Deutsche Bank AG (DB) 2010 Q1 法說會逐字稿

Ladies and gentlemen, welcome.

And thank you for joining the Deutsche Bank first-quarter 2010 analysts' conference call.

As a reminder, all participants are in listen-only mode and the conference is recorded.

(Operator Instructions).

Ladies and gentlemen, at this time, you will be joined to the conference room of Deutsche Bank in Frankfurt.

Please --

Thank you, Maria.

Good morning, ladies and gentlemen.

It's also my pleasure to welcome you to our first-quarter earnings conference call.

As usual, our CFO, Stefan Krause, will go through the presentation in a few seconds, which is available on our website.

Of course, we will take your questions at the end.

If, because of time constraints, you cannot ask all your questions you might have, please come back to Investor Relations and we will follow up.

Last but not least, I would like to remind you to have a look at the slides in the back of the presentation that covers forward-looking statements.

So, let's get going.

Stefan, please.

Yes.

Thank you very much.

And guten tag from Frankfurt to everybody.

Let me start on our first page, on the highlights page, with a summary of our results.

Our quarterly pre-tax profit of EUR2.8b is the second best ever.

This resulted in a net income of EUR1.8b.

Our pre-tax return on equity of 30% is up on a substantially higher capital base versus the first quarter of 2009.

Our Tier One capital ratio came out at 11.2%, well above our target of 10%.

And our leverage ratio, as you can see, is flat at 23 times.

If you move on, on the next chart, we put what we think was a very strong first quarter in its historic context.

Once again, Deutsche Bank has demonstrated its basic and -- basic strong earnings power.

We have achieved the second best quarter ever in both revenues and pre-tax profit, as you can see from the chart.

We -- on the next page, we show we recorded strong revenues of EUR9b compared to EUR7.2b in the first quarter of 2009.

As you may remember, first quarter 2009 revenues included markdowns and impairments of EUR1.5b in CB&S.

This compares with only EUR241m in markdowns this quarter, which predominantly related to our monolines.

Revenues in the first quarter 2010 also include EUR148m from the first consolidation of Sal.

Oppenheim, whose results are consolidated from January 29 onwards.

To move on to page six, provision for credit losses, as you see, almost halved to EUR262m versus the first quarter of 2009.

Provisions related to IAS 39 reclassified assets were EUR104m in the first quarter, which represents less than half of the EUR280m we had in the first quarter of '09.

I think that this confirms our guidance that, obviously, the magnitude of IAS 39 reserves booked in 2009 does not represent a trend going forward at that time.

And I would like to highlight again that, obviously, this is one-time in nature and that we might see -- continue to see volatility in this position.

The core loan book, though, in CIB, which means the loan book excluding these IAS 39 assets, experienced very low net provisions in this quarter.

The main reason for this number was the successful completion of many restructurings with German mid-caps, particularly here in manufacturing and automotive.

Loan loss provisions in PCAM continued to develop favorable.

See the decreasing delinquency ratios in small corporates, mortgages and consumer loans we've put in the Appendix.

So to give you a further outlook, obviously, despite this encouraging outcome in the first quarter, we would be very hesitant at this point to extrapolate the first quarter into the full year 2010.

There's still, as you know, many market uncertainties as the economy continues to be very fragile.

The recovery is very fragile.

And, of course, we intend to further reduce our IAS 39 assets.

But we don't we think we should, at this time, extrapolate our first-quarter results to the full year.

We will, therefore, not yet change the general guidance that we have given you at the Investor Day at the end of 2009.

We move on to page seven.

Here you can see that our non-interest expenses was EUR5.9b, an increase of EUR1b versus the first quarter of '09, which I'll explain, obviously, in more detail.

Compensation and benefits in the first quarter 2010 were up about EUR600m, which reflects the higher deferred compensation of approximately EUR350m of which EUR298m relates to the acceleration of deferred expenses.

This relates to our early retirement rules that were applicable to the February 2010 grant.

There was no comparable effect in the first quarter of 2009.

EUR120m related to the UK bonus tax on a portion of the deferred compensation element, which many of our peers, as you know, have not yet recorded.

And there will be more to come in terms of UK bonus tax in the second and third quarter.

This payment to the UK tax authority will be due in August 2010.

But we will not clearly quantify the exact amount yet, as the legislation is not yet final.

And last but not least, obviously, the improved business performance resulted in higher compensation accrual.

So our compensation ratio overall was 40%.

Excluding the effect of the UK payroll tax it was 38%.

The increase in these expenses also related to the consolidation, of course, of Sal.

Oppenheim, as you can see on the chart.

Non-compensation expenses versus the first quarter 2009 were impacted by an increase in IT and professional services spend.

We move on to page eight.

Here, because this is a specific first quarter effect, and this effect has a much higher magnitude than in previous years, we wanted to provide you this first-time disclosure and it will be a one-time disclosure, by the way.

We just wanted to make sure that you understand this career retirement effect and it's -- as it has impacted quite a bit the performance, or the numbers showed, of our different divisions.

The slide, obviously, gives you more details on this career retirement effect and especially shows it by our separate divisions.

As you can see, EUR230m were allocated to CB&S, EUR69m were allocated to our classic banking business, which were impacted more severely in relative terms.

Furthermore, you will note that in this quarter we have already digested nearly 40% of the 2010 portion of the deferred compensation expense for the awards made in February of 2010.

You can also see at the end of 2010, we will already have absorbed almost 60% of the deferred grants awarded in February 2010.

We have included in this chart, just to show you the timing and the allocation of this increased deferred compensation expenses and, obviously, I want to say that we would not proceed to repeat such disclosure in every quarter going forward because it is a specific Q1 event.

Move on to page nine.

We show that in the first quarter 2010 our income before income taxes is EUR2.8b, an increase of 54% versus the first quarter of 2009.

We've generated a return on equity of 30%, as I already said, on an active equity base which is roughly EUR4.5b higher than the one the year before.

If we go to page 10, we show our net income in the first quarter, which was EUR1.8b, 50% higher than one year before.

Our effective tax rate in the quarter was 36.4%.

This first-quarter ETR mainly reflects the following items.

We had a significant change in the regional mix of our results and we, obviously, had the UK bank payroll tax which is not tax deductible.

As a result of these two effects, we expect the full-year ETR to come in slightly above 35% at this point in time.

On page 11 we discuss our Tier 1 capital ratios.

Our Tier 1 capital ratios came in at 11.2% as of March 31.

The decrease compared to year end 2009 is mainly driven by the acquisition of Sal.

Oppenheim, which had an impact of negative 117 basis points.

Please bear in mind, as we disclosed, that we decided not to raise capital for this acquisition due to our strong capital generation at year end.

Moreover, a change in the regulatory reporting of certain securitization positions in our trading book led to an additional Tier 1 capital deduction of EUR1.4b.

And we had a corresponding deduction in Tier 2 capital, translating into a decrease of 49 basis points in our Tier 1 ratio.

These effects were partially, obviously, offset by the net income generated in the first quarter, which gave us a positive 61 basis points.

Our Core Tier 1 ratio, which excludes hybrids, was at 7.5% at the quarter end.

Our risk-weighted assets increase by EUR23b to EUR292b was also mainly driven by the Sal.

Oppenheim acquisition which represented EUR17b and, obviously, significant movement in the FX effect in the risk-weighted assets.

We provide further details on the development of our Tier 1 capital and risk-weighted assets on page 45 of the Appendix for your information.

In the second quarter, the Tier 1 ratio will be impacted by the acquisition of the ABN Amro business.

We give you this heads up already.

This will reduce the Tier 1 ratio by 30 to 40 basis points approximately, including the expected positive impact from the negative goodwill.

Just to say an additional point, the change in our reporting of our trading book securitization will reduce the impact of future trading book rules on our book versus our previous estimates.

We move onto page 12.

We move onto the balance sheet.

Total IFRS assets increased by EUR169b, about 11%, obviously driven by higher settlement balances, the strengthening of the US dollar and, as I've said already, the consolidation of Sal.

Oppenheim.

The US dollar impact and Sal.

Oppenheim were also the two main reasons for the EUR87b or 10% increase in our US GAAP pro-forma assets, which is our balance sheet after netting.

The consolidation of Sal.

Oppenheim contributed about approximately EUR30b and the strengthening of the US dollar about EUR28b.

As you know, we make this US GAAP pro-forma asset calculation to calculate a comparable leverage ratio with our US peers.

The leverage ratio, therefore, remained unchanged at 23 times as higher assets are partly compensated by higher equity and increased pro-forma fair-value gains on our own debt.

Let me move on to the segment results on page 14.

This slide gives an overview of the segmental performance during the quarter.

Many of the divisions include some of the negative items which I already talked about and some additional negative items which I'll talk through as I go through them individually.

Let me only highlight here that the consolidation adjustment reflects a negative swing in revenues of almost EUR400m versus previous year's quarter.

As you may remember, in the first quarter of 2009, we benefited from positive timing differences between our segment reporting and our IFRS Group reporting due to the situation we had on the interest rate development in the last quarter of 2008.

There was a swing back in 2009.

That's part of the strong explanation.

Then, obviously, this C&A gets always impacted by timing differences between our segment reporting and our IFRS Group reporting overall.

These differences are due to a different treatment of an underlying position and its economic hedge.

In the first quarter 2009, the bulk of the positive revenues were due to a significant decrease in euro interest rates.

Again, these things do not show real losses or gains but only reflect timing differences between our segment reports.

On page 15 we show CB&S.

We've achieved the best pre-tax profit ever despite the fact that we've had some markdowns of approximately EUR250m and the aforementioned increased amortization expense for deferred compensation.

I must really say we were extremely happy with this result.

Obviously, the reduced provision for credit losses also contributes to this really outstanding result.

And pre-tax return on equity is at a remarkable 69%, which was apart from the record profit.

This ratio also benefited from a significant risk reduction we also could show in this business and therefore lower allocated capital.

On page 16 we show that the first quarter 2010 was the second best quarter ever for our Global Market Sales and Trading businesses.

The previous record was in the first quarter of 2007 when we had a very different risk profile.

I think that makes this result even more impressive.

When compared with the respective peaks in 2007 and subsequent, we have cut our global market balance sheet by almost 50%.

We've cut our Level 3 assets by 35% and we've cut our constant input VAR by 40%.

I think a very impressive result.

Sales and Trading revenue came in at EUR4.7b, after EUR255m in markdowns mainly related to monoline exposures.

This compares to EUR4b revenues in the first quarter '09 after EUR1b of markdowns and certain other losses we had.

Our competitive position reflects the strong client franchise.

Our results also do not include material legacy asset appreciation, nor high levels of prop trading.

Most impressive was the strong performance from our credit and equity businesses, which has gone through a substantial restructuring, as we have reported to you in several occasions.

In sales and trading, we broadly saw the development which Anshu Jain had forecasted for 2010 on our Investor Day.

In two weeks' time he will speak at the Investor Conference and provide an update on the development in the first quarter.

In total, this business is fully on track to deliver its contribution to our 2011 profit target.

On page 17 we show that revenues in Sales and Trading debt were very strong.

Although we saw the expected normalization of revenues in our flow products such as money markets, FX and rates, these businesses continued to generate very good revenues.

We have a high market share with clients and continued to investment to be here at the leading edge.

In credit, our recalibration has totally paid off.

We've reoriented the platform to be more flow and client focused.

We've been able to respond to investors' increased appetite for credit across investment grade, high yield and distressed product lines.

In other areas, we're also doing very well.

And the emerging markets franchise continues to -- the emerging markets franchise continues to generate excellent revenues across all regions but with especially awesome highlights here, in Latin America.

In commodities, we've yet to see all of the benefits of our investment in key hires.

And, obviously, we've seen less favorable market conditions than in the first quarter of 2009.

Let me move on to page 18 in which we also show that in equities we had our best quarter since the fourth quarter of 2007.

We have narrowed the gap to our peers, having gone through this significant recalibration of this business area.

Our results were strong and positive in every product although the contribution from our designated prop trading platform remained at a very low level this quarter.

In equity derivatives, we've found some subdued client flow but there has been demand for lightly structured products and we have changed our risk management approach here.

First quarter 2009, as you remember, was impacted by a significant losses.

In equity trading, cash equities market uncertainty impacted the volume.

In prime brokerage, we've maintained our market share and seen new balances.

Hedge fund clients are more active, although the environment is much more competitive than a year ago, but we're still doing well.

We continued to commit very low resources to dedicated prop trading.

As shown at the Investor Day, this is not a driver of our business model.

It makes up less than 5% of our equities revenue.

On page 19, we show Origination and Advisory.

We're very proud to announce that we ranked number four globally for the first quarter 2010, up from number seven at year end 2009.

In EMEA we have been number one, benefiting from a very strong performance in Germany.

Some of our landmark deals in Advisory include Kraft Foods and Proctor and Gamble, as you know.

In Origination, Deutsche Bank was also involved in several landmark transactions in the US which were, obviously, and are significant for our franchise.

As communicated, we are in the process of selling legacy assets.

In the first quarter 2010 this took place, particularly in the leveraged finance area, but also in commercial real estate.

Overall in the first quarter, we sold EUR645m of CIB assets reclassified under IAS 39 in the first quarter, at more or less their carrying values.

We will continue to take any opportunities to reduce our exposure to legacy assets.

And, by the way, if we look into the second quarter, we've seen a very strong momentum so far.

So, let me move now on to the Global Transaction Banking business.

On page 20 you see the P&L.

On page 21 you see the GTB reports on income before income (sic) of EUR100m in the first quarter.

And, certainly, a weaker and for us disappointing result in a difficult environmental for our Transaction Banking business.

Revenue remains subdued, driven by, obviously, the low interest rate environment in both US dollar and euro rates.

The increase in non-interest expenses by EUR82m versus the first quarter of '09 reflects an impairment of intangible assets of EUR29m.

The career retirement acceleration effect this business was impacted by of EUR20m as well as, obviously, higher regulatory expenses due to the deposit protection fund in Germany.

On April 1, we must say, we finally closed the acquisition of ABN Amro's commercial banking business in the Netherlands.

The operating P&L impact is anticipated to be roughly breakeven for 2010, due to one-time integration costs.

We look forward to a significant expansion, obviously, of our Deutsche -- Dutch business with this acquisition.

Let's go to PCAM on page 22.

Let me highlight, as we also did in our press release, that after the acquisition of Sal.

Oppenheim, we now manage invested assets of over EUR1 trillion.

On page 23, let me start now with Asset Management.

As expected, we have seen no further significant impairments in the first quarter in Asset Management.

First quarter has traditionally been a weaker quarter in the performance fees cycle, as you know.

However, portfolio and fund management revenues further improved in an increasingly positive market environment.

Profit of EUR30m after, again, the deduction of EUR25m for the aforementioned career retirement effect.

We generated in this business EUR4b of net new money, mainly in our insurance assets.

Our cost structure has further improved.

Headcount has been adapted to the new environment with run-rate cost savings down by approximately 25% year-on-year.

So, all the work we've put to recalibrate and restructure Asset Management is starting to pay off.

And we have some additional measures underway to further improve our cost/income ratio, for instance the consolidation of our equity investment platform into Frankfurt.

On page 24, we see the Private -- our Private Wealth Management business that adjusted for Sal.

Oppenheim and consolidation effects, PWM pre-tax profit was EUR24m, as we show here on the chart.

Excluding Sal.

Oppenheim revenues, we were up 15% year-on-year, mainly due to higher transaction based revenues, predominantly due to increase in Asia Pacific, Northern Europe, Middle East, Africa and Germany.

We recorded very strong net money inflows of EUR5b, mainly from Germany and Asia, which fits our strategy to grow especially in these regions.

And, again, as the chart shows, the PWM result was burdened by the consolidation of Sal.

Oppenheim, EUR59m and the career retirement effect of EUR12m.

On page 25 we show the P&L for the -- for our PBC business at a glance.

If I move onto page 26, we saw that PBC had a pre-tax profit of EUR189m.

And that's the best result after the Lehman collapse, if we adjust again for the non-operating items.

So in the underlying a good performance.

The first quarter 2009 PBC profits had benefited from a release of credit losses -- for credit losses of approximately EUR60m.

So on the year-on-year comparison, you need to take this one-time effect into account.

As forecasted, we did record higher revenues from our investment business.

Revenues from lending activity remained stable, while deposit revenues went up notably due to the improved margins.

Credit provisions further declined, which demonstrated, again, I think, the quality of our PBC assets in generally -- in general and then also showed how our efforts, our improved collection efforts, particularly, for example, in Spain, have supported our good performance in this division.

Expenses benefited from efficiency measures as planned, on the one hand, but were more than offset by the specific integration expenses and the effect from career retirement and increased mandatory regulatory expenses we were exposed to, especially in Germany.

All in all, going forward, we expect much healthier levels of underlying performance than in the previous year.

Finally, to end my presentation, I'd like to cover three key current issues.

The first one is, obviously, the closing of the acquisition of Sal.

Oppenheim in the first quarter, our complexity reduction program and the quarterly performance in the context of our 2011 profit target.

As you know, we closed the Sal.

Oppenheim -- on page 28, we closed the Sal.

Oppenheim transaction in the first quarter.

The purchase price of EUR1b was paid in cash.

That obviously excluded the BAS business which was sold on.

We have now structured this business into four clusters.

Cluster One comprises the Wealth Management in Germany and the Asset Management businesses in Germany and Luxembourg.

And that business for us represents the core franchise in Germany, which is -- we will keep with a distinct value proposition.

That's where we'll drive a separate brand strategy.

Cluster two, summarized Oppenheim's key international activities, which will be combined or aligned with [DW] and international activities, where we're looking for a maximum of synergies and we will have a one brand approach.

Cluster three includes all other Sal.

Oppenheim businesses.

Some of this will be wound down or exited, such as the investment banking business.

The private equity and the asset management insurance business will be integrated into our corresponding DB activities.

And Cluster four is BHF, where we're currently examining all our strategic options.

So this highlights the approach.

And on page 29, beyond the impact on risk on capital that I already alluded to, this page summarizes the impact of Sal.

Oppenheim Group on the divisional P&L.

So you have an idea of how much of the business got allocated to the different divisions.

PWM includes clusters one to three.

However, some of the asset management activities in cluster three are allocated to Asset Management.

The final allocation, I want to say this very clear, the final allocation to these divisions is still under review and may change.

This just represents our first and initial (technical difficulty).

On page 30, we show you our invested assets reporting for Sal.

Oppenheim Group.

We have now applied Deutsche Bank's invested assets concept in terms of the definition for the past and present numbers, to make it comparable with our numbers.

Invested assets have grown, mainly due to the consolidation of the insurance asset management business, as well as due to markets appreciation.

You can see there was an insurance asset that was not consolidated previously in the Sal.

Oppenheim Group that led to this increase.

Net new money outflows have been only marginally about EUR300m in our core proposition since the consolidation.

So we see a very positive development.

With this acquisition on page 31, we give you some of this rationale.

We obviously want to have undisputed leadership in Private Wealth Management in Germany.

We want to have the complementary and added on client profile in the ultra-high net worth individual client segment.

We want to obviously have a second brand with a second wealth management proposition in the competition.

We support -- obviously, these acquisitions support such a bank expansion in non-investment banking activities.

And thirdly, it will represent a further diversification of Deutsche Bank earnings mix.

For 2010 and 2011, we expect some significant impact obviously now from the integration, exit and synergy costs.

This year we anticipate approximately EUR120m in restructuring costs, mainly severance costs.

From 2012 onwards we expect then a positive contribution.

All in all, we see substantial upside potential from this acquired business.

On page 32, I wanted to give you a brief update on our complexity reduction program.

As you know, efficiency gains and complexity reduction is expected to result in about EUR1b of cost savings.

Coming from a cost/income ratio of 72% for the Group by the end of 2009 and a very strong 66% by the end of the quarter, we target a cost/income ratio of 65% by the end of 2011.

And on page 33, I will show you what we -- how our process works.

Since our Investor Day in December, we have set up a process and governance structure.

And we have specifically committed cost savings, accounting for about EUR550m in efficiency gains with our different businesses.

And this process obviously will continue on.

All our initiatives will be centrally listed, quantified and further developed.

The progress will be regularly tracked by our executive committee.

So, on page 34, to sum up, let's look at our first quarter results in the light of our 2011 profit target.

Note that, due to the typical seasonality in investment banking, you should not annualize our near record first quarter results.

At first sight, the gap between the first quarter results in our classic banking business, our profit target was quite remarkable.

However, if we look at the underlying performance, we are not concerned.

The operating performance of our business in the first quarter appears really, in the reported number, weaker than it actually was.

I remind you, EUR298m of career retirement charges were frontloaded and absorbed during the quarter.

EUR120m of UK bonus tax were recorded.

And PWM digested a negative EUR58m of Sal.

Oppenheim, which was also driven by the integration.

So I think that we feel that we are very well on track.

If we add up the range, it's about EUR3.2b to EUR3.3b of underlying business performance.

So, even applying the usual seasonality effect of our business, we seem to be in a well off in track on a Group basis to achieve our 2010 target.

So with that, I conclude my presentation and I welcome any questions you may have.

(Operator instructions) The first question is from Jernej Omahen, Goldman Sachs.

Please go ahead.

Yes, hi, it's Jernej here for Goldman.

I just have a couple of questions.

The first one, I guess, is the obvious one on capital.

You made a reference to market risk at some point in your presentation and I was just wondering whether the estimates for the increase in market risk at the end of the year still stands?

So the EUR15b figure?

And whether the timing of those -- of that increase stands as well?

The second question is also related to a reference you made to the credit risk development during the quarter.

I think that the suggestion was, we shouldn't annualize the Q1 figure and I guess this is a relatively straightforward question.

To what extent do you think that Q1 undershot your expectations for the run rate for the full year?

And then, the next two questions are, I guess, more topical.

The first one is the question on the disclosure you made at the back of your report on the subpoenas and requests for information.

And you'll understand, I feel slightly awkwardly positioned to ask this question.

But can you maybe elaborate what those subpoenas relate to?

I think you highlight the product, so the RMBS and the CDLs.

Is this current investigation we're looking at in the US, or is that something different?

And then just a final question, I guess, the Deutsche Postbank February '11 deadline is getting close and the discussion about potential actions of Deutsche Bank are getting louder.

And I was just wondering if you could update us on your thoughts here?

I guess, given that we are relatively close to the timeline at this point?

Thanks.

Thank you, Jernej.

Let me go through your questions.

The first one, on capital and expected increase to market risk by year end.

As you know, the rules on capital are still under discussion.

As you know, the European parliament vote got delayed.

We therefore expect now some delay in implementation.

So overall, we feel very comfortable with what we've always said, that we believe that will continue to take some time and be less critical than many have assumed in various estimates.

And I think what has happened since year end in this topic basically shows that we are right in terms of our views on this issue.

So I think we'll wait until final resolution, get no change.

And that's, I think, the main message about no change to our views and, rather, decisions and process development that indicate that our forecast that we also gave at Investor Day is fine.

On the credit risk provisioning, yes, we had a very good Q1, no question.

And as I said, you shouldn't project that out.

We, obviously based on the experience of 2009, did not give any specific guidance on credit provision.

And I don't want to go into it but we would definitely think it would trend higher, from our current point of view, than what an annualization of Q1 would suggest.

Again, as there is still uncertainty in the environment, whilst we are very confident that our portfolios will perform well, IAS 39 assets might also bear a surprise.

That's the reason why they're IAS 39 assets and therefore we might, or could see, volatility in this position as we experienced throughout the last year.

The subpoenas and legal situation.

Honestly, there is no new information towards year-end.

We have the same, obviously based on what's going on in the external environment, disclosures of this nature generate some more attention.

It is a standard and we have the same.

It's not related to any current issues.

It's not related to the issue you allude to.

In fact, only to clearly state it here, we have done our internal review of our transactions.

We do not see that we have any similar situation than the one that is being discussed and therefore we don't have any concerns in that area.

Thank you also, Jernej, for the Postbank question, because again, I will very loud and clearly say that our position on Postbank has not changed.

The fact that the market has become a little bit more aware that there is some timeline considerations in the way we built the optionality structure in our structure is not new for us as Deutsche Bank.

And when we previously have indicated to the market that, number one, we had all the time of the world.

And number two, we see no pressure to move on quickly.

In fact, we even think that and see what the Postbank management is doing in terms of de-risking Postbank and continue to work and improve results.

This is very encouraging.

You know that we also have continued to have very good reports on our contract with Postbank to get to synergies.

So we are recovering all the synergies, or getting to the synergies that you would normally expect by consummating a transaction sooner.

There will be no big difference if we would be the owner of Postbank.

So there is no incentive to move on quickly here.

And therefore, again, we can only say that we continue and our view is unchanged.

There is no rush.

There is no hurry to move on Postbank as the Postbank business itself and our synergies are going in the right direction.

Thank you very much.

The next question is from Jon Peace, Nomura.

Please go ahead, sir.

Yes, hi.

Good morning, everybody.

Could I just ask three questions please?

Firstly on trading, obviously a very good result this quarter.

But I wondered if you might be in a position to estimate what kind of drag there might be from a liability tax, I know the German press have put a few figures around, and whether that might affect your 2010 goals?

The second question is on the Core Tier 1.

It's obviously a little low at the moment but your core profitability will build that quite quickly.

However, given regulatory developments, how should we think about the dividend this year?

Is it likely to be another year of fairly low payout?

And the final question is just on Greece.

Would you be able to quantify your exposure to Greek government bonds?

And would you expect any mark-to-market losses in the second quarter?

Have you been able to hedge that through CDS, or some other mechanism?

Thanks.

Jon, yes.

Well, the big problem, obviously we hear a lot about taxation around banks right now, in the market and we read it in the newspaper.

Our main problem is we don't really have specific plans.

We don't really know what the numbers are going to really look like.

Therefore, to make any forecast at this point in time is just too early.

We'll have to wait, what comes around.

Of course, again like in every change, like the one we have seen in the reg capital change at the beginning, that's always big concerns that this may impact us significantly.

I guess we'll have to wait and see what finally comes before we can make a prediction how this will impact.

On dividend, it's very early in the year.

As you know, in our financial statements, we always accrue versus our previous year basis.

And obviously, as you know, I have to do this disclosure to every year to the dividend point and it will be a decision of the AGM based on the proposals of our supervisory committee.

We have no estimate at this point in time.

We'll have to see how the year develops and I think this is always a decision that is made quite late in the year, depending on how our profits develop.

But as you know, we continue to be committed to be a dividend-paying organization and as we move on, and as the environment allows us, obviously we will go back to increase this.

But please accept this is too early to make any forecast.

To your Greek bond exposure.

We were locked in the second quarter.

We don't have much exposure to Greek directly -- to Greece directly.

That's what we've always said.

So we are not concerned.

Obviously it always depends what the Greek situation then causes in the second magnitude of it.

And obviously we could not completely isolate ourselves if the situation in Greek gets somewhat worse that there might be issues of a second nature, second category that might impact us.

But our direct exposure will not concern us.

Thank you.

The next question is from Philipp Zieschang, UBS.

Please go ahead, sir.

Good morning.

I'd like to come back to your risk-weighted asset guidance of the EUR50b net impact.

So if then basically the capital deduction you've published today due to the securitization, is this an amount which wasn't in the guidance and which is now basically done and covered?

Or would you expect further charges throughout the year?

So could you just comment on the front loading part of the pain which we've seen today on the Tier 1 ratio?

Second question would be with respect to the regulatory environment in the US.

In particular, with respect to the derivatives, what's currently being discussed in the Senate and has been agreed by the Agricultural Committee in terms of moving most of the OTC derivatives to exchanges.

I was just wondering, is that covered in your chart on the Investor Day in December, in terms of the annualized 10% regulatory negative impact on sales and trading revenues in general?

Or did you, back then, rather refer to the gearing impact which actually should have been much more modest?

And then, finally, could you just confirm that you haven't received any new Wells notice?

Thank you.

Okay, Philipp, thank you.

I'm going to go in reverse order.

We have not received Wells notice, to say it very clearly.

Your other question that referred to the application -- or let me take your first question, first, your strict application of the current rules.

And we very clearly said this helps us in terms of our focus because it is already a rule application that we take that does lower our expectations for future impact because that's exactly the type of impact we would expect to see in our securitization book.

So it will reduce our further impact and in that sense it's a front loaded [stretch] to it.

The last thing, and to use your words, I would say we have some taken pain here but again, when we -- when the newer rules will come out, this will ease the difference, it will lower the difference that we will have to absorb at this point in time.

By the way, and I clearly want to say it here, this has not changed the risk profile, despite the fact that based on the rule, we have to put some more tier capital on the book, the risk profile of the bank has not changed at all.

This has something to do with the fact that, according to this rule, any portfolio hedging we do to the securitization positions, that are not one to one hedges, basically, do not count for the regulatory capital definition.

And therefore, whilst our VAR has not changed and whilst our risk position and our balance sheet position to this securitization has not changed, we have to account for a higher capital charge because portfolio type hedging cannot be considered for this type of capital charge.

So in that sense, this rule is very much in line with what we expect to come in terms of securitization capital charges.

Your derivatives regulation.

As you know, we don't get tired to tell it all the time.

Of course, when you do a forecast for profitability, you make a lot of assumptions.

At that point of our assumption was a different one, in terms of what will happen with the derivatives portfolio in books.

Therefore, obviously we'll have to assess what this US situation really means.

But it is a change to what we had assumed the structure of the business will look like in our forecasted EUR10b target.

Sorry, if I may follow up on your last comment.

But you said in your statements that you are reiterating the CBS pre-tax profit guidance for 2011, nevertheless?

Yes.

But of course what we don't know at this point in time, we don't know exactly what is the impact -- real impact is going to be because we don't know how it's going to look like finally, yes?

So in that sense, from our current point of view, we can reiterate our target, there is no question about it.

We don't know if all.

If it's only OTC, what portion of the business we'd move.

How the revenue distribution is going to be etc., etc.

So it's just, we'll have to wait to come and then we'll give you.

But everything we know at this point and the assumptions we have made, lead us to confirm our target.

And sorry, just a quick clarification on the first point, on your EUR50b risk weighted asset guidance.

So you've always left it open what the impact would be in terms of the securitization rules.

So are you now saying, with this charge in Q1, basically the EUR50b is the only remaining impact?

Or are you saying the EUR50b will essentially be lower, given the charges you've done today?

Well, this is now difficult to estimate again.

We continue to be in an environment of uncertainty as you know.

We continue to be in discussion with regulators and with politicians on the clarification, etc.

As you know, there's a lot of movement in the position.

So at this time, I would not like to give any change on our EUR50b estimate because I have no new information.

We're only saying that from the charge we had in Q1, would represent a lowering of any difference and gap that there exists.

But we have not done, yet, a new calculation on the deferred implementation we expect.

And some of the changes we are continuing to discuss with the regulators on our EUR50b number.

Thank you.

The next question is from Huw van Steenis, Morgan Stanley.

Please go ahead, sir.

Good morning.

Perhaps I should just ask two questions.

One, you often give us a bit of color on how the current quarter is going.

Is there any particular update you'd like to share?

And number two, I guess one disappointment today was that the stable businesses, so GTB, Asset Wealth Management and PCAM, were all a bit light and I think if I annualize Q1, they're about EUR2.5b short of your targets for next year.

In the light of investment bank being over 90% of your earnings today, how quickly do you think you can get to a more diversified earnings base?

Is this going to take well to the end of '011, or do you think one could see slightly earlier progress?

Thanks.

On the current quarter update, I know that's always something interest.

I alluded to that in our corporate finance business, we're doing quite well.

We continue to see a good business environment going into the first quarter there.

So the update I can only give is we continue to be positive.

And especially don't forget that as the deferred comp effect cannot be annualized and taken over, we expect, obviously, some of the onetime negative fundings we had in the first quarter, obviously not to impact Q2.

But you know, there's also seasonality in the business and we'll have to see how that develops.

But everything we see makes us positive for Q2, as well and the start of (technical difficulty) been good.

The second, the stable businesses, or the classic banking business are clearly short of some of the targets, if you don't take out the one-offs.

If we take out the one-offs and we look at the performance, and especially I can say that, if I look at their performance versus budget, and the seasonality that is included in the budget, we are actually tracking well towards our 2011 target.

I know it's a surprise that I make this statement, if you look at the bare numbers.

But take it as that statement.

Take it as such when we look into how we have calendarized and claimed for the year.

How we expect and again, that's an important assumption we have made, how we expect the environment to further improve throughout 2010 and 2011, which is obviously an important assumption we have made as we track towards the achievement of 2010 targets and then 2011 targets.

Let's not forget that our classic banking business were the businesses that went into the crisis later than the investment bank.

We saw the recovery of the investment bank first.

And that sort of altered our plans (inaudible).

So from that, I think the indication that Q1 showed us that we are recovering in all these businesses.

That certainly GTB still has to suffer under the interest rates.

But I think you can make your interest rate under what your two year interest rate forecast is.

As interest rates improve, this business will benefit, and especially will benefit because of the additional customers and the additional volumes this business has been able to gain throughout the year.

In PBC, in our retail business you've seen a good Q1 that shows, in the underlying business, the improvement.

As markets get better, this should also not be an issue.

We have had -- obviously, we have some costs in our costs right now that are investment costs into the efficiency program that will not repeat in 2011, of course, because we need to get to these efficiencies.

If I go to Asset Management, all our work to recalibrate this business, to refocus this business is starting to pay off.

We will finalize some of these measures at the beginning of this year, which will further pay off in increased profitability of this business.

And obviously, Private Wealth Management -- that development will be contingent on how quickly the Sal.

Opp situation and the Sal.

Opp business can be brought on track.

But as I forecasted to you, we are taking some money in hand to move as quickly as possible to integrate and to structure the business so we can bring it to its expected performance level.

So we are very happy with our results in April and we are very confident that we are on track to our 2010 and then, obviously, to our 2011 target.

Okay.

The next question is from Carsten Werle, Macquarie Capital.

Please go ahead, sir.

Yes, Carsten Werle, Macquarie.

Good morning.

You've already touched the efficiency program.

Could you perhaps give us an update when exactly you expect the full EUR1b of cost savings?

How much we may already have seen as achievement, and how much of it is likely to come in compensation and benefits, and how much in the general cost line?

Okay.

Our program is targeted to obviously mainly non-comp related topics, of course.

If we have efficiencies, that will impact the cost line, but we do -- our program is not targeted to change the structure or the quality of our compensation at all.

So therefore only, obviously, it's targeted at mainly non-comp cost items.

Just only to say it very clear, in it so far that we will not have -- certainly at the one or the other area also headcount, eventual headcount reduction.

The EUR1b we mainly are targeting, obviously, efficiency.

Efficiency in that sense, obviously, as we grow the business, and that's what we've always said, that we are at the same time growing and developing the business, obviously we will have some increased cost based on the effect.

So the EUR1b will be measured as an efficiency gain and therefore should translate mainly in our cost/income ratio target.

And that's -- we like to call it the exit rate 2011, that's what we are targeting there.

So to give you some light, we are well -- the progress is good.

We are moving along.

What I want to caution you for 2010 is, as I said already, there will be some costs to achieve these synergies, that we have to invest in the one or other business area, that obviously we will try to front load in order to move on quickly and get to these synergies.

That's the way you have to look at it.

The cost base could overall increase as we move, obviously, along and grow our revenues and grow our business.

Because we don't want -- with the program, we don't want to restrict the growth opportunities that are presenting to the Bank as we move out of the crisis and have opportunities to grab market share and build new businesses.

So that's -- I think hopefully that's shed some light on this question for you.

So if I get it right, apart from the fact that there are some introduction costs for this program also, you have not yet made any material savings out of this EUR1b which are visible yet in your P&L.

Is this correct, or?

We have not yet, but we have had some.

I can say we have some, but not -- obviously the program is in effect since the beginning of the year.

And obviously right now we are mainly in investing and we are mainly in preparing some of these measures.

Okay.

As I said in my presentation, we already have a substantial commitment of businesses and of our infrastructure areas to reduce costs.

Okay, thank you.

The next question is from Jeremy Sigee, Barclays Capital.

Please go ahead.

Hi there.

Two or three questions please.

Firstly, I just wanted to comment on the wording of your outlook statement.

Because it looks like your investment banking revenues on a clean basis are, well, flat as in your slide, or actually up slightly year-on-year, but your outlook comment talks about most market segments being down versus '09.

So I just wondered whether does that refer to the rest of the industry, while you're flat everyone else is down, or what is behind those comments?

Or are you expecting a big slowdown from here?

That's the first question.

Second question just around Sal.

Oppenheim.

Could you just go back over the decision to pay in cash not shares?

What your thinking was around that?

And then following on, on Sal.

Oppenheim, just to understand the outlook from here, I think you said there's a EUR59m drag in this quarter out of a total EUR120m of charges overall.

Does that mean that the drag falls away quite quickly from here, as early as Q2?

Okay, let me see.

Now our outlook statement I will try to reconcile and find what part you attributed.

In our investment banking overall we have had record development, but we have had a quite substantial change in mix.

And the only statements we made towards a slowdown was that, if you remember in Q1 '09 we had in, for example, the FX part we had an extraordinary, well, improvement that was based on increased margins and increased development.

At that point in time we talked about the extraordinary high margins we had at the beginning of the year.

All that has -- as Anshu also said in the Investor Day, we expected some normalization.

So I think your statements are based on the fact that we expected normalization and that normalization has presented itself.

We still are tracking, as you saw from our numbers, at record levels in many of our businesses.

But we've had a shift in business mix from the flow things.

So our investment banking, and we say very clearly in the report on our outlook, continues to be on a path of another very successful year.

So don't misunderstand the comparisons to extraordinary items in 2009.

But ex extraordinary -- excuse me, sorry.

Your clean -- I mean your own slide, slide 16, shows sales and trading revenues are flat year-on-year.

And then your slide on Origination & Advisory shows that is up.

So your clean numbers, in total, are up year-on-year.

But your outlook comment makes this thing about revenue levels in most market segments are likely to be lower than in the previous year.

So you seem to be showing an increase, but talking about a decrease.

And I just wondered how that squares?

Yes, that's only -- it has only to do with the effects that we see between margin development and volume development.

It's a normalization.

So if that generated a view on you that there is something negative, that's totally incorrect.

That is not what we want.

We have a very strong performance in the investment bank.

We have a very strong performance in the business.

What we saw was the normalization that we expected in terms of pricing effect.

We see increases in market share.

We see strong volumes coming.

And just to very clearly say an overall positive outlook for the business.

Right, thank you.

If some statements on the comparisons look odd, then that has really nothing to do --

It was not intended.

-- with our basic feeling of it.

The Sal.

Oppenheim, your question was why we paid in cash for Sal.

Oppenheim?

Well, because we -- obviously as we had a very good year-end development in 2009, our position was strong.

Our capital position was strong.

We had planned that we will create, at the end of 2009, some surplus capital.

And we told you that we did this planning ahead, very much knowing at what exposures we had to deal with coming into the year 2010.

We therefore also very clearly told you we were not changing our target of 10% Tier 1, to say it very clearly.

And we continue to track well, in our view, versus our target as we take the capital charges relating to our positions and these other capital charges in account, which overall, as I also said, have the good news, that will ease down any further capital charges we have coming down the road.

And we are moving still well above our 10% target.

And as long as we are above our 10% target, I think it does make sense for us to use our capital for these investments.

And that was the reason we decided to pay in cash.

And if I may add, even if you look at our outlook this year and our ability to build capital, that's why we're not concerned at all in terms of our further capital development.

Sal.

Oppenheim, you also asked what to expect in terms of its performance.

Of course, as you know, since January 29 we own it.

And we consolidated it.

And I gave you a first glimpse on how we are approaching the business.

As we now work the clusters, I think we will get more clarity throughout the second quarter.

And I might be able to give you and shed more light then into the mid-term costs and expenses, and also the profit development.

That's something we're currently assessing.

We just first wanted to make sure that we have different clusters, and we have the strategy clear for the different clusters.

As it comes to financial numbers, we'll share them with you as we go on.

But did I understand the numbers that you gave today correctly?

Did you say that you expected severance charges of EUR127m in total, of which about EUR60m we've seen already in Q1?

Or am I mixing different numbers there, because you flagged a EUR59m one-off drag in Q1 --

The EUR50m was just the impact from this first consolidation.

And now we expect EUR120m to come.

Yes?

Okay, okay.

So there was about EUR20m in severance in Q1.

Okay.

Thanks very much.

(multiple speakers) as an example.

But that's an early estimate.

And as we move on, as I told you, as we really find also the allocation of the Sal.

Opp business to our different divisions, that I also told is you something we will finalize throughout the second quarter, I think we'll be able to shed more clarity on that.

So then last question was on the UK bonus tax.

There is something to come in the second quarter and third quarter.

But we definitely expect this to be much lower than in Q1.

And that's even there the sum of both numbers to be lower in Q1 -- Q2.

Thank you very much.

Thank you.

The next question is from Kinner Lakhani, Citigroup.

Please go ahead.

Yes, hi.

Good morning.

Three questions actually.

Firstly, to take up the capital question again.

Obviously, with the combination of the EUR50b potential market risk hit at the end of the year, 30 to 40 basis points coming from ABN Amro, right here right now that could mean the Core Tier 1 ratio is the equivalent of 6%.

Now of course you have retained earnings coming through.

But over 90% of those in the first quarter came from the investment bank.

So my question being, how much are you reliant on the environment being stronger for the investment bank, and/or regulation not being more adverse?

And on the question on regulation, I think one of the key developments in the US is, obviously, the proposal that banks might need to spin off swap dealers.

So I just wanted to get your commentary on what you think the likelihood of this is, and what the implications of that could be?

And the final question is, to come back on your provision commentary, i.e.

not to extrapolate the first quarter; IAS 39 assets could provide surprises.

One of the disclosures you provided in your annual report was that the junior debt portion of your impaired leveraged finance exposure that's about EUR2.1b was only 38% covered.

To me, that sounds a bit low.

But I wonder if you could provide some commentary on that?

Okay.

Let me start on the capital.

You know, Kinner, I see that we have had the capital issue speculation for over a year now, yes.

And it continues to be endless speculation of what's going to happen and what's going to then -- and at the end, we've seen, in our view, the environment easing somewhat.

In our environment, the expected more reasonable is happening in the discussion, when we talk to regulators and politicians, I think our view is now that we have a much more down-to-earth discussion.

The impact analysis that have been made have provided some further insight in how significant this can be.

It has certainly been impacted views and opinions.

I think the view in general is to hit on a near-term short-term banking system with significant capital charges doesn't make any sense for the world economy and the developing of things.

So, I can only answer your speculative question with the broad trends that we have seen since this discussion started.

And with verifying our point of view, that this discussion, I've always used the term "nothing gets eaten as hot as it gets cooked" and this applies here as well.

And again, when I talk about here, again, the new proposals, we have daily proposals on taxes, we have proposals on reg changes, I think we continue to believe that this will ease off.

Of course, as we look into our capital planning, our earnings power and our ability to generate returned earnings is core to our view.

We are above our Tier 1 capital target right now.

Everything we see in the plan leads us to believe we will continue to be fine on the capital side.

But I -- nobody can, at this point, exclude that the environment worsens and then we'll have to make new decisions, if that occurs, which, by the way, we don't foresee at this point in time.

And the second issue that's open, we will have to wait for regulation.

We definitively expect regulation to come, which is also fine from us.

And I think it's also correct, from our perspective.

But the impact of this regulation will be further delayed and further deferred over many years.

That's the current view we have.

So I think that's why we -- I can only say it very loud and clear, we're not concerned on our capital plan at this point in time, as we move along.

And you are -- I think -- okay, then the coverage of the leveraged finance exposures has not materially changed since year end.

And we continue to feel very comfortable with what we have.

But, again, we always have to say these transactions are individual single transactions.

As time moves on, situations, business situations in the underlying assets can change and make -- or make us require to take additional charges on it.

But we feel that our provisions in this business are -- in our coverage ratio is comfortable.

Let's not forget, that in the leveraged finance business this represents businesses.

In the coverage ratio you don't -- you normally don't track the assets of these businesses as being something that will support your coverage.

That's why a lower coverage in this business, from our point of view, is sufficient, yes, asset deals with businesses.

And on your OTC derivatives impact, yes, there could be an impact.

We totally agree.

But we feel certainly we can always react and adjust our business model.

And that's what, in many of the capital extrapolations and the capital planning and the exposure planning that I've seen for Deutsche Bank was not taken into account and it's something that Hugo alluded to in our Investor Day in December very strongly is you always have management action.

We're not going to sit there and not do anything.

You always will have management action which provides for us, and I think we've shown it as the Bank throughout the crisis, provides for us a great lever to deal then specifically with the situation.

So, in the combination of yes, new regulation coming, that we expect to be deferred and delayed and less impact for full than in some of the estimates.

The second we continue to believe that we will have a good momentum in terms of our profit.

And thirdly, we always we believe that you can take management action that will have significant impact on it.

We continue to feel comfortable with the capital position of the bank.

Let's not forget, reg capital, yes, was adjusted down, but interesting enough, we see the gap widening between our true capital and our reg capital.

Also so, our risk has not changed, yes, in the bank.

Our risk indicators are -- have moved down rather than up.

So in that sense we continue to be not -- we don't share the concerns many have out there.

Thank you.

The next question is from Stuart Graham from Autonomous Research.

Please go ahead.

Hi.

I have two questions on capital, I'm afraid.

Firstly, you talked about EUR1.4b, but I think on slide 45 there was a figure of EUR2.1b.

So there's another EUR0.7b of deductions.

Could you just explain what was going on there?

And then second question is a bit more philosophical, picking up from the previous question.

It seems right now, I can understand what you're saying in terms of your absolute capital level, but you also need to take account of relative situations.

And if you're saying that you expect regulation to be delayed somewhat, then that will benefit your peers as well, many of whom have much higher Core Tier 1 ratios and are still pilling on capital.

So, I guess I'm just interested in what the philosophical argument for being at the lower end of your peer group in relative terms is at a time when investors seem to see capital strength as a relative advantage.

Why wouldn't you want to be at the stronger end rather than the weaker end, because when regulation comes in, if you're right, other banks are going to benefit much more from that laxer regulation than you are?

To answer your second question, it's always a question how you define your competitive environment and we believe that we are in the mid to the higher end of the capital rather than to the lower end of the capital.

And that we always get compared only with one side of the chart is regretful but, in fairness, our internal view would be we are absolutely in line - with 11.2% - we're in line with what describes our business model, our risk model and our competitive environment.

I was looking at the Core Tier 1 rather than the Tier 1.

Yes.

On both, in our view.

And, therefore, the next -- the other issue, the deduction.

That was the second element in this deduction which was related to also securitization asset that are -- had to take a larger capital charge which was -- would be normal ongoing business.

Nothing changed.

It is an asset whose risk profile changed and according to reg rules we had to take additional -- reclassify and take additional banking book type charge on it.

So that's not linked into this EUR50b then?

No.

The EUR1.4b was the separate effect of this specific change, whilst the rest of that position, which you correctly point out is larger, was just, I would call it, ongoing business in terms of capital adjustments.

And were there any other similar positions which might be adjusted in further quarters or that was it, that EUR0.7b?

At this point in time, just -- this was what -- this is always a point in time view.

And the current point of view, I said to you, of course, life changes, environment change, we'll have to see there's a further one.

Okay.

Thank you.

The next question is from Matthew Clarke, KBW.

Please go ahead, sir.

Good morning.

A couple more questions capital related, I'm afraid.

Firstly, could you just comment whether there's any specific relief items come through from either sales of parts of Sal.

Oppenheim in the second quarter or in the near term, and if so can you quantify them?

And then, also just to be absolutely clear, I get that you don't want to give a specific update on the EUR5b regulatory impact guidance that you gave back at the Investor Day, but in terms of isolating the impact of this EUR1.4b methodology change that hit this quarter, should we be looking at a one-for-one relief versus whatever other regulatory burdens come in?

So, regardless of whether that original EUR5b projection would have changed, it would be EUR1.4b lighter than before you took this methodology change in the first quarter?

Thanks very much.

Okay.

Let me, again, try to give an answer to your second question.

Look, we have not done an update of the EUR50b to one-to-one mathematically be able to say -- let's not forget we are still dealing with a moving target.

We don't have final regulation.

We don't have the final thing.

The EUR50b was an estimate that included, obviously, Management action that included our expectations of what realistic regulation will come in.

Technically, of course, the step we did is the first step in that direction.

And, technically, to whatever supposedly increase would be versus the supposed year-end 2009 figure this will apply.

Of course, it does apply because it's completely in line with what expected new regulations.

It goes in the same direction, it doesn't increase the gap, it doesn't rather reduce the gap.

But I don't have (technical difficulty) EUR50b now based on this EUR50b estimate we gave to you a one-to-one calculation that can tell you exactly what amount you could deduct from it.

Because, let's understand that the EUR50b was an estimate trying to help you, to give you a view after Management action.

After the reg changes that we expected at that time of what magnitude we are talking.

And, therefore, just please understand that this is not a mathematical one-to-one calculation that we track on a Excel spreadsheet that gives us pluses and minuses.

There has been so much happened since the EUR50b in the positive sense.

Some of our expectations as I have also told you have come true, which then, obviously, helps us to feel that we are more in that region that in some of the estimates that were out to the market, I also disclosed that.

But no one-to-one view.

On the core one -- on the Tier 1 capital adequacy and what capital relief, I think you made out a very good point.

I think what you will see with Sal.

Oppenheim that, of course, at the beginning we had a significant impact on our capital from Sal.

Oppenheim.

And, as the year progresses, we have a plan in place to significantly reduce risk-weighted assets from Sal.

Oppenheim.

Let's not forget Sal.

Oppenheim, at this point in time, as it just came into the Group, we have become, over the last couple of years, pretty good at managing risk-weighted assets.

I think we have a good track record in them.

And we're applying there as many assets in that group that the group does need for its core business.

When we talked about the clusters, we talked about the focus we want to bring to the business.

Cluster three is comprised of assets we definitely are reducing, disposing, because we don't regard them to be a core.

Cluster four, we said that we will look at our strategic options.

Certainly some of the outcomes of what could happen with cluster four will reduce risk-weighted assets for the Group substantially as well.

So we do expect, I cannot tell you exactly the time because it's contingent on when we will sell assets and when these disposals and closings will happen, but we do expect a significant reduction of risk-weighted assets coming from the whole cleanup and integration of the Sal.

Oppenheim group.

And is there any gain on the sale of the business to Macquarie already come in, or is that something that will be in the second quarter?

And, if so, how much?

The -- all the initial effects of consolidation were included in Q1.

Okay.

Thank you.

The next question is from Derek De Vries, Bank of America Merrill Lynch.

Please go ahead, sir.

Great.

Thanks.

It's -- I've got two questions actually.

The first relates to Basel III and just really to the comments that you and your peer groups submitted.

It seems pretty consistent that people think there's an unfair treatment of counterparty risk associated with the OTC derivatives.

I'm hoping you can just help me understand this a little bit.

So, if I look at your balance sheet, you have EUR620b of positive replacement value and then you mention in your comments you have EUR559b of netting impact.

And so is the right way to think about that to take the EUR620b to subtract the EUR559b, you have a EUR61b gap or so?

And then is the Basel III proposal to put that EUR61b gap essentially into risk-weighted asset terms i.e.

something around EUR60b and then you and your peers are saying hold on, that's not fair, that overstates the risk associated with that.

Do I have the crux of that argument right or is there some scaling factor of that EUR61b that I'm missing?

So that's my first question.

And my second question.

On slide 29, you give the impact of Sal.

Op on your revenues.

I'm just wondering if you could give us that same segmental breakdown of the costs exceptional in the quarter?

Okay.

For the Sal.

Op, we have made the decision that some of the parts of the Sal.

Op business on sales processes, etc.

not to give further disclosure on the segmental distribution of other components.

Please understand that as you have assets in a sales position, we want to be cautious with some disclosures around that.

On this first argument, I can only say your math is -- the way you look at it, it is not entirely correct in the sense that you cannot calculate it some more based Basel III -- suggests no recognition of netting for the leverage ratio.

That's why we strongly oppose.

But that's mainly the discussion was around the leverage element of it.

On the counterparty risk, the rules are quite more complex than the one you -- the conclusion you come to.

Because it's really more on a one-to-one basis and a one-to-one definition how it's going to be looked at.

So, I think I would caution you -- extremely caution you to apply this math, because that could guide you in the wrong direction.

But just so I understand.

So, what you're saying is what I've done, which is just take your netting number, that would actually overstate your netting because their definition of netting is even stricter than the one you use, is that correct?

Just from your answer, that's what I'm interpreting.

Again, I didn't get your point, sorry.

So, just conceptually, what they're saying is, look, there's this counterparty risk that you're not capturing and we want to capture it.

And so me, as an analyst, to try to work out roughly what the debate is over how big a number, I just take in your derivates position and then I've taken the netting number that you give in your slide.

When I say -- that the math is too simple.

That's what I'm saying.

(multiple speakers) that may be misleading.

But right.

But it's clearly not --

(multiple speakers) misleading.

Right.

But, clearly, it's not going to be -- it's going to be a bigger number not a smaller number, i.e.

the netting is going to be smaller, therefore, the counterparty exposure's going to be bigger than what I've done is what you're saying.

Because the definition of netting is stricter under Basel III than the one you use in your disclosure, is that correct?

No.

A large part already is based -- a large part of the risk-weighted asset is already calculated on the net.

And that's not expected to change.

And now to, here on the phone, estimate the magnitude of the differences is difficult.

Okay.

So --

Maybe I'll follow up offline.

I'll caution you that your math anyway could be heavily wrong, yes.

Okay.

Thanks.

The risk-weighted asset netting is unchanged, by the way.

It's only the leverage discussion where this has such a big impact, because on a leverage discussion that's what -- why you hear us so loud is that on a leverage discussion, it will be completely misleading, yes, in that sense, especially if you compare different accounting standards if it's given and the numbers would be quite low on the leverage if this effect is then taken into account this way.

If the math gets done this way.

But I also thought there was an impact on your risk-adjusted capital ratios because I thought the counterparty risk is not currently captured in the way they want to capture it.

So, it sounds like I'm confused and I need to have this conversation off line.

Yes.

Let's do that.

Ladies and gentlemen, and I apologize, but in the interest of time, I have to ask now for one last final question please.

The last question is from Kian Abouhossein from JP Morgan.

Please go ahead, sir.

Thanks.

I'm the lucky one.

Legal issues, normally, you only have to disclose them when they're material.

So, could you tell us how you define the materiality of those six legal issues?

Second question on compensation ratio.

If I look at CIB, it's quite low.

If I do some implied variation on CB&S, you probably accrued the lowest comp to revenue of your peers so far.

How should we think about compensation levels into the next few quarters, in terms of accrual?

Is this just a structural change that we're seeing, or, as revenues normally come off post the first quarter, should we also assume a change in compensation ratio, basically starting to increase?

And lastly, if I look at the Anshu slide on revenue decline on a clean year-on-year basis as a guidance for 2010, it looks to me it looks very aggressive now, i.e.

it's too conservative.

Is that fair to say?

Should we forget that material decline year-on-year on a clean basis?

Thanks.

Okay, Kian.

First of all, let me start with the comp level discussion.

Again, I -- we have had some structural changes, as you know, based on the G20 requirement.

We've had increase in our base salaries.

We have, therefore, obviously, in step one decreased accordingly our bonus, because this was the intention of the increase in base annual compensation.

We continue to be very committed and monitor the market developments.

We want to pay competitively.

I think it's essential for the success of our franchise to pay competitively.

We are observing what is happening in the market.

We all know, you all know, that there's sometimes quite different development in the markets in reality than in -- what some expectations were of what the structural changes will really do.

We have increased, obviously, our bonus accruals, because, based on the good performance.

If this continues, we will continue to have to increase bonus accruals throughout the year.

That has not taken -- the increased performance in Q1 has not yet been taken into account for the rest of the year, as we did our accruals on what the planned 2010 year results are.

So, we expect our comp ratio not to go further down.

We expect it to be at this level or slightly higher throughout the year.

But that depends now on how competitive environment development develops and how we feel that we need to pay in order to stay competitive and to retain top talent.

We have switched, though, from base to bonus.

And that, obviously, distorts some of the numbers.

The -- on the -- first, on the legal issues, what's the threshold of materiality, it needs to be in excess of 1% of our equity.

That's the threshold of materiality that we apply.

And the last question, what you should be expect on the material decline in Sales and Trading, Anshu's guidance is still valid.

I would say yes, there's no news from our point of view and no change.

We have -- in our overall Sales and Trading development, we observe a couple of the things that Anshu had predicted.

You see pricing became weaker as competition set in.

But we see increased volumes.

We see increased market share that all contributed to the success.

And, obviously, we also have seen a change in the mix in the business as well.

The exchange rate business is strong in the beginning of 2009, based on the environment, and has come now to a normalization.

That's also what Anshu predicted, the normalization of revenues that would occur in some of the areas that benefited at the end of the crisis.

Now you see our strength in the credit products coming back as customers come back and as we see the classical strengths of the Bank kicking in and the environment supporting that.

So what you see is mix changes.

What you see is volume improvements.

What you see is market improvements and, on the other hand, weaker pricing.

And that these components mix to the development that Anshu's done.

As I told you also, Anshu will be speaking soon at a conference.

And that will be a good question that you can ask him then.

I'm sure that he will present to that in detail.

But I think there's no change to what we said.

Great.

Can I just clarify this materiality, it has to be more than 1% of stated shareholders' equity?

Yes.

And that's on an after-tax basis?

Yes.

For each case?

Yes.

Thank you.

Okay.

Thank you, Stefan, for your explanations.

And let me conclude the call now.

Once again, I would like to thank you, everyone, for joining our first-quarter conference call.

Please feel free to contact the Investor Relations Department if you have additional questions.

Otherwise, have a nice day.

Ladies and gentlemen, the conference call is now concluded and you may disconnect your telephone.

Thank you and have a nice day.