Deutsche Bank AG (DB) 2010 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the third quarter 2010 conference call of Deutsche Bank.

I am Jason, your operator for this conference.

(Operator Instructions).

At this time I would like to turn the conference over to Mr.

Stefan Krause, CFO.

Please go ahead, sir.

Good morning.

This is Joachim Mueller from Investor Relations.

And a warm welcome from Berlin.

I'd like to welcome you all -- of you to our third-quarter analyst call.

You will find the presentation along with all the other documents on our website.

Please note our cautionary statement regarding forward-looking statements at the end of the presentation.

Our CFO, Stefan Krause, will guide you through the slides.

After that there will be room for questions and answers.

With that, I hand over to Stefan.

Yes.

Thank you, Joachim.

Good morning, good afternoon and good evening, ladies and gentlemen.

As Joachim said, today we're calling from Berlin, the birthplace of Deutsche Bank.

The third quarter actually was a milestone also therefore in the history of Deutsche Bank, because we successfully conducted the Bank's largest capital increase, generating a gross proceed of EUR10.2b.

As you know, we mainly need the money for our intended takeover of Postbank, where the PTO is currently underway.

But, before I start, I would really like to express my gratitude to our shareholders, who believe in Deutsche Bank.

We will continue to commit our capital in a shareholder-friendly manner.

Now, let's move to -- on to our third-quarter results.

We start at the third page, at the overview.

As you can see here, we had a strong operating income before income taxes of EUR1.3b.

Here, this time, because of the Postbank effect, we've added an additional column that shows you our results without this one-time accounting charge.

So in the quarter, as you know, Deutsche Bank has performed very well in, as we can see, still fragile global economy.

As we have indicated before, we had to revalue our existing Postbank stake and the MEB, which led to the charge of EUR2.3b, which therefore is masking a little bit the underlying strong operating performance.

But I'll try to guide you through to show, separate from that one-time effect, the good performance of the Bank.

This charge, as just said, was triggered by our intent to consolidate Postbank.

The related asset is a non-cash, non-tax-deductible charge, which represents a difference between the previous carrying value of the equity method investment and the fair value of the current stake as of September 30.

The charge was booked as a negative revenue in our Corporate Investment segment.

Including the Postbank-related charge, we reported a loss before income taxes of EUR1b.

We reported net income of EUR1.1b, excluding the Postbank effect, versus EUR1.4b in the third quarter of 2009.

Including the aforementioned Postbank-related charge, net loss in the third quarter was EUR1.2b.

Pre-tax ROE for the firm's target definition was 13% versus 14% in the third quarter of 2009, based on a higher average active equity.

Tier 1 capital ratio, excluding the proceeds of the capital increase, was at 11.5% at the end of the quarter, up versus the end of last quarter.

Excluding the Postbank-related charge, Tier 1 capital ratio would have been 11.9% based on a Tier 1 capital of EUR33.6b.

IFRS assets of EUR1.9 trillion was slightly up versus the end of the second quarter, while adjusted assets, which reflect the netting of derivatives and certain other trading instruments, were essentially unchanged versus the end of last quarter.

The Bank's leverage ratio for our target definition was 25 at the end of the quarter.

And here, as well, if I exclude the Postbank-stake-related charge, the leverage ratio was 24, slightly above the prior quarter-end level.

The increase is mainly to a reduction in the adjusted equity of EUR4.5b.

If I move onto page four, you see that the third-quarter net revenues were EUR5b compared to net revenues of EUR7.2b in the previous quarter.

Here, again, excluding the Postbank-related charge of EUR2.3b, net revenues for the quarter would have been EUR7.3b.

Net revenues included approximately [EUR130m] from the sale of Axel Springer shares, which had been pledged as loan collateral, partly offset by fair-value losses on certain of our own debt of EUR130m.

Lower revenues in CB&S were offset by higher revenues in our classic banking businesses.

Revenues in GTB and the Asset and Wealth Management business were both [set] by the recent acquisitions.

In all businesses, net revenues were in line or higher compared to the prior quarter, with the exception of GTB, where the second quarter included the recognition of provision and negative goodwill for the first-time consolidation of parts of ABN AMRO of EUR208m.

If I move onto page five, we show you the provision for credit losses, which were significantly below last year in both our core lending and our non-core IAS 39 portfolio.

The quarter-on-quarter increase in IAS 39-related provision for credit losses reflects charges on a small number of individual assets, where we mainly saw rating downgrades.

Nothing that overly worries us, but as I told you in the last quarter, there will always be some variance in this number, given it is very asset-specific and event-driven.

In our core business, provision for credit losses has been very stable with PBC recording EUR165m this quarter after EUR171m last quarter.

CIB, excluding IAS 39, remained at a low level and quite a bit below the EUR109m recorded in the prior-year quarter.

The slight overall pickup in provision for credit losses outside IAS 39 includes a higher provision related to the Sal Oppenheim Group and ABN AMRO, which you know is covered by -- 75% covered under the risk umbrella, in line with our expectations.

If I move on to page six, you'll see the development of non-interest expenses that were at EUR5.7b in the quarter, up EUR300m compared the third quarter of 2009, bearing compensation and benefits of EUR3b, up EUR140m versus the prior-year quarter.

The increase is mainly driven by the acquisitions and exchange-rate effects.

The comp ratio, excluding the Postbank-related charge, would have been 41%.

General and administrative expenses were EUR2.5b in the quarter, up EUR350m compared to the third quarter last year.

As you may remember, we had a specific negative item of EUR200m in last year's number, related to the repurchase of investment products from private investors.

Adjusted for this, almost half of the increase is related to the acquisitions.

More than EUR100m represents the impact of foreign exchange rate changes.

And the majority of the remainder is driven by business extension and strategic initiatives, including some IT investments that are also related to our complexity reduction effort that I cover later.

The reduction in other non-comp expenses reflects lower reserves in our Abbey Life business, which was fully offset by corresponding revenues in CB&S.

Not yet reflected in our comp costs are any impacts derived from the new German and the new European CRD 3 regulation on compensation.

All remuneration paid after of January 2011, including variables paid resulting from 2010 performance, will be subject to the new regulation.

We're currently reviewing the new requirement and any potential actions for our compensation structure and governance.

Let me move on now to page seven, in which, as I already mentioned, excluding the Postbank charge, the third-quarter income before income taxes would have been EUR1.3b, in line with the same quarter last year, which we feel is a really solid result considering the usual seasonal Q3 slowdown in client activities.

The pre-tax loss of EUR1b included, again, the aforementioned Postbank charge.

If I move onto page eight, in the third quarter we recorded a net loss of EUR1.2b versus a net income of EUR1.4b in the third quarter 2009.

The effective tax rate in the quarter was negative 16%, also distorted by the Postbank-related charge, which did not result in a tax benefit.

Without this charge, the ETR for the quarter would have been 13%, benefiting from the favorable geographic mix of income and the release of the deferred tax liabilities.

We expect the full-year ETR to come in approximately 44% because of the Postbank-related charge, which, as I already said, did not result in a tax benefit.

Without that, our full-year ETR is -- would have been expected to be approximately 28%.

Currently, and I apologize for that, we do not provide a mid-term guidance for the Bank's ETR because, obviously, of the current uncertainties related to the UK and German bank levies which are still being discussed.

If I move on to page nine, here we show our Tier 1 capital ratio development, which was at 11.5%, as I said, at the end of the quarter, up from 11.3% at the end of the second quarter.

Excluding the Postbank-related charge, our Tier 1 capital ratio would have been at 11.9%.

The Core Tier 1 ratio, which excludes obviously the hybrid capital instruments, was up 7.6%.

Excluding the Postbank-related charge, our core Tier 1 ratio would have been 8.1% at the end of the third quarter.

Not yet reflected in these ratios are the EUR9.8b of net proceeds from our capital increase, which was successfully completed on October 6 and would have led to a pro-forma Tier 1 capital ratio of 15% and 11.1% core Tier 1 ratio respectively.

Those ratios reflect the Postbank-related change.

The decrease of Tier 1 capital of EUR2.5b during the quarter was offset by reduced risk-weighted assets, which were EUR26b lower than at the end of the second quarter 2010.

On page 10, I disclose some further developments both for Tier 1 capital and risk-weighted assets.

As you can see, Tier 1 capital decreased to EUR31.8b, compared to EUR34.3b at the end of the second quarter.

And the decrease is largely driven by the net loss; that includes obviously the Postbank charge and negative effects of EUR1.4b, partially offset by capital deduction items of around EUR400m.

The Postbank-related charge was partially offset by a reduction of the capital deduction for our Postbank investment and by reduced risk-weighted assets on the mandatory changeable bond.

Risk-weighted assets, as you can see, decreased from EUR303b to EUR277b at the end of the quarter.

The decrease was mainly related to FX movements and risk-mitigation initiatives within our credit risk, as well as lower levels of risk exposure and reduced market volatility within our market risk.

It includes also a risk-weighted asset relief of EUR5b arising from the revaluation of the MEB.

On page 11, I show you the strength of Deutsche Bank.

Again, in terms of our funding and liquidity position, we continued to have a very diversified liquidity position.

The reduction in stable funding sources is consistent with lower term funding requirements.

Our strategic liquidity reserves stands still at EUR45b.

And in September, we have already now completed our issuance plan of EUR19b for the year.

Let's move on to now the segment results on page 13.

We have once again proven the robustness of our recalibrated business model, despite the continuing demanding economic and market conditions.

This slide not only shows the solid performance of our Investment Bank, but also robust results in all of our classic banking businesses.

GTB and Asset and Wealth Management were both impacted by their respective recent acquisitions.

Excluding the Sal Oppenheim transaction, Asset and Wealth Management has achieved a pre-tax profit of EUR130m in the quarter.

And again, here the result in Corporate Investment reflected the charge related to Postbank.

On page 14, let's move on to our Investment Bank.

And here you see that despite challenging marketing conditions -- market conditions in the quarter, we achieved a EUR1.1b pre-tax profit, which I think is quite remarkable.

On page 15, we've split up now the P&L of our Investment Bank.

First into sales and trading, here net revenues of EUR2.9b that were in line with the prior year quarter, as we have said.

Revenues were impacted by a EUR90m charge related to Ocala.

Overall volumes in the third quarter were down 20% versus the prior quarter, but 17% higher than the previous year.

Equity volumes were up significantly in September, as were rates and FX volumes.

Businesses such as flow credit and cash equities saw a surge in revenues in September, about 50% above July and August levels, as activity and volatility returned to the market.

We also saw significantly lower client activity, especially in Europe, due to sovereign risk concerns, as well as the usual seasonal slowdown in the quarter.

Wider margins towards the second half of the quarter reflected lower liquidity and risk aversion, but margins remained far lower than during the peak of the crisis.

There was a significant pickup in the second half of September and growth in volumes partially offset the reduction in margins compared to last year.

As expected, in a lower-volume environment, we saw slightly higher margins in July, compared to July of 2009.

However, by September, margins had contracted.

Overall in the third quarter, margins were 44% lower than in the third quarter of 2009, which offset the higher volumes.

Nevertheless, conditions reaffirmed the importance of global markets recalibration and our revenue diversification.

On page 16, you see that the diversification of our fixed-income businesses was very important during the quarter, and allowed us to post solid results.

Although credit activity was muted, we saw good revenues from FX and rates.

In FX we saw increased volume, even compared to 2009, which I think is quite remarkable and shows that we maintain our competitive edge in these products.

Money markets and rates revenues were lower versus the previous-year quarter, reflecting market normalization and lower margins.

However, we recorded an increase in rates solutions for our clients, even though we also had a very strong [flow franchise].

We ranked, by the way, number one overall in Risk Magazine's Annual Risk Interdealer Poll, with top rankings across most currencies and tenders.

In credit, we had a strong performance across the franchise, both in our flow and distressed businesses, but also in our solutions businesses, which was described at Investor Day as working with clients on restructuring their exposure by not exposing ourselves to illiquid risks.

In emerging markets, we noted an increased interest in Latin America and we continue to develop well in Eastern Europe.

Euromoney voted us the Best Risk-Management across our emerging markets franchise.

Commodities' results were lower compared to the prior year, due to low volatility and difficult trading conditions, but we are still on course to deliver good results this year.

Let's move on to page 17.

We are obviously very happy with the performance of our recalibrated equity spread fund, which is more client-focused and we have significantly reduced our tail risks.

This quarter, we shut our dedicated equity cross-trading platform.

We're number one in prime brokerage and are number in [euro] cash equities and are investing in improving our market share in US and Asia cash equities.

I will admit that we are somewhat disappointed by our equity derivatives performance, but continue to invest to grow client market share over time, for example, in institutional flow equity derivatives.

CIB integration, the integration of our Investment Bank, will ensure that we are able to bring our primarily and secondary franchises even closer together, so we'll benefit from the large pipeline of IPOs.

However, client volumes were down substantially in the third quarter compared to the second quarter, while volatility increased.

In cash equities, like in the second quarter, commissions held up well, but client facilitation was difficult in this environment.

And overall secondary market activity was significantly lower due to the lack of primary issuance.

In equity derivatives, we saw extremely low client activity.

Our prime brokerage platform continues to do very well.

Despite a much more competitive environment and margin compression, we maintained very stable revenues, as we on-board more clients in new products in our synthetics business.

We exited our dedicated equity prop trading business.

This was small revenue contributor anyway, and the fact that we generate good equity results without any contribution of prop is a testament to the success of our client franchise, but there's still work obviously to be done, as I described previously.

Keep in mind that we continue to aim to improve our model.

We run our business now with significantly lower risk.

This will, at times, limit our upside, but also our downside, and should improve relative revenue stability over time, which is what we understand shareholders want us to do.

On page 18, we show that in Origination & Advisory we achieved a solid result in the second quarter and continue to make a good progress in achieving our target of a consistent top-five position.

DB ranked number five globally for the first nine months in Origination & Advisory.

In the last three years, DB has gained the most market share and ranked the most league-table positions of any bank in the top 10, three places from number eight at the end of '08 to number five at the end of September.

We ranked number four globally by fees here today, which represents our best ever advisory ranking for the first nine months.

Looking ahead, strategic M&A expected by well-capitalized acquirers and significant go-private LBO activity driven by financial sponsors.

So we have a good outlook here for our business.

Deutsche Bank ranked number five globally and has maintained our number-one position in the first nine months in EMEA, with a strong IPO backlog, and are ranked number two in the Global IPO bank [loan].

We were also ranked number two in all bonds and in euros, and number two in all Euromarket issues, number two in all corporate bonds in euro year to date.

In high yield, DB ranked number five globally and number one in Europe.

Expect issuance to remain high, and the leveraged loan market to remain positive for this business.

Against this climate, I think Deutsche Bank has achieved a competitive ranking, whilst maintaining our underwriting discipline which we will continue to monitor very closely.

On page 19 we show the results of GTB, which had a solid third quarter with an overall EBIT of EUR214m compared to a record second-quarter result driven by a EUR208m provision and negative goodwill attributable to the commercial banking activities that we acquired from ABN AMRO in the Netherlands.

GTB's net revenues were EUR852m in the third quarter, an increase of almost 30% compared to the third quarter.

This was predominantly attributable to the commercial banking activities that I have just described.

In provision for credit losses, GTB recorded a net change of EUR44m, which is an increase of EUR38m year on year, solely driven by the aforementioned acquisition.

Non-interest expenses were EUR594m in the quarter, up EUR141m compared to the third quarter 2009, driven by integration and operating costs related to the acquisition, as well as higher regulatory costs related to deposit protection.

As I've told you in the past, the last results -- that was in the last call, the ABN AMRO P&L impact is anticipated to be roughly breakeven for 2010 due to one-time integration costs, since we are taking over and integrating this business.

The bottom-line acquisition-related pre-tax profit impact this quarter was EUR13m negative.

On page 20, we show the different -- results of the different businesses within GTB.

All these businesses suffered from seasonal decline quarter on quarter.

But overall performance improved year on year.

We have recorded a continued shift to fee income, as planned, that we have done to counterbalance the impact of the still low interest rate environment.

Strategically, we're trying to move this business segment further away from its dependence on the interest-rate environment.

However, interest rates are also slowly starting to increase again in some regions, mainly in Asia.

In the 2010 Euromoney Cash Management poll published in October, Deutsche Bank retained its number-one position in euro clearing in the Western European Corporate Cash Management, while improving to number-two position in the US and Latin America for US dollar clearing.

Our trust and securities service showed a solid performance, mainly driven by the direct securities services business.

And here also, particularly in Asia, we expect the GTB business to continue capitalizing on their improved position in the market as we move on.

On page 21, I move to our Asset and Wealth Management business that recorded net revenues of EUR1b in the third quarter 2010, an increase of 32% year on year.

Revenues included EUR200m related to the Sal Oppenheim Group.

Provision for credit losses were EUR19m, up EUR14m compared to the same quarter last year.

This development was primarily driven by higher provision related to the Sal Oppenheim Group.

Non-interest expenses in the third quarter were EUR921m.

Sal Oppenheim and BHF accounted for more than 80% of the increase year on year.

On page 22, I show some details about the performance of Asset Management, which reported a strong pre-tax profit of EUR84m, up 50% quarter on quarter, due to one slightly more favorable market and obviously as a result of this higher performance fees in DWS Europe, mainly in money market and the equities business, and also quite a success in a lower cost base.

A lot of things in this business are going in the right direction.

Real estate write downs are trailing off.

And the restructuring of Asset Management over the last year -- five years, it's mostly completed.

And, going forward, we should see the underlying earnings and the underlying benefits of this significant restructuring we've done to this business.

Net new money inflows of EUR2b, predominantly in cash and insurance products, started to reverse last quarter's cash outflow trend.

On page 23, I show the Private Wealth Management business that's adjusted for the Sal Oppenheim Group consolidation effect, achieved a EUR47m pre-tax profit.

The revenues, ex Sal Oppenheim/BHF, were lower due to seasonal effects, but were up compared on a year-on-year basis.

Costs in this business remained stable quarter on quarter, despite the IT investments we had to do in this business currently.

We are also pleased with the progress we have made in Asia, where revenues were up 25% year on year.

And also I can report that Sal Oppenheim's performance has now improved quarter on quarter.

On page 24, another of our successful businesses.

PBC's net revenues were EUR1.5b, up 5% versus the previous -- prior-year quarter.

Provision for credit losses was EUR165m in the third quarter, down 21% compared to the third quarter of 2009 as a result of measures taken in the portfolio and on -- at different country levels.

Non-interest expenses were EUR1b in the third quarter and were in line with the prior quarters, while the third quarter 2010 included expenses for strategic projects and other one-offs.

And if you see on page 25, our comparisons, these results was really the best quarterly results since the Lehman bankruptcy, even exceeding our strong second-quarter results, driven by revenue growth, reduced provision for credit losses and stable costs.

Higher margins led to a record quarterly revenue in our deposits.

Revenues from credit products were robust.

We had a solid performance investment products, but we have still the results of the usual holiday season and that general environment.

We were very pleased with the performance in the quarter.

Also, in this division, things are moving in the right direction.

Let me move on now to some key current issues.

And, as you know, on October 6, on page 27, I refer to our two large transactions.

As you know, on October 6, we completed our EUR10.2b capital increase.

And you know, one day later, on October 7, we published the offer document for the voluntary public takeover for all of the shares of Deutsche Postbank.

Acceptance period runs from October 7 until November 4.

And the final settlement is then expected by either the end of November or the beginning of December.

As you know, our offer price is EUR25 per Postbank share.

And, through this takeover offer, we aid to consolidate Postbank already this year.

As you know, going in, we did hold 29.95% of the shares, but, as of Thursday October 21, we have -- the offer has been accepted for a total of 1.3m Postbank shares, so we are successfully already above the 30% threshold.

On page 28, now I think move onto one of the real hot topics right now.

And I'm going to ask to bear with me for a while, because we need to give you some detailed explanations on this page and on the next.

On these two slides, I want to explain to you how we look at the upcoming regulatory changes, specifically the new trading book rules under the Basel 2.5, CRD 3, which will become effective on December 31, and the new minimum capital standard, under what is referred to as Basel III, CRD 4, which will be phased in over a number of years, starting on January 1 of 2013.

I have to separate this.

And let me first talk about the impact on the risk-weighted assets and then talk about the impact on capital.

Based on our latest analysis, the new trading book rules, when applied to our current position, would increase our risk-weighted assets by EUR85b.

Banking book rule changes would add another EUR8b.

The higher trading book risk-weighted assets comprise charges for stress value at risk, an incremental risk charge for credit default exposure, as well as additional charges for trading book securitization, which includes correlation trading.

On the banking book side, the increased charges caused by the introduction of higher risk weight for re-securitizations (technical difficulty).

Under Basel III we see additional risk weighted assets of EUR185b, again before Management action.

Here the main items are 1,250% weighted securitization positions, currently deducted half and half from Tier 1 and Tier 2 capital, as well as the new risk-weighted assets requirement in relation to credit valuation adjustments.

Obviously all of these movements will be subject to management and risk-reduction actions.

Overall, targeted management actions will allow for a reduction of EUR90b risk-weighted assets as we manage down legacy positions and further optimize our risk profile and processes.

And, as we have said, this includes a reduction also on the trading book Basel 2.5 to [EUR50b].

Let me give you some more specifics.

On stress VAR, we intend to rebalance our trading book risk profile further to be less sensitive to extreme market moves.

However, to protect our overall trading franchise, we will continue to provide sufficient VAR and stress VAR limits to the businesses.

It means that management action in this area will provide comparatively limited benefits.

Regarding the new incremental risk charge, we see more room for mitigation.

Here, in particular, targeted hedging of low-rated sovereign exposure will be used as an effective countermeasure.

The biggest area of risk-weighted asset increase, and therefore also the biggest area of risk-weighted asset mitigation, is the securitization, which also includes our correlation trading.

Under Basel 2.5, trading book securitizations and correlation trading will attract extra charges.

And under Basel III, securitization-related capital deductions get replaced by risk-weighted assets at 1,250%.

The targeted reduction includes a further reduction in our correlation trading exposure where we have already made good progress, as well as a review of our full inventory of trading and banking book positions, for which we target a reduction of about a third.

The CVA-related charges that will come with Basel III are another area of significant management action.

Next to targeted counterparty risk hedging in collateralization of exposures, we also continue to investment in our infrastructure.

The latter will result -- will ensure that we have the most appropriate modeling results, which include conservative regulatory add-ons only for a very few selected transactions.

Lastly in this area, the shift of OTC derivatives towards central clearing will provide risk-weighted asset relief.

Combined effect of Basel 2.5 and Basel III after target actions, would be approximately EUR188b risk-weighted assets, or what we call EUR125b risk-weighted asset equivalent.

Let me explain what we mean by this.

That includes the Tier 1 capital benefit from the removal of securitization-related Tier 1 deductions under Basel III.

To clarify, we've added a column for risk-weighted asset equivalent value to give you an estimate of the net core Tier 1 ratio effect from future rule changes after management action.

What we reflect here is the fact that, under Basel III, we not only have higher risk-weighted assets, but also higher core Tier 1 capital because securitization-related Tier 1 deductions will be removed and, instead, reflected in risk-weighted assets.

[Scaling these] no-longer-required Tier 1 deductions by 12.5 and subtracting the benefit from the net risk-weighted asset impact gets you to the EUR125b equivalent.

Simply speaking, you multiply the EUR5b deduction times 12.5 and get a EUR62.5b risk-weighted asset equivalent, which is the difference between the EUR188b risk-weighted asset and the EUR125b risk-weighted equivalent.

If I now move on to page 29, here I show the capital effect of the equation.

Thus, therefore, our simulation that we have prepared here plays out in all of our risk-weighted assets and therefore in the Core Tier 1 capital and capital ratio terms.

First, we take the September 30 Group risk-weighted assets of EUR270b, as I reported previously, and then we add the effect of the anticipated consolidation of Postbank.

Then we add the EUR188b risk-weighted assets from the previous page, from the Basel 2.5 and Basel III, and then you arrive at a pro-forma risk-weighted asset of EUR525b under the future regulatory regime.

This obviously includes now Postbank.

Second, we simulate movements in Core Tier 1 capital, beginning with the EUR21b published today for the third quarter.

To start, we then adjust the Core Tier 1 capital by the EUR8b, reflecting our recent rights issue and the anticipated Postbank consolidation effects.

In our scenario, we go on to add about EUR11b net income until January 1, 2013, purely based on current analyst forecasts and a dividend assumption.

Lastly, we add back the current securitization Tier 1 capital deduction as this must be reflected as risk-weighted assets under Basel III rules.

In such a scenario, we would arrive at a pro-forma January 2013 core Tier 1 ratio of 8.5%, way above the regulatory 3.5% minimum at that point in time.

Now, I understand that many of you are asking what the situation would be if Basel III rules would be fully applied as of January 2013.

For us, to be honest, this is not really an issue, and the real question should be how much capital a bank needs from a regulatory and economic perspective at a given point in time to be safe and sound, but without being over-capitalized at the expense of shareholder returns.

Still, to answer your question, we provide you here with an estimate of the capital impact from applying directly, this is what we mean with the word without phase-in, the full Basel III rule package as it is expected to be legally in place in the year 2019.

Applying 2019 rules directly at January 1 of 2013 leads to a pro-forma core Tier 1 of 7% in our scenario and over 8% by the end of this year.

Lastly, in our chart we illustrate our ability to generate new capital through net income over the Basel III phase-in period, calculated by applying the latest analyst net income forecasts for 2013 flat for five years.

As you can see, capital formation will provide ample room to ensure strong capitalization, whilst at the same time being able to pay attractive dividends to shareholders and to fund future growth.

So starting 2013, meeting analysts' estimates would allow us to pay annual dividends of 30% to 40% of net income, grow risk-weighted assets by EUR20b a year and still achieve a core Tier 1 ratio of above 10% at the end of this phase-in period.

So let me finish in saying that while we do have concrete plans to mitigate the impact of upcoming regulatory rule changes, as discussed on the previous page, we remain 100% committed to our broad trading franchise.

And we will optimize our actions in the interest of our shareholders and allocate our capital for the most [accretive] businesses, balancing capital requirements and shareholder return.

On the next page now, I move away from the capital topic to the second hot topic, obviously we brought up here for your attention, which is the update on our complexity reduction program.

It took some time to go on with the program and finalize the program.

You should take this as proof that we did or homework first.

We have now a detailed action plan in place.

And we're already delivering against it as we speak.

The target, we have now identified initiatives in excess of EUR1b of efficiency gains which are, as I said, already being executed right now.

As mentioned, we're focusing on mainly three levers.

It's Group-wide standardization, it's consolidation, especially in the IT systems area, application systems, and we are reducing our reporting processes and improving their efficiency.

And we are also centralizing our vendor and centralizing all our sourcing activities.

A generic description and some initiatives and examples of initiatives are outlined here on the slide.

And, again, many of my colleagues are happy to provide you with additional color if that would be required.

Now, on page 31 I want to make you aware that obviously the timeline for the target cost-to-achieve and savings of the complexity reduction program.

Obviously, due to the scrutiny we applied setting up the program, we won't be able to reap all benefits already in 2011, as initially indicated, as the 2011 exit rate reflects sustainable cost savings from initiatives implemented by year end of 2011, which will fully occur in 2012.

So, in 2011, more than EUR500m of net savings are scheduled to be achieved.

But, of course, the run rate of net savings will increase during the year.

So in 2012 the program will reach its full run rate of EUR1b of net savings.

For 2010, planned savings and cost-to-achieve will almost neutralize, but for the first nine months we've already achieved EUR200m, which were offset by cost-of-achieve.

On page 32, I show you that -- the divisional split of the targeted cost-to-achieve and the savings.

And, as you can see, all businesses are contributing to their complexity reduction efforts.

The majority of cost-to-achieve and savings obviously affect our Investment Bank.

This program, by the way, does not yet include savings we expect from the integration of Global Banking into our CIB platform.

We will provide you with more information in due course.

But let me already highlight that we have ambitious plans to optimize the structure and reap further benefit of the integrated platform.

So, to conclude, on page 33 we show our performance in the first nine months of 2010 against, obviously, the 2011 profit targets.

And, after nine months, we have achieved EUR6.1b and we remain committed to our target.

And we believe to be on track to achieve our 2011 target.

Please bear in mind that obviously the underlying profitability in the first months -- first nine months of 2010 was negatively impacted by a variety of specific charges, such as the front loading of the UK bonus tax, integration costs of Sal Oppenheim and the other acquisitions or asset markdowns.

Our continued improvement in the classic banking business in the third quarter also gives us a lot of confidence that we are on the right track, under the assumptions made at Investor Day.

So, to sum up, the economic environment remains challenging and our business model was influenced by the third-quarter seasonal slowdown.

Against this backdrop, we had still a very strong operational performance.

Our Investment Bank remains a very strong pillar of performance, with a much improved risk profile.

Our proposed acquisition of Postbank will allow us to develop an equally strong second pillar, improve our earnings mix with an increased proportion from more stable revenue streams.

And in executing on our current initiatives, which is the complexity reduction and the cost savings of the CIB integration and the targeted Postbank synergies, we will definitely create incremental shareholder value.

So if economic and market conditions further stabilize, we are also confident that we will continue to deliver strong earnings.

So thank you very much, and we are looking forward to your questions.

(Operator Instructions).

The first question is from Christopher Wheeler.

Please go ahead, sir.

Yes.

Good morning, gentlemen, and well done on some good results.

Three questions, if I may.

First of all, on the Basel III disclosure you've given, which is very helpful, the securitization side.

Could you perhaps comment on the impact you think the changes in securitization [sleevement] will have on the way you do business in that particular area?

Because clearly the concept of holding on to some of the higher-rated pieces of those transactions is part of actually getting deals done.

Do you think there's going to have to be a change in the way you actually operate in that area?

That's the first question.

The second question is on Wealth Management.

I notice the decline in earnings from EUR77m to EUR47m in EBIT before Sal Oppenheim.

I'm finding that a bit confusing, by looking at your spreadsheets, given that revenues were pretty up or flat across the board in Asset and Wealth Management.

And I'm just wondering what was the reason for that decline.

Is it a reallocation of some costs or maybe the costs of the build-out?

And the final point which I asked UBS yesterday, and you touched on in terms of the new European laws on compensation, what are your -- how are you viewing the bonus round as you move forward, given the fairly aggressive noises obviously this week from the British Prime Minister and Business Secretary about their intentions if banks choose to what they describe as paying unreasonable bonuses in the particular climate?

Because certainly UBS insinuated yesterday that they would just get on with it, retain talent and take the hit in Q1 for what will inevitably be not just perhaps a UK bonus tax but other bonus taxes.

And I just wonder how you viewed that, particularly given the comment you just made on your EUR10b targets.

So thank you very much.

Thank you, Christopher, for your questions.

Obviously you touched on a very good point; and that's valid not only for securitization but for all our business.

In the new environment certainly we need to reassess what -- how our business model is going to look into the future in different areas, and the additional capital charges certainly will demand that.

And obviously, in terms of your securitization question, we plan to continue in this business.

We believe that securitizations are important for the world.

It's a -- we continue to believe that there will be a market.

And we will definitely stay in this business as a market maker.

But, however, the volume of these positions that we hold will need to be lower, and certainly we will need to be able to go to quicker terms on those.

So it will change the shape of it very clearly.

In terms of the Wealth Management, there was no specific cost issue in here.

It was mainly driven by the usual seasonality in between Q2 and Q3.

It's vacation month.

And therefore we have -- that mainly impacted this business.

So this is what happened with Wealth Management and nothing out of the ordinary, with a little higher run-rate costs in this quarter as well.

In terms of your compensation question, number one, we also acknowledge there is a lot of general pressure on the compensation topic.

It continues to be also, not only in the UK but also in Germany, an area of focus.

We will have to manage this.

On the other hand we see that the market continues to be very competitive and top talent has its value and its price, and we can't not ignore that fact.

So we have found some formulas how we deal with it.

I think there are some areas in terms of our business where we can effectively start reducing bonuses without weakening our competitive performance.

This is mainly obviously in less-competitive back-office functions and things like that.

But we also have a significant new German law that basically rules the percentages between fixed and variable compensation, and within the variable compensation, fixes percentage between cash and stock, and then, within those, again rules deferred amounts and straight paid-out amounts.

So quite complicated.

We are assessing the implementation of this, but it will have an impact on how compensation is structurally done.

Overall, we believe though that if we comply with these rules, that mainly aim to reduce the incentives of risk takers to take on short-term risk, that we should not have a problem, nor with governments, nor with regulators.

I think that the spirit that we always understand out of the discussion is to make sure that the incentive structure is derived for a longer term, not short-term risk taking and to try and attempt to influence right behaviors.

So therefore I think if we comply with that and if we are able to prove to regulators and to our government that what our new compensation system is, and we comply with these rules, we expect that we will be able to manage that.

Just as a follow-up though, Stefan, clearly nobody would argue with your sentiments at all on this call, I would suggest.

But I think the comments we certainly heard in the UK about absolute levels of compensation which does suggest that we -- they will return to a bonus tax, undoubtedly, if we do go to into a competitive round of bonuses.

But anyway there's no answer yet.

But it's quite interesting that the German law, for example, and the discussions we had with the German government did not provide any absolute level caps.

So I think in that, in the environment and the discussions we have had, we know that people understand this is not something you can regulate or govern.

This is something the market -- at the end, the market will define.

But I think it's right for governments and it's right for our regulators to make sure that the incentive system drives the right behavior.

And I think that's what, bottom line, is what we are focusing on.

Thank you very much.

The next question is from Kinner Lakhani from Citi.

Please go ahead, sir.

Yes.

Hi.

Good morning.

I wanted to come back to slide 29 actually.

And basically I wanted to understand what are your views in terms of the natural RWA inflation, because obviously this analysis has been done based on the EUR277b of RWAs at the third-quarter stage.

So I just wanted to get a feel of how you would think about natural RWA inflation over the coming years.

Secondly, also if you have any views on capital requirements for systemically important financial institutions, of which I'm sure Deutsche Bank would be one.

So if you have any kind of broader views on that.

Secondly, what do you -- what's your read of the kind of exposure and risk of Deutsche Bank to the US mortgage business, both from an origination standpoint, I remember you had an originating vehicle in the US, but also from a securitization point of view?

And final, maybe if you could provide us with an update on how you're thinking about dividends for the current year.

Thank you.

Yes.

Thank you, Kinner, for your questions.

Let me start with your RWA question.

Obviously our simulation, as we said, does not include any actions or growth that we plan to take outside, obviously outside assets or anything.

But again, this is always -- when you do a simulation, we have to base it or found it on a specific point of time.

And therefore, obviously this is what this [math] does at this point, as you know.

But it does also not include BHF sale; it does also not include any divestments we might do; and does also not include to the downside of that, for example, any change or recalibration of our business model.

So to some extent I think it's a fair estimate of where we're going to be, because we will see chances and opportunities on both sides in terms of an increase and decrease.

As we have described, it's important.

It is important to take into account that obviously a simulation like that needs to be based on something and we are somewhat limited in terms of what we can see in terms of forward-looking statements as well.

On systemically important banks, we understand that this will be covered outside of core Tier 1 capital, but ultimately this is too early to tell.

We know that we will be -- if something like this, we will be a bank exposed to that.

But again, I defer to the longer-term implementation timeframe, which again, let's go back to what regulators and governments really intended to do is give banks enough time to grow into these scenarios.

So I think as I have presented, we have ample room in our capital map that we have provided to you.

As you know, we have not provided for any earnings growth.

We used just analyst estimates and then projected them out.

So I think there is some ample reserve to compensate if there would be some additional requirements.

But I think you've heard capital markets' estimates that range around a bank of our size being in the 8% to 10% capital requirement framework.

And I think that would mirror our views, our current views as well, but taking into account a longer implementation time.

Our exposure to the mortgage business, let me say that obviously we are aware that there is much discussion in the markets regarding these mortgage-related issues.

And, in our view, those discussions has been focused on two areas.

First, obviously the impact, the financial impact due to any defects in the mortgage foreclosure documents or foreclosure practices done by loan servicers, and second, the exposure to mortgage repurchase claims for alleged breaches of representations and warranties.

These are, from our point, the two main areas of risk.

With respect to the alleged defects in the mortgage foreclosure documents and practices, we do not expect here any significant exposure because we do not have a US mortgage loan servicing business.

And, as you know, our originator business is disbanded by now and closed by now.

And therefore on mortgage repurchase claims we currently have approximately $780m of pending mortgage repurchase demands.

And we have a reserve against these claims that we believe are more than adequate.

And the last question was the update on dividends.

I can give you my usual update on dividends that obviously it's a decision of the Supervisory Board and the AGM.

So therefore we accrue always to the previous year dividend policy, which is no indication of what our true dividend decision will be at year end.

Brilliant.

Thank you.

The next question is from Mr.

Huw van Steenis from Morgan Stanley.

Please go ahead, sir.

Good morning.

Can I just ask three questions?

Firstly, about 19% of your level 3 assets have been moved up to level 2.

Could you share with us what -- which instruments or any color you can on that move?

Secondly, maybe if you could share any thoughts on Deutsche or your perspectives on the potential use of CoCos if that were to be a mature part of the system and premium in the future?

And thirdly, just going back to the mortgage repurchase issue, sorry I think I missed what reserve you had against the $780m of pending claims.

And does that also include the litigation which AGO had been considering against Deutsche as well?

Thank you very much.

Let me start with your last question.

We are not disclosing what the reserve levels are, but we are adequately reserved.

As you know, this is a business that we already since some time started to reduce and started to get out of in the US.

This dates back as far as our decision in 2008.

So, in the process of disbanding this business and in the process of running off this mortgage origination entity we had in the US, we have reserves more than adequately for any risk.

This is part of the [disbanding] of this.

But at this point we are not providing, for obvious reasons we're not providing any numbers around that.

On the level 3 assets it's pretty much across the board.

It's -- obviously a big portion is derivatives, but that's also been a large portion in the level 3 assets.

And we saw a migration as markets had improved.

We observed our parameters for our models have increased.

We had more observed parameters so we had a significant move there.

That had something to do with the fact that we just put better assets in our models to the value of these assets.

We are, to your other question, we are looking at CoCos but we don't have a firm view, at this time either way.

What we do believe is that as a system the financial industry should have CoCos available, but this will always depend on regulation.

And then at the end of the day it will also depend on the cost and how attractive a funding instrument of this nature will be.

Perfect.

And just to clarify, the $780m includes the litigation from Assured Guaranty as well.

No.

This is a separate --.

Okay.

Yes.

Thank you very much indeed.

The next question is from Carsten Werle.

(inaudible).

Sorry?

Hello?

Mr.

van Steenis, you can still be heard.

Sorry, no, I've finished my question.

Thank you very much indeed.

The next question is from Mr.

Werle from Macquarie Capital.

Please go ahead, sir.

Yes.

Carsten Werle.

Good morning.

Two or three questions, please.

On page 28, you targeted management actions that you've already elaborated on, Herr Krause.

What would you realistically expect to be the negative revenue impact from these and what should we assume here?

Then I would like to come back to the dividend question that we heard before.

I understand that actually you take the EUR0.75 per share dividend into your model until 2013, and it's not just as an accrual base for this year.

Is this actually indicating that also from your side, as well from others who have already said so, we should expect very low dividend yield going forward?

And last question, on the net new money in Private Wealth, I think we had another outflow of EUR3b.

Perhaps you could shed some light where this is coming from, where you see inflows, where you see outflows.

Thank you.

Okay.

So the target management action we see that they will be all doable with very limited P&L effect.

Let's not forget that some of them don't have a P&L effect at all.

This is the improvement side, this is some of that.

And then obviously some of them are related to legacy assets in which anyway the P&L contribution is limited.

So the way that we have looked at management actions was to carefully balance exactly what you say and not to risk our future P&L and our profitability.

But obviously, for example, there will be some hedging costs.

Sometimes you get risk-weighted assets reduction when your hedge goes up.

There will be something like hedging cost.

And certainly what we don't know exactly yet is, for example, as derivatives move to platform, what the revenue model will be there.

But this is more future than existing P&L at this point in time.

So therefore, for example, if we look at the management actions that's already planned for Basel 2.5, we don't anticipate an impact on our EUR10b target from the all the discussed and agreed-upon measures with our Investment Bank.

On the dividend, I really have to ask you to bear with us here.

We try to provide the disclosure.

And in a model like this, obviously we can't make any statements to any anticipated future dividend or share buybacks or anything.

It is a simulation.

It's a simulation.

It should give you some indication for the size of the numbers.

And therefore I have to very clearly say the 75 basis points in the model do not imply any behavior of Deutsche Bank in terms of dividend.

On the contrary, I can clearly state that we remain committed to be an organization that's very shareholder-oriented in that sense, as we have shown in the past.

And therefore obviously we remain committed to as quickly as possible and as quickly as we can to move ahead with our dividend and with our payout ratios there.

So please don't take the [75%] as any indication of future behavior or as any indication showing any kind of management intent at this point.

In the -- in terms of your net new money question in PWM, it's mainly in our European business where we had some outflows.

As you know, we think that what's happening underlying in this business is quite some change.

Especially this cross-border business that was strong in the past is changing and therefore we see some structural changes in that.

And therefore it's somewhat expected towards the month of September then we started to see a reversal in this trend.

And therefore we expect to re-grow our portfolios.

By the way, this was also the first quarter where we had an improvement in the assets in our Sal Oppenheim franchise as well.

Okay.

Thank you.

The next question is from Philipp Zieschang from UBS.

Please go ahead, sir.

Good morning.

Three areas please, all of which have already been touched on somewhat.

Coming back to slide 21, just to clarify this is all before 2013 retained earnings.

Also in the right part of the slide, the 8.1 if you frontloaded the deduction.

And also, related to that, the comment on the organic growth was already or the question was already been asked.

But this is also before any potential capital release at Postbank.

And am I right in assuming that you continue to target roughly EUR40b as the core risk-weighted asset base for Postbank?

That's the first part.

The second one, sorry to come back on the dividend, but you were quoted on Reuters as saying that 30% to 40% payout ratio under Basel III is basically what you're aiming for.

Is that a level which is very much medium-term or is that also depending on the business conditions over the next two to three years that you would aim to move towards these levels?

I'm just asking because it was quoted.

And the third one is on the complexity reduction.

So, if I got you right, you're saying that you have EUR1b in the bag or in your plan for 2012.

The related implementation costs are somewhat only 100 -- only 420 or so to come.

The rest has already been booked.

But it reduces implicitly your 2010 target by 500, given that the 500 are going to come in 2012.

How should we read this?

Has it been [fast] because of the merger of the investment bank or you didn't include a potential contribution of Postbank?

So why -- or could you reconcile it to your 2011 target given that 5% has just been done basically?

Thank you.

Okay, Philipp, let me go through.

Your first question on slide 21, it does include --.

29 it was.

Yes, it does include the analyst income forecast for the periods of 2010, 2012, 2013 and 2018.

So we did include obviously retained earnings, but not based on, I can even say if you look at 2011 right now, at the lower analyst estimates versus what we have even put out there as our plan.

So there's some reserve margin in the calculation from our point of view because we used a much lower analyst estimate.

And then yes, it's correct.

Also these numbers do not include de-risking efforts.

You alluded to Postbank; it's EUR30b, by the way, and not EUR40b that we think that we will get out of it.

And also this math did not include any actions relating to that, which provides further buffers in terms of our calculations.

So current internal projections I can disclose to you show much better ratios than the ones in the simulations.

But I cannot use our internal longer-term business plan and projections for obvious and known reasons.

So that's why we related it on that.

In terms of the dividend, it's in line with what I just said.

In the model we used the EUR0.75 because that's not giving -- in the main shows what we anticipate until we pay -- what we have in the accrual this year.

But it does not show, sorry, what we anticipate into the future.

And at the end, yes, as I said, we remain very committed.

And therefore if you were to ask me what an acceptable payout ratio were, I would reconfirm the 30% to 40%, which is something that Deutsche Bank has done in the past.

And of course it is our aim to get back at that as quickly as possible and as we can.

And we believe that the plan that we have just showed you in terms of our capital development, and we believe that -- and you asked me a couple of questions that shows you that we have some reserves in this plan as well, that we should be able to get back at that.

The big caveat I still have to do, we don't know what the government and regulatory environment's point of view on dividends will be.

And that's something that will somewhat remain outside a little bit of our control.

On complexity reduction again.

In the EUR10b plan there was an assumption for a contribution of complexity reduction which is not a full-year effect of EUR1b because -- and when we started the project we knew that we were going to get stuck with an impact on run-rate savings.

But normally you might have 10% of the savings at the beginning of the year and 100% of the savings at the end of the year of implementation which, on average, throughout the year will obviously not deliver to you the 100%.

That's why we always use the word exit rate.

I did want to include this time a clarification of what exit rate really means.

Exit rate means that the Bank will be efficient by the end of the year 2011; we'll be more efficient by EUR1b.

And I can right now say at least, because obviously we will get further contributions obviously through, as you correctly said, the CIB integration and the Postbank effect.

But this will be an exit rate.

This means at the year end that's the run rate savings we will have.

But if you extrapolate it during the course of the year 2011, you will not have full effectiveness of EUR1b.

And, on top of it, there will be, and that's also what I wanted to come clean with and clear with, there will be some costs to achieve these run-rate synergies which will be booked in the year 2010 and 2011 respectively.

Okay?

So I just wanted to make sure that the market understands all the effects that this has.

But again, this has absolutely no change to our EUR10b plan and the impact was correctly calculated in the plan.

And I alluded to two additional upsides we have towards the plan, relating obviously mainly to the CIB integration portion that's not included in any of our numbers and was not anticipated in the EUR10b plan, as well as then obviously something we'll have to then look into separately as soon as we can consolidate Postbank, which is then the first portion of the synergies that we might be able to realize after the consolidation has taken place.

Thank you.

The next question is from Kian Abouhossein from JP Morgan.

Please go ahead, sir.

Yes.

Hi.

I've got a few nitty-gritty questions.

On slide 46, you show the number of shares.

And the number of shares have gone up from the second quarter under common share issued.

And you have a note, but admittedly I don't fully understand your note and I want to make sure I use the exact share count.

In addition, it looks like the dilution effect is not in the numbers due to a loss, so I should assume that you still have 27m additional shares there.

That's the first question.

The second question is on the page 29 on Postbank.

Clearly Postbank is using a standardized methodology and wants to go to internal.

So, if I look at CVA plus securitization versus model change, how should I think about the risk-weighted assets of Postbank going forward on your numbers?

Or have you already adjusted for standardization to internal on the market risk side?

And the third question is on your IAS 39 assets, I see a decline.

And I was wondering if you actually have sold or the IAS 39 reclassification, if you have sold assets at this point.

Thanks.

Okay.

If I start on the IAS 39 assets, yes, we actually had sales in the third quarter.

And actually we had a positive P&L contribution, a slight, slim positive P&L contribution, which again showed us that these assets are marked at a right level.

If I look at the whole year, we've sold quite substantially IAS 39 assets.

We had to interrupt in the second quarter as markets become weak and volatile again.

But we have sold a substantial part of that portfolio throughout the year at more or less breakeven, if I take the year-to-date effect.

But in the third quarter we had sales with positive P&L.

In what areas was that?

Pretty much across.

You know this is a portfolio of quite diversified assets and it was pretty much across the different asset classes that we have in this portfolio.

And then in terms of your share count, according, as you know, to IAS 33, if a capital increase or subscription rights issue is performed at a price below the market price of the existing shares, the capital includes a bonus, so-called bonus element.

And this bonus element is viewed as an implicit change in the number of shares without a fully proportionate change in resources.

Therefore IAS 33 requires that the number of shares outstanding that we then have to use for the EPS calculation is adjusted for all periods before the capital increase.

And this adjustment is already reported in the third quarter, because the subscription rights issue was performed before September 30.

So that's the background to this question.

And then again to your last question, which is the Postbank question, there is no adjustment for Postbank in our simulation.

Therefore, as stated, there's further room to reduce risk-weighted assets that we did not include in our simulation at this point in time.

As you may know, Postbank has already disclosed their improvement, that their move away from the standardized to the internal model will provide a substantial reduction in terms of risk-weighted assets that will be positive in terms of this map as well.

Okay.

And if I can maybe add one more question.

Your Postbank equity pickup on slide 36, I assume under your accounting standard you have to amortize that pickup.

Is that correct, in the P&L?

No, no.

Okay.

So there's no adjustment over time on the Postbank pickup and it's going through the P&L?

No, no.

Okay.

Thanks.

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

Please go ahead, sir.

Thank you.

I have two questions actually.

The first comes to your outlook statement, and yesterday UBS gave us a pretty clear positive outlook on Q4.

I've read through yours a couple of times and I'm a little bit more confused.

I was hoping you could provide some clarity.

You talk about volatile trading and downward correction in valuations, but you also had some positives in there.

So I was hoping you could just sort of clarify for me what you are trying to say on Q4 trading conditions in the outlook statements.

Then coming over to a sort of copy and paste in your interim statements on the risks related to the US mortgage situation, I recognize that the comments are very much the same as last quarter.

But I'm just wondering, when you talk about the litigation risks from securitizations that you've done for third parties Indymac, Countrywide, Wells Fargo, etc., at any point in the warehousing process or at any point in that securitization would you have provided the representations and warranties on these mortgages?

Or is the risk just that you're being sued and people will try to prove that you breached securities laws and that's how we should be thinking about it?

Okay.

First of all, the outlook, this is clear as the environment we're facing.

So it's honestly very difficult to say and it's still volatile.

But I can put one line behind it.

We are very positive, especially looking at the pipeline, especially looking at how the end of September has run and how our development has been since.

So, in that sense, you should take it all with a positive note.

We always have to caution because obviously in one or the other areas there might be still issues, we believe.

But in principle we also remain positive.

Now to your US mortgage business, if we quickly go through the different roads you can have in it and if we quickly say what our exposure is.

Number one, Deutsche Bank is not a servicer.

So in any discussions around the servicing of this mortgage portfolio, we have no exposure because we have never been a servicer in the US and we are not servicer of this business.

On the loan origination, we had this company in the US that we disbanded in the crisis.

We put obviously there, but in the process that already -- that we underwent already as we disbanded this business, we have had litigation and we've dealt with this litigation.

And as part of the closure of this business, obviously we've provided for what we think will be needed to completely disband this business.

We don't expect therefore any [information].

Obviously there could be legally an exposure there.

But again it's, in our view, covered.

Then as a trustee, obviously what we are in the US, we are a trustee, and the role of trustee is pretty clear.

What the trustee issue brings to us mainly is reputational risk.

As you know, in the United States, because as a trustee you appear to be the one foreclosing, although the servicer is the one that's doing all the foreclosure process, you are the owner of this mortgage or the holder of these mortgages, to say it correctly, and therefore you have more reputational exposure.

We'll see -- but we don't expect any large exposure to this part.

And then if we go into securitization, of course, as a market maker in the securitization area, there could be obviously exposure to discussions around legal claims around representations that may have been done.

But there might obviously -- and therefore we feel that what we expect is then litigation on the securities rather than on the loans.

We don't expect to be exposed to the loans itself, but the situation is still unclear.

Some of these claims have been made, but, to be honest, it's really difficult to see how substantial these claims and how real these claims will really be.

Okay.

So just to be clear, the last area which you perceive as a potential area would be people coming and saying look, these underlying securities weren't as we understood them to be.

And it's not so much the individual loans themselves, it's just the process of what got put in there.

Is that correct or am I oversimplifying it?

No, it's absolutely right that we don't, because of our roles in these types of transactions, we don't expect exposure out of the structured services in terms of the securities that we issued based on these assets.

And therefore there's the question how big is the risk therefore, because you know who you sell these assets -- these securities to, and the knowledge of risk around this assets should be pretty [averaged].

So -- again, but it's really too early assess what, at the end of the day, a court could make a decision.

Understood.

Thank you very much.

Let me also clarify, we are a small player in the spot market in the US.

We are not one holding big volumes in the United States.

Thanks.

The next question is from Jernej Omahen from Goldman Sachs International.

Please go ahead, sir.

Good morning.

It's Jernej here from Goldman Sachs.

I just have two questions left.

Essentially the first one is very straightforward.

I think that you commented that on Deutsche Postbank you're just above 30% shareholding currently, which is where you want to be.

Can I just ask this, I guess by now a question asked many times, which is what makes you or what makes Deutsche Bank, rather, so certain that you will get to a high enough acceptance level to fully consolidate Deutsche Postbank?

And furthermore if we look at the slides from the acquisition announcement data, actually get to, say, 80% to 90%, etc.

Can you just clarify that for us, please?

And then the next question is on now slide 28 of your presentation.

And I was just wondering, the total targeted management action for risk-weighted asset reduction of over EUR90b, how much of that EUR90b is actually just, in a sense, just passive, passive measures?

And what I mean by that is how much of your securitization and correlation books essentially just roll off?

I guess I'm asking the question of what is the roll-off rate per year, let's say, of the assets that you want to get rid of.

Thanks a lot.

Okay.

Let me clarify the Postbank question first.

When we made the announcement, we provided some math in which we implied a 21-point take-up, just because that's what is the natural and straight way to consolidation, getting us to 50 plus of ownership of Postbank straightaway and therefore enabling us to consolidate straightaway.

This was not intended to be our estimate of how much shares will get tendered because, to be honest, we don't know.

But, as you know, there are many roads to Rome.

And they all will lead to Rome.

And therefore we are confident that we will be able to consolidate Postbank.

And all I can disclose at this point in time, we have planned and assumed different paths that will lead us to the consolidation.

So the take-up itself and achieving the 50 plus is only one of these paths.

And in terms of your roll-off question, of course there will be a roll-off.

But looking at the timeframes, there's obviously a smaller part, I can really say, that's effective in 2011.

And then obviously, as we continue on in 2012, there's a larger part that is a natural roll-off.

But only to say it very clearly, it's the management action that's active instead of passive is much larger than the management action, than what you call the passive action, will be much larger.

Thanks a lot, and that's very clear.

So just a short follow-on on that note.

Given that all investment banks are essentially talking about identical management action, particularly when it comes to securitization book, is there, on your side, any anxiety as to the execution risk on this point or not really?

Well that -- number one, I think you ask a very, very good question, because if we add up all the plans of de-risking of all the global banks, they're certainly quite substantial.

We believe that there is a market for this.

We believe that, based on the fact that many of these assets, just we have to accept regulated bank is not the best holding entity for these type of assets in the future under this regime.

But we believe that there are enough other entities for whom an ownership of these market -- low market value and high potential future revaluation value might bear.

So that's why we're not too concerned.

Thank you very much, Stefan.

Thank you.

The next question is from Matthew Clark from KBW.

Please go ahead, sir.

Good morning.

A couple of more clarification questions, please.

Firstly on your $780m residential [put-back] requests, can you just confirm that that includes all [GSC] requests, monoline requests and any private investor requests, so that's everything?

Secondly, on the Basel III EUR185b gross impact, could you give us a split between the CVA impact and the securitization components there?

And then finally, just on the CB&S division's result.

Compared to the prospectus guidance that you gave for the summer, the outturn was much better, both in revenues and costs than I interpreted from the prospectus.

I'm just wondering whether I misinterpreted the prospectus guidance.

Or, if not, what has -- what changed?

What were the drivers?

You said you had a much better trading result in September, but what product areas?

And why didn't you have higher costs associated with that better trading result?

Thanks.

Okay.

On the $780m, I had previously said it does not include monoline.

Okay.

That's not included.

On the EUR185b, we don't split it into different, but securitization is bigger than CVA, as I have referenced in my words.

But we don't -- we will not provide a split at this point in time.

And then on your CB&S, it was really that way that when we issued the prospectus, which obviously was worked -- done before the month of September, we were looking at two months that obviously had considerably weaker results, as I also alluded to in my speech.

And then, towards the end of the quarter, we had quite an improvement in conditions, but second, also one-offs.

I referred to one of them being the Axel Springer sales that provided significant P&L as well as some other transactions that could be then concluded towards the end of September, which were not foreseeable and where decisions [had made].

And therefore I think it fits very well to what we said in the prospectus.

And in later updates, when we gave later updates to that, we already told you that on the revenue side, for example, in our CB&S business, we're seeing stronger results coming in September as compared to the previous months.

At the time of issuance of the prospectus, the data available was July, August, a data that had shown this significant slowdown.

And have you changed any of your compensation accrual formulas since the prospectus?

It wasn't that you migrated to more of a fixed component or something, or, sorry, more of a --?

No, no.

Okay.

Thank you very much.

So, gentlemen, there are no more questions.

I would like to hand the conference back over to Mr.

Mueller.

Yes.

Thanks.

So we need to stop here.

We're very happy to take up any remaining questions with IR.

So thanks a lot for your participation and your interest in Deutsche Bank and have a good day from Berlin.

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

Thank you for joining and have a pleasant day.

Goodbye.