Deutsche Bank Aktiengesellschaft (ETR:DBK)

Earnings Call: Q2 2021

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Jul 28, 2021

Thank you for joining us for our Q2 2021 results call. As usual, our Chief Executive Officer, Christian Sewing will speak first, followed by our Chief Financial Officer, James von Molkke. The presentation as always is available to download in the Investor Relations 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 you over to Christian. Thank you, Jona. A warm welcome from me as well. It's a pleasure to be discussing our Q2 2021 results with you today. We are now over halfway through our transformation journey, And we have continued to deliver against our milestones. For the 2nd consecutive quarter this year, We have delivered significant profit improvement driven by growing strength across our businesses. We generated EUR 1,200,000,000 of pretax profit and EUR 828,000,000 of profit after tax. And that's including a negative impact of around €230,000,000 from the German Federal Court ruling or BGH ruling on consent for changes to consumer contracts, which we will discuss later in further detail. Despite a more normalized market environment in the quarter, revenues remained robust at €6,200,000,000 down only 1% compared to the previous year. This demonstrates regained franchise strengths at Deutsche Bank. We also continue to make progress on costs. We reduced our adjusted costs, excluding transformation charges and reimbursements for Prime Finance from €4,800,000,000 to €4,500,000,000 year on year. And we continue to invest in the execution of our transformation agenda With more than 90% of our transformation projects now in the implementation phase, they are key contributors to our cost reduction progress. Risks are well under control, and so we continue to make progress towards achieving sustainable profitability. This quarter, we generated a 5.5% return on tangible equity. The headway We made across all business in the Q2 reinforces our confidence that we will be able to meet our profitability targets. Finally, we delivered another quarter of progress towards the goals we outlined at our sustainability deep dive in May. Now let me take you through the highlights of what we have achieved in the first half of this year on Slide 2. Our performance over these past 6 months shows that our 2022 targets and ambitions are well within reach. Refocusing our business around core strength is paying off. Revenues of EUR 13,500,000,000 for the first half of 2021 fully support our trajectory to the 2022 revenue goal. We have reduced adjusted costs, excluding transformation charges, by roughly 4% year on year, Coupled with provisions for credit losses down 89% on the year to EUR 144,000,000 or 7 basis points of average loans, We continue to see an improvement in our operating environment. We also reduced our cost income ratio to 78% from 87% for the same period last year, which represents significant progress towards our 2022 target of 70%. And in the core bank, the cost income ratio is even lower at 73%. Let's now turn to profitability on Slide 3. Our relentless focus on delivering transformation is reaching the bottom line. We delivered a 92% year on year increase in our adjusted profit before tax in the core bank for the last 12 months to the Q2. And once again, all 4 core businesses contributed and are either in line or ahead of their plans so far. At the same time, we have substantially reduced the capital release units losses in the course of our transformation. Once again, we are ahead of our plan for derisking. And we remain committed to minimizing the P and L impact of deleveraging efforts by the unit. Let me now turn to underlying shareholder returns on Slide 4. We remain committed to our 8% return on equity target for 2022, and we see a clear path to that goal. For the first half of twenty twenty one, the group reported 6.5% post tax return on tangible equity. This would be 7.6% when adjusted for transformation related effects and 9.2% Excluding the impact of certain external factors outside our control, such as the BGH ruling and the decision to increase the size of the single resolution fund. In the core bank, we are already in line with our 2022 target With a 9% post tax return on tangible equity on reported basis and 10% on adjusted basis, even before the impact of the unforeseen factors. This level of profitability, combined with a robust capital position, Gives us confidence that we are on the right path towards our ambition to return capital to shareholders from 2022 onwards. Now let me too take you through some divisional highlights on Slide 5. The Corporate Bank continues to offset interest rate headwinds through repricing strategies and growth initiatives. We also regained the position of Germany's number 1 corporate bank in the recent poll published by Finance Magazine. This demonstrates the regain trust of corporate clients and provides a very good basis to grow over the next years. The Investment Bank continued to benefit from our refocused business model with another strong quarter of performance in FICC. We made market share gains in Origination and Advisory, where we were number 1 in Germany in the quarter. We expect markets to continue to normalize in the remainder of 2021, but we remain confident That a substantial portion of our Investment Bank growth since 2019 is sustainable. As a result, we are keeping our full year outlook to show a 2021 revenue number in line with 2020. The private bank Was also successful in offsetting interest rate headwinds with continued business growth, with EUR 14,000,000,000 Of net new business across assets under management and client loans in the quarter and EUR 29,000,000,000 in the first half year, close to its full year target of more than €30,000,000,000 The private bank also completed its first trial migration of a Set of postbank customers onto Deutsche Bank Systems. Implementation is running in line with plan. In Asset Management, assets under management grew by €39,000,000,000 to €859,000,000,000 a new record high, including record quarterly net inflows of €20,000,000,000 In short, The dynamics in all four core businesses show that our refocused business model is paying off and that our clients Our supportive and belief in our capabilities. Successful execution is increasingly visible in our revenue performance in the core bank, as you can see on Slide 6. Revenues in the core bank for the Q2 of the year stand at EUR 6,200,000,000 Down only 1% on the year. As we guided to at our Q1 results, This is in line with the market normalization and seasonality we expected, despite an additional impact of approximately €100,000,000 from the BGH ruling. Revenues in the Investment Bank are EUR 2,400,000,000 down from the same period in 2020, As the strong performance in credit trading and financing partly offset more normalized volumes in core rates, emerging markets and FX. Both our corporate and private bank successfully offset headwinds with either continued deposit repricing or business growth, despite some unexpected items for the private bank in particular. Asset Management delivered revenue growth for yet another quarter, boosted by management fees and strong inflows. On a half year basis, core bank revenues have grown by 13% since the beginning of our transformation strategy in 2019, showing significant revenue improvement. In summary, All our core businesses have proven the strengths of their franchises, putting our 2022 objectives well within reach. Now let me turn to costs on Slide 7. We reduced adjusted costs, Excluding transformation charges and the reimbursements for Prime Finance for another quarter to EUR 4,500,000,000 We continue to strongly advocate for a reduction in the size of the single resolution fund, which would result in lower bank levies. However, we now expect this to remain unchanged for next year. Together with higher than expected contributions to the German Deposit Protection Scheme, These unforeseen external items are now expected to add approximately €400,000,000 to our expense base. And as previously discussed, we do not believe it is sensible to further constrain investment spending to offset these externally driven expenses. On the cost items we can control, We are keeping our absolute cost discipline and focus, and the second quarter has shown that we are in full control. Despite the fact that volume driven expenses and investments in controls represent some pressure. To offset this pressure, We are introducing a series of new cost reduction initiatives, including further workforce optimization, Accelerating real estate reductions, further systems rationalization and streamlining internal processes. Against this background, we reaffirm our commitment to the 70% costincome ratio target. Supporting our cost to income ratio target, we now expect revenues to be better than we discussed at the Investor Deep Dive. Based on the resilience we have delivered in the first half of the year, business growth and an easing of interest rate headwinds. Moreover, we now see provision for credit losses in a range of around 20 basis points of average loans in 2021, ahead of our previous guidance, and we expect some of this benefit to carry over into 2022. The bottom line impact of these factors helps us offset the cost headwinds from the unforeseen items, And we continue to remain committed to an 8% return on tangible equity in 2022. With that, Let me now turn to risk management on Slide 8. As you know, strong risk discipline It's a central pillar of our strategy across credit, market, liquidity and non financial risk. And as discussed, Provision for credit losses was EUR 144,000,000 this half year or 7 basis points of average loans on an annualized basis. We continue to manage a high quality and well diversified loan book with strong underwriting standards, and we remain vigilant. Both our market and liquidity risk controls contribute to robust risk management practices. Importantly, We continue to strengthen non financial risk management. This is of the highest priority for management, and we have made significant investments in improving our controls over recent years. At the same time, the demands on anti financial crime continue to grow, not just for Deutsche Bank, but for the entire banking sector. Therefore, we announced a fundamental reorganization of our ALC function to become more effective, more flexible and more holistic. Now let us turn to capital and balance sheet on Slide 9. In line with the guidance we provided With our Q1 results, we did see a reduction in our common equity Tier 1 ratio to 13.2% this quarter, primarily due to the impact of around 70 basis points from regulatory items. We maintain a buffer of over 2 70 basis points above regulatory requirements. Our leverage ratio increased to 4.8% in the quarter, reflecting actions we took to strengthen our capital position. Our liquidity coverage ratio is at 143 percent, €67,000,000,000 above regulatory requirements. As a result, We can deploy our capital and liquidity strengths to support clients in what is still a somewhat uncertain environment. Let me now give you an update on our progress towards our sustainability targets on Slide 10. In our sustainability deep dive in May, We outlined a series of targets for the group and for each business. We accelerated our target of over EUR 200,000,000,000 in cumulative ESG financing and investments from 2025 to 2023, And we set a target of at least €100,000,000,000 for the end of this year. I'm very pleased to report that at the half year stage, we are already approaching our 2021 full year plan. We have been able to generate €99,000,000,000 of volumes across our businesses, and all three of our other Wholly owned businesses contributed to this total. As a reminder, this excludes Asset Management as DWS is a separate entity with its own sustainability targets. Nevertheless, Asset Management captured more than EUR 3,000,000,000 in inflows on ESG Investments in the quarter. And finally, in April, Deutsche Bank became a founding member of the Net Zero Banking Alliance. Before I hand over to James, let me now summarize our progress this quarter on Slide 11. As we promised you at the investor deep dive, our focus remains on executing our transformation agenda while supporting our clients. Our top priorities are managing to a 70% cost income ratio and to deliver 8% return on tangible equity in 2022. Our first half results this year reinforce our confidence in our path. We have made clear progress in client momentum, which is visible through our revenues And the macroeconomic backdrop has improved relative to the outlook we gave you in our annual report, strengthening our operating environment. We continue to advance on our key deliverables to support our cost reductions despite the impact of external factors. We remain strict and conservative with our risk management framework, And we are absolutely committed to further strengthening our control environment. Last, but certainly not least, We are making strong progress on our path toward our accelerated sustainability targets. In short, after 2 years, we are well on our way to meeting our 2022 strategic and financial ambitions. With that, let me now hand over to James. Thank you, Christian. Let me start with a summary of our financial performance for the quarter compared to the prior year on Slide 12. We generated a profit before tax of €1,200,000,000 or €1,400,000,000 on an adjusted basis. Total revenues for the group were €6,200,000,000 down 1% versus the Q2 2020. Net interest income has declined by €143,000,000 versus the prior quarter as the one offs I flagged in April have normalized. The resulting net interest margin held broadly steady at 1.2%, but we expect this to trend down slightly as the remaining rate pressures feed through. We expect net interest margin to stabilize at slightly over 1%. While rates have been volatile in recent months, We planned on a conservative basis and still see a modest tailwind to the numbers we shared with you at the investor deep dive in December. Turning to costs, Non interest expenses were down 7% year on year. Our provision for credit losses stood at €75,000,000 or 7 basis points of loans for the quarter. In line with our previous guidance, we saw a decrease in our CET1 ratio to 13.2%, which was mainly driven by regulatory items, notably the impact of the final targeted review of internal models assessments, partially offset by net income generated in the 2nd quarter. Leverage ratio has increased to 4.8%, up 15 basis points compared to the previous quarter. Tangible book value per share was €24.06 up $0.86 or 4% in the year to date. The tax rate for the quarter was 29%. Let's now turn to Page 13 to look at our core bank's 2nd quarter performance more closely. Corebank revenues are €6,300,000,000 for the quarter, down 1% on the prior year quarter. For the first half of the year, Our revenues in the core bank were €13,400,000,000 up 5% compared to the same period in 2020. Non interest expenses were down 3%, mainly driven by lower litigation expenses as well as reduced restructuring and severance costs. This takes our profit before tax to €1,400,000,000 up 90% on the prior year. We have delivered a 4% year on year increase in our post tax return on tangible equity for the quarter to 7.8%. Our cost income ratio for the quarter stands at just under 76%. Let me turn to costs for the group on Slide 14. In the Q2, adjusted costs decreased by 6% year on year with reductions across all major cost categories. We saw lower compensation and benefits costs reflecting workforce reductions, although this was partially offset by a prior year one off credit from a change in estimate for certain deferred compensation awards. We saw a decrease in IT costs largely from lower hardware expenses. We also achieved a reduction in professional service costs, primarily reflecting lower legal fees. The decline in other costs Was largely driven by lower bank levies as changes in the input assumptions made by the Single Resolution Board led to additional charges in the prior year quarter. Our Q2 adjusted costs excluding transformation charges and reimbursements from Prime Finance were €4,500,000,000 Transformation charges were €99,000,000 down 15% sequentially. As we mentioned in the Q1, we faced an unexpected increase in our contribution to the German statutory deposit guarantee scheme, which we will continue to incur on a quarterly basis going forward. As we indicated in April, we expect this incremental contribution to be roughly €70,000,000 in 2021 and approximately €60,000,000 per year thereafter until 2024. It remains too early to determine if incremental contributions to the voluntary scheme will be necessary. As Christian mentioned earlier, we will continue to retain our Cost discipline to manage tightly all the components we can control as we remain committed to the cost income ratio target of 70% for 2022. Let us now move to Slide 15 to discuss our provision for credit losses. Our Stage 3 provisions reduced more than expected Compared to our previous guidance to EUR 111,000,000 reflecting releases in the Corporate Bank and fewer impairment events across all our businesses. These were offset by €36,000,000 of net releases in our Stage 1 and 2 provisions from portfolio improvements. While an improved macroeconomic outlook would have resulted in a further release of provisions in Stages 12, We implemented a conservative management overlay that more than offset this release. In addition, as in the Q1 of this year, We retained a portion of the management overlay we established in 2020 to account for future uncertainties in the outlook, particularly for the Private Bank portfolio. We will continue to be focused on prudent risk management and as Christian mentioned, we would now guide to provisions in a range of around 20 basis points of average loans for 2021 lower than our previous guidance with positive scope for improvement for the balance of the year if current trends persist. Let me now turn to capital on Slide 16. Our CET1 ratio decreased to 13.2% during the quarter, broadly in line with the expectation we outlined in April. This reflects a decrease of approximately 70 basis points due to risk weighted asset inflation from TRIM decisions and the CRR2 go live, 10 basis points less than our previous guidance. Looking at the balance of the year, we now see a remaining net impact of approximately 20 basis points on the CET1 ratio from further regulatory items such as the new EBA guidelines on the definition of default, the implementation of which was delayed as now expected to follow in the second half of the year. Within this 20 basis points guidance, we also reflect benefits expected from completing our remediation efforts on certain historical ECB findings. As before, the ultimate timing and magnitude of these regulatory items remains uncertain and subject to final ECB decisions, but we see no deviation from our long term trajectory and we remain committed to a CET1 ratio greater than 12.5%. All in all, we expect to end the year with a CET1 ratio of around 13%. The 2nd quarter CET1 ratio includes a deduction of an additional €275,000,000 of common share dividend on top of the €300,000,000 we deducted last quarter. Our fully loaded leverage ratio increased by 15 basis points to 4.8% this quarter. The increase was largely driven by additional Tier 1 capital issuance and net income. Our pro form a leverage ratio including ECB balances was 4.3%. With that, Let's now turn to performance in our businesses, starting with the Corporate Bank on Slide 18. Profit Before tax in the Corporate Bank was €246,000,000 a more than threefold increase versus the €78,000,000 in the prior year quarter, while adjusted profit before tax rose to €274,000,000 This equates to a 6.5% reported and a 7.4% adjusted post tax return on tangible equity for the quarter. Revenues were €1,200,000,000 in the quarter, 8% lower on a reported basis and 6% lower year on year excluding the effects of currency translation. In the current quarter, the impact of episodic items was approximately €90,000,000 lower than in the prior year, Evenly split between lower benefits from recoveries related to credit protection and portfolio rebalancing actions. Adjusting for these effects and currency translation, underlying corporate bank revenues would have been essentially flat as deposit repricing and other business initiatives offset interest rate headwinds of approximately €80,000,000 At the end of the Q2, charging agreements were in place on approximately €87,000,000,000 of deposits, which resulted in revenues of €85,000,000 Well on track to generate around €300,000,000 on an annualized basis. We continue to expect the combined effects Of the moderation of interest rate headwinds based on current interest rate curves, the increasing quarterly contribution of deposit repricing as well as business momentum to support our revenue outlook for subsequent quarters. For the full year 2021, We expect revenues to remain essentially flat compared to the prior year, which was our expected jump off point for 2022 as we guided in our Q4 results. Non interest expenses decreased by 10%. Adjusted costs Excluding transformation charges declined by 5%, reflecting headcount reductions, non compensation initiatives and benefits from currency translation, partly offset by the non recurrence of a benefit from a change in the estimate related to certain deferred compensation awards in the prior year. The current quarter included significantly lower litigation charges compared to the prior year quarter. Compared to the Q1, loans and deposits remained essentially flat, while the year on year increase in RWA mainly reflects regulatory inflation related to TRIM. We released EUR 20,000,000 of provisions for credit losses in the quarter, driven by unusually low impairment events compared to provisions of €144,000,000 in the prior year quarter. Turning to revenues by business segment in the Q1 on Slide 19. Corporate Treasury Services revenues were 10% lower year over year on a reported basis or 9% excluding currency effects, mainly driven by lower benefits from episodic items. Interest rate headwinds were partly offset by charging agreements and other business initiatives. Institutional client services revenues were essentially flat excluding the effects from currency translation, but were 4% lower on a reported basis. Institutional Cash Management and Trust and Agency Services grew on an underlying basis, while Security Services declined. Business Banking was 7% lower year on year with underlying business growth more than offset by a revenue decline in contributions from episodic items and interest rate headwinds. I'll now turn to the Investment Bank on Slide 20. Revenues for the Q2 of 2021 excluding specific items decreased by 10%. Our trading businesses were impacted by the reduced market activity during the quarter compared to the heightened levels seen in the Q2 of 2020. Compared to the Q2 of 2019, Investment Bank revenues are up 31% with both FICC and O and A significantly higher. Non interest expenses were essentially flat year over year as were adjusted costs excluding transformation charges. The Investment Bank generated a pretax profit of €1,000,000,000 and a return on tangible equity of 12.5% in the 2nd quarter, both an increase on the prior year period. The cost income ratio for the quarter was 56% and continues to be well ahead of our full year expectations. Our loan balances reduced year on year, Primarily driven by the repayment of revolving credit facilities. However, versus the prior quarter, they are up driven by activity in our financing businesses. Leverage exposure was higher, impacted by increased lending commitments. The year on year increase in risk weighted assets reflects the impact regulatory inflation primarily from TRIM with underlying business growth essentially flat. The improving credit environment A near absence of impairment events led to materially lower provisions across businesses compared to the elevated levels of the Q2 of 2020. Turning to revenues by business segment on Slide 21. Revenues excluding specific items in fixed sales and trading decreased by 9%. Financing and credit trading revenues were significantly higher, driven by a strong performance across financing And within trading, our distressed business continued to perform very well. As expected, revenues declined across our rates, FX and Emerging Markets businesses as market conditions normalize when compared with the heightened levels seen in the Q2 of 2020. In FX, revenues were significantly reduced to low levels of due to low levels of volatility and compressed spreads. However, our franchise strength was evidenced in the recent Euromoney 2021 FX survey, which saw Deutsche Bank Ranks number 3 globally, up from 4th the previous year. In emerging markets, Revenues in Asia were impacted by lower client activity, specifically in the first half of the quarter. This was partially offset by growth in both the EMEA and Latin America regions as those refocused businesses continue to perform well. In May, we also launched our new institutional client coverage model starting in European rates and European investment grade credit. The new model is underpinning and driving our quarter on quarter electronic market share gains in those two businesses. Revenues in origination and advisory were essentially flat versus prior year, while in our home market, we regained our number one rank. Debt origination revenues were lower. Materially higher leveraged debt capital markets revenues were more than offset by a reduction in investment grade related revenues as issuance levels normalized versus the extreme levels of the Q2 2020. ESG continues to be a focus area. We ranked 3rd globally for the year to date on ESG related debt products. Equity origination revenues were slightly lower year on year, Predominantly driven by lower follow on activity, which reached record levels in the Q2 of 2020. Significantly higher advisory revenues reflected the continued growth in M and A activity. Turning to the Private Bank on Slide 22. The The Private Bank reported a pretax loss of €11,000,000 reflecting a negative impact of €222,000,000 related to the BGH ruling in April 2021, essentially disallowing negative consent related to fee changes in consumer contracts in Germany. The EUR 222,000,000 effect reflects 2 components, EUR 128,000,000 of litigation provisions, mainly for potential client reimbursements, as well as foregone revenues of €94,000,000 related to suspended fees, of which €93,000,000 in Private Bank Germany. We expect this temporary revenue impact to continue into the Q3 and to a significantly lesser extent in the Q4 when we expect the majority of pricing agreements to have been accepted. Adjusted for this and specific revenue items as well as transformation And severance expenses of €133,000,000 the Private Bank would have achieved a profit before tax of €309,000,000 and on an adjusted cost income ratio of 80%. On the same basis, the adjusted post tax return on tangible equity of 7% would have been in line with the last quarter. Reported revenues were EUR 2,000,000,000 Up 3% year on year or up 8% if adjusted for the BGH ruling as interest rate headwinds of approximately EUR 100,000,000 We're more than offset by continued business growth in an improved market environment. The prior year quarter also included negative impacts related to our strategy execution. Business volumes grew by EUR 14,000,000,000 in the quarter with EUR 10,000,000,000 of inflows and assets under management and EUR 4,000,000,000 of net new client loans. With this, the private bank attracted EUR 29,000,000,000 after only 6 months into the year against a full year target of greater than €30,000,000,000 Adjusted costs excluding transformation charges declined by 4% across both compensation and non compensation costs, including savings from the execution of our strategic plan. Provisions for credit losses were 19 basis points of loan for EUR 117,000,000 and reduced by 48% year on year, reflecting tight risk management, The extension of moratoria in Italy and Spain as well as the high quality of our loan book. The prior year quarter was also impacted by the macroeconomic outlook at the peak of the COVID-nineteen pandemic. As shown on Slide 23, Revenues in Private Bank Germany declined by 1%. Adjusted for the temporary impact of €93,000,000 from the BGH ruling, Revenues in PB Germany would have increased by 7% year on year. The prior year quarter included negative impacts of approximately EUR 45,000,000 arising from the German legal entity merger. Continued headwinds from deposit margin compression were more than compensated by growth in loan revenues and fee income from investment and insurance products in recovering markets. The business achieved net new client loans and net inflows in investment products of EUR 2,000,000,000 each in the quarter. In International Private Bank, net revenues increased by 9% despite headwinds from continued deposit margin compression and negative FX translation effects, reflecting continued business growth in recovery markets. Net new business volumes were €8,000,000,000 including €5,000,000,000 of net inflows into investment products. Growth was especially pronounced in Germany and Asia. Private Banking and Wealth Management revenues increased by 10%, excluding specific items and FX translation effects. Sustained momentum in investment products and loans in part supported by previous hiring of relationship managers offset headwinds from lower interest rates. Personal Banking revenues increased by 6% if adjusted for the one off re hedging charge in Italy in the prior year. Growth was supported by higher investment product revenues in the current quarter. As you will have seen in their results, DWS had another successful quarter compared to the previous year. To remind you, the Asset Management segment on Page 24 includes certain items that are not part of the DWS standalone financials. Assets under management of €859,000,000,000 have grown by €39,000,000,000 in the quarter, driven by positive market performance and positive net flows. Net flows in the quarter were a record €20,000,000,000 driven by substantial inflows across all product pillars and regions. Positive flows continued in targeted areas of passive and alternatives with cash reversing some of the outflows observed in the Q1. The business also attracted €3,800,000,000 into ESG products during the quarter. Profit before tax of €180,000,000 in the quarter Increased by 59% over the same period last year, driven by improved revenues. Revenues grew by 14% versus the prior year, primarily due to a strong increase in management fees of $76,000,000 as improvements in equity market levels and consecutive quarters of net flows More than offset the impact of continued industry wide margin compression. Non interest expenses decreased by €5,000,000 or 1% with adjusted costs excluding transformation charges up 3%. The increase in costs was driven by higher variable resulting from the DWS share price increase, platform investments and higher asset servicing costs due to the increase in assets under management. Non operating costs reduced significantly as the prior year included severance and restructuring charges for organizational and executive board changes. The divisional cost income ratio improved by 10 percentage points to 63%. Turning to Corporate and Other on Slide 25. Corporate and Other reported a pretax loss of €39,000,000 in the quarter compared with a pretax loss of €165,000,000 in the same period last year. The loss included €60,000,000 of funding and liquidity charges not allocated to the businesses, consistent with our prior guidance to remain at around €250,000,000 in 2021. The year on year improvement in valuation and timing differences was driven by non recurrence of adverse movements in interest rates in the prior year period. This was partly offset by a smaller benefit from a lower than planned infrastructure costs that have not been charged to business divisions. We can now turn to the capital release unit on Slide 26. The capital release unit recorded a loss before tax €258,000,000 in the quarter, a significant improvement to the prior year. Revenues were negative €24,000,000 Quarter down from negative €66,000,000 in the same period last year. Derisking, risk management and funding impacts We're partly offset by positive revenues from the Prime Finance cost recovery and from reserve releases reflecting market conditions. Adjusted costs excluding transformation charges declined by 45%, reflecting lower service costs, The absence of incremental bank levies that were recorded in the Q2 of the prior year and lower compensation costs. Compared to the Q2 of 2019, Adjusted costs excluding transformation charges have been reduced by 61% ahead of our internal plan. Leverage exposure was €71,000,000,000 at the end of the second quarter, down 30% compared to the prior year quarter and reflecting a €10,000,000,000 reduction from the previous quarter. These reductions were primarily driven by derisking and lower prime finance leverage. In addition, we saw a lower than expected impact from the implementation of the standardized approach for counterparty credit risk. RWAs were €32,000,000,000 at the end of the second quarter, of which €23,000,000,000 were from operational risk. We saw reductions in credit, CVA and market risk, bringing us to a 24% decrease versus the prior year quarter. We continue to make good progress on de risking the portfolio in the Q2, focusing in particular on complex or illiquid positions that we were successful in eliminating. Since the Q2 of 2019, the division has reduced leverage exposure by 71% or €178,000,000,000 and RWA by 50% or €33,000,000,000 Looking forward, We expect to be at or ahead of our 2022 targets for RWA and leverage exposure by year end 2021. This includes completing the transition of our Prime Finance platform. We expect this transition to release approximately €25,000,000,000 of leverage by year end. Migrations of client balances are already underway and will accelerate over the Q3. For the remainder of the year, we expect negative revenues in the capital release unit. We are on track to hit the cost reduction targets we set out in the investor deep dive. Turning to the outlook on Slide 27. Christian talked about the continued execution of our strategic agenda and the progress we've made this quarter as we look to our 2022 targets. Beyond the improvements to our control environment mentioned earlier, our top priorities remain managing to the 8% return on tangible equity ambition and a 70% costincome ratio. On revenues, the improved trajectory in the core bank shows that we are operating at a level That puts our goals well within reach and we see continued momentum in our client franchise. We remain focused on diligent cost management, Notwithstanding the unforeseen and uncontrollable items, which led to our target adjustment for 2022. We do not think it is prudent to starve the company of investments to offset these items. However, our 2021 pretax profit expectations have improved over the course of the year despite higher expenses reflecting stronger revenues and lower credit provisions. We have been and will be disciplined on risk management and will continue to manage the balance sheet conservatively. As discussed, we have revised our guidance for provision for credit losses to around 20 basis points of loans for the full year 2021 and we see a positive trajectory if current trends persist. We reiterate our target of a CET1 ratio greater than 12.5%, and we continue to target a leverage ratio of approximately 4.5%. We remain focused on our capital return objectives. We have deducted €575,000,000 for dividends from first half twenty twenty one earnings under standard ECB rules in the consolidated CET1 capital calculation. We will continue to assess capital distribution options for 2022. With that, let me hand back to Joanna and we look forward to your questions. Thank you, James. Operator, we are now ready to take questions. Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer 1st question is from Tom Hallett from KBW. Please go ahead. Hi, guys. Thank you for taking my questions. So firstly, could you just walk us through the building blocks for the incremental 600,000,000 And revenues by division, please. And how the recent curve developments have been incorporated into your planning, if at all? And then secondly, the 8% return target has remained flat. So when I factor in the bump in revenues and moderate provision somewhat, I would get to an increase in your RAT target Even after adjusting for the rising costs. So is there some one offs or something we should be considering? So any commentary around that would be great. And I'm going to be a bit sneaky and ask a third question, but you're guiding towards a lower risk charge even for the next year now, But the majority of the better performance has been from the release of prior period Brazil build. It looks like you've now released significant portion of those made last year, which strikes me as quite high versus your peers, but you also see the supervisor remaining pretty cautious on credit risk too. So What gives you the confidence on moving guidance already? Thank you. Well, thank you, Tom, for your questions. Let me start to answer that and then James just chip in for additional comments. To your revenue question, let me go through the building blocks as you're saying, and I'm doing it business by business. But overall, Our confidence in higher revenues, Tom, really goes back to the positive development, which we have not only seen now for the last quarter, the Q1, Actually, for the last four quarters in all four core businesses. And what we can do is that we can go back to Our 4 business and compare our 2022 revenue targets, which we outlined at the IDD in December And compare this now with our view after the 1st 6 months, but also after looking at the transformation over the last 12 to 18 months. So let me start with the private bank. First of all, let me say that I'm really happy with what we see there. There is clear growth in investment business and on the credit side. Remember, the prepared remarks we sent, We almost or we actually reached our full year target in new investment business after 6 months' time. And obviously, that will Spark the revenues also going forward. Same on the credit side, really good momentum, in particular on the mortgage side with good margins. Don't forget that we are selectively repricing deposits in that business. So actually, we see ourselves Fully on track to achieve the €8,300,000,000 revenue number, which we gave to you on the IDD. I would even say There is upside because with the optimism and the business we see right now, I do believe that we are Ending this year with an €8,200,000,000 number with the growth rates which we see right now in the last 6 months, but also the momentum in the business, I think SEK 8,300,000,000 is a conservative pick. Same actually goes for Asset Management. You remember our plans Asset Management in the IDD was at, I think, CHF 2,300,000,000 for the year end 2022. And given the development which we have seen so far, we will outperform this. Looking at Q1, Q2, the inflows Which we are seeing, and it's actually continuous inflows. Business momentum is very good. It's actually excellent. The run rate we see now in this business points to almost 10% higher than the plan, which we have for the year 2022, so clear outperformance on that side. On the Corporate Banking side is The underlying business in this segment has grown steadily since 2019 and actually as a result of 4 measures, which We have implemented and which we are working on day by day. It's a) the core initiatives such as the business with platforms, fintechs and e commerce providers. We See the growth rates there. Very successful, our growth in the Asia Pacific business, but also in the German Business Banking. You will remember that We launched a specific German Business Banking initiative last year in October, really goes well. We have further positive development on the charging agreements, which we have in place now for, I think, €87,000,000,000 of deposits. And I can tell you, we are not Stopping here. Obviously, we won't see those kind of jumps anymore like we have seen over the last 15 months, but it will further increase. But even these €87,000,000,000 of deposits will bring us on an annual basis €300,000,000 of revenues. And we put even more focus, and that's what Fabrizio and Stefan Hops are doing, more focus on the lending business. And finally, can see and we could already see that in June, but also now in July, that the lending business also in Germany in the corporate bank Is gaining momentum, and we are putting more capacity and focus on that. Furthermore, James always said in the last quarters that the headwinds from interest Rates is getting lesser, in particular, in the Corporate Bank. So in this regard, with a jump off, which we estimate this year of 5.2%, Potentially even slightly better. And then the underlying growth we have in all the items we have told you, 5.5% is definitely Achievable. So we are confident about that. Let's talk about the IB. As the Force business, I think also here, we have shown now for the last four quarters that we can gain market share there where we want to play and where we think we are relevant and that even In a normalized market environment, I think Q2 is nothing else and the best evidence for that. And also, we are seeing that What we have told you, in particular, in the IDD and in the Q1, that we see a very good degree of sustainable earnings from 3 or 4 items: Client reengagement, looking at our CDS price, looking at the overall momentum and also robustness of the bank, Client are reengaging, coming back to us and simply are doing more trades. And it's our really good Financing franchise, which obviously also contributed a lot to Q2. So now looking At the number which we have given you for 2022 of €8,500,000,000 of annual revenues as a target for 2022 And taking into perspective where we are right now, what we see, this SEK 8,500,000,000 is clearly a conservative number. We will be north of SEK 9,000,000,000 For this year, we see the momentum. We have the market share. And therefore, I think 8.5% is again conservative and there is upside. Next to all these items, I. E, the 4 businesses which I tried to describe and again, James can give you more details on this, We have further upside in some treasury positions, in particular, on the interest rate curve, but also in our funding costs. That again is a smaller 3 digit €1,000,000 amount, which you can add. And therefore, at the end of the day, We are highly confident that we can outperform the number which we gave to you on the revenue side in December 2020 in 2020. And I believe that we have an absolute credible path to go to €25,000,000,000 or actually to plus €25,000,000,000 On the CLP side, let me answer That first of all, you can imagine I'm very happy with the risk management, which we have shown now for years, but in particular also throughout the COVID crisis. And it's simply on both levels an outstanding risk management, I. E, on portfolio But as well as an individual level when you take into account some happenings, in particular, in Q1, which we avoided at Deutsche Bank. So in the 1st 6 months, as James said, we had on an annualized basis, 7 basis points. Of course, this number is too low. But we should also remember what we said at the beginning of the year, Tom, and that was approximately basis points of loan loss provision expectation for 2021. We believe now with looking at the portfolio, looking at the economic development That we believe looking at the upgrade, downgrades in the portfolio, that 20 basis points is a conservative pick for 2021. You know that for 2022, actually, we planned something between 25 30 basis points, again at a time In December 2020, when the economic outlook was more vague than it is right now, looking at the portfolio behavior, The robustness of our clients, I can see upside to that number, which we haven't yet even planned for. So clear upside on the revenue and on the CLP side. Now to your last question, why they're not even higher than 8%. Look, at the end of the day, I firmly believe that coming to 8% is our target. We want to achieve that. This management team is laser focused on this one. And therefore, let's only talk about the upside to that when we already achieved the 8%, and there is a way to go for the next 18 months. But hopefully, with the comments on revenues, our clear discipline, which we have on costs and the risk discipline, I'm confident to get there. Tom, I have very little to add to Christian's answer. I would just say on the curve, look, it's moving every day. We obviously update and Fresh our analysis constantly as well. As of the end of the second quarter, we would have had upside of as much as $150,000,000 in revenues, Constant balance sheet to our plan assumptions for the curve. That's probably halved in the month of July so far, a little bit more than halved. And as Christian mentioned, we probably have about $100,000,000 of benefit coming through on funding due to sort of balance sheet efficiency and also Improved spreads in our unsecured funding. So we have a bit of a tailwind there as well. On the CLP, again, very little We think the allowance is prudent. We think we've taken the right actions in terms of overlays. We don't think there's a lot of overbuild to still release, Which as you know is perhaps being a characteristic of some of our peers where we've been very clear throughout the crisis that we've Taken, we think appropriate steps methodologically and otherwise to ensure we had a prudent and appropriate allowance at all times. I'd just focus You on Page 14 of the supplement where we have the asset quality details and carrying an allowance of almost $5,900,000,000 $4,900,000,000 I apologize In total, is I think a very comfortable level for us. Okay. Thank you. Very clear. Next question is from Anke Rangan from RBC. Please go ahead. Yes, good afternoon and thank you very much for taking my The first is on costs. I just wonder if you can give us some comfort that you're not losing focus on costs. I mean, you're still running on a cost income ratio, 80% group, 76% core bank, which is still some way off the 70% target. How do you feel comfortable about dropping the absolute cost target? Maybe a bit premature. And then Just thinking about if your revenues come in at the €24,400,000,000 like the old target, Would we then be back to the CHF 16,700,000,000 cost target? Or is it basically moved to CHF 17.1 And then lastly, sorry, just coming back to what you just mentioned on the positive comments on the Corporate Bank. The flat revenues, 'twenty one, 'twenty look a bit challenging based on the Q2 run rate. So you basically assume that corporate banking revenues have troughed under your assumptions in Q2. Thank you very much. Well, let me start and Then I hand over to James. So look, very fair question on the cost side. But with everything I have, I can tell you Our focus on costs and of course, in particular, on the controllable part of the costs is unchanged. We will not Change anything in terms of our attitude on costs. So therefore, you have the full commitment And passion of the management board and the leadership team to actually further reduce our costs. You are completely right. In order to get to 70% Cost income ratio, there is a way to go. And therefore, we are always working on the 3, 4 items, which we have said before. Number 1, it's obviously the normal cost reduction, which are in particular supported by our key deliverables, Which are overseen by the Chief Transformation Officer. There is a big part to come from all the initiatives, which we already obviously kicked off and which will pay and reduce our costs in 2021 2022. Number 2, you will see that we have other operating costs and lower restructuring And severance costs next year, which will also be part of the reduction in the cost income ratio. And number 3, James said it. Of course, you have some with the really positive the positive momentum we see on the revenue side, you have Some volume related costs, where we now decided in the Q2 that we have further cost measures and kicked off further cost measures in order to actually compensate for that. And we have done it quite successfully in the Q2. Otherwise, we wouldn't have been able, Despite the overall increase in revenues in Q1 and Q2 to actually reduce the cost to CHF 4,500,000,000 in Q2. So therefore, there is nothing like loosening on the cost, not at all, the full focus. And I do believe with that, I. E, the cost reduction in the normal operating basis, lower litigations, lower restructurings and severance, we will get to the 70%. And everything what is volume related, we try to offset, and we've been very successful in Q2 about it. With that, I would hand over to Jens. Sure. Thank you. Anke, I can only underscore what Christian just said. Look, every measure That was part of the targeting to $16,700,000,000 is underway and on track as we sit here today. So there's no sort of loss of focus on execution. And as Christian mentioned, we've initiated a set of additional cost measures In order to offset what we see as volume and control related costs. So in a sense, we are redoubling on our efforts here. There's always uncertainty about our revenue environment, but I think our outlook is certainly skewed to the upside relative to the 24.4 that we shared with you in December, as Christian has gone through. And we always have to be prepared for a downturn, of course. And there, I think the volume related costs that we've called out would certainly help. But we think there's a fair amount of support, if you like, in the revenue outlook. We intend to invest against the revenue outlook that we provided. On the Corporate Bank run rate, I would say we're on track with what we have planned to do. Of course, It's been heavy sledding for the Corporate Bank, facing the headwinds that it has on interest rates And what have you. But as Christian outlined, they've been very successful under Stephan Hoebs' leadership, just executing on the Plans that we laid out for you in 2019 and again in 2020, to drive growth, both, if you like, organically from the existing portfolio and based on new initiatives going forward. And we're making the right investments we think to underscore that. So from our perspective, we do understand it's a higher growth rate than perhaps some of the other businesses have, 2021 into 2022, but we see the underlying momentum that supports that. And as we've said for some time, as the interest rate headwind falls away, that underlying momentum should simply go through to the top line. And one last comment, supporting James, but to your specific question, yes, I do think we have seen The low revenue number in Q2. So all we can see from the forecast is that Q3 and Q4 are turning around. Thank you very much. Next question is from the line of Stuart Graham from Autonomous Research LLP. Please go ahead. Hi, thanks for taking my question. I had 2, please. They're quite geeky. Can you say how much of Q1 and Q2 revenues And the investment bank came from that ZYN distressed trade and whether there are further unrealized gains assumed to be booked in the second And then the second question is on the BGH ruling. How many complaints or requests or address have you received so far? And can you say what percentage The clients have signed up to your recent letter inviting them to consent to paying higher fees. Thank you. Sure. Stuart, I'll start and Christian may wish On ZIM, obviously, we're happy with the developments around ZIM integrated shipping. As you may be aware, a position that was built up over several years in the distressed debt trading business That arose from making markets in the debt instruments of that company. But over time, we built a zero basis Position also in the equity of ZIM. Together, the debt and equity revenues from ZIM in The first half have represented $300,000,000 of revenues, approximately $170,000,000 of that in the second quarter. So it's certainly been a help for the revenues, but it really doesn't change directionally the story around outperformance in both the first and second quarters in FIC driven, of course, by very strong results in credit also outside on that one position. Looking to the future, we continue to hold a significant equity stake. We're subject to liquidity restrictions on that equity stake. We have a significant reserve to reflect the lack of marketability And don't necessarily expect that to change in the near term. Over time, of course, we would seek an orderly exit and realization. Over time that liquidity reserve would come down, but it's too early to say when over what period That would that was likely to take place. Turning to the BGH item that you mentioned, we're tracking obviously very carefully The customer responses. Let's start with the outreach, if you like, the repapering exercise. That commenced at the beginning of July. We're working hard to bring as many of those customer agreements to completion during the Q3. Obviously, it's in our interest to have the foregone revenue impact for a shorter time as possible on that on those current accounts. So as isolated as possible to Q2 and Q3, there is a possibility a small amount may still Dribble into Q4, but we do expect in and around the 1st October to have closed off the lion's shares of the customer acceptance of revised fee schedules. On the question of the restitution cost, as you saw, we booked Slightly higher reserve in the quarter than we'd initially called for. As it happens, we've also booked in that litigation The costs of operationally executing on the restitution and the repapering, so there's a significant amount of that reserve that is And then an additional amount that represents the operational cost. We think that reserve is appropriate And perhaps even conservative against prior experience dealing with similar situations. And as of today, I won't give you the precise numbers, but the actual customer inquiry For restitution is running below the level that we would have expected, supporting that reserve impact. So hopefully That's clarity for you on those questions. That's great. Just on the ZYN, because I think your stake is worth $500,000,000 but you're saying you mark that to market, You have a reserve against it. So we shouldn't just be assuming there's a $500,000,000 gain to come in the second half. Is that right? That's right. I mean, so it is partially the market value of the equity position is partially already recognized In revenues, but there is a significant reserve for illiquidity that is held against it. So future revenues At the current stock price, of course, it'll depend on both the stock price development and the reserve release, But that is now marked daily, including the reserve amount. Perfect. Thank you for taking my questions. Next question is from the line of Kian Abu Hussain from JPMorgan. Please go ahead. The first question is related to Slide 44, just more detailed question around How we should think about loan growth, in particular in the financing business, as you highlight lending growth in the investment bank? And how do I square that with the U. S. Wholesale funding growth target? Should I take those 2 together In that context, what kind of financing exposures are we or should we be thinking of In context of ongoing growth. So if you can talk about ongoing growth, but also what you're financing and if I'm putting 1 together correctly. Secondly, on IT expenses, you're running at around $4,400,000,000 And I'm just wondering how we should think about the future of IT expenses beyond 21 into the future. Is this a number that you're seeing will be continuously creeping up As you are improving your ROE, so are you seeing this is a level that you're happy in terms of investment levels going forward? Thanks, Kian. It's James. I'll start and Christian may want to add. I'm not sure exactly the connection that you're seeking to make about The loan volumes and what it sounded like dollar funding, so you may need to re point me. But Overall, I think the comments we'd make on Page 44 is we were pleased with loan growth developments, as you can see in Private Bank and Investment Bank. Corporate Bank, as you may have seen also from other peers, has been a little bit slower to develop than we would have expected. Although late in the quarter and I think the trajectory, we're still confident about growth coming back into that market. The Investment Banking loan balances are a mix of things, but as you say, a relatively significant amount of Structured lending, that is split between dollars and other currencies. All of the dollar piece of that is, of course, built into our overall dollar funding base, and so it doesn't present a significant burden, frankly. It's been relatively speaking steady as she goes in terms of dollar fundings. On the IT expenses, It's an area we've been looking very, very carefully at. As you've heard, I think over the years, for one thing, There has been what I would call deferred investment that we've had to catch up on, and we've been talking about that for a while. We're making very good progress on a series of relatively large scale investments that we've been building. And over time, those investments Should result in significant savings in terms of applications, data and generally our technology estate. We'd obviously like to accelerate as much as we can the realization of benefits in technology. So the short answer to your question is we do believe That we will be able in time and it's part of our planning for 2022 and beyond to reduce our technology expenses, All the while preserving an investment budget in technology that we think is appropriate for a company of our size, scope and scale. And in fact, one of the benefits of the investments we've been making, whether that's in data or now in the transition to cloud and also elsewhere is that The efficiency of investments is accelerating in terms of just more value of our investments per euro spent And impact, especially on the front end with clients. And so that's been encouraging. Lots of work to do, As you know, but I think the next 18 months are really critical period for that execution and really then delivering the benefits that we've been working on now for several years. Kian, one more word on the corporate bank lending. I think it, in particular, comes now from 2 directions. Number 1, You can see in particular in Europe that the uncertainty of our corporate clients with regard to the economic development Is slightly reducing. So people start to invest again, in particular also to invest into making their business greener. So the transformation part and the ESG part of financing us He's getting more and more traction here. That's number 1. And number 2, you can also see that during the crisis, a lot of the German corporate clients Have actually used their own liquidity, their own capital to go through this crisis and did not really rely on banking facilities. So That is changing a lot. And therefore, we could already see in the last month of Q2 that there is Starting momentum on the corporate client side to increase lending, and hence, we are quite optimistic for Q3 and Q4 in this regard. Thank you. That's very good, very clear answers. Just in terms of the lending level in the Investment Bank, shall we think About similar growth rate that we saw in the Q2 and in terms of financing costs as A lot of the things like structured credit are dollar related. Is there any headwind Coming from dollar related financing considering you mentioned the funding improvement going forward? Yes. I guess, let me take that. One thing you need to understand is the Investment Bank Quarter end loan balances can be quite volatile based on just which transactions have closed versus in the pipeline at a point in time. So the direction of travel, Kian, we think is up. We do see loan growth opportunities, opportunities to put the balance sheet to work. But the comparisons on any given quarter can move around given the episodic nature of some of this. On the financing costs, obviously, it's all blended in, the sort of percentage of dollar versus euro in our Funding cost is blended in. Interestingly, as we've called out before, the geography of a portion of that funding cost that is based on swaps Is asymmetric as to whether it's in net interest income versus other income. So it's a little bit harder just to pull out for you what the impact on funding would be of a rising dollar balance sheet. But as I said earlier, we don't see a mix shift as likely in that balance sheet growth as it comes. It's likely to be steady from a mix perspective with where we've been in the past. Very clear. Thank you very much. Next question is from Andrew Lim of Societe Generale. Please go ahead. Hi. Thanks for taking my questions. I'd just like to circle back to revenues again. You've talked a lot about 2022 revenues, But on 2021 revenues, you're still guiding to group revenues being flat at €24,000,000,000 And this is despite the fact that the first half It's tracking nearly EUR 1,000,000,000 higher on revenues versus the second first half of last year. So I'm just wondering how you're looking towards the 2nd half, is there something untoward that we should expect that should cause revenues to be EUR 1,000,000,000 lower? Or should the conclusion be that EUR 24,000,000,000 It's a lowball guidance there from yourself. And then my second question is on that prime brokerage business That gets transferred later on this year. Could you remind us what the revenue and cost impacts would be once that transfer takes place? Thanks. So look, the guidance is reflects really seasonality And that is typical and also some conservatism about the outlook in terms of the growth That is still to be captured this year, without taking anything away from the momentum that we've talked about. I wouldn't want to go into lowball or otherwise, Given that's obviously our disclosure and best view, but we certainly see, as I say, a strong year this year, especially relative to the outlook we had at the beginning of the year and especially in light of some of the headwinds that we faced this year that were unexpected. On prime brokerage, as I mentioned, the balances are beginning to transition over to BNP Paribas. We're obviously pleased about that, Given it's a significant undertaking both on the technology and the client management side and people are also transitioning over to BNP Paribas. As I mentioned, the leverage exposure impact would be about $25,000,000,000 from where we are now. The expenses around that $100,000,000 ballpark, it's a little less than $100,000,000 that we pull out of our numbers is the amount that would Simply go away once the transition is complete. There's a little bit more that as you know that is stranded that we're working on separately to take out around the Prime Brokers business. But one of the benefits of this transaction is it's given us obviously much more time to work on that on preparation of removing the stranded costs and that's then built into our view of CRU into next year. And are there any associated revenues on that PD business? Any I'm sorry, what kind of revenues, Andrew? And the associated revenues that we should be aware of? No. The revenues are passed to BNP Paribas as part of the transaction. What we do recognize as revenue is that expense recovery, which exactly offsets the call it $100,000,000 less little less than 100,000,000 That we show you on in our expense disclosures. Got it. Thanks. Next question is from Magdalena Stoklosa from Morgan Stanley. Please go ahead. Thank you very much And congratulations on the quarter. I've got two questions, one on the Investment Bank and one on your assets gathering business. So really when we look forward in the IB, where would you like to see your wallet Gains from here. So you talked about Capital Markets and Advisory in Germany in your prepared comments, But where else would you expect your position to strengthen? So that's question number 1. And question number 2, really, When you look at your kind of integrated model between DWS and Wealth, Where do you see the biggest opportunities from group perspective? And how do you think about the scale in this business? Also because, of course, as we've seen, very strong kind of net new money momentum on both sides. Thank you. Thanks, Maxelina. Let me take the first question. Number 1, I With the focus in the Investment Bank, which we have given ourselves 2 years ago, obviously, we want to grow in those parts where we are now So it's it would be the wrong attitude of Deutsche Bank if we now say and out of these Segments where we are now playing in the Investment Bank, there is only 1 or 2 where we want to grow and take market share. And therefore, I think there is a clear focus, A, on the financing business, where we had a track record of having the right process from origination over credit to distribution. Secondly, I do think we have focus in the O and A business Regionally but also per industries and those where we think we have a relevant market share. We are very happy with regaining certain positions, in particular, obviously, in our home market. But obviously, we can also see in other industries globally that we play a meaningful role. And thirdly, it is next to the financing business in the trading business, in those disciplines where we have been for years, I think leading, be it FX, be it rates, emerging markets, we are doing a lot of investments. That is actually where we invest Into people where we invest into technology. And this has started to pay off. I well remember that I've told you since the Q3 of 2019 That I do believe that with that focus on those 3 or 4 businesses, with making the right people choices and the right IT investments, we can grow. And this, We have done now for 5 or 6 quarters in a row. And they are actually, I don't see, that this is coming to an end, But that actually, we are a very competitive bank in that area, and we obviously use our chances to further outperform. Again, other items like the overall robustness of the bank, CDS prices now playing to our favor that clients are reengaging. And obviously, again, clients are looking for an alternative to the U. S. Banks, in particular here in Europe, and that's what we are playing for in the IB. So I would say a clear mandate in all businesses of the IB, and the focus which we have given ourselves helps tremendously. Just briefly one thing to add on that, Magdalena. If you look at the wallets in FICC and the development over time of that wallet, We think a reasonably sort of conservative view of 2022 and the development of this normalization in the FICC wallet And relatively stable market share numbers for us would support the number in our model that supports the low end of the range that Christian talked about earlier, the 8.5 for IB, the FICC contribution within that. So we think we're still looking at reasonably Reliable assumptions about the wallet and market share for our company next year. On DWS and the Wealth business, it's a really interesting question. We think we are pursuing A very unique strategy around particularly wealth in Europe, where we're able to serve entrepreneurs in a different way for many of our peers. So in markets where we're present as a retail bank, as a corporate bank For small and medium sized corporates and also with larger corporate capabilities, risk management, what have you, Alongside Wealth Management, we're able to serve the wealthy entrepreneurial family in a very different way from peers. And we're able also to offer DWS products. Obviously, that platform is open architecture, but we do sell DWS products. And DWS has a cross sell also into that same client base and the corporate client base in capabilities like pension and money funds. So to your question, we do see a strong sort of value in Pursuing those strategies alongside one another and we have been making investments in those businesses, including in particular in Wealth Management in Europe. And James, would you kind of venture into kind of where would you like that business to be Even on the combined level, so from a perspective of your asset group asset gathering business, to a 3 year view. Bigger would be the 2 or 3 year view. I mean, we are making investments and working hard on that. And I think you'll see the results of that as we execute on the strategy. We're quite bullish on that strategy. And seriously and I assume kind of both organically and inorganically. Well, we said, Magdalena, then, of course, Organically, is that what we are focusing on day by day? But we have also said that, in particular, in the asset management, if there is the right opportunity, with the maturity Asoka and his team have achieved, if there is the right target where we maintain, obviously, the majority and consolidate it because Asset Management is Key business and will always be a core ingredient of Deutsche Bank, we would also look into those alternatives. But that must be carefully reviewed, But we are not shy of doing something. Perfect. Thank you very much. Next question is from Andrew Coombs from Citi. Please go ahead. Good afternoon. A couple of follow ups For me, please. 1 on costs and one on revenues. Firstly, on the costs, I hear everything you're saying about Nothing has changed on your plan on costs. You're still laser focused. Your controllable part of the costs And your view there is unchanged. But I guess it leads me back to the question of why did you choose to remove the absolute cost target rather than just amend it From 16.7% to 17.1%. Is it a case that you wanted more flexibility to pursue revenue opportunities? Do you see a risk of more external factors? Or am I simply just reading too much into it? That would be my first question. The second one on revenues, Christian gave a great walk through of all the core divisions into 2022. I just wanted to pick up both CRU And the CNO division. In CRU, you talked about the prime expense reversal of $100,000,000 Could you just Clarify when you exactly expect that to drop out, which quarter you expect that to drop away. Then likewise, the $250,000,000 internal transfer fund pricing change that will hit CNO, can you just give us a feel for how much of that's already fed through this year? Thank you. Thank you, Andrew. And let me take your phrase now, but I'll explain it. Yes, you are reading too much into it. So number 1, the EUR 400,000,000, I think, which you are quoting, we already signaled that since December in the IDD to the market, that these are external costs not controllable for us. And by the way, We will not give up fighting this increased SRF. But I think we also should be reasonable at this point in time. We think we have to pay more next year. That is now taking into account. And we always signal that for that amount, we will not constrain investments into our core businesses, Which are actually, at the end of the day, also supporting efficiency, but also revenue growth. And in this regard, we Obviously, with the revenues also increasing, as I said, there are certain volume expenses volume linked expenses, which we need to take into account. James and I have done everything and initiated everything to counterbalance that. And therefore, we are confident that we can Compensate for this volume linked expenses. But I also do think after now being 3 years In the transformation, 2 years in the Project Cairo, we are now at a point where actually more and more we invest into Sustainable profitability. And that turning point also means that there is obviously also in managing this Bank to a certain margin, I think the cost income ratio requires also that we are managing it from the KPIs towards the key 2 KPIs, which is 8% return on equity and 70% cost income ratio. That's how we are doing it. The inner attitude of this bank Will not change. Controllable cost will be reduced as much as we said in the initial plan. But I think we also need to recognize the overall progress we have done. And with these revenues going into the direction which we said, We obviously need to also take that into account. And if I look further to 2022, now obviously, we're Turning into a deep dive into our 2022 plan today. But the CRU revenues, we'd be working to keep As close to 0 frankly as possible. There are some positive revenues that the portfolio throws off and then there's funding cost, hedging cost that offset it. And the impact of that revenue recapture will fall away. It isn't to say we won't continue to de risk, but as we talked about in December, it will be a ramp that we would only Particularly the derisk or deleverage and otherwise allow it to run off. In the C and O area, there it's The treasury impacts, as you say, obviously hard to predict valuation and timing differences. So we just assume that they are neutral, but they are We control them as much as we can within the hedging and hedge programs that we can, but there is some hedging effectiveness that can go either way. As you mentioned, there is the held liquidity costs in the aftermath of the funds transfer pricing. That should be below the $250,000,000 that we're expecting for this year, sort of trending towards $200,000,000 And over time, That sort of amortizes or bleeds away. Hope that helps, Andrew. It does. Thank you very much, both. Next question is from Amit Goel from Barclays. Please go ahead. Hi, thank you. So my first question is just, I guess, maybe more of a follow-up on the same theme on costs and revenues. So I just want to, I guess, be completely clear. In terms of do you believe that you can generate More than €25,000,000,000 of revenues and have costs of €17,100,000,000 Which obviously would be slightly better than the 70% cost income ratio. Or if we were to pencil in €25,000,000,000 Of revenues, should we anticipate costs closer to €17,500,000,000 So that's the first question. And the second question Is just relating to the some more detail point on the Corporate Bank this quarter, it looked like The net interest income dropped, but there was more other income. Was that just more of this technical effect relating to swaps? Or What exactly was driving that? Thank you. Thank you, Amit. I'll take those questions. Look, on the costs, You can take it the way to think about it is the following. At the 70% efficiency ratio And moving from the $16,700,000,000 to the $17,100,000,000 adding in some non operational costs, We would have to achieve the $25,000,000,000 or a little bit less $24,900,000,000 to make that math work. And what you're hearing from us, It's early to be talking in detail about 2022, but what you're hearing from us is a high degree of confidence that we're on track to achieve that. If it were to be higher or significantly higher than that, it would probably carry some additional volume related costs with it And so could see us going above, but that's in the case where, again, mathematically revenues have begun to exceed that $25,000,000,000 level. So Again, it's a mathematical exercise, but underneath that, I think you're hearing a strong view about The revenue trajectory that at least affords us the ability to offset these uncontrollable expenses in RoTE and cost income ratio. And the rest we'll see as time goes on and we get into the more detailed planning in the back half of the year to bring home 2022. On the, CB item, it's a detailed point, but a good spot. As we've, I think, mentioned before, there are CLO recoveries, that are recognized in revenue. So In a default situation where there is insurance that we have bought, credit insurance, We will recognize revenue for the compensation in revenues at a point in time. That happened last year, but in one instance this year, there was a recovery and it was therefore reversed. And so part of the movement you hear you see and that's part of the $90,000,000 we've called out as episodic is really a swing relative to last year that's taken place. Okay. Thank you. Next question is from Jernay O'Mearn from Goldman Sachs. Please go ahead. Good afternoon from my side as well. I have a lot of questions, but I understand we're limited to 2. So I'll zoom in on the issue of this ZIM gain. Can I ask you, first of all, how do you think about this gain in the context of your recurring business And recurring revenue? So we're just wondering what is the threshold to classify something as a one off Versus leaving it in the core revenue and PBT line. I think that's question number 1. And then question number 2, You very kindly pointed out, James, what the contribution was at the revenue line. Is it fair to say that Those absolute numbers apply to the pretax line as well. I'm assuming there's not much Cost associated with these positions, because there I think it makes a very, very significant impact. And in that context, I just wanted to check with you on Page 21, you're flagging the first bullet of your presentation. You're flagging the first bullet that Deutsche had significantly higher credit revenues. That is at odds With every single of your global competitors reporting so far this quarter, and I was wondering, does that statement still hold true If you adjust for the ZIM contribution. Thank you very much. Yes. Jernay, thanks for the questions. So I believe the answer to that is the last part of the question is yes. We had a tough quarter last year in credit, As I think you saw in Ram's presentation in December, so it was a difficult environment. And by the way, some of that had to do with The success of the hedging in Q1. So you have a you had a swing Q1 to Q2 That was a burden on revenues last year in Q2. Why what's the one off versus recurring business? Look, we see this transaction as being part of the ordinary course business in distressed debt trading. It's not at all unprecedented to accumulate an equity investment like this under the circumstances we do it, our peers do it. What is unusual, of course, is the size of it, which, of course, is why we're prepared to disclose the amount so that you're able to look At the business without that in it. As we say, direction of travel is the same. Our FICC revenues would have been down 19% reported rather than the 11% that we But still a significant outperformance relative to peers. And on your pretax profit, yes, I mean, for the largest Part, other than operational costs and compensation, the revenues will have fallen to pretax. Again, it's part of a larger business. It's the business, it's not a it's an unusually sized Benefit, but it is part of the ordinary course of the business to engage in transactions like this, Much as again our peers do regularly. Sure. James, just a very short follow-up. So when we think about The path from here to the 8% return on tangible target next year. I guess that we should be Stripping out the ZYN contribution, I. E, this is a non repeat for 2022. Well, that's the thing that's hard to say, Jernej, because as I say, we do have a significant reserve and it's not clear at this point that The time over which that reserve would be released and then we ultimately exit from the position. As I mentioned earlier, We aim to do it over time in a way that is responsible, given the size of the stake. And the timing of that is at this point uncertain. Just don't forget what James just said, I mean, it's a wanted business, and I'm not saying more, in GCT, which we have done for years and where Zim is, so to say, not the only position we have, and we have done that for years. And therefore, always take this into account when you think about our Thank you, Arne. So when a distinction Jernae, maybe a distinction to draw that might be helpful is Tradeweb, We have called out as a specific item consistently since we first started recognizing gains on it precisely because we don't see that as part of the operating Performance of the business. So perhaps that contrast will help you see the accounting distinction we make. But is it fair to say that there are no other similarly sized positions in that portfolio as it stands though? No, no, that wouldn't be fair. We Similarly sized to the balance sheet size of that today, it's a large position. But again, it's not out of the ordinary that we would have Gains to recognize from time to time in that distressed business is again, it's part of the business. Thank you very much. Next question is from Nicholas Pajan from Kepler Cheuvreux. Please go ahead. Good afternoon. Thanks for taking my question. I have 2. The first one will be on Wealth Management because you just mentioned your European Wealth Management Strategy, and I wanted to know how do you see your current setup in Europe? And then how do you see it in Italy in particular? Do you think you The size there to compete. And also in comparison to Asia, because you mentioned a lot of Your European operation, but are you ready also to invest there in Asia? The second question will be on the risk weighted assets Investment Banking, just wanted to know what are the components of the inflation of RWA there? Is it a bit of Stream of lending growth or is there anything else there? Thank you very much. Okay. Let me take the first question on Wealth Management. There is a clear difference between, a, our Wealth Management in Europe and in particular, in Italy or Spain to Asia. In Asia, it is more capital markets oriented, very successful, growing. But in Europe, it goes to the point, which James made in his previous response, that we are actually very well placed, In particular, in those countries where we have corporate banking activities, wealth management and private banking activities that we have seen as The bank for entrepreneurs. And hence, we see a very nice line of growth in Italy, in Spain, also in Germany, Where we can play this card that we have the corporate banking exposure, but at the same time, we are banking the entrepreneur or the owner of the company. And in this regard, we have made also, from a coverage point of view, tailored investments into Italy but also into Spain to increase our coverage, our relationship management base in order to secure more market share. And we have seen the growth also in the second quarter, Which I'm very happy with in the Wealth Management in Europe. And the brief answer on the question of RWA and IB is it was really all TRIM or almost all TRIM. Sort of portfolio movements were relatively neutral. A total Of $10,000,000,000 was added in the Investment Bank, both from TRIM and the CRR2 implementation at the end of June. Very clear. Thanks. Next question is from Daniella Brubacher from UBS. Yes, please go ahead. Good afternoon. Thank you. Just for me a clarification please on the cost front. I mean we talked a lot about 16.7 SEK 71. Probably missed it, but have you made any statement regarding the SEK 18,500,000,000 target for this year, Whether we should lift it up by the SEK 400,000,000 as well? And then in this context, can you tell us in which divisions we will see those SEK 400,000,000 Showing up. Thank you. Daniella, so we talked about a little bit in April. I think you can do similar math To what we were talking about earlier. So 18.5% is to 18.9% as 17.1% is to 16.7 is to 17.1. That's certainly what we are working towards and what we should be measured against. In terms of the second part of your question, I'm sorry, remind me, Daniela. By division, It's probably too early to say. There's a lot in it, but the we can come back to you on that question. Obviously, SRF is an allocation that we would know for the businesses At this point, the step off would be last year's end balance sheet. There, by the way, you'll see a fair amount of the benefit in CRU Because that deleveraging will then be reflected in its allocation of the SRF. So less of a benefit in the core businesses Then you would see in the CRU. On the deposit insurance, it's mostly in private bank. Got it. Thank you very much. Thank you. In the interest of time, we have Stop the Q and A session. And I would like to hand back to Iona Patronicia. Please go ahead. Thank you for joining us for our Q2 call and for your questions. Please do not hesitate to reach out to the Investor Relations team with any follow-up questions, particularly for those who have not we've not been able to get to due to time. And with that, we look forward to speaking to you at our Q3 call. Thank you. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.

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