Preliminary Q4 2022 Deutsche Bank AG Fixed Income Call

Speaker 2: The.

Speaker 3: And.

Speaker 4: you

Speaker 5: Ladies and gentlemen, thank you for sending by.

Speaker 6: Welcome and thank you for joining the Deutsche Bank Q4 2022 Fixed Income Conference call.

Speaker 7: Roger, this recorded presentation. All participants will be in a listen-only mode.

Speaker 8: The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch down telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Philip Toysna. Please go ahead.

Speaker 9: Good afternoon or good morning and thank you all for joining us today. On the call, our group treasurer, Richard Stewart, will take us through some income-specific topics. For seeing how comprehensive income has adapt intensively to what the65 trustees of the missions have completed at us to solve chat solutions, our group chair marshall

Speaker 10: For the FATICRAN QA session, we also have our CSO, James and Larky with us to answer their questions.

Speaker 11: The slides that accompany the topics are available for download from our website at db.com.

Speaker 12: After the presentation, we will be happy to take your questions.

Speaker 13: Before we get started, I just want to remind you that the presentation may contain forward-looking statements which may not develop as we currently expect.

Speaker 14: Therefore, please take note of the precautionary warning at the end of our materials. With that, let me hand over to Richard.

Speaker 15: Thank you Philip and welcome from me.

Speaker 16: Three and a half years ago we set ourselves some key financial goals for the end of 2022.

Speaker 17: Today we would like to talk to you through what we have achieved and to highlight how Deutsche Bank today is a fundamentally different bank.

Speaker 18: Let me start with the five decisive actions we took as we launched our Translation Strategy in 2019 on slide one.

Speaker 19: Firstly, we created four client-centric divisions which have delivered stable growth as promised.

Speaker 20: In 2022, these four businesses contributed to our best profits for 15 years.

Speaker 21: These divisions complement each other and provide well-doublessed learning streams.

Speaker 22: We are now a better balanced bank.

Speaker 23: We are particularly pleased that the corporate and private banks together more than doubled their contributions since 2018, contributing just over 70% of the group's pre-tax profits in 2022.

Speaker 24: Secondly, we exited businesses and activities which would not call to our strategy.

Speaker 25: We exited equities trading, transferred our global finance business, refocused our rates business, and downsized or disposed of other non-strategic activities.

Speaker 26: Our capital release unit reduced leverage exposure from non-strategic activities by 91% and risk-weighted assets by 83%, excluding RDOAs from operational risk.

Speaker 27: This enabled us to redeploy capital into our core businesses.

Speaker 28: Thirdly, we cut costs.

Speaker 29: Compared to the pre-transformation level of 2018, we reduced our cost-income ratio by 18% and increased our cost-income ratio by 18%.

Speaker 30: We achieved this while I was all removering 8 billion of transmission related costs.

Speaker 31: Fourthly, we committed to and invested in controls and technology to support growth.

Speaker 32: Finally, he managed and freed up capital. The capital release unit played an important role here, contributing around 45 basic points on a net basis to our CET-1 ratio.

Let me cover the impact delivering the transformation plan has had our profitability and financial stability on slide two.

We are pleased that all divisions deliver significant positive operating leverage on an annual basis since 2018.

We intend to continue to deliver operating lavage for the group on an annual basis going forward.

Our returns have improved every year since 2019.

We have reduced non-interest expenses over the period. We will continue to be disciplined on costs, including working on additional measures to offset cost pressures, in line with our 2025 target of a cost-income ratio below 62.5%.

Finally, our capital remains resilient.

Since 2018, we absorbed around 270 basis points of cathode headwinds from regulatory impacts and our transformation plan.

and enter the year at 13.4% around 300 base points above our regulatory requirements.

Let me now turn to our performance in 2022 on Slide 3.

Our achievements have positioned us to build and maintain a trajectory of sustainable growth and this is reflected in our 2022 results.

Revenues are above 27 billion euros, well ahead of what we had planned in 2019, despite the business exits I mentioned.

All four core businesses produce positive operational leverage compared to their pre-transformation levels.

In 2022, our reported post-tax return on tangible equity was above 9%, including a deferred tax valuation adjustment.

In terms of profitability, we delivered our highest profit since 2007 at 5.6 billion euros before tax.

Our cost-income ratio is 75% and significantly below the pre-transflation level of 93% in 2018.

Pre-Povisional Profit for Group was nearly 70 billion euros in 2022.

We proved resilience during the challenging environments the past few years.

This regained resilience was also recognized by the credit rating agencies.

Since 2021 we have received four upgrades of the three leading agencies and we are confident to have further momentum.

We have maintained disciplined risk management and a strong balance sheet, as you can see on slide 4.

In order to maintain this discipline going forward, we continue to invest in our people and risk management capabilities, as well as controls and technology which support timely and proactive risk management. This enables us to manage risk dynamically within our frameworks and most importantly within our risk appetite.

We continuously monitor emerging risks, run down side analyses and stress tests, and operate a comprehensive limit framework across all risk types. In this way we can respond proactively to changes in our operating environment, as you have seen us do in 2022 during the escalating war in Ukraine and the stress on European energy supplies.

Our provision for credit losses was 25 basis points of average loans 2022, in line with our guidance provided back in March.

Let's just now dig a bit deeper in some treasury related topics over the next slides.

Slide 5 provides further details on the developments in our loan and deposit books over the quarter.

or figures in the contrary are adjusted for FX FX.

Overall, loans have declined by €2 billion in the quarter.

Loans in the corporate bank have decreased by 5 billion, driven by active portfolio management over year-end as well as 2 billion of episodic effects. In the investment bank, loan growth in the quarter has been 4 billion euros, driven by strong demand across FIC in high quality structured lending.

coupled with moderate growth in origination and advisory. Given the macroeconomic environment, we remain very focused on managing the client and on the end of the tick within our risk appetite.

In the private bank, loans remained essentially flat.

For this year we continue to expect moderate long growth predominantly in the corporate and private bank.

Moving to deposits, where our book grew by 4 billion euros compared to the previous quarter.

This growth has been driven mostly by targeted measures in the Corva Bank as well as some and the economic growth.

Deposits in the private bank have remained essentially flat.

In 2023 we are focused on structurally increasing deposits in both the corporate and private banks in line with our TLTRO repayment plans and business strategy.

Turning to slide 6, I would like to provide an update of the interstate tailwind we expect to see going forward.

In March 2022, we guided the interest rate tailwinds netter funding costs offsets. We'd add approximately 1% to the revenue compound annual growth rate from print 21 to such its weight jeans or among those that have reduced the total of ?tter value we're licensed

This figure has risen to approximately 1.5 percentage points from our 2022 landing point, based on rates and funding spreads as of the 20th of January .

You can see the divisional CAGA's net affirming impacts on the right-hand side of the slide.

As you want to give you a consistent view across rate and funding cost impacts, these figures are based on the evolution of our planned liability stack rather than a purely static balance sheet, but do not include the impacts of planned lending growth.

In 2023 we expect to see strong interest rate impacts due to the timing effects resulting from the rapid pace of interest rate rises.

By 2025, the rollover of our hedge portfolios would have offset the reduction in this timing effect resulting in the net interest income benefit being maintained.

As noted at our third quarter call, the sequential tailwind from 2022 to 2023 is expected to be approximately 1 billion euros for the full year.

Living to slide seven, highlighting the development of our key liquidity metrics.

Throughout the fourth quarter we have maintained our robust liquidity position.

While our daily average liquidity coverage ratio during the quarter was at our target level of 130%, the increase of the spot LCR at year end was driven by strong cash balances and positive FX impacts.

Compared to the third quarter, the liquidity coverage ratio increased by 6% to 142%. The surplus above minimum requirements increased by about €4bn to €64bn quarter on quarter, mainly driven by significantly lower net cash outflows.

The stock of our high quality liquid assets decreased by about 8 billion euros during the fourth quarter due to our pre-payment of TL-TRO and a weaker US dollar.

Net cash outflows also significantly decreased as a result of lowered relative outflows, creative facilities, as well as our efforts to further optimise the deposit book.

This year we remain committed to support business growth and continue to manage the LCR conservatively towards 130%.

The net stable funding ratio increased to 119%, which is within our target range.

This represents a surplus of 98 billion euros above the regulatory requirement.

The available longer term stable funding sources for the bank continue to be well diversified and are driven by a robust deposit franchise which contributes about two thirds to the group's stable funding sources.

Over the course of the Prince 23, we aim to maintain this funding mix with the remaining TRTRO being gradually replaced by caribbons and deposit growth.

Turn into capital on slide 8.

Our common equity tier 1 ratio came in at 13.4%, a three basis point increase compared to the previous quarter.

FX Translation effects contributed two basis points.

Three basis points of the increase came from capital supply changes affecting our strong organic capital generation from net income, largely offset by higher regulatory deductions for deferred tax assets, shareholder dividends and additional tier 1 coupons.

Credit risk weighted assets led to a seven basis points ratio increase versus the previous quarter, as the impact of regulatory model changes was more an offset by tight response to our core bank.

Market risk RDOA increased leading to a 9 basis point ratio decline versus the previous quarter.

The higher market risk resulted from higher S-Phar levels, mainly driven by a change in the applicable stress window versus the prior quarter.

Operational risk weighted assets were essentially flat compared to the previous quarter.

Looking ahead, we expect our CET1 ratio to remain subject to volatility, principally due to regulatory model reviews and ECB audits.

In 2022, amendments were made, in particular to models for our MidCat portfolio and our German retail portfolio.

Now we expect model changes for the wholesale portfolio to follow in phases.

Our first set was implemented in the fourth quarter of last year with an RDOA impact of around 2.5 billion euros.

The models for the larger portfolio of financial institutions and large corporates will follow over the course of this year.

In addition, our market risk qualitative multiplier is currently being reviewed from which we expect a decrease.

We expect to be able to absorb model related impacts by continued retention of earnings, but the timing of regulatory model decisions is likely to create CET1 ratio volatility.

That said, we aim to end 2023 with a CEC1 ratio of 200 base points above our maximum distributable amount threshold expected to be 11.2%.

Our capital ratios remain well above regulatory requirements as shown on slide 9.

The CET1 MDA buffer now stands at 288 basis points or 10 billion euros of CET1 capital down by one basis point quarter on quarter.

While the CET1 ratio increased by 3 basis points in the quarter, the distance to MDA decreased due to the higher CSC buffer setting in the UK of 4 basis points.

Our buffer to the total capital requirement increased to 330 basis points, most notably from our 1.25 billion euros 8kW issuance in November .

As of 1st of February , our CC1 ratio requirement has increased by approximately 60 basis points, including 11 basis points from a higher setting of PILOTEU requirements by the ECB.

and approximately 50 base points from the introduction of the German counter-sythical buffer and the German systemic risk buffer for residential mortgages.

This still leaves us with a comfortable pro forma buffer over the first quarter of the CET1 requirement of approximately 230 basis points or 8 billion euros of CET1 capital.

Moving to slide 10.

We entered the year with a leverage ratio of 4.6% for a lean line with our 22 target of around 4.5% and an increase of 25 base points versus the prior quarter.

FX translation effects resulted in a 5 basis point leverage ratio increase, principally due to a weaker US dollar.

11 basis points came from higher tier 1 capital, affecting higher CET1 capital and our AET1 issuance in November .

Finally, 9 basis point increase came from the seasonal reduction in trading activities at year end.

We continue to operate with significant loss absorbing capacity, well above all our requirements as shown on slide 11.

The emerald surface, as our most binding constraint, has decreased by 2 billion euros to 18 billion euros over the quarter.

This decrease was driven by lower regulatory capital and a roll down of eligible liabilities, partially offset by a lower MREL requirement due to the FX driven decline in risk weighted assets.

We are well prepared to absorb the approximately 2 billion euros impact from name regulatory changes, most mostly the higher-germ buffer requirements, which became effective on the first effect rate, and a further approximately 1 billion euros from new MRO requirements with respect to take effect sometime in the first half of 2023.

Our loss-absorbing capacity buffer remains at a comfortable level, even including these changes on a pro forma basis, and continues to provide us with the flexibility to pause issuing new eligible liability instruments for approximately one year.

Moving now to our issuance plan on slide 12, we close the year with a total issuance volume of 24 billion euros in 2022.

Excluding €4.3bn of structured notes, which were not part of our original plan, this is in line with our previous guidance of ending the year at the upper end of a €15-20bn range.

During the fourth quarter of 2022 we issued €4.8 billion in senior preferred, cover bond and A.T.1 format.

So in the fourth quarter of 2022 we issued 4.8 billion euros in senior preferred Kerobond and AT1 format. The latter is supporting our balance sheet and lending franchise.

Of setting that, we prepaid 11 billion euros of TLTRO in December and an additional 5 billion in January , reducing our outstanding to 29 billion.

For this point forward we expect to reduce our TROT outstanding by 3 to 4 billion euros per quarter through a combination of prepayments and a maturity profile of our remaining TROT road charges

30 now to 2023 we expect slightly lower requirements compared to 2022 and guide to a range of 13 to 18 billion euros with a focus on seeing on prefers and cover bonds.

January was a very busy month for financial issuance in the capital markets, with Euro market issuance being up more than 50% compared to January 2022 levels.

We were also active and issued roughly 4 billion euros in January , split between cover bonds, single preferred and seeing on preferred issuance in the global capital markets.

This equates to 30% of the lower end of our full year issuance plan.

In addition, we issued our inaugural panda bond following recent regulatory changes by PBOC and SAFe to facilitate foreign remittance of panda bond proceeds.

This will further boost our credentials as a leading foreign DCM house in China.

Furthermore, we published the final results of our dollar liable consensus listation on the 90th of January .

As you have seen, our senior non-preferred instrument met the requirements at the second meeting, and the coupon will be amended to reset over SOFA.

whereas the AT1 security did not meet the requirements and continues to reference dollar eyeballs what rates.

Whilst we are disappointed, we know that the reset does not occur until April 2025.

Before going to your questions, let me conclude with summary on slide 13.

As the environment changes, so does our business mix, and the more favorable interest rate backdrop has created a strong step off for further revenue growth.

So let me conclude with a few words on how we see 2023. With regards to revenues, we anticipate performance around the midpoint of a range between 28 to 29 billion euros, reflecting the impact of interest rates, particularly in the corporate bank and private bank, as well as robust organic business growth.

This would be partly offset by some normalisation in other businesses, notably FIC. On the cost side, we remain focused on delivering positive operating leverage, a key driver as we work towards our 2025 goals. We anticipate inflationary pressures but also benefits from our cost efficiency measures, and for Twitter23 we expect to keep our non-interest expenses.

40 flat in 2022. Our risk management discipline, coupled with more benign macroeconomic and credit environment in recent weeks, supports our provision for credit loss horizons, or 25 to 30 base points of average range for 2023. Our current outlook would tend towards a lower end of that range. In other words, essentially flat.

to 2022. We started the year with a strong CET1 ratio to support growth and absorb the upcoming regulatory driven volatility.

We started the year with a strong CET-1 ratio to support growth and absorb the upcoming regulatory driven volatility. With that, I will finish and we look forward to your questions.

Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-down telephone. If you wish to remove yourself from the question queue, you may press star followed by two.

So anyone who has a question may press star followed by one at this time. And our first question is from the line of Lee Street from Citigroup. Please go ahead. Hello, thanks for doing the call and thank you for taking my questions. I've got three please. Firstly, obviously I'm sure you did get me questions on your upcoming call.

of optimistic view for ratings this year. So do you expect to further upgrade this year and link to that? Do you have a specific sort of rating target in mind, like getting your non-perfect senior to being a rated or I think similar to that? And then finally, the point you just mentioned on the other additional tier one.

and the consent which wasn't passed. Obviously if you were not to call that bond, I suppose because it's what happens to the coupon, you know, if no further action is taken, more that just end up effectively fixing. There'll be my three questions. Thank you.

Thanks Lee and thanks for joining us on a Friday afternoon.

The tier 2 security question first, so regarding our $1.5 billion tier 2 security callable in May, as you rightly said we continue to make decisions regarding the exercise of those call rates close to the exercise date. As usual our...

Our decision balances the interests of all our key stakeholders and factoring in all relevant economic factors including the usefulness of the instrument for capital, funding, basic agency metrics as well as the cost of the instrument versus alternatives. As you probably aren't sure aware the core window for the security is actually from the fillers of march 2

24th of April 23. We are monitoring this topic and the market closely. We'd note that the rally we've seen in our spreads over recent months obviously would impact that decision but as always any call of a CAFO instrument is subject to regulatory approval. In terms of ratings, which is your next question.

Overall, we're happy that you've actually had over the last years with four upgrades at the leading three aging agencies that feel there is more room, as I've said in my prepared remarks.

We feel that compared to peers, we have an average still around a not-capped potential. But when we look at specific agencies, obviously Moodies was second half last year, we have an average still around a not-capped potential. But when we look at the average still around a not-capped potential, we have an average still around a not-capped potential.

That was confirmed in September last year. We therefore expect that positive outlook will get resolved at some point during 2023. FIT in their last report stated that they expect further improvements in profitability together with maintaining a CEC1 ratio above 12.5% and a leverage ratio above 4.5%.

We think we've made good progress on all those factors and so we're hopeful there. In addition, I think Fitch have flagged that any upgrade would require only a moderate impact from the economic downturn on the rights capitalisation.

Turning to S&P, they currently have all 18s as they were outlook in the recent Poverts Commentaries which will show on our IAR website. S&P appreciates the progress the bank has made throughout its Transmacial Programme.

At the same time, the HU refers to the expectation of a supportive macroeconomic environment as a prerequisite to upgrade our ratings, but over the last few weeks and months even the economic projections have improved significantly compared to two views a few months ago, so again we remain optimistic there. In terms of concepts, solicitation...

Yep, very clear and thanks for your answers.

The next question is from the line of Sumi Asaka from Blocklays. Please go ahead.

Hello. Thanks for the presentation and taking my questions. I had two. Please. First, you said you were looking to grow the deposits. Is the deposit growth target for 23 broadly similar to what you saw in 22 and um...

How is the deposit development trending? It's only early for 23, but any comment on that? And if given that you have TLTR repayments, if the deposit development is not in line, are you looking at issuing more senior?

preferred bonds, for example, or it would still be more covered bonds. That would be my first question. Second question would be, you mentioned that you had looking for a year-end target of at least 200 bps buffered for MDA. Is that kind of like a floor throughout the year or could we see the MDA buffer given this?

and the private bank in 2012 were very stable. And what we're planning for this year is some time to campaign in both our corporate bank and private bank. The private bank campaign is angel started, so it's all but truly. we are ready for that.

but we are expecting overall deposit growth to be slightly above the full year at 2022 and study throughout the year. So I think that is, we're still in the same comfort about our deposit outlook. In terms of TLTO, there...

The maturity of the tranches is in QQQ3 of Q24 and so we feel very comfortable around that roll-off profile with no kind of cliff edge effects and that roll-off profile will be funded through

through deposit growth or through our co-abonded differenti plans. So that'd be, I guess, the deposit question in terms of MD8. So we expect to see T1 requirement of approximately 11.2% by the end of Q423.

Reflecting already announced changes to the counter-surgical buffers that are coming applicable throughout the year.

We expect further ECB decisions related to internal credit risk model audits to contribute also during the year, some of life ECU-T1 ratio burden and others with some potential benefits. However, there is uncertainty on the ultimate timing and magnitude of those impacts.

and consequently we expect some CET1 ratio volatility during the year. But I draw we expect CET1 ratio by year and of turn to age once a 5R or MGA threshold.

Thank you. The next question is from the line of Juliana Golub from GS. Please go ahead.

Good afternoon. Thank you for the presentation and for taking my questions. I have two, please. First, would it be fair to assume that in terms of capital instrument issuance, that would be skewed towards tier two issuance, given that you have some amortization in your bullet tier two securities and that you're comfortably meeting your A-1 requirements? And the second one would be, if you could please give us a flavor on the RWA development in 2023. Thank you.

Thank you, Julianne for joining us. So in terms of capital issuance, so we are...

As you rightly said, we have a good place in both our tier two and tier one, I guess, insurance right now. As ever, what we do is think about our own business growth opportunities, and so that does drive our decision as to what's passed the capital start to allocate to that business growth.

And I think in terms of our issuance plans for this year, we expected somewhere between zero issuance or up to $2 billion or so. So again, that's kind of more opportunistic. It's more about where the opportunities are within our franchises to deploy that capital and leverage. James, I might take the RWA question.

What we do expect growth from the businesses and that's something we want to fund with our capital. We think that's moderate growth. So we've talked in the past about sort of low single digit growth in the businesses as we just grow the franchise over time. And then to Richard's earlier comments, we will have increases from model audits.

We'll have to give you updates as the year goes by. Understood. Thank you very much. Thank you, Juliane. The next question is from the line of Robert Smalley, fixed income analyst. Please go ahead.

Hi, thanks for taking my question and thanks for doing the call. I wanted to ask about the loan loss provision.

you're going to hold it steady for 2023 versus last year. So fixing that at that level, as we go into a slowing economy, albeit less than maybe originally thought, would that speak to more of discretionary and general

provisions and management overlays within that provision. At the same time, on the call yesterday, I think the discussion was that credit issues may be more idiosyncratic in 2023, which may speak to more specific provisioning.

If you could walk me through how all of that ends up with the flat provision and the thinking behind that, I'd appreciate it. Second part of the question is kind of the same. It seems that most of the credit issues, large credit issues that we're seeing over the past 12 to 18 months.

are not really the result of risk management as much as they are due diligence issues.

Can you talk about your due diligence, you've avoided a lot of these issues, and how that's changed over the past 18, 24 months given what we've seen in losses around the financial system, idiosyncratic losses. Thanks.

Sure, Robert, it's James, and thanks for joining, thanks for your questions.

You know, just looking at Olivier's commentary yesterday...

The, I guess one important part is in the way that the IFRS 9, you know, works

we're basically looking at 23 is a year in which more likely the the provisioning we take will be stage 3 so you know based on impairment events.

In some respect, it's hard, it's therefore very past dependence, hard to guess which credits will deteriorate to be an impairment and when. But obviously we take a view based on the portfolio, the risks we see, the environment and so on.

And so the study is, you know, is a forecast, but it's an educated view based on everything that's going on there.

I wouldn't at this point expect that we'd be taking overlays. We're, as you know, reasonably...

I don't say reluctant. We think overlays are entirely appropriate when the result of the ratings, the models, create an expected loss number that you, or an SCLP, that you think may understate the risks in the books and therefore a more prudent approach is needed.

So we're not reticent to take overlays, but typically we don't see a need for them.

And so we would not build that into our forecasting. Now if you ask yourself, well, what is essentially flat to this year, to 2022, you know, it's a level of credit loss provisions between let's say, or what is consistent with our guidance 300 to 325 a quarter.

And if you look at our history, that's actually a reasonably significant level of CLPs and stage three, absent a significant stress event. And so this current outlook, a milder recessionary environment and slowdown, we think produces that type of outcome.

We don't think that's necessarily an overly optimistic way of looking at it, but to answer your question, not including overlays or events that could take place during this year, which is why we decided to keep a range, even as we indicate our comfort today with the low end of the range. Look, we on the due diligence side.

You know, one of the nice things is we talk about our underwriting standards. We talk about the quality of our risk organization. So in many respects, we rely on the ordinary course due diligence that we do in the second line. We rely on the quality of the relationships, understanding our clients and their needs in the first line.

You're always learning over time and adapting your processes to what you learn and to the environment.

and looking at the value of collateral, the development of those markets. And hence, I don't want to say we're fixed in place, but we feel very confident in our processes and in the capabilities of our people.

in the due diligence and it's one of the pillars we rely on as we think about the risk profile of the company. Hope that color helps Robert.

Yes, it does. Thanks for the detail. My pleasure. The next question is from the line of Ellie Den from Morgan Stanley . Please go ahead.

Hi there, thanks for your presentation. I'd like to ask a question on the old Deutsch Post Bank CMS bonds. Do you have any plans for these? And I'm wondering if you just look at them simply as cheap perpetual funding or and if there's any encouragement from your supervisors to get rid of them? Thank you for the question.

why it's not something which is the regulators going to guess think you know or pressurising us I guess to do anything about. Having said that, well we kind of feel that things are attractive for us to take action on because we're coming up to various exercise dates.

Then of course we do consider that. But yes, the true answer is that we're not under any pressure to do anything with those particular securities.

Thank you. The next question is from the line of Corinne Cunningham from Autonomous. Please go ahead.

I have a couple of questions kind of related, one on refinancing costs, you've got something in your forecast on I guess how that flows into margin expectations. But the other one is on the LCR.

and there's quite a big difference between the average year and the quarter and then the year end. And then when I try and tie this back to what you're saying about replacement of TLTRO funding, I'm finding it a bit difficult to tie it all up. If you look at the Q4 redemption in TLTRO, there's not really much of that was covered by.

than their increasing deposits and lines. You didn't really issue much in the way of covered bombs in Q4. And yet you had potentially what looked like quite a...

significant inflow of deposits over the quarter end. So can you just explain a bit about what's moving behind the LCR and maybe also give us what the average for Q3 was as well. So the average for Q4 was 130, what was the average in Q3. Thank you.

Certainly. So I think the...

Q3 was, from memory just to take questions in a random order, the Q3 was just above 130 on a daily averaging basis.

In Q4, we were quite pleased with our steering, we were running sort of day-and-goos like so, around the WI-30 for most of the quarter, that was the spike like it's year-end, which was a bit just driven to my seasonal factors, which kind of took us to the 142 number and then.

starting again in Q1 again when kind of back to a sort of daily averaging of close to our target level. So I think that's the key to steering, I think is working exactly how we're looking to target. In the fourth quarter we have a very good job of optimising our target.

And so, quarter end it was only a bit above, over 20 billion support of the LCR versus around 30 billion at the end of Q3. That reduction in reliance was achieved without the LCR going down through deposit optimization and lowered derivatives market.

So I hope you have a good question.

And then on the point about margins and your expectations, so what kind of cost of funding, typical cost of funding are you factoring in there or is this entirely driven by paying more on deposits?Looping at a net worth size.

So we factor in a market implied number in the numbers we show in the deck as of the 20th Jan so that we mark implied rates as well as market implied issuance rates and that's for both deposits and for issuance.

Sorry to press on this but are you forecasting just that spreads stay the same? That they that's improve in line with credit ratings.

or similar settings.

There's understanding of your question for the intensity in terms of what we're assuming happens in terms of our spread. Is that we kind of say for on the issue? Yeah, you're also from the spread, yeah. Yeah, exactly. So we just take...

So I guess what we just take is the current issuance for example, I think this deck, the 20th of January , and then essentially over time we assume some sort of convergence to our peers, given we just paid 1 to our peers.

just by that end because over the next few years, just because, as we said earlier, our waiting agencies redo kind of through those, those are going to be up and up lists. So at some point, we're certainly hopeful to be up list at some point. So in that sense, that's how we priced the issuer's curve.

Thank you very much. The next question is from Arun of Brajesh Kumar from Societe General. Please go ahead. Hi, British from SOGCHI. Thanks as always for doing this talk. My first question on issuance has already been answered.

The next one, I missed a bit, I already talked about the LIBOR consent solicitation. So can you please repeat that? So, Barjat, it's James, I'll take the first question. So on specific clients, you know, except in exceptional circumstances, we don't really comment. As yesterday, you know, we do point to our general sort of conservative underwriting, collateralization and risk management, you know, that applies to all situations, but we don't go into individual client names.

The overall asset quality environment for 2023 is, as I got into a little bit with Robert,

You know we we think there are and and as all of you talked about yesterday We there are obviously some watch portfolios, so we're not complacent

credit cycle, rising rates produces some amount of stress in borrowers that may be highly leveraged or where cash flow or asset characteristics are deteriorating. So it's something we watch very carefully.

I'll say that if there are watch portfolios, the ones that we point to for sure would be the commercial real estate market globally, some of the middle market, mid cap enterprises that we lend to, and obviously households that whether through inflation, energy costs, or other reasons may come under pressure. In fairness, as we look at all of those sectors though, the downside that we thought might emerge in 23 just doesn't appear to be emerging. And that's why I think you probably hear from us and our peers.

a more optimistic view about the credit environment than we might have expected three or four months ago. Our portfolio quality overall has been quite stable. When you look at forward indicators, NPE has gone down.

There's been stability more by and large in our internal ratings and sort of stage two events and those types of things. So as we look at all those indicators the portfolio looks stable to us.

And as all of you talked about yesterday, we like the way we manage the portfolio in terms of diversification, hedging, risk diversification and management.

overall. And we'd like to think that stands to some good stead regardless of the cycle we're in, but as the cycle appears to be milder right now than we might have expected, we've come into the year with a higher degree of optimism.

Okay

And I guess to answer your question, I guess on the solicitation, so back in end of January we had a scene on preferred FRN which passed and so that went and moved to...

Move to SOFA and then we had an A tier 1 security as well which didn't get the quorum and so now I guess the options, again we haven't made any decision on any of these but it relies on fallback language or debt exchanges or calling the security itself so that's what we're trying to say.

Okay, and just one quick clarification. In your instrument slide 12,

The footnote says for 2023 this includes only senior preferred disuses. Does this mean 1 to 2 billion will be only senior preferred and no structure in that? That's how you should read it.

That's right, so this page doesn't include structure notes.

That's right, so this page doesn't include structure match. Okay, thank you.

Well, I just laughed at that, that's because it's covered out of our investment banking franchise role, and the tradition has been out for freshroom.

The next question is from a line of Daniel David from Autonomos. Please go ahead.

Hi, good afternoon and thanks for taking my questions. Just on that libel consent, just interested to hear if you consider attaching a fee to maybe get that over the line. And then I've just got two more, just one on the MRL buffer. I know you've answered this and talked about this in previous quarters, how the MRL buffer kind of impacted by LGF. But if I kind of think about that on an RWA basis, I think.

longer term funding plans is the ECB's MRO or LTRO factored in. And it's not why, is it clearly a cost optimization point or is there any other pressure to move away completely from central bank funding moved towards the covered bond and deposit growth? Let me talk about, thanks.

Thank you for your questions.

So I guess the first one was around the solicitation questions and whether the fees are getting over the line. So we need to follow regulatory guidance to have a value neutral transition. So that's what we were attempting to do. That didn't work.

something we may consider further down the line but no rush at this stage. So in terms of AMRAL, there's a lot of work that's going on in terms of the

no assumed reliance on AMRO or LTRO. And currently, so in other words, the 18 billion numbers we're comfortable with right now. And just moving away from

Central bank funding currently is not economic to do so versus our base case funding plan. There's no pressure to do so and also no further operations are announced so we would not build a reliance on national future funding plans.

going back to the to Amwell it will come down a bit already through the counter-surf call buffer and we disclose a 3 billion reduction or pro-fall of Hsis on one of the slides.

Okay, thanks.

The next question is from the line of James Hyde from PGIM Fixed Income. Please go ahead. Hi, Richard. Hi, James. Thank you for doing this. So I've got two bigger picture questions and one very specific one. I'll start with that one. The $4 billion leverage finance exposure is so.

was very comforting but I just want to make sure. Does that include all the exposures in fair value books and trading books and in undrawn commitments? That's my first question. Then the next two questions are about risk-weighting.

assets and capital allocations. First of all, with this, folding in of the CRU into...

corporate center. What's the outlook for the off-risk RWAs there? Do they run off or do they somehow, is it something that you just wait for Basel 3.1?

What's the outlook for the off-risk RWA's there? Do they run off or do they somehow, is it something that you just wait for Basel 3.1 or whatever you want to call it?

to just read.

This, especially in the light of what you said yesterday about maybe Basel.

three point hall is looking a bit heavier than the 20 billion so I just wondered.

bit heavier than the 20th billion. So I just wondered what's the outlook for that.

does it fall off before? And then brought one of the things that was mentioned about the

from various Dunkin Herald sources as we do our disarmament or awards books or whatever that means through our webinar.

proposals and the flaws.

And it was mentioned that in some areas you will have to...

So I'll allocate capital away from I think I even heard you say from German mortgages, so I'm just wondering

What would that be? Would you be doing full securitizations? How would you do this? Or does it also involve revisiting whether you stay in Spain or Italy?

Thanks. So James, it's James. Thanks for joining as always and glad to have you with us. I'll answer the second two questions.

Look, we got to what we think is a floor on the operaske. Now, you never know it's in the models approach. There are sometimes little adjustments, but by and large, we've stabilized around where we are through to Basel. I'll use your language 3.1 in January of 25.

system.

So,.

So it's with us for the next couple of years and will be reported in the associated capital reported in in C&O and then I would expect from 25 there'll be a change in the allocation method methodology That that we still need to need to decide on around the floors, you know all of the events that are going on

do change the capital that each part of the balance sheet attracts. So whether it's floors, model adjustments, limitation, definition of default, or counter-cyclical buffers, let alone a spectral buffer, there are things that we build into our methodologies, our internal allocations, and then...

express themselves in both client pricing and in the returns that we earn from it. So yes, we do react to what's going on.

I think those reactions are always a little bit evolutionary rather than revolutionary. And you have to understand that...

There's client relationships, there's obviously ancillary business that comes from certain businesses, let's say like all these fiends. It's never as simple as, you know.

costs going up or capital charges going up and therefore hurdle rates becoming more challenging and so you're out. It's never quite as simple as that, but it obviously does affect our thinking of capital allocation.

And it's why as we think about the path we're on, the further we diverge from what we think the economic capital requirements of certain businesses are, in a sense, the tougher it gets. You talked about mortgages, we've been...

bringing up the capitalization through a number of these factors of what is one of the safest assets on our balance sheet, which is German mortgages.

which is an ironic situation, but it does cause us to look at the overall profitability of the business.

On the 4 billion, I believe the answer is it's all in, James, in terms of the exposures.

Thank you very much.

So there are no further questions at this time and I head back to Philip Torchner for closing comments.

There are no further questions at this time, so I hand back to Philipp Teuschner for closing comments.

Thank you Natalie. Just to finish up, thank you all for joining us today. You know where the IAR team is. If you have any further questions and we look forward talking to you soon again. Goodbye.

Ladies and gentlemen, the conference is now concluded and you may disconnect. Thank you for joining and have a pleasant day. Goodbye.

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

The.

I have you.

to answer their questions. The slide letter company, the topics, are available for download from our website at DB.com. After the presentation, we will be happy to take your questions.

Before we get started, I just want to remind you that the presentation may contain forward-looking statements which may not develop as we currently expect.

Therefore, please take note of the precautionary warning at the end of our materials. With that, let me hand over to Richard.

Thank you, Philip, and welcome from me. Three and a half years ago, we set ourselves some key financial goals for the end of 2022.

Today, we would like to talk to you through what we have achieved and to highlight how Deutsche Bank today is a fundamentally different bank. Let me start with the five decisive actions we took as we launched our transformation strategy in 2019 on slide 1. Firstly, we created four client-centric divisions which have delivered stable growth as promised. In 2022, these four businesses contributed to our best profits for 15 years.

Secondly, we exited businesses and activities which would not call to our trash sheet. We exited equities trading, transferred our global finance business, we focused our rates business and downsized or disposed of other non-stugic activities. Our capital release unit reduced leverage exposure from non-stugic activities by 91%

points.

We achieved this while absorbing more than $8 billion of transformation-related costs. Fourthly, we committed to and invested in controls and technology to support growth. Finally, we managed and freed up capital. The Capital Release Unit played an important role here, contributing around 45 basic points on a net basis.

to our CET1 ratio. Let me cover the impact delivering the transformation plan has had a lot of of profitability and financial stability on slide two.

We are pleased that all divisions deliver significant positive operating leverage on an annual basis since 2018. We intend to continue to deliver operating leverage for the group on an annual basis going forward.

Our returns have improved every year since 2019. We have reduced non-interest expenses over the period. We will continue to be disciplined on costs, including working on additional measures to offset cost pressures, in line with our 2025 target of a cost-income ratio below 62.5%.

Finally, our capital remains resilient. Since 2018, we have absorbed around 270 basis points of capital headwinds from regulatory impacts on our transformation plan, and ended the year at 13.4% around 300 basis points above our regulatory requirements. Let me now turn to our performance in 2020.

All four core businesses produce positive operation leverage compared to their pre-transpiration levels. In 2022, our reported post-tax return on tangible equity was above 9%, including a deferred tax valuation adjustment. In terms of profitability, we delivered our highest profits since 2007.

at 5.6 billion euros before tax. Our cost income ratio is 75% and significantly below the pre-transflation level of 93% in 2018. Pre-provision profit for the group was nearly 7 billion euros in 2022.

We proved resilience during the challenging environments the past few years. This regained resilience was also recognized by the Credit Racing Agency.

Since 2021 we have received four upgrades of the three leading agencies and we are confident to have further momentum. We have maintained discipline, risk management and a strong balance sheet as you can see on slide 4. In order to maintain this discipline going forward we continue to invest in our people and risk management capabilities as well as controls and technology.

which support timely and proactive risk management. This enables us to manage risks dynamically within our frameworks and most importantly within our risk appetite. We continuously monitor emerging risks, run downsides in our seas and stress tests, and operate at comprehensive limit framework across all risk types. In this way we can respond proactively to changes in our operating environment.

as you have seen us do in 2022 during the escalating war in Ukraine and the stress on European energy supplies. Despite challenges throughout the year, our risk management approach helped us maintain strong risk and balance sheet metrics. Our provision for credit losses was 25 basis points of average loans in 2022.

in line with our guidance provided back in March. Let's just now dig a bit deeper in some treasury related topics over the next slides.

Slide 5 provides further details on a development in our loan and deposit books over the quarter. All figures in the commentary are adjusted for FXFX.

Overall, loans have declined by 2 billion euros in the quarter. Lones in the corporate bank have decreased by 5 billion, driven by active portfolio management over year end as well as 2 billion of episodic effects. In the investment bank, loan growth in the quarter has been 4 billion euros, driven by strong demand across thick.

in high quality structured lending, coupled with moderate growth in origination and advisory. Given the macroeconomic environment, we remain very focused on managing the client and the market in thick within our risk appetite.

In the private bank, loans remained essentially flat. This year we continue to expect moderate loan growth predominantly in the corporate and private bank. Moving to deposits, where our book grew by €4 billion compared to the previous quarter. This growth has been driven mostly by targeted measures in the corporate bank as well as some episodic growth.

In the private bank, loans remained essentially flat. This year we continue to expect moderate loan growth predominantly in the corporate and private bank. Moving to deposits where our book grew by 4 billion euros compared to the previous quarter. This growth has been driven mostly by targeted measures in the corporate bank as well as some episodic growth. Deposits in the private bank have remained essentially flat.

In 2023 we are focused on structurally increasing deposits in both the corporate and private banks in line with our TLTRO repayment plans and business strategy. Turning to slide 6, I would like to provide an update of the interest rate tailwind we expect to see going forward. In March 2022 we guided that interest rate tailwinds met a funding cost of $2.5 million.

You can see the divisional caggers metafonely impacts on the right hand side of the slide.

As we want to give you a consistent view across rate and funding cost impacts, these figures are based on the evolution of our planned liability stack rather than a purely static balance sheet, but do not include the impacts of planned lending growth. In 2023 we expect to see strong interest rate impacts due to the timing effects resulting from the rapid pace of interest rate rises.

By 2025, the rollover of our hedge portfolios would have offset the reduction in this timing effect resulting the net interest income benefit being maintained. As noted at our third quarter call, the sequential tail end from 2022 to 2023 is expected to be approximately 1 billion euros for the full year. Moving to slide 7.

highlighting the development of our key liquidity metrics. Throughout the fourth quarter we have maintained our robust liquidity position. While our daily average liquidity coverage ratio during the quarter was at our target level of 130%, the increase of the spot LCR at year end

was driven by strong cash balances and positive FX impacts. Compared to the third quarter, the liquidity coverage ratio increased by 6% to 142%.

The surplus above minimum requirements increased by about €4bn to €64bn quarter on quarter, mainly driven by significantly lower net cash outflows.

The stock of our high quality liquid assets decreased by about 8 billion euros during the fourth quarter due to our prepayment of TLTRO and a weaker US dollar.

Net cash outflows also significantly decreased as a result of lowered relative outflows, committed facilities, as well as our efforts to further optimise the deposit book. For this year, we remain committed to support business growth and continue to manage the LCR conservatively towards 130%. The net stable funding ratio increased to 119%.

Over the course of 2023 we aim to maintain this funding mix with the remaining TRTRO being gradually replaced by cover bonds and deposit growth.

Turning to capital on slide 8, our common equity tier 1 ratio came in at 13.4%, a three basis point increase compared to the previous quarter.

FX translation effects contributed two basis points. Three basis points of the increase came from capital supply changes affecting our strong organic capital generation from net income, largely offset by higher regulatory deductions for deferred tax assets, shareholder dividends and additional tier 1 coupons. Net risk rated assets led to a seven basis points ratio increase.

versus the previous quarter, as the impact of regulatory model changes was more than offset by tight risk management in our core bank. Market risk RDOA increased leading to a nine basis ratio decline versus the previous quarter. The higher market risk resulted from higher S-file levels.

Many dream by a change in the applicable stress window versus the prior quarter. Operational risk weighted assets were essentially flat compared to the previous quarter. Looking ahead, we expect our CET1 ratio to remain subject to volatility, principally due to regulatory model reviews and ECB audits. In 2022, amendments were made in particular to models for our mid-cap portfolio for our mid-cap portfolio.

and our German retail portfolio. Now we expect model changes for the wholesale portfolio to follow in phases. A first set was implemented in the fourth quarter of last year with an RDOA impact of around 2.5 billion euros.

The models for the larger portfolio of financial institutions and large corporates will follow over the course of this year. In addition, our market risk qualitative multiplier is currently being reviewed from which we would expect a decrease.

We expect to be able to absorb model related impacts by continued retention of earnings, but the timing of regulatory model decisions is likely to create CET1 ratio volatility.

That said, we end at end 2023 with a CSU-1 ratio of 200 base points above our maximum distribution amount threshold expected to be 11.2%. Our capital ratios remain well above regulatory requirements as shown on slide 9.

The CET1 MGA buffer now stands at 288 basis points or 10 billion euros of CET1 capital, down by 1 basis point, quarter on quarter.

While the CET1 ratio increased by three basis points in the quarter, the distance to MGA decreased due to the higher counter-suffield capital buffer setting in the UK of four basis points. Our buffer to the total capital requirement increased to 330 basis points, most notably

from our 1.25 billion euros 80 wattish rooms in November . As for Thursday February , our CET1 ratio requirement has increased by approximately 60 basis points, including 11 basis points from a higher setting of PILOTU requirements by the ECB.

Moving to slide 10. We ended the year with a leverage ratio of 4.6%, fully in line with our 2022 target of around 4.5%, and an increase of 25 basis points versus the prior quarter. FX translation effects resulted in a 5 basis point leverage ratio increase, principally due to a weaker US dollar. 11 basis points came from higher tier 1 capital, affecting higher CET1 capital and our AT1 issuance in November . Finally, 9 basis point increase came from the seasonal reduction in trading activities at year end. We continue to operate with significant loss absorbing capacity, well above all our requirements as shown on slide 11. The M-rail surface as our most binding constraint is a concrete

has decreased by 2 billion euros to 18 billion euros over the quarter. This decrease was driven by a lower regulatory capital and a roll down of eligible liabilities, partially offset by a lower M-row requirement due to the effects driven decline in risk-weighted assets. We are well prepared to absorb the approximately 2 billion euros impact from known regulatory changes, most mostly the higher-journ buffer requirements, which became effective on the first effect rate.

and a further approximately 1 billion euros from new MRO requirements, which expect to take effect sometime in the first half of 2023. Our loss-absorbing capacity buffer remains at a comfortable level, even including these changes, or a pro-fall basis, and continues to provide us with a flexibility to pause issuing new eligible liability instruments for approximately one year. Moving now to our issuance plan on slide 12.

We closed the year with a total issuance volume of €24bn in 2022. Excluding €4.3bn of structured notes, which were not part of our original plan, this is in line with our previous guidance of ending the year at the upper end of a €15-20bn range.

Between the fourth quarter of 2022, we issued 4.8 billion euros in senior preferred Kerobond and AT1 format. The latter is supporting our balance sheet and lending franchise.

Offsetting that, we prepaid 11 billion euros of TLTRO in December and an additional 5 billion in January , reducing our outstanding to 29 billion.

From this point forward we expect to reduce our TLTRO outstanding by 3-4 billion euros per quarter through a combination of prepayments and a maturity profile of our remaining TLTRO times.

Early now into 2023, we expect slightly lower requirements compared to 2022 and guide to a range of 13 to 18 billion euros, with a focus on seeing non-preferred and covered bonds. January was a very busy month for financial issuance in the capital markets, with euro market issuance being up more than 50% compared to January 2022 levels.

We were also active and issued roughly €4bn in January to split between covered bonds, senior preferred and senior non-preferred issuance in the global capital markets. This equates to 30% of the lower end of our full year issuance plan.

In addition, we issued our inaugural panda bond following recent regulatory changes by PBOC and SAFE to facilitate foreign remittance of panda bond proceeds. This will further boost our credentials as a leading foreign DCM house in China.

Furthermore, we published the final results of our dollar LIBOR consent solicitation on 19 January . As you have seen, our senior non-preferred instrument met the requirements at the second meeting and the coupon will be amended to reset over SOFA.

whereas the AT1 security did not meet the requirements and continues to reference dollar eyeball swap rates.

Whilst we are disappointed, we note that the reset does not occur until April 2025. Before going to your questions, let me conclude with a summary on slide 13.

As the environment changes, so does our business mix, and the more favourable interest rate backdrop has created a strong step up for further revenue growth.

So let me conclude with a few words on how we see 2023. With regards to revenues, we anticipate performance around the midpoint of a range between 28 to 29 billion euros, reflecting the impact of interest rates, particularly in the corporate bank and private bank, as well as robust organic business growth. This would be partly offset by some normalization in other businesses.

notably FIC. On the cost side, we remain focused on delivering positive operating leverage, a key driver as we work towards our 2025 goals. We anticipate inflationary pressures but also benefits from our cost efficiency measures and for 2023 we expect to keep our non-interest expenses broadly flat in 2022. Our risk management discipline coupled with more

benign macroeconomic and credit environment in recent weeks, supports our provision for credit loss guidance for 25 to 30 basis points of average loans for 2023.

Our current outlook would tend towards a lower end of that range, in other words, essentially flat to 2022. We started the year with a strong CETI-1 ratio to support growth and absolutely upcoming rate-latory driven volatility.

With that, I will finish and we look forward to your questions. Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-down telephone. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time.

And our first question is from the line-off list, straight from the D group. Please go ahead. Hello, thanks to the call and thank you for taking my questions. I've got three please. Firstly, obviously, I'm sure you did get me questions when you're upcoming call here $4.290.960.2. And then the past you've stated you're going to take an economic approach to calls, but if you care to anything to your thoughts, or if you're running the potential call or not to the bench. And then the next question is from the line-off list.

and the consent which wasn't passed. Obviously if you were not to call that bond I suppose because it's what happens to be the coupon. You know if no further action is taken more that just end up effectively fixing. There'd be my three questions. Thank you.

Thanks Lee and thanks for joining us on a Friday afternoon. So I'll take the Tier 2 security question first. So regarding our $1.5 billion Tier 2 security callable in May, as you said we continue to make decisions regarding the exercise of those call rates close to the exercise date and as usual our

Our decision balances the interests of all our key stakeholders and factoring in all relevant economic factors including the usefulness of the instrument for capital, funding, basic agency metrics as well as the cost of the instrument versus alternatives. As you probably aren't sure aware the core window for the securities is actually from the 25th of March to 24th of April 23. We are monitoring this topic and the market closely.

We'd note that the rally we've seen in our spreads over recent months obviously would impact that decision, but as always any call of a capital instrument is subject to regulatory approval. In terms of, I think, ratings, which is the next question, overall we're happy with the trajectory we've had over the last years with four upgrades of the leading three rating agencies feel there is more room.

As I said in my prepared remarks, we feel that compared to peers we have an average still around a notch catch-up potential. But when we look at specific agencies, and obviously Moody's was second half of last year we had the upgrade there, but when I think about Fitch, they're on positive outlook. That was confirmed in September last year. We therefore expect that positive outlook.

will get resolved at some point during 2023. FIPS in their last report stated that they expect further improvements in profitability together with maintaining a CET1 ratio above 12.5% and a leverage ratio above 4.5%. We think we made good progress on all those factors and so we're hopeful there.

In addition, I think that any upgrade would require only a moderate impact from the economic downturn on the banks capitalization. Turning to S&P, they currently have our ratings on stable outlook in the recent published commentaries which we'll show on our IR website.

S&P appreciates the progress the bank has made throughout its transmission program. At the same time, the entry refers to the expectation of a supportive macroeconomic environment as a prerequisite to our radar ratings. But over the last few weeks, a month even vehicle projections have improved significantly compared to...

Two views are a few months ago, so again we remain optimistic there. And then in terms of consent solicitation regarding the AT1, the absent any further action the fallback language takes effect which we'll see is a dealer poll and if that fails a fixer equal to the last available fixer. But obviously we can do that with debt exchanges as well at some point.

So I hope that these answers your questions. Leave it for questions. Yep, very clear. And thanks, your honor. The next question is from the line of Sumiazaka from Boclase. Please go ahead. Hello.

Thanks for the presentation and taking my questions. I had two. Please. First, you said you were looking to grow the deposits. Is the deposit growth target for 23 broadly similar to what you saw in 22? And

How is the deposit development trending? It's only early for 23, but any comment on that? And if given that you have TLTR repayments, if the deposit development is not in line, are you looking at issuing more senior preferred bonds, for example, or it should still be more covered bonds? That would be my first question. And second question would be, you mentioned that you had looking for a

year-end target of at least 200 bps buffered for MDA, is that kind of like a floor throughout the year, or could we see the MDA buffer, given the CET1 volatility, pointed out, go below that 200 bps number as well. Thank you.

Thank you very much for your questions. So I guess deposit growth, deposit volumes both for the call-up bank and the private bank in 2022 were very stable and what we're planning for this year is some time to campaign in both our call-up bank and private bank.

The White Bank campaign has only just started so it's a little bit too early but we are expecting overall deposit growth to be slightly above the full year at 2022 and study throughout the year. So I think that is, we're still pretty confident about our deposit outlook.

In terms of TLTO, we paid 11 billion in Q4 and a further 5 billion in January . And then in terms of the roll-off profile, we have 3-4 billion or so a quarter all the way out to the end of the......in Q3, Q3 of Q24 and so we feel very comfortable around that...

the end of Q423, reflecting already in-out changes to the counter-surgical buffers that are coming applicable throughout the year. We expect further ECB decisions related to internal credit risk model audits to conclude also during the year, some of life ECU-T1 ratio burden and others with some potential benefits. However, there is uncertainty on the old-script timing and magnitude of those impacts.

and consequently we expect some CET1 race-shaped volatility during the year. But overall we expect to see as you want race-shaped by year and of turn to base once and by bar our MDA threshold.

or CEC1 ratio volatility during the year. But overall we expect a CEC1 ratio by year and up to a very small supply bar or MGA threshold. Thank you.

The next question is from the line of Juliana Golub from GS. Please go ahead. Good afternoon. Thank you for the presentation and for taking my questions. I have two, please. First, would it be fair to assume that in terms of capital instrument issuance that would be skewed towards tier 2 issuance given that you have some amortization in your bullet tier 2 securities and that you're comfortably meeting your 81 requirements?

And the second one would be if you could please give us a flavor on the RWA development in 2023. Thank you Thank you, Juliana for joining. So in terms of capital issuance, so we are Yeah, as you rightly said we have a good place in both our tier two and tier one

I guess, instruments right now. As ever, what we do is think about our own business growth opportunities. And so that does drive our decision as to what's passed the capital start to allocate to that business growth. So in terms of the two instruments and what our plans are in that space, again, that's the same. We will be thinking about opportunities to clear as we do any other instruments.

And in terms of a Tier 1, as you know, we kind of issued in November . And I think in terms of our issuance funds for this year, we expected somewhere between zero issuance or up to $2 billion or so. So again, that's kind of more opportunistic. It's more about where the opportunities are within our franchises to deploy that capital and leverage. James, I might take the RWA question.

Look, we do expect growth from the businesses and that's something we want to fund with our capital. We think that's moderate growth. So we've talked in the past about sort of low single digit growth in the businesses as we just grow the franchise over time. And then to Richard's earlier comments, we will have increases from model audits where the magnitude, the timing is uncertain.

You know, we're tracking obviously upwards with all of that said, but that model uncertainty makes it hard to be honest to predict that the year a number on it. So we'll have to give you updates as the year goes by.

Thank you very much. Thank you, Julia. The next question is from the line of Robert Smalley, fixed income analyst. Please go ahead. Hi. Thanks for taking my question and thanks for doing the call. I wanted to ask about the loan loss provision. You're going to hold it steady for 2023 versus last year. So, fixing that at that level, I'm going to go ahead and call the call.

As we go into a slowing economy, albeit less than maybe originally thought, would that speak to more discretionary and general provisions and management overlays within that provision at the same time on the call yesterday?

It seems that most of the credit issues, large credit issues that we're seeing over the past 12 to 18 months are not really the result of risk management as much as they are due diligence issues. Can you talk about your due diligence? You've awarded a lot of these issues and how that's changed over the past 18, 24 months, given what we've seen in losses around the financial system, idiots and credit losses, and so on. Thanks. Sure, Robert is James and thanks for joining. Thanks for your questions.

You know, just looking at Olivier's commentary yesterday, the, I guess one important part is in the way that the IFRS 9, you know, works, we're basically looking at 23 as a year in which more likely the provisioning we take will be stage 3. So, you know, based on impairment events. In some respect it's hard, it's therefore very path dependent, it's hard to guess which credits will deteriorate to be an impairment and when.

But obviously we take a view based on the portfolio, the risks we see, the environment and so on. And so the study is a forecast but it's an educated view based on everything that's going on there.

I wouldn't at this point expect that we'd be taking overlays. We're, as you know, reasonably, I don't say reluctant. We think overlays are entirely appropriate when the result of the ratings, the models, create an expected loss number that you, or an SLP, that...

that you think may understate the risks in the books and therefore more prudent approaches is needed. So we're not reticent to take overlays, but typically we don't see a need for them. And so we would not build that into our forecasting. Now, if you ask yourself, well, what is essentially flat to this year, to 2022?

of a significant stress event. And so this current outlook, sort of a milder recessionary environment and slow down, we think produces that type of outcome. And we don't think that's necessarily an overly optimistic way of looking at it. But to your answer, your question not.

not including overlays or events that could take place during this year, which is why we decided to keep a range even as we indicate you know our comfort today with the low end of the range. Look, we on the due diligence side, you know, one of the nice things is we talk about our underwriting standards. We talk about our

line. You're always learning over time and adapting your processes to what you learn and to the environment.

and looking at the value of collateral, the development of those markets. And hence, I don't want to say we're fixed in place, but we feel very confident in our processes and in the capabilities of our people in the due diligence. And it's one of the pillars we rely on as we think about the risk profile of a company.

Hope that color helps, Robert. Yes, it does. Thanks for the detail. My pleasure. The next question is from the line of Ellie Den from Morgan Stanley . Please go ahead. Hi there. Thanks for your presentation. I'd like to ask a question on the old Deutsch Post Bank CMS bonds. Do you have any plans for these? And I'm wondering if you...

just look at them simply as cheap perpetual funding and if there's any encouragement from your supervisors to get rid of them. Thank you for the question. It's always an interesting one that we think about a lot of ourselves but to answer your question kind of best way was

We think of ourselves that it's a lot of energy as well as the efficient force on a bank sheet and say that's why it's not something which is the regulators kind of guess I think or pressurising us I guess to do anything about having set that where we kind of feel that things are...

attractive for us to take action on because we're coming up to various exercise dates, then of course we do consider that. But yes, so the true answer is that we're not under any pressure to do anything with those particular securities. Thank you.

The next question is from the line of Corinne Cunningham from Autonomous. Please go ahead.

Afternoon everyone. I have a couple of questions, kind of related. One on refinancing costs, he's got something in your pork arse on, I guess, how that flows into margin expectations. But the other one is on the LCR. And there's quite a big difference between the average, sharing the quarter and then the year end.

And then when I try and tie this back to what you're saying about replacement of TLTRO funding, I'm finding it a bit difficult to tie it all up. If you look at the Q4 redemption in TLTRO, there's not really much of that was covered by the net increase in deposits and loans.

You didn't really issue much in the way of covered bonds in Q4 and yet you had potentially what looked like quite a significant inflow of deposits over the quarter end. So can you just explain a bit about what's moving behind the LCR and maybe also give us

What the average for key query was as well. So the average for key four was one turn to what was the average in key query. Thank you. Certainly. Theanco eleviado.

Q3 was a memory just to take questions in the random order. Q3 was just above 130 on a daily averaging basis.

In Q4, we were quite pleased with our steering, we were running sort of daily averages like so, around the 130 for most of the quarter, that was a bit of a spike like it. Year-end, which was a bit just driven to my seasonal factors, which kind of took us to the 142 number and then.

starting again in Q1 again we're kind of back to a sort of daily averaging of close to our target level. So I think that's, you know, this is, the liquidity steering I think is working exactly how we're looking to target. In the fourth quarter we have a, we do a very good job of optimising our deposit book. So essentially just making it as...

ratio as efficient as we can, which allowed the, facilitated the repayment of the TLTRO. As you know, the TLTRO impact on the LCR depends on that classisation. And so, course rent was only a bit above, over 20 billion in support of the LCR versus around 30 billion at the end of Q3. That reduction in reliance was achieved without the LCR.

So we factor in a market implied number in the numbers we show in the deck as of the trends here at JAN, so that we might invite rates as well as market implied issuance rates and that's for, say, for both deposits and for issuance.

Sorry to press on this, but are you forecasting just that the spreads are the same, that they are perhaps improving, and are not really credit-rating?

So understanding your question currently in terms of what we're assuming happens in terms of what we're assuming happens in terms of what we're assuming happens in terms of what

spreads, is that what you're saying? Your wholesale funding spread. Yeah exactly so we just take the current issuance spreads as of this deck the 20th of January .

And then essentially over time we assume some sort of convergence to our peers, given we use the Y to R peers, just we just baked that in because over the next few years, just because as we said earlier about raising agencies we do kind of throw those at those going to be up and up list. So at some point, we're certainly hopeful to be up list at some point. So in that sense that's how we priced the issuer's curve.

Thank you very much. The next question is from a man of briache from society general. Please go ahead. Hi, I'm from South China. Thanks as always for doing this call. My first question and issuance has already been answered. So I'll take this opportunity to hear from you or your views in general on asset quality in FY23. Can you hear me gagging out of the static here? What do you think?

in exceptional circumstances we don't really comment. As yesterday, we do point to our general conservative underwriting, collateralization and risk management you know, where it applies to all situations.

but we don't go into individual client names. The overall asset quality environment for 2023 is, as I got into a little bit with Robert,

You know we we think there are and and as all of you talked about yesterday We there are obviously some watch portfolios, so we're not complacent At all about the environment. We're in You know recessions typically produce a credit cycle rising rates produces some amount of you know stress within borrowers that may be highly leveraged or where

cash flow or asset characteristics are deteriorating. So it's something we watch very carefully. I'll say that, so if there are watch portfolios, the ones that we point to for sure would be the commercial real estate market globally, some of the middle market, mid cap enterprises that we lend to.

And obviously households that whether through inflation, energy costs or other reasons may come into pressure.

In fairness, as we look at all of those sectors though, the downside that we thought might emerge in 23 just doesn't appear to be emerging. And that's why I think you probably hear from us and our peers a more optimistic view about the credit environment than... …

than we might have expected three or four months ago. Our portfolio quality overall has been quite stable. When you look at forward indicators, NPE has gone down. There's been stability by large in our internal ratings and stage two events and those types of things. So.

As we look at all those indicators, the portfolio looks stable to us. And as all of you talked about yesterday, we like the way we manage the portfolio in terms of diversification, hedging, risk diversification and management.

overall. And we'd like to think that Standison Good Steads said regardless of the cycle we're in, but as the cycle appears to be milder right now than we might have expected that we've come into the year with a higher degree of optimism.

Okay. And I guess to answer your question, I guess the on the solicitation, so back in end of January , we had a CA non preferred FRN which was passed and so that will then move to SOFA and then we had an A2-1 security as well, which didn't get the quorum and so.

Now, I guess the options, again we haven't made any decision on any of these, but it relies on fallback language or debt exchanges or calling the security itself. So that's what we're trying to say.

Okay, so, and just one quick clarification in your issuance slide to 12. The footnote says for 2023, it doesn't put only senior preferred issuances. Does this mean 1 to 2 billion will be only senior preferred and no structure in that? That's how is your unit? That's right, so this page doesn't include structure match.

Okay, and just one quick clarification in your issue slide 212, the footnote says for 2023 this includes only senior preferred issuances. Does this mean one to two billion will be only senior preferred and no structure in that? That's how you read it? That's right, so this page doesn't include structure match. Okay.

And just one quick clarification in your issuance slide to 12. The footnote says for 2023, it just imputes only senior preferred issuances. Does this mean 1 to 2 billion will be only senior preferred and no structure in that? That's how is your unit? That's right, so this page doesn't include structure names. Okay, so thank you.

Just after that, that's because it's covered out of our investment banking franchise world and traditionally it's been out for treasury. The next question is from a line of Daniel David from Autonomous. Please go ahead.

Hi, good afternoon and thanks for taking my questions. Just on that libel consent, just interested to hear if you consider attaching a fee to maybe get that over the line. And then I've just got two more, just one on the MRL buffer. I know you've answered this and talked about this in previous quarters, how the MRL buffer kind of impacted by LGF. But if I kind of think about that on an RWA basis, I think that 5% buffer is probably...

bit bigger than what we kind of think is reasonable for MRL buffers. I'm just thinking is that 18 billion 5% reasonable to kind of stick around or could we see that coming down a bit. And then finally just to maybe round off on funding. Just interested in your longer term funding plans is the ECB's MRO or LTRO factored in and if not why is it clearly a cost optimization point.

or is there any other pressure to move away completely from central bank funding and move towards the covered bonds and deposit growth that you talk about? Thanks. Thank you for your questions.

So I guess the first one was around the solicitation questions and whether the fees are getting over the line. So we need to follow regulatory guidance to have a value neutral transition. So that's what we were attempting to do. That didn't work. It's something we may consider further down the line but no rush at this stage.

So in terms of AMREL, there's no assumed reliance on AMREL or LTRO and currently, in other words,

the 18 billion numbers we're comfortable with right now. And in terms of moving away from central bank funding, currently it's not economic to do so versus our base case funding plan. There's no pressure to do so. And also no further operations are announced, so we would not build a reliance on the

on national in our future funding plans. Going back to the to NREL, it will come down a bit already through the counter-sleeve call buffer and we do disclose that a 3 billion reduction of pro-fallivation is on one of the slides. Okay, thanks. The next question is from the Light Up James Hyde from PGI Ampix. Please go ahead.

Hi, Richard. Hi, James. Thank you for doing this. So I've got two bigger picture questions and one very specific one. I'll start with that one. The 4 billion leverage finance exposures for...

was very comforting but I just want to make sure. Does that include all the exposures in fair value books and trading books and in on-drawing commitments? That's my first question. Then the next two questions are about this weighting.

I just want to make sure. Does that include all the exposures in fair value books and trading books and in undrawn commitments? That's my first question. Then the next two questions are about risk weighted assets and capital assets.

So first of all, with this folding in of the CRU into corporate center, what's the outlook for the off-risk RWA? Do they plan all for today? Somehow, is it something that you just wait for, Basel 3.1 or Basel 4?

to just read this, especially in the light of what you said yesterday about the maybe Basel 3.1 is looking a bit heavier than the 20 billion. So I just wondered, what's the outlook for that? Does it fall off before? And then one of the things that was mentioned about the Brussels proposal.

And just read this. Especially in the light of what you said yesterday about the maybe Basel 3.1 is looking a bit heavier than the 20 billion. So I just wondered, you know, what's the outlook for that? Does it fall off before? And then brought one of the things that was mentioned about the Brussels proposals and the...

for the floors. It was mentioned that some areas you will have to allocate capital away from. I think I even heard you say from German mortgages. So I'm just wondering.

What would that be? Would you be doing full securitizations? How would you do this? Or does it also involve again revisiting whether you stay in Spain and Italy? Thanks. So James, it's James. Thanks for joining as always and glad to have you with us.

I'll answer the second two questions. Look, we got to what we think is a floor on the op risk. Now you never know, it's in the models approach, there are sometimes little adjustments, but by and large, we think we've stabilized around where we are through to Basel, I'll use your language 3.1 in January of 25. We will move to that sort of new approach and therefore.

decide on. Around the floors, you know, all of the events that are going on do change, you know, the capital that each part of the balance sheet attracts. So whether it's floors, model adjustments, limitation, definition of default.

or Camercikogobuffer is let alone a sectoral buffer, there are things that we build into our methodologies, our internal allocations, and then express themselves in both pride, client pricing, and in the returns that we earn from it. So yes, we do react to what's going on. I think those reactions are always a little bit evolutionary rather than revolutionary.

And you have to understand that, you know, there's client relationships, there's obviously ancillary business that comes from certain businesses, let's say like LDCM, so it's never as simple as, you know.

costs going up or capital charges going up and therefore hurdle rates becoming more challenging and so you're out. It's never quite as simple as that but it obviously does affect our thinking of capital allocation.

And it's why as we think about the path we're on, the further we diverge from what we think the economic capital requirements of certain businesses are, in a sense they're tougher against. You know, so you talked about mortgages, you know, we've been...

bringing up the capitalization through a number of these factors of what is one of the safest assets on our balance sheet, which is German mortgages. And that which is an ironic situation, but it does cause us to look at the at the overall profitability of the business.

On the 4 billion, I believe the answer is it's all in, James, in terms of the exposures. Great. Thank you very much. Pleasure. So there are no further questions at this time, and I hand back to Philipp Teuschner for closing comments. Thank you, Natalie. And just to finish up, thank you all for joining us.