Thank you for joining us for our second 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, Yohanna, and a warm welcome from me. Our first half results demonstrate clearly where Deutsche Bank stands today. Our strategy has proven itself in different environments. Our global house bank served clients at times of elevated volatility in the second quarter, and thanks to our diversified model, we delivered resilient revenues which grew 6% to EUR 16.3 billion, in line with our full-year goal of around EUR 32 billion. While it is still early, we are encouraged by the strong start of the third quarter. Non-interest expenses declined 15% year-on-year to EUR 10.2 billion, in line with our full-year outlook, resulting in a cost-to-income ratio of 62%.
This strong operating leverage produced a return on tangible equity of 11% in the first half year, which means we delivered returns in line with our target of greater than 10% in both quarters, including the second quarter that was impacted by increased volatility. Our CET1 ratio of 14.2% enables us to deploy capital to grow our business and to support clients while increasing returns to shareholders. We are absolutely focused both on delivering our year-end targets and on preparing the next phase of our strategy to further boost returns and value generation for our shareholders beyond 2025. As you can see on slide three, we delivered a pre-provision profit of EUR 6.2 billion in the first half, nearly double the same period in 2024.
Adjusting for post-bank takeover litigation impacts, pre-provision profit was up 29% year-on-year on the back of strong operating leverage of 10%, resulting in a 37% increase in the pre-tax profit over what was already a strong operating performance last year. Robust revenues reflect our well-diversified business mix, with 74% from more predictable revenue streams in the corporate bank, private bank, asset management, and fixed financing. Net commission and fee income increased by 4% year-on-year, in line with our goal to boost revenues from fee-based and capital-light businesses. As anticipated, net interest income in key banking book segments and other funding also remained resilient. Excluding the impact of the post-bank takeover litigation provision in both periods, non-interest expenses declined 4%. Adjusted costs remained flat, and as we intended, significant progress on our operational efficiency measures is offsetting business investments and inflation. Now let's look at divisional developments on slide four.
All four business delivered double-digit returns in the first half of this year, and we believe they will continue to build on this. Our diversified business mix is poised to perform in a fast-changing environment, particularly as our focused investments to serve clients are paying off across the platform. Our corporate bank has a leading market position in Germany and, with deep roots in our home market, is perfectly positioned to help clients capitalize on opportunities created by investment programs in Germany and Europe and the improving business momentum overall. We expect revenue momentum to pick up again once government investments and initiatives to support the economy show their impact. We are already preparing for this. As an example, we are cooperating with KfW and EIB to support clients in Germany with tailored solutions.
Additionally, its global markets presence positions the corporate bank well to support multinational clients as they respond to the rapidly evolving environment. The investment bank is focused on consolidating its position as the leading European fixed franchise, while origination and advisory is looking to grow market share, specifically in advisory aided by recent investments driving further revenue diversification. Our platform is ideally placed to help institutional and corporate clients serve the German and European infrastructure and defense agenda, especially in Germany, where we have the leading O&A franchise, including in aerospace and defense, where we have recently invested further in our dedicated sector coverage team. Our investment and corporate banks have already seen increased demand for defense finance. Our O&A team has been involved in deals spanning equity capital markets, M&A, and financing, while the corporate bank sees growth potential, particularly in trade finance solutions for short-term and long-term financings.
In the private bank, we are pleased to see the progress on our transformation, reflected in the improvement in returns seen year to date. Personal banking continues to drive efficiency through workforce reductions and branch network optimization, mainly in Germany. These steps, combined with increasing digitalization, are enabling us to streamline operations and innovate our offerings. At the same time, we are focusing on investments in growth across wealth management and private banking, deepening segment coverage, leveraging the bank's broader product suite for our clients. Progress made, and the fact that the private bank is well-positioned to help clients take advantage of current trends makes us confident we will see returns improve further in the medium term.
Asset management stands to build from its diversified assets under management of more than EUR 1 trillion, and we believe it is ideally placed not only to serve German and European investors but also to act as a gateway to Europe for global investors. Clearly, both our asset-gathering businesses will support one of the strategic initiatives of the Savings and Investment Union. Fostering citizens' wealth by broadening their access to capital markets, as we are Germany's leading wealth manager and retail fund manager in addition to being its leading capital markets bank. Before I hand over to James, let me conclude on the progress toward our 2025 delivery on slide five. Let me start with revenue growth. Since 2021, we have achieved a compound annual growth rate of 5.9%. In the middle of our target range of 5.5%-6.5%.
Second, we have achieved around 90% of our EUR 2.5 billion target for operational efficiencies, with EUR 2.2 billion in cost efficiencies either delivered or expected from completed measures. We continue with our strict cost management approach, which includes strategic and tactical measures to deliver our profitability and efficiency targets. Third, capital efficiencies have reached a cumulative total of EUR 30 billion, already at the high end of the bank's target range for full year 2025 and contributing to our strong CET1 ratio. We delivered another EUR 2 billion of RWA reductions this quarter through sectorization transactions. We are not stopping here. We already see opportunities to deliver further capital efficiencies in the second half of 2025. With a CET1 ratio of 14.2% this quarter, we feel very comfortable with our commitment to surpassing our EUR 8 billion target for total distributions to shareholders.
In fact, we already applied for a second share buyback in addition to the previously announced EUR 2.1 billion distribution for this year. James will shortly cover our pathways to materially reduce or potentially eliminate the impact of the output floor from the implementation of CRR3. To sum up, our first half results demonstrate that we are on track to meet our 2025 financial targets, and we are fully focused on delivering them. In parallel, we are working on the next phase of our strategic agenda to further increase value generation beyond 2025. We see significant potential to unlock additional value from the combination of our strategic actions and market opportunities arising from growth stimulus, defense spending, and structural reforms in Europe.
The Made for Germany initiative, which we launched together with leading German companies earlier this week, underscores a shared commitment by both government and industry to prioritize growth and competitiveness. We also see increasing global investor demand to deploy funds into the German economy. All in all, given our unique domestic positioning and global reach, this is a clear net positive for us. We have built a resilient and diverse business mix and a strong capital base, and we are now in the sustainable growth stage. This allows us to fine-tune our business model and extract further value by strictly applying our SVA framework, targeted re-engineering, and further developing our leadership culture. We look forward to updating you in more detail on our plans later this year. With that, let me hand over to James.
Thank you, Christian, and good morning. As you can see on slide seven, we saw continued delivery this quarter against all the broader objectives and targets we set ourselves for 2025. Our revenue growth, cost-to-income ratio, and ROTE are developing in line with our full-year objectives. Our year-to-date performance continues to support our revenue and non-interest expense objectives before FX effects of around EUR 32 billion and EUR 20.8 billion, respectively. Note: If current FX rates were to persist, the weaker US dollar would result in a small headwind to pre-tax profit, as the negative impact on revenues would be slightly greater than the benefit on expenses. Our capital position is strong, and our liquidity metrics are sound. The liquidity coverage ratio finished the quarter at 136%, and the net stable funding ratio was 120%. With that, let me now turn to the second quarter highlights on slide eight.
We continue to demonstrate strong franchise momentum across the bank, and our diversified and complementary business mix resulted in reported revenue growth of 3% year-on-year, or 5% if adjusted for foreign exchange translation impacts. Our cost-to-income ratio of 63.6% remained in line with our guidance for 2025. Second quarter non-operating costs benefited from a modest provision release, mainly driven by further settlements related to the post-bank takeover litigation matter. Profit generation was robust, and our post-tax return on tangible equity of 10.1% continues to support the ambition to deliver sustainable returns of greater than 10% in 2025 and beyond. In the second quarter, diluted earnings per share was EUR 0.48, and tangible book value per share increased to EUR 29.50, up 3% year-on-year. The sequential development mainly reflects AT1 coupon and dividend payments, as well as FX impacts.
Before I go on, a few remarks on corporate and other, with further information in the appendix on slide 38. C&O generated a pre-tax profit of EUR 28 million in the quarter, mainly from positive revenues in valuation and timing, partially offset by shareholder expenses and other funding and liquidity impacts. Let me now turn to some of the drivers of these results, starting with net interest income on slide nine. NII across key banking book segments and other funding was EUR 3.4 billion, stable quarter on quarter despite headwinds from a weaker US dollar. Private bank continues to deliver strong NII supported by our structural hedge portfolio, while corporate bank NII remains stable, supported by the ongoing hedge rollover, loan income, and a one-off benefit from hedge portfolio optimization. FIC financing benefited from loan growth in the first quarter, with strong lending margins offsetting FX effects.
With respect to the full year, we confirm our prior guidance of EUR 13.6 billion. Underlying drivers of the year-on-year development continue to be an increasing contribution from the long-term hedge portfolio rolling at higher average rates, which we detail in the appendix on slide 25, and volume growth combined with stronger lending income in FIC, as well as lower funding costs. Together, these are more than offsetting margin normalization and FX headwinds. Turning to slide 10, adjusted costs were just over EUR 5 billion for the quarter. Cost discipline across the franchise remained strong. Compensation costs were slightly lower on a year-on-year basis, as wage growth was more than offset by ongoing measures for workforce optimization and beneficial FX impacts. With that, let me turn to provision for credit losses on slide 11.
Stage three provision for credit losses materially reduced in the second quarter to EUR 300 million, reflecting a model update, mainly benefiting the private bank, while provisions for commercial real estate continued to be elevated. Stage one and two provisions remained at a high level at EUR 123 million and also included an impact from the aforementioned model updates, as well as portfolio-related effects and moderate charges relating to forward-looking information, net of the overlay we built in the first quarter. The model updates mainly impacted CRE-related provisions and reflect updates to loss-given default assumptions to align with the latest EBA requirements, incorporating a change in assumptions applied in portfolio-level calculations. On a year-to-date basis, overall CRE provisions stand at EUR 430 million.
As guided in prior quarters, the impact from new non-performing items is limited, but we are seeing ongoing valuation pressure on existing non-performing exposures, particularly on the US West Coast. While developments around CRE, as well as the macroeconomic environment, continue to create uncertainty, we feel comfortable with our broader portfolio performance and asset quality, and we currently anticipate provisions to ameliorate in the second half of the year. With that, let me turn to capital on slide 12. Strong second quarter earnings, net of AT1 coupon and dividend deductions, combined with diligent resource management, led to a CET1 ratio of 14.2%. Up 42 basis points sequentially. Lower risk-weighted assets were driven by credit risk, benefiting from continued execution of capital efficiency measures, predominantly through two securitization transactions during the quarter. Market risk remained flat.
Increases at the beginning of the quarter, reflecting market turbulence at the time, have been offset through strict risk management and hedging. Our second quarter leverage ratio was 4.7%, up by 8 basis points, principally driven by FX effects, as higher Tier 1 capital was mostly offset by higher trading inventory. With regards to bail-in ratios, we continue to operate with significant buffers over all requirements. Before we turn to our divisional performance, I want to offer my perspective on the bank's most recent CRR3 disclosure on slide 13. We see clear pathways to materially reduce or eliminate the hypothetical impact of CRR3, and let me say upfront, our distribution policy and financial targets are unaffected.
Before we go into detail, we need to remember that the implementation of CRR3 is a multi-year journey, including several transitional arrangements that are subject to review and will mostly apply through 2032, and we are not planning franchise-changing decisions today for an outcome that is almost certain to change. The hypothetical RWA inflation of EUR 118 billion in 2033. Includes a EUR 64 billion impact from the output floor and EUR 54 billion from the potential expiry of the transitional arrangements in 2033, based on an unmitigated balance sheet as of March 31st, 2025. We expect the output floor impact to decline by at least EUR 45 billion through a combination of low-cost mitigation measures and the full application of already final CRR3 rules not reflected in the March pro forma. We see this mitigation as virtually certain and without any meaningful cost.
We will address the remaining RWA impact of around EUR 20 billion via additional mitigation measures like business mix reviews through the application of disciplined, SVA-driven decisions on balance sheet optimization. As a result, the output floor will only become binding in 2030 at the earliest, instead of 2028. Based on the March pro forma numbers, we would subsequently face a further RWA impact of EUR 54 billion if transitional rules expire, which you can see on the right side of the slide. Even at this early stage, we are confident we can reduce this impact by at least EUR 15 billion through additional measures, such as expanding private rating agency coverage for unrated corporates and further potential additional balance sheet optimization actions.
In addition, considering developments in the U.S., rule changes in Europe are expected to ensure European banks can operate on a level playing field and continue to support lending to European corporates and overall economic growth. As an example, around EUR 30 billion of the EUR 54 billion RWA under the transitional rules relate to unrated corporates. It is crucial for the EU's bank financing-dependent corporate sector that banks continue to provide this funding at appropriate capital costs. If transitional arrangements are extended or made permanent, there would be no additional RWA impact. Let us now turn to the performance of our businesses, starting with the corporate bank on slide 15. Corporate bank revenues were essentially flat in the second quarter, as interest hedging, higher average deposits, and growth in net commission and fee income have offset ongoing margin normalization.
Revenues were impacted by adverse FX movements, which were compensated by one-off interest hedging gains from portfolio optimization. We continue to make good progress, further accelerating non-interest revenue development with 6% growth in reported net commission and fee income and a particularly strong contribution from our institutional client services business. For the third quarter, we expect revenues to be slightly lower and in line with the prior year, reflecting the aforementioned FX headwinds and a lower level of one-offs. Adjusted for FX movements, loans increased by EUR 3 billion year-on-year and sequentially, with the growth primarily coming from our trade finance and lending business. Deposit volumes remained strong, as volumes were up by EUR 9 billion year-on-year and remained essentially flat sequentially. Non-interest expenses were lower year-on-year, driven by a litigation provision release.
Provision for credit losses declined to EUR 22 million, as stage three provisions remained overall contained, while stage one and two benefited from a model update. This resulted in a post-tax return on tangible equity of 17.6% and a cost-to-income ratio of 60%, both improving sequentially and year-on-year. I'll now turn to the investment bank on slide 16. Revenues for the second quarter increased 3% year-on-year, despite a significant FX headwind, with strength in FIC more than offsetting a decline in O&A revenues. FIC revenues increased 11%, primarily driven by strong performances in both financing and macro products. FIC financing continued its momentum, with revenues again higher than the prior year period, reflecting an increased carry profile following targeted balance sheet deployment in line with our strategy, in addition to robust fee income.
Excluding financing, FIC revenues increased versus the prior year period, despite the extreme market volatility seen in early April, as we continue to support our clients through these uncertain times, with year-on-year activity increasing across institutional, corporate, and our priority clients. Moving to O&A, revenues were significantly lower when compared to a strong prior year, with the business impacted by market uncertainty, most notably in our areas of strength, combined with the delay of some material transactions into the second half of the year. Debt origination saw the biggest impact, with the leveraged debt capital markets industry pool declining year-on-year, while the business was also selective in relation to new committed transactions in a volatile environment. Advisory performance was robust, with revenues increasing year-on-year, while the pipeline for the second half is encouraging. Non-interest expenses were 5% lower year-on-year, reflecting reduced litigation charges, with adjusted costs essentially flat.
Provision for credit losses was EUR 259 million, significantly higher year-on-year, with the increase driven by stage one and two provisions, particularly in CRE due to the aforementioned model updates, as well as forward-looking indicator impacts, while stage three impairments declined. Let me now turn to private bank on slide 17. In the private bank, discipline strategy execution drove 10% operating leverage and a 56% increase in profit before tax. Return on tangible equity grew both sequentially and year-on-year to 10.8%. The private bank recorded stronger revenues as net interest income grew by 5% year-on-year, while net commission and fee income rose by 1% year-on-year, supported by investment revenues despite market volatility. Sequential revenue trends reflect seasonal investment activity, typically concentrated early in the year.
Personal banking benefited from better deposit and investment products revenues, mainly in Germany, leveraging successful deposit campaigns as well as the bank's leading advisory product offering. The growth was partially offset by lower lending revenues following the strategic decision to reduce capital-intensive loans. Wealth management and private banking revenues grew 2% year-on-year, driven by discretionary portfolio mandates, despite FX headwinds and market volatility. Good business momentum continued with the majority of net inflows of EUR 6 billion in the quarter coming from these businesses. The private bank continued the transformation of the personal banking business, closing a further 25 branches in the second quarter, bringing total closures to 85 this year. Workforce was reduced by 700 in the first half, continuing the trajectory in line with plan. Transformation effects more than offset inflationary pressure, leading to a 5% reduction in adjusted costs.
Non-interest expenses declined by 8%, reflecting lower restructuring charges, with the cost-to-income ratio improving by seven percentage points to 69%. Provision for credit losses benefited from updated loss-given default model assumptions, while underlying portfolio performance remained stable. Provisions in the prior year quarter benefited from a non-performing loan sale. Turning to slide 18, my usual reminder, the asset management segment includes certain items that are not part of the DWS Standard Loan Financials. Profit before tax improved significantly by 41% from the prior year period, driven by higher revenues and resulting in an increase in return on tangible equity of eight percentage points to 26% for this quarter. Revenues increased by 9% versus the prior year. Higher management fees of EUR 630 million, driven by passive products, reflected higher average assets under management.
Performance fees saw a significant increase from the prior year period, mainly due to the recognition of fees from an infrastructure fund. Non-interest expenses and adjusted costs were essentially flat, resulting in a decline in the cost-to-income ratio to 60%. Quarterly net inflows of EUR 8 billion represent the fourth consecutive quarter of positive net flows, including a further EUR 3 billion into passive products. Cash and alternatives saw combined net inflows of EUR 9 billion, which more than offset EUR 4 billion in outflows from active products and advisory services. Assets under management remained above EUR 1 trillion. An increase from positive market impact and net inflows was offset by negative FX effects. In the quarter, DWS and its partners received BaFin approval to issue Germany's first fully regulated euro-denominated stablecoin, and the division also extended its strategic partnership with Dufour AG for another 10 years.
For further details, please have a look at DWS's disclosure on their internal relations website. Finally, let me turn to the group outlook on slide 19. We are on track to meet our full year 2025 targets and remain comfortable with our trajectory to deliver an ROTE above 10% and a cost-to-income ratio of below 65%. Our year-to-date performance supports our revenue and expense objectives. Our diversified and complementary businesses are performing well, and the strong revenues in the first half year put us on course to deliver our ambition for revenue growth. We remain committed to rigorous cost management while maintaining our focus on controls and investments as we continue to benefit from ongoing delivery of our cost-efficiency initiatives.
As outlined, the current FX rates marginally impact our return and efficiency ratios, but this has been more than offset by a greater-than-expected reduction in non-operating costs, which we expect to carry into the remainder of the year. Our asset quality remains solid, and despite uncertainty from developments around CRE as well as the macroeconomic environment, we currently anticipate a reduction in provisioning levels in the second half year. Our strong capital position and second-quarter profit growth provide a solid foundation as we head into 2026. As we plan capital distributions for 2026 and beyond, we also plan to return excess capital to our shareholders when sustainably exceeding a 14% CET1 ratio.
To date, we have announced EUR 2.1 billion of capital distributions, including the EUR 1.3 billion dividend paid in May and the two-thirds complete EUR 750 million share buyback announced in January, and we await approval for our second share buyback. In short, we remain comfortable with our capital position and reiterate our commitment to outperforming our EUR 8 billion distribution target. We are also steadfast in our commitment to further improve profitability and increasing shareholder returns beyond 2025. With that, let me hand back to Yohanna, and we look forward to your questions.