Good morning, everyone, and welcome for the second day of the conference. Thanks all for being many here this morning. Raja, you joined about a year ago, six months now that you are fully in charge, and Germany promptly decided to make things interesting for you. We had a fiscal package big enough to change the macro conversation, an election calendar nobody can ignore, Chase turning up to the competition for German deposits, and European consolidation very close to home. Most CFOs would have a honeymoon period, but you appear to have been handed the live agenda. But the good news is that the bank arrives here in rather best shape than the backdrop. The 2028 plan with above 13% RoTE targets, revenues that finally look diversified rather than dependent, and a capital story that has moved from repair to return.
We have 40 minutes here, and we will try to get underneath all of it. Maybe you can start with the general macro. And welcome, Raja.
Thank you, Tarik. Thanks for having me here, and very pleased to be here representing Deutsche Bank. Look, I think from my perspective, yes, the macro is complicated, but the direction of travel in Germany is, from my perspective, still very encouraging. If you look at stepping back, what has actually happened in Germany, last year we actually had a 50% increase in foreign direct investments. We just did a survey of international investors, and Germany still is on top of the list from a desired location. We had a 0.3% growth in second quarter. The projections for the growth rates in this full year and next year are actually creeping upwards. What I also find encouraging is the corporate sentiment, despite what you read, is actually quite positive. We can see corporates getting engaged. They are making investment decisions.
Where you see a little bit of lack of obvious consistency is on the SME sector, so the corporate confidence has not clearly and consistently transferred to SME. That is why you perhaps see a little bit less of that. The other thing that we think about it from a Germany perspective is last year alone, the VC funding was up by almost 44%. There were 3,000 new startups. I would say all in all, while Germany is not where we thought it would be when the stimulus and the defense package came in, I think it would not be prudent to conclude that nothing is happening. Us, as the largest bank based in Germany, certainly see activity, and that can see in our working capital finance transactions and our loan growth transactions.
All in all, I would say what we need is more of the same, but at a faster pace. To say that momentum is not happening is probably not accurate either.
We'll see how that translates into your guidance shortly. Before that, on the German politics, how would you really describe the political landscapes? Because the recent elections in different Länder point to some instability potentially at the government and mayors level, and what implications on the fiscal stimulus and the speed of investment that you just mentioned and the growth. How do you see these implications?
Yeah. I'm probably the least equipped to opine on German politics, given I've only been there less than a year. Look, I think one thing, you have to find the commonality. One thing is clear that Germany needs more reforms, more economic progress, more growth that goes down all the way, not just at the corporate sector. From my perspective, that is the most important part, is that there's alignment that there needs to be done more. I think from my personal perspective, any views that take away from a European perspective and lead towards more of an isolationist is probably not the one that we want. Clearly, the reform agenda is on the table. The defense spending and infrastructure spending we already see playing out.
While the politics is something that we have to closely watch, at this point, I think what we see is that the activity is happening, and we'll see how it plays out. Look, it's a decentralized political system, so in the end of the day, the government in the center is the one that is really important, and I think that's where we need to focus.
Thank you. Next to your strategic plan you presented November last year with the 2028 timeline. Now almost a year in, what areas you think actually you've been, and we'll go in detail on each, but which area you see as challenging to achieve or actually you see more upside?
Sure. Look, in your introduction, you were kind enough to acknowledge the overall landscape, but I would like to say I'm super happy about the start. We had a record first half with RoTE close to 12%. From a start perspective to my own start, but not also a start to new strategy cycle, I'd say we're doing pretty well. Look, we're just starting with no any particular order. If you look at what we have done on the Private Bank side, where we had set a goal for EUR 1 trillion client assets, we have, I would say, done as well as we thought we could, perhaps even better in terms of asset gathering, and that momentum is continuing. The asset management story is pretty clear. The long-term flows are strong. Germany and Europe is a destination, and we are playing that part.
Thankfully, and finally, Corporate Bank, which we always said would have a turnaround in the second half of the year, and we started showing that in the second quarter. I think given what we're seeing, both in Germany and the loan growth and the flows, I think there, too, now we are right back where I thought we would be, and we will talk about it a little bit more. Finally, look, I don't need to say too much about our Investment Bank and especially our Fixed Income franchise. It is the crown jewel in some ways. It has actually done extremely well. IBCM, which actually had a little bit of a slower start to the year, is finally fully participating in the U.S. perspective.
Europe is where we are strongest, which has a little bit of slower growth, so I think perhaps still a little bit more work to do over there. Overall, the credit quality has remained consistently where we thought it would be. All in all, Tarik, I would say pretty pleased expenses we have managed to keep under control. Obviously you saw the capital story that we actually started accelerating our buyback. I would say as this first six months go, I would have not wanted a different start.
Perfect. In terms of the overall strategy, you've sped out with the CMD obviously, but this diversification on focusing more on the repeat business, if I say so, less volatile, is that something that you see really happening? At what pace? Of course you want to be still big IB player, but how much of the focus on rest with the pension reforms in Germany and all other topics are actually pushing that angle off?
The pension reform was not fully baked into our 2028 plan because at that time the proposal was out. We didn't know what it would look like, when it would come. So yes, that is certainly a tailwind. Look, even at today, 60% of our revenue are now coming from non-IB. So we have clearly started to shift that mix. The PBT will follow shortly after, and then it's a matter of how much capital do we really need in IB versus non-IB. So I think that mix, which is organic, is already happening, and if the German fiscal reforms and the pension reforms accelerate, clearly that shift would progressively go faster.
Look, what I want to point out to you is, I know our wealth management, we grew our revenues by almost 8% and I don't see that trajectory over the long term slowing down, given that we brought in EUR 60 billion of net new assets just in the first half of the year.
Yeah. Digging more on revenues, can you give us an overview of the key trends for each of the businesses?
Sure. As I mentioned, Private Bank continuing down its journey, what we saw in the first half of the year, a strong deposit inflow in the German retail wealth management, continuing to bring in new assets and new investment products. I've suggested what we see the first half of the year, I see that trajectory continuing. Corporate Bank, I've already mentioned that we believe that we will exit the year out in mid-single digits to slightly higher, and we expect to see that trajectory soon. Meaning the second half of the year already evidencing that. Asset Management, again, strong inflows. I feel pretty good about where we were in the second quarter and where we are in the third quarter. Frankly speaking, on our Investment Banking side, FIC 2025 was our strongest third quarter on record.
In this quarter, you have to look at it a little bit on a sub-business level outside of credit trading, which was a record quarter by the way last year. Everything else seems to be up from where we thought we would be and exactly in line with where we were. Putting aside the credit trading dynamic, most of the products are up. We have still six more days to go in the quarter. Against a very strong third quarter last year, we still expect to be either flattish or slightly down. But if you remember, this is against the record quarter last year. I don't personally see the gloomy outlook in FIC over the long term that we've seen. We built a business here that is not an episodic quarter, but a sustainable one. I feel pretty good.
IBCM, we have strong activity in M&A, ECM, and DCM offset a little bit by LDCM, mostly because of the calendar. Overall, IBCM I would expect would probably be flattish. All in all, depending on how the last six days go, we could come out overall Investment Bank, probably flat to maybe slightly down, but we'll see where the last six days go.
Okay. Thank you for that guidance. We had last week some guidance from U.S. Banks on the IB, and I think for the others it would be interesting to really, from your perspective, how we should read across the U.S. guidance into Deutsche Bank, given your mix and so on overall.
Yeah, like I-
Not for the quarter, but in general, how?
Like I mentioned, I think the FIC business would just take that since it is such a big portion. We had a very strong July. August is usually seasonally slow, so there is no difference than what we would see in a normal year. September was a little bit of a mixed bag, but I think as I mentioned, we are having a FIC quarter, which is pretty much matching up to a record second quarter last year. As we see our product mix and our diversification, I feel pretty good about where things are headed. That is why I mentioned I did not quite get the gloomy outlook specifically. Clearly second quarter was an outsized quarter, but when we look at our third quarter, it is entirely in line with our expectations.
Thank you. In terms of the bigger topic of super cycle AI investment and so on, clearly it started very strong in the U.S. We can see from some sector data that is starting some green shoots coming into Europe. How you really see that environment for the IB, then specifically for you, do you have now the teams, the structure to be a key player that captures those revenues?
Yeah, as I mentioned in the U.S., we have been participating along with the U.S. banks in all the major transactions that have happened this year. So it tests our hypothesis, Tarik, that we can be a European alternative or at least alongside U.S. banks. The way I think about it is that European corporates need a little bit less dependence solely on U.S. U.S. corporates want diversification of advice. For both, we have Deutsche Bank. So the three Ds from my perspective work pretty well. If you look at the data center financing and exposure that we have, 75% is U.S., 25% is Europe. So Europe is certainly a player, perhaps not to the same extent as U.S. Perhaps U.S. is ahead, but if I think about the super cycle coming to Europe, then clearly we will be the biggest beneficiary.
In terms of putting balance sheets at work to capture those revenues, clearly, in Europe, we have slightly more constraints versus U.S. Do you see that as a handicap to be participating on those revenues?
No, if we're within our risk appetite and what we want to do, I don't think it is a handicap. It has not kept us from deploying more or less. We're maintaining within our risk appetite. So I would say our constraint is perhaps our own risk appetite and how exposed we want to be, because we'd want to be with the hyperscalers, we want to be with the diverse companies. So from our perspective, it is not a handicap for us for what our ambitions are.
Okay. I'll turn to the audience if there's any question on stage. No, I will carry on. Still on revenues, on the net interest income, the shape of the curve is completely different from where you actually have your assumptions on the last year in the plan. I think Q2 , you kind of suggested that there is upside to the current guidance, EUR 14 billion for this year and subsequently 20 27, 20 28. Can you update us on what you see on that aspect?
Sure. I think we had provided previously guidance around NII of around EUR 14 billion. Given the rate environment, we certainly see that will be slightly better than where we are. If you think about the way our hedging program works, that we actually have a structural hedge to protect against downside risk, which means that our upside also comes gradually and sequentially. It will be a bigger upside in 2027 and a bigger one in 2028, and go on. The advantage of that is that while you don't get an immediate impact, when rates do go up, it stays for us much longer. That is how we have designed our interest rate management to not be a speculator here, but to manage interest rate through the cycle.
From my perspective, that's what we should expect to see: that gradually over the outer years, as the hedges roll over and we reset them at a higher rate, we see benefits, and then those benefits last much longer. Even if the rates come down, we are protected and now to the downside.
Very clear. Maybe we can talk a bit about deposits and what's your assessment competition in Germany. Some will underplay a bit the new entrants competition, but what do you see on the ground, and how do you actually position there?
Germany is a very attractive and competitive market for deposits, and it always has been. I feel lucky that we are the largest player in one of the most attractive deposit markets because that means that we have an opportunity. We have certainly seen new entrants come in, whether they're fintechs or whether they're large banks, with promotional offers and teaser rates for a certain period of time. That causes a short-term disruption, but not a long-term impact on our strategy. We just did the campaigns where we talked about it. We never go out with the highest rates. In all of our campaigns, we got what we wanted to get. I think that the difference, Tarik, is that our relationships, we have 18 million existing customers. Our relationships are not just paid on a proportional rate.
There are usually investment products attached with it, transactional and operating deposits attached with it. From my perspective, it has been less of an issue that would cause me to rethink our strategy. Even temporarily, if the betas are slightly higher, these deposits for us are hugely accretive. Yes, they are there. We take into consideration what they are doing. But all in all, I would say it has not forced us to change our strategy.
What do you see in terms of pricing among deposits and versus your deposit beta as well, indication there?
Look, I think every new entrant has come at the very beginning with an attractive offer. The question really is, how many of our clients actually leave, and how many come back? The way I think about it is that when we do a promotional campaign, what was our hypothesis of people who will stay post the campaign and what they will leave? So far, we have not seen a material deviation. So our model behavior has played out really well. As I said, temporarily, you could see a higher rate dynamic play out, but these promotional rates expire eventually and clients who are solely transacting based on the rates generally tend to come back.
Very clear. Now, in terms of conversions of those deposits into investment products, Germany has not been always the forefront of that. How do you see now lots of banks introducing more and more products to convert those deposits? How is it going in your side with the asset management and-
Yeah, this is obviously more of a play on the retail side specifically, where general clients tend to sit on cash or deposits versus investment products. I talked about it in the first quarter alone. We had a record inflow of investment products, and we are continuing to see that trend. The big game changer, obviously, there would be the pension reform, because that will set not only a new avenue for people to invest, but also I think more importantly, it will create a culture of investing into the capital markets versus a culture of putting money into deposits.
The awareness is slowly coming, and we are actually working pretty hard on our 18 million customers to make sure that they have access to our products, both from inside the bank but also DWS, which obviously is a natural advantage for us that we are the only real bank there with a large wealth, retail, and asset management presence.
Yeah. I'm just looking at the floor in case there's any questions. There's a question in the front here.
Thank you very much. Can you give us an update on the commercial real estate exposures? Rates are now going up. I mean, virtually everywhere. The risk never really cleared. You can see some of your peers' exposures in Europe and in Germany in particular deteriorating. It does not look like a great picture, and obviously it is something that has tripped up many players in the market. Can you give us the state of the art on that, please? Thank you.
Sure. I think that, as you know, commercial real estate has been a story for us the last couple of years, including something that we took in the first quarter. First of all, our high-risk exposure is down by almost 40%- 50% from the start of the cycle. We have significantly worked that thing out, including exits that we did in the second quarter, which were intentional to get some of the non-performing exposure out so that we do not have a revaluation or repricing risk with that. Most of our exposure that we were working through was not necessarily European, but it was the U.S. West Coast office exposure, which we have worked through over the last two or three years.
At this point, while that story is not fully over, we have substantially reduced both the notional, plus we have reserved for a large chunk for that. At this point, the gap between our stress loss scenario and our actual reserves is very tiny. So to the extent there is not a major upturning of the market, we feel cautiously optimistic that we have gotten at least most of the issues behind us. We are not quite seeing the stress yet, at least in our book in Europe. I obviously cannot opine on other people's plays, but so far, Europe has not been really the main driver for us. In the past, it was the U.S. commercial real estate, especially West Coast.
Following up on this question, as you alluded to, in Q2, you had to take extra provisions. You mentioned it was SVA positive with higher capital generation on the back of that. What should we expect for Q3? Is this something, trend will continue here, or you will be doing it in an opportunistic way?
As I mentioned in the second quarter, we will do it in an opportunistic way, and it will not be earth-shattering kind of a change. If you see an opportunity to de-risk, but also free up capital, I would like to take that trade, Tarik. I think for the third quarter on the CLPs, as I have said, the underlying quality of the book is pretty good, both on the Private Bank and the Corporate Bank. We are not seeing the level of stress that you would expect given the economic environment. Overall, I think, obviously, we have an idiosyncratic charge related to a Corporate Bank exposure that has actually also impacted a few other players as well. I would expect our third quarter CLP to be somewhere between first and second quarter. Nothing extraordinary.
Okay. Staying on asset quality, you have been very clear about Q3, but in general, we hear lots of delinquencies and deterioration of quality in general for the SMEs in Germany. Is that something you see on your books, or is it more local, smaller banks?
I think from a German-
It has to be somewhere.
Yeah. Look, from the German consumer perspective, while the spending has been muted, the general resiliency of the German consumer has been sound. We do not see that stress in our retail book at all. On the German corporate sector as well, there is probably stress in pockets, but it is not pervasive. All in all, I feel pretty good about where we are on both the Corporate Bank and on the Private Bank from a credit perspective. Other than the dynamic that I just mentioned about one single name, same thing on the Investment Bank. As I mentioned, most of the stuff is pretty much in line with what we thought it would be at this quarter.
Yeah. Maybe a move to costs. This one was of your pillars, cost efficiency in the plan. You have a good start in the plan on cost, good control. I just wanted to know what is actually - you have been even actually going slightly ahead of the plan. What areas you have really seen as Is it just quick wins and basically we will still stick to the plan in terms of the savings, or you see opportunities there, in what areas?
For 2026, I would like to stick to my guidance. This was an investment year for us. We are scaling up the investments through the cycle, and they are playing out really well. The two big areas where we thought we would win would be investments in wealth management on the advisor side and Corporate Bank on the governance side. On both sides, we are actually seeing really good momentum. The FAs are productive, so I would like to continue with that trajectory. Longer term, I have alluded to, I think from my perspective, there is a lot of opportunity for the bank to have a structural cost base or an operating model that is actually much more positive than, frankly speaking, even what I would have expected in November last year. That is something that we are evaluating and working on.
For the year 2026, I think we will keep costs under control, but the areas where we see an outsized return, especially on the non-investment banking side, I would like to continue to invest according to the plan.
This is important point because in your plan, the spirit was, yes, we keep control of cost, but we are a growing bank. Which is very different from a lot of what other banks are doing, which is like, let's keep a grip on cost and be opportunistic on revenue growth. Are you more into investing any potential higher savings on costs rather than actually beating on a cost guidance and deliver faster cost? Are you reinvesting all your actually cost savings above your budget?
For this year, yes. But this year, the investments are being offset by the productivity. The investments that we are making are just not on the top line. The investments are actually, especially if you look at the Private Bank, they are actually to reduce the structural cost. We closed over 100 branches. We have taken significant headcount out. I would say the trajectory for the future, Tarik, is that we have shown that we can grow the top line close to 5%, 6%, and I do not see that trend changing. That was one pillar for the investor day. 2026 was meant to be an investment year where we did a lot of these things. And then obviously the investments pretty much bear down in the next two years.
What I am saying is there is a third pillar that we had not fully digested, which is that we can actually do much better at these baseline structural cost in the outer years, what we had assumed. To me, another lever has now come obvious to me for the outer years that perhaps I had not fully appreciated at the time of the investor day.
Yeah. Some costs and maybe we can talk a bit about AI, which is a clear instrument here to get to better efficiency, cost efficiency. Can you give us an example where you are, some user cases and where you are in the implementation of AI, being it is on the compliance credit checks or actually more embedded in your business?
So, just like every other bank, I heard them, we have hundreds of places where we think it could be beneficial. The two or three that excite me the most at this point where we have actually quite advanced is actually on our customer-facing side, especially we have launched this tool on Postbank for client interaction, and we're going to scale that for our Deutsche Bank brand. On the back office side, the transaction monitoring, and the credit underwriting process, which we can shrink significant amount of time, but also do much more efficiently are probably the two biggest areas. But the way I'm thinking about it, Tarik, is that what AI has allowed us to do, which you could ask why could you not do that without AI?
Which when you go to deploy AI, you look at the underlying existing process, where the resources are, what the spans and layers of the people are, where those people are sitting, high-cost location, low-cost location, what they're doing. So AI has, in a way, allowed us to go in to redesign the whole process because it has to be redesigned when you deploy AI. So in some ways, that's why I feel like we have a bigger opportunity and better opportunity because it's forcing us to look at certain things that we thought had already been optimized. And when we go and deploy AI, we found actually forget about AI, there's other things that we could do without AI. So those are the things that I think are on top of our mind. I would expect that the pace of AI implementation would be not gradual but exponential.
What I mean by that is I think if it is going to just multiply every year rather than just flatline, and that's what our hypothesis is.
And in terms of AI implementation, how much are you doing in-house, versus, using off-the-shelf tools and, how you feel really confident about controlling the cost of AI? Obviously for next year, you probably have a very pretty view, but in five years time, how confident you are in control of your spending in AI?
Yeah. Thankfully, as a CFO, I feel very confident that we have built the controls to control the cost of token. What we have also designed is we obviously are using the tools and the models that everybody in the industry is using, which are cutting edge. What we've been very deliberate about is to make sure that the appropriate model is used for appropriate use, which means that our engineers and our software developers have access to the most sophisticated tools, which are obviously costlier, but their productivity is reflected in that. Majority of our general population has access to tools that are sufficient for their need, and we are monitoring both the usage and the type of users that we have. It's not just being used for reasons.
In general, I would say, while we see some AI-related cost increase, it has been more than offset by the productivity that will come out of it. That is one aspect that, we have diversified our supplier base on AI tools. I feel a little bit less stressed about. What I really am focused on is if we have the tool, are we deploying it fast enough, or are we actually not executing on it that quickly?
Thank you. Back a bit on the revenues and, clearly you have a big M&A transaction going on in Germany. Where do you see yourself having taken advantage of this situation in terms of capturing some of the revenue, the synergies potentially between HVB and Commerzbank? I had a chat with Fabrizio, and he sounded very confident to at least he put a task force to capture those.
Yeah.
Can you tell us-
Yeah.
What is really the strategy there? Because that can be significant.
Yeah. While I will not comment on the live transaction, because it will not be appropriate, I can say, thankfully, go back to November when this transaction was not as far ahead and there was some doubts. If you look at our investor day presentation, we had very clearly said that we are going to invest in Germany, we are going to invest in corporate client coverage in Germany, and we are going to take market share in Germany. Thankfully, our plan was already set six, seven, eight months ago about what we wanted to do in Germany regardless of this transaction. Now it happens fortuitously that this transaction is happening, and we had already started investing for that.
From my perspective, this is a great opportunity for Deutsche Bank to take share, continue to take share in middle market, in business banking, where we actually have deployed a lot of resources. As I was preparing for this conference, I asked the team, I said: "What is happening from a new client activity, especially around the space where the M&A might be happening?" Within 10 minutes, I had a dozen names of clients which are new to us. Now, this is a small sample. A dozen is not our aspiration. It should be hundreds. What I can see sitting here, the momentum for us is already there.
We are the only global investment bank based out of Germany that has capabilities across payments for corporate clients, advice on the M&A side, a wealth management business, and an asset manager that corporates, by the way, need now for their corporate pension plans. I think, Tarik, we have an opportunity here. We just need to execute on it.
And technically, you would see most inflow of new corporates or clients once the legal entities would have merged, not before, because of the diversification of those corporates, or you could pick up earlier?
Well, as I said, I just got examples, of which I won't name, already, which means that the activity is happening. Look, we have to be able to offer a compelling value proposition. People are not just going to come to us just because the merger happened. There are other options as well. But thankfully, we have the capabilities, and we are a name that they can rely on. So I think the activity on the corporate side is already there. Where we have not quite yet started seeing is on the wealth side, because it might be lagging a little bit, because they don't have a need right now. But on the corporate side, the corporates want to get ready.
Perfect. So let's move on capital topic. This recurring debate in Europe. Do you think in Europe, banks are structurally over-capitalized relative to its rational peers? And maybe in that context, I want to get your view on the level playing field, U.S. versus Europe, and where do you see the direction of regulation in European banks?
Tarik, as you know, I've had the opportunity to work now in both capital regimes after 20 years in the U.S. now. Here's my view. I think both systems are extremely well-capitalized. Now, one could argue you can always have more capital. But I always go down to this notion of do two seat belts in a car make the car safer? Or do you need actually a different type of protection like airbags? And what I mean by that is, in addition to having enough capital, I think what's really needed for Europe is structurally profitable banks that can actually survive or thrive in any different kind of economic environment. So I think that's what Europe needs. It needs banks that are adequately capitalized but are structurally profitable.
I am cautiously optimistic that the European Commission proposal on the bank competitiveness, plus the commissioner's own remarks that the bank should be built not just for stability but also for growth, I think is a very encouraging posture. Now we just need to get these rules to be implemented. So far, as I mentioned, even in the capital-intensive businesses like fixed income, we have been able to hold our own. But what I would really like to see is these proposals to be implemented so there's predictability about what's to come, but also more importantly, Tarik, a predictability about how the implementation will be done. That's what we're hoping for.
Can you have datas on your progress on the offsetting of the potential impact from the output floors and the impact post 2028? You put these slides in Q2 results last year, and we haven't even seen the progress yet in terms of offset of all this. We have news of FRTB, obviously, some other, but you had also your own management actions.
Yeah.
Where are we in this process?
Yeah. Look, I think it's not a 2028, it's more of a 2030 and beyond impact if the rules as they are written come into play. But if you look at the European Commission report, one of the main things that they acknowledge is the discussion around unrated corporates, which kind of goes against the whole notion of European growth because Europe needs more growth in that area. So I'm optimistic and hopeful that that thing will get addressed in any case. But in the meantime, we have to have a backup plan, and we are working on what our remediation aspects would be. FRTB being one. There's something about models. There's better data. That work stream in parallel we are operating on, and every year we update on that.
But in the meantime, our focus also is frankly on advocacy to make sure that some of these things that are not just important for the banks, but are important for Europe also get addressed.
And in that context, if you can remind us, your CET1 target is 13.5%-14%, but you want to be in a different part of this range in 2026 and then later on. Can you remind us where you see capital this year and next? Then we'll discuss on capital return after that.
Sure. Look, I just want to reaffirm our guidance in the near term of being between 13.5% and 14%. I think that's a very healthy range for us. It allows us to have enough capital, but also take opportunities that are coming, as you said, in the European space. We had talked about it on the investor day that once we are sustainably above 14%, we would like to put excess distributions right at the top of the list from capital distribution perspective. But obviously, we have to get there first, and 13.5% and 14% is our range today based on our capital requirements, where we think we should we want to be. Obviously, as those things get calibrated downwards, we will revisit that range down the line.
But to be clear, for example, for Q2, you were mentioning that it would be comfortable to be in mid-range. But can you be more precise in terms of, for example, Q3 and full year, where it should be within 13.5%, 14%, very close to the 14%? Then conversion towards 13.5% later on, or?
Look, as I said, we would like to be somewhere in the middle. I do not think we would, by design, try to get to the lower end of the range, although we are equally comfortable being there. At this point, I think where we were at Q2, was actually a pretty comfortable place to be because it is allowing us to deploy our capital in very SVA-accretive transactions. But at some point, we will be above 14%, sustainably, and at that point it would be a different conversation about what we do with that capital.
If you announced a EUR 500 million buyback with Q2, and now we should expect you to wait for a full year to see where you are positioned, and then you announce the remaining distribution, which will be around 60%. Or is there optionality to actually sound more reassuring on your confidence of generating earnings and exceed that from 2026?
First thing, look, there is a couple of pretty big changes that we made this year. One was that we increased our distribution from 50% to 60%. Secondly, we started doing, for the first time, in-year distributions. We had quite a meaningful impact to our investors already. We have already done EUR 1.5 billion this year, if you consider the EUR 1 billion that we did at the beginning of the year. That is compared to EUR 1 billion all of last year. I think we have done a pretty meaningful change. From my perspective, where I sit today, this could always change in the future, a six-month cadence to me sounds about right for these things. Yes, I would expect that when we have a little bit of clarity around the forward trajectory, we go and execute another share buyback.
But to me, at this point in the first year of our new strategy, a six-month cadence seems a little bit wise for us.
Very clear. Maybe a last question. Christian talks a lot about beat and raise, 13% RoTE, 2028 could be exceeded substantially. Putting together all what we discussed today, looks like there is upside on NII, beats on corporates, confidence on the FIC, cost not this year, maybe a bit next year. Asset quality is fine. Capital will convert CET1. Is it all of the above that will make you confident? Because for now, you repeat that many times, but from you saying today, we are sticking to the 13% and to the 2026 guidance.
Look, remember, our guidance was 13% + when we started. What we said the plus was four things that we had not put in. Better NII-led productivity, Savings and Investment Union, capital reforms, and then the pension plan. All those things are playing out now. We do not have a full view on what the quantification should that be, but we were always sure that 13% was our floor. We had to get some of you guys to get there, to get to 13% in the first place. As I sit here today, Tarik, if the top line is growing exactly where I thought it would be growing, we have a good handle on our BAU costs. From my perspective, the cost trajectory for the outer years, the interest rate environment for the outer years, plus the pension reform, at least now becoming more transparent.
I have way more confidence on the plus now, because the plus is now solely in our hands just by the virtue of having a better cost trajectory.
When is the next update? The one year anniversary of the plan or full year?
Look, I learned it from one of the best CEOs I ever worked for, that you have to deliver your year before you start making new promises. We want to deliver 2026 entirely in accordance with what we suggested, perhaps better, and then it would be time for us to make new promises.
Perfect. Thank you very much, Raja. Thank you.