Q3 2023 Deutsche Bank AG Earnings Call

Ladies and gentlemen, thank you for sending by.

And found that the chorus call operator.

Welcome and thank you for joining the Deutsche Bank Q3, 2023 analyst conference call.

Throughout today's recorded presentation, all participants have been decent only mode.

They should be followed by a question and answer session.

If you would like to ask a question you May press. The Star then one on you touched on the telephone.

Please press the Star key followed by zero for operator assistance I would now like to turn the conference over to silica cheap at Deputy head of Investor Relations. Please go ahead met them.

Thank you for joining us for our third quarter 2023 results call as usual, our 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 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 a material with that let me hand over to Christian.

Thank you Luca and a warm welcome also from my side, it's a pleasure to be discussing our third quarter and nine months results with you today.

These results show our continued progress on the path to our targets in several respects.

First and foremost we continued to demonstrate strong earnings momentum.

We generated profit before tax of 5 billion euros in the first nine months after absorbing nearly 950 million euros and nonoperating costs incurred.

Including restructuring related to operational efficiency.

<unk> was 7%.

And would have been nearly 9% excluding these nonoperating costs and with bank levies are cautioned equally across the year.

This reflects progress on our path to meet our 2025 target of above 10%.

Second we are seeing progress across all three dimensions of accelerated execution of our global <unk> strategy, namely revenue growth operational efficiency and capital efficiency.

Strong operating performance is driven by business momentum through a well balanced business model.

Revenues in the first nine months were $22 2 billion.

Up 6% year on year, well above our target growth rate.

Private bank and asset management together attracted net inflows of 39 billion euros.

Alongside 18 billion of deposit growth at the group level in the third quarter.

We also continue to make progress on the second dimension of our global <unk> strategy.

Operational efficiency, we have progressed with existing measures and we have additional measures some flight.

And in terms of capital we are delivering on our distribution commitments.

We are on track to complete the 450 million share repurchase announced in July.

Thereby delivering total distributions across 2022, and 2023 of $1 75 billion.

We finished the third quarter with strong capital our CET one ratio was 13, 9%.

And in addition.

We have identified further capital opportunities and we now see scope to free up additional capital of 3 billion euros.

Enabling us to accelerate our strategy and boost returns.

But our original expectations from now through 2025 and beyond.

This gives us added potential to increase capital distributions to shareholders, while also deploying capital to support clients.

Before we move on to progress in our businesses.

Let me give you an update on the Postbank IP migration.

This was one of the largest IP migration projects in European banking.

I am Sandra, the Cool School Operator.

And it's essential to lay the foundation for more digital bank offering at Postbank.

Operator: Welcome and thank you for joining the Deutsche Bank Q3 2023 Analyst Conference Call. Throughout today's recorded presentation, all participants will be in decent only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press a star and one on your touch on telephone. Please press a star key, followed by zero for operator assistance. [inaudible] If you get started, let me remind you that the presentation contains forward-looking statements which may not develop as they currently expect. We therefore ask you to take notice of the precautionary warning at the end of our material.

We successfully migrated 50 billion records of 12 million postpaid customers power.

However, we saw unexpected levels of client inquiries, which led to backlogs.

We have put measures in place to work through these backlogs.

This not only includes an increase of temporary stuff, but also accelerating measures already underway such as implementation of automation and process optimization tools.

And I am pleased that we have reduced the operational backlog by about two thirds over the past weeks and we expect 70% of all impacted postbank customer processes to run against service level commitments again by end of October <unk>.

Including processes, which have been particular critical for our clients.

We are confident that the remainder will be completed in the fourth quarter.

Let me now turn to the key highlights of our resilient performance over the nine months on slide two.

Operator: With that, let me hand over to Christian.

Christian Sewing: Thank you, Silke, and a warm welcome also from my side. It's a pleasure to be discussing our third quarter and nine months results with you today. These results show our continued progress on the path to our targets in several respects. First and foremost, we continue to demonstrate strong earnings momentum. We generated profit before tax of five billion euros in the first nine months after absorbing nearly 950 million euros in non-operating costs, including restructuring related to operational efficiencies.

We delivered operating leverage of 4% on an adjusted basis in the first nine months with revenues up 6% and adjusted costs up 2%.

As a result, our pre provision profit for the first nine months was up 5% on year year on year to 6 billion.

In addition, we continue to reap the benefits of disciplined risk management and a high quality loan book.

<unk> for credit losses for the first nine months remained in line with our full year guidance at 28 basis points of average loans.

Christian Sewing: Our post-SEX ROTE was 7% and would have been nearly 9%, excluding these non-operating costs and with bank levies, apportioned equally across the year. This reflects progress on our path to meet our 2025 target of about 10%. Second, we are seeing progress across all three dimensions of accelerated execution of our global house bank strategy, namely revenue growth, operational efficiency and capital efficiency. Strong operating performance is driven by business momentum through a well-balanced business model.

Our balance sheet proved its resilience.

Posits rebounded by $18 billion to 611 billion in the third quarter.

We saw franchise momentum across the board.

And Furthermore, we strengthened our capital position.

Tier one ratio rose to 13, 9% during the quarter. Thanks, primarily to strong organic capital generation from earnings and the results of our capital optimization efforts.

This more than offset negative regulatory impact, mostly model changes and deduction for dividends and share buybacks.

Christian Sewing: Revenue is in the first nine months where 22.2 billion euros, up 6% year on year, well about our target growth rate. Private bank and asset management together attracted net inflows of 39 billion euros alongside 18 billion euros of deposit growth at the group level in the third quarter. We also continue to make progress on the second dimension of our global house bank strategy, operational efficiency. We have progressed with existing measures and we have additional measures in flight.

Let me now discuss the growth and balance across our business on slide three.

The corporate bank delivered to post tax <unk> of 17% in the past nine months.

Strong revenue growth combined with flat adjusted costs, driven by tight expense discipline produced operating leverage of 24%.

Our momentum with key clients this encouraging we.

We saw an increase of around 40% in incremental deals one with multinational corporate clients, which will drive future revenues.

Christian Sewing: In terms of capital, we are delivering on our distribution commitments. We are on track to complete the 450 million euros share repurchase announced in July, thereby delivering total distributions across 2022 and 2023 of 1.75 billion euros. We finished the third quarter with strong capital. Our CET1 ratio was 13.9%. And in addition, we have identified further capital opportunities and we now see scope to free up additional capital of 3 billion euros enabling us to accelerate our strategy and boost returns above our original expectations from now through 2025 and beyond. This gives us added potential to increase capital distributions to shareholders while also deploying capital to support clients.

Our client focus strong core capabilities and standing as an innovative thought leader in the market has been evidenced by the bankers transaction Banking Awards 2023, where Deutsche Bank has been voted best Bank for cash management as well as transaction bank of the year for Western Europe.

For the second consecutive year.

In the investment bank, we have a well diversified business portfolio.

Reported by our leading financing business, which contributed $2 2 billion or approximately 35% of FIC revenues year to date.

We have invested into our origination and advisory business, taking advantage of market opportunities, which are expected to drive future revenues.

Including through the acquisition of Numis, which we recently completed.

Christian Sewing: Before we move on to progress in our businesses, let me give you an update on the Post Bank IT migration. This was one of the largest IT migration projects in European banking and it's essential to lay the foundations for more digital bank offering at Post Bank. We successfully migrated 50 billion records of 12 million Post Bank customers. However, we saw unexpected levels of client inquiries which led to backlogs. We have put measures in place to work through these backlogs.

We are also seeing clear signs of recovery in the market led by debt origination.

Okay.

Turning to the private bank. The business grew revenues attracted inflows of 22 billion euros supported by new money campaigns.

And made further progress in streamlining our distribution channels.

And finally, we also grew volumes and asset management.

Christian Sewing: This not only includes an increase of temporary stuff but also accelerating measures already underway, such as implementation of automation and process optimization tools. And I'm pleased that we have reduced the operational backlog by about two thirds over the past weeks and we expect 17% of all impacted Post Bank customer processes to run against service level commitments again by end of October, including processes which have been particular critical for our clients. We are confident that the remainder would be completed in the fourth quarter.

Assets under management grew by 38 billion, including $17 billion of net inflows in.

In the first nine months of 2023, driven by strong inflows into passive including ex strike us.

The business launched 18, new products in the third quarter alone, including our first the medic Etfs in the U S market.

To sum up we delivered revenues of $28 5 billion in the last 12 months to September 30.

At over 6% versus the equivalent prior period.

We also see forward momentum from net inflows investments.

And business wins with key clients.

Our businesses are strongly complementary and well balanced.

Christian Sewing: Let me now turn to the key highlights of our resilient performance over the nine months on slide two. We delivered operating leverage of 4% on an adjusted basis in the first nine months with revenues up 6% and adjusted cost up 2%. As a result, our pre-provision profit for the first nine months was up 5% on year to 6 billion euro. In addition, we continue to reate the benefits of disciplined risk management and a high quality loan book.

All of this supports our conviction that we will continue to grow our franchise.

And exceed our revenue growth targets.

Now, let me turn to the progress we are making to accelerate the execution of our global hubs on strategy on slide four.

First on revenues with compound annual revenue growth of six 9% over 2021.

We are well on track to outperform on our revenue growth target of three 5% to four 5%.

Christian Sewing: Provision for credit losses for the first nine months remained in line with our full year guidance at 28 basis points of average loans. Our balance sheet proved its resilience deposits rebounded by 18 billion euros to 611 billion euros in the third quarter. We saw franchise momentum across the board. And furthermore, we strengthened our capital position. Our CET-1 ratio rose to 13.9% during the quarter. Thanks primarily to strong organic capital generation from earnings and the results of our capital optimization efforts. This more than offset negative regulatory impacts, mostly model changes and deductions for dividends and share buybacks.

And we will continue to benefit from the higher rate environment.

Which drive sustainable performance and the private bank and corporate bank.

We also made progress with our own initiatives.

That are expected to drive fee income.

We are confident that the new addition to the family Deutsche <unk> will enable us to take advantage of an expected pickup in corporate finance activity.

The 39 billion euros of net asset inflows in the nine months.

We are expect we expect the growth of our assets under management.

To drive fee income in future quarters.

Second on.

On operational efficiencies our existing savings measures are largely proceeding in line with or ahead of our plan.

Christian Sewing: Let me now discuss the gross and balance across our business on slight freight. The corporate bank delivered a post-text ROTE of 17% in the past nine months. Strong revenue gross, combined with flat adjusted costs, driven by tight expense discipline, produced operating leverage of 24%. Our momentum with key clients is encouraging. We saw an increase of around 40% in incremental deals, one with multinational corporate clients, which will drive future revenues. Our client focus strong core capabilities and standing as an innovative thought leader in the market has been evidenced by the bankers transaction banking awards 2023, where Deutsche Bank has been voted best bank for cash management as well as transaction bank of the year for Western Europe for the second consecutive year.

This includes streamlining of front to back processes and headcount management.

We're also optimizing our distribution network and we have reduced branches by more than 90 over the first nine months of 2023.

And this enabled us to keep our adjusted costs essentially flat compared to the prior year quarter, despite absorbing inflationary pressures and investments in growth in controls and.

And we continue to work on further measures.

And third turning to capital efficiencies as I mentioned earlier, we have made considerable progress on several fronts.

We have already delivered after two quarters around 10 billion euros of the 15 to 20 billion euros <unk> reduction we plan by the end of 2025.

Other measures are already ongoing mainly focused on hedging and reductions in SAP hurdle lending.

Christian Sewing: In the investment bank, we have a well diversified business portfolio, supported by our leading financing business, which contributed 2.2 billion euros or approximately 35% of thick revenues year to date. We have invested into our origination and advisory business, taking advantage of market opportunities, which are expected to drive future revenues, including through the acquisition of Numus, which we recently completed. We are also seeing clear signs of recovery in the market, led by debt origination.

And given progress to date.

We have identified additional opportunities to reduce <unk> further and this enables us to raise our target by 10 billion to 20 to 30 billion euros.

Let's now discuss what this means for us on slide five.

As just mentioned we will deliver a further <unk> reduction of around 10 billion euros from our capital optimization measures.

And on top of this we now anticipate a lower impact from Basel III by 10 to 15 billion.

Christian Sewing: Turning to the private bank, the business grew revenues, attracted inflows of 22 billion euros, supported by a new money campaign, and made further progress in streamlining our distribution channels. Finally, we also grew volumes in asset management. Essence under management grew by 38 billion euros, including 17 billion euros of net inflows in the first 9 months of 2023, driven by strong inflows into passive, including extractors. The business launched 18 new products in the third quarter alone, including our first thematic ETFs in the US market.

Which James will discuss in a moment.

Taken together these two sectors.

Give us potential to free up additional capital of around 3 billion through 2025.

We believe that our enhanced capital outlook will support accelerated and expanded distributions to shareholders.

While increasing our ability to invest in our platforms to boost growth and profitability.

We will deliver this by sharpening our business model around capital light and at scale businesses.

While applying a rigorous hurdle rates to our portfolios to drive returns.

As we look to 2025 and beyond we see clear opportunity to shift gears through a self reinforcing process of franchise growth operating leverage and increased returns.

Christian Sewing: To sum up, we delivered revenues of 28.5 billion euros in the last 12 months to September 30, up over 6% versus the equivalent prior period. We also see forward momentum from net inflows, investments, and business wins with key clients. Our businesses are strongly complimentary and well-balanced. All of this supports our conviction that we will continue to grow our franchise and exceed our revenue growth targets.

And to create more lasting value for our shareholders.

Our global House Bank growth with that let me hand over to James.

Thank you Christian let me start with a few key performance indicators on slide eight and place them in the context of our 2025 targets.

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

Christian Sewing: Now, let me turn to the progress we are making to accelerate the execution of our global health and strategy on slide 4. First on revenues with compound annual revenue growth of 6.9% over 2021, we are well on track to outperform on our revenue growth target of 3.5 to 4.5%. And we will continue to benefit from the higher rate environment which drives sustainable performance in the private bank and corporate bank. We also made progress with our own initiatives that are expected to drive fee income.

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

Our strong revenue growth combined with cost management led to a two percentage point improvement in the cost income ratio to 73% and our return on tangible equity was 7% in the first nine months of 2023.

These ratios would've improved by almost 5% and one eight percentage points, if adjusted for higher nonoperating costs, and if bank levies, where a portion of the equally across the year.

Our capital position remains strong with CET, one ratio at 13, 9% this quarter after absorbing regulatory headwinds and the impact of the share repurchase.

Christian Sewing: We are confident that the new addition to the family, Deutsche Numis will enable us to take added advantage of an expected pickup in corporate finance activity. With 39 billion Euros of net asset inflows in the 9 months, we expect the growth of our assets under management to drive fee income in future quarters. Second, on operational efficiencies, our existing savings measures are largely proceeding in line with or ahead of our plan. This includes streamlining of front-to-back processes and headcount management.

Our liquidity metrics also remained strong LCR was 132% in line with our target of around 130% and the net stable funding ratio was 121%.

In short our performance in the period reaffirms, our resilience and our confidence in reaching or exceeding our 2025 targets.

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

Group revenues were $7 1 billion euros up 3% on the third quarter of 2022 or 6% excluding specific items.

Noninterest expenses were $5 2 billion euros up 4% year on year, mainly driven by higher nonoperating expenses.

Christian Sewing: We are also optimizing our distribution network and we have reduced branches by more than 90 over the first 9 months of 2023. And this enabled us to keep our adjusted costs essentially flat compared to the prior year quarter despite absorbing inflationary pressures and investments in growth and controls. And we continue to work on further measures. And third, turning to capital efficiencies, as I mentioned earlier, we have made considerable progress on several fronts.

Non operating expenses this quarter included litigation charges of 105 million euros.

And 94 million euros of restructuring and severance provisions.

Adjusted costs increased 2% year on year, which I will discuss in more detail shortly.

Provision for credit losses was 245 million euros, or 20 basis points of average loans.

We generated a profit before tax of $1 7 billion euros up 7% year on year.

Christian Sewing: We have already delivered, after two quarters, around 10 billion Euros of the 15 to 20 billion Euros RWA reduction we planned by the end of 2025. Other measures are already ongoing, mainly focused on hedging and reductions in sub-hurtle lending. And given progress to date, we have identified additional opportunities to reduce RWA further and this enables us to raise our target by 10 billion to 20 to 30 billion Euros.

Net profit of $1 2 billion euros was down 3% year on year, reflecting an effective tax rate of 30% compared to 23% in the prior year quarter.

Our cost income ratio was 72, 4% and our post tax return on average tangible shareholders equity was seven 3% in the quarter.

Diluted earnings per share was <unk> 56 in the third quarter and tangible book value per share was <unk> 27 euros and <unk> 74.

<unk>, 5% year on year.

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

Christian Sewing: Let's now discuss what this means for us on slide 5. As just mentioned, we will deliver a further RWA reduction of around 10 billion Euros from our capital optimization measures. And on top of this, we now anticipate a lower impact from Basel 3 by 10 to 15 billion Euros, which James will discuss in a moment. Taken together, these two factors give us potential to free up additional capital of around 3 billion Euros through 2025.

Average interest, earning assets increased by 6 billion euros quarter on quarter, driven by the increase in our deposit levels led by the corporate bank.

Net interest margin in the corporate bank declined by approximately 25 basis points due to lower lending income and a higher cost of liquidity reserves. However, net interest income on our corporate deposit books remained stable over the quarter.

Net interest margin and the private bank remained broadly stable in the third quarter.

Overall, our deposit betas continue to outperform our models.

At the group level NIM is down 12 basis points of which approximately five basis points relates to an accounting impact in <unk> similar to the first quarter and the balance relates to the NIM reduction in the corporate bank.

Christian Sewing: We believe that our enhanced capital outlook will support accelerated and expanded distributions to shareholders. We will deliver this by sharpening our business model around capital light and at-scale businesses, while applying rigorous hurdle rates to our portfolios to drive returns. As we look to 2025 and beyond, we see clear opportunity to shift gears through a self-reinforcing process of franchise growth, operating leverage and increased returns, and to create more lasting value for our shareholders as our global house bank growth.

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

Adjusted costs, excluding banks bank levies were $4 96 billion euros in line with the prior quarter and up 2% year on year.

The increase was driven by inflationary pressures on growing investments in controls and business growth, which were partially offset by active cost management measures.

All cost categories, except for other costs were broadly flat to the prior year quarter.

The variance in other non compensation costs includes the non recurrence of benefits in the prior year quarter, which related to deposit protection cost as well as movements in operational taxes.

James Moltke: Thank you, Christian. Let me start with a few key performance indicators on slide 8 and place them in the context of our 2025 targets. Christian outlined the business momentum and our well-balanced revenue mix, which resulted in revenue growth of nearly 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 targets. Our strong revenue growth combined with cost management led to a 2% percentage point improvement in the cost income ratio to 73%, and our return on tangible equity was 7% in the first 9 months of 2023.

In addition, we see a normalization of marketing spend and we continue to invest into talent.

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

Provision for credit losses in the third quarter was 245 million euros equivalent to 20 basis points of average loans.

The decline compared to the previous quarter reflected a reversal of approximately 100 million euros of stage, one and two provisions driven by model changes and improved macroeconomic forecasts, mainly impacting the investment bank and corporate bank.

Stage three provisions of 346 million euros were broadly in line with the previous quarter.

James Moltke: These ratios would have improved by almost 5% and 1.8% of points if adjusted for higher non-operating costs and if bank levies were portioned equally across the year. Our capital position remains strong with CET1 ratio at 13.9% this quarter after absorbing regulatory headwinds and the impact of the share purchase. Our liquidity metrics also remain strong. LCR was 132% in line with our target of around 130%, and the net stable funding ratio was 121%.

Provisions this quarter were driven by the private bank and investment bank, while the corporate bank benefited from a lower level of impairments.

James Moltke: In short, our performance in the period reaffirms our resilience and our confidence in reaching or exceeding our 2025 targets.

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

Before we move to performance in our businesses, let me turn to capital on the next two slides starting with slide 12.

Our third quarter common equity tier one ratio came in at 13, 9% and 19 basis point increase compared to the previous quarter.

Regulatory changes principally from the go live of now approved wholesale and retail models resulted in a decline of 38 basis points slightly below the low end of our previous guidance.

James Moltke: With that, let me turn to the third quarter highlights on slide 8. Group revenues were 7.1 billion euros, up 3% on the third quarter of 2022, or 6% excluding specific items. Non-interest expenses were 5.2 billion euros, up 4% year on year, mainly driven by higher non-operating expenses. Non-operating expenses this quarter included litigation charges of 105 million euros, and 94 million euros of restructuring and severance provisions. Adjusted costs increased 2% year on year, which I will discuss in more detail shortly.

Optimization initiatives generated 27 basis points from lower credit risk <unk>, principally reflecting improvements in our data and certain process changes.

Further 19 basis points of ratio support came from diligent risk management in our businesses.

Finally, 11 basis point increase came from strong organic capital generation that is net income offset by deductions for the share buyback dividends and 81 coupons.

Building on Christian's earlier comments, let me give updated guidance on our capital outlook on slide 13.

James Moltke: Provision for credit losses was 245 million euros, or 20 basis points of average loans. We generated a profit before tax of 1.7 billion euros, up 7% year on year. Net profit of 1.2 billion euros was down 3% year on year, reflecting an effective tax rate of 30% compared to 23% in the prior year quarter. Our cost in-com ratio was 72.4%, and our post-tax return on average tangible shareholders equity was 7.3% in the- in the third quarter. Deluded earnings per share was 56 cents in the third quarter and tangible book value per share with 27 euros and 74 cents, up 5% year on year.

As mentioned regulatory changes led to a reduction of 38 basis points and our common equity tier one ratio.

With the go live of the now approved wholesale and retail models. The ECB has completed the review of approximately 85% of the relevant portfolio and we expect only a limited ratio impact from the remainder.

Next we announced in the first quarter of this year, our targeted 15% to 20 billion <unk> reduction by the end of 2025 through several capital optimization initiatives.

We accelerated some of the anticipated data and process optimization initiatives into the third quarter, which brings the cumulative RW <unk> reductions to 10 billion euros to date.

James Moltke: Let me now turn to some of the drivers of these results, starting with interest revenues on slide 9. The bank declined by approximately 25 basis points due to lower lending income and a higher cost of liquidity reserves. However, net interest income on the corporate deposit books remains stable over the quarter. An interest margin in the private bank remained broadly stable in the third quarter. Overall, our deposit betas continue to outperform our models.

The work we have done over the past several months gives us the confidence to increase the original target by 10 billion euros to $25 to 30 billion euros.

Lastly, let me touch on our Basel III estimates the.

The latest review of our impact assessments indicates an <unk> increase of only around 15 billion euros compared to the 25% to 30 billion euros, we have previously guided.

The majority of the improvement comes from our market risk and credit valuation adjustment Fr TB program, the impact estimates for which matured significantly.

James Moltke: At the group level, name is down 12 basis points of which approximately 5 basis points relates to an accounting impact in C&O. Similar to the first quarter and the balance relates to the nim reduction in the corporate bank.

Credit risk estimates are still under review and remain dependent on the final C. R. R. Three legislative taxed.

Overall, let me highlight that current estimates are based on our interpretation of current draft regulation and therefore remains subject to change.

James Moltke: With that, let's turn to adjusted costs on slide 10. Adjusted costs excluding banks left bank levies were 4.96 billion euros in line with the prior quarter and up 2% year on year. The increase is driven by inflationary pressures, on growing investments in controls and business growth, which were partially upset by active cost management measures. All cost categories, except for other costs, were broadly flat to the prior year quarter. The variance in other non compensation costs includes the non recurrence of benefits in the prior year quarter, which related to deposit protection cost, as well as movements and operational taxes. In addition, we see a normalization of marketing spend and we continue to invest into talent.

Cumulatively. These changes in our outlook are significant and support Christians earlier statements relating to our enhanced ability to execute our strategy and improve our return profile.

Let's now turn to performance in our businesses, starting with the corporate bank on slide 15.

Corporate bank revenues in the third quarter were $1 9 billion euros, 21% higher year on year, driven by an improved interest rate environment and pricing discipline with double digit growth across all client segments.

Sequentially revenues decreased slightly due to lower net interest income from lending and a higher cost of liquidity reserves, however, pricing discipline on our deposit businesses remained exceptionally strong with limited pass through and higher business volumes, resulting in strong deposit income.

James Moltke: Let's now turn to provision for credit losses on slide 11. Provision for credit losses in the third quarter with 245 million euros equivalent to 20 basis points of average loans. The decline compared to the previous quarter reflected a reversal of approximately 100 million euros of stage 1 and 2 provisions driven by model changes and improved macroeconomic forecasts, mainly impacting the investment bank and corporate bank. Stage 3 provisions of 346 million euros were broadly in line with the previous quarter.

We continue to anticipate a normalization of our deposit revenues over the coming quarters, which we expect to be partially offset by growing non interest rate sensitive revenue streams, including commission and fees.

Loan volume in the corporate Bank was 117 billion euros down by 12 billion euros compared to the prior year quarter, but 1 billion euros higher compared to the low point in the prior quarter.

Deposits were 286 billion euros 15 billion euros higher than in the second quarter with growth in both overnight and term balances in euro and U S dollar and essentially flat compared to the prior year quarter. Despite the market events in March.

James Moltke: Provision this quarter were driven by the private bank and investment bank, while the corporate bank benefited from a lower level of impairments. For the full year, we continue to expect provisions to land at the upper end of our guidance range of 25 to 30 basis points of average loans.

Provision for credit losses was 11 million euros or four basis points of average loans.

James Moltke: Before we move to performance in our businesses, let me turn to capital on the next two slides starting with slide 12. Our third quarter common equity tier 1 ratio came in at 13.9%, a 19 basis point increase compared to the previous quarter. Regulatory changes principally from the go live of now approved wholesale and retail models resulted in a decline of 38 basis points slightly below the low end of our previous guidance.

The decrease compared to the prior quarter reflects a lower number of impairments in the third quarter and further benefits from stage three recoveries as well as model changes impacting stages, one and two performing loans.

Noninterest expenses were $1 1 billion euros, a decrease of 2% year on year, driven by FX movements sequentially expenses decreased by 7% predominantly driven by the non repetition of litigation charges.

Profit before tax was 805 million euros in the quarter doubling year on year and driving the post tax return on tangible equity to 18, 3% with a cost income ratio at 57%.

James Moltke: Optimization initiatives generated 27 basis points from lower credit risk RWA, principally reflecting improvements in our data and certain process, of changes. Further 19 basis points of ratio support came from diligent risk management in our businesses. Finally, 11 basis point increase came from strong organic capital generation, that is net income offset by deductions for the share buyback, dividends and AT-1 coupons.

I'll now turn to the investment bank on slide 16.

Revenues for the third quarter were essentially flat, including excluding the impact of DVA and 4% lower year on year on a reported basis.

Fixed sales and trading decreased by 12% against what was a strong prior year quarter.

James Moltke: Building on Christians earlier comments, let me give updated guidance on our capital outlook on slide 13. As mentioned, regulatory changes led to a reduction of 38 basis points in our common equity tier 1 ratio. With the go live of the now approved wholesale and retail models, the ECB has completed the review of approximately 85% of the relevant portfolio, and we expect only a limited ratio impact from the remainder. Next, we announced in the first quarter of this year a targeted 15 to 20 billion euro RWA reduction by the end of 2025 through several capital misoptimization initiatives.

Rates foreign exchange and American emerging markets revenues were all lower compared to a very strong prior year quarter and reflected a less volatile market environment.

Financing revenues remained strong on an absolute basis slow down year on year due to the non repeat of a material episodic item in the prior year quarter.

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

James Moltke: We accelerated some of the anticipated data and process optimization initiatives into the third quarter, which brings the cumulative RWA reductions to 10 billion euros to date. The work we have done over the past several months gives us the confidence to increase the original target by 10 billion euros to 25 to 30 billion euros.

Moving to origination and advisory revenues were up over threefold materially driven by the non recurrence of leveraged lending markdowns in the prior year. However, excluding these markdowns origination and advisory performance was still significantly higher and outperformed the industry fee pool.

Debt origination revenues were significantly higher benefiting from the non repeat of the aforementioned markdowns and improved <unk> performance, which saw a partial recovery in both the industry fee pool, and our market share versus the prior year.

James Moltke: Lastly, let me touch on our Basel III estimates. The latest review of our impact assessments indicates an RWA increase of only around 15 billion euros, compared to the 25 to 30 billion euros we have previously guided. The majority of the improvement comes from our market risk and credit valuation adjustment FRTB program, the impact estimates for which matured significantly. Credit risk estimates are still under review and remain dependent on the final CRR3 legislative text.

Advisory revenues were significantly lower reflecting a decline in the industry fee pool.

However, as previously stated with signs that deal activity is starting to recover we expect our investments in origination and advisory to result in a significant improvement in performance into 2024.

Noninterest expenses and adjusted costs were both essentially flat year on year.

Risk weighted assets were broadly stable year on year.

Leverage decreased year on year, driven by the impact of foreign exchange movements.

James Moltke: Overall, let me highlight that current estimates are based on our interpretation of current draft regulation and therefore remain subject to change. Cumulatively, these changes in our outlook are significant and support Christian's earlier statements relating to our enhanced ability to execute our strategy and improve our return profile.

Provision for credit losses was 63 million euros, or 25 basis points of average loans the.

The decrease versus the prior year was primarily driven by model changes affecting stage, one and two performing loans, partially offsetting stage three impairments from commercial real estate.

Turning to the private bank on slide 17.

James Moltke: Let's now turn to performance in our businesses starting with the corporate bank on slide 15. Corporate bank revenues in the third quarter were 1.9 billion euros, 21% higher year on year driven by an improved interest rate environment and pricing discipline. With double digit growth across all client segments. Sequentially, revenues decreased slightly due to lower net interest income from lending and a higher cost of liquidity reserves. However, pricing discipline on our deposit businesses remained exceptionally strong with limited pass through and higher business volumes, resulting in strong deposit income.

Revenues were up 3% year on year or 9% if adjusted for specific items in the prior year period, which related to Sal Oppenheim workout activities.

Net interest income was essentially flat quarter on quarter and higher deposit revenues in the third quarter were mainly offset by higher mortgage hedging costs. Following the postbank transition, which were held centrally before.

And the private bank, Germany revenues increased by 16% due to higher deposit revenues.

The decline in fee income, mainly reflected changes in contractual conditions impacting insurance products.

James Moltke: We continue to anticipate a normalization of our deposit revenues over the coming quarters, which we expect to be partially offset by growing non-interest rate-sensitive revenues streams, including commission and fees. Loan volume in the corporate bank was 117 billion euros, down by 12 billion euros compared to the prior year quarter, but 1 billion euros higher compared to the low point in the prior quarter. Schroeder. The posits were 286 billion euros, 15 billion euros higher than in the second quarter, with growth in both overnight and term balances in euro and US dollar and essentially flat compared to the prior year quarter, despite the market events in March.

Reported revenues in the international private bank were down 13% or up 2% year on year, if adjusted for the non recurrence of both specific revenue items in the prior year quarter and revenues from the divested financial advisory business in Italy, as well as FX impacts.

Both was driven by deposit products in Europe, which were in part offset by continued client deleveraging in Asia.

Revenues in wealth management and bank for entrepreneurs declined by 21% or 3% if adjusted for the aforementioned effects.

Revenues in premium banking increased by 14% supported by higher interest rates.

James Moltke: Provision for credit losses was 11 million euros or four basis points of average loans. The decrease compared to the prior quarter reflects a lower number of impairments in the third quarter and further benefits from stage three recoveries, as well as model changes impacting stages one and two performing loans. Non-interest expenses were 1.1 billion euros, a decrease of 2% year on year driven by FX movements. Sequentially, expenses decreased by 7%, predominantly driven by the non-repetition of litigation charges. Profit before tax was 805 million euros in the quarter, doubling year on year and driving the post tax return on tangible equity to 18.3% with the cost income ratio at 57%.

Turning to costs the increase of noninterest expenses, mainly reflects continued higher internal service cost allocations, including investments in controls as well as restructuring preserve provisions and severance related to strategy execution.

The prior year period included a benefit from deposit protection costs.

Provision for credit losses was 174 million euros, or 27 basis points of average loans in the quarter and included an impact of approximately 25 million euros driven by the temporary operational backlog at Postbank.

Overall credit quality remained stable across our portfolios.

The private bank attracted net inflows of 9 billion euros in the quarter with 6 billion euros in AUM deposits and 3 billion euros and investment products.

James Moltke: I'll now turn to the investment bank on slide 16. Revenue for the third quarter were essentially a flat, excluding the impact of DVA and 4% lower year on year on a reported basis. Fixales and trading decreased by 12% against what was a strong prior year quarter. Rates, foreign exchange and emerging markets revenues were all lower compared to a very strong prior year quarter and reflected less volatile market environment. But answering revenues remained strong on an absolute basis, though down year on year, due to the non-repeat of a material episodic item in the prior year quarter.

Let me continue with asset management on slide 18.

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

Assets under management remained stable at 860 billion euros in the quarter supported by net inflows and positive FX effects, largely offset by 13 billion euros of market depreciation.

Net inflows were primarily in passive continuing the momentum in our X trackers products, we've seen throughout the year.

As you will have seen in their results dws saw a decline in revenues compared to the prior year, However, with slightly lower noninterest expenses profit before tax was essentially flat.

James Moltke: Credit trading revenues were significantly higher driven by ongoing improvements in the flow business and continued strong performance in distress. Moving to origination and advisory, revenues were up over a threefold materially driven by the non-recurrents of leverage lending markdowns in the prior year. However, excluding these markdowns, origination and advisory performance was still significantly higher and outperformed the industry fee pool. That origination revenues were significantly higher benefiting from the non-repeat of the aforementioned markdowns and improved LBCM performance, which saw a partial recovery in both the industry fee pool and our market share versus the prior year. Advisory revenues were significantly lower reflecting a decline in the industry fee pool.

This develop and principally reflected a 6% decline in management fees to 589 million euros due to prior year declines in assets under management, driven by net outflows, excluding cash and market developments in 2022 as well as FX movements.

Performance fees declined by 19 million euros.

Other revenues declined due to lower mark to market valuations of co investments, partly offset by favorable outcome of deferred compensation hedges.

Noninterest expenses in adjusted costs were both 8% lower than the prior year.

James Moltke: However, as previously stated, with signs that deal activity is starting to recover, we expect our investments in origination and advisory to result in a significant improvement in performance into 2024. Non-interest expenses and adjusted costs were both essentially flat year on year. Risk weighted assets were broadly stable year on year. Leverage decreased year on year driven by the impact of foreign exchange movements. Provision for credit losses was 63 million euros or 25 basis points of average loans. The decrease versus the prior year was primarily driven by model changes affecting stage one and two performing loans, partially offsetting stage three impairments from commercial real estate.

Compensation costs were lower driven by a significant decline in carried interest expense, partially due to lower performance fees in the period.

Non compensation costs were also lower reflecting effective cost reductions across almost all cost categories.

Profit before tax of 109 million euros in the quarter was down 18% compared to the prior year, reflecting revenue performance.

The cost income ratio for the quarter was 75% and return on tangible equity was 13%.

Moving to corporate and other on slide 19 corporate.

Corporate and other reported a pretax loss of 195 million euros this quarter versus a pre tax loss of 28 million euros in the third quarter of 2022.

James Moltke: Turning to the private bank on slide seven. 13. Revenues were up 3% year on year or 9% if adjusted for specific items in the prior year period, which related to cell up and high workout activities. Net interest income was essentially flat quarter on quarter, and higher deposit revenues in the third quarter were mainly offset by higher mortgage hedging costs, following the post bank transition, which were held centrally before. In the private bank Germany, revenues increased by 16% due to high deposit revenues, a decline in fee income mainly reflected changes in contractual conditions impacting insurance products.

This year on year change was driven in part by valuation and timing differences, which were positive 158 million euros in this quarter versus 199 million euros in the prior year quarter.

The <unk> results in this quarter was driven in particular by the reversal of prior period losses.

Expenses associated with shareholder activities were 170 million euros in the quarter compared to 144 million euros in the prior year quarter.

And the pretax loss associated with legacy portfolio was negative 137 million euros, driven primarily by litigation charges.

Turning to the group outlook for the full year on slide 20.

James Moltke: Reported revenues in the international private bank were down 13% or up 2% year on year if adjusted for the non recurrence of both specific revenue items in the prior year quarter and revenues from the group, which were in part offset by continued client deleverging in Asia. Revenues in wealth management and bank for entrepreneurs declined by 21% or 3% if adjusted for the aforementioned effects. Revenues in premium banking increased by 14% supported by higher interest rates.

We remain focused on delivering positive operating leverage as we drive our revenue growth initiatives and execute our cost reduction measures.

We now expect full year 2023 revenues to be around 29 billion euros.

Our noninterest expenses will be slightly higher reflecting a series of nonoperating items. However, we expect our adjusted costs to remain essentially flat in line with our guidance.

Provision for credit losses is expected at the upper end of the 25 to 30 basis points range of average loans for the full year.

Thinking ahead, our fourth quarter earnings are expected to be impacted by a number of one off items, both positive and negative.

James Moltke: Turning to costs, the increase of non interest expenses mainly reflects continued higher internal service cost allocations, including investments in controls, as well as restructuring preserve provisions and severance related to strategy execution. The prior year period included a benefit from deposit protection costs. Provision for credit losses was 174 million euros or 27 basis points of average loans in the quarter and included an impact of approximately 25 million euros driven by the temporary operational backlog at post bank. Overall, credit quality remained stable across our portfolios. The private bank attracted net inflows of 9 billion euros in the quarter with 6 billion euros in AUM deposits and 3 billion euros in investment products.

Including an accounting impairment of the goodwill from the numerous acquisition.

Potential restitution payment from a national resolution funds further restructuring and severance as well as year end tax adjustments.

And finally as both Christian and I have mentioned earlier, our capital outlook is substantially improved by further <unk> reductions, we have identified and we plan to engage with supervisors on the scope for further additional distributions to shareholders.

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

Thank you very much operator, we are ready to take questions.

Ladies and gentlemen at this time, we will begin the question and answer session.

Anyone who wishes to ask a question may present star and one on the touch tone telephone.

James Moltke: Let me continue with asset management on slide 18. My usual reminder, the asset management segment includes certain items that are not part of the DWS standalone financials. Assets under management remain stable at 860 billion euros in the quarter supported by net inflows and positive effects, largely offset by 13 billion euros of market depreciation. Net inflows were primarily impassive, continuing the momentum in our extractors products we've seen throughout the year. As you will have seen in their results, DWS saw decline in revenues compared to the prior year.

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

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Please lift the handset before making your selection.

Anyone with a question May press Star one at this time.

The first question comes from Nicolas Guyon from Kepler. Please go ahead.

Yes. Good morning, Thanks for taking my questions I have two please on capital.

The first one is on your increased capital efficiencies could you give us a bit of more color on how you managed to increase your reduction targets by 10 billion euros and also regarding the 3 billion euros of potential additional freed up capital through 2025, what does it mean for your capital distribution and Youll targeted 8 billion shoulders distribution.

James Moltke: However, with slightly lower non-interest expenses, profit before tax was essentially flat. This development principally reflected a 6% decline in management fees to 589 million euros due to prior year declines in assets under management driven by net outflows excluding cash and market developments in 2022. As well as FX movements. Performance fees declined by 19 million euros. Euros, Other revenues declined due to lower market market valuations of co-investments, partly offset by favorable outcome of deferred compensation hedges.

Should we expect a meaningful increase as soon as next year.

And then on the regulatory capital outlook NV improved <unk> outlook is the new guidance related to the input floor and also do you have any change regarding your output full guidance. Thank you.

Well good morning, and thank you Nico for your question, let me take the first part and then I'll hand over to James.

Let me start that this is a very important and I think very good day for Deutsche Bank, because I think what we show now also on the capital side is nothing else than further evidence that our long term strategy.

James Moltke: Non-interest expenses and adjusted costs were both 8% lower than the prior year. Compensation costs were lower, driven by a significant decline in carried interest expense, partially due to lower performance fees in the period. Non-convitation costs were also lower, reflecting effective cost reductions across almost all cost categories. Profit before tax of 109 million euros in the quarter was down 18% compared to the prior year, reflecting revenue performance. The cost income ratio for the quarter was 75% and return on tangible equity was 13%.

And obviously the diligent execution around it.

Is paying off more and more and obviously more to come.

To your capital distribution question and how we did arrive.

It's a good day for shareholders with material progress on our capital measures.

And scope to freeing up additional capital of dimension 3 billion euros from now through 2025.

And as both James and I said in our prepared remarks, we see the outlook improvement regarding capital efficiency and Basel four is providing us.

James Moltke: Moving to corporate another on slide 19. Corporate another reported a pre-tax loss of 195 million euros this quarter versus a pre-tax loss of 28 million euros in the third quarter of 2022. This year on year change was driven in part by valuation and timing differences, which were positive 158 million euros in this quarter versus 199 million euros in the prior year quarter. The V&T result in this quarter was driven in particular by the reversal of prior period losses.

With the opportunity to both accelerate and expand our distributions lightpath.

Monks other things it gives us the confidence to go beyond our earlier expectations in terms of buyback potential already next year.

The better than expected third quarter EBITDA optimization.

And the improved outlook.

Are both relatively recent changes and hence and hope you understand that it is a bit too early to provide exact details of how and when we will be in a position to accelerate exactly this distribution posh.

James Moltke: Expenses associated with shareholder activities were 170 million euros in the quarter compared to 144 million euros in the prior year quarter. And the pre-tax loss associated with legacy portfolios was negative 137 million euros driven primarily by litigation charges.

And Niko as you would expect.

We are obviously in discussions with our supervisor on the revised capital plan.

James Moltke: Turning to the group outlook for the full year on slide 20. We remain focused on delivering positive operating leverage as we drive our revenue growth initiatives and execute our cost reduction measures. We now expect full year 2023 revenues to be around 29 million euros. Our non-interest expenses will be slightly higher reflecting a series of non-operating items. However, we expect our adjusted costs to remain essentially flat in line with our guidance. Provision for credit losses is expected at the upper end of the 25 to 30 basis points range of average loans for the full year.

As we have laid down, though a very clear path for dividend I E. A 50% increase per year. The next two years extra.

Extra distributions would come in form of share buybacks.

And subject to further dialogue with our supervisors, we would expect a significant proportion of the incremental capital to be distributed to our shareholders.

And for instance, one way to think about this trajectory nickel from here is that it gives us the opportunity to move to a 50% payout ratio sooner than we initially expected.

So I think at this point, we can safely say that shareholder distributions is a key priority for Deutsche Bank and for more details I'll hand over to James.

James Moltke: Thinking ahead, our fourth quarter earnings are expected to be impacted by a number of one-off items both positive and negative, including an accounting impairment of the goodwill from the numerous acquisition, a potential restitution payment from a national resolution fund, further restructuring and severance, as well as year end tax adjustments. And finally, as both Christian and I have mentioned earlier, our capital outlook is substantially improved by further RWA reductions. We have identified and we plan to engage with supervisors on the scope for further additional distributions to shareholders.

Sure. Thank you Christian and Nicola. Thank you for the question so to give you a little bit of color on what is the optimization being that we've accomplished so far.

You've seen us do three securitizations over the past couple of quarters, including one on the Italian consumer portfolio in this quarter and so that's been sort of quicker and more effective than we might've expected.

And then when we talk about data and process improvements.

Operator: With that, let me hand back to Silke and we look forward to your questions. Thank you very much operator.

The data is quite powerful and by the way. This is where also we are getting the postbank portfolio onto the same systems as DB is helpful. Because we are able to apply for example, SME support factor is in for support factors on the portfolio.

Operator: We are ready for to take you to the questions.

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

In a way that we couldnt in the prior landscape. So it's enhancing the data enhancing the way that we that that our portfolio. If you like interacts with the rules.

Operator: Thank you. If you're using a speaker equipment today, please lift the handsets before making your selection. Anyone who has a question, may press star on one at this time.

We think there is still a distance to go with that and although we've worked on it for years as rules change.

Nicolas Payen: The first question comes from Nicola Payen from Kepershubru. Please go ahead. Yes, good morning. Thanks for taking my questions. I have two please on capital. The first one is on your increased capital efficiency. Could you give us a bit more color on how you manage to increase your reduction targets by 10 billion euros? And also regarding the 3 billion euros of potential additional freedom capital to 25, what does it mean for your capital distribution and your targeted 8 billion shoulders distribution?

One one always finds additional optimization measures. So that's been that's been very encouraging.

If I think about.

Your question about input outflows put floors on Basel three we've really been focused on the on the 125 impact and.

As <unk> seen dramatic improvement based on better visibility into the <unk> models as we mentioned.

Nicolas Payen: Should we expect a meaningful increase as soon as next year? And then on the regulatory capital outlook and the improved battery outlook is the new guidance related to the input floor? And also do you have any chance regarding your output floor guidance? Thank you.

At this point.

The output floor is still some years away so I think of that as a.

As biting maybe in 2030, if you want guidance, we would probably stick with the 30 billion impact at that point.

But to be fair, we haven't really done. This next round of mitigation in terms of portfolio shifts and what have you.

Christian Sewing: Well, good morning, and thank you, Nico, for your question. Let me take the first part and then I hand over to James. Let me start that this is a very important and I think very good day for Deutsche Bank, because I think what we show now also on the capital side is nothing else than further evidence that our long term strategy and obviously the diligent execution around it is paying off more and more and obviously more to come.

So that's still that's still a long way out.

Hopefully that helps Nikola on your on your questions.

That's great that's.

That's great. Thank you very much.

The next question comes from Adam develop from Mediobanca. Please go ahead.

Good morning. Thank you for the questions I have one on capital and one on revenues I. Appreciate you don't want to front run exactly what we're gonna look.

Christian Sewing: To your capital distribution question and how we did the rise, yes, it's a good day for shareholders with material progress on our capital measures and scope to freeing up additional capital of the mentioned 3 billion euros from now through 2025. And as both James and I said in our prepared remark, we see the outlook improvements regarding capital efficiency and Basel for us providing us with the opportunity to both accelerate and expand our distribution light pass amongst other things.

Good luck in the short term, but you won't be types. This morning discussing higher payout next year then in your original planning can you confirm that our original plan was the plus 50% on the buyback to match.

The dividend increase.

Can you also discuss whether we can look at more regular capital return.

Over the next few years, rather than having to wait for full year results each year.

Secondly on revenues NII to any step back in corporate Bank private bank. This.

Quarter, that's kind of guided to but can you give us some more color about the shape from here and use that as a reference.

Christian Sewing: It gives us the confidence to go beyond our earlier expectations in terms of buyback potential already next year. The better than expected third quarter RWA optimization and the improved outlook are both relatively recent changes and hence and hope you understand that it is a bit too early to provide exact details of how and when we will be in a position to accelerate exactly this distribution pass. And Nico, as you would expect, we are obviously in discussions with our supervisor on the revised capital plan.

So your confidence in revenue growth, particularly into 2024.

Yes, Thank you Adam.

And thanks for your participation look let me start on on briefly again on the capital question.

And again.

I think it's good order to discuss all the details with the regular with our regulator first but I think you are right the 50% dividend posh we all.

All we said and we also said that this is quite a good guidance for our past guidance on the.

Christian Sewing: As we have laid down though, a very clear pass for dividends, i.e, a 50% increase per year, the next two years, extra distributions would come in form of share buybacks. And subject to further dialogue with our supervisors, we would expect a significant proportion of the incremental capital to be distributed to our shareholders. And for instance, one way to think about this trajectory, Nico, from here is that it gives us the opportunity to move to a 50% payout ratio sooner than we initially expected. So I think at this point we can safely say that shareholder distributions if you keep priority for Deutsche Bank and for more details I hand over to James.

On the share buybacks so.

In this regard I think you have a good assumption and as I, just said I think with the scope now of the additional $3 billion.

Obviously, we would like and we intent then to start increasing the share buyback already in 2024 beyond that what we already communicated.

In our previous correspondence, so clearly an acceleration and expansion that's our goal.

That with focus now this is our focus in our discussions with the regulators going forward with regard to the revenues I will hand over to James for a more detailed in particular when it comes to NII, but also here I think very good messages because the clear jump off point for 2024 is now the 29 billion.

James Moltke: Sure, thank you, Christian and Nicola, thank you for the question. So to give you a little bit of color on, you know, what is the optimization being that we've accomplished so far. You know, you've seen us do three securitizations over the past couple of quarters, including one on the Italian Consumer Portfolio in this quarter. And so that's been sort of quicker and more effective than we might have expected. And then, you know, when we talk about data and process improvements, you know, the data is quite powerful.

In 2023.

<unk> seen a good development in the third quarter again, a very stable development also by the way on the NII side in both corporate bank and private bank, we see that momentum going forward into Q4, and therefore, there is a high confidence in delivering a 29 billion number four.

For the full year 2023.

On top of that and I think we referred to that in our previous calls already.

James Moltke: And by the way, this is where also we're getting the post bank portfolio on to the same systems as DB is helpful. Because we're able to apply, for example, SME support factors, infer support factors on the portfolio in a way that we couldn't in the prior landscape. So it's enhancing the data, enhancing the way that we that that our portfolio, if you like, interacts with the rules. We think there's still a distance to go with that.

<unk>.

The geopolitical.

Environment, the economic environment.

Something where at the end of the day, the advice, which is us by the clients on the private banking side on the corporate banking side also with regard to our investment banking services.

Is increasing and increasing and.

And therefore, we also said in our prepared remarks, a 40% increase in mandated deals from the culprits.

James Moltke: And although we've worked on it for years, you know, as rules change, one always finds additional optimization measures. So that's been that's been very encouraging. You know, if I think about your question about input output floors on on Basel 3, we've really been focused on the on the one one 25 impact and and as you've seen dramatic improvement based on better visibility into the FRTB models, as we mentioned. And at this point, you know, the output floor is still some years away.

First nine months of 2023 versus the same time period of 2022 is just one signal.

How much we are actually and see the momentum with our corporate clients around the world to think about how to best position in these geopolitical situations, where we are.

And hence in particular also the investments, which we are doing on the corporate side in the investment banking on the advisory side, the investments, which we have done on the wealth management side now the finalization of the numerous transaction will grow also the non NII business in 'twenty.

James Moltke: So I think of that as a as biting maybe in 2030. If you want guidance, we would probably stick with the 30 billion impact at that point. But to be fair, we haven't really done, you know, this next round of mitigation in terms of portfolio shifts and what have you. So that's still that's still a long way out. Hopefully that helps Nick around your on your questions. That's great. Thank you very much.

For a lot and therefore seeing the stability actually.

Also in the <unk> business in 23, plus the growth we see from the advisory.

Our clear goal is to show a 2024 revenue number of 30 billion regarding the composition James will outline further, but we can see a momentum which is simply unbroken.

Adam Terelak: The next question comes from Adam Teralak from Media Bank. Please go ahead.

Adam Terelak: Morning. Thank you for the questions. I have one on capital and one on revenues. I appreciate you don't want to front run exactly what we're going to look at what this is going to look like in the short term. But you're on the take this morning discussing higher payout next year than in your original planning. Can you confirm that that original plan was the plus 50% on the buyback to match the dividend increase.

So Adam a couple of things on your comments.

Well, let me start with the comment that our group.

NII number.

Is is a very noisy line and we've talked about it before the impact of the of the FX swap book and therefore, the rate differential between euros and dollars plays a role here as does hedging results.

Adam Terelak: And can you also discuss whether we can look at more regular capital return over the next few years rather than having to wait for full year results each year. Secondly, on revenues and IE clearly step back in corporate bank private bank this quarter that's kind of been guided to but can you give us some more color about the shape from here and use that to reference your confidence in revenue growth for the group into 2024.

Other parts of the Treasury piece, which is why it's actually I think more instructive to look at the at the net interest income and the margins of the businesses, especially <unk> and Seabee.

Now there we show your margins that were actually reasonably stable quarter on quarter, some pressure in PB and CB rather.

But interestingly this quarter are the principal drivers were not the deposit margins.

Again noise, even at that level around mortgage hedging for example in the private bank.

Adam Terelak: Thank you. Yeah, thank you Adam. And thanks for your participation. Let me start on briefly again on the capital question. And again, I think it's it's good order to discuss all the details with the regular with our regulator first. But I think you're right. The 50% dividend pass we always said and we also said that this is quite a good guidance for our past guidance on the share buybacks. So in this regard, I think you have a good assumption.

You know.

The excess of Av.

Deposits over loans impacting the.

The margin in the corporate bank, so things outside of the deposit margins.

That difference was about $130 million if you take the two businesses together, we think Q4 will be about the same level so flat to that.

Really is as deposit deposit margins come in a little bit but some of this other noise.

Adam Terelak: And as I just said, I think with the scope now of the additional three billion. Obviously we would like and we intend then to start increasing the share buyback already in 2024 beyond that what we already communicated in our previous correspondence. So clearly an acceleration and expansion that's our goal and that will focus now. This is our focus in our discussions with the regulators going forward with regard to the revenues. I will hand over to James for more details in particular when it comes to NII.

Kind of clears through the system. So as Christian says, we feel we feel good about the trajectory.

Looking forward one even to two quarters in those two businesses and that are support of course supports our view going into 2024.

I think the other thing just briefly you mentioned on the on the timing of the buyback and distribution announcements. It's a fair point it would take a lot of pressure off of us and the supervisors to do this more frequently.

And let's see as this the short version we wanted to the.

Adam Terelak: But also here, I think very good messages because the clear jump of point for 2024 is now the 29 billion in 2023. You have seen a good development in the third quarter again a very stable development also by the way on the NII side in both copper bank and private bank. We see that momentum going forward into Q4 and therefore there is a high confidence in delivering a 29 billion number for for the full year 2023.

The nice thing is if you split it out over the year, you could be a little bit more dynamic to the market environment and conditions on the other hand, I think to some degree shareholders have sought.

The greatest degree of confidence as early as possible. So we're going to need to balance those two things, but I could certainly envisage.

You know me.

Multiple requests in the in the year going forward.

Thank you Paula.

Thank you Adam.

Adam Terelak: On top of that, and I think we refer to that in our previous calls already, the geopolitical environment, the economic environment, is something where, at the end of the day, the advice which is asked by the clients on the private banking side, on the corporate banking side, also with regard to our investment banking services, is increasing and increasing. And therefore, we also said in our prepared remarks, a 40% increase in mandated deals from the corporates in these first nine months of 2023, versus the same time period of 2022, will grow also the non-NII business in 24 lot.

The next question comes from Craig Hallum from Goldman Sachs. Please go ahead.

Good morning, everybody just two from my side first on costs could you give us a sense of the size of the inflation headwinds youre able to offset and underlying costs in the quarter and maybe also where you would expect in the year given the Q4, one offs you flagged and how that sets the business up.

Going into 2024.

And then secondly, maybe looking a bit further out to 2025, obviously the revenue momentum is working out in your favor as you just discussed but there's also still a disconnect between your targets on cost to income ratio and return on tangible equity for 2025 and the latest consensus. So just what are the main moving parts.

That's over the next two years that gives you confidence in reiterating those 2025 targets.

Yes, potentially I start on your second part.

And obviously James Shell shell Ed.

Look on <unk>.

The difference in the 2025 targets I think it comes from both sides number one.

Further increasing revenue line James just outlined.

20, full Pos our confidence in the $30 billion in 2024.

And obviously, we see that momentum also going then into the next year in 2025 and in particular in 2025% as we always said before we have another NII tailwind actually in the private bank, which is not to be underestimated. So therefore on.

Adam Terelak: And therefore, seeing the stability actually, also in the NNI business in 23, plus the growth we see from the advisory, our clear goal is to show a 2024 revenue number of 30 billion regarding the composition, James will outlight further, but we can see a momentum which is simply unbroken. So Adam, couple of things on your comments. Well, let me start with the comment that our group NNII number is a very noisy line.

On the revenue side, Chris further further growth to be seen clearly on the cost side.

I'm really confident because you know that we have given the goal of $2 5 billion $2 billion already with our idd in 2022.

Note that this 2 billion is actually based on our so called key deliverables.

I E. The Germany optimization, the front to back the technology architecture.

Adam Terelak: And we've talked about it before, you know, the impact of the FX swap book and therefore the rate differential between euros and dollars plays a role here as does hedging results, you know, and other parts of the treasury piece, which is why it's actually I think more instructive to look at the net interest income and the margins of the businesses, especially PB and CB. Now there, we show you margins that were actually reasonably stable, you know, quarter on quarter, some pressure in PB and CB rather.

The infrastructure efficiencies real estate savings and so on and then we really have a high confidence to deliver and these 2 billion based on all the structural work, which we have done over the last 18 months since the idd and we can see progress every quarter on the remaining 500 million obviously.

We are working diligently, but also theyre good progress.

We discussed with you with the reduction in force program in April.

We have action on that we have 900 reduction delivering more than $100 million of.

Adam Terelak: But interestingly, this quarter, the principle drivers were not the deposit margins. There was, again, noise even at that level around mortgage hedging, for example, in the private bank, you know, the excess of deposits over loans impacting the margin in the corporate bank. So things outside of the deposit margins, that difference was about 130 million. If you take the two businesses together, we think Q4 will be about the same level. So flat to that really as deposit margins come in a little bit, but some of this other noise, you know, kind of clears through the system.

Annualized savings now from now on starting.

James said it this morning and rightly. So we have additional measures, which are now in execution and in flight that we further reduced our workforce by the way also with regard to the overall remediation, which we have seen over the last years. We can see now that we think we are.

Seen the peak in our workforce and we will further reduce and this.

If you want to mention it reduction enforced to zero.

B from a size a number bigger than the reduction we have seen in April 1.0, So that is the next spot.

Adam Terelak: So as Christian says, we feel we feel good about the trajectory looking forward one, even two quarters in those two businesses. And that of support, of course, supports our view, you know, going into 2024. I think the other thing just briefly you mentioned on the timing of the buyback and distribution announcements it's a fair point you know it would take a lot of pressure off of us and the supervisors to do this more frequently.

And in line with.

Our goal of achieving this additional $500 million. Obviously, we are doing other things like third party spending whether it's consultants marketing spending which.

We will save us a meaningful.

<unk> number also in 2024 versus 2023.

We are obviously also wished the peak in workforce, which we have seen we are obviously very selective and cautious also when it comes to new hirings and in this regard we have some very good site on the $2 5 billion vet with the growing revenue number which I just outlined we are in full confidence.

Adam Terelak: And let's see is this the short version we want to. The nice thing is if you split it out over the year you can be a little bit more dynamic to the market environment conditions on the other hand you know I think it to some degree shareholder's of soft you know the greatest degree of confidence as early as possible so we're going to need to balance those two things but I could certainly envisage you know multiple requests in the in the year going forward. Brilliant thanks for that.

Operator: Thank you Adam.

We can achieve the 10% or what we always wanted to do and where we still standby to actually exceed the 10% of our <unk> in 2025.

So Chris just on your on your inflation question.

And perhaps a little bit more on the on the targets and.

So inflation it depends very much on what youre looking at compensation cost elements of non compensation for example software.

Chris Hallam: The next question comes from Chris Hollam from Goldman Sachs, please go ahead. Good morning everybody just two from my side first on cost could you give us a sense of the size of the inflation headwinds you were able to offset in underlying costs in the quarter and maybe also where you'd expect and the year given the Q4 one off you flagged and have that sets the business up heading into 2024 and then secondly maybe looking a bit further out to 2025.

There can be quite quite varied impacts, but I would say, we're facing across the world probably 4% to 5%.

Inflation on average in both comp and non comp costs that we need to work to offset.

So far I think we've been quite successful in both line items you need to work very hard on on workforce composition as Christian outlined we've got a lot of measures underway there whether its internalization location strategy or just managing with discipline across.

Chris Hallam: Obviously the revenue momentum is working out in your favor as you just discussed but there's also still a disconnect between your targets on cost to income ratio and return of equity for 2025 and the latest consensus.

The company.

James Moltke: So just what are the main moving parts over the next two years they give you confidence on reiterating those 2025 targets. Yeah potentially I start on on your second part and obviously James shall look on on the difference in in the 2025 targets I think it comes from both sides number one further increasing revenue line James just outlined the 2024 pass our confidence in the 30 billion in 2024. And and obviously we see that momentum also going then into the next year in 2025 and in particular 2025 as we always said before we have another NII tailwind actually in the private bank which is not to be underestimated.

And then on the non comp you've really got to focus on demand.

And that's where I think the passing some of the what I'll call the inflection points that we've been passing whether thats.

Technology implementations, whether thats <unk>.

Control investment remediation it does give us more flexibility to manage the demand side there.

And so that gives us.

Some comfort.

If I think to run rates, which I think was embedded in the second part of your question.

We've talked over the course of the year about run rates, maybe made it too complex for you but.

We are trying to manage in that.

$4 95.

So, let's say 5 billion per quarter in adjusted cost range.

James Moltke: So therefore on the revenue side and Chris further further growth to be seen clearly on the cost side I'm really confident because you know that we have given the goal of two and a half billion two billion already with our IDD in 2022 you know that these two billion is actually based on our so called key deliverables. IE the Germany optimization the front to back the technology architecture and the infrastructure efficiencies real estate savings and so on and there we really have a high confidence to deliver these two billion based on all these structure work which we have done over the last 18 months since the IDD and we can see progress every quarter.

We've had some pressure this year not just in inflation, which I think we've been successful offsetting but also some of the investments that we've been making.

In the fourth quarter, we may have some additional sort of unexpected costs associated with postbank remediation that may push us up closer to or perhaps slightly above the $5 billion level in Q4.

With all of that baked in including the additional numerous costs I think we've talked about 497, 5% back in July but overall a continued sort.

Evidence of I think discipline and control across the company and that that would represent a good step off also into into 'twenty four whereas you know the goal that we have in Christian has outlined is to continue to crystallize. These cost savings measures in order to to manage overall flat notwithstanding.

James Moltke: On the remaining 500 million obviously we are working diligently but also there good progress you know we discussed with you the reduction in force program in April we have action on that we have 900 reduction delivering more than 100 million of annualized savings now from now on starting. Jane said at this morning rightly so we have additional measures which are now in execution and in flight that we further reduce our workforce by the way also with regard to the overall remediation which we have seen over the last years we can see now that we think we have seen the peak in our workforce and we will further reduce and this if you want to mention it reduction in force 2.0 will be from a size and number bigger than the reduction we have seen in April 1.0 so that is the next part.

Inflation and investments.

Very helpful. Thank you.

Thank you Chris.

The next question comes from Anthony <unk> from RBC. Please go ahead.

Yes, thank you very much.

I have two questions.

On the backlog.

Knowing that postbank.

Nation.

Can you talk a bit about.

The implications on cost.

I think you just mentioned that in revenues near term.

That was a risk that that could potentially delay the targeted cost savings.

And if you can please talk about I mean, if you can about what the.

Might expect in terms of potential excellence by Boston quite it would be like find a place no risks alright.

And then secondly on the.

NII or the headwinds to your revenues.

James Moltke: And in line with our goal of achieving these additional 500 million, obviously we are doing other things like third party spending, whether it's consultant in marketing spending, which will save us a meaningful, a meaningful number also in 2024 versus 2023. So Chris, just on your inflation question and perhaps a little bit more on the targets. So inflation, it depends very much on what you're looking at, compensation costs, elements of non-compensation for example, software, you know, there can be quite, quite varied impacts, but I would say we're facing across the world probably four to five percent.

Bank.

Funding costs.

Should be expect.

Yeah.

Please.

The collection further in Q4 and expect that headwinds.

And this is related to Tia tallo maturities, if you kind of I mean that does it.

Offsets the benefit of the higher rate so how much more of a headwind should we see that thank you very much.

Thanks Sanjay.

I'll try to be brief look we don't see a revenue impact of the postbank integration or operational backlog issues.

And we wouldn't necessarily expect one going forward, obviously, we want to work hard to put these issues behind us and instead of pivot to a very different customer experience and that's the focus of the management team there.

You have seen.

Our cost of provisioning cost impact in Q3 that could also extend into Q4, but ultimately we would expect to get that back as you really get back on track in terms of the collections activity, where there's been some diversion of the of the operational staff.

So call it zero or close to zero in those two lines when all of a sudden done on.

Unexpendable, it's probably being in the in the high single digits in Q3 in terms of the remediation costs and if you kind of look to that in Q4 somewhere between 30% to $35 million.

James Moltke: You know, inflation on average in both comp and non-comp costs that we need to work to offset. So far, I think we've been quite successful in both line items. You need to work very hard on workforce composition. As Christian outlined, we've got a lot of measures underway there whether it's internalization, location strategy, or just managing with discipline across the company. And then on the non-comp, you've really got to focus on demand.

The incremental spend on the remediation, but we would expect that to tail off relatively quickly in 2024 as we as we put the operational issues behind us and frankly invest in automation and improved capabilities going forward. So so we feel it'll be a temporary.

Temporary impact.

As it relates to sort of crystallizing the long term benefits of the unity project No change there, where we are at work and App decommissioning and the various elements of the project that particularly on the technology side, we're going to drive.

James Moltke: And that's where I think that, you know, passing some of the, what I'll call the inflection points that we've been passing, whether that's, you know, technology implementations, whether that's control investment remediation. It does give us more flexibility to manage the demand side there. And so that gives us, you know, some comfort. If I think to run rates, which I think was embedded in the second part of your question, you know, we've talked over the course of the year about run rates, maybe made it too complex for you, but we're trying to manage in that 4.95 to let's say 5 billion per quarter and adjusted cost range.

The benefits.

Too early to make any comments on fines frankly.

We're working very closely with the Boston.

Collaboratively with them and the monitor and I think our interests are very well aligned that we want to put the backlog behind us and sees any disruption to our clients.

On the liquidity and funding costs, it's interesting I mentioned earlier, it's excess of of.

Liabilities over assets in the corporate bank that can sometimes be a drag.

James Moltke: We've had some pressure this year, not just an inflation, which I think we've been successful off setting, but also some of the investments that we've been making. In the fourth quarter, we may have some additional, put of unexpected costs associated with cost bank remediation that may push us up closer to or perhaps slightly above the 5 billion level in Q4, with all of that baked in, including the additional numerous costs. I think we talked about 4.95 back in July, but overall, you know, a continued sort of evidence of, I think, discipline and control across the company.

The interesting sort of corollary there is.

We haven't yet seen a benefit in the NIM of loan growth and so for the corporate bank in particular, and then at the group level, we would benefit from from putting these deposits.

To use.

We're looking forward and believe that we should start to get some momentum in terms of loan growth going forward and hence that that imbalance.

You can begin to help us.

As it relates to <unk>, you've seen that we've pre funded.

James Moltke: And that that would represent a good step off also into into 24, whereas you know the goal that we have in Christianist outlined is to continue to crystallize these cost savings measures in order to manage overall flat, notwithstanding inflation and investments. Very helpful. Thank you. Thank you very much.

Some of the maturities the December maturities and so <unk> is becoming a less and less impactful.

Sort of as part of our overall balance sheet and funding profile.

Yes, theres, a little bit of a drag going into 'twenty four coming in that but that at this point is in.

<unk>.

Low very low double digits per quarter in the coming several quarters.

Let me just add one point to anchor.

Unknown Attendee: I have two questions first. First is on the backlog following a post bank IT migration. Can you talk a bit about the implications on costs? I think you just mentioned it and revenues near term. And is there also risk as an equipment to delay the target of cost savings? And if you can please talk about, I mean, if you can, about what we might expect in terms of potential actions by barfin, could it be like fines, operational risks, or similar.

To your first question and James is absolutely right that there we don't expect an impact on our revenues.

To support that in Q3 23 versus the previous year Q3, we increased and particularly the German private banking business by 16% and I think this is another evidence actually that from a revenue point of view.

It is a sofa and not affecting us and I also don't expect it and I have to say what the people in the private bank are doing in Germany is a fantastic job.

James Moltke: And then secondly, on the NII or the headwinds to your revenues and the corporate bank, the higher funding costs, should be expect, you increase the deposit collection further in Q4 and expect further headwinds. And this is related to TLTL materities. If you can, I mean, I guess it's offset the benefit of the higher rate. So how much more of a headwind should we see there? Thank you very much. Thanks, thank you.

A to make sure that we reduce the backlog and we are doing really good progress and secondly, actually take care of our clients. So really good job done and I think it's evident in the third quarter.

Thank you.

The next question comes from my name is from UBS. Please go ahead.

Yes, good morning, and thank you for the presentation I have two questions. Please.

The first one I wanted to go back to the $3 billion potential additional capital freed up in the next two years.

James Moltke: I'll try to be brief. Look, we don't see a revenue impact of the post bank integration or operational backlog issues. And we wouldn't necessarily expect one going forward. Obviously, we want to work hard to put these issues behind us and sort of pivot to a very different customer experience. And that's the focus of the management team there. You've seen a cost of provisioning cost impact in Q3, that could also extend into Q4.

As a result of Basel four.

Hard to be a reduction.

I was just wondering if you could.

Can you give us a sense too.

What extent do you expect actually to deploy some of that.

Additional capital into the business organically or perhaps inorganically and if so what are you here.

There you see perhaps the most demand.

And clear opportunities for redeployment.

Mindful that you mentioned that.

James Moltke: But ultimately, we would expect to get that back. As it really, we get back on track in terms of the collections activity, where there's been some diversion of the operational staff. So call it zero or close to zero in those two lines when all is said and done. On expenses, it's probably being in the high single digits in Q3 in terms of the remediation cost. And if you kind of look to that in Q4 somewhere between 30 to 35 million of incremental spend on the remediation, but we would expect that to tail off relatively quickly in 2024 as we as we put the operational issues behind us.

Different proportion is obviously four for distribution. So that's the first question and the second question is on the corporate Bank and I just wanted to pick up on the comments from you James.

So far you haven't.

Put those additional deposits.

Yes, we are seeing very small uptick.

In loans in the corporate bank.

So the combination of the two.

Suggest perhaps you have somewhat of a better outlook in terms of deployment and new.

Lending.

Could just share your thoughts on that thank you, yes. Thank you very much for the question and it's a great question. We've spent some time looking at this actually.

And I want to give you a little bit of sort of color looking at the last seven quarters.

James Moltke: And frankly, invest in automation and improved capabilities going forward. So we feel it will be a temporary impact. As it relates to crystallizing the long-term benefits of the Unity project, no change there. We're at work in APD commissioning and the various elements of the project that particularly on the technology side, we're going to drive the benefits. Too early to make any comments on fines, frankly, we're working very closely with the Bafin collaboratively with them and the monitor.

Where the capital is gone.

So on average we've generated about 27 basis points of capital.

Each quarter over the last year and change.

And this is what's interesting about a third of that has gone to support the distributions that we've been making so far the 175.

Billion.

About a third has gone into the regulatory changes.

And about a third has gone into the ratio improvement up to now close to 14%.

James Moltke: And I think our interests are very well aligned that we want to put the backlog behind us and cease any disruption to our clients. On the liquidity and funding costs, you know, it's interesting. I mentioned earlier that this excess of liabilities over assets in the corporate bank that can sometimes be a drag. The interesting sort of corollary there is we haven't yet seen a benefit in the name of loan growth. And so for the corporate bank in particular, and then at the group level, we would benefit from putting these deposits to use.

Almost none has gone into the business so far.

And.

One of the reasons, we think that sort of inflection point is so important is.

First of all we think we can step up the profitability. So the 27 basis points doesn't by any means have to be the cap in terms of what we can we can generate.

But I think there is scope to increase the business deployment beyond.

What we've been doing the past couple of years, especially as that Reg build falls away and were at a ratio level now.

James Moltke: We're looking forward and believe that we should start to get some momentum in terms of loan growth going forward and hence that imbalance can begin to help us. As it relates to TLTRO, you've seen that we've pre-funded some of the the December maturities, and so TLTRO is becoming a less and less impactful sort of part of our overall balance sheet and funding profile. Yes, there's a little bit of a drag going into 24 coming of that, but that at this point is in, you know, sort of low, very low double digits per quarter in the coming several quarters.

That is entirely comfortable for us in terms of buffers. So so there is capacity both for business deployment and for significant.

Distribution increases.

Now to your point about corporate bank revenue.

The loan growth in the past year and change has been quite slow across both businesses.

And.

We'd like to think that there is again some some signs of life you mentioned, a small increase about $1 billion in the quarter and loans in our corporate bank, we've been waiting for that to come wed like to see it and we think we may see it already in the fourth quarter, but then extending into into 2024.

And with our loan to deposit ratio the ratio now again below 80%, we have the capacity to support loan growth both from a capital and from a funding perspective. So so we do think.

James Moltke: We just met one point, Anke, to your first question, and James is absolutely right that there we don't expect an impact on our revenues. Just to support that in Q3, 23 versus the previous year, Q3, we increased in particular the German private banking business by 16%. And I think this is another evidence actually that from a revenue point of view, it is so far not affecting us, and I also don't expect that.

We're turning the corner in terms of the ability to redeploy and both of those.

Both of those sensors.

In private bank, perhaps a little bit more sluggish as you know we've made a decision.

Not to kind of emphasize mortgage lending.

In Germany, both given the market environment, and giving given capital requirements, but we think we have capacity to grow.

James Moltke: And I have to say what the people in the private bank are doing in Germany is a fantastic job. Actually, A, to make sure that we reduce the backlog, and we are doing really good progress. And secondly, actually take care of our clients, so really good job done, and I think it's evident in the third quarter. Thank you.

Margin lending and wealth management as that comes back to grow unsecured consumer lending.

So that may take a little bit longer to come back but also in that business. There is there is potential.

It will grow loans to redeploy capital.

Lastly, and this came up in a recent conference. We are we are careful in how we manage the capital that is committed to the investment bank. So those are portfolios that while there is opportunity to grow within our risk appetite. We are we are careful to manage the capital to that business devoted to that business.

Mate Nemes: The next question comes from me to name us from UBS, please go ahead. Yes, good morning, and thank you for the presentation. I have two questions, please. The first one, I wanted to go back to the $3 billion potential additional capital freed up in the next two years. There was also Basel IV and then RWA reduction. I was just wondering if you could give us a sense to what extent do you expect actually to deploy some of that additional capital into the business organically or perhaps an organically. And if so, what are the areas where you see perhaps the most imminent and clear opportunities for that three deployment. And mindful that you mentioned that significant proportion is obviously for distribution.

Within constraints that we set and so while we think there are attractive lending opportunities.

Opportunities there.

We're going to be cautious about about growing, especially in an environment, where there is still some uncertainty in the in the in.

And the credit environment. So look short version is real capacity now for deployment in the businesses, while we're in a very different environment in terms of distribution potential.

That's great. Thank you guys.

Thank you Marty.

The next question comes back to you on the ground from Autonomous Research. Please go ahead.

James Moltke: That's the first question. And the second question is on the corporate bank. And I just wanted to pick up on the comment from you, James, on so far you haven't put those additional deposits into work. Yet we're seeing a very small attic in loans in the corporate bank. So the combination of the two suggests perhaps you have somewhat of a better outlook in terms of deployments and new lending. If you could just share your thoughts on that.

Hi, Good morning. Thank you for taking my questions I had two please both on capital first can I just press a little bit more on the optimization measures. Please.

On the call.

Gasoline pool factors, you've been optimizing for a long time and I guess I was surprised to find another.

This phone call.

Okay.

How do you think about what you.

We could invest about three extra capital in growing the IP.

On the one hand.

James Moltke: Thank you. Yeah, Margie. Thank you very much for the question. And it's a great question. We've spent some time looking at this actually. And I want to give you a little bit of sort of color looking at the last seven quarters of where the capital has gone. So on average, we've generated about 27 basis points of capital each quarter over the last year and change. And this is what's interesting about a third of that has gone to support the distributions that we've been making so far, the 1.75 billion, about a third has gone into the regulatory changes, and about a third has gone into the ratio improvement up to now close to 14%.

Perfect.

Okay.

Okay.

Okay.

Oh.

Yeah.

Excess capital optical sensors 25 leverage ratio of four 6% on Vascepa.

If you then.

No.

So that traffic I think that please thank you.

So Stuart it's James you were cutting in and out a little bit, but I'll go with what I, what I believe the questions. We're in you may need to follow up.

On our to be way optimization to be honest. So are we surprised we've been I would like to think that the more sophisticated end of of this type of balance sheet management over the years.

James Moltke: Almost none has gone into the business so far, and one of the reasons we think this sort of inflection point is so important is, first of all, we think we can step up the profitability. So the 27 basis points doesn't, by any means, have to be the cap in terms of what we can we can generate, but I think there is scope to increase the business deployment beyond where what we've been doing the past couple of years, especially as that reg build falls away, and we're at a ratio level now that is entirely comfortable for us in terms of buffers.

And to find more opportunity.

On the one hand encouraging.

On the other hand suggests that there was there was something left on the table in the past.

Now the securitization piece is is a step change in what we're what we're looking at and willing to do.

But we've as we've talked about before we still like the economics of the securitization. So we would estimate for example that the revenue to our W. A relationship of the securitization we did this.

This quarter was about one and a half maybe one 6% and so we can redeploy that capital.

James Moltke: So there is capacity both for business deployment and for significant distribution increases. Now to your point about corporate bank, yeah, loan growth in the past year and change has been quite slow across both businesses, and we'd like to think that there's again some signs of life. You mentioned a small increase about a billion in the quarter and loans in the corporate bank. We've been waiting for that to come, we'd like to see it, and we think we may see it already in the fourth quarter, but then extending into 2024.

It better.

Sort of.

Sort of equity margins call it than that so there is still more to do.

And as I mentioned earlier.

The data environment improves more and more.

We see scope to continue optimization of course Basel III is entirely new so that so the work on the models there the visibility into the impact of hedging strategies. That's also new so it's a bit of an ongoing story.

The redeployment I talked about a moment ago related to march's quick question.

James Moltke: And with our loan to deposit ratio now again below 80%, we have the capacity to support loan growth both from a capital and from a funding perspective. So we do think we're turning the corner in terms of the ability to redeploy in both of those in both of those senses. In private bank, perhaps a little bit more sluggish as you know, we've made a decision not to kind of emphasize mortgage lending in Germany, both given the market environment and giving given capital requirements.

Again.

There is scope to support growth in the businesses.

But.

But frankly, the extra capital that we now have.

Doesn't really change the growth potential of the businesses.

And won't change our risk appetite as you know we've been disciplined about risk appetite and we also intend to be different disciplined around capital allocation as I mentioned earlier, especially recognizing that.

James Moltke: But we think we have capacity to grow, you know, margin lending in wealth management is that comes back to grow, unsecured consumer lending. So that may take a little bit longer to come back, but also in that business, there's potential to grow loans to redeploy capital. Lastly, and this came up in a recent conference and we are careful in how we manage the capital that's committed to the investment bank. So those are portfolios that while there is opportunity to grow within our risk appetite, we are careful to manage the capital to that business devoted to that business within constraints that we set. And so while we think there are attractive lending opportunities there, you know, we're going to be cautious about about growing, especially in an environment where there is still some uncertainty in the in the credit environment.

That's a focus of attention around the investment bank.

And finally on the leverage balance sheet.

We see them as sort of moving a little bit in tandem so as our CET. One ratio goes up so too is the is the leverage ratio and while there is a bit more flexibility in managing the leverage balance sheet. We think we can we can very comfortably remain in the mid to high fours.

<unk>.

Over time, and if you like optimize the revenue footprint of that leverage balance sheet.

So hopefully those answered your questions, even though there was a little bit of.

Signal challenge.

Apologies for that so.

You do see it to the extent the U S banks are pulling back because of Basel four you do see an opportunity in investment bank are you done.

James Moltke: So look, short version is real capacity now for deployment in the businesses while we're in a very different environment in terms of distribution potential.

No.

What I'd say is the the higher put it this way the higher CET, one capital base or total capital base supports a leverage balance sheet, that's a little bit larger than it has been historically.

Christian Sewing: That's great. Thank you, Jen.

Operator: Thank you, Matty.

Stuart Graham: The next question comes as to your grant from Autonomous Research. Please go ahead. Hi, good morning. Thank you for taking my questions. I had two, please, both on capital. First, can I just press a little bit more on the RWA optimization measures, please? I hear what you say on the SLA support factors, but you've been optimising for a long time. And I guess I was surprised to find out that I've seen this one before.

But I.

I do not see us changing dramatically our strategies put it that way in terms of leverage deployment.

I would think that you know on a comparative basis, we've been on the more conservative end in terms of the deployment of our leveraged balance sheet and I don't see that changing dramatically Stuart.

Even in light of some of the changes that youre seeing in the U S.

James Moltke: Question, how do you think about the opportunity to invest that three bit of extra capital in growing the IB? On the one hand, oh, I was prodding leave to Ernie. Okay. Thank you, three balls. Yes, ex capital of the co-authenticist 25 leverage ratio. I get just four points to the fan. I'll invest you a lot of scope if you will. Thank you. So Stuart, it's James. You were cutting in and out a little bit, but I'll go with what I believe the questions were and you may need to follow up.

And Stuart.

Two to James' point with no dramatic changes I think.

If you talk to Robin IRT has the clear strategy, where he wants to be in Europe, but also in the U S and that where he wants to be in the U S was already for him in the plan.

Before the potential changes to the Basel requirements for U S. Banks, So I agree with James I think for US. It is good on the one hand that there is more capacity, but the strict adherence to risk return and two hour.

Capital allocation in this regard will not change we want to grow our profitability now we have a bit more capacity to do this and we will do this but we will not leave a risk appetite nor our clear rewards expectations, we have from the businesses.

James Moltke: On RWA optimization, to be honest, so are we surprised. You know, we've been, I would like to think at the more sophisticated end of this type of balance sheet management over the years. And, and, you know, to find more opportunity, you know, is on the one hand encouraging on the other hand, you know, suggests that there was something left on the table in the past. Now, the securitization piece is a step change in what we're looking at and willing to do.

That's right.

Thanks Stuart.

The next question comes from Tom <unk> from K BW. Please go ahead.

Hi, Thanks for taking my question.

I suppose one of the debate for investors has been.

Around the sustainability of profit.

Within that what normalized trade goes look like.

<unk>.

If we take this year it looks like your revenues could land around the 8 billion Mark.

James Moltke: But we've, as we've talked about before, we still like the economics of the securitization. So we would estimate, for example, that the revenue to RWA relationship of the securitization we did this quarter was about one and a half, maybe 1.6%. And so we can redeploy that capital at better sort of equity margins, call it than that. So there is still more to do. And as I mentioned earlier, you know, as the data environment improves more and more, you know, we see scope to continue optimization.

With consensus is expecting something similar in the next couple of years.

But this is two and a half billion higher than what we saw in 2018 and 19 and I. Appreciate the rate environment is very different as being a bit of balance sheet growth there as well.

But what makes you confident that the 8 billion sustainable given that pretty well documented normalization of the wider industry.

And then secondly on government taxes.

It's been a key thing secondly, the last few months.

And again I appreciate the impacts when you will it be limited thanks, Bob but do you see any risk for Germany fully seat. Thank.

James Moltke: Of course, Basel III is entirely new. So the work on the models there, the visibility into the impact of hedging strategies. That's also new. So it's a bit of an ongoing story. The redeployment, I talked about a moment ago, really to Mate's question, again, there is scope to support growth in the businesses. But frankly, the extra capital that we now have doesn't really change the growth potential of the businesses and won't change our risk appetite, as you know, we've been disciplined about risk appetite.

Thank you.

Yes. Thank you for your questions, let me start look what.

What makes me confident on the fixed side that there's kind of $2 5 billion higher than three years or four years ago is something sustainable.

It's three full points, but number one the healing of the bank.

I mean this is the most important if you talk to our institutional clients, but also to the corporate client and I cannot even tell you and that was our focus the transformation the heating and with that obviously the rating upgrades, which we have received from all of the major rating agencies.

That resulted in a completely different way, how they can deal with our clients and that a lot of clients actually return to Deutsche Bank and.

James Moltke: And we also intend to be different discipline around capital allocation, as I mentioned earlier, especially recognizing that that's a focus of attention around the investment bank. And finally, on the leverage balance sheet, we see them as sort of moving a little bit in tandem. So as our CET-1 ratio goes up, so too is the leverage ratio. And while there's a bit more flexibility in managing the leverage balance sheet, we think we can very comfortably remain in the mid to high fours over time. And if you like, optimize the revenue footprint of that leverage balance sheet. So, hopefully those answered your questions even though there was a little bit of signal challenge. Apologies for that.

To be honest, we are still in the Documentations of clients, who have returned after the last increase and improvement of the rating agencies. Because you know how long it takes to get the documentation is the agreements right.

And in this regard I can still see the benefits from that so the heating of the bank.

The one of the key reasons number two I think it's the focus which we have given our sales and in particular <unk> has done in the FIC business and the trading business. It was exactly right to focus on that where we are strong from a regional point of view starting with Europe, then obviously going into our emerging markets franchise also cut.

<unk> Asia, but also investing very focused in the U S and Rahm has.

A clear plan how to grow also our FIC business in the U S. Over the next 12 to 18 months and you put the right investments into that number three it's the front to end to reengineering of our processes. In FIC also that is obviously, which is not only making us more efficient but at the end of the day front to end always results in one.

Christian Sewing: So you do see, to the extent the US banks are pulling back because of the buzz or fall, you do see an opportunity in the US bank or you don't? Well, what I'd say is the higher, put it this way, the higher CET1 capital base or total capital base supports a leverage balance sheet that's a little bit larger than it has been. Historically, but I do not see us changing dramatically our strategies, put it that way in terms of leverage deployment.

This is client experience for our clients and with that obviously, we make ourselves more attractive to deal with us. So I think it's the overall healing of the bank, but also the real focus and reengineering of the platform <unk> has done to the Fig business, which.

Christian Sewing: I would think that on a comparative basis, we've been on the more conservative end in terms of the deployment of our leverage balance sheet, and I don't see that changing dramatically Stewart even in light of some of the changes that you're seeing in the US. And Stewart, to James Point with no dramatic changes, I think, you know, if you talk to Ram Nyer, he has the clear strategy where he wants to be in Europe, but also in the US.

Makes me comfortable that the 8 billion, which we have seen so far is a very good number to actually plan for the future and in my view if I look at the at his plan to even increase from there. Nevertheless, we always said, we even want to make the investment banking business more balanced and therefore.

The investments into the <unk> businesses and also in the prepared remarks, we said how stable actually within the Sig business. The financing partners, it's 35% of the FIC business and that is coming through year by year, I think which are very good.

Christian Sewing: And that way he wants to be in the US was already for him in the plan before the potential changes to the buzz or requirements for the US banks. So I agree with James, I think for us, it is good on the one hand that there is more capacity, but the strict adherence to risk return and to our capital allocation in this regard will not change. We want to grow our profitability. Now, we have a bit more capacity to do this and we will do this, but we will not leave our risk appetite, nor our clear reward expectations we have from the businesses. Thanks, Stewart.

Solid underwriting scheme regarding government, Texas look it's always hard for me to judge what is coming.

But on this and in Germany on this site in Germany, I'm very com, we have clear statements.

These kind of excess Texas I think is not supported in particular, not a buy or a finance minister.

There is really no active discussion on this one and therefore it is for me a non topic.

Okay. Thank you.

The next question comes from Andrew Lim from Societe Generale. Please go ahead.

Christian Sewing: The next question comes from Tom Harlett from KBW, please go ahead. Thanks for taking my questions. I suppose one of the debates for investors has been around the sustainability of profits, and within that what normalised trade calls look like. If we take this year, it looks like your thick revenues could land around the 8 billion mark with consensus expecting something similar the next couple of years, but this is 2.5 billion higher than what we saw in 2018 and 19.

Alright, thanks for taking my questions.

So firstly on capital.

Just wanted a clarification here you it doesn't seem like you're prepared to increase the 8 billion overall capital return envelope.

But it does seem like Youre more confident on reaching about 50%.

Payout sooner rather than later is that the best way to think about it.

<unk> 3 billion.

Capital.

That does.

Being released as it were that doesn't really.

Christian Sewing: I appreciate the rent environment is very different, there has been a bit of balance sheet growth there as well. But what makes you confident that the 8 billion is sustainable, given pretty well documented normalisation of the wider industry, and then secondly, on government taxes, it has been a key theme for the sector over the last few months. And again, I appreciate the impact on you will have been limited so far, but do you see any risk for Germany to follow suit?

Additive to the $8 billion.

With that.

If you look at your actions to optimize capital.

And a lot of the ways I guess that reduces risk weight density.

The way you see it in and so that being the case maybe youll.

Your guidance on the output floor the yocum.

Your comments earlier on.

That we should.

Maybe stick to the 30 billion.

Christian Sewing: Thank you. Yeah, thank you for your questions. Let me start. Look, what makes me confident on the fixed side that this kind of 2.5 billion higher than 304 years ago is something sustainable. That resulted in a completely different way how it can deal with our clients and that a lot of clients actually returned to Deutsche Bank. And to be honest, we are still in the documentation of clients who have returned after the last increase and improvement of the rating agencies because you know how long it takes to get the documentation, is there agreements right?

Although blurry.

The.

And just very lastly on the corporate bank NII.

It does seem like the largest impact from the increase in liquid see reserve costs, what's your patient.

For how that should develop going forward. Please.

So Andrew the answer to the first question is no that's not the correct way to think about it so think about it. This way we had a capital commitment to shareholders of $8 billion.

At a point in time, where we're our outlook and our step off were weaker than they are today.

What we're not able or willing to say at this point is how much of that increment.

Is going to come out to shareholders and how soon.

We obviously owe you an answer on that in time, and we'll work through that internally on our capital planning and then with supervisors, but no. We would we would see it as incremental to the 38 billion.

Christian Sewing: And in this regard, I can still see the benefits from that. So the healing of the bank is the one of the key reasons. Number two, I think it's the focus which we have given ourselves and in particular, Ram has done in the thick business and the trading business. It was exactly right to focus on that where we are strong from a regional point of view, starting with Europe, then obviously going into our emerging market franchise also covering Asia, but also investing very focusing in the US and Ram has a clear plan how to grow also our thick business in the US over the next 12 to 18 months and he put the right investments into that.

And in terms of optimization, it's complex just because at a point in time, we're going to need to optimize around the output floor.

That's not something that we've really done ironically, the impetus there would be to take on higher risk density assets.

And so sort of optimizing that way.

And actually it goes a little bit also to Stuart's question.

The what what regulation asks you to do now is run this complex optimization algorithm across all of those resources in time. So it's it's.

Christian Sewing: Number three, it's the front to end reengineering of our processes in thick. Also, that is obviously which is not only making us more efficient, but at the end of the day, front to end always results in one thing. This is client experience for our clients. And with that, obviously we make ourselves more attractive to deal with us.

It's advanced approaches.

<unk> it'll be standardized approaches or <unk>, and then the leverage balance sheet and we are going to need to find the optimal use of the balance sheet under all three of those tests in the case of these standardized we have until the until 2030, when we think the output floor bites.

Kian Abouhossein: So I think it's it's the overall healing of the bank, but also the reason why real focus and reengineering of the platform, Ram has done to the thick business, which makes me comfortable that the 8 billion which we have seen so far is a very good number to actually plan for the future. And in my view, if I look at the at his plan to even increase from there, nevertheless, we always said we even want to make the investment banking business more balanced and therefore the investments into the own or in a business and all that.

I wouldn't expect just on the CB NII piece I wouldn't expect that to change sequentially in the next couple of quarters again, a little bit depending on whether on how the loan and deposit sort of.

Trajectory for the business go from here, we'd like to think we can continue to grow deposits and grow the loan balances, but but it's the relationship between the two that really drives the.

So the question of the liquidity funding and the CV business.

Kian Abouhossein: Also in the prepare remarks, we said how stable actually within the thick business, the financing parties, it's 35% of the thick business and that is coming through year by year, I think, which is a very good and solid underwriting scheme regarding government taxes. Look, it's always hard for me to judge what is coming. But on this end in Germany, on this side in Germany, I'm very calm. We have clear statements that these kind of access taxes, I think is not supported in particular not by our finance minister.

Sure.

That's great thanks very much.

Thank you Andrew the next question comes from Ken Abbas Hussain from Jpmorgan. Please go ahead.

Yes. Thanks.

Taking my two questions.

Question is related.

We made it too.

Thank you Ken.

Clearly you are right.

Right now in driving revenues and then you did really well in that respect and then it looks like youre, indicating flattish cost.

Kian Abouhossein: There is really no active discussion on this one and therefore it is for me a non-topic. Thank you. The next question comes to Endure Lim from Société General. Please go ahead. Hi, thanks for taking my questions. So first of all on capital, just about the clarification here, it doesn't seem like you're prepared to increase the 8 billion overall capital return envelope. But it does seem that you're more competent on reaching that 50% pay out sooner rather than later.

You have to you have to.

Go ahead.

The break.

Two market conditions changing when you talk about the flexibility of costs as you indicate there is a lot of stickiness as inflation in costs.

And I just try to understand your flexibility in that respect.

How we should think about the elemental to adapt.

In a different environment.

And how you model that.

And then secondly.

Yes.

To your remark on.

Kian Abouhossein: Is that the best way to think about it? So that's 3 billion capital that's being released as it were. That doesn't really... Lee, become additive to the $8 billion. And then with that, if we look at your actions to optimize capital, and I'll probably raise, I guess that reduces with weight density, and it's not the way you see it. And so that being the case, maybe your, your guidance on the output floor there, your comments earlier, are that we should maybe stick to the, the, the, the, the, the.

Okay.

Hmm.

Model changes and improved macro Coco, leaving whoever's Hilton H, one and two provisions.

Can you help me understand what's driving more optimistic outlook.

And if you could talk a little bit about the household not we'll put a misunderstanding.

Maybe.

Yes.

Thanks, Kian sure well look we've talked about this over the years, the P&L sensitivity and.

I'd like to.

Yes.

I think in fact I am confident.

But both sides of that equation have improved over the last several years.

Kian Abouhossein: 30 billion, or doubly, impact there, just very lastly on the corporate bank and II, that seems like the largest impact there's from the increase in liquidity reserve costs. What, what's your patient there for how that should develop going forward, please.

So start with the revenue side as our revenue mix has shifted over time I think our revenue sensitivity has declined dramatically and not just because more of the revenues are coming from the businesses that we describe as more stable.

Andrew Lim: So Andrew, the answer to the first question is no, that's not the correct way to think about it. So think about it this way, we had a capital commitment to shareholders of $8 billion. At a point in time where, where our outlook and our step off, were weaker than they are today, what we're not able or willing to say at this point is how much of that increment is going to come out to shareholders and how soon.

But also because the revenue composition in the investment bank.

I think has has firmed up as well and our market position as as Christian has outlined so I think that revenue sensitivity is lower than you might think.

And by the way, you'll also see us take relatively conservative decisions, whether that's about risk appetite or on our interest rate risk management. So so we manage that it's not just an accident.

Andrew Lim: We obviously owe you an answer on that in time and we'll work through that internally on our capital planning and then with supervisors, but, but no, we would, we would see it as incremental to the, to the 8 billion. In terms of optimization, you know, it's, it's complex just because at a point in time we're going to need to optimize around the output floor. That's not something that we've really done. Ironically, the impetus there would be to take on higher risk density assets and, and so sort of optimize in that way.

And then on the cost side I have said over the years that less as the cost base is variable than I would like it to be I think that equation is also changing for the better let's start with just the investment profile as.

As we shift from.

I'll call them non discretionary investments investments that needed to be made in technology and in controls.

Two a more discretionary profile, we can hit the brakes on those investments.

And the other thing is that as we get deeper and deeper into the structural cost saves that Christian outlined.

Andrew Lim: And actually, it goes a little bit also to, to, to steer its question, you know, the, what, what regulation asks you to do now is, is run this complex optimization algorithm across all of those resources in time. So it's, it's, it's, it's advanced approaches RWA, it'll be standardized approaches RWA and then the leverage balance sheet. And we, we're going to need to find the optimal use of the balance sheet under all three of those tests.

More of the cost base ends up being variable.

And that can be variable compensation, but it can also be other other elements of the cost base. So.

The short version I think we are improving both aspects of that equation, Ken relative to where we were a few years ago.

On the cost of risk just in the detail there we had a 100 million nets on the stage one and two actually what that was was 100 million model benefit associated with the PD LGD is in the new wholesale and retail models plus about $30 million of.

Andrew Lim: In the case of the, the standardized we have until the until 2030 when we think the output floor bites. I wouldn't expect just on the CB NII piece. I wouldn't expect that to, to change, you know, sequentially in the next couple of quarters. Again, a little bit depending on whether on how the loan and deposit sort of trajectory for the business go from here. We'd like to think we can continue to grow deposits and grow the loan balances, but, but it's, it's the relationship between the two that really drives the, the, the question of the, of the liquidity funding in the, in the CB business. That's great. Thanks very much for that. Thank you, Andrew.

<unk> forward looking indicator benefits.

Offset by about $30 million of in stage, one and two of portfolio changes.

Including sort of internal ratings in that sort of thing.

Now why did the <unk> improve.

The point in time is always hard to remember, but the last time. We book. This on a quarterly basis was in July where the outlook for the soft landing, particularly in the U S was actually less optimistic than it became through the third quarter. So so what you what you're seeing is.

A bit of a lag effect as to where things where things stood at that time.

Jeremy Sigee: The next question comes on Kian, but who's saying from JP Morgan, please go ahead. Yes, thanks for taking my two questions. The first question is related to PNL tentativity, if you can. Clearly you're hitting the gas pedal right now and driving revenues and you're doing really well in that respect and it looks like you're indicating flat is cost. If you have to, if you have to have the break due to market conditions changing, can you talk about the flexibility of cost as you indicate there's a lot of thickness, there's inflation and cost, flexibility in that respect, how we should think about the elements of cost reduction in a different environment, in how you model that internally and then secondly, the question is regarding your remarks on cost of risk you mentioned model changes and improve macro forecast leading to reversals and stage one and two provisions, can you help me understand what's driving this more optimistic also clean and if you could talk a little bit about the health of large corporate and middle standard particular clearly in Europe, sorry internally.

And kian.

On your last question I think on the German corporates large corporates and middle stunt.

Look we are observing a very stable situation.

In terms of their credit worthiness.

Benefit hugely from the resilience.

I think I said it in one of the previous quotes.

If I compare the situation of German mittelstand clients with 15 years ago, we have a capital ratio with a liquidity ratio liquidity position of those slots, which is in much better shape than 15 years ago. After the global financial crisis. They all worked in themselves. So I think despite the no growth situation in Germany.

We can really attest the very resilient portfolio.

And hopefully with gross coming back in 2000 and for all but very low gross and 24.

Then we will also see that.

There is obviously gross coming back into those slides so for the time being also from our.

Our rating downgrades versus upgrades no negatives.

Or no deterioration to that what we have seen three or six months ago.

Thank you if I could just briefly follow up on the cost flexibility and I know I thought the question on the pod.

But you're trading at three times tangible book value for a reason.

Jeremy Sigee: Thanks, Keane. Sure. Well, look, you know, we've talked about this over the years, the PODL sensitivity and I'd like to think in fact, I'm confident that both sides of that equation have improved over the last several years. So start with the revenue side as our revenue mix has shifted over time, I think our revenue sensitivity has declined dramatically and not just because more of the revenues are coming from the businesses that we describe as more stable, but also because the revenue composition in the investment bank.

And that's a reflection of the.

The concern that in a different scenario.

You will not be able to manage cost to some operating leverage let's put it. This way. So can you quantify and give us more confidence in your cost stability and Madden managing your cost stability in a different scenario.

Let me start and end James.

Follow up first of all I do believe that its most important for our credibility that achieve that we achieved those cost targets, which we have given to the market and we will do so.

Jeremy Sigee: I think has has firmed up as well and our market position as as Christian is outlined, so I think that revenue sensitivity is is lower than you might think. And by the way, you also see us take relatively conservative decisions, whether that's about risk appetite or on our interest rate risk management, so so we manage that it's not just an accident. And then on the cost side, I have said over the years that that less of the cost base is variable than I would like it to be.

Therefore, I ran you through the structural cost savings and that what we now put on top actually in order to get to the $2 5 billion.

Secondly of course, if this would happens you have three or four.

Our layers of cost where we can very quickly.

Reduce the spending.

That is the variable comp which means.

With regard to investments.

Obviously, we are reviewing those investments on a quarterly basis.

Jeremy Sigee: I think that equation is also changing for the better. Let's start with just the investment profile. You know, we as we shift from, I'll call them non discretionary investments investments that needed to be made in technology and in controls. To a more discretionary profile, we can hit the breaks on those investments. And the other thing is that as we get deeper and deeper into the structural cost saves the Christian outlined, you know, more of the cost base ends up being variable.

Also adhering obviously too.

The profile on the business side and whether the performance is the right. One I think we have a very good monitoring in place on on this one.

Secondly, yes, there is always the flexibility on the variable comp, which we obviously.

Adjust to the performance into the revenue to the revenue performance I think we have also shown that in the past that we are able to do this and we will do this. So this is obviously if you look at all of arrival comp.

That is not an insignificant number which we could reduce like for the CDB.

Jeremy Sigee: And that can be variable compensation, but it can also be other other elements of the cost base. So the short version, I think we're improving both aspects of that equation can relative to where we were a few years ago. On the cost of risk, just in the detail there, we had a hundred million net on the stage one and two. Actually, what that was was a hundred million model benefit associated with the PDLGDs in the new wholesale and retail models plus about 30 million of FLI forward looking indicator benefit.

He changed the bank investments.

And then you have those items, where Rebecca is going actively after already now, but which also plays into this one which is everything.

On.

Third party cost, which means also consultancy, which means marketing and easily in this regard from a flexibility point of view Kian you are in a in a very high three digit million number and in this regard I would say this bank has clearly the ability to react.

But most important for US is obviously to first of all delivered what we promised to you and this is the $2 5 billion.

Jeremy Sigee: Offset by about 30 million of in stage one and two of portfolio changes, including sort of internal ratings and that sort of thing. Now why did the FLI improve? The point in time is always hard to remember but the last time we booked this on a quarterly basis was in July where the outlook for the soft landing particularly in the US was actually less optimistic than it became through the third quarter.

Thank you.

The next question comes from Chemo Donaldson D that bank. Please go ahead.

Yes, hi, good morning, Thank you for taking my questions.

I've got two please one is on Q4 and the other question is on <unk>.

So starting with Q4.

Jeremy Sigee: So what you what you're seeing is a bit of a lag effect is to where things were things stood at that time. And Kien on your last question I think on the German corporates, large corporates and middle stunt, look we observing a very stable situation in terms of their creditworthiness, they benefit hugely from the resilience. I think I said it in one of the previous quotes, if you know if I compare the situation of German middle stunt splints with 15 years ago, we have a capital ratio, we have a liquidity ratio, liquidity position of those slides which is a much better shape than 15 years ago after the global financial crisis, they all worked on themselves.

Maybe you could provide some specific specific.

Specifics on one offs reflect for the current quarter. So quantification, maybe on the restitution of the national resolution funds.

<unk>.

Antitrust Len Texter Trust and what steps you mentioned that would be helpful. So this would be my question number one.

And my second question is on the outlook on all day so.

Again, a strong recovery here.

So what's your view on the last quarter.

We expect another pick up despite the seasonal patterns and what are your expectations looking further down the road. Thank you.

Jeremy Sigee: So I think despite the no gross situation in Germany, we can really attest the very resilient portfolio and hopefully with gross coming back in 24 or about very low gross in 24, we then will also see that there is obviously gross coming back into those slides. So for the time being also from our rating downgrades versus upgrades, no negative or no deterioration to that what we have seen three or six months ago.

Thanks, Tim I'll briefly on the second question.

Yes, we would see a continued improvement.

Sequentially in <unk>.

And we would look to.

A much more significant improvement going and then to 2024. So we're we're optimistic there on.

On the Q4, one offs why don't I meet you halfway.

On the DTA I would expect in here, it's a different geography from last year.

Whereas the DTA related to the to the U S.

I would size it today at about $500 million of opportunity in the tax line.

Giulia Miotto: Thank you, if I could just briefly follow up on the cost flexibility and I know I've asked this question in the past, but you're trading at points three times tangible book value for reasons and that's a reflection of the concerns that in a different scenario, you will not be able to manage cost to some operating leverages for this way. So can you quantify and give us more confidence in your cost ability and managing your cost ability in a different scenario.

Potentially larger it all depends on our forward looking view of profit profitability in the U K entities and jurisdiction going forward.

That's to the to the positive.

Numerous goodwill it's too early to give an exact number given we're going through the.

The purchase price allocation process as we speak but to give you a ballpark I would expect us to book about $250 million.

Giulia Miotto: Look, let me start and James will follow up. First of all, I do believe that it's most important for our credibility there to achieve that we achieve those cost targets which we have given to the market and we will do so. That's that's therefore I ran you through the structural cost savings and that what we now put on top actually in order to get to the two and a half billion. Secondly, of course, if this would happen, you have three or four layers of costs where we can very quickly reduce the spending.

As a nonoperating cost around around that numerous goodwill.

The numbers that I can't really guide you on today would be one the restitution payment to the to the upside.

And then as you all know restructuring and severance and legal litigation items are always subject to some uncertainty.

And so as we get more visibility if we get an opportunity we will give you.

An update on that.

I'd like to thank the net of those four things is biased to the positive, but we have to wait and see how it all plays out.

Giulia Miotto: That is the variable comp, which means which regard to investments, obviously we are reviewing those investments on a quarterly basis also adhering obviously to the profile on the business side and whether the performance is the right one. I think we have a very good monitoring in place on this one. Secondly, yes, there is always the flexibility on the variable comp, which we obviously would adjust to the performance and to the revenue to the revenue performance.

Great. Thank you.

The next question comes from Doug Arthur.

From Morgan Stanley. Please go ahead.

Yes, hi, good morning, Thank you for taking my question.

So the first one on city commercial real estate. Thank you for the detail provided in the slides at the back.

If I compare.

You don't have enough provisioning, especially in the U S side with the U S banks have been seeing so far this quarter. It seems like you'll have.

I don't know where I was wondering what gives you the confidence.

Giulia Miotto: I think we have also shown that in the past that we are able to do this and we will do this. So this is obviously if you look at our variable comp that is not an insignificant number, which we could reduce like for the CTB IE change the bank investment. And then you have those items where Rebecca is going actively after already now, but which also plays into this one, which is everything on third party costs, which means also consultancy, which means marketing.

It's relatively a lower provision.

Market, specifically, especially for U S office, which seems particularly challenged and then.

On a new lease.

I know it's early days the acquisition closed 15th of October I believe but I was wondering if you have any R&D.

That's what people like to Shannon This is part of Deutsche.

So each bank and then a quick technical one dike as with all these D. As being you know everything back what's a good benefit for the tax rate in the coming years. Thank you.

Giulia Miotto: And easily in this regard from a flexibility point of view, Kian, you are in a very high three digit million number. And in this regard, I would say this bank has clearly the ability to react. But most important for us is obviously to first of all deliver that what we promise to you. And this is the two and a half billion. Thank you.

Thanks Juliet.

Try to.

Starting with CRE.

It's just hard to say because we have no insight into our competitors' portfolios and so we can we can tell you what we think of ours and as we've said consistently from the start of the cycle.

We think we have a high quality portfolio.

Amit Goel: The next question comes from Timo Dums from DZ Bank, please go ahead. Yes, hi, good morning. Thank you for taking my questions. I've got two please. One is on Q4 and the other question is on on a. So starting with Q4, maybe you could provide some specific specifics on the one off you flagged for the counter quarter. So a quantification may be on the restitution of the national resolution fund. And here and the trustments take the trustments that you mentioned that would be helpful.

It's to the extent, it's concentrated obviously theres an office exposure, but its concentrated in in class a strong sponsors and what have you.

And what we what we're happy to share at this time and in the appendix material is is frankly the experience that we've had so now we're sort of four or five quarters into this into this cycle in commercial real estate and we think that the relationship between the loan modifications and the expected credit losses.

That arise from that.

Speak to the quality of the portfolio.

Now that we're call it halfway through that.

Amit Goel: So this would be my question number one. And my second question is on the outlook on all day. So again, a strong recovery here. So what's your view on on the last quarter should we expect another pickup despite the seasonal patterns? And what are your expectations looking further down the road? Thank you. Thanks Timo. Briefly on the second question. Yes, we would see a continued improvement sequentially in ONA. And we would look to a much more significant improvement going in than to 2024.

<unk>.

But you can see that if trends continue or even deteriorate a little bit this should be.

Entirely manageable situation for at coverages hard to hard to measure on a comparative basis, but we think we're taking <unk>.

Provisions and collateral or allowance in collateral together, we think we're sort of reasonably in line with the peers.

On <unk>, we're very excited about the transaction I mean, the first few days and the and the process with the Deutsche numerous organization have been very successful both the Deutsche U K corporate finance team going into numerous and the relationship with the numerous leadership and staff is off to a.

Amit Goel: So we're optimistic there. On the Q4 one offs, why don't I meet you halfway on the DTA. I would expect and here it's a different geography from last year where the DTA related to the US. I would size it today at about 500 million of opportunity in the tax line. Potentially larger. It all depends on on our forward looking view of profit profitability in the UK entities and jurisdiction going forward. That's to the positive.

A great start and the client feedback has been extremely positive ever since the announcement so.

So it's early days in terms of in terms of revenue production. If you like but we're very encouraged by what we see so far.

Ultimately on the DTA it doesn't really affect the tax rate. So so you should expect us to to advise on an effective tax rate continuing to be in the sort of 29 to 30 range going forward always a little bit of variation in that but but the DTA as a one off and I would.

Amit Goel: The new miss goodwill. It's too early to give up an exact number given we're going through the purchase price allocation process that of as we speak, but to give you a ballpark. I would expect us to book about 250 million in a as a non operating cost around around that new miss goodwill. The numbers that I can't really guide you on today would be one the restitution payment to the to the upside.

Think of it as as complete if you like this year when we when we revalue of the U K tax tax characteristics.

Okay.

Yeah.

The next question comes from Amit Glenn from Barclays. Please go ahead.

Hi, Thank you.

So just coming back on the cost.

Amit Goel: And then as you all know, you know, restructuring and severance and legal litigation items are always subject to some uncertainty. And so as we get more visibility, if we get an opportunity, we'll give you an update on that. I'd like to think the net of those four things is biased to the positive, but we have to wait and see how it all plays out. Great, thank you.

You reiterated the conviction in terms of getting getting down to that kind of 18 19.

Type platform.

I'm just curious I mean, I think on this exchange the exit rate for this year is a bit higher than the level achieved.

This year will be.

So I mean.

Should we expect to see those costs coming coming out would that be more in the second half of 'twenty into 'twenty five or could it be sooner.

Giulia Miotto: The next question comes from Giulia Aurora, Miotto from Morgan Sandley, please, go ahead. Yes, hi, good morning. Thank you for taking my question. So the first one on CRD commercial real estate. Thank you for the detail provided in the slides at the back. If I compare your level of provisioning, especially on the US side with what US banks have been seeing so far, this quarter seems like you have your provisions are lower. I was wondering what gives you the confidence of these relatively lower provisions in this bucket specifically, especially for US office, which seems particularly challenged.

And then secondly.

Just related to that I mean, if cost is proved to be a bit more sticky.

Are you seeing potential distribution fee.

Also can I efficiency savings.

Yes.

Yes.

Lisa to help get to that 10% target.

<unk> or box.

Or are these kind of just take very independent.

Yes.

And then just.

Yes.

One follow up.

And I guess, you just mentioned.

The revenue tailwind in 2025.

James Moltke: And then on Numis, I know it's early days, the acquisition closed, 13th October, I believe, but I was wondering if you have any early thoughts that you would like to share now that this is part of Deutsche Bank. And then a quick technical one DTA is with all these DTAs being written back. What's the benefit for the tax rate in the coming years. Thank you. Thanks, Giulia.

I was just wondering if you can.

<unk> size now give us an indication of how much you're expecting from that.

Thank you sure. Thanks Amit.

Look actually or the middle part of your question is a really good one the <unk> and the <unk> are in fact linked anyhow.

<unk> you start to have a denominator problem and therefore, a strong incentive to distribute capital.

In order not to have the <unk> dragged down by by higher.

James Moltke: So I'll try to, well, starting with the CRE, it's just hard to say because we have no insight into our competitors portfolios. And so we can tell you what we think of ours. And as we've said sort of consistently from the start of this cycle, you know, we think we have a high quality portfolio. It's to the extent it's concentrated obviously there's an office exposure, but it's concentrated in class A strong sponsors and what have you.

Tangible equity in fact, Youre seeing that already this year you know the biggest part of the <unk> decline in the third quarter versus last year. It was just higher capital.

The tax rate played a big big impact as well, but leaving that aside it's higher capital. So we are incentivized to push out capital.

If you think about the exit rate, yes, the five is a little higher than we'd like it to be and to your point to get to a full year number of adjusted costs in line with with this year, we would need to start bringing it down in the second half.

James Moltke: And what we're happy to share this time in the appendix material is frankly the experience that we've had. So now we're sort of four or five quarters into this cycle and commercial real estate. And we think that the relationship between the loan modifications and the expected credit losses that arise from that, you know, speak to the quality of the portfolio. Now that we're call it halfway through that, but you can see that if trends continue or even deteriorate a little bit, this should be an entirely manageable situation for that.

But look if we're traveling in the $4 nine to five area that.

Next year in each of the four quarters, we think where we're doing okay and we will.

So I'm to Ken's earlier question, we think we've got more levers to help to drive that going forward.

On the tailwind into 'twenty five.

This is some distance ahead, but I would quantify it as $2 million to $300 million just from the.

James Moltke: Coverage is hard to, hard to measure on a comparative basis, but we think we're, you know, taking provisions and collateral allowance and collateral together. We think we're sort of reasonably in line with the peers on numerous.

The deposit hedges kind of rolling rolling over so so a nice tailwind for that business for.

For the PB business going forward.

Amit Goel: We're very excited about the transaction. I mean, the first few days and the process with the Deutsche Numerous organization have been very successful, both the Deutsche UK corporate finance team going into Numerous and the relationship with the Numerous leadership and staff is off to a great start. And the client feedback has been extremely positive ever since the announcement. So so it's early days in terms of in terms of, you know, revenue production, if you like, but we're very encouraged by by what we see so far.

Thank you.

As a reminder, ladies and gentlemen, if you would like to ask a question. Please press star followed by one.

The next question will come from Jeremy <unk> from BNP Paribas. Please go ahead.

Hi, Thank you just a couple of quick numbers questions. Please the expectation was that you'd be getting to just over 400 billion of our <unk> in 2025, if I adjust that for the undershoot today, the extra savings the Basel four it was more like 370 billion is that a is that a fair expectation.

Or is it likely to be higher than that with redeployment. So that's my first question and then.

Amit Goel: Ultimately on the DTA, it doesn't really affect the tax rate. So so you should expect us to to advise on an effective tax rate continuing to be in the sort of 29 to 30 range going forward. There's always a little bit of variation in that, but, but the DTAs are one off, and I would think of it as, as complete, if you like, this year when we, when we revalue the UK tax tax capture.

Numbers question on NII, you've talked a bit about deposit.

Pressure in the <unk>.

If if if rates stay at this level and b to get to.

Sort of medium term resting place and also term assets reprice fully what would we be subtracting and adding to NII and I'm, particularly focused on the corporate bank and the private bank. So just those two big numbers, if we fully the beta and fully repriced anytime assets. It take time, what would we be adding than subtracting.

Amit Goel: The next question comes from Amit Goel from Barclays, please. Go ahead. Hi, thank you. So, just coming back on the cost of the reiterated conviction in terms of getting down to that kind of 18.5-19 billion type level, I just curious. I mean, I think unless it's changed the exit rate for this year, it's a bit higher than the level achieved this year or will be. So, I mean, when should we expect to see those costs coming coming out?

So Jeremy on the <unk> I would in brief I would anchor off of $3 80.

Rather than $3 70.

So the work was from call it $4 20, which was the earlier.

Consensus number for the end of 'twenty, five, which we said was pretty close we took that down to 405 with the 15 and now the 10 and the 15 improvement should should get you to about about 480 380 I'm sorry.

That's.

Amit Goel: So, would that be more in the second half of 24 or into 25 or could it be sooner? And then secondly, just related to that, I mean, if costs do prove to be a bit more sticky, are you seeing potential distribution of the RWA efficiency savings as the other or another leaver to help get to that 10% roti targets or above? Or are these kind of just two very independent things? And then just a one follow-up, you know, I guess you just mentioned, or see on PP, the revenue tailwind in 2025.

That doesn't account for the redeployment. So we'll see if that if that number is still holds there may be maybe more opportunity to redeploy them than we had originally anticipated which is why it. It's early days in our capital plan.

In terms of fully phased in.

I'll be honest I haven't thought about it in the injustice two deposit books.

And as I say, there's a lot of noise in the in the NII number, but but in round numbers.

We've.

On a reported basis, we've held steady at 13 and a half.

Some of most of the NII upside that we saw this year actually went into the noninterest revenue lines.

Amit Goel: I was just wondering if you can, you know, potentially size that or give us an indication of how much you're expecting from that. Thank you. Sure, thanks Amit. Look, actually, the middle part of your question is a really good one. The RWA and the ROTROT are in fact linked. And, you know, ironically, you start to have a denominator problem and therefore a strong incentive to distribute capital in order not to have the ROTE dragged down by higher tangible equity.

If I look to a normalized level you'd like to see it frankly at 13, five or better, especially going into 'twenty five and beyond given the answer to <unk>.

Question.

The the uplift that you get in both businesses from the from the deposit hedges moving so.

So.

Whatever the dip is next year.

Hopefully small.

We think that we are.

<unk> currently traveling at a baseline that's a pretty good baseline to grow from into 'twenty five 'twenty six and.

Amit Goel: In fact, you're seeing that already this year, you know, the biggest part of the ROTE decline in the third quarter versus last year was just higher capital. The tax rate played a big impact as well, but leaving that aside, it's higher capital. So we are incentivized to push out capital. If I think about the exit rate, yes, the five is a little higher than we'd like it to be and to your point, to get to a full-year number of adjusted costs in line with this year, you know, we would need to start bringing it down in the second half.

And that's before all of the noninterest revenue upside that we see in the Christian went through in his earlier comments. So so that underscores if you like that the optimism we have.

For the for the revenues next year and beyond.

And we don't see any reason why the compound annual growth rate target.

I would actually step back significantly from here over the next two years, three and a half to four and a half is something that you'd like to say I think we can we can achieve from this point.

Or even better.

Amit Goel: You know, but look, if we're traveling in the 4.9 to five area that next year, in each of the four quarters, we think we're doing okay. And we will, to Keynes earlier question, we think we've got more levers to help to drive that going forward. On the tailwind into 25, this is some distance ahead, but I would quantify it as two to 300 million just from the deposit hedges kind of rolling over. So a nice tailwind for that business, for the PB business going forward. Thank you.

Thanks, that's very helpful.

Okay.

There are no further questions at this time I hand back to <unk> for closing comments.

Thank you very much for your questions. If you have any further inquiries. Please reach out to the Investor Relations Department.

Thank you very much take care and goodbye.

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

[music].

Jeremy Sigee: As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one. The next question comes from Jeremy Sigee from the MP Barry Bar, please go ahead. Hi there, thank you, just a couple of quick numbers questions, please. The expectation was that you'd be getting to a just over 400 billion of RWA's in 2025. If I adjust that for the undershoot today, the extra savings, the Basel 4, it would come out more like $370 billion.

Jeremy Sigee: Is that a fair expectation or is it likely to be higher than that with redeployment? So that's my first question. And then different numbers question on NII, you've talked a bit about deposit NII pressure in 4Q. If rates say at this level and beta gets to its sort of medium term resting place and also term assets reprise fully, what would we be subtracting and adding to NII? And I'm particularly focused on the corporate bank and the private bank.

Jeremy Sigee: So just those two big numbers, if we fully did the beta and fully reprise any term assets that take time, what would we be adding and subtracting? So Jeremy, on the RWA, I would, in brief, I would anchor off of 380 rather than 370. So the walk was from call it 420, which was the earlier consensus number for the end of 25, which we said was pretty close. We took that down to 405 with the 15 and now the 10 and the 15 improvement should get you to about 380.

Yeah.

Yeah.

Jeremy Sigee: I'm sorry. That doesn't account for the redeployment. So we'll see if that number still holds. There may be more opportunity to redeploy than we originally anticipated, which is why it's early days in a capital plan. In terms of fully phased in, I'll be honest, I haven't thought about it in just the two deposit books. And as I say, there's a lot of noise in the NII number. But in round numbers, we've, on a reported basis, we've held steady at 13 and a half.

Jeremy Sigee: Some of, you know, most of the NII upside that we saw this year actually went into the non-interest revenue lines. You know, if I look to a normalized level, you'd like to see it frankly at 13 and a half or better, especially going into 25 and beyond, given, you know, in the answer to Amit's question, the uplift that you get in both businesses from the deposit hedges moving. So I, you know, whatever the dip is next year, hopefully small, we think that we're sort of currently traveling at a baseline that's a pretty good baseline to grow from into 25 and 26.

Jeremy Sigee: And that's before all of the non-interest revenue upside that we see in the Christian went through in his earlier comments. So that underscores, if you like, the optimism we have for the, you know, for the revenues next year and beyond. And we don't see any reason why the compound annual growth rate target would actually step back significantly from here over the next two years. So three and a half to four and a half is something that you'd like to think we can achieve from this point or even better.

Operator: Thank you very much.

Operator: There are no further questions at this time.

Operator: I hand back to Silkit Sipa for closing comments. Thank you very much for your questions.

Operator: If you have any further inquiries, please reach out to the Investor Relations Department and we say thank you very much, take care and goodbye.