Q2 2023 Deutsche Bank Aktiengesellschaft Earnings Call

Ladies and gentlemen, thank you for standing by welcome and thanks for joining the Deutsche Bank Q2, 'twenty 'twenty Street Analyst Conference 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.

If you'd like to ask a question you might do slipped by pressing star followed by one on your telephone keypad. Please.

Please press the stocky followed by Xerox off Richard.

I would now like to turn the conference over to Victor Chu Powell Deputy head of Investor Relations.

Thank you for joining us for our second quarter 2023 results call as usual I'll, let chief Executive Officer Christian saving will speak first 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 at <unk> Dot com.

Before we get started let me just remind you that the presentation contains forward looking statements, which may not develop as we currently expect we therefore ask you to take notice of the precautionary warning at the end of all material with that let me hand over to Christian.

Thank you so good and a warm welcome also from my side, it's a pleasure to be discussing our second quarter and first half results with you today.

These results provide a vital perspective of the progress we are making towards our objective for me a few key points stand out.

First.

We have strong growth momentum revenues in the first half year were up 8% to $15 1 billion euros, putting the upper end of our guidance range of 28 to 29 billion euros within reach.

We also captured net inflows of 28 billion euros across the private bank and asset management.

We are reaping the benefits of our complementary and well balanced earnings mix, we are delivering strong growth in our private bank and corporate bank franchises and resilience in key areas of our investment bank.

Second we have proven our earnings power, we generated profit before tax of $3 3 billion euros in the first six months up 2% over last year and the highest first half since 2011 after absorbing more than 700 million euros in nonoperating costs.

Including restructuring related to operational efficiencies.

Excluding these non operating costs pre.

Pretax profit would have been 4 billion euros, 21% higher than in the first half of 2022 on a comparable basis.

I will post takes our T was six 8% and would have been about 9%, excluding nonoperating costs and with bank levies apportioned equally across the year very close to our 2025 target of.

About 10%.

Third our balance sheet and capital position are resilient.

Our CET one ratio has risen to 13, 8% driven by strong organic capital generation, we have sound liquidity and a solid deposit base, which we slightly increased in the second quarter.

Fourth we are delivering on our promise to distribute capital to shareholders.

As announced yesterday evening, we have received supervisory approval to start share buybacks of up to 450 million euros, 50% higher than last year.

Together with the dividend we paid in respect of 2022, we aim to distribute more than a billion euros of capital to shareholders. This year.

This would bring total distributions across 2022, and 2023 to around $1 75 billion euros and of course. It is our clear aim to continue on that trajectory in 2024 as part of our 8 billion Euro distribution promise.

Fifth.

We are accelerating the execution of our global hosting strategy we.

We are already making good progress in driving operational efficiency boosting capital efficiency and outperforming our revenue growth target.

Let me now discuss the franchise strengths across our businesses in the first half year on slide two.

Starting with the corporate bank, we delivered 30% revenue growth with strong momentum across all business areas with.

With noninterest expenses up 6% operating leverage in this business was 24% in the first half of 2023.

That enabled us to deliver an Iot of nearly 17%.

In the investment bank we.

We demonstrated the stability of our financing business and resilience of our FIC franchise overall after the exceptionally strong levels of the same period of last year.

And we are further diversifying our investment bank by strengthening our O&M business, both organically and Inorganically, we announced the acquisition of Numis and seize the opportunities to add revenue generators through selective hiring.

Turning to the private bank.

We grew revenues by 10% in the first half of 2023.

These are the best six months revenues since the formation of the private bank with double digit year on year growth in both the first and second quarters of the year.

We also generated net inflows of 13 billion euros in the first half year. This helped us grow assets under management by 23 billion to 541 billion euros. During the first six months of 2023.

Finally, we also grew volumes and asset management.

We captured net asset inflows of 15 billion euros or 19 billion ex cash.

Driven by passive and alternatives both focus areas for us.

That enabled us to grow assets under management by 38 billion euros.

To 859 billion euros in the first half year.

And these business are strongly complementary.

Which drive sustained revenue growth as we show on slide three.

Over the past two years, we have seen steady growth in first half revenues.

We see ourselves well on track to deliver at the higher end of our full year guidance too.

<unk> 28 to 29 billion.

We achieved this despite significant shifts in the operating environment over the past 24 months.

It's a strong post COVID-19 recovery in 2021 gateway to inflationary headwinds and economic uncertainty driven by the war in Ukraine.

We maintain our growth trajectory in a changing environment.

Thanks, and a good measure to a complementary business portfolio.

And as mentioned, we delivered strong revenue growth in our corporate and private banks, which took full advantage of rising interest rates and new client mandates, we expect that momentum to continue into the second half of 2023.

This together with the stable contribution from the investment bank financing business more than offset normalizing conditions in our more market sensitive businesses.

That reflects well balanced revenue mix in line with our global Health Bank ambition.

As we anticipate some normalization of interest rates, we aim to further complement our earnings mix.

We are making investments in capital light businesses, including origination and advisory and wealth management.

Together with technology enabled high return businesses in the corporate bank.

Finally.

Across all business, we continue to make progress towards our sustainability targets.

We added ESG financing and investment volumes of 17 billion in the second quarter, bringing our cumulative total to 254 billion euros since January 2020.

And our business growth has further increased our underlying earnings power as we set out on slide four.

As I said earlier, our first half profit before tax of $3 3 billion was up 2% compared to the first half of 2022.

And as you can see pre provision profit was up 8% at 4 billion euros after absorbing significantly higher nonoperating costs than in the prior year.

Non operating costs were 744 million.

Comprising liturgy litigation charges to settle mainly longstanding matters and restructuring and severance as we realize operational efficiencies.

Revenues were up 8%, while adjusted costs, which exclude non operating items were up only 2% below inflation. Despite continued investments in our platform.

And with Pro rated bank levies adjusted operating leverage was 5%.

This earnings power is reflected in the progress we are making on our key target ratios.

<unk> <unk>, excluding nonoperating costs and with bank levies apportioned equally over the four quarters of the year.

Would be over 9% in the first half of 2023.

While our cost income ratio would be 67%.

In other words, we own a clear path towards achieving our 2025 targets.

Before I hand over to James a few words on the progress we are making to accelerate delivery of our global <unk> strategy as we discussed with you in April on slide five.

We aim to accelerate delivery on three dimensions.

Operational efficiency.

Capital efficiency and revenue growth.

We aim to outperform our original targets.

We have already made progress in all of this.

Turning first to operational efficiencies.

We raised our ambition for incremental efficiencies from 2 billion to $2 5 billion euros as we said.

We have already delivered more than 600 million euros through a range of measures such as branch closures and the private bank standardizing loan processing in the corporate bank and investment bank and simplifying our technology infrastructure.

We anticipate 300 million of savings by 2025 from the successfully completed migration of 12 million postponed clients onto the Deutsche Bank technology platform.

And we expect more than 100 million.

From the announced redundancies in senior non client facing roles.

As more than 80% of affected staff have either been informed or left the platform.

In other words, a total of around 1 billion euros and savings are either already achieved our expected from measures now implemented.

We have a serious of other measures in Florida.

For example, streamlining our mortgage business and further branch closures and the private bank.

Re engineering more front to back processes in the corporate bank and investment Bank.

Further application decommissioning and additional workforce measures.

These are some examples of a wider program of initiatives underway.

Based on our progress on the east and realized achievements, so far we reaffirm our $2 5 billion year ago.

In respect of capital efficiencies.

As you know our aim is to reduce risk weighted assets by 15 to 20 billion by 2025 realm.

Relative to our baseline assumptions with the modest revenue impact.

In the second quarter, we accelerate secretary relation transactions, which delivered <unk> relief of around 3 billion euros.

In addition credit risk <unk> were reduced as part of the trade finance and lending optimization efforts.

Overall, we proved our revenue strengths with the business delivering revenue growth, while our FX adjusted <unk> decreased by 5 billion euros compared to the prior year quarter.

We are further optimization measures in preparation for the second half of 2023, including Secretary <unk> of consumer finance loans and reductions in sub hurdle lending.

This gives us confidence that we will deliver on our capital optimization goals.

Turning finally to revenue growth.

We are fully on track to outperform on our revenue growth targets of three five to four 5% compound annual growth against 2021 levels.

On a last 12 month basis, we delivered compound annual revenue growth versus 2021 of seven 5% well ahead of that target with revenue growth of 8% in the first half of this year.

We expect the interest rate environment to continue to drive sustainable performance in our stable businesses.

We anticipate added momentum from our organic and inorganic investments, including the numerous acquisition all the new partnership with Lufthansa and much more.

And from hiring of some 50, SR O&M bankers.

This enables us to take advantage of an expected pickup in corporate finance activity.

This enables us to take advantage of an expected pickup in corporate finance activity.

We are already seeing signs of this in our backlog.

We have also hired around 30 wealth managers.

And we expect the growth in our assets under management and net asset inflows to.

To drive fee income in future quarters.

Yeah.

To sum up we are delivering revenue and business growth of a strong franchise.

Our well balanced complementary business mix enables us to drive continued revenue momentum.

We are increasing our earnings power year by year, and we see a clear path to achieving our 2025 profitability targets, among others and Iot of larger than 10% in 2025.

And we are delivering on two key promises.

Distributing 8 billion to shareholders.

And accelerating execution of our global House brand strategy with that let me hand over to James.

Thank you Christian.

Let me start with a few key performance indicators on slide seven and place them in the context of our 2025 targets.

Christian outlined a strong revenue momentum and are well balanced business mix, which resulted in revenue growth of well above 7% on a compound basis for the last 12 months relative to 2021.

This performance puts us well on track to deliver revenue growth above our 2025 target.

The strong revenue growth combined with ongoing cost discipline led to a two percentage point improvement in the cost income ratio to 73% in the first six months compared to 2022 <unk>.

Despite significantly higher nonoperating expenses in the second quarter, which we would not expect to repeat in the same magnitude in coming periods.

Our capital position has remained strong and our CET one ratio of 13, 8% positions us well for capital distributions investments and the implementation of regulatory changes.

Our liquidity metrics remain strong.

LCR was 137% above our target of around 130%.

We ended the second quarter, the net stable funding ratio was 119%.

In short our performance in the period reaffirms our confidence in reaching our 2025 targets.

With that let me turn to the second quarter highlights on slide eight.

Group revenues were $7 4 billion up 11% on the second quarter of 2022.

Noninterest expenses were $5 6 billion euros up 15% year on year.

The increase was largely driven by the 655 million euros of nonoperating expenses in the quarter compared to 102 million euros in the prior year period.

Nonoperating expenses this quarter included $260 million of restructuring and severance provisions to accelerate the execution of our global House Bank strategy, primarily through a reduction in non client facing roles and optimization of our mortgage platform.

The settled a number of long standing litigation matters, we incurred litigation charges of 395 million euros as in each case, the outcome was higher than expected.

Adjusted costs increased year on year, which I will discuss in more detail shortly.

Provision for credit losses was 401 million euros, or 33 basis points of average loans.

We generated a profit before tax of $1 4 billion euros down 9% year on year, mainly due to the higher nonoperating items.

Net profit of 900 million euros was also impacted by the higher effective tax rate, principally reflecting the non deductibility of certain litigation charges.

Our cost income ratio was just under 76% and our post tax return on average tangible shareholders equity was five 4% in the quarter.

Excluding the aforementioned nonoperating expenses the cost income ratio would have been 67% and post tax return on average tangible shareholders equity close to 9%.

Diluted earnings per share was <unk> 19 in the second quarter and tangible book value per share was 26 euros a 95.

Up 5% year on year.

Let me now turn to some of the drivers of these results starting with interest rate developments on slide nine.

Net interest margin and the private bank and corporate Bank remained strong in the second quarter as deposit betas remained below our model assumptions in both divisions.

We expect margins to begin to decline from this point, but expect that the tailwind from interest rates for 2023 will be larger than the 900 million euros, we had guided at the start of the year.

Net interest margin at the group level increased to one 5% as the accounting effects. We noted in the first quarter partially reversed.

As we noted at the time. These effects are held encino and are offset in noninterest revenues and the businesses and do not affect the group's total revenues.

Average interest, earning assets declined compared to the first quarter driven by lower average cash balances in the second quarter.

With that let's turn to adjusted costs on slide 10.

Adjusted costs, excluding bank levies were $4 9 billion euros and this is consistent with our guidance range of $1 six to $1 65 billion euros per month.

The increase of 4% was driven by inflationary pressures ongoing investments and business growth, which are partially offset by our continued cost reduction efforts.

Compensation and benefits and information technology costs were broadly flat to the prior year quarter.

Higher professional service costs were driven by business consulting and legal fees.

The variance in other costs exclude includes higher expenses for banking services and outsource operations as well as movements in operational taxes.

We also saw a normalization of marketing spend and talent recruitment to foster our growth trajectory.

Let's now turn to provision for credit losses on slide 11.

Provision for credit losses in the second quarter was 401 million euros equivalent to 33 basis points of average loans slightly up compared to the previous quarter, reflecting the broader impact of the macro environment.

Stages, one and two provisions were 63 million euros with a moderate sequential increase driven by portfolio and rating movements, especially in the investment bank.

Stage three provisions of 338 million euros were broadly spread across our businesses and slightly lower compared to the previous quarter, partly reflecting a non recurrence of provisions relating to a small number of idiosyncratic events in the international private bank.

Overall, there are currently no signs of a persistent deterioration in the environment.

However, we observed softening and some German mid cap sectors, including automotive and continued weakness in commercial real estate.

For the full year, we continue to expect provisions to land within our guidance range of 25% to 30 basis points of average loans, albeit at the upper end of the range.

Looking at the first six months provisions were in line with our expectations. If we include the nonrecurring events in the international private Bank, we had in the first quarter.

And for the second half of the year, we expect the usual quarterly run rate of about 150 million euros in the private bank while provisions in the corporate Bank and investment Bank are expected to overall remain in line with the first half of the year taken together.

Before we move to performance in our businesses, let me turn to capital on Slide 17.

Our common equity tier one ratio was 13, 8% at the end of the second quarter 15 basis points above the prior period.

Organic capital generation contributed 16 basis points to the increase reflecting our strong net income, which was offset mainly by higher regulatory deductions for common equity dividend at 81 coupons.

Risk weighted assets remained broadly flat this quarter.

In the second half of the year, we expect approximately 70 basis points of headwinds from various items. We have discussed with you before notably impacts from model and methodology changes share buybacks and the numerous acquisition.

And our leverage ratio was four 7% at the end of the second quarter four basis points up versus the prior quarter based on our strong organic capital generation.

Let's now turn to performance in our businesses, starting with the corporate bank on slide 14.

Corporate bank revenues in the second quarter were over $1 9 billion euros, 25% higher year on year, driven by an improved interest rate environment and continued pricing discipline with growth across all client segments.

Revenues remained close to the prior quarter due to continued lagging rate pass through fee growth in institutional client services and stabilized deposit volumes.

As we highlighted at our first quarter results, we do expect a normalization of our interest revenues in the second half of the year as client pass through further accelerates.

Posits were 271 billion euros, essentially flat compared to the prior year quarter and to the first quarter of 2023 as deposit levels stabilized despite increased interest rate competition and strong pricing discipline.

Loan volume in the corporate Bank was 116 billion euros down by 13 billion euros compared to the prior year quarter, and 5 billion euros compared to the previous quarter.

This reduction reflected overall lower demand and continued selective balance sheet deployment, and our trade finance and lending business as well as the negative impact from FX movements.

We remain conservative in our underwriting at this point in the cycle and continue to apply strict lending standards in order to maintain the high quality of our loan portfolio.

Provision for credit losses increased in the quarter, reflecting a weakening in certain sub sectors.

Noninterest expenses were $1 2 billion euros and increase of 10% year on year, driven by increase in nonoperating costs predominantly litigation provisions, whereas adjusted costs remained stable.

Profit before tax was 670 million euros in the quarter up by 52% year on year.

The cost income ratio improved to 59% and post tax return on tangible equity was 14, 8% percent despite higher nonrecurring costs.

I will now return to the investment bank on slide 15.

Revenues for the second quarter were 11% lower year on year.

Fixed sales and trading decreased by 10% against what was an exceptional prior year quarter and were pleased with the underlying performance, which remained strong with growth in structured activity, helping to reduce the impact from a lower volatility environment.

Financing revenues were higher year on year, reflecting the proven stability of the franchise with net interest margin remaining robust and solid pipeline execution.

Credit trading revenues were significantly higher driven by improvements in the flow business and strong performance in distressed.

Rates and foreign exchange revenues were significantly lower compared to a very strong prior year quarter and reflected a more normalized environment than the prior year period.

Emerging markets revenues were lower as expected with the prior year seeing heightened market activity linked to Russia's invasion of Ukraine and outperformance in the Asia region.

Moving to origination and advisory revenues were up 25% driven by the non recurrence of material leveraged lending markdowns in the prior year.

Including these markdowns the business underperformed in a challenging market with the global fee pool down approximately 20% year on year.

Debt origination revenues were significantly higher.

Benefiting from the non repeat of the aforementioned markdowns. So performance also reflected a partial year on year recovery and <unk> market share.

Investment grade revenues were slightly down year on year, but reflected market share gains and a lower lower fee pool environment.

Advisory revenues were significantly lower reflecting both lower fee pool and relative underperformance.

With indications with deal activity is starting to recover we expect our investments in the investment bank to result in a significant rebound in O&M performance into 2024.

Noninterest expenses in adjusted costs increased versus the prior year, reflecting investments in both our controls and the business to support future revenue growth.

Loan balances were slightly higher year on year, driven by higher origination across fick with quarter on quarter balances essentially flat.

Provision for credit losses was 141 million euros, or 54 basis points of average loans.

The increase versus the prior year was driven by higher stage, one and two provisions due to rating migrations and portfolio movements combined with higher stage three impairments primarily in the commercial real estate sector.

Turning to the private bank on slide 16.

Reported revenues were $2 4 billion in the quarter up 11% year on year, driven by higher deposit revenues.

Revenues in the private bank, Germany significantly increased by 16%, mainly due to higher deposit revenues, which more than compensated for changes in contractual and regulatory conditions affecting fee income.

In addition, the prior year quarter benefited from higher valuation impacts.

And the international private bank revenues were up 4% or 6% if adjusted for foregone revenues from the sale of the financial advisory business in Italy.

Growth was driven by deposit products, which also were the primary driver of the 11% growth in premium banking.

In wealth management and bank for entrepreneurs revenues were up 1% or 4% if adjusted for the aforementioned foregone revenues.

Improved performance, mainly in Europe was partially offset by continued slower business momentum in APAC.

Turning to costs noninterest expenses were up 26%, mainly attributable to an increase in nonoperating expenses, reflecting restructuring and severance as provisions related to strategy execution as well as provisions for individual litigation cases, whereas the prior year quarter benefited from net provision releases.

Adjusted costs increased by 5%, mainly reflecting investments in infrastructure control improvements and strategic initiatives.

Inflation impacts were largely mitigated by efficiency initiatives.

Profits in key ratios in the quarter were impacted by a total of 254 million euros of nonoperating expenses.

Provisions for credit losses was $150 147 million euros, or 22 basis points of average loans in the quarter, which reflects the continued stability of our high quality loan book, especially in the retail businesses and continued risk discipline.

Provision for credit losses in the prior year quarter benefited from releases of credit loss allowances following sales of nonperforming loans.

The significant sequential decline reflects the non recurrence of certain idiosyncratic events in the international private bank in the first quarter.

We saw solid net inflows in assets under management of 7 billion euros in the quarter with 4 billion euros and investment products and $3 1 billion euros in AUM deposits.

Let me continue with asset management on slide 17.

As you will have seen in their report dws reported stable revenues. Despite the effect of weaker markets in 2022, and slightly lower adjusted profit before tax compared to the prior year.

My usual reminder, the asset management segment includes certain items that are not part of the gws standalone financials.

Assets under management increased to 859 billion euros in the quarter, reflecting 11 billion euros of market depreciation and <unk> 9 billion euros of net inflows net.

Net inflows were primarily in passive and alternatives, notably in real estate.

Closing cash products. Once again has been significant and very volatile throughout the quarter ending with net outflows of 1 billion euros.

Revenues declined by 6% versus the prior year. This was predominantly driven by higher funding charges in this segment and a decline in management fees from a reduction in average assets under management.

Performance and transaction fees were significantly higher year on year, driven by the alternatives business.

Other revenues declined due to higher funding charges and lower mark to market valuations of co investments, partly offset by net interest income on excess cash from rising interest rates.

Noninterest expenses were slightly higher with adjusted costs remaining essentially flat.

Compensation costs were slightly higher driven by variable retention costs and hiring to support transformation and business growth.

General and administrative costs were also slightly higher reflecting higher banking services costs and transformation implementation, mostly offset by a decline in group support costs.

Nonoperating costs are significantly higher than the prior year from an increase in litigation costs.

Profit before tax of 103 million euros in the quarter was down 34% compared to the prior year.

The cost income ratio for the quarter was 76% and return on tangible equity was 12%.

Moving to corporate and other on slide 18.

Corporate and other reported a pretax loss of 115 million euros. This quarter, a substantial improvement versus the pre tax loss of 500 million euros in the second quarter of 2022 on the same basis.

This year on year improvement was driven to a large part by valuation and timing differences, which were positive 252 million euros this quarter.

As a reminder, validate valuation and timing differences differences arise on derivatives used to hedge the economic risk of the group's balance sheet.

These are accounting impacts in the current period gains partially reflect reversals of prior period valuation losses as the underlying instruments approach maturity.

The pre tax loss associated with our legacy portfolios was 170 million euros versus negative 120 million euros in the prior year quarter, driven by additional litigation provisions relating to Polish foreign currency mortgages.

Expenses associated with shareholder activities as defined in the OECD transfer pricing guidelines were 138 million euros in this quarter compared to 120 million euros in the prior year quarter.

Funding and liquidity impacts were negative 10 million euros in the current quarter compared to negative 126 million euros in the prior year quarter.

The reversal of Noncontrolling interest in the operating businesses, primarily from Dws was positive 51 million euros broadly flat year on year.

Other impacts reported in the segment aggregated to negative 100 million euros.

Risk weighted assets stood at 41 billion euros at the end of the second quarter down 2 billion euros since the first quarter of 2023.

The <unk> figure includes 19 billion euros of operational risk <unk>.

Turning to the group outlook for the full year on slide 19.

With first half revenues above 15 billion euros, we believe that revenues above the midpoint of our guidance range of 28 to 29 billion euros for the full year 2023 are achievable.

We continue to execute on our agenda to foster the bank's growth ambitions and to improve the banks structural efficiency.

As Christian outlined we have a number of measures underway.

Adjusted costs for the full year 2023 are still expected to be essentially flat compared to 2022 benefiting from strict cost management lower single resolution fund charges for the current year as well as the potential restitution payment from a national resolution fund.

We now expect noninterest expenses to be slightly higher compared to 2022.

This reflects higher than anticipated litigation expenses, we had in the second quarter and an impact in relation to the Newman's transaction, which we expect to close in the fourth quarter.

Provision for credit losses is now expected at the upper end of our guidance range of 25% to 30 basis points of average loans, reflecting the current macro drop backdrop and lower loan balances than initially anticipated.

Our capital guidance is unchanged, our second quarter's CET one ratio of 13, 8% allows us to absorb roughly 70 bps that 70 basis points of headwinds in the second half, reflecting the impacts from model changes share buybacks and the numerous acquisition.

We remain committed to our capital objectives. Most importantly, the distribution of <unk> 8 billion euros to shareholders in respect of the financial year, 2021% to 2025, and moving up to a 50% payout ratio.

And as Christian said part of this plan is the next phase of our share buyback, which will commence next month and will be finalized in the second half of this year.

So the performance and the growth opportunities, we see in the first half of this year strengthen our confidence in the path towards our 2025 targets and our global House Bank strategy with that let me hand back to silica and we look forward to your questions.

Yes.

Thank you Emma.

To take the first question.

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 the telephone keypad. If you wish to remove yourself from the question queue. You May Press Star then chase.

Anyone who has a question my press star followed by one.

At this time, one moment for the first question. Please.

First question is from the line of Uncalled Langdon with RBC. Please go ahead.

Yes, good morning, and thank you for taking my question.

If you kind of thought I was talking about the revenue outlook, maybe firstly, yes Big picture number question pretty weak go with a slowing confidence is low low prices are declining in light of this environment, where do you actually see opportunities for you with nickel with especially in the more stable businesses.

Where do you see the risk and then secondly, ammo concrete in terms of the numbers.

Revenue guidance went up for the year.

This implies.

More like six to seven day than a quarter in the second half.

And it does all party seasonality, but overall.

In the first half so how should we think about that.

Jim.

On the second half into until 'twenty 'twenty four can you actually grow revenues in 2012 at this time. Thank you very much.

Okay.

Good morning, and thank you very much for your question, let me start and James.

Potentially it.

But first of all on your description on the macro side.

I agree but.

It's completely validates that what we have shared with you.

In the previous call. It's we always said that 2023.

Will it be based on a very weak economy on a kind of a no growth scenario.

I, even expect for the end of 'twenty three.

Technical or a very mild recession in Germany potentially also in the U S.

That was always in exactly the foundation of our plan and hence until there is no negative surprise.

<unk>.

In the macroeconomic outlook when it comes to our plan or too.

The underlying drivers bead revenues speed also risk question.

That is also I think important that from a risk point of view our credit forecast was always built exactly on that description of the market you just shared with us and hence we also don't see any downside to our credit focus was which James just again reemphasize in his prepared remarks.

When it comes to.

Where do we see growth opportunities in particular for the stable businesses in such an environment.

Look I really do believe that the global health Bank strategy in particular in the state of our business is exactly the right answer and that's what we feel.

Kind of on a day to day basis with our clients.

Of course, we are benefiting from the NII and to get back to that in a second but if you think about what kind of discussions mandates we win with our corporate banking clients around the world when it comes to reorganizing their networks reorganizing their supply chain.

Making sure that we obviously then follow up with the cash management systems around the world.

As an answer to their reorganized network than this.

This brings us a lot of new mandates.

Which honestly is even above our expectations of course in this regard also the most recent upgrades from rating agencies again help us because whenever we get this obviously it helps to increase revenues and new timeshare onboarding.

And the private bank.

There is a lot of ask and Youll see that also in our development in the assets under management on the investment side.

I think we have seen not only in Germany, but if I if I look in particular in other European countries in Spain, and Italy, we are seen as the go to bank when it comes to investment advice and this is if you talk to the clients in this scenario, where inflation is still above 5%, where they think about.

How they secure their pensions.

Now with having postbank fully integrated on our Deutsche Bank system.

People think about how to secure the pensions and that is obviously, our chance and opportunity and Thats, what we see in the data business on the investment business.

And in the IBD I know that a lot of people always think this is a more volatile business, but I think we shouldnt underestimate also in these days the stability of the financing business in the IV again shown in Q2 also year over year.

I think the future investments we are doing in the <unk> business. They will pay off because we can see that actually the trough in this business has been passed and we see from the mandates. We are discussing with declines that there was clearly an uptick in this business and therefore I expect rising into revenues.

And that business also in Q3 and in the following quarters.

And I also think that Q2 has again shown that also in the trading business we.

We have done quite well and also compared to our peers and that we are actually.

<unk> or even growing our market share. So if I if I take all of this I think the positioning of the global hosting with 70% of the revenues now coming from the private bank corporate Bank MTS. It management growing assets under management I really do think we have the right answer in particular for the environment.

We are experiencing right now now.

Coming to the concrete revenue question and not only for 'twenty three or 'twenty four.

Let me give you some more guidance.

The NII curve is holding up far stronger than we initially planned and I do believe that.

With regard to our own existing plan, we see positive surprises is also in the second half of 'twenty three and I do also think in 'twenty four and let me give you. One example in the private bank business, we see a modest.

Three digit million revenue increase potential in the second half alone versus our own plan and that is mainly coming from NII, but also from the growing assets under management.

The assumptions, which we had so far and the corporate bank when it comes to the decrease in NII I would say were too conservative.

I would also predict that going forward this would be slower than anticipated it would come down but it is slower.

The growth and.

The growth in investment and other fee income as I, just said is encouraging.

It's not only the assets under management, but you have seen the announcement of a relationship business. We are doing for instance, with Lufthansa on mice and more.

And to be honest. This is not the one off this is actually coming more and more as additional mandates in particular, if I think about her.

How the corporate bank are thriving and these mandates.

<unk>.

More and more and therefore I really do believe we are building now the platform to growth in non NII business with all of the technology spend which we did in the corporate bank, but also obviously in the other business and therefore, we did all the investments in <unk> and wealth management also in hiring the people because we see that this business.

We'll grow that there is that there is the increased <unk>.

Discussions we have with clients in particular in <unk> and therefore, we staffed up for that so looking at all of this and with the starting base of $15 billion of revenues.

Look there is clearly upside in the private bank versus our own plan in H in the second half and to be honest I wouldn't be surprised if we see a similar number in the private bank in the second half than what we have seen in the first half.

I think very stable numbers in the corporate bank potentially slightly lower because of the.

The NII growth, but again, we have been very conservative in the past potentially too conservative state.

Stable asset management, and very robust IV was growing <unk> revenues. So all this gave us the confidence James deny that.

Nearly can hint to a higher revenue base than the mid point of 28 to 29 I think we can focus on the 29 billion number and if I then look at the businesses. We are creating again in the non NII, but also actually what we always emphasize to you that the real ups.

Kick in NII in the private bank is only coming in 'twenty four 'twenty five.

Honestly.

I'm very bullish on the revenue trajectory for 24 and 25. So I think we're exactly rightly placed from a revenue point of view from a positioning and hence it plays into our cups.

Thank you very much.

Okay.

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

Yes. Good morning, Thanks for taking my question I have two please the first one would be on costs and could you give us a bit of color regarding how you think about cost for the rest of the year and whether you know the one six to $1 65 billion of months I'll, just teed costs run rate still holds and maybe also in light of the price pressure.

We are seeing how do you manage to strike a balance between cost discipline and investments for growth and which areas are you prioritizing.

And just similar question will be on CRP EBITA was the same question regarding your outlook for the rest of the year and particularly after the increase in Q2 have you got any concerns on any particular areas. Thank you.

Thanks, Nicholas James I'll take both of your questions and Christian may want to add.

Look we've talked about the run rate as we can.

Gives you a sense of what management is focused on.

And I think.

The past three quarters, we've been able to adhere to the run rate and it's been a.

An area of real focus given both the need to deliver on cost savings measures in order to support that and manage the investments.

And our phasing that corresponds with the with the cost takeout that we're that we're achieving.

So if I think about priorities look our priority is on the on the.

On the cost measures are reasonably clear we laid them out in March of last year, and we're building on that.

And they are focused on particularly technology distribution platform.

In private bank in particular, but not exclusively and then infrastructure support can we make that infrastructure support more efficient.

And so we're very focused on that and the delivery in terms of.

Priority is on the on the business growth side leave aside control investments for a moment, where I do think we're near or at the peak of.

What is required in order to to finish that control remediation agenda.

We've been we want to be really clear that our focus is on the capital light.

Product areas in the in the firm and the ability to grow fee and commission income going forward that supports both the return potential of the company and the distribution profile in the future.

In those areas.

<unk> talked about wealth management being one origination advisory being a second.

In the corporate bank fee income sources in the corporate bank that go to technology capabilities, but also just growing our client footprint and in some areas, where we're a leader I have dock custody for as one example, so we've been we've been focused on those types of investments and I think we're making really good.

Progress.

Just going to the run rate.

Thing as much as we're focused on that range, we do see the pressures.

Outlined coming towards the end of the year. Numerous is an obvious example will give us about $50 million per quarter of additional expense and then the investment we make in frontline bankers, taking advantage of the opportunity in the marketplace, maybe a little bit more so.

If there are the exit rate per month is perhaps $25 million more constant FX that would be a natural place.

But I think we are in essence, we have started to run downhill.

In terms of the.

Our ability to deliver on those cost savings being derisked, if you like and gaining momentum.

The Unity project is one example that is.

Behind us and as we said in the prepared remarks, you are now it's about crystallizing the run rate benefits over time, but there are many more similar.

Initiatives that will have a cumulative impact at which point our greater challenge is phasing of of growth investments rather than delivery of cost savings.

I just wanted to say one other thing while we're on the costs there as nonoperating cost area for us obviously frustrating to have those exceed especially those out of our control our original planning so I look to the second half.

We would expect at around say $100 million per quarter, the remainder of the restructuring and severance.

Costs that we outlined for the year to come through.

I always uncertain on litigation, but clearly we would hope to do much better going forward than than in the most recent quarter.

And then finally, one thing to just make you aware of we alluded to a little bit in our disclosures.

It's early to talk about specific purchase price adjustments and what have you and the numerous closing process, but but our current expectation is that we would impair the goodwill attached to that immediately on closing so in the fourth quarter producing about $200 million item. There also but we would think of as not all non op.

Operating so for your models and awareness.

On the <unk> I'll try to be shorter.

Look the guidance.

It takes into account everything we know today.

The environment on balance is in line with our expectations and if I go all the way back to the beginning of the year, maybe even a little better than our expectations. We did have the idiosyncratic items in the first quarter in IPD come through and that sort of pushed us up in a range.

But otherwise at the call it 30 basis points, we think it captures.

Our expectations about the second half.

We see this as a slightly elevated but not a not a <unk>.

Broad deterioration of the credit environment. So we're very comfortable with the guidance there.

Thank you very much thank you niccolo.

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

Well, thank you for the questions on capital and one on <unk>.

On capital and capital return good to see the $450 million I want to poke around a little bit beyond that.

Pro forma CET, one at 13, 1% post youll headwinds Youre capital generative.

Would it be.

Possible for a buyback another leg to come as soon as the full year results.

When you clear clearly are highlighting $8 billion of total capital return $3 22 to 25 plan.

But you've only done $1 75 billion. So I just a sense of how quickly you need to accelerate capital return plans in order to get through the full 8 billion I think it would be really helps you. The investors. The full 50 is helpful. But people want to know what's coming beyond that.

And then secondly on NII.

Talking about the long dated NII tailwind within the private bank. This makes sense given that the nature of that business, but can you put some numbers to it I think.

That's one reason the market around peak NII, but a sense of what that recurring tailwind into 'twenty four 'twenty five 'twenty six and even beyond.

Right.

Could give us a bit more confidence about your revenue trajectory beyond this year is a bit more color around volume of hedges or kind of.

The back book right on those hedges would really give us a bit more.

More to play with what we think about the longer term NII story. Thank you.

Yeah.

Thank you Adam for your question, let me start with your capital question, and then I'll hand over to James with regard to the NII question in some more detail beyond the comments I made before.

Look on the capital.

First of all thank you very much for the recognition of the $450 million.

I think hugely important for management to deliver that what we have promised and so far what we have promised we delivered.

And therefore, one thing is clear the $8 billion absolutely stent that is.

That is our target and based on how the company evolves, how actually the capital ratio looks like if I think about the growth you just heard from James how committed we are on the on the cost line and hence to further increase the operating leverage.

We have full confidence in delivering the $8 billion.

I think and we clearly understand that obviously this should be a continues.

Trajectory and therefore I also said in the prepared remarks. It is clearly our aim to continue that distribution in 'twenty four.

Now you will understand after we just.

<unk>.

Published our.

Our share buyback last night that we won't give you the details for next year. Because there's also always requires a detailed planning our planning around to starts in September .

Then I think we have such a constructive relationship with our regulator that warrants a than the.

The next discussion.

But looking where we see the firm it is our clear aim.

To continue this trajectory in 'twenty four.

We have gone on a pretty nice journey with an annual increase of 50% when it comes to dividend.

We did this not only on the dividend side, but also on the share buyback and as.

As we think this is exactly the right approach one can potentially think that this is the management and also to know that in 24. So hopefully that gives you a little bit of.

Way forward, but clearly it's not a back end loaded only in 25, we know what we have to deliver in 'twenty for James.

And Adam Thank you for the question.

So much that goes into banks sort of rate hedging and profiles.

It is hard to pull out.

The hedging on the PB portfolio is longer than than CB.

And more euro heavy so so that that effect will be with us for for several years after 24.

It's been a while since I've looked at this in this way, but but my memory is that that uplift is sort of between 2% and $300 million.

Per year for a period of time, so that that uplift is is considerable just on the rate side, if you've got volumes and sort of a spread dynamic.

Sort of more active hedging as well as capital benefit and.

Improving unsecured spreads.

Yes, there is a number of different features that can that can help support.

The NII of the group and the businesses over time so.

Isolating that item good story, there's sustainable growth that comes.

After 24.

And actually already in 2000 and for especially in the second half, but but it's one of a number of supportive items.

Hopefully that helps give you some some color on it.

Yes. Thank you.

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

Yes, thanks for taking my questions.

I just wanted to come back to the cost. So if I understand this correctly, we should think more of a cost run rate per month of one 675 that gets me to 21 billion annualized.

Is there any other factors that you think we should consider or rather than this constant adjustments of the cost base can you share that is asked if there is anything else any curve balls that we should think which could impact cost in 'twenty four 'twenty five going forward and in that context on the stated cost space.

Can you just clarify what we should think of as a run rate headwinds and litigation expenses, you mentioned numbers in the past, but they might've changed based on the experience of the second quarter.

And then the second question I have is regarding the private bank you are running at a clean cost income around 76 still looks very high considering how the higher rates have helped you on the NII and I was thinking how we should think about the cost income development and then pick it.

Cost development absolute in the private bank. Thank you.

Okay. So thank you kian.

Yes.

116 hundred 75 is not a bad place to think of in terms of exit rate.

We'd be pleased to run the company at there over the course of next year, there are always curve balls.

And the expense world, but but we.

And that's what I mean by running downhill I think that are the tools that we have to manage those curve balls hopefully begin to expand.

As we as we come out of a shrinking control remediation you know repairing our technology estate world of the call. It the past five years and move into a growth.

And.

And they are accelerating benefit from from initiatives underway world.

Leave FX aside for a second because that will obviously change the run rate.

Going forward, but.

But otherwise I would say inflation is is tough.

Especially on the technology side, so so how much inflation flows through.

Again, I want to I want to be clear because we have so much coming on the on the expense initiative side.

It would then give us the flexibility to to phase in time some of the investments in a way that that gives us control and allows us to to manage that obviously, we'd like to make the investments and investments that are that are.

High return low marginal cost income ratio.

As the direction of travel, but that gives us sort of additional levers.

Litigation severance restructuring obviously the second is in our is in our control.

We would probably tell you that a typical severance year if nothing else is going on is.

Maybe 100 150 per year, so so not gigantic.

And it really just depends on whether there are larger programs that we that we initiate and then put aside.

But obviously, we'd like to get it get to the end of a period of time, we are major initiatives are necessary as part of the transformation of the company.

And then on litigation.

<unk> been hard to estimate and in fairness they've been items that are that have taken us by surprise, both last year with a third party messaging as an example in this most recent quarter with a with a number of items.

One always has the view that as you get through items. They are behind you you've taken out the risk.

And then therefore the forward.

A list of matters begins to diminish.

But it's and.

And the run rate there therefore is hard to hard to define.

Properly, but wed love for that to be.

Sub 400 in a year, let alone in a quarter.

On private bank Christian will want when I want to add but.

The operating leverage in private bank, we will be we think dramatic over the years ahead and that that's really the story there.

Yes, so well you took my words, because kian I think youre right. Obviously, we are not yet happy with the cost income ratio we are in the private bank.

If you see.

Only on the cost side, what is still to come.

Just because of the Finalization now of unity $300 million of costs will fall away.

In 25, we have branch closures.

Further to come I think in the last quarter or the last two quarters. We close approximately 90 to 100 branches that goes on this is continuing you have seen our announcement on the mortgage side that we are actually.

Reducing <unk>.

Reducing they're also our people in that in that business as a consequence of our business mix and the capital allocation.

So I think on the cost side and the private bank. If I also look at all the key deliverables under Rebekah swing, where she is now working with Claudio to Santos on.

There is a clear cost take out on itself and I haven't even touch now on the on the revenue side on.

On the revenue side actually clear upside I, just gave you a little bit of number for the second half of 2023. This is not extra ordinary income. This is just better revenues that we initially planned that will continue also when I look at the plan in the year 'twenty four 'twenty five or also on the back of the NII comments Jay.

<unk> made earlier and all of that brings us actually into a cost to income our range for the private bank, which is in the low 60% debt in 2025 that is our plan and we feel exactly on that trajectory and I do also think with the announcements Claudio mate on making.

The structure now after building up the private bank internationally in private.

Germany, and our cards leadership now moving it together there is additional cost, which we actually take out. So therefore I'm absolutely confident that we can achieve this low <unk> cost income ratio than in 'twenty five.

Thank you.

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

Hi, Thanks for taking my questions I.

I had a couple please geeky question Antonio CRE exposures. So thank you for the extra information in the interim report you know talk about nonrecourse loans of 40 billion, but I think that's a different definition to the 33 billion you talked about that the Q1 stage.

So my question is why the change in definition and what is the like for like figure out to the 33, but in Q1.

And then secondly, you talk about an additional 800 million of stress bad debt provisions with CRE, but presumably some of that already captured in your basic provisioning guidance given the current provisioning run rate of 100 million in the quarter for CRE. So how much of that 800 million is incremental stressed provisioning not captured in your current guidance. Please thank you.

Yes.

On the second question.

Great question.

Probably around 500.

Of the eight not in so we and it depends by the way Stewart on the timeframe you choose so.

Over over this year and next.

We would expect another few hundred million dollars of total provisions to come in and therefore, I would say about $500 million incremental.

But we had been working hard on that on that disclosure.

And also to your question about definitions, what we were trying to clean up is this is two things one is the Naas code disclosure, which which is a.

Is it <unk>.

Industry definition, but to be fair not really how we think about risk managing the portfolio.

And therefore, we wanted to bridge from the Naas at around $40 billion within the Naas definition, there is non recourse and recourse Ironically, there's also some non recourse outside of the Naas definition in these numbers. So so we're trying to give you.

<unk>.

Reconciling if you like to some of the existing external disclosures.

What I think is important though.

Is this.

The 33 of the old focused portfolio of the 34 of the new focus portfolio, what we're trying to give you his.

Our sense of the size of the perimeter that is our focus from a risk management perspective, where we think.

What is the portfolio that can produce losses based on its exposure to the current environment.

That's a little bit different today than it was in the Covid time, when we first created the focus portfolio and so hence also.

Shifting to that but not a meaningful difference in terms of total exposures. So that's hopefully some color Stuart to help you understand what we were what we were trying to do for you in that disclosure.

Basically you forget the 33 billion and then just focus on the new disclosure yet.

I would.

Look the problem with the pillar three is often that the industry disclosure in the pillar three is really tough to draw meaningful conclusions from.

So yes short answer is.

Trust us that we're doing our very best to show you. The portfolio that we are focused on risk managing in those disclosures.

And Stuart I cannot I cannot have myself as a form of risk measure to comment on that because.

A.

Downside, which we <unk>.

Which we now included with the $800 million.

Obviously, something which is over multiple years.

Not only this year and next year, so it's a real downside to spread over multiple years.

And therefore I don't want that this is now taken any wrong context, and you think this is a hidden way to increase our base case not at all but we feel that transparency may even help you to see how strong this portfolio is.

That's helpful. Thank you for the extra transparency. Thank you.

Thank you Sir.

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

Thank you.

Couple of questions on capital please.

First one is.

You mentioned that you've now got very friendly relations with the ECB and I think it's a nice positive surprise that you've got this approval, perhaps earlier than we were expecting it didn't have to wait for you to print. The one H numbers, you've already got the approval and I'm. Just wondering if you could talk about what's changed in that regulatory relationship because obviously.

<unk>.

You are in a tougher situation at the start of the year when you Couldnt do the buybacks that you wanted.

Wondering what the main changes whether it sort of visibility on your headwinds or or other factors. So sort of what has changed in that regulatory contacts in these approvals being so forthcoming now.

And then my second question also on capital I was just wondering if you had any perspectives on the U S. Basel III Finalization that's coming through.

How that might impact you either in your does it impact your local U S business or do you already have such a high CET one ratio that it's not particularly affected.

Does it affect competitive position for the group in the U S or elsewhere does it create pressure for Europe to tighten up its implementation of Basel III finalization any views on that would be really interesting.

Yes, Jeremy let me start and.

I hate to correct, you, but I think I said very constructive so.

I must be careful I don't want to say frankly, because that may be even taken wrong. Then so we have a very constructive relationship.

With our regulator and that should be always the case.

Look what changed and James May want to add for this I think.

Actually nothing really changed because we ourselves at the beginning of the year as we always sit in November and December says, we want to wait how 'twenty three is starting and how the economy is actually developing.

We would like to see how the first quarter is developing.

And we.

We now can say, we didnt actually apply for a share buyback at that point in time, because we wanted to see.

What is going on and this was the volatility was around we have the geopolitical uncertainties, we had an inflation.

The economics, economic forecast, where everything between hot recession, and actually a growth scenario and therefore I think rightly. So also with all of that what we could see James.

Decided and.

With my full support that we for the time being hold off and then we started well into the year, we had a far better forecast what is happening we saw how how stable. The business is developing and we feel we are making good progress and that was the right time, then also wished to forecast into 'twenty, three and 'twenty four.

Four to apply for that and in this regard I think we had very constructive.

Discussions and this.

This is my own assumption.

Only interpretation I do think that the regulator will also actually recognized that we were on the cautious side at the end of 2022 when it came to the start of 'twenty three and I think that also then obviously.

At least not taken negatively.

And Jeremy just to add that the timing and magnitude of the Reg changes is something that they and we had more visibility into as timing went on the model and methodology changes. So that was helpful in terms of giving us greater confidence in that.

That capital plan.

I think the step off now in Q2 helps to support that further in and of course that was the progress during the year was visible to them through the year on U S. Basel III final framework.

Obviously very curious to see what's in it I don't think it really impacts us in a meaningful way.

In terms of our business operations potentially competitive positioning.

Given that in our view European banks have been at a capital disadvantage for for some time.

And then there's also the at least the possibility that the timing of implementation.

Could give us a bit more breathing room relative to the first of January 25, but but beyond that.

Not much expected I would not expect that.

The European Ledger.

The legislator sort of reopened its discussions based on whatever they read in the NPR and I think thats appropriate with Europe should decide for itself what the appropriate.

Legislation in implementation looks like.

That's really helpful. Thank you. Thank you Jeremy.

Next question is from the line of Jpmorgan.

Please go ahead.

Yes, hi, good morning.

I would like to address two strategic strategic topics. Please so one is on PPE and one on demand and multi year, so starting with PB.

I mean, there has been a re softening.

Under the new leadership with closer Desalt is taking over so.

When do you plan to communicate further details on that.

If you could share any.

The.

Details can some color there and.

What you're also considering for instance, streamlining to different brands.

We are working with in PB I thought that would be question number one.

And then on the miles are multiyear.

Great relations on this one so maybe you could outline to matrix drivers here why you have been chosen and what may have changed here in that respect compared with some years ago and maybe.

Could you discuss also the kernel of the attractiveness of the co branded card business I mean.

Some of your competitors.

Pulled away from the sort of basis in the last two years. So thank you.

Yes.

Well, thank you team.

On the on the PB side.

Look cloudy you'll start at 25 days.

Ago.

Let me, let me start differently first of all I think Carl has done a wonderful job and actually making sure that the private banking business is becoming a profitable business. He has done a lot in order to make sure that we on the trajectory to become a very profitable business. As we said also two key on.

Question, So the trajectory, which card is late is exactly the right one now.

Now, what we will see actually in the in the private banking business.

Actually that the international private banking business and the German private banking business is moving closer together from a product responsibility from an investment.

Responsibility also from an infrastructure and servicing responsibility. So you will see a more leaner structure, which we now can do after we have done the necessary steps in Germany with unity.

We can now actually put it under a more combined and efficient leadership together, which obviously.

Bring certain cost.

The cost benefits.

On top of that and I do believe that our Claudio will focus very much across the private banking business on the investment on the capital light.

You have seen that he has done that very successfully in the international private bank.

And I do believe if I look at the long term challenges in particular in Germany. If you really think about what the people are concerned about it's about the pensions, it's about the state pensions, which will come or not come in 10 or 15 years and in this regard there is in almost each and every client meeting there was the question how can I actually.

For my own retirement in that time period and for that you need a first class offering on the investment side and Thats exactly where you need the private banking experience private banking expertise, which we have with cloud you, which we have with a lot of other people and Thats I think where cloud is.

Very much focusing on secondly, he would make sure that also this offering in a digital way.

Would make its way to 15 million clients now all on the same platform that is really a meaningful step forward. So I'm very proud of what happened with unity. So I do think that Paolo which we can now bring in particular in the investment business to Deutsche Bank clients, but in particular 215 million postponed client.

Now part of our technology is is simply outstanding and Claudia will focus on that.

On the mice and more look I haven't seen by the way.

From the.

From the competition.

Also from the deal in itself that the competition was not interested anymore in such a deal that was a real race.

We are super proud to them that we were able to be selected by months in Mumbai Lufthansa what makes a difference at the end of the day, our client can fall, but I'll talk about that I will not talk about the client took a decision.

But I do believe.

That our shift four years ago that the corporate bank the day to day business. The combination the client Centricity, which we have built between the private bank the corporate bank. The way. These two units work together and worked in that pitch made a different we delivered one.

Deutsche Bank to Lufthansa and one Deutsche Bank to Lufthansa is not only the best platform for months or more and the best technology.

<unk>, which by the way we started to invest already last year and in order to be ready now to really do the migration, what we deliver to them at 15 million additional potential clients and that nobody else has and with the commitment of the full board that the private bank and corporate bank is as much.

Uh huh.

Hot off the Deutsche Bank business.

Our focused investment bank I think the clients get it and they want to work with us and I think that is the advantage, which we can deliver and I can tell you that is only the start because with that mandate. We were I think have a big big chance to win other businesses in Germany, yet in Europe .

Okay.

Okay wonderful thank you everyone.

Next question is from the line of Andrew Lim with <unk>. Please go ahead.

Hi morning, Thanks for taking my questions I've got three if I may.

The first one.

One capsule could you update us on the <unk>.

And Pat you probably see from final Basel III rules I think the most latest guidance.

All right.

Inflation of about 30 billion.

But if I'm not mistaken that excludes the impact of the output floor. So maybe you could also give us Additionally, what that impact might be.

From the output floor.

And then on slide nine of the presentation.

Margin.

I see that your average interest earning assets have been declining for a few quarters here.

Pointed to lower cash balances.

So of course for Q2.

I was hoping.

A bit more persistent going alone.

In terms of maybe high interest rates and demand for loans or maybe also the contribution.

The reduction in sub hurdle lending and maybe that has a larger impact here.

So if you could talk about that in a bit more detail.

And then the third question is a bit more technical.

So you've got EPS of <unk> 19 cents here.

So I'm trying to reconcile.

The net profit that you've used to calculate this has any $402 million.

Which is a lot lower than the 763, so I'm trying to understand how you get to the 402. Both of these measures include the reduction of 81 coupons. So there's some other impacts here to get to the 400 to 400.

763 thank.

Thank you very much.

So Andrew I'll just add.

Im not sure exactly what you were talking about in those last numbers. So we may need to clarify.

The area that you were at.

On the on the capital impact I'd say, we would probably stick with the with our earlier commentary, which I think was 10%, but it's been a while since we've looked at that incremental of the output floor, then between 25 and 30 and in fairness, that's all pre.

Mitigation business model changes and all that good stuff. So so it's.

<unk>.

There is no update on that but that would be orders of magnitude and I think important to emphasize the capital measures that we've talked about in April I mean, you can ask where they intended to support offsetting Basel III impact or or to support the distribution same.

Same same.

They're they're really I think valuable in both respects too and to shift the group to.

More capital light usage of the balance sheet.

It goes a little bit to your NIM or net interest, earning assets question I'd be surprised if the if the next number in this series, we're as big as a downward movement as well as the last three.

Albeit loan growth has clearly slowed down and youre seeing the impact now of some of the decisions we announced in April around trade finance and lending as well as the mortgage book. So we would expect to see some.

Impact in the loan balances as a consequence, but we think that that's the right decision economically in terms of supporting.

Both.

And.

And NIM going forward.

And maybe just I want to make sure I understand the reconciliation that you or that you are.

<unk> two in terms of the was it a forward on capital that you're after or.

Wasn't sure Oh, yes, okay.

If I could clarify further so on the on the supplementary disclosures on page 21.

So you give the.

The net profit.

<unk> hundred two.

Meeting to calculate your EPS of 1919 losses lower than last quarter.

63 cents.

So I'm trying to trying to understand how you get to that 402, because on on slide 15, you've got net profit of 763.

So that's a big down shift here and the net profit and I can't quite figure out how you get to that 400 to that doesn't seem to be any.

Any kind of disclosure there.

So that's on the on the EPS side.

I don't think there is a mystery I think it's just that we've got about $2 billion and change shares outstanding. So it looks to me to be proportional to the number but we'll we can we can quadruple check and come back to you again.

We obviously have to take out in an EPS calculation, we take out all of the earnings.

You'd like to go to other.

Other capital providers, whether that's been to our minority interest or 81 holders.

Yes, it actually will completely agree I mean, it seems like those two lines all exactly the same except for Q2 with on these different I mean, it seems like you deducting everything like 81 coupons for example.

And also a minority interests.

So.

Pat.

Yes, we can follow up on that.

Okay, Great and then sorry.

No guidance on the output floor, then because it was not something we have to wait for later on I guess that was the first part.

Ballpark of 10% over over several years with a lot still to kind of to go in terms of how we.

Shift the balance sheet in order to mitigate what we can in that in that output floor impact.

So 10% increase in total <unk> exactly.

Great.

Again, a denominator that was closer to 300, maybe 330, then to Ben to $3 50, or even 400, where we will be by that time. So you have to go back several years.

To the point, where we gave you a percentage there.

That's great. Thank you very much thank you.

Next question is from the line of Vishal Shah with Morgan Stanley . Please go ahead.

Alright. Thank you so much for your presentation I had two questions. The first one was on capital returns.

So clearly with the new buyback announced your distributions are now at $1 75 billion and then remaining is $6 5 billion to 8 billion total target.

So if I take your 50% payout policy.

You would need to generate about $13 billion plus in net income over the next two years and then this is much higher versus consensus.

About $9 billion right now combined for 24 and 25, so I'm wondering how what are the key drivers youre looking at to bridge that gap. So that's one and then the second one is on your investment banking business. So you have clearly hired a lot on the front office side, there and in both banking and capital markets plus there's the deal must deal.

It is under way too.

So clearly you are positioning for a potential rebound in banking and capital markets activity. So.

I mean, what I wanted to check there is if you have a target market share in mind.

In terms of what you where you want to see our banking business works with global peers are.

Sure.

With the recent hiring of the new must deal do you think you are right sized from a staffing perspective at least for now.

That's about it.

So vishal on the first item you, probably just missing a year so.

It's a little bit complex the way, we do it but we have said in respect of the year is 21% to 25 paid in the years 'twenty two and this would include a little bit of capital then returned in a lot of capital returned in 2006.

So we think are on the on the trajectory that we're on which you remember instead of asymptotic. If you go 50% per year. The increase is quite steep and we think also prudent in light of our own view of the earnings growth potential of DB.

On the I B item I'll focus now on origination and advisory.

The investments have been going.

That'd be more visible, perhaps there have been investments into into the Fig platform, which we think have performed very nicely in terms of our market share improvements from a low point in 18, and 19 to where we are today, we're very pleased with that without progression.

But in the corporate finance area, where we've invested more recently our market share has been bouncing around 2%. We do think there is a significant opportunity for us there.

We don't have a specific target, but but I don't think theres any reason why we shouldnt be able to double the market share.

And again with our.

In a disciplined way inside our client footprint inside our capital footprint, but by doing just much better in terms of closing industry gaps in terms of.

Building more of the chain.

For example, with private equity sponsors.

On the way in and the way out there is there is a lot of potential.

That is if you like within our franchise perimeter that.

We really just haven't captured so so.

Lots of upside for us there I believe.

Thank you so much thanks vishal.

Next question is from the line of Tom <unk> with <unk>. Please go ahead.

Hi, Jeff just a quick one.

I've made it.

Ebay from recent weakness.

Increase our confidence in the trading activity to pick up in the second half with yet.

Wondering if you could elaborate on that because at the second quarter was actually pretty strong and last year. Prior period are all set alright strong on a relative basis.

Yeah, I would just like to know what gives you that confidence is it just the simple kind of.

Maybe the credit side of things the normal increasing a little bit more.

And at the back end of the year. Thank you.

So Tom first of all the comparative that we've got four for the fourth quarter isn't very demanding.

So I do think Theres, a theres just in that Theres, a theres a theres a real.

The opportunity to take the the year on year and revenue up.

<unk> I.

I think we are in an interesting time, we've talked about the macro weakening in lower volatility and you've started to see that against a high base and one where we think we're executing well in terms of our client engagement.

But in the language I've been using the micro coming back, especially credit.

And financing businesses and doing quite well.

And an interesting question is there an environment in which the credit stays there continues to do well in the second half and going into 'twenty, four but because we find ourselves now on the other side of the cycle.

Increasing volatility as investors now begin to position for an uncertain path in terms of reducing policy rates and in an uncertain path in terms of the length of time the policy rates stay at the at the at the terminal rate. So.

Theres sort of an interesting environment that we see we see coming in.

In the second half of the year.

We'll see whether that when it comes to fruition or not but what we are.

Ron Mack and his team Super focused on is just engaging with our clients. So that we can participate both in the flow side of that activity as well as the structure and I think they've done a a.

Fabulous job at that in the second quarter is a good is a good indication of how we can perform in that market or maybe a slightly better backdrop.

Okay. Thanks, Tim.

Thanks, Tom.

Next question is from the line of mezzanine with UBS. Please go ahead.

Yes, hi.

Two questions. Please.

First one is on capital.

Was just wondering if you could give us a rundown of the moving parts on the CET one ratio in the second half of the year I know that.

Your commentary to the 700 basis points impact.

From numerous deal closing.

Share buyback.

Some of the regulatory changes.

Hi, Christian mentioned segregation and reduction in sulfur lending potentially resulting also.

<unk> reduction.

Could you perhaps quantify that.

The second question is on the corporate bank.

Obviously, the loan book declined.

And 4% quarter on quarter, I know solve that is intentional and it's clearly coming from risk management from perhaps.

Some impact at some.

From her lending I'm just wondering.

To what extent do you see future demand.

Does that is that.

How is that driven by you and if so when do you expect the turnaround on that front. Thank you.

Sure. Thank you Bob So briefly the 70 basis points as we're still thinking 50 basis points of model methodology adjustments, there's a range around that and then nine basis points for numerous 12 basis points for the for the capital return.

Hi.

The other moving parts of our organic capital generation and how much we use in terms of balance sheet growth.

That should produce a year end ratio probably higher than our original guidance for the year. So we'd like to we'd probably be closer to or further into the <unk>, let's say than just the 200 basis points margin to MDA, which would be 13 two.

Within that we do have embedded some assumptions about what additional support we can get from Securitizations optimization.

In other other capital measures.

Look we I think if we if we outperform those assumptions or our own execution.

Sort of path.

That puts us in an even better position going into 'twenty for both for distributions and for the Basel III build.

So those are some of the moving parts that we see.

And on your on your second question.

I think.

Youre kind of differentiation is right on some of the.

Lower loan growth or even decline is intentionally.

By the way not only from a risk management point of view, because we have actually a very.

Conservative and longstanding risk appetite and therefore, we don't need to do so many adjustments in between but.

Of course also we have sub hurdle relationships, where we and we said that in April where we want to go for.

And even better and more focused risk return strategy and Thats. What we are doing so that is one part.

And secondly, yes, I think in particular in Europe , but also in Germany, you see that midcap companies family owned companies.

That you see in a softening in loan growth.

And the reduction in demand for the time being in particular when it comes to long term investments.

To be honest I don't think that this is something.

Which is which is.

Continuing for a very long period, but I would say that those companies would like to see where the next six to 12 months are going so and therefore I would say this rather soft loan growth is something which we will see in the second half of 'twenty, three which is part of our which is part of our planning and all.

Also which goes into into the first half year of 'twenty four Nevertheless, and therefore again it is so important that we build the corporate bank on various engines and the other engines are.

The fee income our cash management mandates the card business I was just talking about before and that actually gives us all the confidence that even with the softening demand, which in my view is only temporary and will come back.

Can actually compensate that with our fee.

Fee business and that is the reason why we invested into that so much.

Got it thank you very much.

Okay.

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

Hi, Thank you.

Yes, two questions.

One just coming back on the asset quality.

I think the commentary about.

This may sound, a persistent deterioration, although there was some softening in German mid cap sector.

If I just kind of curious.

What gives you that confidence that it is now persistent deterioration.

And are you changing any behavior.

Credit that you provide.

And to that space.

And then secondly.

And just.

I guess just to help my understanding but intense.

Pass through rates.

Thanks for that.

And what other factors kind of driving the level of pass through rates. So I appreciate it.

Maybe that's conservative assumptions, but what are the things that you think will.

Drive.

It changes all kind of increase in pass through.

As we kind of got three time.

So just curious what are the factors that you think are influencing policy.

At the moment and since the second half the year. Thank you.

Yes.

Well. Thank you for your questions, let me start on the asset quality because I'm also.

A lot of client contact actually also in Germany, obviously.

Eight I really do believe and I've said, it again and again, but the resilience of the family owned companies and the mid cap companies in Germany.

Is bigger than a lot of people think.

If I think about how they actually improved from the 2008 global financial crisis. If you think about how they actually increased capital how they improve their working capital their liquidity. This is a completely different picture than it was 15 years ago, and I'm, saying it because they go with a different.

Buffer into the situation, which we have right now and that's also what we are seeing not only in our portfolio, but if you actually look at the at the overall statistics there is no such thing like.

A material deterioration.

In the credit worthiness of the German midcap companies now.

What is then specifically on us and and I do believe if I. Even go further back to Deutsche Bank's history in 2002, and 2003, when we actually had too many credit losses in that area. We completely changed the way we are managing credit risk also for medium and family owned corporate when it comes.

Concentration risks when it comes to differentiating between sort of say winners and potential companies, which are more challenged in a certain industries, we have a clear industry view and not only the the specific company view and by that I think our.

Our risk management to the individual review of corporate is simply superior one.

And I personally just went last week through the for instance, the OEM suppliers in Germany, if I look at the portfolio high Def how diversified we are.

From a rating point of view from a from a concentration risk point of view I E that there are no big concentration risk. If we have larger risk, it's actually with investment grade companies, who are actually themself diversified globally in that business than I do believe that there may be a little bit of Dts.

In that in that portfolio, but I can't see that.

We are coming into a situation, where I would see a material deterioration of our mid cap portfolio. So looking at their own resilience and the way we have risk manage that I'm confident that obviously your portfolio is in good health.

So on pass through it.

An interesting topic.

<unk> is going to be too early to tell so we'll sort of do those do the analysis of this cycle once it's over.

A few things one I think the dollar it's different by currency I think the dollar has started to converge.

Perhaps not to model, but to a place that looks to us to potentially be where things settle out a little bit better than the models would have expected.

<unk> is still it's still well behind.

What's driving that I think there is disciplined pricing discipline in the industry. I think there is an element of this cycle is different because of how sharp.

How steep and how fast it was I think there is an element that the banking industry had a long time of negative and.

<unk> is seeking to recover.

Some of that sort of lost structural profitability.

And I think client behavior is also a piece of the puzzle here.

Obviously there.

Specialty the more you go to wholesale money, they're smart enough to move their money with two places that it earns a higher yield and but then they also know they need to leave.

Certain amount of money with the banks and they understand.

That the remuneration of that for payments and operational purposes, and they understand that the remuneration for that money.

Is it doesn't follow the market because they are services attached to it. So I think that's a that's an understanding of the business model, that's maybe better than it has been in the past so lots of different drivers will need to unpack and time, but one that I think is overall a bullish sign for the industry of the value.

The banks frankly are providing to their clients.

Not just in corporate and middle market, but also in the retail space.

Thank you thank you Beth.

Well. Thank you very much for your interest and questions is there any further questions. You have please reach out to the Investor Relations Department and have a good day bye bye.

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

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