Status Update

Jun 18, 2020

Slides

Ladies and gentlemen, thank you for standing by. I am Haley, your Chorus Call operator. Welcome, and thank you for joining the Deutsche Bank Risk Deep I would now like to turn the conference over to James Rivett, Head of Investor Relations. Please go ahead. Thank you, Haley, and welcome from me. Stuart Lewis, our Chief Risk Officer, is going to speak first. He will discuss our approach to risk management here at Deutsche Bank. Following Stuart, James Von Molker, our CFO, will discuss the capital outlook. Following the prepared remarks, as Haley said, we'll be happy to take your questions. The slides should be visible on the screen as part of the webcast and are available for download in the Investor Relations section of our website, db.com. Before we get started, let me just remind you that the presentation does contain 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 Stuart. Thank you, James, and welcome from me. Before we go into the presentation, a few brief comments on my background. I joined Deutsche Bank in 1996 and have been primarily involved in risk management roles. I've been the bank's Chief Risk Officer since 2012. And during the financial crisis, I was Head of Credit Risk Management and Deputy CRO. During my time at the bank, I have managed through the burst of the tech bubble, nineeleven, the failure of Lehman, the financial crisis and the Eurozone debt crisis. But the past few months have been unlike anything any of us has seen in our professional career. What we witnessed in financial markets, in the economy, in society and in our own daily lives is truly extraordinary. It is times like these we think it's important to provide you with a comprehensive picture of Deutsche Bank's risk profile. We believe that in the past few months, Deutsche Bank has shown its true strength. We have continued to perform well in difficult circumstances and we're well positioned to emerge stronger in the post crisis recovery period. Specifically, we believe having Germany as our home market and being market leader in Germany is a key advantage. Our conservative balance sheet management, one of the core pillars of our transformation has enabled us to manage the challenges we faced. The investments we have made in risk management and supporting technologies in recent years are paying off, enabling us to manage our risks in a more timely and proactive manner through this period. Additionally, our deep understanding of a well diversified and relatively low risk loan book gives us confidence in the guidance for loan loss provisions we published, which we publicly reaffirmed last week. We will talk about each of these topics starting first with our position in Germany on Slide two. We made clear when we launched our strategic transformation last summer that our leadership position in our home market was a core pillar of our agenda. Germany accounts for 43% of revenues and 47% of our loan book. We are the clear leader across all four core businesses, with the Husebank to around 900,000 corporate and commercial clients, including Mittelstand companies. The relationships we have and the position we occupy has allowed us to play a key role in transmitting the German government's programs, especially the KFW schemes into the real economy. In the first quarter, we reclaimed the number one position in German corporate finance with our best market share since 2017, in particular by helping clients raise debt financing. Across the Deutsche Bank and Postbank franchises, we serve 19,000,000 retail clients, of which 11,000,000 are online banking customers. DWS is the market leader in mutual funds in Germany with around a quarter of the market. Simply put, we're happy to have a strong leadership position in Europe's strongest economy, which is proving its resilience in this crisis as you can see on Slide three. Germany is a tough banking market, but in times like these, we benefit from its conservative characteristics. It may be relatively low return, but it's also low risk and that's going to be key in the near and medium term. Germany came into the crisis in a relatively strong position, with low levels of government, household and corporate debt, as well as good levels of corporate liquidity. Thanks to decisive action and a world class healthcare system, COVID-nineteen infection and mortality rates have been less than a quarter of other Western major Western European nations. Fiscal conservatism has allowed the German government to take aggressive and decisive action. The programs of financial support, both in emergency liquidity and financial stimulus amount to around 50% of GDP, larger than other major European nations or The U. S. These factors have left Germany well positioned to relax lockdown measures and recover earlier and faster than its neighbors and that's an advantage for us. Slide four gives you some background to what we mean by conservative balance sheet management. We have transformed the bank's balance sheet since the financial crisis. Liquidity reserves are almost 2.5 times larger. We will talk about those in a moment. Trading and related assets have declined by 40%. Within these derivative trading assets after taking account of netting and collateral are now around EUR 30,000,000,000 or 3% of the net balance sheet. And the vast majority of our trading assets today are government bonds and other highly liquid securities. Our loan book now accounts for around half our funded balance sheet has more than doubled since the financial crisis to EUR459 billion. The growth has primarily come through the acquisition of Postbank. Today, nearly half of the book is in Germany, with the majority low risk retail mortgages. In a moment, we'll go through why the loan book despite being larger and is considered safer than in the last crisis. Slide five gives you a summary of the key balance sheet and risk metrics in the same time period. Our common equity Tier one capital ratio has risen from 8.7% under Basel II to 12.8% in the first quarter of this year. This is at the high end of our peer group and with a comfortable buffer above our regulatory requirements. Reflecting the simplification of our loan book, provisions for credit losses have come down from 100 basis points of loans in 2009 to 44 basis points in the first quarter annualized this year. Our provisioning levels have been historically lower than peers. Average bar has come down by around 80% and actually touched a historic low in February. Our funding position is very strong. More than 80% of our funding comes from the most stable sources, the majority customer deposits. Liquidity reserves are EUR205 billion today and we operate with a EUR43 billion surplus above our requirement to maintain a liquidity coverage ratio of 100%. Finally, Level three assets, which were €88,000,000,000 in 2008 and €58,000,000,000 in 2009 are now less than half that at €28,000,000,000 We'll talk about each of these in more detail, but before we do that, a few words on the way we've developed our risk management capability. On Slide six, you can see how we've invested to strengthen our control environment in the last few years. In total, we invested around EUR900 million on a cash basis between 2017 and 2019. We have significantly boosted our capabilities in anti financial crime compliance. In screening for sanctioned entities and politically exposed persons, we've gone from screening 700,000 names per week to 28,000,000 names per day. We can now monitor more than a million voice and written communications per day in 12 languages. In liquidity risk, we've comprehensively enhanced our internal stress testing methodologies and refined our funds transfer pricing model. These enhanced tools are improving our resource allocation decisions. We have also set up T plus one reporting on liquidity risk and our liquidity coverage ratio. These capabilities are rapidly developing into leading practices and have provided us with confidence as we manage through the recent stress period. In credit risk management, we have recently launched a new system, which covers ratings, workflow and portfolio management. Across the process from rating assessment to transaction approval, information is timely and we can slice it more finally by legal entity, branch and asset class. That gives us better integrated workflow and contributes to better and quicker decisions. Finally, in market risk, we have launched historic simulation or HISSIM risk modeling and portfolio analytics, and that gives us better, more accurate and more granular data. We are currently able to execute around $15,000,000,000 trade revaluations per day. This is an important step in our FRTB preparation, aligning even more closely the relevant capital calculations to our end of day pricing models. One of the key considerations as a risk manager is managing concentration risk. Slide seven gives you an overview of how we manage concentration risk across all counterparties. We do this along a number of different dimensions. We apply industry risk thresholds across 27 corporate and institutional portfolios. We set country risk thresholds for all emerging market nations and some developed markets depending on rating. We assign specific risk limits and dedicated strategies for specialist risk buckets in commercial real estate, leverage debt capital markets and underwriting. We also operate hedging strategies to manage the concentration risk of single name exposures. Our emerging market exposures are also supported by other mitigants, including export credit agency cover and private risk insurance. Finally, around particular events, we conduct ad hoc stress tests and dramatic reviews and may reduce the risk of these are characteristics of our exposures that are outside our risk tolerance. Recent examples away from COVID have included stress testing our portfolios in Hong Kong, and our exposure to oil, including certain oil sensitive countries, given the movements in commodity prices. On Slide eight, we look at how these measures impact our Pillar three disclosures. Loan exposure at default under Pillar three was EUR $495,000,000,000 at the end of the first quarter. Pillar three disclosures include some framework differences compared to our IFRS nine loan book of EUR459 billion. In particular, the inclusion of undrawn commitments after applying credit conversion factors. A significant proportion of exposure at default is covered by collateral, guarantees, hedges and other structural risk mitigants, which act to reduce loss given default. Adjusting for the loss given default, the exposure is approximately 70% lower at EUR160 billion. In addition, we have other mitigants including export credit agency contracts and private risk insurance, as well as purchase CDS protection. The ECA contracts and the PRI act as additional protection and help to lower our probability default assumptions. Let's now turn to Slide nine, where you will see how mitigation is applied across our portfolio. Slide nine shows our exposures at default split by internal rating before and after mitigation measures. As you would expect, we deploy mitigants more actively in the lower rated parts of the portfolio. In single B and below, around 70% of the gross exposure is covered by risk mitigation, including asset collateral and hedges, but also structural risk mitigation, for example, in LDCM. This results in an adjusted exposure in the below single B category of EUR24 billion. We additionally also hedge some of our larger exposures to investment grade counterparties to manage concentration risk. Although the probability of default of these exposures is low, these higher exposures are hedged to limit our risk of losses driven by potential jump to default. Regulatory expected loss across the non defaulted loan portfolio is around EUR 1,300,000,000.0 compared to EUR 1,300,000,000.0 of allowances that we currently have in place. Given our forecast build for allowances in the remainder of the year, we feel adequately provisioned against potential losses. In summary, we feel very comfortable both with the quality of our loan exposure and the mitigants that we have in place. We fully recognize that this analysis is on a modeled basis and that begs the question, our actual performance stacks up against models. We believe our actual performance over the past six years supports our view that our models are robust as shown on Slide 10. This slide looks at the provisions for credit losses we have built compared to the actual charge offs we have taken over the past six years. We see a number of points. First, the ratio of gross charge offs to provisions has never gone above 100%. In other words, we have never been under provisioned in this period. We hit close to 100%, for example, in 2016 that partly reflects IS-thirty nine reclassified assets within the NCOU. Second, it's a consistent range. Charge offs have been between 7798% of provisions over this period. Third, we are not grossly over provisioned. In fact, we have a historic track record in accuracy. These factors give us confidence that our provisioning is appropriately conservative and consistent. Now let's look at the loan book by business under IFRS accounting on Slide 11. Around half the loan book is in the Private Bank, including Postbank. 60% of this or around 30% of our total loan book is low risk German retail mortgages with loan to value ratios of around 70%. Only 5% of our book is unsecured consumer finance, significantly lower than for some international peers, notably U. S. Banks with large credit card portfolios. 10% is in wealth management, principally secured lending with high collateral values to wealthy individuals and families or family offices typically with personal guarantees. The Corporate Bank accounts for 28% of our loan book predominantly trade finance and commercial lending. For example, to German medium sized corporates. The investment bank accounts for 18% of the loan book across leveraged debt capital markets under EUR72 billion global credit trading portfolio, which we do detail on Slide 12. We believe that our portfolio is very conservatively managed. First, the book is predominantly shorter duration, around 40% has a tenure of less than two years and 84% is under five years. Second, quality is high. Around half of this book is investment grade with only 6% rated CCC plus at the low. Third, the portfolio is very well diversified. The average size of exposure is around EUR 40,000,000, while the top 10 names account for only 11% of the loan book. Over 40% is in what we describe as asset backed securities and securitizations. Here, we provide senior financing credit facilities to talk to your sponsors and or experienced originators and well understood asset classes. Given our senior position, these securities have an average rating of between single A and triple B plus with multiple times loss coverage and strong financial covenants. Our ABS portfolio have been very resilient with average loss rates of just one basis point in the last five years. Around two thirds of the book is in North America and the bulk of the remainder in Europe. The ABS portfolio today is different than it was in the run up to the financial crisis. We no longer act as a principal sourcing loan pool sorry, we no longer act as a principal sourcing loan pools and therefore no longer participate in the equity or other more junior tranches. The other portfolios of around EUR 19,000,000,000 are well diversified across a number of sectors, including infrastructure and energy, transport and project finance. We have been especially focused on our EUR 3,600,000,000.0 aviation portfolio given the challenges facing that industry. We recently updated our asset valuations to reflect the current market pricing and are comfortable that the expected losses should be modest. And we also reviewed our €1,000,000,000 shipping portfolio and feel comfortable here too with the revised valuations. Commercial real estate accounts for around a third of our global credit trading portfolio, which we will detail on Slide 13. In aggregate, across the Investment Bank and Corporate Bank, our commercial real estate portfolio is around EUR 33,000,000,000 or 7% of our total loan book. Our assets are usually senior in the structure as first lien creditors, well protected by high quality collateral with an average loan to value around 60%. The portfolio is well diversified. Average exposure size is less than EUR 60,000,000. We are also well diversified geographically with around two thirds in The U. S, one quarter in Europe with the balance in Asia, although with limited exposure in Hong Kong. Our assets are focused on top tier, most liquid gateway cities, New York, Los Angeles and San Francisco. We are also well diversified by property type with around 30% in office space, 20% in residential housing and around 25% predominantly in mixed use and industrial. Only a quarter of our exposure is to harder hit areas such as hotels and retail with limited exposure to new construction risk. The EUR 2,000,000,000 retail portfolio is predominantly U. S. Based with a concentration in New York. We have been very cautious on retail malls, focusing on exposure on prominent locations with strong anchor tenants. In hotels, our €5,000,000,000 book is predominantly in higher quality assets. Our exposure to higher risk hotels and retail is mitigated by low loan to values of between 50% to 60%. And finally, our tenants are also of high quality. To date, we have approved 75 loan modifications with the sponsor typically contributing additional equity. Let's now turn to another area we closely monitor, our leverage debt capital markets portfolio on Slide 14. Our total LDCM portfolio is EUR 11,000,000,000, a little over 2% of our total loan book. The majority just under EUR 9,000,000,000 consists of cash flow lending, mainly revolving credit facilities. This is well diversified with the top 10 names accounting for only around 15% of the portfolio. Almost all exposures are senior secured first lien facilities. This book is also well diversified by industry with very low exposure to shale gas producers. Exposure to the most COVID sensitive industries such as real estate, gaming, lodging and leisure, business services, automotive and transportation is about 20% of this portfolio and well diversified with an average exposure size of EUR 23,000,000. The balance of our LDCM exposure around EUR 2,000,000,000 is asset based lending, which is exclusively U. S. Based and the loss history is negligible. Before we leave the Investment Bank and turn to our consumer loan book, a few words on our underwriting exposures on Slide 15. Underwriting exposures, which are not part loan book as commitments, but are recorded at fair value were around EUR 19,000,000,000 at the end of the first quarter. This exposure is very different from in the financial crisis. In particular, we have systematic measures in place to reduce concentration risk. The largest component, 8,400,000,000.0 is corporate investment grade, which consists mainly of bridge facilities for bond issuances by our core clients. These markets have remained active and open over the past few months. Another EUR 4,000,000,000 is in leveraged debt capital markets. As I mentioned earlier, we have completely transformed our approach to LDCM since the financial crisis. Not only is our total pipeline commitment substantially lower than pre financial crisis, but our average commitment size is also materially lower. Today, our underwriting portfolio is well diversified with an average commitment size of around €250,000,000 Post the financial crisis, we have established protocols to automatically hedge pipeline market risk. This approach meant we saw very manageable net mark to market losses during the first quarter. We have de risked the remaining pipeline by 15% since the end of Q1 and we expect the vast majority of the pipeline to be de risked prior to the summer as markets have reopened. Exposures to the most COVID impacted areas, which account for around 20% of the LDCM pipeline should be derisked over the third and fourth quarters. In some of these areas, while we may sell below par, this is typically covered by the flex built into the transactions and fees that we receive. Of the rest, under EUR 3,000,000,000 is in commercial real estate, which is split roughly fifty-fifty between CMBS and whole loans. Here, we are also protected by first lien collateral and loan to value ratios of 63% on average. In summary, our pipeline risk in this crisis is very different from what it was going into the financial crisis in 02/2008. We manage underwriting volumes to much tighter levels and further mitigate through single name risk concentration limits and extensive pipeline hedging protocol. Now let's turn to the consumer finance portfolio in the private bank on Slide 16. Our consumer finance portfolio is EUR24 billion. At 5% of loans, we have one of the lowest proportions among major international banks and we will discuss in a moment how this exposure influences provisioning in this environment. Also in contrast to our American peers, our consumer finance portfolio is predominantly current account credits linked to income as well as installment loans. Credit cards account for only around 5% of the consumer finance portfolio. In other words, around one quarter or 1% of our total loan book. Of the total consumer finance portfolio, 65% is in Germany, where delinquency rates are low at around 50 basis points of loans, ninety days plus past due. Again, reflecting the strength of the German consumer and the strength of the government programs put in place, we have seen limited changes in recent payment patterns. The remaining 30% is in the Private Bank International, predominantly Italy and Spain. Our Italian business is concentrated in the North of the country. This is the most prosperous part in terms of per capita wealth, one of the most prosperous parts of Europe. It was however also the first region of Italy to be impacted by the virus and lockdown measures, Reflecting the quality of our borrowers and strong underwriting standards, delinquency rates in our Italian consumer finance business are amongst lowest in the industry at around 150 basis points. Stage three coverage of our total consumer finance portfolio is good at around 60% of Stage three exposures, reflecting strong recovery rates. In Germany and Italy, our existing client relationships are supported by legislative moratoria. Since February, we have seen approximately 113,000 requests for payment moratoria of which 90% is approved. Although we continue to have a good risk return relationship on our existing portfolio, we have taken several actions in response to the crisis, including more stringent client selection and setting tighter lending criteria for new business. In summary, we believe that our loan books are high quality, well diversified and resilient with limited exposure to the most COVID impacted sectors. This is a key reason why we remain confident in the outlook for provision for credit losses, which we will now discuss starting on Slide 17. Despite the growth in our loan book, our provisions have been on a relatively steady downward trend since 2013, as you can see on the left hand chart. This has in part been driven by de risking of the former non core operations unit, which we closed at the 2016, having reduced RWA by €120,000,000,000 In the core bank, we have also completed the targeted derisking of certain portfolios, most notably in shipping and in U. S. Oil and gas. On the right hand side, you can see that as a proportion of loan book, provisions for credit losses has been consistently lower than peer average. For 2020, first quarter provisions were 44 basis points of loans on an annualized basis or just over EUR 500,000,000, with the increase principally driven by changes in macroeconomic assumptions. Provisions are expected to be around EUR 800,000,000 in the second quarter, driven to a significant degree by higher Stage three provisions. We then expect provisions to be lower in the second half of the year. To put this in context, we expect to see economies, notably Germany benefit from the phased relaxation of lockdown measures with government stimulus measures gaining traction in the real economy. As a result, we reaffirm our guidance of provisions for credit losses of between thirty five and forty five basis points for the full year. Some of you have asked how to compare the results of the last EBA stress test in 2018 to our guidance for credit loss provisions in 2020. The short answer is that they are really not comparable for three reasons as shown on Slide 18. First relates to differences in the EBA's macroeconomic scenario and what we see today. The EBA scenario assumed a continuous three year downturn. We are currently seeing severe shock followed by a relatively fast recovery. The EBA also made no assumption of government support. As we discussed earlier, the current crisis has seen the greatest level of government measures ever launched. Secondly, on methodology, the ECB imposed overlays in relation to credit losses, equivalent to approximately 20 basis points of loans as part of the stress test. They also imposed constraints in our internal methodology and models, which increased the pace of default migration and assumed losses. Additionally, the EBA stress test takes a static balance sheet approach, which as we've explained today is very different to the act of hedging and mitigation that we employ to manage our portfolio. The third relates to results. The hypothetical credit losses and the EBA exercise were driven by retail accounting for 40% of the total. As we have seen, this does not align with the Swiss and decisive response to the crisis in Germany and low levels of consumer leverage. However, there's one important point of alignment. The EBA results demonstrated that Deutsche Bank was well below peers on credit impairment. And as we've discussed, we believe there are some reasons for that to be maintained going forward. We're also aware of the challenges that you face in your analysis given the significant differences in provision for credit losses between different banks in the first quarter. There was some discussion as to the reason for the very different levels of provisioning amongst leading European and U. S. Banks. Slide 19 shows a very strong correlation between the proportion of unsecured consumer finance and the loan books of leading banks and provisions for credit losses as a proportion of loan loss allowances. For some of our peers, consumer finance accounts for between 1525% of their loan books. For U. S. Banks, the largest exposures are typically in credit cards, where stress loss rates can reach 10% of loans. However, even versus our other European banks, our exposure to consumer finance is low. As we already observed, Germany went into the crisis with household debt levels amongst the lowest of any Western economy. This macro backdrop combined with our conservative lending standards plays to our advantage. There has been a lot of discussion and speculation about the reasons for the differences in credit costs among leading banks in the first quarter. And we believe that unsecured consumer finance at a time of rapidly rising unemployment is a key differentiator. With that, let's turn to the IFRS nine accounting framework on Slide 20. IFRS nine was introduced in 2018. We went for full adoption from day one, whereas other banks decided to use a transitional approach. IFRS nine devised credits into three stages. Stage one refers to performing loans and looks at expected credit losses over a one year time horizon. Stage two is for credits which are performing, but where there is a significant deterioration. When looking at the expected credit loss or ECL over the lifetime of the loan. Stage three refers to credits that are non performing or are in default. Stage three loans will either be subject to individual assessment for non homogenous exposures, while homogenous portfolios and the private bank will be subject to an expected lifetime loss. Importantly, in this forward looking approach, a rise in provisions for credit losses does not need to be the result of a deterioration of the portfolio, but can also be the result of a deterioration of the macro economic outlook. In a fast changing economic environment, the triggers which require a credit to move from one stage to the next are important. These are from stage one to stage two, a significant increase in lifetime probability of default, rating downgrade, transfer to work out or forbearance flag. Migrations from stage two to stage three are driven by unlikeliness to pay and going ninety days past due. Let's now turn to our loan book by rating before and after migration between stages on Slide 21. On Slide 21, you see the impact of these triggers on our Stage two assets according to internal ratings. Stage two assets of EUR44 billion include EUR31 billion of loans and EUR13 billion of other financial assets at amortized costs. It is noticeable that of the EUR 19,000,000,000 asset migrations into stage two, these are most pronounced amongst the highest rated credits on the left of the chart. Here, the probabilities of default remain low and as a result, the increase in overall Stage two credit loss allowances for these counterparties was minimal. The Stage two transfer for these investment grade counterparties seen in the first quarter was almost entirely driven by the deterioration of the macroeconomic outlook at the March, giving rise to a significant increase in the lifetime probability of default. This is equivalent to a hypothetical downgrade of these investment grade counterparties, which mostly consists of finance institutions by one or two notches. It is important to note, however, that the individual counterparty ratings for these investment grade credits were mostly unchanged compared to Q4 twenty nineteen. We did see some increase in Stage two driven by sub investment grade counterparties, which contributed almost all of the increase in Stage two allowances for credit losses. These changes were driven by a combination of forward looking indicators, rating changes and watch list inclusions. Other financial assets include interest earning deposits and brokerage and cash margin receipt. With that, let me hand over to James. Thank you, Stuart. Let me take you through a few slides on our capital outlook for the remainder of the year. The capital planning process sits in the treasury function within finance, although the governance and steering of our capital management is conducted through our group ALCO. This brings together colleagues from treasury, risk, as well as the businesses to get an all round picture of our capital position. Let's start by looking at the impact of COVID-nineteen on risk weighted assets, starting with credit risk RWAs. As you can see on slide 22, the impact of ratings downgrades in the first quarter was relatively muted, adding a net €1,000,000,000 to group risk weighted assets. That said, downgrades did increase in March and our capital outlook assumes that the pace of downgrades accelerates in the second quarter, thereby increasing our credit risk RWA. The impact of the ratings migration is expected to increase credit risk RWA by between 5,000,000,000 and €10,000,000,000 during the year. The RWA inflation driven by ratings migrations is likely to be partly offset by a reversal of the drawdown related increases seen in the first quarter. Some corporate clients have taken advantage of improved market conditions to repay facilities drawn on during March and April. Turning to market risk on slide 23. Market risk RWA of €25,000,000,000 accounted for 7% of group RWA at the end of the first quarter. Market risk RWAs are calculated in part based on sixty day average value at risk or VaR. VaR and stress VaR declined in January and February as we continued our derisking activities. These reductions were offset by an uptick in March given the significantly higher market volatility. Average VAR was $24,000,000 in the quarter, but increased to around $40,000,000 on a daily basis by quarter end and remained elevated through April and May. As a result, market risk RWA will increase in the second quarter as the averaging feeds into the calculation. Slide 24 shows the key drivers of our capital ratio for the rest of the year. There's even more uncertainty than usual in the timing and impact of several items. But fundamentally, there are three factors at work. First, COVID-nineteen impacts are expected to be a headwind of around 40 basis points in the balance of the year. These headwinds include the additional credit loss provisions consistent with our guidance, as well as higher credit and market risk RWA from the factors that I've just described. The headwinds will be partly offset by the expected release of prudent valuation reserves taken in the first quarter. Second, our results will continue to be burdened by restructuring and severance and the ongoing wind down of the capital release unit as we work to substantially complete our transformation in the coming three quarters. Our planning also includes movements in deferred tax asset balances as well as negative movements in OCI principally related to pension assets. The burden of transformation and other movements are expected to be mostly offset by core bank earnings and capital generation. Finally, the impact of these two buckets is likely to be partly offset by the benefits of the regulatory adjustments that have just been announced. These adjustments include the inclusion of a portion of software intangibles in CET1 capital, which should give us an approximately 20 basis point ratio benefit towards the end of the year based on the most recently published draft regulatory technical standards. Overall, our CET1 ratio outlook is consistent with the guidance we gave around the first quarter results. At that time, we said we would allow our CET1 ratio to dip modestly and temporarily below our 12.5% target, as we support clients and the wider economy. We stand by that commitment. In aggregate, we expect the negative impact of COVID-nineteen to be around 80 basis points from our CET1 ratio in the full year. Over time, these mostly temporary COVID-nineteen factors should normalize, supporting our longer term target of keeping the CET1 ratio at or above the 12.5 level. In this range, our CET1 ratio is at the higher end of our peers. It is also around two forty basis points or the equivalent of €81,100,000,000 above our regulatory requirement of 10.44%, as you can see on slide 25. And following our Tier two issuance earlier this quarter, our buffer to the total capital requirement increased by approximately 37 basis points during the second quarter to 192 basis points. Let me summarize briefly on slide 26. Stuart has outlined why we believe that from a risk perspective, we're relatively well positioned to manage through the current stress period. This confidence is in part driven by the relative strength of Germany as our home market. Our robust and enhanced control framework has proven to be effective. We continue to manage our credit risk tightly and the internal stress tests that we have run validate our approach. Stressing our portfolios most exposed to the impacts of COVID-nineteen gives us confidence that the downside risks are manageable. And our capital buffers are well above our regulatory requirements and provide further protection against any unexpected losses. And finally, this management team continues to set targets and deliver against them. Our guidance for credit loss provisions of between 35 to 45 basis points this year remains valid. And while there's still many moving parts, we believe that we will operate with a CET1 ratio in a range around 12.5% throughout the year. With that, we'd be happy to take your questions. And I'll pass the call back to Haley. Ladies Anyone who wishes to ask a question may press star followed by 1 on their digital telephone. If you wish to remove yourself from the question queue, you may press star followed by 2. If you are using speaker equipment today, please leave a handset before making your selection. And the first question is from Adam Terrillak of Mediobanca. Please go ahead. Yes. Good morning. Good afternoon. I just wanted to follow-up on your comment on second quarter provisioning. You said it would be driven by Stage three. So that suggests some souring in the book already through this crisis. And I'm wondering how that squares with the kind of the implied guidance for the second half of the year, which implies credit risk charges coming off from the Q2 level and what confidence you have given what clearly is already developing in the book? And then secondly, I just wanted some clarification on the regulatory impacts in your capital walk. At the investor update last year, we had £15,000,000,000 for 2020, pounds 15,000,000,000 more in 2021. How much is in that 10 basis points? And what is the picture for the €15,000,000,000 you're expecting for 2021? Is that being pushed out, being delayed, or where we are on that side of things? You. So thank you for the question. Let me take the first one. So our stage three provision assessment is really done bottom up. So I guess like all risk organizations within banks, know, we're looking at the whole watch list of credits and trying to determine given the factors that we see and foresee what the potential for impairment might be, on our list of what's the names. And therefore it's very much sort of a bottoms up single name by name review of credits, which is driving that commentary on going forward. So I'd expect in the macroeconomic model, FRLI impact started to reduce, but the sort of stage three names, you know, continuing to to to record CLPs in March. Overall, though, the trend will be peak for total CLPs in q two, downward into q three and '4. And, Adam, it's James. On the second question, you know, as I mentioned, the the the visibility is is tough at the moment, given the number of changes that are going on in timelines. And frankly, still some uncertainty around which elements, you know, of regulatory actions, exams, reviews, and what have you, you know, how far they'll be moved out, and whether some of relief is temporary or permanent. I'd say if I were to zero in on just a number in terms of how our glide path has shifted out of of of '20 into '21, I I'd give you a range from sort of 5 to 7,000,000,000 of of RWA inflation that that we think at this point is is pushed out. But as I say, it's early days, and we'll provide more in the way of guidance for '21 and beyond, when we have some more visibility. In general, I'd say that the glide path is similar, in some cases improved, as you know, but similar to to what we've been working on, since our restructuring announcement in the middle of last year. But the 30,000,000,000 total is still, applicable? We think so. Again, it remains to be seen whether whether some of the of the actions will be will be permanent. But but, yes, we think that's still still applicable. And, of course, some of the Basel Basel three final framework impacts, we think are moved out by at least a year now. Okay, great. Thank you. Thank you. The next question is from Magdalena Stuklosa of Morgan Stanley. Please go ahead. Thank you very much. And I have to say, Stuart James, I think the level of detail in this presentation is quite impressive. So thank you very much for that. That will kind of keep us going for a few days. Good evening, Shimo. To follow-up. All of you are more, exactly. I've got I've got two questions, and both are kind of more more top down. So so my first one is about the the change in ECB's macro scenarios. Over the last kind of couple of weeks, we had Andrea Henriette kind of commenting about how different the macro scenarios were across various banks determining provisions in the first quarter and how she urged the banks to use the current ECB projections both for the base and the adverse case from here. And, of course, you know, the SSM will be running their own simulation, the vulnerability test in in July. How do we translate those new scenarios, or how have they translated into your two q forecast and potential thinking going forward? So that's my first question. And my second question, you know, we all struggle with the with how to price in the positive cumulative impact of the fiscal mitigation we're seeing in various countries, in Europe, particularly when we look at the the short labor programs or the guarantee loans. When you actually kind of look at those look at those programs kind of country by country, where do you see the most kind of positive impact on the on the development of your provisions in the corporate portfolio across Europe based on your assessment of the positive effect of the fiscal and guarantee schemes? Thank you. Thank you very much for your questions, Magdalena. Answer question number one, we ran the latest EBAECV stress test through FLI model. That doesn't have a particularly meaningful impact on our model from the consensus macroeconomic inputs that we use in our model. So I think we were doing kind of the sensible thing anyway on on using most updated macroeconomic projections. To your second question, look at I think we tried to say in the presentation that we view households and corporates in Germany particularly well supported. I would say that households in Italy are pretty well supported as well. So those those would be the areas where we again, as we outlined, we've got some pretty big exposures. And therefore we take a view that our clients in those particular areas will perform reasonably well through the remainder of this crisis. And can I just very quickly follow-up? Are you worried about the kind of any cliff edge kind of effect as those programs roll off into 2021? Look. Look. I I think it would be wrong to say we're not worried about it. We're we're watching it carefully. But, again, a little bit premature to say what the impact impacts would be as of today. Okay. Thanks very much. Thank you. The next question is from Kian of JPMorgan. Please go ahead. Yes. Thanks for taking my question. The first question is on page 24 on your capital movement. I'm just wondering if the 12.3%, is that do you see that as a low point of the cap ratio this year? And on the 10 basis points mitigation improvement, so to say, it looks like a very small number, especially when we compare that to some of the peers. I'm just wondering if you can comment how you I mean, what what assumptions you make around the 10 basis? It sounds like a very, very small improving figure. Clearly, difficult for us to question, but if you could maybe put some caveats around it or or what the issue is, why it's not comparable to peers. And then on page 11, I'm just interested generally in the 460,000,000,000 book, how we should think about duration of the book. Port hedge is clearly very difficult for us to see except the mortgage book. If you could maybe talk a little bit, where where is the long duration book sitting within within that four sixty x mortgages? Thanks, Kian. It's James. I'll I'll take your the questions in your order. Look, as I mentioned, lots of uncertainties and moving parts in the capital forecast at the moment. We'd certainly like to see that as being a low point. But there's obviously, you know, there's at least a possibility that we'll go beyond that. But I also as you've heard me say before, we tend to forecast hopefully with some conservatism built into our capital planning. So I'd like to think that the bias is better. And of course as you go then further out in time the question that we're looking at is the, you know, what is the timeline over which that element of the COVID drawdown, that we've called out, you know, that is temporary, the time period over which it comes back. Frankly, in this forecast, not that much comes back this year. So it's pushed into, you know, '21. So short answer, the hope is that that's a low point, but and we'd like to see some upside potentially, but we can't, you know, put a floor right now. On the 10 basis points, we've bucketed it together with some of the regulatory pressure that we still see in the balance of the year. So we mentioned that there's 20 basis points coming from the software intangibles, assuming that we get through that rulemaking process and that's effective, before the year end. But there's also the definition of default rules and the NPE backstop, which are negative for our ratio was part of the original planning and that we have built into that bucket. So that's why you see the the relatively modest effect here. And it also explains why when we gave the original guidance around temporary modestly below, you know, we weren't looking you know, we weren't really leaning on regulatory changes so much as we saw them some of them to be temporary, and some of the offsets to be or some of the benefits to be offset by the remaining in the forecast. Hope that's helpful. And then on the the average duration of the book of yours for the mortgages, it's three, three and a half years. Good enough. And any very anything you would highlight in terms of significantly long and and significantly short duration? I mean, some of it clearly be have an idea, but anything you would that you would stress besides the mortgage book? First one? Look. The shorter stuff, clearly, in the trade world, where, you know, trade finance and some of the working capital is is short. But there's nothing nothing else I would highlight as being, know, say, a longer duration. The next question is from Stuart Graham of Autonomous Research. Please go ahead. Hi. Thanks for taking my questions. I had three, please. The first one is on Slide 12, the GBP 31,000,000,000 of ABS. Can you just give us more detail what that is by asset class? I mean, is it CLOs? What is that? Then the second question is, you've guided for 35 to 45 basis points on the whole book for 2020, but I wonder if you'd give us equivalent figures for those key buckets, the ABS, the CRE and the LBCM. What would be the equivalent basis point figures feeding up into that 35 to 45 for those books, please? And then the third question is, thanks for the extra granularity on your stage two movements. So I think you've got £31,000,000,000 of loans amortized costs, but which you've got just under 2% coverage, which is a low number versus peers. How do you arrive at that 2% coverage for stage two loans, please? Thank you. Hi there. Stuart, on your first question, ABS the is a combination of CLOs, autos and credit cards. And then on the your sorry, your second question was on the 35 to 45 basis points. I think we're not going to give more detail on that. On Stage two coverage, actually I think we think about that on an asset by asset basis. So on the for example, CLA coverage and LDCM is about 2.7%. And we need to go through all the different assets to kinda give you a to give a breakdown, which I frankly don't have in front of me at the moment. I guess my question is why would you be so much lower than than your peers in that bucket? Well, think we'll try to outline that because we think the quality of underwriting and the if we look at the risk mitigants that we have, whether that be collateral and the mitigation that's built in our structures, the low loan to values, and all the the hedging CLO activity that we do and our experience on have been recently strong recovery rates that would, give us comfort that where we currently are, is appropriately, is fully provided. And I think again if you look at one of the slides that I had 19 or 20, that shows that we have provisioned and when we have provisioned our actual write downs are in line with the level of provisioning. Okay. Sorry to dig because you've obviously given a lot of information here, so I feel guilty digging. But just going back to the 31,000,000,000, could you give us a sense of how much that €31,000,000,000 is CLOs? And then secondly, I get it that you don't want to give more granularity on the 35 to 45, but I know in the old days, you used to say CRE would be under 200 basis points in a recession. So is that still valid? Well, I think we might come back to you on to answer that more specifically. On the CLOs, yeah, we've got about 18,000,000,000 in CLOs with the balance, I think, split between the autos and the and the consumer. That's great. Thanks for doing this. I really appreciate it. Thank you. The next question is from Andrew Cohen with Citi. Please go ahead. Mr. Combs, your line is open. Please unmute your telephone. Sorry. Can you hear me? Yes, we can. Yes. Thank you, Andy. I couldn't hear you operator there. So firstly, I'd echo the thanks for the presentation. I just wanted to come back to Slide eight and nine, where you gave quite a lot of granularity on corporate exposures and some of the hedging mitigation that you do. The reason I wanna come back to this is when we look at your IRB corporate risk weights, they're they're amongst the lowest in Europe. And when you dig a bit further, the PD looks fairly comparable and the split of your exposures by credit rating looks fairly comparable. Where the difference seems to be is your LGD is quite low. And it's particularly true actually if you compare it to Commerzbank. So if you could just elaborate a bit more for me on some of the hedging and mitigation steps that you discussed, which of those specifically alleviate the LGD versus which of those are a PD benefit? Thank you. Look, I think if you look at the composition of the book, and again, we're trying to think indicate that in the presentation. We do have in our GCT business a very significant portfolio of structured credit risk. And the nature of that structure, whether it's first lien loan to values. We talked about some of the securitization that we do, where loss rates have been negligible over the last five years. I think that that's really a reflection of the significant degree of structuring that we have in our portfolio across the Bloomberg, particularly in the investment banking investment banking space. And and the the historic performance of that book, I think even in downturns, has has proved to be relatively resilient across a variety of asset classes. And then the reason I think we, you we feel comfortable today with the positioning of the book is that we've stuck to asset classes where, you know, we've seen that general resilience. And we've, you know, reduced our exposure to other asset classes, which have which have in our experience, fair, less resilient. So there's really an issue of having far more structured rather than plain vanilla lending book that gives us that comfort. I guess, well, there's another way. The point you're making is very much about the underlying exposures, and and perhaps I'm more interested in the the actual hedges and the mitigations in place. So I'm just trying to work out the construct of of exactly how the hedge work that allows you to reduce some of the LGDs on that adjusted exposure. Well, so so so for example, on some of these exposures, if you have ECA or PRI protection, in fact, we would look right through to PD adjustment. Yeah. So something is guaranteed by a triple a ECA agency that would be 95% of the exposure would be at that triple e, triple a rated element with a 5% residual exposure and underlying rating of the of the transaction or or the counterparty depending on the the nature of the actual loan itself. I don't know whether that that would give you, you know, some indication. If I look at at CRE, for example, or given the low loan to value, then, their loss given default, on CRE, is about two and a half percent. It's been our observed experience. That's very helpful. Thank you. And thanks again for the presentation. The next question is from Amit Goel of Barclays. Please go ahead. Hi, thank you. I have three questions, and thank you again also for the presentation. The first one, just taking just a step back in terms of thinking about this cycle and potential losses. And obviously, you mentioned, obviously, you've been through a few different cycles. So I'm just kind of curious in terms of the comparison, obviously, a lot of us do it versus the post global financial conference sorry, the GFC crisis losses. Just curious if you look back even further, say, to 02/2002, 02/2003, still when we look at the kind of impairment charges that you're anticipating, they seem to be quite low versus, say, some of the other banks. So just curious what your thoughts are in terms of this cycle versus previous cycles and for Deutsche specifically? Secondly, also just coming back to Slide nine. Just looking at some of the PDs and the expected losses and allowances and the guidance that's been given for this year. So just trying to understand how much you're thinking the kind of PDs change. So for example, if I'm looking at the B bucket, so there's €15,000,000,000 of LGD basis exposure. In terms of the coverage, I guess you've got something like a 4% PD on that currently. If you had to factor in another billion dollars or so provisioning. So it's kind of doubling or tripling. Is that the kind of thought process in terms of PD there? And then my third question kind of relates to the actual the news from Wirecard today. So just curious if there's any comments you can make there in terms of the business relationship and any commentary on the exposure that you may or may not have in that situation? Thank you. Thank you, Alex, for your questions. Look, I think if you look back to to earlier crisis that that you indicated, you know, I think one of the key differentiators is clearly the degree of government support that's going into this current crisis that's we've never seen before. And I mentioned that Germany has something like 50, a plan which is tantamount to half its GDP in order to ensure that the that the economy is sustained. So that would be for me the biggest difference. The the portfolio that we have today, I would also say, is quite different from what it was in the bank in 02/2001, 02/2002. That was even before the Postbank acquisition. So amount of exposure in Germany, which again, to highlight the German government support is far larger as a percentage of the book than it was was prior in the early two thousands. Now Germany did have a recession in 02/2001. Our underwriting standards and our business model around the German corporate and SMEs is considerably different today. And then you may recall that certainly in 02/2001, 02/2002, there were some quite high profile losses, which again were very much a sub jump to default type losses. So these were the Enron's, oral comms, Swissair's of this world, Marconi's of this world. I think those were the probably the five big ones that we actually had exposures to at that time. And I seem to recall that we probably take about a billion of provisions against five names if I recall correctly. And since then we have done we we post that we we implemented our our hedging strategy and that that hedging strategy is absolutely designed to reduce our exposure to these kind of investment grade fallen angels jump to default risk. So I would say that's another element that that I would would highlight I would highlight there. On Wirecard, I won't comment on individual exposures. We've just talked about how we actively manage our concentration risk to ratings at the lower end of the investigator grade spectrum via a variety of mechanisms to mitigate against jump to fault risk. So I'll let you reach your own conclusions on that comment. Sorry. Your second question was on PDs. Yes. We do think that PDs will deteriorate as a result of, you know, what's going on. You know, we watch the rating migrations on a constant basis. And if that really informs us of our, you know, our stage one to stage two provisioning and and clearly also informs us of our stage three provisioning impairment events and provisioning arising on the back of that as well. So I I don't wouldn't want to make any more comments on that. Thank you. Okay. Thank you. The next question is from Robert Molley of UBS. Please go ahead. Hi, thanks very much and thanks for doing the call. Very informative. I'm sorry I missed the end of, the answer to the last question. It's because I cut out. It really informs my second question. My first, When you talk about, there's, potential points of CET1 in question, including transformation, effects and capital release, you know, wind down. That a little bit, where that is now? Is that kind of steady state wind down and we're just waiting go off? And do operational risk, RWAs, lead or lag that and how that works? And secondly, and it it probably goes back to, to what you were just saying, look at, government mitigation, and any kind of, relief subsidies. How else is this informing you, in terms of, credit problems, potential credit problems, in four and one of next year. Is there any data or any way that you're sifting this that you're getting any different information, counterintuitive information than you would think from the outset? Thanks. Sure. Hi, Robert. It's James. You were in and out a little bit in terms of reception, but hopefully we got your questions. Just briefly on Stuart's answer to the PD migration and, you know, rating migration, you know, the answer simply put is, you know, we are watching carefully the ratings migration. We have assumptions built in, to the modeling essentially that's driving our outlook. And so while those assumptions are critical to the future path, we're comfortable with that path. But it's an area of course intense focus as we've described. As it relates to the capital path, yes, we sort of we've baked the CRU and then the operating performance of the businesses of the core bank into the second bucket. So everything we've told you in the past about the deleveraging impact of the CRU is on track. And the team has been working around RWA is on track. The team has been working, to execute on that plan. I will say, CRU participates a little bit in that market risk uptick that we talked about due to volatility. So I don't think we'll show in this quarter as much of the progress that in fact has happened on an underlying basis in in that deleveraging. But that's just timing. The actual risk reduction is is taking place sort of as we planned. Otherwise, we say, the the core bank, as you can see in our reporting, you know, is profitable, is generating capital, and is is also managing, you know, its balance sheet in line with our expectations. Op risk RWA really isn't a big feature in 2020. As you know, it was a significant driver of some capital relief in 2019. But it's a pretty modest impact in the balance of this year. We do think there's opportunity further down the line, but it's, you know, quite a lot further down the line. And so we don't we're not, you know, looking to that in terms of near term or even, call it medium term benefits. And I'll I'll pass it over to Stuart to talk about about the credit path in in 2021. I think, you know, as a general statement, it's it's early at this point to to have a very clear view of 2021. We feel good about the second half, but I'll leave it there. And think you're right. It's a little bit too early. There's no explicit data on waiting government support. I think our expectation is for the remainder of the year will help this growth and it has clearly in certain areas helped to provide much needed liquidity to certain struggling counterparties. And I would say I think that the market consensus that we use in our macroeconomic model, we call it forward looking indicator model, the SLI, is kind of reflective of that. You know, I think really through the rest of the year, we'll continue to do what I I alluded to earlier. We do a huge amount of of bottom up analysis on our watch list portfolio. This is an activity which is really always ongoing. And our credit analysts are constantly developing views companies and impact of macroeconomic scenario on their ratings as well as the performance of the underlying companies too. So I still think there's a little bit of there's a high degree of uncertainty, you know, on trying to give outlooks now into into 2021. And we're, let's say, monitoring the portfolio closely as of today and going forward. Okay. Thanks very much. And again, thank you for doing the call a lot here. Really appreciate it. Thank you, Robert. Thank you. The next question is from Daniel Brubecka of UBS. Please go ahead. Yes. Thank you. Good afternoon. I also wanted to ask about Slide eight and nine, and I think it's similar to what Andy from Citi asked on the risk mitigation part. Just looking at Slide eight, obviously, is a lot of information on the slide. So thank you for this. I was just trying to get a little bit better feeling for how safe is this risk mitigation, what could go wrong there, What's the risk in there? And what could make that change significantly in any given quarter? So where's the sort of the pressure points there? And I mean, still need to digest some of the information on that slide, but is there also any kind of accounting dynamics working here? I mean, you mentioned financial instruments. How does it look from that point of view? Is there, for example, I don't know, mark to market stuff that is a result of those risk mitigation, which is probably hedging an underlying book that is done on an accrual accounting. Now is there any kind of accounting implication out of this? So this is first question. And then just on Slide nine, I mean, the expected loss, if I just add up all the light blue circles there, I get to, I think, around $3,700,000,000 or something. Then you obviously give the risk cost guidance for the whole year, which is probably at the upper end, a bit more than $2,000,000,000 Can I compare these two numbers? And if not, why? Or is it yeah, what's just the delta? How can I sort of look at these two numbers in context? These are my questions. Thank you. So on your question on Slide eight, I'm not so sure that an SRA follow this is really our exposure at default on accrual book. And I don't see any kind of accounting things that are going on across that book where we so I think I don't need to go further into that one if that's okay. On your question on Page nine, I'm not sure I fully followed what you're asking on that one. You're asking if you add everything up then what, sorry? Yeah, mean, guess that's a yearly expected loss number, which is 3,600,000,000.0. I mean, Commerzbank across the street has an expected loss of a bit more than a billion. They gave a risk cost guidance of 1.5. They say through the cycle expected loss numbers are very relevant, but in any given year it's very different. So they did say, yes, this is very relevant. So we do look at these two numbers. Or am I I don't know, is this something different here? How should how do I compare the 3.6 versus your upper end of the 35, 45 basis on risk of clients, which is, I guess, 2,000,000,000 or so a little bit more? Well, the upper end would be $2,000,000,000 incremental, I guess, point 5,000,000,000 has already taken $05,000,000,000 in the first quarter on top of these allowances for credit loss during the year. So that would be incremental across stage one and two plus stage three specific loan loss provisions. Okay. I'll follow-up with IR. It's fine. Okay. I'm I'm not sure probably, I'm asking the wrong question. It's it's it's very it's it's possible. But, yeah, I'll follow-up with IR. Happy to follow-up, Danielle. Danielle, I think there's with three things to think about. One is the existing allowances, which are a part of the puzzle. The second is, expected loss, you know, over one year and then the full life loss, and then how the new allowance the new provisions add to the allowances and and and cover, you know, charge offs. So so those those features all go into it and, again, you know, affects our you know, as it underscores our confidence in in the the allowances and the provisions that we're building. You also have to bear in mind that the defaulted portfolio, you know, you know, so it's 1.3 as your in your math is it's 1.3 if you exclude the defaulted portfolio. Okay. Okay. Thank you. The next question is from Andrew Lim of Societe Generale. Please go ahead. Hi, good afternoon. Thanks for doing this presentation. It's above and beyond compared to other banks. So my first question is regarding economic assumptions. So we've had a clear sense from The U. S. Banks that more conservative economic assumptions should be driving some chunky loan losses in the second quarter. I was wondering to what extent that's also the case for yourself in your guidance for around GBP 800,000,000 for the second quarter? And then my second question is on the impact on capital ratios. So on Page 24, I was wondering if you could give an equivalent guidance for the leverage ratio or even the CET1 leverage ratio as to how you expect this to pan out for 2020. Thank you. So on on your first question, look, we we use consensus Bloomberg economic consensus input, and we update that on a monthly basis in term wall. So, yes, clearly, we've seen, you know, some higher impact into the FLI, the macroeconomic model, given that consensus did deteriorate so far anyway during q two. It it it remains to be seen kinda how we end up in q two since it it feels like some of the inputs that that we use, outlook for unemployment in in Germany, GDP in Germany, to use two examples, how those how how those end the quarter given that, you know, I guess there's a sense of feeling that there is some improvement on that look, albeit coming from a low basis. And then Andrew, the leverage ratio, you know, there I guess one thing to, as we look at the the changes in in potential changes in legislation or regulation, we do see a benefit coming. If both pending settlements and cash at central banks were to be excluded from the denominator in the calculation, we'd pick up about 25 basis points. Of course, you know, and this was the again the basis for our capital guidance around the time of earnings. And you know, we are extending our balance sheet more than was planned as we came into the year to support clients and the economy during this COVID period. That would include also incidentally, for example, guaranteed loans in the KfW program. So there's, you know, there's additional leverage exposure out there without a great deal of impact on RWA. And we think that'll persist for a period of time. So I would think we get a near term benefit, brings us closer to where we hope to be for the year. But then the normalization of the balance sheet will take a little bit of time. And then over time, especially with the additional efforts around leverage exposure in the Capital Lease Unit in 2021, and the deconsolidation of the Prime Finance assets next year, you'd see us sort of, I think come back to the glide path that we'd initially envisaged as we announced our our restructuring last July, maybe a little better to the extent that, at least temporarily to the extent, as I say, cash and, and pending settlements in one case are out for a period of time and the other case was brought forward. Yeah. I think you alluded there to, credit drawdowns persisting a bit more. Is that still quite a strong feature in the second quarter that you've seen? Not really. On a net basis, we saw a slowdown. So there were still some net draws in April. And but then we saw reasonably quickly in April, the beginnings of repayments. We had, I think, had a relatively conservative view, about additional draws net during the quarter. And so far, I can say it slowed down more than we thought. And in fact, I think, you know, may swing to a net repayment, if you like, by the end of the quarter. And as I said in the prepared remarks, we see that continuing for the balance of the year. So we do see some recovery of the credit risk RWA, the 5,000,000,000 that we showed in the slide. We we would expect to get some of that back by the end of the year. That's great. Thanks. Next question is from Anke Reingen of RBC. Please go ahead. Yes. Thank you very much for taking my question. Thank you very much for hosting this call. I'm sure I have a very simple question. Apologies if I missed this somewhere. Can you share with us the percentage of your loan book where you've granted a payment moratorium? I see some number in absolute terms in the consumer book, but I wondered if you can maybe give us a percentage number. And then on the guaranteed loans from the government or by the government, what is sort of like the gross amount? And what's the depending? And if there's any number you have maybe on the net risk you would carry? And then just lastly, on the pricing of risk and loans, do you think the I mean, has the general spread widened on on loans, or is there a little change? And I was wondering, I guess, you've probably taken some of the TLTRO funds. What you think in terms of risk taking, will you invest them in the business? Or will they go to ECB? Or what's the general parameters about how you could use them in the business? So on on your moratorium question, Anka, it's less than 4% on retail where we've granted moratorium. And then in the institutional sort of wholesale business, it's about 400 names. And then in the corporate bank, about 500 names. Not in a in a they're larger borrowers in the corporate bank. Mhmm. I I I wouldn't say any more than that. Okay. And the government On the pricing and on on the sorry. On on that issue. On the pricing environment, that spreads are widening. Yes. So new deals that are coming to market done at wider spreads, and we're also seeing a greater flex in some of the noninvestment grade transactions as well. And then Yousuf, t l TRO, do want Yeah. I'll take that. So we've we look carefully at the at the at the drawing on on TLTRO, in in this auction. And, obviously, at the loan, commitments that go with that, and and and so we we sized it to what we think we can achieve. And I think we're minded to be, if you like, aggressive in in the use of that of that facility, both to, support clients in the economy and in recognition of of the, you know, the economic incentive that is that is built into that program. So we've we've used assumptions in terms of loan, commitments that we think are are very reasonable in the environment, that that help to inform that, that that submission. Okay. Thank you. And on the guaranteed loans, are you willing to share any amount? Oh, thank you. On guaranteed loans, it's probably early. I think we maybe talk a little bit about that in at the end of the quarter as we're you know, we've we've talked about, you know, KFW lending in the kind of mid single digit billions, which is probably a good, you know, little good assumption for the quarter, but we'll we'll come back to you when when we report in July. Okay. Thank you very much. Thank you. There are no more questions at this time. I hand back to James Rivett for closing comments. Thank you, Haley, and thank you all for joining us. Do you know where the Investor Relations team is if you need us? Otherwise, we will speak to you at the July with our Q2 results. Take care. Thank you. Ladies and gentlemen, the conference has now concluded. Disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.