Deutsche Bank AG (DB) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

This is the Chorus Call conference operator.

Welcome to the Deutsche Bank analysts call.

As a reminder all participant lines are in a listen only mode and the conference is being recorded.

After the presentation there will be an opportunity to ask questions in the Q&A session.

(OPERATOR INSTRUCTIONS).

I am now handing over to Dr.

Schmitt, who is hosting this call.

Please go ahead, sir.

Yes, Shirley, thank you, and also welcome from our side from Frankfurt.

With me is Tony di Iorio our CFO who will present the financials to you and answer your questions.

We have published earlier today the interim report as per end of March, the usual earnings release, the accompanying financial data supplement and a set of presentation slides Tony will refer to in this call.

As always I assume that you all have read our cautionary statements on forward-looking statements so in the interest of time I will not read them out to you.

But I will hand over now to Tony.

Tony.

Thank you, Wolfram and good morning, ladies and gentlemen.

As Wolfram said we announced this morning that Deutsche Bank in the first quarter of '08 had a loss pre-tax of EUR254m and after tax of EUR141m.

That loss was primarily due to markdowns in our CB&S business as well as softer markets for that business.

Before taxes CB&S had a loss of EUR1.6b and that's after reflecting EUR2.655b of markdowns in Leveraged Finance, Commercial Real Estate and Residential Mortgage Backed Securities.

That compares to the EUR2.5b number that we announced on April 1.

Of interest, the gain from fair valuing our own debt was EUR77m during the quarter, so a very modest effect and almost no impact on the overall.

Our income before taxes from the stable businesses was EUR700m, just over EUR700m, which is up 7%.

We had net gains on Corporate Investment assets of EUR700m.

Our Tier I ratio was 9.2%.

And we continue to have ready access to funding mortgages.

If you turn to our summary income statement that lays out the revenues, provision costs, non-interest expenses as well as the net income number.

Our effective tax rate for the quarter was approximately 45%, reflecting among other things, losses in the United States as well as the -- and our overall rate.

And that compares with a guidance rate which we said would be between 33% and 35%.

Turning to costs, our costs are down 25% from the first quarter last year and some points warrant mention.

That's a EUR1.4b decline.

Almost all of that is in the comp line which resulted from reduced bonus accruals during the quarter.

Although I should mention that in the first quarter, and we reminded everyone of this last year, we accelerate -- we have to accelerate the amortization of share awards granted in February to those individuals who are eligible for early retirement.

And in the first quarter this year, that acceleration was just over EUR260m.

And that will go down -- the RU amortization will go down in the quarter.

As far as non-comp expenses, we were at about the same level as last year.

In non-comp this year, we recorded EUR54m for capital injections by Asset Management into certain money market funds.

And then the other oddity this quarter is the bracketed EUR100m which is -- we broke that out.

That's for the cost of policy holder benefits and claims.

Normally that is a cost in the first quarter because the value of assets underlying these insurance policies declined consistent with movements in the market.

Our payable under the policies to the policy holders declined and that's a credit.

We've broken that out separately and you can see that on the chart.

Adjusting for one-offs in the first quarter last year and in the first quarter this year, our ongoing costs were EUR1.850 which is up by EUR1.830b compared to last year.

And some of that was helped by FX movements but likewise on the revenue side.

Turning to the pre-tax results by segment, the item I'd focus on here is Corporate Investments because we'll go through the other categories in a minute.

And what that profit recognizes is sales of principally three industrial holdings, Daimler, Linde and Allianz.

But offsetting that are certain losses, the largest of which is on our option position to increase our shareholding in Huaxia Bank.

Turning to CB&S, as I indicated earlier, income before income taxes is EUR1.6b (sic - see presentation).

This reflects the EUR2.655b of markdowns that I mentioned earlier.

And we have lower revenues in certain of our businesses particularly in the credit businesses.

But that was offset by increased strength in a number of our customer distribution businesses.

If we were to look at the EUR2.1b -- EUR2.2b of reported revenues in CB&S and adjust that for the markdowns that are included in Sales and Trading which is EUR900m of the EUR2.655b, the balance is on the leveraged finance loans and commitments.

And that's shown in origination as well as EUR600m negative revenue in certain of our businesses -- the credit businesses that I just mentioned and a small write down, markdown in designated equity prop, then our ongoing revenues for the quarter in CB&S -- in Sales and Trading rather would be EUR3.5b and we'll go through where that is shortly.

I should repeat again that our -- the gain in the quarter on marking to market our own debt is only EUR77m.

If we had elected to mark to market all of the debt that was eligible, then the revenues of EUR3.5b or EUR2.2b would have been higher by EUR2b.

The importance of that to you is that on a cumulative basis we have just under EUR100m on the balance sheet from this deferred charge related to mark to market of own debt.

As spreads tighten, when they tighten the exposure we have to releases back into our P&L is only that less than EUR100m and that compares very favorably to the large sizes of many of our peers.

Turning to Sales and Trading debt, this is where the major effects of -- or a major effect took place.

We had a decline of EUR2b in revenues on a recorded basis.

But adjusting for these items that I mentioned, the change -- they amounted for EUR1.5b so we would have had a much stronger result.

We are happy to report in our FX and rates business that we had record revenues as volumes increased.

And we also take great pride in the fact that Euromoney Magazine awarded us for the fourth year in a row, which is unprecedented, the number one position in market share with 22% in the FX markets.

The RMBS business suffered from net markdowns driven by basis risk.

We had a very marked reduction in the Alt-A product during the quarter.

We saw this as some of our peers sold large holdings into the market and there was an inverse correlation effect with the sub-prime market.

And in fact in many cases the default rate on these Alt-A assets is -- implied default rate given the prices, is higher -- is lower.

The default rate is higher and the value lower than in some of the sub-prime business and we're monitoring this as we go along.

So we had unprecedented selling pressure during the quarter and our basis risk resulted in that effect.

And that was just over EUR500m in the RMBS business.

With regard to Commercial Real Estate, we also had markdowns and those were just under EUR350m for the quarter, those are net of hedges and we'll talk about that exposure as we will the RMBS exposure shortly when we go through the exposure slides.

Our Credit business saw substantially reduced client inflow and we continue to focus on risk reduction and that's another chart that we'll go through shortly with regard to our exposures.

We're happy to report that our Commodities business is growing and produced strong results for the quarter.

In the Sales and Trading equity business we also saw a decline in the quarter from EUR1.714b in the first quarter last year to [EUR745m].

The biggest shift was in Equity Derivatives and this arose from our structural short position on our retail structured notes issued and an unprecedented correlation in equity markets there.

And that was the largest single reduction in our equity revenues.

Cash Equities were positive and strong for the quarter.

However, they came in lower than the record levels in -- or the high levels in the first quarter last year.

And as the chart shows we see continued growth in Asia and North America.

Prime Services we saw an increase in mandates and also an increase in revenues albeit modest in the quarter but it's another business that we see long term positive for us.

Our Designated Equity Prop results were down by about EUR300m on a comparative basis to the first quarter last year, although we were just slightly negative for the quarter in the mid double digits.

So not a large loss but a reduction from very high levels last year.

Turning to Origination & Advisory, the story here is that difficult markets continue.

We took write downs of EUR1.770b, (sic - see presentation) markdowns in our high yield business.

That write down was mitigated by a strong net interest margin of just over EUR200m for the quarter.

Advisory revenues were down from the prior levels consistent with lower market activity and as was Equity Origination and Investment Grade.

Turning to the exposures on the CDO sub-prime exposure, we continue to see a reduction in that exposure.

On a gross basis our exposure went down from EUR2.9b to EUR1.8b, on a net basis from EUR1.2b to EUR900m.

It is important to define what this recognizes.

This is our gross exposure and the numbers if we had 100% loss in the asset values with zero recovery, our loss would be at that point in time EUR900m.

Reductions as indicated on the chart are from markdowns and liquidations.

And we should also mention that these number aggregate different vintages, locations, credit raisings etc., so there is some basis risk that we monitor.

Except for the EUR385m of sub-prime CDO exposure in our available for sales portfolio, which is substantially hedged, all of our CDO sub-prime exposure is in our trading accounts.

And on this AFS security portfolio we also recorded during the quarter EUR144m of other than temporary losses in our P&L.

So although it's in available for sale, as we did in the fourth quarter, we had some charges from that portfolio reflected in the P&L in the first.

On a net short -- we're net short on a delta notional basis as well.

Our U.S.

Residential Mortgage business, our exposures continue to come down there.

The Alt-A book was reduced from EUR7.8b to EUR5.2b and this came from some liquidations, markdowns and the effect of FX, particularly the dollar weakening during the quarter.

Our net exposure dropped from EUR3.6b to EUR1.7b.

And again that's presented on the same basis as the CDO sub-prime, with a 100% default and zero recovery.

I should mention again that all of our exposure on Alt-A is in the trading book and subject to mark to market every month.

Turning to monoline exposure we show on the chart those receivables or assets we're carrying in our balance sheet as potential receivables from monolines on the high credit prices instruments.

And so that amount increased during the period from EUR1.1b, which we disclosed in the (inaudible) at the end of December to EUR1.9b.

And as you can see on the chart, the predominant increase or all of the increase -- most of the increase was in the Alt-A.

We, in addition to this, have other receivables from monolines on asset classes that have not been subject to substantial dislocations and those include CLO, CMBS, student loans and muni securities.

We've taken credit -- we have credit reserves on our books of just over EUR300m against this exposure.

And it warrants some explanation.

In order for us to have a claim due from a monoline, there has to be a default in the underlying assets supporting the securities that they have insured.

And so we've highlighted here those securities that have had the most focus with regard to the defaults and that's the super senior tranches, Alt-A and other sub-prime.

Turning to Commercial Real Estate, we show a summary of traded loans.

And as you can see through FX and sales, we've had a reduction of our gross exposure and on a carrying value we've also seen a reduction to EUR15.5b.

It's important to note the geographic distribution of these loans.

About half of them, just under half are in North America with the balance outside North America principally in Germany.

The write down -- the markdowns we've taken were not equally distributed across the geography and the predominance amount was in the North American book.

And in fact in some of our European loans which are fixed rate loans and which are in different markets and different situations from those in the U.S.

we had small mark ups.

So in looking at this exposure I think you'd need to focus on geographic split.

All these loans are collateralized by real estate and we're going through where there are issues, trying to resolve with the owners and with the real estate collateral.

On a Leveraged Finance basis -- exposure, you can see that our exposure continues dropping.

On a gross basis, it's EUR33.1b and on a carrying value basis it's EUR30b.

You can also see the amounts of funded and unfunded.

One of the issues you need to focus on here is the composition of the book.

We have more of our loans outside the United States than many of our peers and likewise the loans in which we are involved have not been many of those that have seen substantial problems.

So while some loans are trading in the market below 70, and looking at the average carrying value or average gross markdowns of others, you have to take that into account compared to the loans we have.

So it's important as with the Commercial Real Estate and the Leveraged Finance that we don't just focus on broad averages but consider the distribution of the risk across individual borrowers.

Turning to the stable businesses, we generated, or they generated income before tax of EUR742m in the quarter which is an increase.

And the first stable business we'll look at is GTB which had pre-tax profits up 17% from the prior year at EUR250m.

It was a very strong quarter 8% increase in revenues and we show continued momentum across Trade Finance, Cash Management as well as our Domestic Custody business.

Turning to Asset and Wealth Management, we had pre-tax of EUR188m, comparable to the prior year.

As far as Asset Management is concerned, we had lower investment management fees consistent with a decline in the equity markets.

As I mentioned earlier we've also had charges of EUR54m in expense and a small charge to revenue relating to fund injections.

And we did have some asset gains in the quarter -- sales of assets of a business in this case as we did in the first quarter last year.

And if you were to look at the change in this business from the increased asset sales, it is just under the amount of the fund injection.

So on a comparable basis if you excluded both the fund injection cost as well as the change in asset sales and went to an inherent return it would be about the same as in the first quarter last year.

We showed on the positive side in Asset Management strong net new money with EUR2b in the quarter.

With regard to PWM there is a very positive story here.

As we've mentioned to you in prior calls we've spent the latter part of '05, and a good part of '06, early '07 investing in this business bringing in new representatives and advisors and we're happy to report that the results are beginning to show.

A very positive quarter, with strong year-on-year profit growth and net new money of EUR4b.

As we mentioned we also had a gain in these results, a small gain from the sale of an asset we acquired through an acquisition.

Turning to PBC, their pre-tax income for the quarter was EUR304m, a 4% increase over the prior year, record revenues at EUR1.454b.

What we saw here in terms of revenue composition is a reduction in our Securities Brokerage revenues, as people were cautious in terms of particularly the equity markets.

However that was offset by increases in the sales of pension products, particularly a product here in Germany.

So the net effect was that although Securities Brokerage revenues were down, total revenues were up.

We were also helped with strong deposit flows and a continuing growth in the loan book.

And our net new assets in the quarter were up EUR4b.

If you were to look at the size of our invested assets you'll see that since December we had a decline from EUR952b in PCAM to EUR896b.

That comprised reductions in market performance.

The value of assets declined in the funds again consistent with the trends in the market.

An FX effect with the weakening dollar of EUR20b, offset by the net new money that I alluded to earlier of EUR11b.

We turn to credit, capital and risk.

You'll see that our loan loss provisions for the quarter were up slightly from the prior year first quarter at EUR114m.

Some of that -- EUR9m is due to a reduction in the releases in CIB.

We still have releases of EUR11m and an increase in the PCAM provisions and that's consistent with the growth in our loan book.

Problem loans remain relatively stable at 62%.

And if we look -- turn again to our Tier I ratio at 9.2, very strong results.

And let me talk about what's in here because there is a lot of dynamics.

First it's the first time we've announced our Basel II results.

And so this reflects both on the risk weighted asset side a difference in the risk weighting of assets as there's been a great deal more differentiation and gradation among risk classes.

On the other side though we've had some first time reductions, introduction of capital reductions for the first time and those reduced our Tier I capital.

We also had the movement of about EUR15b of risk weighted assets under Leveraged Finance from the trading book into the regulatory capital book which we indicated in the past that would happen.

And that's reflected in the risk weighted assets.

Notwithstanding that our risk weighted assets are only up to EUR303b which we think is a very strong indicator of how we've approached risk in all.

I should mention one other factor.

We took a reduction in this quarter of just under EUR600m, assuming that the dividend for 2008 would be comparable to the 2007 dividend of EUR4.50.

The ultimate decision on the dividends is taken by our Supervisory Board and recommendation to the AGM and that will be next year.

So you shouldn't view this as indicating a dividend policy.

The reason we did it is because we though it would be prudent this early in the year to allocate a portion of our Tier I in the first quarter so we don't overstate that ratio of 9.2%.

And secondly so that we don't burden later quarters in the year with a full reduction of the dividend which provides the Supervisory Board with full flexibility to determine dividend policy later in the year.

So this is an important statistic for us both on the risk weighted assets side as well as the Tier I ratio side.

I mentioned earlier that we continue to have ready access to liquidity and the next chart indicates what we've done to manage our unsecured funding base, which as you can see from the numbers has grown both in quantity, up EUR15b from June levels at the beginning of the crisis, from EUR511b to EUR526b.

But it's important to note what's happened to the quality and stability of those assets.

If you look at the first stack in the bars, that is short term wholesale funding.

Our reliance on that source of funding has declined since last June by about a third from its former levels or EUR49b, from EUR153b to EUR104b.

At the same time, we've more than made up for that by a growing deposit base and a capital market funding of EUR64b.

So we've shown the more stable component of this unsecured funding base has increased from EUR358b to EUR422b and we think that this is important to note in terms of our funding.

It's a diversification, away from the dislocated money markets and it's strengthening our funding mix.

You can see the effect and how the credit markets view that by looking at the next chart which shows that our -- the CDS spread on a five-year basis as of April 25 was 59 bps.

That's up from where we were last July.

However if you look at how it compares with our major peers, it shows a very positive story of how the credit markets see Deutsche Bank.

So much for the quarter.

Probably one of the things you want to focus on is where do we go from here.

And if you look at the next slide, I will address that.

I want to caution and repeat something Wolfram said.

These are our views as to where we see resources -- where we want to allocate resources.

It is not predictive nor a forward looking statement although we would not be allocating resources in certain product and geographic areas if we did not believe that those provided opportunities for us in the future.

If you look at Investment Banking, we think that the conditions in the market since last summer will have a substantial impact on structured credit.

As Anshu and others -- and we've said in the past, we will probably see a reduction in the more exotic structures.

However we believe that the need for businesses and the need for capital to grow economies in non-OECD and OECD markets will continue to support the structured credit market.

The ability to originate and distribute will probably not go away although the character, the structures and the nature of those structures will probably change.

We see a potential for share gains in the flow products.

And you can see what's gone on in this current quarter in which we showed very strong revenues and growth in our FX and money market business as well as in core rates.

We see growth in non-OECD markets.

Deutsche Bank is active in 76 countries around the world.

We're very strong in Asia and growing in Asia.

We're very strong in Europe and moving into Eastern Europe.

And we believe that that puts us in a very strong position to continue capitalizing on that market.

As far as products are concerned, we've seen our Commodities and Prime Services businesses grow.

And we'll continue to allocate resources to those two businesses.

We also see the opportunity for share gains in Corporate Finance.

As many of our peers are dealing with issues of current risk and P&L, we believe with our strong capital base and our ready access to liquidity, there is an opportunity for us to continue growing in the Corporate Finance business.

As far as the stable businesses are concerned, GTB is a focus business for us.

We see continued growth and momentum there.

On PBC we're beginning to see returns on our investments, not only here in Germany but also in Poland and India particularly and other parts of Europe.

On PWM we've had strong asset growth and the investments that we made in the recent years are beginning to pay off.

Asset Management will continue under pressure probably for the remainder of this year as market conditions both in equities markets and in real estate infrastructure remain difficult.

However as we said earlier, they've shown an increase in net new money.

We're continuing to grow in our insurance outsourcing business.

Our institutional business is an area of focus and growth for us.

And as we said one of the mega trends is the continued growth in invested assets as wealth creation continues particularly outside the developed countries and as people in both developed and non-OECD countries see the need to save for their retirement.

The following page is the highlights that I started in the introduction.

And that concludes my comments and now we'll open it up for questions.

Thank you Tony and on that note we would like to hand back to our operator to take us through the discussion.

May I ask everybody who is posing a question to limit the number of questions and keep it crisp.

Thank you.

Shirley?

This is the Chorus Call conference operator.

We will now begin the question and answer session.

(OPERATOR INSTRUCTIONS).

The first question is from Mr.

Jon Peace of Lehman Brothers.

Please go ahead Mr.

Peace.

Yes, hi, morning everybody.

The balance of your leveraged loans in CMBS didn't fall this quarter as much as some of your peers.

I know you've been linked in the press with a number of possible leveraged loan disposals.

I just wondered if you could give us an update on how those are proceeding.

And also -- I know the LCDX has improved in recent weeks.

But the FT was suggesting that you were having to offer subsidized financing to offload leverage loans for the current marks.

Is that true or are you finding these things quite easy to dispose of now?

Jon first in terms of dispositions of leveraged finance, we sold some in the quarter -- in the first quarter.

Since the end of the quarter and these have been smaller tranches, but we have sold perhaps EUR1.4b of loans at about our marks which was important for us to note.

We did not provide to my knowledge any funding on those sales.

And with regard to the second question, in order -- there are some very strict requirements on accounting both from a financial statement as well as a regulatory standpoint on when you can account for a sale as a sale.

And in order to de-recognize loans there has to be a substantial risk transfer to the buyer, number one.

And number two, the value of the consideration would be affected by whether we provided below market financing because that has to be a price adjustment.

We price these loans not by reference to an index although we do look at indices just to see where the relative price levels and movements are.

We price them as we've indicated in the past based on a bottoms-up, name by name analysis.

And we do gauge where the sales -- I receive a weekly sales activity report which looks at the realized proceeds compared to our marks.

And we're not discounting or providing uneconomic financing in order to unload these as has been indicated.

That's very clear.

Thanks.

The next question is from Kinner Lakhani of ABN Amro Equities.

Please go ahead, sir.

Yes, hi.

I've got three questions.

Firstly in terms of the risk weighted asset trends, obviously with average value of risk up 38% and your outstanding loans up 4% sequentially, I just wanted to understand what the underlying RWA trends would have been ex Basel II effect?

And if you could quantify how much Leveraged Finance has now been included incrementally?

The second question is on Asset and Wealth Management.

If I were to strip out the disposal gains, the annualized pre-tax run rate seems to be closer to EUR0.4b compared obviously to your original target of EUR1.3b.

Could you please comment if my methodology is correct and if that is true then is there any changes in strategy?

And thirdly in terms of the rates business within the investment bank, if we were to get to a more stable rate environment in the U.S.

would you expect any change in the levels of activity within the rates business?

Let me start with the first question, Kinner as far as Basel II and Leveraged Finance.

The market risk increase in RWA terms in the first quarter was about EUR4b from the prior levels.

In looking at VAR though, I should mention that there was a technical factor which is not to say that the ratio or the metric would not have increased.

We updated market data twice I believe, in the first quarter and this accounted for most of the change.

Now someone could say but that's the way the ratio works and you're right.

But I just point that out in terms of the extent of the change during the period.

With regards to the Asset and Wealth Management I think we've come in a little bit higher because you can't just take out the disposal gains.

There are other effects that may not continue.

The one I mentioned most prominently was EUR55m of which EUR1m was in revenue and EUR54m was in expense.

And I think if you take out the disposal gains you have to look at that.

The second is that as we've mentioned in the past, performance fees are lumpy and don't come in on a regular or orderly basis.

So any annualizing you do based on a single quarter is subject to some potential distortions.

With regard to the rates business we saw very positive returns during the quarter as we increased both share and absolute revenues.

And we see this as an advantage at Deutsche Bank given the breadth of our platform both geographically and product-wise.

So we see the rates business as a strong contributor in the future as it was during this quarter.

Thanks very much.

The next question is from Mr.

Jeremy Sigee of Citi Investment Research.

Please go ahead Sir.

Good morning.

Thank you very much.

Can I ask three questions please?

Firstly, could you come back to the Equity Derivatives point that you mentioned in investment banking and maybe if you could give us a sense of what's the size of the exposure and the mechanics of the sensitivity.

So whatever it was that caused you a dent in the revenues in Q1, could you explain how that exposure works?

Secondly I just wanted to come back to Asset Management because some of the core revenues, the core portfolio fund management revenue lines look very weak.

And I just wondered if you could give any more details on what is the sort of the weakness there?

Is it just performance fees?

And then the third quick question, total assets went up dramatically in the quarter in the Investment Bank, up 15% or up 33% year-on-year.

Could you just comment on what's driving that please?

Jeremy can you just repeat the last question?

Yes, I'm sorry.

Just total assets, not risk weighted assets but total assets, have gone up a lot in the Investment Bank.

I think it's 15% in the quarter, 33% year-on-year.

I just wondered if you could comment on the drivers?

Yes, absolutely.

As far as the Equity Derivatives change, I don't have the notionals here with me so as far as size, I can't give you an answer, but maybe offline our Investor Relations colleagues can.

And just broadly, is it something that is likely to recur in future quarters?

We don't know.

Let me tell you the mechanics of what had happened and what it is.

As with other large European banks, we are an issuer of retail structured notes which are very popular in Europe.

These notes reference some index or some pool of assets.

The notes have an embedded derivative.

We look to hedge that exposure on the basis that if we have a return to give to the noteholder we've got to do something on the other side.

The hedge is not a static hedge.

It's constantly reset and re-balanced.

And what we saw during the quarter was a correlation, and as I said that at times was as high as 85%.

And so the moves we expected to happen, as the equity markets dropped we did not see the same effect or a more pronounced effect on our asset side and that was the effect.

If there's more information that you'd like I think we can deal with you offline on that.

With regard to assets, you've got to be very careful here.

If you looked at the change in our balance sheet since the time we converted to IFRS, the bulk of the growth in the balance sheet is coming from derivative mark to market.

In the current quarter on the asset side we saw an increase of nearly [250b].

And if you look at the interim report you'll see that disclosed.

In comparing us to the U.S.

peers I think you have to reflect on different accounting methods.

If we were to net down under IFRS all of the balance sheet that would be eligible under U.S.

GAAP.

There are three principal areas here.

It's the derivative mark to market where we have master netting agreements in place and where we have collateral, which we do on a substantial amount of these.

Second is the trade day settlement date effects, which are allowed to be net down on securities transactions.

And the third is on repos.

Our balance sheet would be one-third lower.

If you adjusted for those factors, our tangible ratio of net worth balance sheet capital to tangible assets would be in line with most of our U.S.

peers.

Now if we look at the nature of what the growth in the balance sheet is, on the asset side the derivative mark to market does not have to be funded and in fact in many cases we received collateral.

On the liability side if we have to post collateral that does require funding, but because the two numbers are very close, the asset and the liability side, many of the assets we receive as collateral on our receivables on the derivatives can be used to fund the margin there.

So in terms of liquidity there is an effect, there's not as great an effect as if they were securities.

In addition to that, because we have master netting agreements with our major market counterparties which account for a substantial portion of this, the credit risk taken into consideration with the collateral is greatly reduced.

Now, is there market risk?

There is on both sides, of course.

But for that reason, while we look at tangible assets on a reported or on a gross basis, we also look at our risk-weighted asset levels and the Tier 1 is 9.2%, which we reported.

So we think that the focus on gross balance sheet, while well intended, has to be looked at in a qualitative and not just a quantitative sense.

Okay.

Jeremy, that's okay?

Just on that and then I wanted to come on to Asset Management as well.

But just on that, I'm struggling a bit to understand what's changed.

I understand the different arguments about the accounting.

But what's changed in the quarter that's driven up the balances still further, is it volume or is it a change in the calculation?

We had on the asset side, we had positive mark to markets, mark to market on certain derivatives.

And on the liabilities side we have said -- so as the derivative mark to markets flow through the P&L --

It grosses up, yes.

The offset goes in the balance sheet.

And that's the nature of the increase.

And you have to look at that, and that's disclosed.

If you look at the back of our interim report, we showed the components of our, of what's called, what used to be called trading assets and liabilities, which is now I guess financial assets at fair value.

But if you look at that composition you'll see what's happened to our securities component, what's happened to our derivative component, the other components, and that's fairly transparent as to what's happened.

So with spread widening, depending on which side we were on the contract, we had gains or losses, those gains or losses go through the P&L, the offset is through the balance sheet, either as an asset or a liability.

Okay, thank you.

Sorry, just final question was just on Asset Management.

It looked to me like the underlying -- on your slide where you break out the different types of revenues, it looked like the core portfolio management revenues were soft and you mentioned performance fees.

Is that the only effect there as well as the AUM balances?

Yes, that's -- it's softer.

It's down by 8% from last year from EUR525m to EUR485m.

If we were to look at the components of that, the bulk of it is -- the largest component is the -- we had some sales in the first quarter last year in our REIT business which were not repeated this year.

And we had with asset-based fees with a reduction in asset values, the fees were down.

Now, if asset values go up and as more new money comes in, we would hope to replace those.

But that's the net effect.

Okay, thank you very much.

You're welcome, Jeremy.

Thanks, Jeremy.

May I place my usual call, really try to limit the number of questions?

I'm hearing about a long queue of attendants, and we don't want to cut anybody short.

Next, please?

The next question is from Mr.

Czepliewicz, Mr.

Matthew Czepliewicz of HSBC Bank.

Please go ahead, sir.

Yes, thank you, good morning.

Two questions, one on GTB and one on PCAM.

Your GTB business has been pretty resilient as it has for many of your competitors.

And I'm just wondering, is there any seasonality first of all in Deutsche Bank's GTB revenues?

And secondly, are there any parts of that business where you are picking up market share in Europe vis-a-vis those competitors?

And the question on PCAM is specifically on asset management Americas.

You had net new money flows of zero there on the quarter which under the circumstances I think was fine.

And I guess the invested assets going down, that was partly because of currency impact.

But are you overall reasonably comfortable with your competitive positioning in asset management Americas?

Or could we see some recalibration of that business going forward here?

Sure, Matthew.

As far as GTB, I don't know if it's so much seasonality to focus on, but rather two other factors that we're seeing an impact.

The first, in Europe, we gained market share with the single European payments initiative where -- and we've seen that in our cash management business, particularly in corporates, where corporates now have the opportunity to go to a single clearer for the European business.

We're up on the platform, it's working well in terms of technology, and that is an advantage to us, in addition to the swing to more stable institutions, which is why it's important to have a strong Tier 1 ratio and continued access to liquidity for us.

So it's not seasonal.

The second effect is what happens to interest rates because there is -- there's a fee component to this revenue base but there is a net interest margin component.

And as we see interest rates move, we see an effect.

With regards to PCAM Americas, we're in a tough competitive position.

And you're right to point that out.

We think we have strong business opportunities in REIT both in real estate and infrastructure.

We're growing our institutional business with regard to the retail asset management business.

There is pressure, both on asset values as well as in net new money.

And we'll continue to work to strengthen that position but it is a tough environment.

I think our people are doing as good a job as can be done to deal with it.

But we do have strengths in other areas as I've mentioned.

Okay, thank you.

Thanks, next please?

The next question is from Mr.

Kian Abouhossein from JP Morgan Securities.

Please go ahead, sir.

Yes, hi.

A few questions.

First of all, fixed income sales and trading.

If I look at slide ten and I adjust the write-downs I get to about EUR2.2b fixed income sales and trading.

Just trying to understand how important FX and rates in money markets in this is.

I have a rough idea commodity is relatively small.

So is it fair to say that 70%, 80%, more than two-thirds of the revenues, are generated from this business?

And considering that we're in a record environment in the first quarter how should we look at this business going forward as volatility and rate cuts in the U.S.

are going to be more limited?

Secondly is on the AGM proposal of authorized capital and the EUR19b which has been referred to also in the press -- sorry, EUR17b.

First of all, what consolidation role would you like to play in Germany?

And secondly, what kind of assets would attract you?

Is it more deposit gathering, franchise, is it more consumer, is it a traditional consumer or more consumer related assets as credit cards, etc.

if you could talk about that.

And lastly Gordian Knot, you own two-thirds of Gordian Knot, what is your position in the case of further downgrades or if potential defaults will happen?

And what is your actual investment in Gordian Knot?

Thanks.

Okay, Kian, starting from your first question, in this quarter.

And I don't know that I'd only focus on this quarter because as other product categories revert to at least a more positive than they were, if you were to look at the adjusted amounts excluding those gains, those write-down markdowns that we talked about, for the businesses you talked about in this quarter we'd be somewhere in the realm that you're talking about, two-thirds of the revenues, that's correct.

Although we think that it's not just a condition of the current times.

Because if it were everyone else would be enjoying the same success and we don't have privy to the details of all of our peers, but we don't believe that the same effects are being felt.

I said earlier that we have to look at the -- at our footprint, both from a geographic and a product basis.

We were able to do -- our people were able to do what they did because of our strengths in those areas, not because they were just -- they just happened to be in attendance that day.

So there is an effect and I think you need to focus on that.

With regard to consolidation I'll repeat what we've said in the past.

We always look at opportunities and we have all along, we look at those opportunities in terms of what they will mean for the shareholder.

And so we have financial hurdles that we look to achieve, in any strategic combinations.

With regard to specific businesses we have indicated a goal to increase our stable businesses.

So that would not just include PCAM but also GTB and we look for opportunities in those areas.

There's been a lot of talk, and the only response I have is that we really cannot comment on specific market rumors.

With regard to Gordian Knot, we own a kind of preferred issue -- it's not preferred but it's an equity or a long term debt, subordinated debt position.

I'm not sure legally of the exact form now.

The amount is not a very large amount, and we're a passive investor.

Alright, thank you.

Okay, next please.

You're welcome, Kian.

The next question is from Mr.

Michael Rohr of MainFirst.

Please go ahead, sir.

Yes, hi, good morning everybody.

It's three quick questions from my side.

Number one, on the net interest income, if you just could outline the effects which led to the rise in net interest income and maybe try and explain potential trading elements which might be underlying in the rise there.

Second one is on Tier 1.

I see that the Tier 1 is down some EUR400m quarter-on-quarter which obviously includes the equity that you've chosen to put into capital and also the dividend accrual.

If you can just indicate what the impact of the revaluation reserve was in that quarter because I think it must have been negative by around EUR1.5b.

If you can just confirm that.

And third and last question on the monoline exposure, which rose to EUR3b from EUR1.5b quarter-on-quarter, if you can just explain the effects on that.

Thank you.

Okay.

On the net interest margin, we -- the amounts are up EUR600m from the prior year, because the first quarter in '07 was just under EUR2.1b, the current quarter is about EUR2.7b.

Of that EUR600m the leveraged finance loans accounted for the number I mentioned earlier of EUR200.

We had net interest on RMBS securities, Abbey, so the rest of it was across the pitch.

And we had an increase in interest expense from our debt issuance of about EUR200m.

So that's the components of that increase.

The Tier 1 capital, repeat what you said about the revaluation reserves, I may have missed that.

Yes, actually your capital is down EUR400m net, i.e.

the Basel I to Basel II swing is a net EUR400m.

I know it includes the dividend accrual, I know it includes the Tier 1 capital that you chose to finally add to it, the $248b in Q1.

So calculating net worth, there must be a negative residual for the revaluation reserve.

If you can just outline the size of that impact of the revaluation reserve.

What we had, as I said earlier, the -- as far as the Tier 1 is concerned, we had some new charges for the first time.

And those accounted for about EUR1b of the reduction.

The largest component of which had to do with how expected loss is treated under Basel II which is different from the former.

And then the other two have to do with certain securitizations and our investments in finance subsidiaries which are between 10% and 50%.

So that's the one.

The other effects are, we had a reduction in -- we had, or rather, no net income but we had almost a EUR600m dividend allocation.

And as far as the revaluation we did have a reduction of about EUR700m.

And this is disclosed in our interim report in unrealized gains on listed securities.

With regard to the monolines, these are hedges against risk.

So what happens is, as the cash side, let's assume it's the cash side, declines in value, so the RMBS book is marked down, if we have insurance protection, and that's where the bulk of this change has occurred, we have an increase in our receivable from the monoline.

And so as we talked about earlier with derivatives, that hedge is revenue, because it's an increase in our potential claim, although the claim will only occur in the event of default, not market decline.

So if the asset doesn't default, then we don't have a claim and we don't have an issue of whether or not we have a credit impairment.

So it's as simple as that.

Alright, thank you.

Operator?

You're welcome, Michael.

The next question is from Mr.

Huw van Steenis of Morgan Stanley.

Please go ahead, sir.

Yes, good morning.

Just want to focus on your derivatives business.

I was just wondering, given the basis risk you've seen in the first quarter and the slowdown in activity from structured equity derivatives to clients, your M&A clients and to retail clients, number one, how's your view changed about the growth of that business?

And then number two, does the breakdown and correlations on the significant basis risk you've experienced in Q1 change the amount of capital you think is appropriate for that business or at least how much buffer you want to hold at the Group level?

Huw, as far as the growth in the derivatives business, we still see it as an opportunity for us, both in the retail structured market as well as in our dealings with both market counterparties and others.

And we still see that as a business that we think we're ideally suited in terms of both technology, in terms of market penetration and market familiarity.

So we'll continue on that.

As far as the equity derivatives are concerned, we think that the pain has substantially been taken, correlation is very high and we don't think it can go much higher.

And we believe we have upside if it falls.

Okay, thanks.

You're welcome.

Thanks Huw.

Next?

The next question is from Mr.

Matthew Clark of KBW.

Please go ahead, Mr.

Clark.

Good morning.

Couple of follow-ups on the Tier 1 capital, if you don't mind.

Firstly, your hybrid capital went up a lot during the quarter, presumably you converted some of the conditional capital.

Is there any restriction that you see applied on the proportion of hybrid that makes up your Tier 1 capital, because it's now 26% I think of your overall capital, which seems a bit high.

Secondly, wondering if there's just a single figure percentage point number that you can give us for the impact of Basel II on the Tier 1 ratio on first application.

And then thirdly, there doesn't seem any mention of your EUR8.4b vision, just wondering where you feel about that, whether that's something that's now gone, whether you think it could come back in 2009, just your thoughts there.

Thanks.

Okay, Matthew.

As far as the effect of the conversions, it looks like we had about EUR1.8b added to Tier 1 so there's about a 58 basis point uplift in the Tier 1 ratio from the contingent capital.

With regard to the ceiling, we still have some headroom.

We look at this carefully, we talk to rating agencies and other parties about it, but we still have some headroom.

As far as Basel I, Basel II, I would just look at the -- we reported under Basel II an 8.9% ratio and EUR329b of risk-weighted assets.

The risk-weighted assets went down as did the capital, but the effect -- the 8.6% rather at the end of the year, we went to 9.2%.

So that you can probably gauge the effect.

With regard to a forecast of this year's earnings, I think we were pretty clear in the outlook statement in our 20-F.

We reiterated that in the interim report that we issued today.

These are very uncertain times.

The markets are unpredictable and I don't think we're prepared to estimate a number as to what this year's results would be.

What I can tell you is that our focus is on the risk that we take and understanding it and managing it prudently, at liquidity, and at reallocating resources to those businesses where we think we have the highest potential.

Okay, can I just follow up with the hybrid question?

You say you still have some hedge room.

How do you calculate that hedge room and is there any quantitative indication you can give us on how much headroom?

I don't know that there's a hard quantitative number, but based on discussions we have with various parties as I've indicated we have a sense of where they'd be comfortable and we look to manage below that range.

And we believe we have some room currently.

Okay, thank you.

You're welcome, Matthew.

Your next question is from Mr.

David Williams of Fox-Pitt, Kelton.

Please go ahead, Mr.

Williams.

Hello, good morning.

Just a question on the compensation accrual, please.

Obviously with the write-downs in the quarter it might be more difficult to follow your normal formula.

So I just wonder if you can give us some indication, the extent to which your normal bonus formula was followed.

And therefore in future quarters and for the remainder of the year, would you expect each of those quarters to have a standalone compensation accrual based upon that quarter's revenues?

Or will there be basically an overall picture being taken at year end as you decide how to divvy up returns between the shareholders and the employees?

David, we've mentioned before that we do have formulas that we apply.

We've applied those formulas directly, as usual, in the non-CB&S business.

In the CB&S business it was difficult to apply the formula because of the results, because the result is based on profits before bonuses.

Nevertheless we thought it was prudent to reflect some accrual, albeit at levels commensurate with the returns.

As we've also mentioned in the past, we update the successive quarters on a cumulative year to date basis, not on a standalone basis.

So we will be looking at the overall profitability in each quarter.

That profitability will obviously be impacted by the first quarter results.

But we will update that and look on the cumulative basis as we have in the past.

Thank you.

You're welcome.

Thank you, Fiona.

The next question is from Ms.

Fiona Swaffield of Execution.

Please go ahead, madam.

Hi, it's Fiona (inaudible - microphone inaccessible).

The question (inaudible - microphone inaccessible).

Fiona, we're --

Fiona, can you speak up?

We don't hear you.

Is that better?

Much better.

Okay, just questions in a few areas.

The first thing is on Leveraged Finance and CMBS and relation with risk-weighted assets.

So if I look on slide 17 you've still got unfunded Leveraged Finance commitments of EUR17b and then you've got Commercial Real Estate at EUR15.5b.

Could you explain to us how that could affect risk-weighted assets over time?

So how much of the commercial real estate is already in your risk-weighted assets?

And then how the EUR16.6b could come into risk-weighted assets over time, that's the first question.

The second question is the area of goodwill impairment that's in the notes.

And you mention that you're testing your goodwill in Corporate Finance.

Could you talk about how much of your goodwill is involved?

Because you've got obviously a rather large balance of EUR8.5b.

And then the third question is on conduits.

When you talk about equity on page 18 of the report, you talk about the fact you'd had additional write-downs I think on some of your conduits.

It seems to be EUR900m.

And what I'm trying to understand is what's the nature of these and why it's gone through the balance sheet rather than through the P&L.

And then I think your reporting accounts talked of lots more balance sheet entities.

I think something like EUR33b.

So if you could update us on what's happening there.

Thanks.

Sure, Fiona.

With regard to the treatment of both the Commercial Real Estate and the Leveraged Finance in RWA, until the loans are funded and in fact all along, as long as they're in the trading accounts, and it's not been funded for the 180 days, they're in RWA, they run through the VAR calculation in RWA, and so they are reflected, albeit at a different rate from funded loans that have been on the balance sheet for 110, 80 days.

And it's the same for the Commercial Real Estate.

With regard to the goodwill, we did do a valuation this quarter, because we thought it was prudent, given the dislocations in the markets for the products in our Corporate Finance Business.

We thought it was prudent to do that valuation.

We worked with the business, they updated their forecast on their strategic plan, and as we reported in the interim we concluded that there was not a write-off -- an impairment.

I'd rather not get into the details as to how much it is, although it's less than EUR1b.

As far as the conduits are concerned and the EUR900m, which I thought was a little bit less than that, what we have about EUR27b of DB sponsored conduits.

And Fiona, we've mentioned this in the past.

We have a total number -- a total value of about EUR32b, EUR33b of DB sponsored conduits, where we organize the conduits.

These are organized in order for us to help customers finance receivables that they generated.

So these are not Deutsche Bank receivables that we're putting into the conduits but rather facilitating customer business.

Because of the terms and conditions of these conduits under IFRS we're required to consolidate them, and we do.

And we consolidated those since the beginning of '06 in IFRS.

These are classified in available for sale securities.

And we're required to mark them to market.

But that mark to market goes through equity unless there is a credit event of default on those underlying assets.

The assets in those conduits consist of credit card receivables, automobile loans, mortgages other than sub-prime and other trade receivables.

So there's a mark to market but as long as that mark to market has not resulted from a credit default, then there's no need to put it through P&L.

I should add that we have other assets on our CDO sub-prime book and available for sale.

And that balance is somewhere in the EUR350m.

And that's disclosed.

And we've marked those through the P&L -- through OCI unless there is an issue with the valuation other than temporary.

And as we disclosed in our interim report, we reflected EUR144m of loss in our first quarter as a result of those CDO sub-prime assets held and are available for sale.

The EUR900m you are talking about is related to other assets on which there were mark to market through equity.

Just coming back to that leveraged financed point, because I don't know if I missed it earlier on.

But when I look at CB&S your RWAs have gone up 6%.

I presume that's Basel I of 218 going to Basel II of 231.

And there must be currency going on in there as well as leveraged finance balances.

Could you just talk a bit more about what's going on in that number, and whether it could go up further?

The -- hold on a second, let me just go to the reference you are talking about.

Page eight of the supplement.

It could go up more.

One of the reasons it will go up is because more loans that we've funded will move into the 180 day category.

And a lot of these loans are denominated in U.S.

dollars, so you could have an FX effect.

Okay, thanks very much.

Welcome

Thanks Fiona.

Next one please.

The next question is from Mr.

Stuart Graham of Merrill Lynch.

Please go ahead sir.

Hi, it's Stuart from Merrill's.

Just a few quick questions on capital if I might, firstly on the balance sheet do you have any plans to shrink the nominal size of the balance sheet, or are you agnostic as to whether it carries on growing?

That's question one.

Question two is the economic capital usage, it was EUR13.6b at the end of the year, could you give us an updated figure for Q1 please?

And then the third question is Tier 1 ratio, your 8% to 9% target range used to look quite high, but many other banks now increasing their own target ranges.

Is there any debate about changing your target range for Tier 1 ratio?

Thank you.

Stuart as far as shrinking the balance sheet we are always focused on size.

We realize that this is an issue that is of interest to you to the rating agencies, to investors and others.

And therefore we are focused.

We think it's prudent to be focused on it.

But as I said earlier in answer to a question I think you have to look at why it's growing and what's in there, and what is driving the effects.

So I don't know whether shrinking it -- if we were to think of that this past quarter one of the ways of shrinking it would have been to close out those derivatives positions, and whether that would have been prudent or not.

So you can't look at the absolute size you've got to look at the composition.

You've got to look at how that fits in the business strategy.

You've got to look at the risk, both credit and market, and you have to look at liquidity.

And I think we covered all of those in the past in other questions.

As far as the economic capital, largely unchanged from the fourth quarter.

With regard to the Tier 1 ratio we have always been, and we've had a consistent message of 8% to 9%.

And that's when others were lower.

We believe 8% to 9% is a good target range.

The fact that others have increased to that level and perhaps higher may not change -- or does not change our view as to where our ratio should be.

We think at 9.2% it indicates capital strength.

And we revisit it periodically, we look at our peers, we look at our own risk and our own appetite and market opportunities.

So we do look at it, but I don't know that we have -- well I can tell you we don't have plans now to increase that, Stuart.

Okay, cool.

Thanks very much.

You're welcome.

Thanks Stuart.

The next question is from Mr.

George Kanders of WestLB Equity Markets.

Please go ahead sir.

Hello its George Kanders from WestLB.

I have a question on the net interest income development in PBC.

As far as are suggested from the figures, loan volume has grown there and also the deposits.

Why do we see there a decline, is there a special reason for this?

George, you rightly picked up the point.

What's happened is we've seen a growth in the loan book and -- hold on a second let me just go to some data here so that I can speak with data in front of me.

What we've seen is an increase in the loan book, and a slight decrease in the margin.

The deposit book has increased significantly in PBC.

And with our deposit campaign in Norisbank as well as in the rest of our German business we've been successful in attracting increased deposit base.

And you can see that from the unsecured funding chart that we showed earlier.

However, the higher cost of that has shrunk somewhat the net interest margin on those deposits.

Overall we have an increase from EUR709m to EUR742m, and we are about flat with the fourth quarter.

But it's the combination of both what's happened with the balances, and we have seen some compression on the margin.

Although on the deposit side it was not a compression that either we did not anticipate or in fact even pursue, because we knew what the result was gong to be by offering the competitive rates.

And we've been successful in attracting significant deposit growth.

So it's more or less marketing expenses?

It's not marketing, George, but it's prudent liquidity management.

Okay.

Thank George, next please.

The next question is from Mr.

[Riccardo Ricciardelli] of Brevan Howard.

Please go ahead sir.

Yes good morning, thanks for the full presentation.

Just one quick follow up on M&A, can you confirm that Postbank is part of your targets as you repeated in the past.

And when do you expect to be begin processes for this bank to start?

Thanks a lot

Ricardo, (spoken in Italian).

Pardon.

We don't comment on market rumors.

So we would not talk about any individual institution.

We've stated in the past and I've stated it on this call and I will reiterate it, we look at opportunities regularly in the market.

We have standards to look at those opportunities.

We'd like to see a growth in our stable businesses.

But I don't think it would be appropriate to comment on individual transactions or market rumors.

Sorry I catch the possibility to generate comment on the business trend as up until now.

I am surprised by the resilience of the sector despite first quarter trend which has completely unpredictable.

And as you say these are very uncertain times.

And I perfectly understand the fact that you can't give guidance.

Are you surprised?

What is your expectations on especially CIB business going forward, because apparently market is pricing in something like a very, very sharp recovery already maybe in second half of '08 but especially in '09.

What is your view on this?

I don't think I am a forecaster of markets.

And so I don't think I'd respond on that.

What I can tell you is whatever direction the markets take its important that, number one, we understand the risk that is already on our books.

We look to understand what is happening in the markets, so market intelligence and the breadth of our portfolio is important there.

We have the capital, we have the liquidity, so we have to be prepared for whenever the turn occurs.

But I am not in a position to forecast market trends.

Thanks a lot.

You're welcome Ricardo.

Thanks.

Next please.

The next question is from Mr.

Carsten Werle of Oppenheim Research.

Please go ahead sir.

Yes Carsten Werle of Sal.

Oppenheim, good morning.

One follow up actually on the staff level in Corporate Banking and Securities.

That's significantly down in the first quarter by nearly 1,000.

We don't see any expenses for restructuring activities in the divisional P&L here.

So how many of these people have actually left the bank?

Is there any risk that we may see restructuring activity expenses coming in future quarters?

Perhaps you can say some words on this subject?

Yes sure Carsten.

Your right there is a reduction in headcount in CB&S of approximately 1,000.

Any of those reductions that were redundancies have already taken place or they wouldn't be in the reduction.

And if there were redundancy compensation required it would be paid.

And in fact we did have an increase, albeit it small, in severance during the quarter.

A lot of the people, just over half, came from a mortgage banking operation in the United States, MortgageIt.

And the rest of it came from various parts of our sales and trading and Corporate Finance businesses.

As far as redundancy plans, as I said earlier we are looking to re-deploy assets which -- and resources which will include people into the high potential businesses.

However, we do not have currently any large scale redundancy or reduction in force plans.

Okay.

Thank you.

You're welcome Carsten.

And your final question is from Mr.

Dirk Hoffman-Becking from [Bear Stearns].

Please go ahead sir.

Hi, it's Dirk Hoffman-Becking from Bernstein actually.

Quick question, I am trying to reconcile your write-downs of EUR2.7m.

I find EUR1.77m in leveraged loans, EUR340m commercial real estate, EUR310m monoline.

Is it correct to assume that a sort of delta of about EUR300m is in Alt-A, and -- or it's predominantly in Alt-A, or is there something in CDOs and other things?

The second question is on equity derivatives.

If you would strip out the problems you had from the correlation, would the overall -- what would the equity and trading revenues look like compared to last year?

And lastly on VAR in your VAR chart for the quarter there are sort of three jumps upwards.

Are these jumps because of the resetting of the VAR inputs last year, or is this just a market development?

Sure Dirk.

The EIR2.7m are the mark downs in those focused businesses that we talked about.

The breakdown is EUR1.77b in Leveraged Finance, it's just under EUR550m in RMBS and the balance of just under EUR350m is in our Commercial Real Estate home loan business.

So that's that point.

On equity derivatives it is difficult to strip out the effects because all these issues are inter-related.

So what happened with correlation, what happened -- you'd have to somehow discount the value of the embedded derivative and figure out how much of that would have happened and look at the assumption as to how much of the hedge would have worked.

So I don't know how to answer that question.

With regard to the VAR you point is absolutely correct.

Those blips are due to the updating of the market data.

In fact our inherent risk in our trading book has remained flat or gone down during the period.

So those are technical factors, which are important because that's how the statistic is calculated.

But that's what's driving it.

Just a quick follow up.

Another way of thinking about the equity derivatives question, did your client business decline in the first quarter in equity derivatives?

And on the EUR500m, is within the EUR500m that includes the EUR300m from the monolines, or am I totally off there on the monolines?

You're talking the EUR500m on RMBS?

Yes.

Some of that -- let me answer the second question first.

Some of the monoline effect is seen -- the offset.

The monoline effect is a revenue positive.

One of the things that the monoline wrappers are hedging is our Alt-A portfolio as we show.

So there would be some impact on a decrease in the value of the assets.

But it's not the total change in the provision for the quarter.

As far as the other question you raised on equity derivatives, the business has slowed down.

So if that was the original question that is the answer.

But to break out what would have happened in the P&L or what the dynamics were is very difficult Dirk.

Yes I know.

But that's -- the other one is the more important answer I think.

Okay, thanks Dirk.

Well I think this concludes a rather unusually long conference call, but I think its fair given the reporting quarter in difficult times.

And Tony I think also on your behalf thanks for all your strong interest.

If there is anything left over please come back to the IR team and we try to help you all of that.

Thanks

Goodbye.

Ladies and gentlemen, thank you for joining.

The conference is now over and you may disconnect your telephones.