Operator: Ladies and gentlemen, welcome to the Q3 2026 analyst conference call and live webcast. I am Moritz, your conference call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Silke Szypa, Deputy Head of Investor Relations. Please go ahead.
Silke Nicole Szypa: Thank you for joining our Q3 2026 results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first, followed by our Chief Financial Officer, Raja Akram. The presentation, as always, is available to download in the investor relations section of our website at db.com. Before we get started, let me just remind you that this presentation contains forward-looking statements that may not develop as we currently expect. We therefore ask you to take note of the precautionary warning at the end of our materials. With that, let me hand over to Christian.
Christian Sewing: Thank you, Silke, and good morning, everyone. Let me start with a few words on what we believe are the key takeaways today. We are growing, particular where we want to grow. Our asset gathering businesses performed strongly. The Corporate Bank delivered strong growth and our Investment Bank continued to perform well. Revenue mix is improving with growing commissions and fees and record net inflows and business mix continues to shift to a more sustainable and stable revenue base. in Germany, a vital element of our growth strategy is starting to deliver. With that, let us turn to where we stand on strategy execution on slide 2. We delivered record performance and strong momentum in the first 9 months of 2026. We grew revenues to EUR 25.5 billion, well on track to meet our full year ambition of around EUR 33 billion.
Christian Sewing: We have now completed a large portion of this year's investments, and we continue to maintain cost discipline. As planned, we have largely self-funded incremental investments with efficiency gains. This enabled us to deliver a record profit before tax of EUR 8.4 billion for the first 9 months of the year, along with a record Q3. Post-tax RoTE was 11.5% and our cost income ratio was 61.4%. Our CET1 capital ratio was 14.0%. We continue to drive business growth while making distribution deductions in line with our 60% payout ratio. We have already completed our second share buyback of the year, bringing total buybacks in 2026 to EUR 1.5 billion. Now, a few words on our progress on scaling our global house bank on slide 3.
Christian Sewing: We made tangible progress on all three levers of our strategy in the first 9 months of the year. We continue to deliver focused growth. Revenues grew by 5% versus last year, in line with our planned growth trajectory through to 2028. Our focus growth areas contributed nearly 80% of the increase and grew by 6%. Franchise momentum was strong across all businesses, with growth rates above our IDD targets. Furthermore, we continue to build business volumes, which support future revenue growth. Assets under management rose by nearly a quarter of a trillion euros year on year to just under EUR 2 trillion, supported by record inflows across our asset gathering businesses. Loans and deposits grew year on year, supported by broad-based business activity. Second, we maintained strict capital discipline.
Christian Sewing: Our capital initiatives included further capital accretive actions on non-performing exposures and progress with our securitization programs. Third, we made further progress on our scalable operating model. We continued to simplify our processes and made targeted investments in upgrading our infrastructure. The Private Bank reached an important milestone in its technology transformation, selecting its first cloud-based platform as it is moving from 15 banking platforms to just two. In IBCM, we have started to roll out Farsight, an AI-enabled tool designed to improve efficiency and provide more granular client insights, further supporting client experience and engagement.
Christian Sewing: Across all three levers, we are driving strong performance across our businesses, investing in growth and efficiencies, and reinforcing connectivity between businesses. This allows us to deliver the bank to clients. For example, by combining coverage across financing, investment solutions, and product distribution. Turning to slide four. All divisions delivered RoTE of 12% or higher, while each division increased profit before tax in every quarter of the year. Private Bank net flows reached EUR 17 billion, a record for the Private Bank, with around two-thirds from wealth management.
Christian Sewing: Year-to-date inflows have already exceeded the full year 2025 level. Client assets increased to EUR 865 billion, up EUR 75 billion year to date, and well on track toward our EUR 1 trillion target by the end of 2028. Asset Management grew assets under management to over EUR 1.2 trillion, with record net flows of EUR 31 billion in Q3. The Corporate Bank delivered record quarterly revenues, with sustained growth in loans, deposits, and client activity across every client segment. We delivered strong revenue growth in Germany, underlining the strength of our home market franchise. The Investment Bank delivered strong results. FICC revenues were close to the record prior year quarter, despite less favorable market conditions. In IBCM, we increased our EMEA market share by 160 basis points year on year.
Christian Sewing: We are also pleased that our global foreign exchange business was awarded World's Best FX Bank at the recent Euromoney Awards for the second consecutive year. Our nine-month performance strengthens my confidence yet further that we are on track to deliver on our 2026 objectives. Our franchise, business performance, and balance sheet have remained resilient despite heightened fiscal uncertainty across Europe in an already challenging global economic backdrop. We have seen no meaningful adverse impact to date. Path to our 2028 targets and objectives has become clearer as we make progress against our strategic priorities. This strengthen our view that an RoTE of above 13% represents a floor. Last quarter, I highlighted trends which support further upside to our 2028 targets. German reforms and fiscal stimulus, AI, Savings and Investments Union, and the regulatory environment.
Christian Sewing: In Germany, we see encouraging signs in the political and economic environment, reinforced by our client conversations. Reform progress continues with growth, competitiveness, and investment firmly on the political agenda. Exports, entrepreneurial activity, and foreign investment are showing signs of improvement. Corporate sentiment is improving and translating into investments, while the Mittelstand remains resilient. We expect German growth to come in ahead of consensus, but faster and more decisive government action is needed to sustain this momentum. On regulation, we are encouraged by plans for a legislative package in Q1 2027 to further integrate Europe's banking sector and boost its competitiveness. We also continued to see further upside from initiatives that are largely in our control, particular technology and process simplification and AI-led productivity gains. We intend to provide further detail on these opportunities with our full year results in January.
Christian Sewing: With that, let me hand over to Raja.
Raja Akram: Thank you, Christian, and good morning. We delivered another strong Q3 with net revenues of EUR 8.3 billion and a return on tangible equity of 10.6%. Profit before tax was EUR 2.6 billion, up 8% year on year with an improved cost income ratio of 62.4%. Importantly, all divisions contributed to the year-on-year profit increase. Revenues were up 4% year on year, making these 21 consecutive quarters of revenue growth. With non-interest expenses flat year on year, we delivered positive operating leverage. C&O once again contributed positively to the revenues this quarter, mainly due to valuation and timing differences, which we expect to partially reverse in Q4. Let me now turn to revenues in more detail, starting on slide 7. We saw strong growth in the Private Bank materially benefiting from higher net commission and fee income. Asset Management also made a strong contribution driven by higher management fees.
Raja Akram: As promised, the Corporate Bank delivered both year on year and sequential revenue growth with business volume growth and higher revenues across businesses. Investment Bank revenues broadly matched a record prior year quarter. Looking at revenue composition, net interest income demonstrated a solid increase driven by volume growth and hedge rollover, with trading and other income down year on year. Net commission and fee income performance showed continued strength, benefiting from growth in discretionary mandates in Wealth Management, as well as stronger performance in the Corporate Bank. Overall, our non-investment banking business represented around 65% of group revenues and increased both sequentially and year on year. Let me now move to NII on slide 8. NII was solid at EUR 3.7 billion across the key banking book segments and other funding.
Raja Akram: Deposit related NII continued to benefit from underlying volume growth and the contribution from our hedge portfolio, while loan NII benefited from strong volume growth. For the full year, we continue to expect NII across key banking book segments and other funding to slightly exceed EUR 14 million. As we said previously, benefits from recent rate decisions are expected to come gradually and sequentially, becoming more pronounced in 2027 and increasing even further in 2028 and beyond, reflecting our structural hedging approach. As always, you can find details on the benefits from long-term hedge portfolio rollover on slide 23 of the appendix. Turning to slide 9, non-interest expenses declined by 3% sequentially and were flat year on year.
Raja Akram: Incremental investments included around EUR 80 million of workforce measures, mainly reflecting Private Bank operating model optimization, as well as infrastructure investments, ongoing hiring in Wealth Management and IBCM, and the expansion of Corporate Bank solutions to support our capital light growth agenda. Operating efficiencies, mainly through workforce and target operating model measures, continue to largely offset these incremental investments. The modest increase in volume-related costs included higher fixed pay, which was fully offset by lower litigation expenses and bank levies. As we continue to execute our investment plans and efficiency benefits accelerate, we expect positive jaws to become increasingly visible. With that, let me turn to provisions for credit losses on slide 10. Provision for credit losses was EUR 501 million. We continue to take proactive capital accretive actions to further de-risk our CRE portfolio, which is reflected in our provisions for the quarter.
Raja Akram: In addition, provisions in the Corporate Bank were impacted by an idiosyncratic event in Asia. Underlying asset quality remains strong, with leading indicators showing a stable or improving picture across the majority of our portfolios. As shown in the appendix on page 25, CRE is the primary driver of the elevated group provision run rate. The run rate reflects the proactive de-risking measures and valuation updates on legacy defaulted positions. Our high-risk CRE portfolio has declined materially since 2022. In the US, where we have seen the majority of stress, the book is down 42% since 2022 and about 20% year on year, reflecting repayments and our proactive de-risking measures. There is no evidence of broader portfolio weakness with the Private Bank and Corporate Bank portfolios remain stable and resilient. Our medium-term expectations remain unchanged.
Raja Akram: A gradual but steady decline in CRE provisions in 2027, and in 2028, a further improvement in the group provision run rate normalizing at around 30 basis points. Turning to capital on slide 11, we ended the quarter with a CET1 ratio of 14% at the high end of our operating range. Risk-weighted assets decreased by EUR 3 billion, excluding FX effects of EUR 1 billion. The quarter on quarter reduction was driven by the Investment Bank, which carefully contained market and credit risks in a volatile environment. The increase in the other category includes the impact of model simplification efforts. Net income, net of deductions for AT1 coupons contributed 43 basis points, reflecting strong third quarter earnings, while deductions for distributions of 26 basis points represent the 60% payout ratio.
Raja Akram: The 16 basis points reduction in other includes an immaterial impact from recent increases in government bond yields, reflecting prudent portfolio positioning and risk management. Note that the majority of our government bond portfolio in the banking book is accounted for at amortized costs, and overall, we remain comfortable with our sovereign bond exposure. Looking towards year-end, we expect our CET1 ratio to be within our operating range, reflecting ongoing business activity and the annual update of our operational risk RWA, reflecting higher 2026 revenues. Let me now turn to divisional performance, starting with the Private Bank on slide 13. Private Bank continued to execute on its strategic objectives and delivered a strong business performance across both personal banking and wealth management. Return on tangible equity rose to 13%, while the cost income ratio improved to 65%.
Raja Akram: Revenues increased by 8% year on year, driven by strong growth in both net commission and fee income, which increased 13%, and net interest income, which rose by 9%. Personal banking revenues climbed 6%, supported by strong deposit gathering, particularly in Germany. Wealth management revenues increased by 10%, reflecting higher deposit and investment product revenues as discretionary mandate grew significantly year on year. Continued strong net new asset inflows of EUR 17 billion with inflows in wealth management, mainly investment led, while personal banking continued to generate strong deposit flows. Deposits grew 4% year on year, supported by successful campaigns amid continued competition in Germany. Strong sequential growth in wealth management lending more than offset the targeted reduction of EUR 1 billion in non-SVA accretive retail portfolios. 180 wealth management hires have joined, well on track towards a target of around 250 by 2028.
Raja Akram: While the Private Bank launched a new digital mandates platform for clients in Germany. As expected, non-interest expenses increased year on year, reflecting continued investments to support future growth, including costs related to workforce initiatives. The increase was partly offset by continued efficiencies from organizational simplification, including run rate savings from prior branch closures and workforce measures, as well as lower costs due to favorable episodic items. We expect sequential cost increase reflecting the phasing of our investments. Provisions for credit losses were higher year on year, primarily due to the non-recurrence of favorable prior year model updates, while underlying credit performance remained stable. Turning to slide 14, Asset Management delivered a solid quarter, with assets under management surpassing EUR 1.2 trillion for the first time, driven by record total net flows and FX movements.
Raja Akram: Revenues increased 4% year on year, primarily driven by higher management fees, up 14% year on year, supported by higher average assets under management. Performance fees were lower as the prior year benefited from the fees generated through asset realizations in an infrastructure fund. Non-interest expenses increased by 5% year on year, reflecting investments in strategic growth initiatives and higher volume and share price-related compensation effects. Total net flows stood at a record EUR 31 billion in the quarter, including EUR 17 billion of long-term net flows, with Xtrackers being the primary growth driver. Our alternatives business returned to positive net flows, supported by EUR 800 million of net flows into our infrastructure products. For further details, please refer to DWS's disclosure on their investor relations website. Let us now move to the Corporate Bank on slide 15.
Raja Akram: The Corporate Bank delivered a record quarter, generating its highest-ever revenues of approximately EUR 2 billion, supported by an increase in commission and fee income in the revenue mix. The underlying momentum across the Corporate Bank is clearly becoming visible. Higher loans and deposits, together with the strong client engagement across our businesses, continue to drive growth. As a result, revenues increased by 9% year on year, including double-digit growth in both net interest income and net commission and fee income, a trend we expect to continue. Corporate treasury services and business banking both delivered double-digit revenue growth supported by business volumes. Institutional client services revenue grew modestly, reflecting the non-recurrence of prior year benefits. In Germany, revenue growth was even more pronounced, with a 13% increase driven by higher activity across all client segments.
Raja Akram: Deposits were EUR 346 billion, up 13% year on year and 6% sequentially, primarily driven by growth in sight deposits in corporate cash management. Loans increased 8% year on year and 2% sequentially to EUR 127 billion, supported by continued growth in flow and structure trade, while the targeted reductions of non-SVA accretive portfolios continued. Non-interest expenses remained essentially flat year on year as volume-related growth and targeted investments were partly offset by disciplined cost management. Provisions for credit losses increased to EUR 68 million, driven mainly by an idiosyncratic event, while the quality of the underlying loan portfolio remains solid. I will now turn to the Investment Bank on slide 16. Q3 revenues broadly matched the prior year, which was driven by a record FICC performance. FICC Financing revenues were significantly higher, reflecting strong pipeline execution and continued targeted balance sheet deployment across the franchise.
Raja Akram: Within this, net interest income was slightly higher as growth in the book was partially offset by previously discussed margin compression. FICC Markets revenues were down, driven by the non-recurrence of a very strong credit trading performance in the prior year quarter, specifically within the distressed businesses. Performance across the remainder of the markets businesses was higher year on year, with particular strength in our emerging markets business. Moving to IBCM, revenues were essentially flat compared to the prior year, with continued strength in equity origination and further year-on-year improvement in advisory. This was offset by debt origination, where a less robust environment for LDCM more than offset a record quarter for the investment-grade business. The IBCM pipeline for the remainder of 2026 continues to point towards an improved revenue performance for the H2 of the year.
Raja Akram: Non-interest expenses were 4% lower year on year, reflecting reduced litigation, bank levies, and certain one-off items, partially offset by targeted investments in line with our IDD strategy. Provision for credit losses was EUR 197 million, significantly lower year on year. While the prior year quarter was impacted by adverse Stage 1 and 2 model changes, the current quarter is driven by Stage 3 provisions, in part reflecting the planned capital accretive exits of legacy CRE exposures. Before we move to the outlook on slide 17, let me recap what I have observed about the franchise as I come to the end of my first year. I am impressed with the resiliency of the FICC franchise. We have a complementary and well-diversified business mix. As we saw this quarter, FICC Financing did very well in an environment which was not as conducive for FICC Markets.
Raja Akram: The Corporate Bank flywheel effect is now underway. We are gaining momentum even before we see full potential of German growth. The net new asset funnels in both wealth management and asset management are working better than expected. We have seen each quarter bringing record inflows, and this is before we see any tailwinds from pension reform or the expected shift towards more investment-led behavior in Germany. On expenses, we are delivering on plan quarter after quarter while investing. The CLP headline number reflects decisive actions to de-risk and free up capital. In respect of the CET1 ratio, our operating range reflects the totality of our expectations covering business and non-business related factors. Before we take your questions, let me summarize how these points shape our full-year 2026 outlook. We are on track to deliver revenues above EUR 33 billion, assuming markets remain constructive.
Raja Akram: We continue to expect total expenses of around EUR 21.3 billion, reflecting continued investment discipline, operating efficiencies, and any one-off items. Excluding the impact of targeted proactive de-risking actions and the idiosyncratic event, we expect loan loss provisions to be broadly in line with our guidance, slightly lower in 2026 compared to the prior year. We remain committed to delivering consistent capital returns and continue to make CET1 capital deductions in line with our 60% payout ratio target. As Christian said, we will provide an update on progress of our strategy when we report our full-year 2026 results. Thank you.
Silke Nicole Szypa: Thank you, Raja. Operator, we are now ready to take questions.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone with a question may press star and 1 at this time. One moment for the first question, please. The first question comes from Tarek El Mejjad from Bank of America. Please go ahead.
Tarik El Mejjad: Hi. Good morning, everyone. Christian, you mentioned a few times this year that you are a beat and raise story. We have seen the beats actually for the last 2, 3 quarters, not yet the raises. I have two questions in that context, understanding how we are actually coming at the end of this 2026 transition year. First on the revenues. Revenue growth was solid in the quarter with the Corporate Bank and Private Bank as the key highlight. As you mentioned, the FIC was also really resilient. You are tracking to deliver above EUR 33 billion if we analyze even assuming a harsh seasonality in Q4. Yet you also flag again that your ability to beat the 33. How much visibility you have for the rest of the year, and why did not you feel comfortable upgrading the guidance already in Q3?
Tarik El Mejjad: Maybe you can run us through your outlook for the different divisions, and particularly on NII. The second question is on costs. To me, that is the key highlight really of this result season and been the case in Q2 and since CMD actually started. You still guide though for EUR 21.3 billion, which implies a significant increase in Q4 costs and actually even a downside to consensus of around EUR 100 million. Are you intending to reinvest most of the cost savings? As I think you commented in Bloomberg this morning that tech and AI can let you raise ambitions further, or there is room to beat your latest guidance, and it will be a source of upgrades. Thank you very much.
Christian Sewing: Good morning, Tarek. Thank you for your question. Let me start with the revenue side, and Raja will take over on the cost commenting. Look, first of all, you said it right, beat and raise. By the way, it is not only beat, it is also raise, because we just increased the revenue guidance. You see that we are also raising. We are not only beating, but we are obviously based on the foundation which we have achieved over the first 9 months. We are very confident that from the around 33, we can clearly go beyond the 33 and above the 33. What gives us the confidence?
Christian Sewing: It is actually all four businesses, and I think this is the nice story which we outline in the IDD and where we are really tracking quarter by quarter in each and every business that we are actually firing on all four cylinders of this bank. In particular in the, let me put it this way, the more stable business, as we always call it, the Private Bank, Asset Management, and Corporate Bank. Obviously, all the inflows we see, be it in deposits, be it in assets under management, but also the lending growth, which we can see in the Corporate Bank, obviously provides us with a very good trajectory and with a very good view already for Q4, but also actually for 2027, where revenues are going.
Christian Sewing: Despite the fact that Q4 is always a, so to say, a special quarter and from an Investment Bank point of view is always a quarter which tends to be a bit softer than the first three quarters, we do believe, actually, that in particular, the other three businesses will compensate. To be honest, in the Investment Bank, everything I can see after the first three to four weeks, despite challenging markets, is actually that we are quite stable year over year and that we can have a very satisfactory quarter too. So the momentum in the Private Bank in terms of deposit gathering and growth and assets under management is continuing. Obviously, we are benefiting from that, what we have collected already in the first nine months. In the Asset Management, the fourth quarter is usually a better one because also of the performance fees.
Christian Sewing: The Corporate Bank, we have seen this really nice turnaround already in Q2, now the record quarter in Q3. I can't see any reason why this is not sustainable for Q4. Then I think a pretty stable Investment Bank performance, which gives us, so to say, all the visibility that we will be clearly above EUR 33 billion. So that is why we increase now the guidance. On the cost side, I would hand over to Raja. But let me be clear, full focus on cost discipline. I think we have shown it and demonstrate for the last three quarters that is ongoing. Raja give you a little bit more details how we plan for the fourth quarter.
Raja Akram: Yeah, thanks, Christian, and thanks, Tarek, for the question. I think, Tarek, if you remember when we did the IDD, one of the key changes that we made in the way we look at costs is to essentially give guidance around our total non-interest expenses rather than on an adjusted basis. Which means the various components of run the bank, but investments, operating efficiencies, any one-offs, they're all considered in that guidance. Obviously, things can come at different times. Operating efficiencies, we generally tend to have a pretty good view on. Investments we make according to our plan based on the opportunity that we do, and obviously investments and other items also include severance charges. So we took it into totality what the year would look like, and so therefore we sit here today, we think that's still reasonable.
Raja Akram: I think I mentioned in my prepared remarks on the Private Bank side, we will still be lighter this quarter versus from the investment perspective versus what we expect in Q4. We think we have a few more actions we can execute in Q4 that would actually be benefit to us in 2027 and 2028 and give us further upside. Look, I think the plan would be if we do end up doing better and we are able to make the investments that we want to make at a lower cost, I don't think there's that much more for us to pull into this quarter. If we end up being better, then we end up being better, and I'm not going to try to squeeze in artificially more investments into the quarter.
Raja Akram: But I think where we sit today in October, we think we have a reasonable plan towards the 21.3 for the full year, but obviously within a small margin that could move one way or the other. But as I said in my first call, our goal will be to undershoot that 21.3 and not overshoot that 21.3.
Tarik El Mejjad: Perfect. Thank you very much, both.
Operator: The next question comes from Chris Hallam from Goldman Sachs. Please go ahead.
Chris Hallam: Morning, everyone. Actually, the first question is just a bit of a follow-up to that question from Tarek. You are comfortable on that 21.3 for this year, but I guess how do we think about as a base case for next year? I appreciate you probably want to spend more time on this at Q4 results. But how should we balance that incremental investment, the normal sort of inflationary impacts or volume-related growth against the accelerating efficiency benefits that you should be seeing? In other words, if we try and pull all that together as a natural course or the natural sort of outlook for OpEx next year, that it goes down, that it goes sideways, or that it continues to grow in line with the business.
Chris Hallam: Then second, as you head into next year, it feels as though you are approaching quite an interesting sort of fork in the road in terms of capital allocation. You have got improving and strong capital generation that potentially creates scope for distributions above the 60% payout ratio. But at the same time, I think you are seeing attractive opportunities to deploy capital into growth, and you have become more confident in that 13% RoTE in 2028 representing a floor. So I guess how much of the potential upside requires additional capital deployment and RWA growth versus upside that can be delivered while simultaneously increasing shareholder distribution? Is the outlook you are seeing, the stronger outlook you are seeing becoming more capital intense or more capital generative? Thank you.
Raja Akram: Yeah. Thanks for the question. Let me just kind of take you, remind you of the baseline IDD plan. If you were to remember that we had talked about EUR 1.5 billion or so of incremental investments, of which we said EUR 900 million were going to be in 2026, which was really the big investment year, and they were going to taper off in the outer years. But the EUR 2 billion of productivity saves, they were going to obviously ramp up in the other direction. So if you were to just take those two things, dynamics into play, you would expect that our run rate should be better next year versus where we are today. So that is one perspective I would give you.
Raja Akram: You can look at the way we have managed expenses through the first three quarters, which means that we have pretty much offset the investments with operating efficiencies, and we do not see that trend slowing down in the future, which means that we actually have established a pretty good lower run rate base for the year. So that is the way I would think about it. But that is versus the IDD plan. But we have also been very clear that we believe we can, and we will do better, than the IDD cost trajectory for up till 2028.
Raja Akram: As Christian mentioned, and I said in my prepared remarks, we would like to give you guys a fully and a wholesome update on our new trajectory, a new and improved trajectory in January so we can lay out the sequencing, where we see the opportunity coming from and the operating rhythm going forward. In terms of your question, I think you only have to look at the way we had planned our investments, which were front-loaded, and our savings, which were ramping up to give you a little bit of sense of what we expect for 2027 and 2028. Sorry, on your second question about distributions. Look, we are fully committed to operating within our operating range. I think within our operating range, we have tremendous opportunity to deploy for our businesses, as you can see this quarter.
Raja Akram: Despite using a little bit less RWA planned, we had great performance in the FIC Financing business, a great loan gathering in our Corporate Bank. Yes, Chris, we would eventually, within the cycle between now and 2028, we will, given our strong earnings capacity and capital generation, be at a point where we will have to make those decisions. I think my perspective would be, for now, what we have is pretty self-sufficient. Again, we are seeing tremendous opportunities in our Corporate Bank as well as our Private Bank to deploy balance sheet. At the same time, that is something that we are considering as part of our full plan progress update in January to lay out our capital path going forward as well as our expense path going forward.
Raja Akram: You can expect that we will update you all in January, but for the moment, for the rest of the year, we believe we are comfortably within our operating range, and we will finish the year that way. In terms of the capital return cadence, I think we would like to, which subject to supervisory approval, have a cadence that is pretty predictable and consistent with what we have done in the first two buybacks this year. As you know, we have already done EUR 1.5 billion, and if everything goes well, we would like to keep that cadence subject to all the normal caveats.
Chris Hallam: Okay, thanks very much.
Operator: The next question comes from Anke Reingen from RBC. Please go ahead.
Anke Reingen: Yeah. Thank you very much for taking my questions. Just firstly, on the Corporate Bank, obviously a very strong trend in Q3, and you previously talked about exits in the mid-high single digit, which now based on the Q3 performance, looks somewhat conservative. Just thinking, should we think Q4 guidance is conservative and the trend can continue sequentially increase, or is there anything in Q3 you would highlight as a bit of a one-off that we can't extrapolate? I think you said on the fee growth you feel really encouraged about double digit. I think you talked about this a lot at the investor day, but maybe if you can just underpin a bit about what drives this double-digit fee growth.
Anke Reingen: Just technically, sorry, on the loan losses, when you say underlying they should be down, how should we think about it on a reported basis, loan losses in 2026? Thank you very much.
Raja Akram: Sure. Let me take the question on Corporate Bank. Look, we were very convinced, as you know, we had been telegraphing it quite a bit in advance that we expect that the H2 of the year we will end up at mid to high single digits. Frankly speaking, we outperformed our own expectations. No, there are no one-timers in this 9%. It is actually solid underlying operating performance. We believe based on where we are today, that we should be able to carry the same revenue momentum into the Q4. So we don't necessarily see a dip down in the revenues in the next quarter. I think we should be able to match what I said is already a record-performing quarter for the Corporate Bank. The reason I have that much conviction in that is because, one, it is coming from all three things.
Raja Akram: We have NII that is up both because of strong deposit gathering and loans. Then we have increased our fee year-over-year by 13% on the back of record trade finance and lending core and structured trade products. That gives us a lot of confidence that this trajectory for us is now there to continue. Just to remind you, I am sure it does not need to be said, this is before we see the full German fiscal stimulus play out. This is before we start seeing the full impact of the hedge resets that are being done. Obviously, as I mentioned, based on our hedging strategy, it comes gradually and sequentially and then over time, exponentially. That gives us a lot of confidence that we have now put the Corporate Bank squarely on a clear growth path.
Raja Akram: I would stop there, Anke, on that.
Christian Sewing: Can I just add one further? Raja rightly said it is before the German stimulus is really kicking in, though we are now finally seeing the first impacts and it goes down into the economy, which is good. Secondly, obviously, we also see that we have an opportunity here in the market with what is happening in Germany, and we see actually in Q3 the first real positive developments. Therefore, I would actually expect that this is going to be even more emphasized in the following quarters.
Raja Akram: Yeah, I think your next question was about CLP in Corporate Bank. I have mentioned before that the number for CLP, the Corporate Bank, is reflective of an idiosyncratic event in there, which we have fully reserved for now. If anything, we have a recovery potential, but that remains to be seen. Interestingly enough, our underlying usage of the Corporate Bank CLP was actually better than what we had planned. I think as we see the trends for the Corporate Bank, they are actually very promising despite what everything else is going on in the economy. The book has been held pretty well.
Anke Reingen: Thank you.
Operator: Then the next question comes from Nicolas Payen from Kepler Cheuvreux. Please go ahead.
Nicolas Payen: Yes, good morning. Thanks for taking my question. I have two, please. The first one would be on the IB, and just could you help us maybe reconcile what we see as a strong FIC financing revenue growth with only a slightly higher financing NII? Just wanted to understand how much reflects recurring income versus transaction-related revenues and to whatever extent we have a sustainable growth in FIC financing. The second question will be still on NII, and just wanted to see how we should think about the trajectory in 2027 beyond the hedge contribution in particular, in relation to deposit pricing and loan margin, how does it evolve and how much support you expect actually from volume growth going forward. Thank you very much.
Raja Akram: Sure, Nicolas. Look, I think on the FIC financing side, you have to think about it from a two perspective. We have a great volume growth because our pipelines are very strong, which is partially offset by the previously discussed spreads compression. We had talked about it at the Investor Day. We had talked about it at the beginning of the year, that there is certainly spread compression versus prior year. But that said, it is still accretive to us because the volumes are more than offsetting the spread compression. And in fact, what we had modeled from a spread compression perspective and a timing of when these refinancing would take place, that they had actually taken place earlier than what we expected. So that is why you see a little bit of a divergence between the volume growth versus the underlying NII growth.
Raja Akram: So that dynamic is playing out, but thankfully it is playing out, if not in line, but slightly better than what we had anticipated when we had put our plans together for 2025.
Operator: The next question comes from Tom Hallett from KBW. Please go ahead.
Tom Hallett: Hi. Thank you for taking my questions. Firstly, just what is your data center AI-related credit exposure and maybe what was that one year ago? I guess the same question on the revenue side of things, given the apparent slowdown. On the German macro, what are you seeing given all the rate moves and everything else that is going on, and how is that reflected in your numbers? Is it positively impacting your business or negatively impacting it, maybe relative to your expectations from a few months ago? Thank you.
Raja Akram: Sure. I would take the AI-related exposure or the data center exposure, however you want to call it. It has actually not changed since the last time we spoke. It was sub-EUR 10 billion. It is still sub-EUR 10 billion. It is still primarily focused on single-tenant long-term leases, 70% of it in the US. Low loan to value. Nothing has changed there. We obviously have a hedge program that goes with our overall exposure. I would say in the end of the day, it is not dramatically different. We have continued to participate selectively in all these deals and not much honestly to add on that front.
Christian Sewing: Tom, on the German macro, I would say that we see, as I tried to say before, encouraging signs actually when it comes to the broader economy. The government has revised the growth rate to 1.3%. We, as Deutsche Bank, see it around 1%, slightly above 1%. We actually see the German growth in 2027 based on the fiscal stimulus, but also based on the private investments which are now coming in at around 1.5% or slightly higher in 2027. If the government is continuing with its reforms and restructuring, to be honest, I think we can see even bigger growth in 2028. That is clearly an upside also for us. Why? Because we can already see it in the Corporate Bank that the stimulus is actually developing and translating into real business.
Christian Sewing: Secondly, the real game changer in particular for the Private Bank and for the Asset Management is the pension reform. From everything I see and I hear, you have also seen and heard all the comments from last week's Invest in Germany Summit in Berlin, but also from our Made for Germany initiative. The government is absolutely determined to go ahead with the pension reform. There might be the one or the other slight change when it comes to the years you need to pay in, whether it is 45, 43, but the capital markets component, in particular in Pillar 1, will remain. That will be part of the reform, and that is a game changer on the investment side. We have seen, I think because of the discussion already, a pretty good momentum in our business, but that will even be much better when this reform is decided.
Christian Sewing: Again, I do believe that this will go to parliament at the end of Q4, will be then decided, and then we have a quite different environment in Germany. Overall, I have to say, also looking at the results of the Invest in Germany Summit last week, that there is not only a renewed interest, but in particular what is happening in this world, that there is even more interest in Germany and in the stability. Therefore, compared to the end of Q2, I am net more positive on Germany, and again, we can see it and start to see it in our numbers.
Tom Hallett: That's great. Thank you. Just a quick follow-up to maybe the first question. Could you give us a sense of the revenue contribution of the AI data center stuff? Is it a meaningful contributor to your earnings? Just help us, give us a sense on that.
Raja Akram: Yeah. Look, I think we mentioned last time around that we participated in the three large tech IPOs that happened in Q2. Clearly, as you know, we are not the lead left bank, so you can think about that our contribution, we are meaningfully participant, and we like that, but we do not have a dependence on the AI revenue stream to keep or support our IBCM businesses. When I give the guidance that IBCM is going to be higher, H2 will be better than H1, the AI is a component of that, but we do not have a massive dependency or sole dependency. In our FIC financing book also, we had a growth, but there the growth is also pretty well diversified, not concentrated on AI. Yes, it is helpful.
Raja Akram: We want to obviously be in that space selectively, but it is not something that is going to make or break for us.
Tom Hallett: Great. Thank you.
Operator: The next question comes from Giulia Aurora Miotto from Morgan Stanley. Please go ahead.
Giulia Aurora Miotto: Hi. Good morning. Thank you for taking my questions. A question on deposits in Germany. If I look at your numbers in the Private Bank and in the Corporate Bank, deposits are up quarter-on-quarter. I do not know how much of that comes from Germany. There is a big debate on new entrants, more price competition, new players increasing the rates. Can you give us a sense of how your deposit growth looks like for Germany specifically? Do you see any pressure at all towards these new players that are paying more? A second question on pensions. Christian, I hear your optimism, and I understand that on the basis of volumes, but on the basis of profitability, we have seen really fierce competition on margins, especially from platforms that essentially are offering no fees.
Giulia Aurora Miotto: How do you think about the business opportunity in terms of revenues and bottom line from these pension reforms? Because it does not seem as material as we could have thought a few months ago. Sorry, just a quick follow-up on cost of risk. For Q4, consensus is closer to EUR 400 million. Shall we instead read that it will probably be a number closer to what you printed in Q3, so more like EUR 500 million, on provisions? I just need a quick yes or no answer. Thank you very much.
Christian Sewing: Giulia, let me start with the deposit question, and also the investment, and then Raja can add and also go for the provision question. Look, despite the competition we have in Germany, and to be honest, Giulia, we have seen that for the last 37 years since I have been in banking, that competition is highest in Germany. Therefore, I am not that worried about each and everybody who is entering the market because trust and long-term relationships is the key item, how you actually overcome it, and that is what we see. In the Private Bank, the biggest driver of our deposit intake is actually Germany, and it is the Personal Bank in Germany. We went with a campaign, and honestly, we are not providing rates which are in line with new people and new market entrants.
Christian Sewing: But, in our view, with fear, and for ourselves, I would say absolutely also attractive conditions. We saw a record Q3 quarter in terms of deposit intake in the Personal Bank. That is usually actually with existing clients and where we have new clients, we also see actually that with our additional products which we are offering and with the relationship approach we have, we can turn these new deposits into long-term business. I think that is the secret of the success. It is not about gaining the next deposit for four weeks, and then we are losing it. We do not want to have these hoppers.
Christian Sewing: And actually, we can see that with the number of new clients which then stay with Deutsche Bank and where we are doing out of deposits also other investment business, that this is really the success and therefore trust, credibility, of course also all our investments in the technology that we are enabling our clients to approach us in a digital way, that it is easy actually to get in contact with us. These three things makes the difference, and that is what we have seen for the last 9 months. To be honest, I do not actually see that this is a lot changing. I am not saying that this is not a competitive market.
Christian Sewing: But with that, what we have with the client foundation we have and the offerings which we are putting out, we have fared very well and therefore, the largest driver of deposit intake is coming from Germany. On the investment side, to be honest, I cannot see actually any erosions on the margin side. But you know that when we are talking about the Private Bank and what Claudio has done, I think in a superb way, is actually operating leverage. What he is doing month by month, quarter by quarter, is bringing the cost down in the Personal Bank. But also, by the way, process-wise in Wealth Management and in the overall Private Bank. Obviously, this helps us also to actually compensate for any margin pressure which would be there.
Christian Sewing: But therefore, also the new business we are getting in terms of or related to the pension reform when it comes to assets under management, is actually highly profitable because we also have our costs under control and actually bring it down quarter by quarter in the Personal Bank. Raja?
Raja Akram: Yeah. Thanks, Christian. Giulia, the only thing I would add on deposits is that on Private Bank, as said, we are predominantly coming from Germany. Obviously, the Corporate Bank deposit intake is very global for us, given the nature of our businesses. We have a great mechanism to get actually the operating deposits, and that is what is also driving our cash management business' progress. But there is also Germany is actually a big factor for even our Corporate Bank deposits because that is where majority of our clients sit. To your question about CLP, where we sit today, no, Giulia, I do not think that you should expect a number that is close to the Q3. I would say if I was to estimate at this point, the H2 probably in total may look like what the H1 looked like.
Raja Akram: And that is with the decision if we were to do any more additional de-risking of the CLP book for CRE. So no, I do not think we should be expecting a EUR 500 million quarter in the Q4. The way I think about it right now is a good proxy would be just in total, the H2 similar to what the H1 was like. But that also depends a little bit on whether we decide to do more de-risking or not. If we do not, then obviously it will be a little bit different number.
Giulia Aurora Miotto: Thanks.
Operator: The next question comes from Kian Abouhossein from J.P. Morgan. Please go ahead.
Kian Abouhossein: Yeah, thanks for taking my question. Just coming back on CRE and the provisioning line. You clearly indicated there could be further reduction on CRE into 2027. Trying to understand how we should think about provisioning in 2027 actually, rather than the Q4. What is triggering this accelerated de-risking at this point? This seems to be a bit of a change. The second question is related to RoTE. You are targeting RoTE of 13% plus. That in action, our coverage is the lowest RoTE of any bank, either achieved this year or achieved by 2028. I am really wondering what the trigger is or what you see as the long-term RoTE possibility, considering the environment is actually quite good. What should be the delta? Where is the delta coming from? Your Investment Bank performs well but makes a RoTE of 12%, roughly.
Kian Abouhossein: You are capping the size when other competitors are growing. I am just trying to understand how do we get that 13% to 15%? Or should we even think about beyond, from your perspective, and what will be the delta there? Thanks.
Christian Sewing: Hey, Kian, it is Christian. Let me start with the second question. Kian, we have always said, let me be clear, that we are on a journey also in the IDD in 2025. Please do not assume that the larger 13%, which we are more than confident in to achieve that this is the end game. Not at all. I agree with you. We are not yet there where we should be, and therefore we have a clear plan. Secondly, I think Raja pointed out very clearly that we will give you an update in January. Now, let us be patient for the next 3 months. As I told you, beat and raise, I love that. We just gave you a little bit of an upside on the revenue side. Raja has told you for the last 3 quarters, I think, that he sees actually upside on the cost side.
Christian Sewing: If you all move that together. You can obviously expect a different number in January. We need to work that out bottom-up, and we want to provide you with a solid plan. Where does it come from? Number one, cost. We have shown over the last three quarters a total cost discipline upside to that. With all that, what we are doing on AI workforce, other items, we are managing. To be honest, we see upside on the cost side, number one. Number two, I do not want to go into Raja's answer already, but also when you ask about loan loss provision, the way we are allocating capital, the way we are trying to optimize our capital, has also something to do with that. We are in a position to de-risk now where it is appropriate, where it is capital accretive. That will help.
Christian Sewing: Number three, while I think we have ambitious revenue goals, but so far we have met them or even overachieved them, to be honest, where the world is and where the world really wants to have a global alternative from Europe, we can be that. I can see opportunities in the German market because things are changing here. I can see actually opportunities outside Germany because of our global nature. Therefore, I even think that there is a chance to outperform there. But if you ask me what are the key items where we will outperform, it is cost and capital.
Raja Akram: Yeah. Thanks, Christian. Again, just to maybe put more of a CFO-ish answer to this question. You rightfully pointed out about where our returns are for the Investment Bank, but those are returns today without the full power of the investments on the IBCM playing out. So you have to think about that we have an opportunity there on the fee and the advisory-based business to take that RoTE up, not necessarily from a FIC perspective, but from the IBCM perspective. The Private Bank is generating now a RoTE of 12% to 13%, but that is with a very heavy investment in fixing its cost infrastructure, and we can already see that that is paying dividends. So I expect that the Private Bank RoTE to be closer to what we had promised at the IDD level.
Raja Akram: The two main observations that I had when I came into this job was, one, we can and we should and we must run this bank structurally on a lower cost base. So we are playing for all the marbles in 2028, and we will get this cost base down to beat our original aspirations for 2028. Secondly, about CRE and CLP. From my perspective, it is pretty obvious we need to do de-risking faster and free up capital. Why hope for things to either get better or deteriorate when we know we can actually exit out and put this capital to work today? So it is a little bit of a change in the way we are operating it, but it is quite intentional. We are not taking dramatic actions.
Raja Akram: But if EUR 100 million here lets me get off EUR 1 billion of CRE off my books in this environment where, frankly speaking, we just made this decision before the environment became tricky. I am really glad that we did two quarters of quite big changes. So between CRE getting to 30 basis points, which I will come to your question, and a better cost ambition, even if I was to change not the revenue CAGR, which by the way we are meeting, we think that we can do much better than the 13 plus that we will have laid out. I am actually looking forward to laying all of that out for you all in January.
Raja Akram: Look, the CRE trajectory from here is I am not going to promise a dramatic change in one quarter, but we are very confident that we will get to the 30 basis points in 2028 because of the action on the back of the actions that we are doing. The 2027 headline reported number will be lower than the 2026 number, and we will take that big step next year, and we will make the final step. You have put some additional disclosure in the deck. As you can see, we are almost there for everything already. Our Corporate Bank is running better than expected. Private Bank, same thing. Investment Bank broadly outside of CRE there. We just need to work this out.
Raja Akram: Because we have taken 20% of the CRE high-risk portfolio down in just one year, I feel relatively comfortable that our promise of 30 basis points is now backed by actions and not just by hope.
Kian Abouhossein: Thank you.
Operator: Then the next question comes from Stefan Stalmann from Autonomous. Please go ahead.
Stefan Stalmann: Morning. Thank you very much for taking my questions. I have two, please. Starting with the Corporate Bank. You described some of the very good business trends there, Corporate Banking revenue +13% year-on-year. Also on the deposit side, are we now seeing first tangible benefits from the Commerzbank UniCredit situation here, or is it totally unrelated? The second question is on the Investment Bank. It seems to me that your ability to improve returns depends very much on your cost control. We can see that very nicely in the first 9 months. Cost was only up 1%. That happens in an environment where your competitors, in particular in the US, are highly profitable, have a lot of revenue growth, lots of cost growth as well. Does it create competitive pressures for you, in particular on comp, and then also tech investments? Thank you.
Christian Sewing: Stefan, let me answer the first question. What we obviously see now over the last 3 or 4 months is that the intensity of client discussions, given the situation also around our neighbors, is clearly increasing. That is not a surprise because things are developing, and obviously people are actually looking for options. We can see that really developing in particular in the Corporate Bank, but also in parts of the Private Bank. If you look into the numbers in Q3, the impact is, to be honest, still minimal. But the real good thing is that we can see that clients are considering, that clients are moving, that clients are thinking about future investments to be done with whom, and really thinking about establishing Deutsche Bank as a new or as an alternative. That is obviously our chance.
Christian Sewing: Therefore, everything what we see in the Corporate Bank is actually not yet really reflecting the regrowth, so to say, in Germany and the opportunity we have in our home market. That comes on top. When I only see how in the structured way our people are going over this opportunity, honestly, I am very confident that we see some material upside actually in the Corporate Bank in Germany from the situation here. Obviously we need to take these opportunities. It is our obligation. We do it in a fair way. But obviously, this is a chance, and people are looking for a German bank which has an international network. Deutsche Bank is a remaining one.
Raja Akram: Yeah. Stefan, on IB, I think the return improvement actually has to come from all three angles. Clearly on the IBCM side, we are investing and we believe, as I mentioned, that we are going to make progress against not only in the H2, but in the H2 of the year. The cost discipline is there, and honestly speaking, the investments that are needed are reflected in our run rates because we have been hiring in IBCM. We have been investing in the FIC tech as part of our investment plan for 2026 and 2027. We do not feel the need that we need to materially upsize that spend to compete. Looking at the US banks, a big chunk of their spend actually is in the equities franchise, given with the dynamic, and we are not there.
Raja Akram: Our need for investment is also rationalized by the businesses that we are in. Our entire focus is to keep the cost base as efficient as possible, but frankly speaking, focus more and more on growing our capital light advisory businesses, which frankly speaking, also do not require as much tech or infrastructure spend. I think that this quarter we would also benefit a little bit about the non-recurrence of some things that happened in the year-over-year. Despite that, I think the cost base reflects the investments that are necessary, from my perspective, to be competitive. As I said, and Christian and I said, that said, we still see there is more opportunities there in the outer years.
Stefan Stalmann: Very helpful. Thank you very much.
Operator: The next question comes from Jeremy Sigee from BNP Paribas. Please go ahead.
Jeremy Sigee: Thank you. A couple of quite high-level macro questions really, but I would be interested in your perspectives. The first is you very much emphasize, and it is great to hear it, the positive comments about the German stimulus and the positive impacts that is having. Do you sense or do you hear in your discussions with clients any adverse impacts from some of the bond market disruption, the sovereign issues, energy prices, and also some of the German political pressures that we are seeing. Are any of those headwinds a material factor in your discussions with clients. Then second, also quite macro question, you also mentioned the EU legislative package coming in Q1 next year. What are the key bits of that that you are looking for that will make a difference to your business?
Christian Sewing: Yeah. Let me start, and Raja, please add. Look, overall, and again, I am obviously also a bit influenced by the meetings last week in Germany, in Berlin. But also, actually, obviously talking to investors when I was at the Canada Investment Summit and getting their views on Germany. They clearly see that something is happening in Germany. They clearly see that the growth rate is far more robust than we thought actually, at the end of Q1. If you think that Germany is energy dependent and we have an oil price which is far higher actually than we had at the start of the year, and Germany is nevertheless growing now by potentially above 1%, then this also tells you something about the resiliency of the underlying economy.
Christian Sewing: Again, we can now see that the fiscal stimulus is coming into the economy and that we also see more private investments. Just also have another number. Last week, we got on this Invest in Germany Summit, I think net another EUR 250 billion of investment. That comes on top of the EUR 860 billion of investments which are committed by the Made for Germany initiative. So things are coming. You asked me for the negative questions. It is not so much on the sovereign debt for Germany, to be honest. That is not a topic at all. But there is obviously, with the elections which we had in some of our states, there are concerns and in particular, there are concerns when it comes to the socialization question in Berlin. Now let us see what is happening there with the local government.
Christian Sewing: I cannot give any predictions whether they form a coalition or not. But I think the answer of the federal government was very clear, that they want to put a law into place which actually prohibits that. That was taken very positive by the investors also last week. But I tell you at the same time, this now needs to come. You cannot wait for a long time with this new law, because investors want to see actually evidence to the talk which has been given. But I do believe that the federal government, in this regard, has understood the concerns of investors, in particular to this question, and therefore, I do believe that this is under control. The most important, though, is actually aside of that.
Christian Sewing: The most important is that despite the rise of the far right and the far left, Germany stays the course to do reforms. That is the only chance this government has actually to pursue and get back into economic growth. That is, in my view, the only chance how to make far right and far left smaller. Maybe painful at the start if you do the reforms, but it is in the long term, the right thing for Germany. That is what corporate Germany is telling the government, and I do see in this regard, actually, a very committed government. I think that overall investors are really acknowledging the progress, but now we also need to see that these reforms which have been announced are actually implemented.
Raja Akram: Yeah. Thanks, Christian. Before I address the legislative package, I just obviously know the way I think about it is, one, is what are the actions that are within our control, even before the legislative package goes through. As you know, we announced yesterday that for the second year in a row, our P2R has been lowered by 25 basis points this time around, and that is actually a reflection of the business model shifts that we have been working on being acknowledged even under the current framework. Which is actually something that we are very happy about, that we are not solely dependent on legislation for our capital position improvement, something that we could do. In terms of the overall package, I would say there are three things.
Raja Akram: One is it takes away the uncertainty about additional capital inflation that is weighing down everybody because there is a lack of clarity around what is going to happen with the unintended consequences of CRR3, especially in relation to the output floor, and especially in light of what Christian just said, that where Europe needs growth to be supported by banks, and whether that would actually prohibit that. I think we would very welcome some finality and clarity, and we know what the right answer is, but it would be great to actually have that put aside. Secondly, obviously, the bigger picture is about the single market integration, and for a capital markets bank like us, that obviously is a really big thing.
Raja Akram: The third is some technical changes that I think are super important and from our perspective, easier to implement, the discussions around securitizations or software treatment in Europe versus where we see elsewhere in the world. Net net, I think there was a study, I referred to it last time, was one of the firms that Deutsche Bank, if all these recommendations were approved as proposed, would be the biggest beneficiary bank in Europe. So if we can take different perspectives, but net net, taking away the uncertainty, making sure that we can invest where to support Europe, dealing with some of the nuances about securitization and software capitalization, and then over the longer term, getting the single market integration would be really important. Obviously, from my perspective, the gravy would be some level of regulatory simplification.
Raja Akram: I think that our regulators are already working on that, so I have to comment on that. At least in our own case, getting this P2R reduction, acknowledging our work, I think it is the right step and we hope that trajectory continues.
Jeremy Sigee: Brilliant. Thank you.
Operator: The next question comes from Matthew Clark from Mediobanca. Please go ahead.
Matthew Clark: Good morning. A couple of questions. Firstly, on the commercial real estate and the LTV disclosures in the report. Just hoping to get a bit more color on this other business segment. I know it is disclosed as being a small component of the stress-tested CRE portfolio, but it has seen its LTV go up a long way. Just like to know a bit more what exactly this is, why is not it booked in the other major divisions? Is the higher LTV a bad thing in that the market is deteriorating? Is it a good thing because you are using your discretion to mark stuff for sale? Just a bit more color there to understand what is going on and whether it is good or bad.
Matthew Clark: And then on the personal banking revenue guidance has been nudged down a bit for the full year and seems to imply a Q4 versus Q3 decline. Just like to know what is the driver there. It seems to contrast a bit with the very strong volume growth we have seen. Just wondering what the offset to that volume growth is coming from. Thank you.
Raja Akram: Yeah. Sure. Let me take the second one first. I would not view that as a substantive downgrade. Obviously, when you are in a technical land within percentages, we have to follow the rules and actually reflect what is slightly below or what is slightly higher versus higher. I think the trajectory of that business is as strong as it could be. I would like to reassure you that that is a technical change, not a substantive change.
Matthew Clark: Thank you.
Raja Akram: In addition. Sorry?
Matthew Clark: Just saying thank you.
Raja Akram: Second question you had was about LTV. The way to think about LTV is, a portion of that is actually booked in C&O, which relates to our legacy portfolio, so therefore it is a little bit different. Look, I think the way to think about the slight decline in gross LTV is entirely by the legacy book and reflects some valuation updates. The performing book actually shows a moderate improvement. Given the exits that we do, obviously exiting out of a position that actually had a large non-loss provision can also obviously have a momentary impact. What you should look at is the stable and net LTV basically shows that we have actually built quite a bit of additional CLA buffers to accommodate any future weaker wall valuation trends.
Raja Akram: As such, I am not super fussed about the decline in one particular pocket, which is primarily on the legacy defaulted book.
Matthew Clark: Thank you.
Operator: The next question comes from Andrew Coombs from Citi. Please go ahead.
Andrew Coombs: Good morning. Just a couple of follow-ups on capital. The first, the Pillar 2 deduction, the 25 basis points decline in the SREP. You haven't changed your operating range from the 13.5% to 14%. Just wondering whether you would consider doing so now you've had that confirmation of a lower Pillar 2. Secondly, risk weights. I know you had your wholesale models reviewed back in 2023 by the ECB. We've seen some other banks come out with some disclosure around ECB reviews of their corporate risk weight models. If we run a screen across Europe, Deutsche Bank, even post that adjustment in 2023, does appear to have lower corporate risk weight density than a number of other European banks. Part of that can be attributed to the PD, but a lot of it is lower LGD.
Andrew Coombs: Just wonder if you can comment on that, why you think that is. I know in the past you've talked about using CDS, SRTs, guarantees. Anything you can just disclose on that and on your corporate risk weight models more broadly. Thank you.
Raja Akram: Sure, Andrew. In terms of the changing the operating range, look, we just set it up not even a year ago. We just received this notification, obviously last night. We will take this into consideration in totality when we do our plan update in January and see if anything needs to be updated or revised. But we are very comfortable with the range that we have set up for now. It also allows us a cadence in terms of our share buybacks and predictably. At this point, I would say I'd like to stick to what we committed to, and obviously within that, we have room to maneuver ourselves given that our distance to MDA is now a little bit different. I would say wouldn't change that.
Raja Akram: In terms of the SRTs, I think we had talked about at the investor day that we wanted to get approximately 100 basis point benefit. We are rolling out new programs every quarter. To date, we are probably three quarters of the way from a benefit perspective. This will obviously continue into the rest of the year, and next year, obviously, you have rollover, so that's a continuous program. Look, I think on the risk density, you have to look at our business model. We have a large portion of our portfolios that is in zero or low percent, low risk weighted assets such as bonds or sovereign bonds. So it's hard to compare risk density for our business versus others. As it relates to internal models is concerned, obviously, that's a regular review that all banks are required to take under EBA guidance and CRR.
Raja Akram: What I can confirm is that our operating range of 13.5% to 14% considers any known items or that we foresee impacting our operating range. So it is all-encompassing. Obviously, we go through regular reviews, and we will next year as well, and sometimes we come out ahead, sometimes we come out a little bit behind, but that's nothing to us, that's a routine part of running our business. But low risk density, I don't think it's really easy to compare us to another player if you look at the type of activity that we engage in versus some of the other banks.
Operator: As a reminder, if you would like to ask a question, please press star and 1. The next question comes from Mate Nemes from UBS. Please go ahead.
Mate Nemes: Yes. Thank you for your presentation and for taking my questions. I have three of them, please. The first one would be a follow-up just on deposits. Christian, you talked about new deposit clients turning to longer-term clients. Would you mind giving us a ballpark percentage share of new clients that stayed with Deutsche Bank? How sticky these new clients are? What is the share of so-called hoppers? The second question would be on wealth management. I noticed the 180 hires against the 250 targets in 2 years' time. Can you give us a sense whether there should be any slowdown in hiring the next few quarters? Also, if you can comment on the key USP of Deutsche Bank that allows you maintaining this elevated level of hiring. Just another follow-up on data center exposures.
Mate Nemes: You mentioned that it is in the high single digits, fairly stable, not having much to report on this. I was just wondering if you can talk a little bit about how you approach concentration risk, be it to the entire data center financing CapEx team or to the single obligors as well, as the space can be reasonably concentrated. Any thoughts on that would be appreciated. Thank you.
Raja Akram: Hi, this is Raja. Let me just take. I think it is hard to kind of talk in terms of number of clients. I think the way we look at it is that we have run campaigns in Q2 and Q3 across our brands, both Deutsche Bank and Postbank. What we have seen is whatever we had expected from a model behavior perspective or what we expect to retain after the promotion period is over, we have actually either met that or slightly exceeded that. So that gives us the confidence that we do not anticipate that every new client that will come in as part of the promotion will stick around.
Raja Akram: I think that would be a fallacy to think about it, but what we are seeing is that the retention rates are in line with the model behavior is that it makes it a little bit accretive to us. That is the way we think about the PB deposits, and as Christian mentioned, our goal generally is to not go with the highest offering with the new entrant, nor with the longest promotion period. That is the hypothesis we test, and then based on that, if 50% stay or 60% stay or 40% stay, as long as it is within our model behavior, we consider that campaign to be a success that we were able to generate what we wanted to generate and enough people stayed. In terms of your hiring pattern, I think you are referring specifically to PB.
Raja Akram: At the time of the investor day, we said that we wanted to hire approximately 250 new advisors. We are approximately at 180 already and frankly speaking, we are probably ahead of plan there. That just shows the power of the brand that we have been able to attract collectively teams, where we may have had to hire individuals. I think the hiring by default, if you were to think about between 180 and 250 and if you have done 180 already in the first year, would be obviously exponentially much lower than. We do think that we can get to approximately 200 or 220 by the end of the year. In terms of data center exposure, I think as I mentioned to you, our strategy has always been very clear that we wanted to go with hyperscalers, single tenant long-term leases with strong sponsor.
Raja Akram: Beyond that, we have a strict limit on how much exposure we want by a counterparty. Beyond that, we have hedging programs in place to basically de-risk above and beyond our risk appetite. As I mentioned, the number, the overall exposure is pretty much the same that I had discussed in the beginning of the year, sub-EUR 10 billion. We are definitely, obviously where we have concentration, it is with large hyperscalers, and even within those, we try not to retain all the risk.
Mate Nemes: Got it. Thank you, Raja.
Operator: Ladies and gentlemen, there are no further questions at this time, so I would like to turn the conference back over to Silke Szypa for any closing remarks.
Silke Nicole Szypa: Thank you for joining us and for your questions. For any follow-ups, please get in touch with the IR team and we look forward to speaking to you on our Q4 call. Thank you.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
