March in other words.

The model that we shared to 2025 is really benefiting from revenue growth over the next several years, both underlying and the businesses as they are drivers grow the businesses grow and supported by interest rates.

With expenses essentially flat over that period now to be flat over that period, there's a lot of hard work.

Executing on initiatives to take cost out of the company structurally.

And Thats on technology initiatives front to back optimizing our distribution channels optimizing.

Our employee base and how efficiently we run our processes. So all of that is built into our forward planning and we'd expect and certainly try to manage the company to something like that in 2003. So we do expect some of the benefits already to be showing up in 23 of those initiatives the $2 billion that we laid out in March.

<unk>.

And we've also talked about relatively speaking a linear path on achieving those benefits.

There are one or two items of course that will be delayed and of course, we're dealing with inflation.

But thats certainly the ambition that we have looking forward.

One last item to note just inflation.

It's actually hard to use a simplifying assumption because deflation how it impacts your expense bases that are different for each line item.

So some were relatively more shielded some.

Line items inflation comes through more fully right away.

But something in the <unk>.

Now in the low single digits is certainly certainly would.

Aligned with our expectations and hence that means we need to continue our focus on expenses.

To work to offset that inflationary impact over the over the coming years.

Okay. Thank you.

The next question is from the line of Nicholas <unk> from Kepler Cheuvreux. Please go ahead.

Yes. Good afternoon. Thanks for taking my question I have two please the first one is really a follow up on the cost income ratio.

Because basically you have increased your revenue guidance several times this year, but your cost income ratio target remains the same and I was wondering what your marginal cost income or choice because back at your <unk>. You mentioned that you were investing in low marginal cost and commercial activity. So we could have an update on this would be great and then the second question on cost of free.

<unk>.

Your stage three provision of increased pretty substantially, but it's not driven by energy.

Energy prices. According to you so what's the drivers behind this increase and again looking maybe a bit more so that down the road in 2023, what should we expect and notably with regards to your 20 bps scenario.

Because we promoted worsening macro.

Macro condition assumptions, so what should we expect on that front. Thank you.

So Nicholas Thanks for the questions look we we've actually been pretty consistent in guiding towards the upper end of the range of that 26% to 27%. So I'd say, we've been managing costs more with the expectation of the high end and where we are.

Getting them, perhaps a little bit of a benefit above that given in particular, the strong Q3 performance.

And so the question just before.

We've given ourselves a range on cost income ratio I think we have a path now to something more in the lower end of that range. So I don't see there to be a significant deviation in terms of the.

Ingredients, we've given you and and where we currently expect to come out.

Your underlying question about module cost income ratio is a fair one and we've talked in the past about working to make our cost base more variable about investing in and very positive.

Marginal cost income ratio.

Businesses and of course, we have the uplift ahead in the next several years from interest rates, which while not entirely free obviously should have a very strong marginal.

Impact.

In essence the <unk>.

Questions answered by the target in 2025 from where we ended this year, where we are right now it's something like a 10 slightly more than 10% improvement in the cost income ratio and given the model we shared back in March.

That is achieved with <unk>.

Flat costs and rising revenues over time.

There is a lot of hard work that goes into the flat costs.

But but to your point, we would become becoming more variable over time and benefiting from increasing contributions from high marginal cost income ratio revenue sources.

So that's definitely our pattern and what we've been working towards.

On the stage III look where.

It's obviously, an uncertain environment the way I would characterize the credit environment at the moment as well.

We're all looking ahead to some of the risks that we see in the outlook.

But in the if you like backward looking risk metrics.

There is no sign yet of that credit credit cycle starting.

As the impact of energy cost flow through the economy as we see a recession there will of course be some deterioration.

And we're prepared for that as I say, we reaffirm our guidance for this year at this point that implies.

Credit loss provisions about in line with Q3.

For Q4, and we feel pretty comfortable with that based on what we what we see in note today.

If we look to the future.

I would characterize it as we've always given you a range of of normalized plp's somewhere between 20 and 25 basis points.

Perhaps we're a little bit worse than that next year as we go through that cycle.

But.

But.

We're not expecting a dramatic deterioration from where we sit today.

And so why is that outlook relatively speaking probably to your ears.

Domestic given the scale of the challenges we faced we always go back to conservatively underwritten lending.

Tight risk appetite.

Structured well collateralized portfolio.

We sort of rely on to see us through this cycle.

Has done in recent cycles. So hopefully that's helpful. In giving you some color on our thinking and I would add to the last point.

That you can already see that there was a very positive reaction actually in the Germany economy.

The announcement of the support program of 200 billion.

Now obviously it needs to.

Be detailed out in terms of structure, but this is exactly tailored to the mid cap companies and small businesses first of all we have a very diversified portfolio. There so I'm not afraid of it.

Any way of the portfolio, but secondly, as this money is exactly tailored for these companies I think in this regard.

The government did the right thing and to that would be also supportive to our numbers and therefore I agree with James that I think when it comes to next year.

The range of 20 or 25 basis points is in my view the right one, but even if you think that overall there was a deterioration given that support program and our structure of the portfolio I think it's actually beneficial for that portfolio in Germany.

Thank you very much.

Next question is from the line of Adam <unk> from Mediobanca. Please go ahead.

Good morning, I wanted to do the afternoon I wanted to dig into some of the NII disclosures I appreciate you might need to caveat. Some of that's ahead of the ECB tomorrow.

What is in your third quarter numbers, the technical spreads on LTI rate was there any benefit there and how is that modeled through to kind of the next few quarters.

Secondly, could you update us on your kind of NII upside for this year, but also into next year and give us any sort of sensitivity around tearing or LTR alterra technical spreads being removed due to that.

And then finally just around the NIM. It sounds like you are relatively confident that NIM will be gearing up Q1, Q irrespective of what's announce tomorrow.

Any changes from the ECB is that the right way to read it and if so should that mean key on key momentum in corporate bank and private bank revenues or at least the NII continues for Q4 and into Q1 next year. Thank you.

Thanks, Adam.

Lots to go through an in NIM land.

Look so <unk> was relatively minor in terms of its impact in Q3. So so a kind of very low double digits. In Q3 as you know there've been some there's been volatility in how <unk> is recognized on our numbers from a just from an accounting perspective.

But that should that should pick up on the terms of the program next quarter, and we probably have say $90 million in Q4 coming from <unk>.

If you ask me what would be at risk.

In the full year, depending on how retro active the decisions are maybe a little bit more than that.

But <unk> certainly.

Should be a benefit in Q4 on the current terms.

Looking to next year.

There is there is even more at risk you could at least annualize that number as being.

The the at risk amount in <unk> under those terms and obviously, we can share some thoughts with you if you're interested.

Underlying that though just from the interest rate environment. There is there is a huge tailwind coming through at this point.

So if I if I give you the sort of gross number of the of the current interest rate curve running through our balanced balance sheet sequentially that is 'twenty three relative to 'twenty. Two you would see probably a $2 billion revenue upside coming from from the current rate curve on.

On a equivalent balance sheet, if you layer higher funding costs into that that might takeaway $400 million.

And perhaps the same amount at risk as I mentioned on <unk>.

But tying into Christians earlier point about the revenues and our outlook for next year next year. We think we have at least 1 billion somewhere between 1 billion $1 billion to on a net basis, even with a negative outcome on the <unk> program.

So all of that sort of feeding into our our commentary and thoughts about about the direction of NII and of course that goes with it.

Did that cover all your all your questions Adam.

Just two clarifications one the <unk>.

<unk> technical spread presumably.

Drops out $3 $24 25, so it's only a short term noise in your NII guide through 'twenty five.

Net basis is post probably quite conservative deposit beta assumptions.

Yes, so another interesting topic to go into on deposit beta but.

Yes, we published last quarter, our <unk> CRO maturity ladder. So I'd refer you back to that in our disclosures precisely for the reason we thought it was important for investors to see.

How that plays out of course that doesn't give you for each of the programs.

What the average rate would likely be but to your point Adam.

On the current terms the effect in the first half of next year is the strongest there's a significant maturity in June and so after that it tails off but it's still beneficial through to to the final maturities again on the current terms.

So Adam I, just wanted to make sure that exactly that what James said at the end is really clear to all of the North of 28 billion number I mentioned includes the potential <unk> reduction.

Which is important I think you'll see then the conservative approach we are taking.

But let me also say and I think we should say that it would be hugely disappointing if something like that is happening.

Forget about the impact on our financials I think you just saw very nice number anyway on the revenue side.

But that is an implicit contract between the central Bank and <unk> and we did our job we lent the money to the economy exactly what we want to do and then changing retrospectively in my view not the right thing and that is actually also question how the Investor community. We will look at Europe , and therefore, I'm, making this statement because I think.

It is.

It is it is actually a very critical move and therefore I hope.

We get some positive news tomorrow.

Very clear thank you Roger.

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

Hey, good afternoon, and thank you can.

Can we talk about the private bank again.

Obviously, there sequentially risk costs increased quite a bit 60% or so 260 million, but the stage three loans only went up marginally so.

So the run rate now going forward or is this a one off adjustment and can you give us any statements on how you see asset quality at the moment in that division, both domestically and abroad volume margin trends and how competition is behaving at the moment that would be super useful. Thank you sure Danielle.

For the questions James again.

So the sequential increase in <unk> in private bank really reflect two things one is the absence of benefits from nonperforming loan sales that we've conducted and the prior quarters. We actually had some help in Q1 and Q2 from those sales and we didn't have an equivalent.

Event in Q3 and in addition, one of the what we sometimes refer to as idiosyncratic stage III events did take place and the private bank.

Which further pushed up the number so if you wanted to run rates on a net basis I'd, probably say, it's about $125 million per quarter run rate.

For <unk> and the PD portfolio of course, it'll vary around that number but that's a fair I think a fair assessment.

In terms of asset quality.

Where I think you may be hearing from some of our peers.

Confidence on asset quality.

The statistics in that portfolio are just rock solid they've been very stable through the past several quarters and no indication of of a deterioration, which is obviously pleasing. It speaks to I think the quality of the portfolio, but also the environment that that so far hasnt hasnt.

It really began to reflect some of the risks that we all see ahead.

On volumes and margins.

I think hopefully the spreads by and large have widened a little bit in the in the third quarter. So.

So we're seeing I think encouraging developments in terms of spreads on lending, there's only one or two portfolios where we are.

In the other direction, so so by and large good.

Developments there.

Volumes are probably moderating a little bit and again it depends on the product so mortgages in Germany.

As you probably see from from external numbers.

Begun to slow reflecting activity reflecting pricing.

But.

But that doesn't mean is stopped.

Still activity there is still appetite for new lending out there so.

I would say by and large those those developments are all reasonably encouraging and on the on the loan portfolio side and the private bank and Daniela.

On the on the credit side I, often get asked on the mortgage portfolio.

And in addition to James' comment we should never forget that our mortgage portfolio is at least the vast majority comprised of fixed launch so.

That is obviously, a big difference to some of our.

In other European countries.

So the the risk, which which are the six from from the changing interest rate environment in our portfolio is actually when it comes to mortgages negligible.

Just one other point to make that on your question as deposits.

We're not seeing any sort of unusual behavior in terms of the competitive environment for deposits in the marketplace. So overall there.

At least at this point in the cycle.

A still a positive environment competitively in the deposit market.

That's great. Thank you.

Danielle.

Next question.

Comes from the line of Chris <unk> from Goldman Sachs. Please go ahead.

Yes. Good afternoon, everyone. Just two questions one on IP and one a bit of a follow up on the.

On the market conditions question just earlier so on the IP you talked about some of the moving pieces in terms of absolute revenue growth, but I also wondered if you.

<unk> seen any meaningful changes in terms of market share dynamics, either this year or as you head into next year.

And then secondly on rates, we're now a couple of quarters into seeing rates play out through the P&L.

Spoke about some of the dynamics in the private bank and I wondered whether you've seen anything surprised you so far in terms of clients or competitive behavior in the.

Corporate bank.

Yeah, Let me start on the investment banking side, and then James will follow up on the on the second question and obviously add to the first question on.

First of all again I'm feeling confident in the investment Bank also when it comes to 2023, given the diverse business. We entertain again, our key strengths is in the financing business and in the macro and the micro business clearly and now let's see for the official Q3 numbers, but you have seen it.

The previous quarters, we gained market share.

Significantly over the last two years almost quarter by quarter.

I do think that reflects the focus we have given on the on the.

<unk> business the setup around <unk> has taken there.

The rating upgrades, which we have seen the latest one was moodys again, all placed into into our favor and I would say in certain markets.

We almost gained a top market position again.

And therefore, I think that is clearly something which also drives then the momentum into the next year, we still expect volatility in the market and that helps us on.

On the <unk> business in the <unk> by the way we.

Gave up market share, but to be honest kind of on purpose, because we slowed down our underwriting already at the end of Q1 or in Q1.

And therefore, you can also see that in the new underwritings.

Reduced market share, but that is an on purpose behavior and we can also see it now when I look at the pipeline and the commitments we have out there and the losses. We have taken I think this was the right strategy by the way to be very clear, we will stay in that business that is a very important business you've seen some announcements loss.

Year last week that we obviously also adjusting our internal capacity to the volumes, we see but this is a very important business on the financing side. It fits other businesses like the M&A business.

On purpose, we have reduced our appetite and therefore a bit of reduced market share in that business otherwise I would say we are behaving in line with the market actually very happy with the performance.

<unk>.

So I'm confident for 'twenty three.

Chris to your question about competitive behavior or client behavior in the corporate bank no no surprises there I think everything is playing out.

In a business as usual type of way, we are seeing better well.

People, often referred to as beta outcomes.

Then the modeled outcomes would suggest not just in corporate bank, but also in the private bank portfolio.

Although it's early days, it's hard to say.

That's a trend or noise in the numbers.

But we've.

And in particular, whether it's a lag in pricing that's producing that more favorable outcome. So I think one would expect it to catch up with the modeled outcomes, but right now the lag effect.

It seems to be beneficial in both portfolios or major deposit books.

And as I mentioned, a moment ago, we don't see excessive competition for deposits given we all go into this rate cycle with with relatively high levels of liquidity and on the bank's balance sheet and in the marketplace.

Okay. Thanks.

Thank you.

Next question is from the line of Ryan <unk> from RBC. Please go ahead.

Yes, thank you very much.

Thanks.

Just two small ones.

<unk> got the dividend.

Got it.

Yes.

Thank you.

There are no from collecting now basically moved to a payout ratio for 2020.

Thank you.

And then just on.

When you buy those from timing that census, happy reached a point, where we have gone through with us.

Thank you.

Thanks, Thank you.

So yes, we have given a very clear dividend path in March.

That on that past 30, <unk> per share would be the expected divvy.

Dividend in respective 22 paid in 'twenty three.

And that's something that we're very focused on delivering to our shareholders.

No change in the payout ratio thinking when we talked about a 50% payout ratio it was from 2025.

And that again is consistent in our thinking.

So no changes in those plans as it relates to valuation and timing differences in corporate and other.

Always uncertain, we did start talking last quarter about pull to par benefits given how significant the drawdowns have been in the first half of this year and so we are seeing a little bit of that.

And there will be more pull to par in the years ahead, particularly.

In the post three years from now.

A lot of that really all of that loss in Q2, and H one would come back.

But in a sense the pull to par benefit is then.

Part of the of also the Viente impacts driven by both the volatility and the level of rates.

And particularly the FX markets.

That we see so it's really hard to predict obviously helpful that we reversed in Q3.

About the same amount as we had booked in each of Q1 and Q2.

But I wouldn't at this point I think it's far too early to call an outcome that we get it all back in Q4 and in fact, we could could very well go back to a negative result in the <unk> line in Q4.

Okay. Thank you.

Your.

Our next question is from the line of Stuart Graham from Autonomous. Please go ahead.

Thanks for taking my questions I had a couple of high level ones. This turnaround please.

The first question I think it's a Christian you mentioned the uncertain environment several times in your commentary and given the elevated risk something breaking in the system central banks rapidly raise rates I guess it'll be all it was an example of that which areas. If any of you watching particularly closely right now please.

The first question and then the second question maybe also for Christian.

Look of course, having to Nash or friend sure their supply chain in the future do you have any preliminary thoughts on what that might mean for <unk>.

The potential additional revenues in your 2020 planning horizon. Please thank you.

Thank you Stuart.

Look it's always it's always hard in these kind of I would say complex geopolitical and economic times to call out.

The kind of the.

The item Im looking most of them, but I think it's.

Inflation, I think we need to get inflation out of the system for the society and for the economy, Therefore actually I'm glad about the key of statements by the central banks.

You have known Stuart I have been out for 15 months now in the mid of 'twenty, one disinflation, some temporary but more permanent and we also argued for interest rate increases far earlier, because I do think that this is an issue.

Actually.

Will impact the economy in particular in Europe going going forward, if its not Ford adequately and now I do think the steps are the right ones by the central banks I hope that they continue that even if the economy is slowing down that is all in our base case in that is all in the numbers.

James and I gave you before that assumes a slowdown of the economy, but I think it's the right thing to overcome inflation as soon as we can so that would be my first answer second answer is spot on.

Stuart.

We have a lot of discussions actually with corporates about reorganizing their supply change, making sure that they have diversified supply chain.

That it goes a little bit from.

Just in time to just in case that is actually the discussion we have which was our corporate clients.

And in this regard it is on two fronts to be honest.

Incremental to our business and positive for our business.

In the corporate bank with our cash management with our network of network, which we can offer around 60 countries. Because you see a lot of German corporates, who are thinking about diversifying their supply chain within Asia to go from one country to the other thinking about establishing other locations in Asia, but also.

In South and Latin America, where we are present, so that is one secondly, it goes into our corporate finance advisory business that.

And that obviously, we are very close also to the larger German family owned and Midcap companies.

Not always talking about the <unk> companies and having strategic discussions on the corporate finance levels with these combination that's increasingly picking up again, they look forward advice from a research point of view.

From an M&A point of view and then when it comes to execution from a day to day banking point of view and then we have the corporate bank. So while it is a challenging topic. It is.

Suddenly incremental and positive for our business in the investment bank and the corporate bank.

Thank you could give a sense of when you might just put some numbers around that.

Look.

I think.

<unk>.

It would be a bit too early but as we promised we'd give you a little bit more guidance.

On the second of February when we come to 'twenty, three and the reconfirmation of our 25 guidance and having your question in no I will remember your questions, we'd give some answers to that yes and.

And maybe I'll just add one thing Stuart to that numbers around it. So I remember in March when we talked we gave a compound annual growth rate in revenues for the corporate bank of 6% to 7% and I think people reacted and thought that was punchy.

And look some of the just sort of economic growth related lending may not arise or may slow in 'twenty, three and 'twenty four.

Slower growth economy than we might have predicted as we built our plans for that we shared with you earlier this year that said.

I would think to all of the points that Christian just mentioned that there will be increased demand for lending given near shoring given the the need chipset or reinvest in the energy infrastructure in Germany, and what have you. So so in a sense.

I suspect we'll come back to you to say, it's on a net basis supportive of the numbers that we shared obviously with interest rates being being far more supportive than we'd anticipated back in back in March so so by and large again a.

A pretty supportive backdrop for the corporate bank over the years to come.

Got it thank you.

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

Yes, thanks for taking my questions.

The first question is.

Just around cost flexibility and James.

Talked a little bit about that topic.

Assuming that that we are running into tail risk scenario, let's assume that revenues actually youre going to be down $3 4 billion from the 28 billion that you are expecting.

Expecting next CEO could expect and provisions actually double your provision guidance for next year as well.

What's the cost base look like.

That scenario and I assume you run the scenarios and the reason why I'm asking is because I really struggle to get a feeling for flexibility in your cost base at this point.

Even then I do variable fixed cost adjustments et cetera could you give some data.

I just wanted to see how I should think about flexibility.

And then the second question is around.

Provisions.

The message is cautious around what's happening around you, but at the same time, you're very upbeat on provisioning outlook.

Especially into next year as well.

Sure.

Im just wondering what your base case is again here and.

Whereas the tail risk or in that scenario.

Yeah.

Thank you Kian.

Look happy to answer that I'm still trying to digest, where you get to $4 billion of revenue downside, but.

Even if this happens.

Thankfully we are profitable let me add this is a first statement. Obviously, then we would not achieve an 8% return on equity if you would take a $4 billion revenue decline because obviously it would be anything else incredible if we can.

Also if I would tell you we adjust the cost by that number down in a year's time, but first of all we.

Have.

An investment budget, which again this year was higher than last year, which again next year is planned to.

Our sofa.

Our planning discussions, which we have so far which is in line or even slightly above this year, which we would obviously capex. So before we even start to discuss on variable comp.

We would go into investments, which we would do in which we want to do in our business, which we would postpone which we would stop.

And there is a good amount.

I would say, which we can take very quickly out of the system that's number one.

<unk> you just mentioned it in such a downside scenario where revenue split <unk> again.

I think James and I have shown to you that our revenue guidance was spud on over the last three years when it came to the individual businesses for the <unk> III stable business.

Hi.

We almost can't forecast the revenue to the last 100 million for next year.

Given that what we are seeing.

That would mean.

You would you would assume almost half 50% reduction in the investment bank, which on our end.

On the basis of the financing business, which is pretty stable as you know.

The market share and the positioning we have achieved in the macro business.

And then also in the <unk> business, which was very weak this year and which is starting in my view to reemerge next year is again would be addressed stick number but of course, we would adjust the VC and PVC would be then a material reduction to that what you had seen last year, what we have in our mind for this year. So this.

Is another.

Hi, three digit number, which we would take out of course in such a scenario.

On top of that.

We as James was saying we are trying to do everything on the 2 billion cost safe to have kind of a.

Linea <unk>.

Over the years.

I would say.

Equal reduction of cost, obviously more than 24% and 25, but also already in 'twenty, three which bring down the cost and we would in such a scenario, obviously do a completely different job on hiring all of that.

Significantly bring down the cost in such a downside.

And therefore, yes, we could not obviously compensate for a revenue loss.

You are now having in your mind in the downside scenario, but we would obviously.

I would say materially reduce our cost base in Lisa just the first three items I would mention to you.

Number two on the on the risk cost again, our base case and James Please.

That obviously also to the cost comments I gave.

On the.

The risk of our base case is around the 25 basis points, which James mentioned, so approximately $1 3 billion. It's obviously in such a scenario, where we are very hard to forecast, but I think also there we have done Qian quite a good job over the last two years in bringing early out a forecast for the year.

Remember for the Colgate here I remember for this year and we were pretty much spot on on this one so all I can see from the behavior of the portfolio just in German mid caps in the private bank portfolio.

In the international portfolio in the real estate portfolio and the funded <unk> portfolio.

I think the 135 to $1 4 billion absolutely solid number if we think about the downside including gas rationalizing.

So to say.

A worsening crisis in Europe , which by the way I can see given the storage levels of guests where they are the very warm October we should really think about that.

Take that into account also for the next six to nine months, but what happens in Germany. Because these are positively impact the 200 billion, which coming but even if I think about the downside.

I think Olivier and the team rightfully so.

Doing obviously, a monthly rerun of their portfolios.

Keeping up with the $1 billion over 18 months of additional loan loss provisions of which we would see in a severe downside.

But again with the pre provision profit, which we show of over 6 billion for this company I think that is again, something which we are able to withstand James.

James really nothing to add I think you I think you've covered interest in it.

Ken there's always there's always a place to go in terms of severity of stress scenarios.

But as we analyze it.

A reasonably stressed environment next year.

Would see us at at revenue numbers far higher than the sensitivity that you outlined and and PLP numbers I think more in line with what Christian just described.

In the scenario that we've put in our disclosures last quarter and this quarter. So.

Just while were focused on <unk>, our cost base no no disagreement with you there we just don't see that the same.

Levels of sensitivity that you that you are positive.

Thank you very much.

Thanks, Tim.

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

Alright, thank you.

So just wanted to come back.

Thanks, Paul about the NII sensitivity.

Just on that kind of to the impasse.

Number that you gave in terms of benefit next year before that.

Central offsets.

And just to make sure I understand that correctly, because I guess that would add about one trillion.

Earning assets.

The increasing that.

By about 200 Bips.

This is about a 30% beta.

Hi.

About.

Yes.

290 days, so that you all kind of right.

And.

I just wanted to check.

Yes.

If you think.

And with that kind of benefit and there will be any other kind of.

Thanks.

Yes.

I will say, just whether you see any kind of risks and taxation.

<unk>.

From that kind of benefit.

That will be coming sorry. Thank.

Thank you.

Yes, Thanks, Amit I think more like more 20 basis points against the trillion of interest earning assets.

And that I think is a reasonable level to assume so.

Our margin next year sort of somewhere between $1 71, 8%, we think is entirely.

Achievable again with with some of those those netting effects built into the numbers.

So we are.

There's a lot of moving parts here around betas.

Eggs where rates actually are.

What if any unusual items are built in and one area that we're really focused on here is managing down our funding costs.

Where we're not comfortable with the spreads where they are right now we don't think they speak to the underlying credit quality of the firm.

And we'd like to see them come down and that could give us a slightly more favorable environment into which to issue next year, but as I say lots of lots of different.

Pieces of that puzzle on the taxation side look I.

I would just.

Really emphasized the banking industry in Europe is coming back from a period of of depressed profitability, reflecting the interest rate environment that we've been living in since 2014.

And before but negative since 2014.

So the idea that there is sort of excess profits being earned in an industry that has that is trying to get back to its cost of capital is one that I would I would certainly dispute regardless of the political impetus that's out there.

So I think.

Additional taxation, especially in Germany to try to.

Sort of balanced some of the fiscal pressures that are out there.

I would view us as.

A challenging policy in this environment, especially in environment, where where the governments are looking to the banks to support the economies.

And all of that we need to travel through in the next in the next several years.

And so.

It obviously has been enacted or considered in a number of different countries, but it's not something that we are particularly focused on at the moment and we think it's.

It is.

From a policy perspective, potentially a double edged sword.

Thank you.

Yes, sorry, I'll just say thank you guys.

<unk>.

Yes. Thanks.

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

Okay.

Good afternoon, and one on <unk> and then one follow up on the NII guidance and just lastly on <unk> you talked about strong growth in ATM, FX and financing and you, particularly called out right having doubled year on year, there's clearly been a sizable tailwind for you I was wondering if you could provide any visibility on how that breaks up.

Out by region.

Because if we do see that.

Peak out early next year, one would assume that the volatility that might ease somewhat.

So in snacking, you can say on the regional breakdown of the.

Rates revenues, given your commentary about revenue being at least flat next year.

And then second question on the NII.

You talked about well above $3 billion incremental in 2025 back to 2021, I think you said there'll be some offset from higher funding costs and you called out about $400 million.

<unk> has come and gone by that point, regardless of what the ECB Maher.

So.

Yes. My key thing is what are you assuming in terms of deposit volumes I don't think migration to time deposit.

Because that's obviously a trend that we've seen play out at some of your U S peers and even some of your continental pads as well. Thank you.

Thanks, Andrew.

Actually I don't have a specific breakout of revenues in rates.

By by region, and how that's changed over time, it's certainly something we can follow up with you through IR, but.

What I can give you a sense of is just the franchise strengths.

That we have in there I will say.

First of all revenues are up in.

Both that as all regions. So so thats a positive.

EMEA has been particularly strong as we've achieved really a leading position in European government bonds and European rates.

And that's something that we've been working hard to Rob <unk> and his team in particular I think had focused on and we're pleased with that development, but that isn't to say that the market position in the U S. Isn't isn't also strong we've been investing there and I think you've also kind of repositioned the firm.

Especially in difficult markets, we've been very focused on providing good markets to our to our clients in even in sort of volatile environments, and I think thats that sort of.

Really being showing in terms of client feedback and what have you. So so encouraging trends overall in rates, which one would hope will serve us well also when volatility begins to normalize.

The $3 billion through to 'twenty five.

Absolutely correct.

It's well above that number so significant upside from rates more more by far than we had assumed in the numbers. We shared with you in March that said there are these offsets by 2025 <unk> no no feature so.

It's really just a question of funding costs now in the funding costs, you've got to remember that more of our existing unsecured debt stack would have rolled over by that time, so the $400 million from next year call. It.

Our 350 would increase over the years as more of the debt stack is replaced at higher spreads. So so that grows to $1 billion or more.

Obviously highly assumption dependent which is why to the answer to my light to the last question, we're very focused on.

On working to improve the rating improves the unsecured spreads because it's a it's a significant feature.

We expressed it in.

In compound annual growth rate terms.

In March and so there just to give you a simple assumption.

Our rates net of funding costs might have been 1% contribution over the four years at that time now I would assume at least 2% on a net basis, probably a little higher so so that.

Yes.

Where we sit today in a reasonably conservative view.

Yeah.

That's very helpful. Thank you.

Thank you Andrew.

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

Hi, Thank you just some follow ups on the dividend and distribution policy. Please.

Firstly have you given us.

Euromillions dividend.

Dividend accrual amount year to date have not seen it I know you told us last quarter I'm not seeing it for this quarter.

And then just on the payout. This year are you, saying that the <unk> targets that you have.

<unk> pay is the most it could be that you wouldn't go higher than that.

And then sort of broadening out from that how will you think about capital returns at year end this year and.

And how much you might be able to do by buybacks or whatever in the very short term.

Is that relative to a ratio or is it doing a bit more than last year. How would you how would you think about that.

So Jeremy early early to talk about it on the buyback side.

The dividend distributions, yes, no we laid out that that sort of curve of doubling that.

The per share distribution each year for the next several years and Thats something that we want to stick to we thought that that was prudent and appropriate and gave our investors a very clear path that would translate to about $600 million.

Next year, we have now accrued about 600 I shouldnt use the word of crude we have now set aside in our in our Prudential.

Prudential accounts $650 million.

And so so.

Anything that is further set aside from an accounting perspective.

Or deducted in the fourth quarter, we will come back in the second quarter of next year as it relates to the buybacks look it's early to make that decision as you know buybacks were considered in our in the plans we shared with you in March.

But theyre also the place where there is flexibility in two to increment the distributions or to slow them down based on what we see in the environment and all of the other all the others.

Influences or flowing through our capital planning. So early at this point to to give you any indications what our thinking is there for.

For next year.

Okay. Thank you.

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

Yes. Good morning, guys forgive me I got one question that Richard just on the German <unk> merger projected margins if any.

Update you can give us on that I think you mentioned last quarter.

Something around 150 million.

<unk> expense in 2003 from extending the life of some of those programs. If you could just update us on that great. Thank you very much.

Sure. Thanks peers yesterday, we disclosed sort of deepen the earnings report that there's probably it's probably delayed further and what we wrote wasn't to the middle of 2023, which you should read as either <unk> or <unk>.

And so that's a further delay the expense assumption, we have up to $200 million against the 150.

From July .

Now what's the underlying issues there that is a very very large and very complex.

Gration.

One that we are making a lot of progress on for sure.

It goes in waves, but I think it is important to note that our sort of risk tolerance. There is essentially zero.

So we need to give it the time that it's needed.

To do so in a testing.

Testing complete.

And as I say really no appetite to take risk on each migration. So we're working now on what is being critical for us which is the year end ways.

That is specific particularly important for certain product types and then we have in parallel underway. The preparations for the waves in the first and second quarters of next year and we'll wait to see.

What the results are from the testing and what have you, but our current estimate is the middle of 'twenty three with an incremental cost relative to our planning sort of if you like two years ago back when we shared with you in 2020 of about $200 million flowing into 'twenty three no change to our long term.

Cost benefit and also strategic benefits from that investment.

And I think the only it again I think James said it.

There is no postponement of any waves before that so it's not that we are moving away from whatever December to March. It's just the incremental waste in order to be absolutely on the safe side. The next wave is expected I think December 31st right.

That's very clear thank you.

There are no further questions at this time and I would like to hand back to you on our patronage for closing comments. Please go ahead.

Thank you and thank you for joining us for our third quarter 2022 results call and for all your questions. Please don't hesitate to reach out to us in Investor relations with any follow up questions and with that we look forward to speak to our fourth quarter call in February . Thank you.

Yes.

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

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Thank you for joining us for our third quarter 2022 result call as usual, our Chief Executive Officer Christian savings will speak to that.

Followed by our Chief Financial Officer, James von Moltke. The presentation as always is available to download in the Investor Relations section of our website <unk> Dot com.

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

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

Thank you your honor a warm welcome from me as well.

Asia to be discussing our third quarter and nine months results with you today.

We continue to operate in a difficult and uncertain environment.

We are mindful that the economic impact of the war in Ukraine at the energy crisis.

Yet to be fully seen.

However, despite these challenges we are progressing towards completion of our transformation strategy.

Our efforts continue to be recognized by our stakeholders as we saw with the rating upgrade from Moody's earlier this month.

And we believe our progress is reflected in our third quarter and nine months results we.

We delivered our highest third quarter pre tax profit.

2006 and.

And our best nine month results.

<unk> thousand 11, as we work toward our 2022 financial goals.

Turning first to our purple.

Positive trends, we saw in the first half of the year continued in the third quarter.

We delivered group revenues of $20 9 billion in the first nine months, an increase of 7% year on year.

We also achieved average revenue growth of 10% year on year across the four core businesses.

Driven by business volume growth market share gains improving interest rate and business investments.

All of which will support sustainable growth in future years.

And the first nine months of 2022, we generated an 8% return on tangible equity in line with our target and up from four 8% in the first nine months of 2021.

This is the result of increased profitability and efficiency.

<unk> profit for the first nine months were $3 7 billion up 68% year on year, reflecting our improving pre provision profit.

Our cost income ratio was 73% for the first nine months down from 82% in the prior year period.

We also proved our resilience.

We maintain strong risk management in this challenging business environment.

Our vision for credit losses was higher but contained at 24 basis points of average loans.

We are well capitalized we finished the third quarter with a common equity tier one capital ratio of 13, 3% up from 13% in the second quarter.

And above our target minimum of 12, 5%.

Now let me take you through the progress in our core businesses on slide two.

All four core businesses delivered strong post tax return on tangible equity in the first nine months.

This gives us confidence that our 2022 target and ambition.

Well within reach.

And the corporate bank revenues are up 20% year to date.

Thanks to the further improving interest rate environment and higher fee income supported by volume growth in loan and deposits.

Return on tangible equity was 11% a four percentage.

<unk> point increase year on year.

In the investment Bank continued client engagement and strong risk management.

Our leading <unk> franchise.

Revenue growth of 8% with particular strength in our <unk>.

Our core trading businesses.

The investment bank delivered a return on tangible equity of 12%, despite lower origination and advisory activity at market became more volatile.

The private bank boosted its return on tangible equity to 95%.

By delivering a more than threefold rise in pretax profit in the first nine months.

7% revenue growth.

<unk> backed by net new business of 36 billion year to date.

Including net inflows into assets under management.

<unk> loan growth.

In addition, the business continued to optimize the distribution channel with the closure of more than 130 branches.

Asset management delivered revenue growth of 4% year on year.

Moving its resilience in a much tougher market environment.

The business achieved a 20% return on tangible equity, while continuing to invest in growth initiatives and platform transformation.

This strong performance across all core businesses enabled the core bank to deliver nine months.

Before tax of $5 6 billion up 29% year on year.

On slide three you can see in more detail the positive operating leverage.

We achieved in the first nine months.

Group revenues were the highest since 2016.

<unk>, 7% year on year.

Across all our core businesses.

Growth is in line with or ahead of the growth rate.

So at the launch of our strategic transformation three years ago.

Despite absorbing some items outside of our control noninterest expenses were down 5% year on year.

This was mainly driven by lower transformation charges and restructuring and severance as we approach the completion of our transformation program.

Our adjusted costs, excluding transformation charges and bank Levy increased by 1%.

Excluding FX our cost base was down 2% as we successfully offset current cost pressures with our savings initiatives.

This improvement in operating leverage drove our cost income ratio down to 73% in line with our full year guidance of mid to low 70.

Turning to slide four we believe the strong profitability positions us well.

In the face of a tougher macroeconomic outlook in more challenging credit environment.

The core bank delivered a return on tangible equity of 10% in the first nine months up from seven 5% in 2021 and in line with our 2022 target of greater than 9%.

As a result.

Core bank pre provision profit rose, 40% year on year to $6 4 billion in the first nine months.

And pre provision profit is not only higher but also better diversified across our franchise.

The contribution from our stable businesses has increased significantly.

Corporate Bank private bank and asset management now account for over 60% of pre provision profit.

And with the turn in the interest rate cycle, we expect the contribution from our corporate bank and private bank to remain sustainably strong in future periods.

Let me now spend some time talking to our risk management and balance sheet strength on slide five.

It's all we remain extremely focused on disciplined risk management.

We constantly monitor and manage risk through our early identification system.

Notable downside analysis stress debt and selective limit reduction.

We proactively responded to the escalating one Ukraine at the broader European energy crisis by a focused hedging and selectively reducing risk appetite and are focused portfolios.

Our underwriting.

And it has remained robust.

Even as we continue to support clients through these challenging times.

We are engaged with our key clients on their liquidity needs and we are also working closely with <unk> Avenue and the government support programs.

Our approach and our resilient balance sheet mean, we have seen limited impact on our risk profile sofa.

Our key risk and balance sheet metrics have remained stable since the fourth quarter of 2021 before.

Before the start of the war in Ukraine.

Our CET one capital ratio is now at 13, 3% and our liquidity coverage ratio is it.

136%.

Our provision for credit losses increased to 24 basis points of average loans for the first nine months.

Two eight basis points for the same period last year.

This is the normalization, we expected following a less benign macroeconomic environment compared to the previous year.

Nonetheless.

We still expect the full year provision to be in line with our earlier guidance at around 25 basis points.

Overall, our credit portfolio quality is broadly stable and despite the volatility we have seen.

Our market risk is managed within our appetite permitted and we are taking measures to address <unk>.

Given the uncertainty in the outlook, we are continuously reviewing our risk appetite and updating our downside analysis to ensure that we remain well prepared for potential further negative development.

Let me now turn to page six in the third quarter ESG related financing and investment volumes grew by 6 billion net and the cumulative total since 2020 is 197 billion euros for the group excluding dws.

This compares to a year end 2022 target of 200 billion.

The volume development seen in the quarter reflect the implementation of the new Mifid II ESG reporting standard introduced in August .

We also made significant progress in implementing our commitment to reduce our carbon footprint.

On October 21, we published our net zero target for finance submissions in key industry sectors in the corporate loan book.

These target specific reductions by 2030 and 2050 in full particularly.

Carbon intensive sector, namely upstream oil and gas.

Power generation automotive and steel.

We aim to achieve these targets by supporting clients on their transition strategy on the path to net zero emissions by 2050 in accordance with the Paris agreement on climate change.

And are focusing the dialog on the top emitter.

We see a high concentration of finance division.

Our methodology envisions, a progressive and orderly phaseout.

Fossil fuel usage, while incentivizing the financing of lower carbon intensive technologies for clients with credible transition plan.

We look forward to discussing this with you in more detail at our sustainability deep dive in March 2023.

And now before I hand over to James.

Let me summarize our progress to date this year on slide seven.

Our improved profitability in the first nine months of 2022.

Despite a very challenging environment proves our transformation that position Deutsche Bank on the right track strategically.

This transformation resulted in the strong business performance, we are and we are on track to meet our 2022 goals.

Our core bank revenues are rising, reflecting strong momentum across all businesses and the execution of strategic management actions.

Our private bank and corporate bank will in particular benefit from this.

Which will further support our franchise.

We continue to deliver positive operating performance.

It is driven by our improved profitability and built our pre provision profit providing better protection for shareholders.

We continue with our disciplined risk management, and our third quarter risk profile remained contained.

Supported by a high quality loan book.

Market risk discipline, and solid capital and liquidity.

And we will continue to stay focused on this in light of the environment.

The transformation phase we began in 2019 is nearing completion.

And we have laid strong foundations for the next phase of our strategy to 2025.

We aim to further improve our operating margin as we continue to focus on cost in light of the inflationary pressures.

We are executing on a number of tactical measures to offset these near term pressures and then as we progress with our strategy.

The four key initiatives, which we communicated at our Idd in March would support our cost trajectory.

While enabling further investment.

To be clear.

We stick to our 2025 financial and strategic targets, including our capital distribution plan.

With that let me now hand over to Jay.

Thank you Christian.

Let me start with a summary of our financial performance for the quarter on slide eight.

Total revenues for the group was $6 9 billion up 15% on the third quarter of 2021.

Noninterest expenses of 5 billion euros were down 8% year on year due to lower restructuring and severance and lower transformation charges as the prior year quarter included contract settlements and software impairments related to our migration to the cloud.

I will talk about adjusted costs in more detail later on.

Our provision for credit losses was 350 million euros, or 28 basis points of average loans for the quarter.

We generated a profit before tax of $1 6 billion euros and a net profit of $1 2 billion euros and increase of more than three fold year on year.

We reported diluted earnings per share of <unk> 57 for the quarter, which brings the year to date total to one euro and 46.

Our cost to income ratio came at 72% down 17 percentage points compared to the prior year period.

Tangible book value per share was <unk> 26 euros and <unk> 47.

Up 79 on the quarter and 8% year on year.

The return on tangible equity for the group was eight 2%.

The effective tax rate was 23% for the quarter and 24% for the first nine months of the year.

Let's now turn to the core bank performance on slide nine.

Core bank revenues were $6 9 billion euros for the quarter up 14% on the prior year quarter on.

Noninterest expenses declined 6% year on year with adjusted costs down 5% for the same period and 9% if adjusted for FX.

We reported a profit before tax of $1 8 billion euros twice the prior year quarter.

Our core bank post tax return on tangible equity for the quarter was 10% in line with our full year target of above 9%.

And our cost income ratio came in at 68% down from 83% in the prior year period.

Let me provide some detail on the evolution of our net interest margin on slide 10.

The increase in NIM continued to be supported by U S dollar and euro interest rate rises with euro rates now starting to play a bigger role.

It was also supported by approximately five basis points and what positive one off effects predominantly driven by buybacks offsetting the non recurrence of the second quarter one off effects.

We've seen the first rate rises in euro client rates, but for the time being these remained muted compared to our assumptions.

While we expect client pass through to increase somewhat over time. The overall picture remains consistent with the guidance. We have previously shared at this early stage.

Given this we expect the trend for NIM to remain favorable given ongoing rate rises however, possible ECB action regarding deposit remuneration may provide some offset.

Our average interest, earning assets were up reflecting U S dollar strengthening and underlying loan growth.

Before I move onto costs, let me briefly comment on our updated NII guidance.

Interest rate tailwind have increased significantly since the second quarter with effects now well above 3 billion euros in 2025% relative to 2021, however, wider funding spreads were partially offset this benefit if they persist at these levels.

The net impact remains materially better than the impact reflect to you at the idd in March.

Let's now turn to costs on slide 11.

Adjusted costs, excluding transformation charges and bank levies increased by 177 million euros or 4% year on year, but declined 1%, excluding FX movements as we manage to offset investments and inflationary pressures with our cost initiatives.

Compensation and benefits costs increased by 185 million euros, or <unk> 92 billion euros, excluding FX effects.

We saw an increase in performance related compensation and further one off costs associated with the establishment of our Berlin Tech Center as discussed in the second quarter.

Non compensation costs remained essentially flat as adverse FX effects and higher business driven costs were compensated by lower deposit protection cost and other cost measures.

If we look at the nine month comparison on slide 12, adjusted costs, excluding transformation charges and bank levies increased by 112 million euros up 1% compared to the prior year or down 2% excluding ex FX.

The year on year increase was driven by higher compensation costs as we discussed in the second quarter, which is partially offset by a reduction in non compensation expense.

The compensation and benefits movement was predominantly driven by the FX impact on salaries, coupled with increases in performance related compensation and one off costs associated with the establishment of our Tech center in Berlin.

Reductions in non compensation expense reflect the bank's ongoing cost management efforts.

Turning to provisions for credit losses on slide 13.

Provision for credit losses in the third quarter was 28 basis points of average loans on an annualized basis or 350 million euros.

The year on year increase reflects a certain degree of normalization in impairments, especially after unusually low levels in the prior year period.

Stage, one and two provision of 13 million euros compared to a net release of 82 million euros in the prior year quarter were predominantly driven by the further deterioration of macroeconomic parameters, but largely compensated by a reduction of the overlays applied in previous periods and otherwise improved portfolio parameters.

Stage, three provision increased to 337 million euros compared to 199 million euros in the prior year quarter.

The increase reflects higher impairment events, but we have not observed a material trends emerging and in particular the impact of higher energy prices on provisions is not yet visible.

Moving to capital on page 14.

Our common equity tier one ratio ended at 13, 3%.

37 basis points higher compared to the previous quarter.

CET, one capital increased in the quarter, adding 13 basis points.

<unk> organic capital generation net of deductions for dividend and additional tier one coupon payments added 24 basis points. This was offset by nine basis points from slightly higher other deductions.

The second element driving the strong ratio lower risk weighted assets contributing around 24 basis points.

Almost half of this is attributable to market risk, where we have seen very low var and <unk> levels early in the quarter, which picked up towards the end of the quarter with increased client activity.

The rest is attributable to credit risk and operational risk and credit risk. The reduction was driven by modest growth in stable businesses, which was more than offset by a securitization of leveraged loans and further optimization.

Our leverage ratio was four 3% unchanged over the quarter.

Increased tier one capital added four basis points, driven by strong third quarter earnings net of deductions for dividends and 81 coupons.

One basis point came from essentially flat leverage exposure for.

For the quarter FX translation effect effects led to a three basis point reduction in our tier one leverage ratio.

The combined the corresponding effect of year to date was nine basis points.

With that let's now turn to the performance of our businesses starting with the corporate bank on slide 16.

Corporate bank revenues in the third quarter were $1 6 billion euros, 25% higher year on year.

Continued revenue growth was driven by further improvements in the rate environment Commission and fee growth and FX movements. Despite current macroeconomic uncertainties.

Noninterest expenses of 1 billion euros increased by 2% year on year as a positive contribution from non compensation initiatives was more than offset by FX movements.

Corporate bank grew loans to 129 billion euros up by 10 billion euros compared to the prior year quarter, mainly in corporate Treasury services, driven by FX and volume growth.

Provision for credit losses was driven by a small number of stage three events compared to recoveries in the prior year quarter.

Corporate bank profit before tax was 498 million euros in the quarter up by 68% year on year.

Tangible return on tangible equity was 11, 9% and the cost income ratio came in at 63%.

I will now turn to revenues by business segment in the third quarter on slide 17.

Corporate Treasury services revenues of 963 million euros increased by 28% year on year, driven by further improvements in the interest rate environment and a strong operating performance, reflecting higher commission and fee income and volume growth in loans and deposits.

Institutional client services revenues of 400 million euros rose by 22% benefiting from the improving interest rate environment and FX movements.

Banking revenues of $200 million euros grew by 15% year on year, reflecting the transition to a positive interest rate environment in Germany.

I'll now turn to the investment bank on slide 18.

Revenues for the third quarter were slightly higher year on year on a reported basis and essentially flat excluding specific items.

We saw strong revenue growth and rates emerging markets foreign exchange and financing.

This was partially offset by significantly lower revenues in origination and advisory and credit trading.

Noninterest expenses were essentially flat versus prior year adjusting for the impact of FX translation.

Our loan balances increased year on year, primarily driven by higher loan originations across the financing businesses and the continuing impact of U S dollar appreciation versus the euro.

We continue to maintain a well diversified portfolio across regions and industries.

Leverage exposure was higher reflecting increased lending commitments and trading activity to support client flows.

The year on year increase in risk weighted assets predominantly reflects the impact of FX movements.

Provision for credit losses was 132 million euros, or 52 basis points of average loans.

Year on year increase was driven by an increase in stage three impairments.

Turning to revenues by segment on slide 19.

Revenues in fixed sales and trading increased by 38% in the quarter when compared with the prior year.

<unk> third quarter revenues since 2012.

Very strong performance across the majority of the franchise was partially offset by significantly lower level of revenues and credit trading.

Rates revenues more than doubled with emerging markets and FX revenues significantly higher.

The strong performance was driven by heightened market activity and client flows while also benefiting from effective and disciplined risk management across the franchise.

Financing revenues were higher year on year, driven by increased net interest margin and strong pipeline execution during the quarter.

Credit trading revenues were significantly lower due to the non recurrence of the contribution from our concentrated distressed credit position and the prior year quarter and a market environment that continues to be challenging.

In origination and advisory reported revenues were down 85%, but this includes mark to market losses in our leveraged debt capital markets business. Excluding these revenues declined 63%.

Debt origination revenues were significantly lower due to materially reduced leveraged debt capital markets revenues.

This was driven by a significant industry fee pool decline along with the impact of loan markdowns.

In the quarter of the realized and unrealized markdowns equated to approximately 110 million euros, while we reduced our commitment pipeline by approximately 50%.

Investment grade debt revenues were solid decreasing less than the industry average.

Equity origination revenues were significantly lower reflecting an industry fee pool reduction of approximately 50% and mark to market losses on our residual equity position.

Revenues in advisory decreased by 23% and an industry fee pool declined by 32% year on year. According to Dealogic.

During the quarter, we also booked a gain of $91 million relating to the impact of debt valuation adjustments. This was driven by market factors, principally credit spread widening and interest rate volatility.

Turning to the private bank on slide 20.

Revenues were $2 3 billion euros up 13% year on year or 5% if adjusted for the net impact of the bgh ruling and specific items.

Higher net interest income continued business volume growth and FX movements more than compensated lower commission and fee income and a more challenging financial market environment.

Noninterest expenses declined by 5% year on year, reflecting a benefit in the quarter from deposit protection cost lower internal service cost allocations as well as incremental salary savings from workforce reductions and branch closures, partially offset by negative FX movements.

Profit before tax increased almost threefold to 447 million euros.

Strong operating leverage improved cost income ratio to 73% and post tax return on tangible equity to nine 5%, which puts the private bank on track to achieve its full year 2022 targets.

Assets under management recorded net inflows of 8 billion euros as well as positive effects from FX movements of 7 billion euros, which were offset by 14 billion euros from market depreciation.

Provision for credit losses of 24 basis points of average loans increased as the prior year quarter benefited from a release of an overlay related to expiring moratoria.

Excluding this impact provision for credit losses remained stable, reflecting our high quality loan book and tight risk discipline in a declining macroeconomic environment.

Turning to revenues by segment on slide 21.

Revenues in the private bank, Germany were up 8% or stable if adjusted for the net impact of the bgh ruling.

Higher net interest income compensated for lower fee income, which was impacted by a decline in client activity in more challenging markets.

The private bank, Germany attracted net new client loans of 1 billion euros.

Revenues in the international private bank were up 22% or 14% excluding specific items.

Revenues, excluding specific items in wealth management and bank for entrepreneurs increased by 24% driven by continued loan growth and higher revenues from deposits supported by rising interest rates.

FX movements also had a positive impact on revenue growth, especially in APAC and the Americas.

Premium banking revenues declined by 8% as higher deposit revenues were more than offset by lower revenues from consumer loans mortgages and investment products.

Continued business volume growth with net inflows in assets under management of 7 billion euros, mostly in Germany in APAC and net new client loans of 3 billion euros, mainly in EMEA.

The Americas.

The international private bank continues to execute on its strategy to strengthen the bank for entrepreneurs and has successfully closed the sale of the financial advisors business in Italy on October 17th.

We have recorded a pre tax gain on sale of approximately 310 million euros in the fourth quarter 2022.

As you will have seen in their report Dws reported a resilient result, compared to the prior year. Despite the continued market turbulence.

My usual reminder, the asset management segment on Slide 22 includes certain items that are not part of the dws stand alone financials.

Revenues grew by 1% versus the prior year in part supported by FX movements.

Management fees grew by 3%, reflecting higher fees from alternatives, partly offset by negative market impact and active and passive.

Performance fees were also higher than the prior year, partly offset by lower transaction fees.

Other revenues declined on lower gains from co investments higher treasury funding costs and less favorable fair value of guarantees.

Noninterest expenses in adjusted costs increased by 15%, including FX movements.

The increase in non compensation cost was mainly attributable to professional service fees and costs, resulting from further investments into platform transformation, whereas compensation costs increased due to strategic hirings and higher carried interest costs.

Profit before tax of 141 million euros in the quarter declined by 27% over the same period last year.

For the first nine months of 2022, the cost income ratio was 67% and post tax return on tangible equity was 20%.

Assets under management were stable in the quarter.

Net inflows of 8 billion euros predominantly in cash in alternatives and 23 billion euros of beneficial impact from FX movements, offset 31 billion euros of market depreciation.

Moving to corporate and other on slide 23.

Corporate and other reported a pretax loss of 68 million euros in the quarter.

Compared with a pretax loss of 605 million euros in the prior year quarter.

The improvement in pretax loss was driven by in part by the absence of transformation charges recorded in the prior year quarter, which was principally triggered by the banks migration to the cloud.

The improvement was also driven by valuation and timing impacts, which resulted in a benefit of 199 million euros in the quarter, partially reversing the trend from the first half of this year.

We can now turn to the capital release unit on Slide 24.

The capital release unit recorded a loss before tax of 216 million euros in the quarter, an improvement of 128 million from the prior year period.

Revenues for the quarter were negative 17 million euros and improvement of $19 million from the prior year period.

This improvement was due to lower derisking and funding impacts that more than offset the non recurrence of the prime finance cost recovery in the prior year.

Noninterest expenses declined by 33%, primarily driven by a 40% reduction in adjusted costs, reflecting lower internal service charges and non compensation as well as compensation costs.

<unk> reduced leverage exposure by 36 billion euros year on year, driven by the completion of the Prime finance transfer and continued progress on deleveraging.

Risk weighted assets reduced by 6 billion euros year on year, driven by lower operational risk and Derisking.

In the third quarter <unk> decreased by 1 billion euros compared to the second quarter, primarily from lower market risk <unk>.

Looking through to the final quarter of 2022, the capital release unit remains ahead of its year end 2022 targets for both leverage exposure and <unk> reduction and we're confident of achieving the full year target for adjusted costs. Excluding transformation charges of 800 million euros that was reaffirmed at the investor.

Deep dive in 2022.

However markets remain volatile and this could have an impact on financial resources and revenues in the fourth quarter.

Turning finally to the group outlook for 2022 on slide 25.

We believe our strong operating performance in the core bank in the past nine months is a testament to the quality of our businesses and the strength of our franchise.

Reflecting on this performance, we now see upside to our 2022 revenue guidance of 26 to 27 billion euros, particularly given the trends we see in our stable businesses.

Business momentum in the past nine months combined with improving operating leverage makes us even more confident in the delivery of our 2022 strategy and financial goals.

And that we have the right foundations for our path to 2025.

As Christian noted, we continue to adhere to strict risk management principles, particularly in this continued uncertain environment.

We are very focused on managing our resilient balance sheet, and we reaffirm our expectations for our provision for credit losses at around 25 basis points of average loans for the full year.

And finally, we remain committed to supporting the economy during these difficult times.

Either directly responding to the needs of our clients or working with the government on support programs.

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

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

Thank you ladies and gentlemen at this time, we will begin the question and answer session anyone who wishes to ask a question you May press star followed by one on their touch tone telephone.

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

Using speaker equipment today, please lift the handset before making your selection anyone who has a question you May press star followed by one at this time when.

One moment for the first question please.

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

Hi, good afternoon, thanks for taking my questions.

To talk about revenues and then return on <unk>.

So looking to slide 10.

On the net interest margin.

You talked about NIM support Wi Fi, but still one off.

The bulk of this is due to.

According to that.

Now you called this one off so I'm just wondering whether we should think about this as a permanent step down in the funding costs.

I see.

It's an ongoing benefit to.

The NIM going forward, so that 147.

That 147% NIM that.

It keeps on rising through 2023, rather than taking a step down and then go up again.

And then more broadly could you talk about how you see your revenues putting out full for 'twenty two I know you've given an upgrade.

More specifics on that please and then how that pans out for 2023.

And then on the return on NAV.

You've got an 8% target.

You've printed 8% for the past three quarters, but how achievable is that 8% full for 'twenty two given that in the fourth quarter that tends to be seasonally weak. Sometimes you have a true up in costs, how confident do you feel about the 8% for this year and again, how do you see that panning out for 2023 against the backdrop of.

Session and higher Dinos proficient thank you.

Thank you Andrew.

Let me start.

For the NIM question.

I hand over to Jameson, obviously, he will add to my comments.

On the fourth quarter in terms of revenues.

Based on the trajectory, which we have seen in the first three quarters.

Sure.

Im very optimistic in particular for the corporate bank and the private bank everything what we can see is that the momentum in the corporate bank, but also in the private bank in terms of the interest rate environment, but also in terms of the business volume we see.

We are clearly on the trajectory of further increasing revenues also in the fourth quarter.

Particularly for the corporate bank.

Again for the private bank no stoppage of the momentum.

In the investment Bank. Obviously, there is always seasonality also in Q4, we have seen that from the previous years, but.

Looking at that where we are also in October .

I think we would be around the number which we have seen in the <unk>.

Q4 of last year.

And asset management personally I think we expect to be flat, so if I take that altogether.

It's another robust quarter on the revenue side.

And.

Then if I if I then go even into 'twenty three actually.

That kind of foundation, which we have built in terms of the.

The revenue growth again in the stable business, Andrew continuous clearly continues.

While the corporate bank, we expect a similar momentum like in 'twenty two to continue into 'twenty three again, obviously backed by the interest rate curve, but also again and again by the client volume, we see and also increasing client volume.

Again also here the Moody's upgrade helped we see that clients are turning to us wanting to do more business.

In the private bank again, we expect continued revenue growth in 2023.

Further supported by the interest rate environment, we always said that from an interest rate environment. The private bank is lagging a bit the corporate bank. We said that last year you saw it in 'twenty two and exactly is now coming then in 'twenty, three which is <unk>.

Positive.

In the investment bank.

First of all.

Hugely proud of what the investment Bank has shown is showing in 2022, but I do believe we.

We can really say this is quite a diversified business in the meantime, we have three legs to stand on we expect for 2023 and the investment bank.

Obviously.

A better year and saw a better year in the <unk> business very stable financing business potentially we see in the macro business.

A slight reduction versus 2022, because it was an extraordinary good here, but on the other hand, I think volatility will not go away and this is exactly what we said in the Idd in March 2022, and we said this volatility we will see for the next couple of years and therefore to be honest, the rising revenues and private bank.

In the corporate bank.

The rising revenues in both those businesses I think at least a flattish revenues to 2022 and 2023 in the investment bank.

So to say in asset management. So all what we can see is the revenue number now and you will get more guidance on chicken in February when we present, our full year numbers, but all I can see us and Jameson Ics is a number which is clearly north of 28 billion in revenues next year.

You also ask on <unk>.

The 8% for the full year.

So with regard to potentially seasonality in Q4.

Ill revert back to my initial comments on revenues in Q4, very very solid so I think a good set of numbers in terms of revenues also in James May allude to that we have an extraordinary $300 million revenue item in the private bank, which is coming through from the Italian sale and we should not forget that.

Cost all we can see in our targeted Q4 would be lighter than Q3, so slightly lighter.

And then we May also have the one or the other impact James referred to but that makes us very comfortable that the 8% for the year.

Absolutely in reach and that's what we targeted for that was we said three years ago, and Thats, where we will end James Thank.

Thank you Christian and so within that Andrew.

Andrew you'd asked about the NIM the direction of travel is clearly up we called out items in the second quarter and now in the third quarter that were sort of I'll call them. One offs. It's often a noisy line item last quarter. It was more related to <unk> and sort of technical accounting things this quarter it had to do with.

The buybacks.

We wouldn't expect a repetition of that but I would expect given the tailwind we have now into Q4 that we would grow over and probably still increase our NIM in Q4 relative to the $1 47, we showed so where exactly it will be in the rounding.

Around that one 5%.

It remains to be seen but where we feel that that tailwind here, especially with with central bank actions still expected in the quarter, we'll clearly be positive.

In terms of the seasonality point that Christian referred to yes, I mean, there's a lot still to happen in Q4, we've got to manage revenues and expenses towards the goals that we set out as kristian alluded to and we've been talking with you through the year.

We're always working towards the gain on sale, we expected from the Italian <unk>.

Transaction the financial advisor transaction. In addition, we do expect our DTA benefit.

Later this year hard to say exactly what that'll be that'll depend on lots of assumptions and input factors, but we sort of called out for something not less than the level. We recorded last year. So those two items helped to offset the seasonality, which quite rightly you would expect in the fourth quarter.

That's great. Thank you very much for that.

Next question is from the line of Tom Hallett from <unk>. Please go ahead.

Yes, Hi, guys a couple questions from me. Please so firstly on the cost income ratio guidance, you announced the upside to your revenue forecast for the year.

I'd like to think that would better placed within your mid July 17th cost income range.

So is there any reason to believe that that cost income ratio should not land under the 74% consensus currently has plugged in and then maybe looking towards 2023.

I mean does that range change until given all of a sudden a tailwind some rates and then maybe sticking with costs coming out of it from maybe a slightly different angle how should we look at 2020 right because on one side that should be significant benefits coming from IPO path caution is initiatives, but then on the flip side you have some structural cost pressures coming through.

So maybe if you could just walk us through some of the.

Big ticket cost items that are expected to roll off next year that would be great. And then is it will take that to a schema.

Maybe a 3% inflation rate on the underlying cost base.

The next day or do you see that kind of cost precious data. Thank you.

Sure Tom It's James I'll start and there's a lot to go into here. So let me just start with the range for the year based on where we come out in Q4 App.

Absolutely that's what we're working to when we set the mid to low.

Cost income ratio range. Our hope is to is to achieve something in the low area.

But theres always some variability both on cost and on revenues given we're managing to a ratio.

But with the step off into Q4.

We would certainly target closer to the low end in the middle.

Now there are decisions, we still need to make whether thats.

I think Andrew mentioned events in Q4 always take place seasonality compensation decisions also restructuring and severance decisions, but our goal would be to be more lower than mid.

Looking forward to 2023, what I'll, what I'll focus you on is the investor deep dive narrative that we talked with you about in March in other words.

The model that we shared to 2025 is really benefiting from revenue growth over the next several years, both underlying and the businesses as they are drivers grow the businesses grow and supported by interest rates.

With expenses essentially flat over that period now to be flat over that period, there's a lot of hard work.

Executing on initiatives to take cost out of the company structurally.

And Thats on technology initiatives front to back optimizing our distribution channels optimizing.

Our employee base and how efficiently we run our processes. So all of that is built into our forward planning and we'd expect and certainly try to manage the company to something like that in 'twenty. Three so we do expect some of the benefits already to be showing up in 2003 of those initiatives the $2 billion that we laid out in March.

And we've also talked about relatively speaking a linear path on achieving those benefits.

There are one or two items of course that will be delayed and of course, we're dealing with inflation.

But thats certainly the ambition that we have looking forward.

One last item to note just inflation.

It's actually hard to use a simplifying assumption because deflation how it impacts your expense bases that are different for each line item.

So some were relatively more shielded some.

Line items inflation comes through more fully right away.

But something in the you know in the low single digits is certainly certainly would.

Aligned with our expectations and hence that means we need to continue our focus on expenses.

To work to offset that inflationary impact over the over the coming years.

Okay. Thank you.

The next question is from the line of Nicholas <unk> from Kepler Cheuvreux. Please go ahead.

Yes. Good afternoon. Thanks for taking my question I have two please the first one is really a follow up on the cost income ratio.

Because basically you have increased your revenue guidance several times this year, but your cost income ratio target remains the same and I was wondering what your marginal cost income or choice because back at your <unk>. You mentioned that you were investing in low marginal cost and commercial activity. So if we could have an update on this would be great and then the second question on cost of free.

<unk>.

Your stage three provision of increased pretty substantially, but it's not driven by energy.

Energy prices. According to you so what the drivers beyond this increase and again looking maybe a bit more so that's down the road in 2023, what should we expect and notably with regards to your 20 bps scenario.

Because we promoted worsening macro.

Macro condition assumptions, so what should we.

On that front. Thank you.

So nikola thanks for the questions look we we've actually been pretty consistent in guiding towards the upper end of the range of that 26% to 27%. So I'd say, we've been managing costs more with the expectation of the high end and where we are.

Getting them, perhaps a little bit of a benefit above that given in particular, the strong Q3 performance.

And so the question just before.

We've given ourselves a range on cost income ratio I think we have a path now to something more in the lower end of that range. So I don't see there to be a significant deviation in terms of the.

Ingredients, we've given you and and where we currently expect to come out.

Your underlying question about marginal cost income ratio is a fair one and we've talked in the past about working to make our cost base more variable about investing in and very positive.

Marginal cost income ratio.

Businesses and of course, we have the uplift ahead in the next several years from interest rates, which while not entirely free obviously should have a very strong marginal.

Impact.

In essence the <unk>.

Questions answered by the target in 2025 from where we ended this year, where we are right now it's something like a 10 slightly more than 10% improvement in the cost income ratio and given the model we shared back in March.

That is achieved with <unk>.

Flat costs and rising revenues over time.

There is a lot of hard work that goes into the flat costs.

But to your point, we would become becoming more variable over time and benefiting from increasing contributions from high marginal cost income ratio revenue sources.

So that's definitely our path and what we've been working towards.

On the stage III look where.

It's obviously, an uncertain environment the way I would characterize the credit environment at the moment as well.

We're all looking ahead to some of the risks that we see in the outlook.

But in the if you like backward looking risk metrics.

There is no sign yet of that credit credit cycle starting.

As the.

Pact of energy costs flow through the economy as we see a recession there will of course be some deterioration.

And we're prepared for that as I say, we reaffirm our guidance for this year at this point that implies a.

Credit loss provisions about in line with Q3.

For Q4, and we feel pretty comfortable with that based on what we what we see and know today.

If we look to the future.

The way I would characterize it as we've always given you a range of of normalized plp's somewhere between 20 and 25 basis points.

Perhaps we're a little bit worse than that next year as we go through that cycle.

But.

But we're not expecting a dramatic deterioration from where we sit today.

And so why is that outlook relatively speaking probably to your ears.

Optimistic given the scale of the challenges we faced we always go back to conservatively underwritten lending type.

Tight risk appetite, well structured well collateralized portfolio.

We sort of rely on to see us through this cycle as it has done in recent cycles. So hopefully that's helpful. In giving you some color on our thinking and I would add to the last point.

That you can already see that there is a very positive reaction actually in the Germany economy.

On the announcement of the support program of 200 billion.

Now obviously it needs to.

Be detailed out in terms of structure, but this is exactly tailored to the mid cap companies and small businesses first of all we have a very diversified portfolio. There. So I'm not afraid of any way of the portfolio, but secondly, as this money is exactly tailored for these companies I think in this regard.

The government did the right thing and to that would be also supportive to our numbers and therefore I agree with James that I think when it comes to next year.

The range of 20 or 25 basis points is in my view the right one, but even if you think that overall there was a deterioration given that support program and our structure of the portfolio I think it's actually beneficial for that portfolio in Germany.

Thank you very much.

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

Good morning, I wanted to do the afternoon I wanted to dig into some of the NII disclosures I appreciate you might need to caveat. Some of that's ahead of the ECB tomorrow.

I think what is in your third quarter numbers, the technical spreads on LTI rate was there any benefit there and how is that modeled through to kind of the next few quarters.

Secondly, could you update us on your kind of NII upside for this year, but also into next year and give us any sort of sensitivity around tearing or LTR LTE technical spreads being removed due to that.

And then finally just around the NIM. It sounds like you are relatively confident.

NIM will be going up Q on Q irrespective of what's announced tomorrow or any changes in ECB is that the right way to read it and if so should that mean key on key momentum in corporate bank and private bank revenues or at least the NII continues for Q4 and into Q.

One next year. Thank you.

Thanks, Adam.

Lots to go through and.

NIM land.

Look so <unk> was relatively minor in terms of its impact in Q3, so so kind of very low double digits. In Q3 as you know there've been some there's been volatility in how <unk> recognized on our numbers from a just from an accounting perspective.

But that should that should pick up on the terms of the program next quarter and.

And we probably have say $90 million.

In Q4 coming from <unk>, if if you asked me what would be at risk.

Full year, depending on how retro active the decisions are maybe a little bit more than that.

But <unk> certainly should be a benefit in Q4 on the current terms.

Looking to next year.

There is there is even more at risk you could at least annualize that number as being.

The the at risk amount in <unk> under those terms and obviously, we can share some thoughts with you if you're interested.

Underlying that though just from the interest rate environment. There is there is a huge tailwind coming through at this point.

So if I if I give you the sort of gross number of.

<unk> of the the current interest rate curve running through our balanced balance sheet sequentially that is 'twenty three relative to 'twenty. Two you would see probably a $2 billion revenue upside coming from from the current rate curve on a on a equivalent balance sheet, if you layer higher funding costs.

Its into that that might takeaway $400 million.

And perhaps the same amount at risk as I mentioned on <unk>.

But tying into Christians earlier point about the revenues and our outlook for next year next year. We think we have at least 1 billion somewhere between 1 billion $1 billion to on a net basis, even with a negative outcome on the <unk> program.

So all of that sort of feeding into our our commentary and thoughts about about the direction of NII and of course and I am that goes with it.

Did that cover all your all your questions.

Just two clarifications one the <unk>.

<unk> technical spread presumably completely drops out $3 24, and 25. So it's only a short term noise in your NII guide through 'twenty five.

Net basis post probably quite conservative deposit beta assumptions.

So another interesting topic to go into on deposit beta but.

Yes, we published last quarter, our <unk> CRO maturity ladder. So I'd refer you back to that in our disclosures precisely for the reason we thought it was important for investors to see how that plays out of course that doesn't give you for each of the programs.

What the average rate would likely be but to your point Adam.

On the current terms the effect in the first half of next year is the strongest there's a significant maturity in June and so after that it tails off but it's still beneficial through to to the final maturities again on the current terms.

So Adam I, just wanted to make sure that exactly that what James said at the end is really clear to all of the North of 28 billion number I mentioned includes the potential Teodoro reduction.

Which is important I think you'll see then the conservative approach we are taking.

But let me also say and I think we should say that it would be hugely disappointing if something like that is happening and forget about the impact on our financials. I think you just saw very nice number anyway on the revenue side, but.

But that is an implicit contract between the central Bank and <unk> and we did our job we lent the money to the economy exactly what we want to do and then changing retrospectively in my view not the right thing and that is actually also question how the investor community. We will look at Europe , and therefore, I'm, making the statement because I think.

It is.

It is it is actually a very critical move and therefore I hope.

We get some positive news tomorrow.

Very clear thank you Roger.

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

Hey, good afternoon, and thank you can.

Can we briefly talk about the private bank again.

Obviously, there sequentially risk costs increased quite a bit 60% or so to $160 million up the stage three loans only went up marginally is this sort of the run rate now going forward or is this a one off adjustment and can you give us any statements on how you see asset quality.

At the moment in that division, both domestically and abroad volume margin trends and how competition is behaving at the moment that would be super useful. Thank you sure Danielle thanks for the questions James again.

So the sequential increase in <unk> in private bank really reflect two things one is the absence of benefits from nonperforming loan sales that we've conducted and the prior quarters. We actually had some help in Q1 and Q2 from those sales and we didn't have an equivalent.

Event in Q3 and in addition, one of the what we sometimes refer to as idiosyncratic stage III events did take place and the private bank.

Which further pushed up the number so if you wanted to run rates on a net basis I'd, probably say, it's about $125 million per quarter run rate.

<unk> in the PV portfolio.

Of course, it'll vary around that number, but that's a fair I think a fair assessment.

In terms of asset quality.

I think you may be hearing from some of our peers.

Confidence on asset quality.

As the statistics in that portfolio are just rock solid they've been very stable through the past several quarters and no indication of of a deterioration, which is obviously pleasing. It speaks to I think the quality of the portfolio, but also the environment that that so far hasnt hasnt.

Really begun to reflect some of the risks that we all see ahead.

On volumes and margins.

I think helpfully the spreads by and large have have widened a little bit in the in the third quarter.

So we're seeing I think encouraging developments in terms of spreads on lending, there's only one or two portfolios, where there was a when.

In the other direction, so so by and large good.

Developments there.

Volumes are probably moderating a little bit and again it depends on the product so mortgages in Germany.

As you probably see from from external numbers.

<unk> begun to slow reflecting activity reflecting pricing.

But.

But that doesn't mean is stopped.

Still activity there is still appetite for new lending out there so.

I would say by and large those those developments are all reasonably encouraging and on the on the loan portfolio side and the private bank and then yet.

On the on the credit side I, often get asked on the mortgage portfolio.

Okay.

In other European countries.

So the the risk, which which other six from from the changing interest rate environment in our portfolio is actually when it comes to market is negligible.

Just one other point to make their Neil on your question is deposits.

We're not seeing any sort of unusual behavior in terms of the competitive environment on for deposits in the marketplace. So overall there it's at least at this point in the cycle.

A still a positive environment competitively in the deposit market.

That's great. Thank you.

Thank you done yet.

Next question.

Comes from the lineup, Chris Harlem from Goldman Sachs. Please go ahead.

Yeah. Good afternoon, everyone. Just two questions one would I be in one a bit of a follow up on on the.

On the market conditions question just earlier, so on the I B U talks about some of the moving pieces in terms of absolute revenue growth, but I also wanted if you've seen any meaningful changes in terms of market share dynamics, either this year or as you head into next year.

And then secondly on rates were now a couple of quarters and sustaining rates play out through the P&L you.

You just spoke about some of the dynamics in the private buying kind of wondered whether you've seen anything surprised you. So far in terms of clients of competitive behavior.

In the corporate bank.

Yeah, Let me start on the investment banking side, and then James will follow up on the on the second question and obviously add to the first question on.

First of all again.

Feeling confident in the investment bank also when it comes to 2023 given.

Diverse business, we entertain again, our strength is in the financing business in the mackerel and the macro business clearly and now let's see for the official Q3 numbers, but you have seen it for the previous quarter's we gained market share.

Significantly over the last two years almost quarter by quarter.

I do think that reflects the focus we have given on the on the <unk> business the setup rubberneck.

Has taken there.

The rating upgrades, which we have seen the latest one was moody's again or placed into into our favor and I would say in certain markets.

We almost gained the top market position again.

Therefore, I think that that is clearly something which also drives then the momentum.

Into the next year, we still expect volatility in the market and that helps us.

On the <unk> business in the D C M by the way we.

Gave up market share, but to be honest kind of on purpose, because we slowed down our underwriting already at the end of Q1 or in Q1.

And therefore, you can also see that in the new underwritings, we reduced market share, but that is on purpose behavior and we can also see it now when I look at the pipeline and to the commitments we have out there and the losses. We have taken I think this was the right strategy by the way to be very clear, we will stay in that.

Business that is a very important business you have seen some announcements last year last week.

That we obviously also adjust than our internal capacity to the volumes, we see but this is a very important business on the financing side. It fits other businesses like the M&A business.

But on purpose, we have reduced our appetite and therefore a bit of reduced market share in that business otherwise I would say we are behaving in line with the market actually very happy with the performance and.

So I am confidential twenty-three.

Chris to your question about competitive behavior or a client behavior in the corporate bank no no surprises there I think everything is playing out.

In a in a business as usual type of way we are seeing.

Better.

People often refer to as beta outcomes.

Then the model the outcomes would suggest not just in corporate bank, but also in the private bank portfolio.

Although it's early days, it's hard to say.

That's a trend or noise in the numbers.

But we've we've b and in particular, whether it's a lag and pricing that's producing more favorable outcome. So I think one would expect it to catch up with the models outcomes, but right now the lag effect.

Is it seems to be beneficial in both portfolios are major deposit books.

And as I mentioned, a moment ago, we don't see excessive competition for deposits given we all go into this right cycle with with relatively high levels of liquidity and on the bank's balance sheet and in the marketplace.

Okay. Thanks.

Thank you.

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

That comes with very much.

Uhm.

Mm mm.

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And then just on the other <unk> <unk> with us.

The amount of time.

Sounds like a cop.

Thanks.

So so yes, we've given a very clear dividend path in March.

On that path 30 cents per share would be the expected.

Evidently in respect of 22 paid in 2003.

And that's something that we're we're very focused on delivering to our shareholders no change in the payout ratio thinking when we talked about a 50% payout ratio. It was from 2025 so.

Again is consistent in our thinking.

So no changes in those plans as it relates to valuation timing differences in corporate and other.

It's always uncertain, we did start talking last quarter about pulled to par benefits given how how significant the drawdown to being in the first half of this year. So we are seeing a little bit of that.

And there will be more pull to par in the years ahead, particularly.

And post three years from now.

They are a lot of that really all of that loss and Q2 in H one would come back.

But in a sense the pulled apart benefit as part.

Part of the of also the the Viente impacts driven by the both the volatility and the level of rates.

And particularly the FX markets.

That we see so it's really hard to predict obviously helpful that we reversed in Q3.

About the same amount as we had booked in each of Q1 and Q2.

But I wouldn't at this point I think it's far too early to call an outcome that that we get it all back in queue for in fact, we could could very well go back to a negative result in the Viente line in Q4.

Okay. Thank you.

Thank you.

The next question is from the line of Stuart Graham from Autonomous. Please go ahead.

Taking my questions I had a couple of hundred along just hung around please.

There's nothing for Christian you mentioned young certain environment several times in your commentary given the elevated risk of something breaking in the system Central Bank rapidly right right I guess that'll be all I was an example of that whichever is if any of you watching closely right now please.

The first question then the second question is are you looking for Christian <unk>, having to national <unk> change in the future do you have any preliminary thoughts on what that might mean to in terms of potential additional revenue video 2025 planning horizon. Please thank you.

Thank you to it.

<unk>, it's always it's always hot in these kind of I would say complex geopolitical and economic times to call out.

The kind of the the item I'm looking most of them, but I think it's inflation I think we need to get inflation out of the system for the society and for the economy, Therefore, actually I'm glad about the statements by the central banks.

You have known steward I've been out for 15 months now that to a in the middle of 21 Disinflation is in a temporary but more permanent and we also argued for interest rate increases father earlier, because I do think that this is an issue.

Which actually will impact the economy in particular in Europe going going forward. If it's not her fault adequately and now I do think the steps out of the right wants by the Central Bank I hope that they continue that even if the economy is slowing down that is all in our base case in that is all in the numbers.

Which jameson I gave you before that assumes a slowdown of the economy, but I think it's the right thing to overcome inflation as soon as we can so that would be my my first and second answer is spot on.

Steward.

We have a lot of discussions actually with the culprits about reorganizing their supply chains, making sure that they have diversified supply chain.

That it goes to a little bit from.

Just in time too just in case that is actually the discussion we have which was our corporate clients.

And in this regard it as set on two fronts to be honest.

Incremented to our business and positive fall business a in the corporate bank with our cash management with our network network, which we can offer around 60 countries.

Cause you see a lot of German corporates, who are thinking about diversifying their supply chain within Asia to go from one country to the other thinking about establishing other locations in Asia, but also insult in Latin America, where we are present, so that is one secondly, and it goes into our call.

Finance advisory business.

And then obviously we are very close also to the larger German firmly owned midcap companies not.

Not always talking about the ducks companies and having strategic discussions on the corporate finance levels with these companies and that's increasingly picking up again, they look forward advice from a research point of view.

From an M&A point of view and then when it comes to execution from the day to day banking point of view and there we have to corporate bank. So while it is challenging topic. It is.

Suddenly incremental and positive follow up business in the investment bank and in the corporate back.

Do you have a sense of when you might go with numbers around that.

Look.

I think.

We.

Would be a bit too early but as we promised we give you a little bit more guidance.

On the second of February when we come to 23, and the reconfirmation of our 25 guidance and having your question in though I will remember your questions will give us some answers to that.

Maybe I'll just add one thing Stewart to that numbers around it. So I remember in March when we talked we gave a compound annual growth rate in revenues for the corporate bank of 6% to 7% and I think people reacted and thought that was punchy.

And look some of the just sort of economic growth related lending may not arise or may slow and 23 and 24.

Slower growth economy, then we might have predicted as we built our plans for that we shared with you earlier this year that said I.

I would think to all of the points that Christian just mentioned that there will be increased demand for lending given nearshoring given the the need to reinvest in the energy infrastructure in Germany, and what have you. So so in a sense I suspect will come back to you to say, it's on a net basis supportive of the numbers.

We shared obviously with interest rates being being far more supportive than we'd anticipated back in back in March so so by and large.

Ah pretty supportive backdrop for the for the corporate bank over the years to come.

Okay. Thank you.

Next question is from the line of Kian Abu Hussein from J P. Morgan. Please go ahead.

Yeah, Thanks for taking my questions.

The first question is.

Just around cost flexibility and James talked a little bit about that topic.

Assuming that that via running into a terrorist scenario, let's assume that revenues actually you're gonna be down three 4 billion from the $28 billion that you are.

Expecting next to your could expect and provisions I actually double provision guidance for next year as well how.

Now what the cost base look like.

Scenario and I assume you around these scenarios and the reason why I'm asking is because I really struggle to get a feeling for flexibility in your cost base at this point.

Even then I do variable fixed cost adjustments et cetera. Once you give some data.

I just wanted to see how I should think about flexibility.

And then the second question is around provisions the message is cautious around what's happening around you, but at the same time, you're very upbeat on provisioning outlook.

Especially into next year as well and I'm just wondering what your base cases, again here and whereas the tail risk are in that scenario.

Thank you can.

Happy to answer that.

Still trying to digest way, you'll get the $4 billion of revenue downside, but.

Even if this happens to this bank will be profitable let me add this is the first statement.

Then we wouldn't notice chief an 8% return on equity if you would take a 4 billion revenue decline because obviously would be anything else incredible if we can.

Also if I will tell you we adjust the cost by that number down in a year's time, but.

First of all we have.

An investment budget, which again this year was higher than last year, which again next year.

Plan to.

Our sofa.

Planning discussions, which we have sofa, which is in line or even slightly above this year, which we would obviously cutbacks. So before we even start to discuss on Verizon <unk> we.

We would go into investments, which we would do in which we want to do in our business, which we would postpone which we would stop and there is a good amount I would say, which we can take very quickly out of the system. That's number one.

Number two you just mentioned it in such a downside scenario, where revenues would plunge and again.

I think James and I have shown to you that our revenue guidance was spot on over the last three years when it came to the individual businesses for the three state of the business.

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We almost can focus you with the revenue to.

The last $100 million for next year.

Given that what we are seeing.

That would mean.

Would you would assume almost a half a 50% reduction in the investment bank, which on our.

On the basis of the financing business, which is pretty stable as you know.

The market share and positioning we have achieved in the macro business.

And then also in a business, which was very weak this year and which is starting in my view to re emerge next year is again would be addressed stick number but of course, we would adjust the V C and the V. C would be then a material reduction to that what you have seen nausea, what we have in our mind for this year. So this is that.

Hi, three digit number, which we would take out of course in such a scenario.

On top of that.

We change the thing we are trying to do everything on the 2 billion cost safe to have a kind of a linear and.

Over the years.

I would say.

Equal reduction of costs, obviously more than 24, and 25, but also already in twenty-three, which bring down the cost and we would in such a scenario, obviously do a completely different job on hiring all of that would significantly bring down the cost in such a downside.

And therefore, yes, we could not obviously compensate for a revenue loss you you are now having in your mind in the downside scenario, but we would obviously.

I would say materially reduce our cost base and Lisa just the first three items I would mentioned to you.

Number two on the on the risks cause again, our base case and James Please.

Add to that.

You also to the class comments that gave.

On the.

On the risk of our base case is around.

The 25 basis points, which James mentioned, so approximately $1.3 billion. It's obviously in such a scenario, where we are very hard to forecast, but I think also there we have done key on quite a good job over the last two years in bringing early out a forecast for the year remember for the Covid here I remember for this year and we were.

Pretty much a spot on on this one so all I can see from the behavior of the portfolios in German mid gets in the private bank portfolio.

In the international portfolio in the real estate portfolio and the funded LDC and portfolio I think the 13521 4 billion absolutely solid number.

If we think about the downsides, including gas rationalizing.

So to say a worsening crisis in Europe , which by the way I <unk> given the storage levels of guess, where they are the very warm October we should really think about that we.

Take that into account also for the next six to nine months, but what happens in Germany. Because these are positive impact the $200 billion, which are coming but even if I think about a downside.

I think Ah Olivia enter team rightly so.

Doing obviously, a monthly rerun off their portfolios.

Keeping up with the 1 billion over 18 months of additional loaned us provisions of which we would see and it should be a downside.

But again with the Preprovision profit, which we show of over 6 billion for this company I think that is against something which we are able to withstand James.

James really nothing to add I think I think you've covered a Christian.

Kian, there's always there's always a place to go in terms of severity of stress scenarios, but but as we analyze it sort of a reasonably stressed environment next year.

Would see us at at revenue numbers far higher than the sensitivity that you outlined.

And CRP numbers I think more in line with what Christian just described.

And the scenario that we've put in our disclosures last quarter and this quarter. So we.

We just while we're focused on Variabilizing, our cost base no no disagreement with you. There. We just don't see that the same the levels of sensitivity that you that you are positive.

Thank you very much.

Thanks again.

Next question is from the line of armoured goal from Barclays. Please go ahead.

Hi, Thank you.

So I just wanted to come back and.

I found out about the NII sensitivity.

Just on that kind of impasse.

Number that you gave in terms of benefit <unk> potential all set.

And just to make sure I'm, sending that question I guess that what what about one trainer I'm actually interested in any assets and the increasing that by about 200 dance I think he said.

<unk> Pizza and say.

About I guess.

19, <unk> satchel kind of frightening.

So I just wanted to check and sinusitis.

<unk> if you think.

With that kind of benefit there'll be any other kind of <unk>.

And also I, just what do you see any kind of risks and taxes taxation all other thoughts.

From that kind of <unk> benefits that'll be coming through.

Yep. Thanks, I mean, I think more like more 20 basis points against the trillion of interest rating assets.

And that I think is a reasonable level to assume so.

Ah margin next year sort of somewhere between 1.718% we think is entirely.

Achievable again with with some of those those netting effects built into the the numbers.

So we are and again, there's a lot of moving parts here around betas lags where rates actually are.

What if any unusual items are built in in one area that we're really focused on here is managing down our our funding costs.

We're we're we're not comfortable with the spreads where they are right now we don't think they speak to the underlying credit quality of the firm.

And we'd like to see them come down and that could give us a slightly more favorable.

Environment into which to issue next year, but as I say lots of lots of different.

Pieces of that puzzle.

On the taxation side look.

I would just.

Really emphasized the banking industry in Europe is coming back from a period of.