Good morning, ladies and gentlemen, and welcome to the Q1 2025 Analysts Conference Call and Live Webcast. I am Yusuf, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and that this conference is being recorded. The presentation will be followed by a Q&A 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. This conference must not be recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Ioana Patriniche, Head of Investor Relations. Please go ahead.
Thank you for joining us for our first quarter 2025 results call. As usual, our Chief Executive Officer, Christian Sewing, 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, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.
Thank you, Ioana, and a warm welcome from me. Before we turn to our performance, I want to offer my perspective on recent events. The geopolitical landscape is rapidly evolving, and uncertainty and volatility are likely to stay elevated for the time being. This will likely impact the world economy. We still believe globalization will persist, but we expect to see a substantial reordering of trade corridors and supply chains, and this may accelerate some of the long-term trends we have spoken about for some time. We are particularly encouraged to see what is happening in our domestic market with regards to fiscal changes and structural reforms leading to a much-needed economic boost for Germany and Europe. All of this underscores why we believe our global housebank business model and four strong businesses position us very well to support clients through these unsettled times.
Already, since the start of the second quarter, we are seeing clients increasingly seek our expertise and advice. Now, let me turn to our results. We are very pleased with a very strong first quarter performance. We delivered revenues of EUR 8.5 billion, up 10%, a strong start towards our full-year revenue objective of around EUR 32 billion. Our cost-to-income ratio was 61%, with adjusted costs of EUR 5.1 billion in line with full-year guidance. Our loan portfolio quality remained solid. Stage three provisions are down nearly 30% year-on-year, normalizing as expected, while Stage one and two provisions were higher and including overlays in this more uncertain environment. Our pre-tax profit of EUR 2.8 billion was up 39% year-on-year. With net profit of EUR 2 billion, our return on tangible equity was 11.9% in the first quarter.
Our CET1 ratio of 30.8% sets us up well for the rest of the year, both to support our clients and reward shareholders. To summarize, the start of the year was very strong. We believe that we have the right business model both to face uncertainties in the environment as well as to steer the bank towards delivery of our 2025 targets. Beyond that, we have a clear management agenda for further developing our global housbank offering for our clients and sustainably increasing returns for shareholders beyond 2025, which I will talk about shortly. Let's now turn to our resilient operating performance on Slide three. We delivered pre-provision profit of EUR 3.3 billion, up 34% year-on-year. Revenue momentum, combined with cost discipline, resulted in strong operating leverage of 11%, with each operating division delivering positive jaws. Revenue quality is strong.
71% came from more predictable revenue streams in the corporate bank, private bank, asset management, and FIC financing. Net commission and fee income increased by 5% year-on-year, in line with our goals and reflecting our strategic investments. Net interest income in key banking book segments and other funding also remained resilient year-on-year. Non-interest expenses declined 2% year-on-year to EUR 5.2 billion, as non-operating costs normalized as expected. Our progress on operational efficiencies enabled us both to deliver adjusted costs in line with plan and continue to self-finance investments. Turning to Slide four, let's now look at the progress with our 2025 delivery. Turning first to revenue growth, since 2021, we have achieved a compound annual growth rate of 6.1% within our target range of 5.5%-6.5%. Double-digit first quarter revenue growth contributed EUR 700 million towards our target of EUR 2 billion incremental revenues in 2025.
Second, in respect of operational efficiencies, we have reached 85% of our EUR 2.5 billion target, with EUR 2.1 billion in cost efficiencies either delivered or expected from completed measures. Third, we have made further progress with our capital efficiency measures, with EUR 4 billion of RWA reductions delivered this quarter through a combination of data and process improvements and a securitization transaction. This brings us cumulative RWA benefit to EUR 28 billion, at the high end of the bank's target range of EUR 25 billion-EUR 30 billion by the end of this year. We have announced capital distributions of EUR 2.1 billion this year, including the 2024 dividend and our recently launched share buyback program. This will take cumulative capital returns to EUR 5.4 billion since 2022, and we remain committed to surpassing our capital distribution target of EUR 8 billion in respect of the years 2021 through 2025. Put simply, our 2025 targets are in sight.
Let me now turn to our long-term management agenda on Slide five. Our aim is to deliver a sustainable increase in returns through three levers: increasing value generation for shareholders, re-engineering our target operating model, and reinforcing leadership. First, we will deploy shareholder value-add methodology in our planning process and decision-making to optimize resource allocations across the group. Progress is underway. In the private bank, we have reduced RWA exposures in below-hurdle mortgages, and in the corporate and investment bank, we are undertaking client-level reviews. We are also making progress in re-engineering our target operating model. In the private bank, we continue to transform our personal banking operations by reducing branches and moving to digital channels, resulting in a planned reduction of almost 2,000 FTEs. We are transforming our corporate bank German platform and overhauling front-to-back processes in the investment bank, leading to improved client experience and efficiency.
Finally, we are strengthening leadership by streamlining governance structures. We have already reduced our committees, councils, and internal policies by about half. This speeds up decision-making and increases accountability while maintaining a robust control environment. As promised, a few words on how we are well-positioned to help navigate clients through the dynamic environment on Slide six. In Germany and across Europe, we see fresh commitment to support growth, boost competitiveness, and accelerate reform. We believe Germany's loosening of the debt brake will unlock considerable investment opportunities, and the proposed pension reforms are expected to boost activity in the capital markets. At the European level, we see commitments to invest in defense and infrastructure and much-needed embrace of structural reforms, for example, the Savings and Investment Union and measures to boost sectorization. Globally, trading patterns are shifting, supply chains are being rewired, and new partnerships and alliances are emerging.
All of this plays to our strengths. Clients need a partner with the expertise, financial strengths, product breadth, and global and local network to help them navigate this changing environment. We aim to be that partner, as our leading franchise and diversified businesses are best placed to advise clients at European and global levels. Our corporate bank was voted World's Best Bank for Corporates by clients. We combine global reach with local presence to support multinational clients as their supply chains evolve. We are already a partner of choice, with around 40% of our revenues with multinationals coming from cross-regional corridors. With deep roots in Europe and in Germany's Mittelstand, we are ideally positioned to help clients benefit as fiscal stimulus feeds through the real economy. Our investment bank is also ideally placed to help institutional and corporate clients navigate this environment.
We have the leading global non-U.S. FIC franchise. We were the top-ranked European bank in global SSA issuance and in EMIA cash rates, while in Germany, we have the leading ONA franchise. We are well-positioned to support the broader German and European defense agenda, where we have the leading franchise in aerospace and defense in Germany, providing clients with holistic global coverage. We are also Germany's leading wealth manager and retail fund manager through our private bank and asset management businesses. This positions us well to help clients capitalize on savings and investment reforms. We have already rebalanced our wealth management business mix, resulting in increased assets under management flows, and we continue to scale up in our core growth markets.
DWS, with assets under management of over EUR 1 trillion, record net inflows of EUR 20 billion in the first quarter and a market share of 11% in European ETFs, is ideally placed not only to serve German and European investors but also to act as a gateway to Europe for investors globally. To sum up, across all our businesses, we believe we are very well-positioned to serve German, European, and global clients in a fast-changing environment. With that, let me hand over to James.
Thank you, Christian, and good morning. As you can see on Slide eight, we saw strong delivery this quarter against all the broader objectives and targets we set ourselves for 2025. More importantly, we've done so without compromising on our investments, be it to support operating performance or our controls.
Our capital position is robust after absorbing deductions for dividends, share buybacks, and AT1 coupons, and the CRR3 impact. Equally, our liquidity metrics are sound. The liquidity coverage ratio was 134%, in line with our target, and the net stable funding ratio was 119%, at the upper end of our target range. While we recognize that the last few weeks have been turbulent and resulted in a significant amount of volatility and uncertainty, reflecting on the path ahead, our balance sheet remains strong. As shown on Slide 28 in the appendix, asset quality is sound, the bank's liquidity profile is strong, and together with our robust capital position and strong earnings momentum, we believe that we are well-equipped to continue to support our clients globally and to provide advice and solutions as they navigate this time of uncertainty.
Our prudent approach to managing our trading book also paid off in April. Our trading P&L has stood up well throughout the market volatility and developed in line with the bank's risk appetite. With that, let me now turn to the first quarter highlights on Slide nine. We've demonstrated strong franchise momentum across the bank. Investments across businesses continue to pay off, which drove a significant increase in revenues, both sequentially at 18% and year-on-year at 10%. The balanced portfolio mix also enables us to weather times of uncertainty. Our cost income ratio of 61.2% benefited both from our continued cost discipline and a normalization of non-operating costs. Non-interest expenses in the first quarter are in line with our guidance for 2025.
Profit generation was strong, and our post-tax return on tangible equity of 11.9% underpins the bank's ambition to deliver sustainable returns of greater than 10% in 2025 and beyond. Our tax rate in the first quarter came in at 29%. In the first quarter, diluted earnings per share was EUR 0.99, and tangible book value per share increased to EUR 30.43, up 4% year-on-year. Before I go on, let me add a few remarks on corporate and other, where you can now find further information in the appendix on Slide 39. With respect to developments this quarter, C&O generated a pre-tax loss of EUR 34 million, mainly from shareholder expenses and other essentially retained items, partially offset by positive revenues in valuation and timing. Let me now turn to some of the drivers of these results and start with net interest income on Slide 10.
NII across key banking book segments and other funding was EUR 3.3 billion, broadly stable quarter on quarter. As in prior quarters, private bank continues to deliver strong NII supported by our structural hedge portfolio, while FIC financing continues to grow lending. The corporate bank is slightly down compared to the prior quarter, principally due to accounting reclassification effects in loan NII, which are offset in remaining income. Deposit NII was broadly flat, as hedge benefits offset a reduction in policy rates, and portfolio growth remained strong. With respect to the full year, in line with prior guidance, we continue to expect a material NII tailwind for the key banking book businesses and other funding versus 2024, which is principally driven by hedge rollover and deposit growth.
Compared to our disclosure a quarter ago, higher long-term rate expectations, specifically in euros, increased the expected benefit of our hedge portfolio in the outer years. In the appendix on Slide 26, we illustrate the dynamics of the interest rate hedge in more detail. Turning to Slide 11, adjusted costs were EUR 5.1 billion for the quarter, in line with our expectations. Cost discipline across the franchise remained high and materially offset an increase in compensation costs. This was driven by higher performance-related cash accruals and increased equity compensation costs as a result of a rising Deutsche Bank and DWS share prices during the first quarter. With that, let me turn to provision for credit losses on Slide 12. Stage 3 provision for credit losses materially reduced in the first quarter to EUR 341 million, in line with expectations.
Stage one and two provisions were elevated at EUR 130 million and included around EUR 70 million of provisions related to the impact of weaker macroeconomic forecasts on forward-looking information, as well as overlays, including for direct tariff-driven impacts on select higher-risk names. The remainder was driven by model and portfolio-related effects. We feel comfortable with our underlying portfolio performance and the development of provisions, but we recognize the ongoing uncertainty around the macroeconomic environment and monitor these developments closely. With that, let me turn to capital on Slide 13. Our first quarter common equity tier 1 ratio remained strong at 13.8%. The CRR3 go-live impact was one basis point since the reduction in credit risk RWA was largely offset by reductions in capital supply and an increase in operational risk RWA. Aside from the CRR3 go-live impact, risk-weighted assets increased, principally reflecting a normalization of market risk RWA, as previously guided.
This increase was partly offset by a reduction in credit risk RWA, as higher business growth was more than offset by capital efficiency measures, including a securitization transaction during the quarter. The CET1 capital increased as the strong first-quarter net income, net of AT1 and dividend deductions, was offset by equity compensation, the FX impact on account of the AT1 call and other capital charges. At the end of the first quarter, our leverage ratio was 4.6%, up by one basis point, as higher trading inventory and high-quality liquid assets were offset by higher tier-one capital, alongside beneficial FX and CRR3 effects. With regard to bail-in ratios, we continue to operate with a significant buffer over all requirements. In short, our capital position remained strong. With that, let us turn to performance in our businesses, starting with the corporate bank on Slide 15.
In the first quarter, the corporate bank delivered a post-tax return on tangible equity of 14.4% and a cost-income ratio of 62%, despite an uncertain geopolitical and macroeconomic environment and lower interest rates. Revenues were EUR 1.9 billion, essentially flat sequentially and year-on-year, supported by interest rate hedging, higher deposit balances, and growth in net commission and fee income, mostly offsetting ongoing deposit margin normalization. We continue to make good progress by further accelerating non-interest revenue development, with 6% growth in net commission and fee income, and benefiting from a particularly strong contribution from our institutional client services business. The deposit base remained strong. Adjusted for FX movements, deposits were up by EUR 13 billion year-on-year and by EUR 6 billion sequentially. Provision for credit losses was contained at EUR 77 million, including EUR 50 million of stage one and two provisions, of which EUR 29 million related to net management overlays.
Non-interest expenses were lower year-on-year, driven by the non-recurrence of a litigation item in the prior year and continued tight cost management. Looking ahead, we believe that our international presence, strength in all trade corridors, and strong footprint in Germany position the corporate bank well to support our clients on changes in trade flows and supply chains. I will now turn to the investment bank on Slide 16. Revenues for the first quarter were 10% higher year-on-year, with strength in FIC driving improvement to the division's return on tangible equity and cost income ratios. FIC revenues increased by 17%, with both rates and foreign exchange significantly higher year-on-year, reflecting heightened market activity and increased client engagement. We continue to support our institutional and corporate clients through volatile markets and saw activity increase across both groups in the first quarter, including our priority clients.
Meanwhile, we continue to advance the business strategy of developing existing and adjacent businesses. Financing revenues were also higher, reflecting strong fee income across the business, combined with an increased carry profile following targeted balance sheet deployment in line with our strategy. The targeted deployment in the business is also reflected in the increased loan balances compared to the prior year. Moving to origination and advisory, revenues were lower year-on-year due to a loss on the partial sale and markdown of a specific loan in leveraged debt capital markets, as guided. Excluding this item, revenues increased 5% on a like-for-like basis compared to the prior year quarter in a fee pool that was broadly flat. Advisory revenues were significantly higher in a static industry fee pool, with the business maintaining the momentum of a strong 2024.
Non-interest expenses were essentially flat, with higher adjusted costs, which were impacted by FX translation, offset by lower litigation and reduced severance and restructuring costs. Provision for credit losses were EUR 163 million, with the year-on-year increase driven by stage one and two provisions, which includes tariff-related overlays, model changes, and portfolio effects, largely offset by a material reduction in stage three impairments, including CRE. Let me now turn to private bank on Slide 17. The private bank achieved a 43% increase in pre-tax profit, reflecting 7% operating leverage driven by revenue growth and further cost benefits from progress made in our transformation initiatives. Good business momentum continued with net inflows of EUR 6 billion and higher revenues driven by 5% growth in net commission and fee income from investment product revenues, in line with our strategy, while net interest income grew by 2%.
Revenues in wealth management and private banking grew 8%, reflecting double-digit growth for investment products, mainly driven by discretionary portfolio mandates. Revenues in personal banking reflect our decision to reduce capital-intensive loan products such as mortgages, while revenues from deposit and investment products were up 4%, mainly from discretionary portfolio mandates. The private bank has continued its transformation with an additional 60 branch closures and reductions of approximately 400 FTE in the quarter, on track to achieve almost 2,000 FTE reductions as part of further restructuring efforts in Germany. Benefits from these measures, coupled with normalized investment spend, including from the Postbank IT migration and lower regulatory costs, drove adjusted costs down by 4% year-on-year. Provision for credit losses in the private bank was impacted by the deteriorating macroeconomic environment, while underlying portfolio performance improved.
The prior year quarter was impacted by elevated provisions in wealth management and transitory effects from the operational backlog. We expect the private bank to continue benefiting from a combination of efficiency programs underway in Germany, Italy, and Spain, where benefits are yet to be realized, revenue growth initiatives, and optimization of capital usage via recalibrating the lending book and higher focus on capital-light solutions, which in turn will lead to sustainable profitability and annual mid-teens RoTE in the near term. Turning to Slide 18, my usual reminder, the asset management segment includes certain items that are not part of the DWS standalone financials. Asset management delivered materially improved profitability with a 67% increase in profit before tax. This was driven by higher revenues across all streams, resulting in a materially lower cost income ratio and an improved return on tangible equity of 22.1%.
The EUR 730 million in revenues were primarily driven by higher management fees from both active and passive products, benefiting from growth in average assets under management. The increase in performance fees was driven by the ongoing recognition of performance fees on one infrastructure fund, while other revenues benefited from a more favorable outcome of fair value of guarantees. Slightly higher costs were driven by business growth and increased equity compensation costs as a result of a rising DWS share price during the first quarter. Assets under management remained over EUR 1 trillion, with record net inflows of almost EUR 20 billion, driven by passive products of EUR 13 billion, offset by negative FX and market impacts. Cash, SQI, and fixed income also contributed, with combined further net inflows of EUR 11 billion, overcompensating for net outflows of EUR 3 billion in active equity, alternatives, and multi-asset products.
In the quarter, a new private credit partnership with the investment bank was launched to enhance the alternatives franchise, aiming to provide prospective investors with access to this highly sought-after asset class. Finally, let me turn to the group outlook on Slide 19. In short, our outlook remains largely unchanged, and we are on course to deliver our full-year targets for 2025. We are steadfast in our aim to deliver improved profitability and shareholder returns. Our strong revenue performance in the first quarter provides the step off to deliver this year's revenue goal of around EUR 32 billion, with our complementary businesses all performing well. We remain committed to rigorous cost management while not making any compromises on controls and investments, as we continue to benefit from ongoing delivery of our cost efficiency initiatives. Our asset quality remains solid, and we continue to expect stage three provisions to normalize this year.
We are maintaining our full-year guidance for provision for credit losses, but the macroeconomic and geopolitical environment may continue to impact model-based stage one and two provisions. Yes, uncertainty has increased, and we need to remain vigilant, but considering our strong financial performance and levels of client activity, we remain comfortable with our trajectory to deliver an RoTE of above 10% and a cost income ratio of below 65% in 2025, with strong operating leverage and balance sheet efficiency supporting further improved profitability beyond 2025. Our strong capital position and first-quarter results also give us a solid step off for our distribution objectives. The EUR 750 million share buyback we announced in January is already underway, and we have proposed a dividend of EUR 0.68 per share, which brings us to EUR 2.1 billion of capital distributions so far this year.
We will assess the scope for additional distributions in 2025 and remain comfortable on outperforming our EUR 8 billion distribution target. With that, let me hand back to Ioana, and we look forward to your questions.
Thank you, James. Operator, we're now ready to take questions.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one 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 two. 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 who wants to question may press star and one at this time. The first question comes from Chris Hallam from Goldman Sachs.
Please go ahead. Yeah, good morning, everybody, and thank you for taking my questions. I have two, both on revenues. First, for this year, clearly Q1 was strong run rating, well ahead of the EUR 32 billion guide, but obviously a lot has changed in terms of the operating environment in the past few weeks. In some of the businesses, I suppose that supported higher activity levels, but in other parts of the group, client activity will have cooled meaningfully. How does that picture look for you across the group, and where are there, I guess, substitution opportunities for you? For example, let's say a CapEx-related loan is delayed, but now the client needs additional short-term working capital finance. Second, more medium term, on Slide six, you outline these kind of big emerging trends which look set to determine the competitive landscape over the coming years.
I guess simply, what gives you the confidence that following the transformation of the business, Deutsche Bank has the right footprint and the right risk and control setup to succeed against this backdrop, i.e., to take market share and to capitalize on those growth opportunities? Thank you.
Thank you, Chris, and good morning, everybody. Let me take your questions first, and James should add, of course. Look, like we said in the prepared remarks with regard to the full-year revenue picture and our goal and our confidence in the EUR 32 billion, obviously, first quarter helps a lot. We outperformed not only the consensus, we, to be honest, also are ahead of our own plan in the first quarter, which gives us all the confidence that we can keep the momentum and that we will see the EUR 32 billion also at year-end. First quarter helps a lot.
Secondly, Chris, I'm really happy with the diversification in our business, and if you really tear it apart, then you can see that many of our businesses will actually be unaffected by that, what we have seen in early April, or are even benefiting from that over time. We can see a very stable and continuous development in the private bank, very positive, stable delivery path, supported by an ongoing growth in assets under management. I would say also, with having the monthly performance review meetings with Claudio, that this is a continuous path which we enjoy, both in personal banking, also with additional deposit campaigns, but in particular in the wealth management business with our investment business. Similar good momentum in asset management, very happy with the first quarter results.
We always forgot to mention also that I really have to congratulate Stefan also for re-emerging into the MDAX with DWS. It really shows that there is momentum behind the businesses, very positive on the outlook. Also here, I would say, with that, what we have seen in April, also with the way they have managed the performance for our clients, it's actually a very good and convincing picture. Therefore, we stay the course on asset management, and there is, in our view, no concern that we will miss our full-year results. In the corporate bank, we had a little bit of a weaker start in Q1. Fortunately, we offset that with the overdelivery in all the other businesses, and therefore I'm saying we are even stronger in Q1 than our own internal plan. The nice thing is actually that the corporate bank will accelerate from here.
The sequential performance, we believe that we will see slight increases in revenues quarter over quarter from where we are right now. We can already see also a little bit more of demand in the credit business, in the financing business, in the corporate bank. We saw it already at the end of the first quarter. Now, obviously, this did not be or was not fully reflected then in the P&L for the first quarter, but you could see an increase in demand at the end of the first quarter, which also gives us the confidence going forward. Linked to your second question, I will get back to that. Look, in particular, what is happening also in Germany is a huge opportunity for our corporate bank, and I will talk about that positioning in a bit.
On the investment bank, to be honest, I'm super happy with our FIC business. I think, again, we have shown that not only we performed very well in Q1, but also that we took market share. If I compare that with the numbers which we have seen from our peers, Q1 was another example that Deutsche Bank took market share in the FIC business. If we go deeper into FIC, to be honest, yes, we have seen some weaker days in the first half of April, but to be honest, we are back to normal, so to say, in the second half. The outperformance in Q1 will carry us through the year and will also carry us through the somewhat weaker days in the first half of April. I am honestly very happy with that business.
Do not forget that in that business, in the FIC business, we have a very stable financing business where I would even say that the opportunities which the market now presents in the financing business, also in areas like distress and credit trading, are actually really good. From our capital position, the power we have to invest there, I am actually optimistic. In this regard, there are pockets also in FIC where we can benefit from the situation. Again, in the second half of April, we are absolutely back to normal flow business. That then actually remains with the question O&A. I am actually satisfied with Q1 and O&A. You know that we had the one markdown, which we already mentioned also to the market mid of March. Outside that, O&A actually behaved very, very strong.
If I now look forward with a very robust pipeline, stronger pipeline than before, and there is no deal canceled. Yes, we see some delayed deals, but no deal is canceled. I do believe actually that with where the markets are right now, where I do believe we move, that I can see that actually Q2, Q3 with that robust pipeline is actually enjoying quite healthy numbers in the O&A business. All in all, looking at the outperformance in Q1, looking at the chances and opportunities we see in the private bank, in parts of the FIC businesses, the continuous inflow on asset management, and now the acceleration in the corporate bank makes me absolutely comfortable with our EUR 32 billion revenue goal.
With regard to your second question, look, I really do see for the time being three trends, and this is where James and I try to focus the bank on in terms of delivery and client delivery. Number one, and let me start with that, in my view, is the global volatility, uncertainty, clearly also with our clients. Here, the concept of the global house bank is working. We said it in the previous quarters and again in Q1, also in particular in April, we can see that the demand for advice, the demand of a global bank with a global network is higher than ever before.
I also see actually that a lot of clients, and we even have tangible examples in the O&A businesses, in the corporate bank business, where clients want to actually see the European alternative to the US banks, in particular in a world which is more fragmented than before. The setup as a global house bank with strong roots here in our home market clearly helps us. Secondly, I have been on the record with supporting statements of that, what we will see from the new coalition. I do think that Germany can digest actually the additional debt which you intend to take on in order to do investments. There are huge opportunities to leverage that with private debt, to leverage that with financings. That is actually what we started to see at the end of March.
Therefore, I was saying we see in the corporate bank that there is a trend with regard to financing which goes into the right direction. I do believe if the government is taking the right decisions over the next three months, and you have heard actually Friedrich Merz that he is intending to take some accelerated decisions before the summer break, that will be actually very good for the atmosphere, for the psychology in the country, for the consumption in the country. Obviously, we will benefit from that in the various business lines. Thirdly, we should not forget all the acceleration also when it comes to capital markets union, or better said, savings and investment union in Europe. Again, the focus is on banks with the capital markets business. We have seen the reallocation of funds already to Europe over the last weeks.
We have clearly seen that also in our flows. To be honest with that, what is happening in Brussels, together with that, what is happening in Germany, I think we are rightly placed to benefit from that. All that, with the outperformance in Q1, makes me really confident that we can achieve our goals and that we will achieve our goals on the revenue side, but also on the profitability side.
Thanks very much.
The next question comes from Kian AbouHossein from JP Morgan. Please go ahead.
Yes. Hi, Christian, James. Thanks for taking my questions. First question is regarding the comment around FIC slowdown. Can you just put that in context? In April, you mentioned that, I think, on Bloomberg, and Christian, you just mentioned that as well. Could you just put it in context of what time frame you're comparing?
Secondly, in that context, just tell me what subsegments of FIC are weaker? Is it credit? Is it rates? Maybe even by geography, if possible? Just so we get an idea, and if this is just an immediate reaction of what happened in the markets post-terrorists, or is this an ongoing issue that we should think about in our modeling? The second question is regarding your outlook: GDP, US assumption 1.7, China 4.5. Just wondering if these numbers, what would happen if they would be significantly lower? Because they look a bit on the higher end of what market consensus expectation or forward curves are assuming. If you could discuss that relative to your 10% ROT plus target and issues around that, if we should think about if it could have a negative impact, so to say.
Sure. Thanks, Kian.
I'll start on the FIC guidance that we give or commentary about the market. Look, I think one important thing to say is that the second half of April, and it isn't precisely in halves, but I think the easiest way to think about it is second half of April resumed a pattern that looked very much like what you see in the disclosure on daily trading results in the FIC business for much of the first quarter. To your question about ongoing, it isn't a concern for us at the moment at all. In fact, I think we're well positioned to recapture the foregone revenues from the first half of April as in the balance of the quarter. In fairness, we're actually up year on year still in April. We look at this with sort of a relaxed view.
Naturally, in markets that are as turbulent as the ones we experienced in the first couple of weeks of April, you're going to see some correlations break down, some impact on the books. We were reasonably happy. There was, of course, a slowdown a few weekdays, but we were happy with how the desks performed in that environment, the way we were able to stand in to provide liquidity for clients, pricing, what have you. In terms of the products, it was a little sort of varied around the world. To your point, credit struggled more, and there were elements in the rates and FX complexes where, again, correlations moving created some disturbance. What's interesting is how quickly and almost fully the markets have recovered over the course of April.
Again, going to your question about is it an ongoing concern, as we sit here today, really it's not. Actually, I've been positively impressed by the way in which investors have continued to be engaged in the environment that we have, which is reasonably fast-moving. In terms of the outlook, lots of our assumptions are driven by macroeconomic variables, and I'll focus on revenues and expenses. Naturally, we look at downside scenarios, and that was the principal driver, of course, of the overlay that we took in provisions in Q1. We think that overlay was prudent and appropriate and actually reflects how the macroeconomic consensus has moved since the end of March. We feel quite comfortable with how, if you like, first quarter reporting reflects our outlook as well as the consensus environment today.
The other thing, just more broadly to the question you asked and really Christian's response to Chris's question, we see a lot of what I'll call sort of portfolio effects in our businesses. So businesses that are maybe negatively affected by certain elements of the macroeconomic environment will be offset by others that are benefited. It isn't at all linear. We feel like the balance of risks and opportunities that we see in the market really underscores our outlook, as Christian just mentioned. Hence, we're feeling pretty good about the overall macro environment, even as it's changed since the beginning of the year when we last spoke.
Great. Thank you.
The next question comes from Nicolas Payen, Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Two questions, please. One on distribution and one follow-up on CLPs, please.
The first one on distribution, you mentioned that you were continuing to assess the scope for additional share buybacks. I wanted to ask you whether you have started discussions with the regulator regarding second tranche of buybacks and if we could have any indication regarding the potential size of this second tranche. Is there any particular indicator that you and the regulator are looking at to be able to launch that second tranche? On CLP, you just mentioned overlays on tariffs. Is it possible to know what was the size of this overlay and what are the underlying assumptions that you are taking regarding the tariff impact and the whole tariff situation? With the development situation that we see on the CLP fronts, how does it impact your full year guidance?
Are we still on track for the EUR 350 million-EUR 400 million per quarter that you mentioned earlier? Thank you.
Thank you, Nicolas. Look, on the distribution, I stay to that, what I said and what we said end of January, because that was a clear outlook statement that, A, obviously, we have the approval for the EUR 750 million, which started where we started the program early April. We clearly said that we want to deliver two quarters where we show that we are on track for our 10% RoTE. Now, we are very happy with that, what we have seen in Q1. You have heard from our kind of outlook statements, which we just reiterated, that we remain comfortable on the 10%. We will reassess during the second quarter, obviously, the possibility of a second buyback, and we'll then start the discussions.
I would find it not fair, actually, if on the one hand, I'm doing a clear statement in January and saying, "I measure myself and we measure ourselves against the first two quarters," and then I change track. Obviously, the outlook in the overall economy changed. We have shown that we can deal with that. We have shown that we have laid a very solid foundation. We are at 13.8%. Therefore, I feel overall pretty good about all this. Now we are focusing on delivery of a strong Q2. I am sure we will reassess and have the discussion with our regulators.
Nicolas, on the CLP side, it is very nuanced, but the easiest way to think about it is that the overlay represents about EUR 70 million broken into two parts.
One is, as I just part of the answer to Kian's question, we assumed a set of macroeconomic variables that were more pessimistic than what were present in the market in March. That represented about EUR 50 million of the EUR 70 million. Essentially, the consensus has caught up with that level. We feel good that that was appropriately calibrated. EUR 50 million on macroeconomic variables reflected in a forward-looking indicator overlay, and about EUR 20 million reflecting what I'd call collective staging. We've been looking not just recently, but for the past couple of quarters, either at sectors or individual obligors particularly exposed to tariffs. That can be based on their own export activity, their supply chain, what we think the competitive environment for their business might be, and how it'll be affected by tariffs, and so on.
We took some actions around collective staging, and that represents really the other EUR 20 million. To be fair, there is probably some amount in what I would think of as the baseline. The rest of it is about EUR 400 million. Some of that EUR 400 million actually would also reflect tariff-related impacts that have been sort of bleeding in as individual credit decisions for obligors are reflected. The easiest way to think about it is EUR 400 million run rate, which is in line with our guidance, and we always expected the first quarter to be a little higher than the rest of the year, and EUR 70 million of overlay broken out, as I described. As to the guidance, the wide end would have been about EUR 1.6 billion. We note the consensus is a little higher than that already.
We think based on how stage three has developed, and we now see the evidence of that normalization that we called for, we think that's entirely reasonable. It would kind of imply about EUR 375 million per quarter from here, which, absent a deterioration of macroeconomic variables, would be entirely achievable and to be expected, hence sticking with the guidance.
Thank you very much.
Thank you, Nicolas.
The next question comes from Matthew Clark from Mediobanca. Please go ahead.
Hi. A few questions. Firstly, thanks for the commentary on April from a P&L perspective in FIC. I'm just wondering, should we be worried about a risk-weighted asset impact from value at risk breaches or counterparty risk or liquidity drawdowns by customers or anything like that? Would you expect a material impact in the second quarter that could possibly affect your second buyback decision? That's the first question.
Second question is on the U.S. commercial real estate outlook. Christian, I think you gave some fairly constructive comments at a conference in the middle of March. Sorry, a higher rate trajectory did not affect your expectations there. I was just wondering if you could give us an update whether there has been a significant change since then, whether you have reassessed your $500,000,000 stress loss for the commercial real estate portfolio. Final question is just on when we can expect some more concrete targets for future years rather than simply a continuous improvement. Do we need to wait till next year when the CFO succession process has played out before that can come, or can you give us something more concrete, or can we expect something more concrete before then? Thank you.
Thanks, Matthew. Market risk RWA, interesting question.
There is, of course, a risk, but we think we've managed that down. The VaR outliers, we haven't triggered at this point over the threshold at which VaR outliers would produce an increase in market risk RWA. Our SVaR did tick up at the beginning of the month, and we've managed that down through hedging and portfolio actions. Those risks are there if the market were to become disrupted later in the quarter. We think the impact of what was present in the market in the first half of April has been managed, and at the moment, we don't see that presenting itself. On the CRE side, it's interesting. The market indicators are a little bit mixed. Office in the index slightly down, I'll call it flat. Leasing activity has actually ticked up, which is good.
Of course, rates and sponsor behavior, while they've moved around, are largely unchanged. Our outlook for CRE continues to be where it was at the beginning of the year. We would see a steady improvement from the levels that we show you in Q1. In fact, there was only one new default in CRE in office in the U.S. this quarter. What you have is essentially 100% of the provision associated with valuation adjustments on existing defaulted positions. Hence, I think we get closer to the point where you see a more dramatic decline in the provision levels. As you say, we're tracking a little bit closer sort of every quarter to the severe stress, but we do not see anything that would suggest another leg down in CRE. We are still in line with our earlier expectations.
Matt, from a numbers point of view for the outer years and our plan going forward, of course, you will get something during this year. As I said before, I think it's important for us that we deliver very solid numbers for the first half year. Obviously, James and his successor will then work together with me on those numbers because I want to have an absolutely smooth handover. I want to make sure that there is a fully aligned process. I think that is what management is all about, and I'm really happy with how we have set it up. You can be rest assured that numbers will be given to you in the second half of 2025.
Thank you. By implication, does that mean with third quarter results, just if the new guys joining in September?
Look, I said in the second half of 2025, and we have lots of things to do now, and I'm not yet deciding on the exact date, but you will receive in the second half of 2025 a good set of outlook numbers for the oncoming years from us.
Thank you very much.
The next question comes from Stefan Stalmann from Autonomous. Please go ahead.
Good morning. Thank you very much for taking my questions. I wanted to clarify one of your comments, please, James. You mentioned that fixed income trading was still up year on year in April. Does that literally mean April year on year, or does it mean year to date up in fixed income for the full four months? The second question is about the increase in compensation expenses that you flagged that is coming partly from the rise in your share price.
DWS did mention that they are hedging this effect to some degree. Are you also doing this at Deutsche Bank level? If so, was there any positive benefit from this in one of the revenue items, and if so, where? The final question I wanted to ask is on the NSFR ratio, and in particular on the dollar-based NSFR ratio, which received a bit of attention recently with the EBA report. Could you give us a rough indication of where your dollar NSFR ratio sits? The EBA said that German banks on average were at 76%. Can you give us an indication where you are, please? Thank you.
Thanks, Stefan. The answer is both on FIC revenue. We are obviously up big year on year in the first quarter.
We're up slightly in April, in the month of April, and therefore we remain up significantly year on year, year to date in FIC. That's encouraging to see how the franchise strength, the investments that we've talked about, client engagement, all of those things sort of playing out as we hoped and Ram and his team have been working to for such a long time. It's encouraging development. To the earlier question, if the market tone stays as it has been now in the second half of April and in the first quarter, we'd certainly recapture the weakness in the early days of April. On the compensation expenses, at the end of the day, it falls through to the expense line on a consolidated basis. Essentially, the group offers DWS some benefit of hedging that risk.
It transfers and creates a revenue item for DWS that's then eliminated on consolidation at the group level. The compensation cost impact shows up at the group on a consolidated basis. Actually, it represents year on year a decent size of the increase. If I break the compensation numbers up, it's basically four parts all about equal between EUR 30 million-EUR 40 million, foreign exchange translation, the stock impact, variable compensation, and then the net impact of fixed pay coming through, which we think is a good outcome, especially as a lot of that was then offset in non-comp expenses. On the NSFR, we wanted to tip our hat to the question that was raised in the EBA report. On page 28, we show you a number of more than 90% of our US dollar asset side being funded by native US dollar liabilities.
Now, NSFR, by its definition, doesn't include cross-currency funding, which is just a quirk or a feature of it. Including cross-currency funding, we'd be safely above 100%. We think our dollar liquidity position is extremely strong because essentially the liabilities fund a balance sheet that is, I'll call it 80% loan to deposit and a significant amount of cash and high-quality liquid assets in dollars. If anything, our dollar funding is more robust than other currencies. We saw that, and I think hopefully have provided with that one data point a good response. I will say, and we maybe come up to this tomorrow on the fixed income call, there's a lot of, I'll say, technology, limits, controls, maturity ladders, and what have you that we apply to managing currency risks and the funding implications of currency risks on the balance sheet.
We think we've got a very, very strong, robust set of capabilities there.
Excellent. Thank you very much. Thanks, James.
The next question comes from Flora Bocahut from Barclays. Please go ahead.
Yes, good morning. The first question I wanted to ask is on the cost guidance. You've obviously started well here in Q1 on the cost base. You have, I think, 18% of your cost base in US dollar. Assuming the euro dollar remains where it currently is, around 1.14, this should have, I think, around 1% positive impact on your cost base year on year. I'm just asking, would you say there is positive risk to your cost guidance for this year or not really? Because despite the good Q1, despite the FX tailwinds here, you think this could be offset somewhere else by the end of this year?
The second question is on ONA revenues. I see you've dropped the guidance of the plus EUR 600 million you expected for this year. I think it's clear what you've explained already on this call. Maybe just to ask, do you still think nevertheless that you could expect an increase year on year or it could be flat or down? Just to help us frame the range of outcomes here, considering current market conditions, but also your pipeline. Thank you.
Thanks, Flora. On reported expenses, yes, the current FX rate would represent, if you like, however you think about it, put downward pressure on the reported expenses. You've seen that year on year in the first quarter, kind of the average was a EUR 52 million upward movement in reported expenses. That would flip around next quarter to some degree, depending on the path of the exchange rate.
Remember, though, that because we have US dollar revenues, it neutralizes more or less in pre-tax profit and in the ratios. There's a little bit of, I'll call it tracking error, but by and large, the US dollar nets out when you get to cost income ratio, pre-tax profit, and RoTE.
Flora, to your second question on ONA revenues, yes, we do believe that if we compare 2025 with 2024, that we will see an increase in ONA despite of that what we see in the markets right now. Therefore, again, I think it's really important to look at the probability-weighted pipeline, which is still very robust. Also at the comment I made before, that we haven't seen any canceled deals, that we actually have seen a very nice development on the mandates which we received.
Therefore, if I take now Q1, if I look at the pipeline and the work we are doing on Q2, to be honest, I'm very confident that we will see ONA revenue numbers which are ahead of last year. Again, given the diversification we have in the business, also the compensating business areas, even if we have a weakness in ONA versus our initial plan, we believe that this would be offset by other businesses, and we have the really good cushion which we have already established in Q1.
Just one thing to add, Flora, on that is that the guidance is, of course, an update with Q1 behind us, and hence the guidance reflects also that LDCM mark in it. I think it's an encouraging thing to see ONA up and more than overcoming what was a relatively significant one-off item in the first quarter.
Right. Thank you.
The next question comes from Anke Reingen from RBC. Please go ahead.
Yeah, thank you for taking my question. My first is on personal banking. The headwind we saw in the quarter from the runoff of the capital-intense loan products, should we expect that to continue or is the review completed with Q1? I mean, you say comp is up 5% year over year, but I just wonder about the non-comp, which obviously employers are quite good performance in the quarter. Is Q1 a run rate here or is it really quite low and should pick up in the course of the year, but then any uptick should be compensated by lower compensation expenses? If you can, please comment. Thank you very much.
Thank you, Anke.
Just to make sure we heard your comments orally, but question one, we had about EUR 2 billion runoff in mortgages in the quarter, which was relatively significant. Given kind of our strategic view as well as the decision to close the DSL channel, I think you'd expect to see some of that also persist in the year. Again, our outlook statements about private bank are, I would say, bullish that we still see continued growth in the coming quarters. That would incorporate additional runoff of what we think of as capital-intensive portfolios. On the cost side, there was nothing special necessarily in the non-comp in private bank in the first quarter. We did have restructuring and severance, as you saw, most of the restructuring and severance charge that we took at the group level in the first quarter was in PB.
We would expect that to lessen as the year goes by, maybe some more in Q2, but less in the second half of the year. There can be some seasonality in things like marketing expense and what have you, but by and large, what we would expect to see is the continued impact over the coming quarters and into the subsequent years of the benefits of the sort of cumulative restructuring steps that we've taken around particularly branches, personnel, but also the impact now of more fully the benefits of the technology and investments we've made in the past.
I just wanted to support that, Anke, because I'm really happy with what I'm seeing now in the private bank. I think we are really seeing the fruits of all the transformation and restructuring.
Also, by the way, of all the work we have done on Unity, and you know how painful that was, and also with the pain we in particular took in the year 2023, it's paying off now. It's really paying off on the cost side. It's paying off in the way that clients are reacting. I have to say that also one of the reasons why we are so confident to achieve the EUR 32 billion and 10% RoTE is now that all the hard work is flowing through, is going through the P&L of the private bank. I would say there is a continuous improvement. Also, the decision, by the way, because you talk about loans and mortgages, clear decision of one item which we subsummarized under Deutsche Bank 3.0, and this is SVA.
It was a clear decision by the finance department and Claudio's department to reduce mortgage lending under one brand, the DSL brand. That is SVA positive. This is exactly what we want to achieve, and it's just one little evidence that we are working hard actually to further improve on the profitability of the bank and optimize our capital allocation.
Thank you.
The next question comes from Mate Nemes , UBS. Please go ahead.
Yes. Good morning and thank you for taking my questions. I have three of them. The first one is still continuing with SVA. Christian, you mentioned that what you did in the personal bank was a volunteer example of that. Can you share perhaps other key opportunities for the SVA that will help you to increase resource allocation in certain areas and also conversely, where you expect to see perhaps clear restrictions?
Also how this aligns with the demand side, i.e., are there growth opportunities where you can allocate more capital from an SVA perspective. That is the first one. The second one is a question on NII, perhaps for James. Are you still expecting about the EUR 300 million pickup in the banking book NII in 2025, or has this also improved slightly, as you alluded to, 2026 and 2027 have not improved due to the hedge rule. The last question would be on RWAs. You clearly have achieved now a cumulative EUR 28 billion in RWA reduction. RWA optimization is ongoing. Could you point to the opportunity you see in the remainder of the year. What in addition can you achieve in the next three quarters. Thank you.
Let me start on your SVA question.
First of all, I'm delighted that this topic of SVA focus and day-to-day SVA management is now fully incorporated in the bank. You can see that in our monthly performance review meetings that we are really driving the businesses and as such the whole bank based on SVA. I just gave you one example in the private bank, and to be honest, this is one example where we executed and rest assured that obviously we are going through portfolio by portfolio, and in particular in those portfolios where, sort of say, we are SVA negative, we are looking what can we do. One item is where we're starting, and you have seen that also in the private bank, is repricing. Repricing will play a role in the private bank. Repricing will partially play a role in the corporate bank.
If you think about our trade finance book and our lending book, there is a chance actually to reprice. Based on all the data we have, the methodologies we have in hand, we will do this. Secondly, if you think about SVA, it's not only about actually whether we allocated capital in the wrong way. It's actually about the underlying cost and process cost of running the business. Hence, we are very much in the detailed work to think about more efficient front-to-end processes, in particular in credit-related processes. Again, for instance, the German lending book, the trade finance book, David Lin and the credit department are looking into a more efficient credit process end-to-end that will lower the running cost of that business. Actually, I think it will, or we think it will make the trick to bring it into a clear SVA positive business.
Thirdly, we are looking SVA also from a regional point of view, whether there are regional portfolios where we potentially do not have the significant market share where we can restructure or from a brand name point of view like we did it for DSL mortgaging in Germany. SVA is actually a combination of repricing, client-by-client review, which Fabrizio is doing in the investment bank and in the corporate bank, looking at the 5- to 10-year history of clients, whether we have sort of say continuous SVA negative clients where we want to go and will go now into the debate with the discussion with the client, what else we can do in order to make that relationship a more profitable one. It also goes over processes.
At the end of the day, we would not mind to take decisions to also exit certain sub-portfolios if we are not convinced that we can turn it into positive. Therefore, I think it will be one of the most significant levers we have to really raise our return on equity beyond the 10% return to a higher number. The progress which we have seen over the last three months since we introduced it to you end of January is quite significant.
It actually feeds nicely into your third question, which is RWA. One of the levers beyond what Christian just talked about is looking at more capital relief transactions through securitization to help various businesses. Obviously, the market is broader and deeper than a few years ago.
We're sort of going, if you like, more deeply into the portfolio to look for securitization opportunities. That takes some time, so I don't want to sort of go out over our skis in terms of how much more is achievable this year, but I'd certainly see us achieving the EUR 30 billion target, maybe slightly more than that in 2025. At that point, sort of we move into the future, and we will continue looking at capital optimization in the years to come. The opening up of securitization markets with the Savings and Investment Union initiatives will obviously help in that regard. The measurement of businesses by SVA makes them less inclined to hold on to revenues if they're being measured at the, if you like, the very bottom line.
In banking book NII, our guidance is basically consistent with where we were at the beginning of the year. There are obviously moving parts in that ocean. Rates have moved, but as you see, our hedging has protected us, and we do not see an impact from the rate environment. We do see a benefit, as we mentioned, in the years beyond 2025, as the long-term rate curve has steepened, and obviously our hedging, the rollover hedging, benefits us. There has been a little bit of movement in FX and in volumes, but basically, we are still where we were before, about EUR 13.6 billion. A lot of that, the year-on-year benefit is in private bank and in financing. You will have seen there have been some movements in corporate bank.
Some of that's just reallocation or reclassification of revenues, sort of group neutral or even within the CB neutral as it reclassified some revenues into remaining income. With all of that said, our guidance is in line with where we started the year on banking book NII, which is encouraging.
Perfect. Thank you.
The next question comes from Giulia Aurora Miotto from Morgan Stanley. Please go ahead.
Yes. Hi. Good morning. Two questions for me as well, please. The first one is on the mark that you have seen in ONA related to the leverage finance book. Could I ask you, please, to shed more light on this book? How big is it? I do not know, performance through time, sector concentration, warehousing risk, anything that you can give us would be useful.
Then secondly, just on the SRT market, have you witnessed any change in demand for SRTs from investors, given the heightened macro uncertainty, or do you expect any change in demand? Thank you.
Giulia, I actually do not have the size of the book in front of me. We talked about that a lot last year, but the on-balance sheet book is relatively modest. As you know, there is also a revolver piece of it. There is the underwriting pipeline that then gets distributed, but we are actually at a relatively lower point in the cycle given the slowdown of activity so far this year. The individual position that we were talking about is actually our last remaining sort of position from the pre-war period, so prior to March or February of 2022. It is one that actually we have had a reasonably sort of positive view on.
We participated in a recapitalization last year, and the mark reflects really sales activity away from us. Partially, we participated in the sales activity in order to free up capital, but there is certainly a possibility that the on-balance sheet position recovers over time. In terms of orders of magnitude, it is larger in terms of an impact in the quarter than we would typically see. The funded book, there is nothing like that that remains in the funded book.
I think you had one more question, Giulia, on any change in SRT demand. To be honest, no. We even concluded a transaction, I think, James, in mid of April, and we are actually very happy with the demand. It was a transaction which was focusing also on German midcaps and the midcap portfolio. There was also no noticeable repricing required. Actually, there is a lot of demand.
We haven't seen any change in behavior, which also makes us believe that to the prior question on the 30 billion goal or 25-30 billion goal of RWA reduction, that obviously with that, what we have achieved so far with that which is in the pipeline, that we will achieve that, if not overachieve it.
Perfect. Thank you very much.
The next question comes from Jeremy Sigee from BNP Paribas. Please go ahead.
Thank you. I'll just keep it to one question, actually, and it's a slightly broader one. You mentioned Savings and Investment Union, as a lot of other banks have as well. Just how material is that on a three-year planning horizon? I mean, is that something that could make a percentage point or two of RoTE difference in your next three-year plan, or is it still a bit marginal, a bit blue sky?
How material is it for you?
Look, let me start, and James should add. I think, yes, it is material, and it's clearly not yet in our detailed plan for the next year. Why do I think it's material? For two reasons. Number one, we will see with the Savings and Investment Union a lot of more investments actually into Europe, also in certain asset classes like defense, like infrastructure. In this regard, there are not a lot of banks actually who can handle that and who can bring investors together who have the access, the network to the investors around the world. That's what we are already seeing right now.
You cannot imagine actually the kind of interest which was created not only by the Savings and Investment Union, but also by the German decision to invest more into defense and infrastructure and how many investors are now sort of say contacting us in order to be sort of say part of this initiative. I would say that in this regard, the capital markets initiatives, the leverage which we can provide from a banking point of view in order to support these programs is actually quite significant. Again, we saw it in particular after the announcement of Friedrich Merz early March.
The second part where I do believe we have a huge opportunity is actually based on the Savings and Investment Union, but also based on the coalition agreement in Germany, because if you read it in detail, there is a clear intention to look at the pension schemes in Germany and the way the people will actually provide for their retirement plans. In this regard, I'm convinced that we will see changes in this regard also in Germany. I do believe that this is a huge opportunity, in particular for a bank like Deutsche Bank, not only because we have the 19 million end clients in Germany, the retail clients, but also as we have sort of say the product factories, be it in DWS or in the investment bank, which can provide for that.
The level of discussions we have with Berlin, but also with Brussels on how we can facilitate that, how we can make sure that we have a change in the pension scheme is on a very, very good level. Hence, I do believe on both sides, i.e., the investment bank, corporate bank supporting actually the corporates in the investments, but also on the private banking side, there is a lot of upside. Hence, I'm very positive in particular for the outer years.
Thank you.
The next question comes from Andrew Coombs from Citi. Please go ahead.
Morning. If I could have a couple of follow-ups, please, on the numbers. Firstly, on Flora's question on FX, I think you made the point about it broadly messing out when you get to the PBT level.
I think when you gave that FX guidance at the full year, you talked about it being an EUR 800 million tailwind for revenues versus an EUR 400 million headwind for costs. I would have thought both of those would have largely reversed out, but perhaps you could give us the EUR 32 million and EUR 20.8 million guidance for the full year if you marked it on today's FX rates. That would be useful. Secondly, just coming back to the overlay for tariffs, I was looking at your IFRS 9 disclosures on page 41 and 42, and you obviously presented it differently to others. You talk about one percentage point of GDP being a EUR 77 million adjustment on ECLs. The other banks have kind of provided you a downside scenario, adjusted the weightings, and given all the assumptions for the downside scenario.
If you could do just to help us calibrate how you determine that EUR 70 million figure, and particularly the EUR 50 million on the macroeconomic scenarios, would be useful just so we can compare and contrast what you've done versus others. Thank you.
Andrew, sort of so both, the first one is a relatively easy question to answer, but I don't really want to get into sort of mark to market of the plan each quarter. Obviously, you'll see it in our results with the variances. What I'd tell you is, maybe to help, is our plan, as I think we said at the end of January, was done kind of with a rate of about 1.10 on the euro to the US dollar. You remember that December, it had gone all the way to kind of 1.035.
If we do it on March, it would be back to 1.08 and currently 1.14. It has been moving around a lot. I think it is fair to say that it is a downward. Today, it would be a downward pressure on the FX numbers we showed you in January, both for revenues and expenses netting out in pre-tax profit. On the tariffs item and the IFRS 9 sort of view, you are right. One of the, I do not want to say a challenge, but the positive and the negative of the way we show the disclosure is that you are seeing the sensitivity of each of the variables. What we implemented was an overlay that played with a number of the variances, variables. US GDP, US unemployment rate, the level of the S&P, the level of the credit metric.
I could not give you one metric to really sort of quantify what it is. We sometimes look at it in terms of standard deviations of all of the metrics. Hence, it is hard to give you an apples-to-apples comparison with what other people do.
The next question comes from Tom Hallett, KPW. Please go ahead.
Hi. Thanks for taking my question. I guess firstly on NII, kind of just following up. You need to grow key banking for NII EUR 400 million over the next nine months to keep in line with your 2025 guidance. How should we see the NII walk in both the private and corporate bank over the next couple of quarters, and how much is it related to non-hedge-related benefits?
Secondly, could you provide us with any capital moving parts over the next couple of quarters and what we will need to consider for modeling purposes? Finally, on DWS, the CEO noted a few weeks back, it is time to acquire a competitor. I am just wondering why it has taken seven years since the IPO to consider this, and would a large acquisition alter Deutsche Bank's capital return plans in any way? Thank you.
Thanks, Tom. I think you will see improvement from here. As I mentioned, there were some internal sort of reclassifications that we made in corporate bank, but I think a steady but modest improvement from Q1 in corporate bank. In private bank, it is more pronounced and more related to the hedge rollover than any other factor. In financing, we call it EUR 100 million of the full-year benefit, more volume-driven.
Now, I will say with all three businesses, volumes will play a part. Christian noted that in the corporate bank, loan growth was a little bit more sluggish in the quarter than we might have expected, but then spiked up at the end of the quarter. If we do see loan growth sort of on average in the quarters that lie ahead that exceed our current estimation or deposit growth, we could have some volume-related lift on all of those numbers. As I say, most of the hedge rollover benefit you'll see in the private bank. I think your second question was movements in capital. With the first quarter behind us, it becomes a little bit more simple because we do not have really remaining model-related changes or sort of acceleration of the impact of equity comp is really concentrated in the first quarter.
At this point, it's really earnings net of accruals for future distributions or profit recognition for future distributions, net of balance sheet growth or business growth. Last question about DWS and M&A. I think Stefan's comment was more that we are better positioned today to think about and potentially pursue transactions for DWS than in the recent past, in part because DWS was also working through some internal issues. I don't want the implication to be that we haven't considered it at all over the now seven years since the IPO. I want to just emphasize, I mean, we recognize the strategic environment in which DWS is operating, and we haven't been sitting on our hands, but also appropriately, we haven't pursued transactions that aren't beneficial to DWS's shareholders or the group. There's been some discipline attached to it.
Stefan's right to say that the company is better positioned. Of course, the market environment around DWS has changed. You've seen a number of transactions in the industry in recent days. I do want to emphasize DWS is well-positioned with its existing business, and you can see it executing and performing well on its strategic intent with both inflows and the distribution of its assets under management, as well as the performance. All are good indicators about DWS's trajectory from here.
Thanks for that. I mean, just a quick follow-up, but this won't alter Deutsche Bank's capital return plans in any way, or will it potentially?
No. I mean, look, we've set targets for our distribution, and we're bound and determined to deliver on all of that.
Obviously, there is a resource envelope within which we manage all of the businesses and allocate capital, as Christian referred to, based on SVA. We certainly look at asset management of the DWS businesses with a similar view. Yeah, we've got a year left to deliver on the targets that we set out, and we're determined to follow through on our plans and deliver on the distributions that we promised to our shareholders.
Okay. Cheers again.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Ioana Patriniche for any closing remarks.
Thank you for joining us, and for your questions. For any follow-ups, please come through to the investor relations team, and we look forward to speaking to you at our second quarter call.
Ladies and gentlemen, the conference is now over.
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