Deutsche Bank AG (DB) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. I am Mia, your Chorus Call operator. Welcome and thank you for joining the third-quarter 2014 analyst conference call of Deutsche Bank. (Operator Instructions). I would now like the conference over to John Andrews, Head of Investor Relations. Please, go ahead.

(technical difficulty) third-quarter 2014 results. We have with us today our Co-CEO, Anshu Jain, and our Chief Financial Officer, Stefan Krause. First, as is typically the case, Anshu will provide you with highlights of our performance. Thereafter, Stefan will present to you the third-quarter results in more detail. Following their remarks, as customary, we welcome your questions. By now you should have access to all of our publications on the website. Please be reminded of the cautionary statements regarding forward-looking comments at the end presentation. With that let me hand it over to Anshu.

Thank you, John. Good morning, everyone. By now you'd have had a chance to look through our results. During the third quarter, we continued to work systematically through our strategic agenda, and some elements of this had a substantial impact on our results. Nonetheless, we sustained robust underlying performance in our core businesses. I will say a few words on both these points.

Turning first to our work on key points in our strategic agenda. As you already know, litigation provisions once again significantly impacted profitability. We are working towards resolution of outstanding litigation matters; we aim to resolve these as soon as possible. However, we recognize the timing and terms of resolution are not solely in our control.

In addition, like many peers, we incurred costs related to regulation during the quarter. These included adjustments to compensation structures, specific one-time charges and investments in platform improvements, as we continue to elevate our systems and control frameworks to best in class.

We also continued to invest in business growth. In this quarter, these costs more than offset savings from our Operational Excellence program, or OpEx. However, OpEx savings have now reached the original end-2014 target of EUR2.9b, three months early.

Turning to capital, our Core Tier 1 ratio remained stable at 11.5%. RWA discipline was tight, and we reduced CRD4 exposures significantly during the quarter.

We were pleased that we successfully met all criteria of the ECB's comprehensive assessment. The stress test confirmed that our capital buffer in an adverse scenario would have been among the largest of any bank assessed and the largest of all if our capital raising in June is factored in.

We're also pleased to see that our AQR adjustment of just 2 basis points of total assets was among the smallest for any major European bank. All in all, this exercise was collaborative and positive. It has added important transparency and strengthened confidence in Europe's banking system and in its regulators.

Let's turn now to underlying performance in our core businesses. Core bank underlying profit in the quarter was robust, as we've said, at EUR2b, with underlying revenue growth in all core businesses and a healthy balance of earnings contribution across these businesses. In CB&S, FIC revenues grew by 15% year on year, thanks to strong revenue growth and financial performance in our foreign exchange business, a very well diversified platform and an uptick in volatility towards quarter-end.

Equity revenues were up 13%, with strong growth in prime finance. Corporate finance sustained its top-five global position and leadership in Europe. Both PBC and GTB continued to face headwinds from record low interest rates. Despite that, both businesses grew revenues. PBC achieved revenue growth in credit products, insurance and investment products, while GTB grew revenues on the back of strong volumes, especially in Asia Pacific and the Americas.

Deutsche asset wealth management attracted positive net inflows of EUR17b, our best quarterly inflows for several years and the third consecutive quarter of positive money flows. This helped Deutsche asset wealth management surpass EUR1 trillion in assets under management. In the first nine months of this year, this business's pre-tax profit also rose 14%, to EUR662m. Thanks to the team's efforts, our intensive restructuring of this business is now paying off.

Looking ahead, as we work our way through Strategy 2015+, we see some fresh challenges and headwinds, but also new opportunities. We see the different blocks of the global economy moving at different speeds. Europe's economy faces intensifying headwinds and those will impact business conditions. Increasingly we see financial markets responding to a tougher outlook for Europe's economy.

Regulation will also continue to evolve, and we will continue to adapt to it, like many peers. Resolution of outstanding litigation matters will remain a priority for us, as will the right culture going forward. That said, we have not lost sight of opportunities.

In Europe, our universal banking model is becoming more of a differentiator as some peers scale back in investment banking. That is an opportunity for us to win business and gain market share. In addition, we've clearly communicated our aim to reap business opportunities from new technology, including digital technology.

That's why, as we approach the final year of our Strategy 2015+ agenda, we've made some changes to the roles and responsibilities the Management Board, as you've seen. Our aim is simple. We're aligning our top leadership talents as closely as possible around our evolving challenges and opportunities.

To be specific, Stefan Krause will assume a new role as Head of Strategy and Organizational Development with responsibility for delivering on our strategy, our cost targets and all major change initiatives. Stefan will also remain CFO until the 2015 AGM next May.

Dr. Marcus Schenck will join us from Goldman Sachs as Deputy CFO and join the Management Board as CFO after the AGM next May. Marcus combines experience of being a DAX CFO with a distinguished international banking career, and we're delighted to welcome him.

Henry Ritchotte, who continues in his role as COO, will additionally focus on capturing opportunities from digitization.

Christian Sewing, currently Head of Group Audit and a 23-year veteran of Deutsche Bank will join the Board and assume responsibility for legal and for our incident management group and central investigation unit. Christian will spearhead our efforts to work through outstanding litigation matters.

Stephan Leithner, CEO of Europe ex Germany and the UK, will lead our efforts to strengthen our competitive position in Europe, leveraging our unique business model. He will also continue to champion our program of embedding cultural change within Deutsche Bank and retains his responsibility for regulatory affairs, compliance and HR.

Over the coming quarters, we will continue to work systematically through the priorities in our strategic agenda, completing our OpEx program, aligning our platform to new regulation, completing our planned investments in business growth, and as I mentioned, resolving outstanding litigation matters. We will also focus on sustaining the progress we're making in our core businesses and reaping the benefits of investments to build on that progress.

To put it simply, we remain resolutely focused on execution of Strategy 2015+. The new responsibilities of the Management Board and new appointments reflect our commitment.

Now, Stefan, before I hand over to you, let me say a few personal words on behalf of Juergen and myself and the entire Management Board. You have a vital new role ahead of you. A role that's important for everyone on this call, especially our investors. We're counting on you to strengthen our organizational development and strategic delivery. Now you'll be with us for several quarters yet on these calls, but nonetheless, let me thank you for all your terrific work as CFO and to all of your organization. With that, over to you.

Thank you, Anshu. And thank you for your nice words, but as you say, I still have to work quite a while until I can then fully focus on the new roles and responsibilities that I'm very much looking forward to. So good morning to all of you and thanks for joining us. And let me start now with the more dry stuff, which is the highlights of our quarter.

Group income before income taxes, as you can see on the first slide, was EUR266m, reflecting significant litigation expenses which are not tax deductible, leading to a net loss of EUR92m. The core bank IBIT though increased 8%, to EUR1.3b. The estimated fully loaded Core Tier 1 ratio was at 11.5%. Our leverage ratio was at 3.2% on a fully loaded basis, based on the updated CRD4 rules that now reflect the BCBS rules that we have previously guided you on. Tangible book value per share was 2.5% higher than the second quarter of 2014.

Overall, the third quarter has been a quarter of managing lots of uncertainties, especially also around the AQR and stress test exercise as well as litigation.

The revenues of our businesses grew in the quarter. At the same time, Deutsche Bank continues to take risk off the balance sheet and has reduced leverage. The quality of the Bank's revenues as well as the Bank's balance sheet have further improved in the third quarter.

Let me now address some of the key current themes that you might be interested in, which is the comprehensive assessment, capital as well as litigation, before I dive a little bit more into the Group results.

If you turn to page 4, as you know, Deutsche Bank successfully met all the requirements of the comprehensive assessment. First, the asset quality review did not identify any material impact within aggregate prudential adjustment of 7 basis points on the Core Tier 1 ratio at yearend 2013.

Second, under the baseline scenario of the stress test, the pro forma CRD4 Core Tier 1 ratio was 12.55% as of December 1, 2016. This exceeds the required threshold ratio of 8% by 455 basis points.

Third, under the adverse scenario of the stress test, the pro forma CRD4 Core Tier 1 ratio was 8.78% as of December 1, 2016. This exceeds the required threshold ratio by 5.5% by 328 basis points.

As a summary, the results underscore the solid quality of our assets as well as the comfortable level of our capital base. It is important to note that the minor AQR-related impacts do not result in changes to our reported results or ratios.

On a general note, Deutsche Bank undertook a monumental workload over the last month related to the AQR and stress test. However, the results of the AQR and stress test have brought improved transparency. We welcome the results of the exercise, which we believe are positive for the European banking system. After the exercise, we can now even more refocus on our strategy and execution.

If you move to page 5, you can see that over the last couple of quarters that I talked to you about numerous uncertainties in the regulatory landscape, which may have material impact on our capital position. This quarter, we had conclusions on two of those material uncertainties. The first one, the AQR and stress test, where there was no impact on our third-quarter Core Tier 1 capital or CRD4 leverage ratio.

The second one was the revised European rules on leverage were published by the EU Commission on October 10. This brings the leverage ratio calculation in Europe fully in line with the final Basel rules published in January this year. And we now calculate a managed leverage based on these final rules.

However, there's still very significant regulatory headwind expected from the remaining uncertainties on the rules and the framework. In particular, and as I've noted before, the implementation of the EBA technical standard on prudent valuation alone will lead to direct capital hit of EUR1.5b to EUR2b. Please note that the stress test results include a deduction of EUR1.6b already. Furthermore, other uncertainties about EBA technical standards persist, notably in the area of CVA.

Over the medium to long term, the ECB's upcoming horizontal review of the computational capital requirements in Europe and the review of RWA measurements on Basel level may provide further challenges.

Let's turn now to page 6. In the third quarter, you see that Core Tier 1 ratio is unchanged at 11.5%. The ratio was not impacted by FX as RWA and capital movements were largely offsetting in ratio terms. Still, reported capital and risk-weighted assets are significantly impacted by EUR1b and EUR10b respectively.

Adjusted for FX, RWA were down [EUR7b] in the quarter, despite further headwinds from model adjustments, notably, EUR4b in light of the new EBA guidance on derivatives counterparty risk, as well as the further increase in operational risk RWA of EUR5b. Still, we more than offset the impact of increased model adjustments through reductions in market risk and CVA RWA.

Let me turn now to leverage on page 7. As expected, the European version of the revised Basel rules on leverage were published this month, and we now manage leverage on a Basel-equivalent basis. In the quarter, on the new rules the exposure fell EUR66b, excluding FX but including exposure growth to support our M&A pipeline.

Offset reduction over EUR25b came from deleveraging our securities financing activities. Within our derivatives portfolio, we have again worked to compress, innovate and restructure transactions to reduce exposure. This yielded more than EUR20b in leverage exposure reduction.

The third major area of activity has been in reducing our trading inventory by more than EUR20b. Finally, we have deleveraged NCOU by EUR7b. We have therefore substantially mitigated the impact of the revised rule.

Move to page 8. As you can see here, net litigation provisions increased by approximately EUR800m, largely in connection with certain ongoing regulatory investigations impacting NCOU and CB&S. There continues to be significant uncertainty as of the timing and size of potential resolutions for some of our larger matters, and so actual litigation costs for the balance of the year are unpredictable.

Contingent liabilities decreased by approximately EUR1.5b, largely as a result of establishing provision for certain matters. As a reminder, under the accounting rules, we cannot have a provision and a contingent liability for the same claim. Further, for contingent liabilities we disclose the upper end of the range of outflows whereas provisions are required to be established at the best estimate within the range. Accordingly, there's not a one-to-one relationship when a matter moves from one category into the other.

Mortgage repurchase demand activity remains benign, continuing a trend that began earlier this year.

Let me now move on to Group results. As you can see on page 10, Group revenues were up EUR190m versus the same period last year. All four businesses have grown year on year. I will discuss overall revenues in more detail in the business division sections.

On page 11, you see that credit loss provisions in the third quarter remained at very low levels. The significant reduction compared to the third quarter last year mainly results from lower credit losses for IAS 39 reclassified assets in the NCOU. In our core bank, we continue to record very low levels of provision for credit losses, reflecting the consistently strong credit quality of our book that you probably also saw evidenced in the data provided in the AQR.

On page 12, our non-interest expenses increased by EUR130m from the third quarter 2013 to EUR7.3b in the third quarter of 2014.

Let me move on now to page 13 and I think something you've heard from our competitors as well. The adjusted cost base was approximately EUR400m higher than in the same period in 2013. Our OpEx program realized savings of EUR300m in the third quarter, our total OpEx savings life to date accumulates to EUR2.9b. Cumulative CtA spend for OpEx is now at EUR2.7b. We expected that some of the spend originally target for 2014, will shift into 2015. The overall committed spend of EUR4b is unaffected by this shift.

We continued to face headwinds from higher costs related to regulatory, audit and control requirements. These were more than EUR400m in the quarter. Of this amount, approximately EUR140m are attributable to the changes in our compensation structure related to CRD4. As we converted the majority of affected staff in the third quarter, this amount contains a true-up effect. The full-year impact of CRD4 adjustments is still anticipated and -- at about EUR300b.

Additionally, we had specific changes of approximately EUR100m, mainly related to specific regulatory investigations, which we expect to be nonrecurring. Further investments in IT and enhanced processes to meet regulatory requirements amounted to about EUR0.2b. Remaining offsetting effects amount to an overall cost increase of about EUR200m. This includes about EUR100m in selected growth investments in our operating businesses. Additionally, the substantial US dollar strengthening increased the cost base and we highlight the impact from FX as in previous periods.

We continue to anticipate regulatory-induced cost and FX headwinds to remain strong for the remainder of 2014.

Let me now turn to page 14. As you can see, the pre-tax profit was EUR266m. Nondeductible litigation expenses in the quarter negatively impact our effective tax rate, and as a result we report a net loss of EUR92m in the quarter. In the short term, our effective tax rate may continue to be negatively impacted by litigation and also going forward by changes in the bank levy.

As both the impact of litigation and proposed changes to the bank levy regime remain subject to significant uncertainty, it is difficult to quantify the impact at this time. As we go through our planning process and the bank levy rules are finalized, we plan to update our effective tax rate guidance.

Let's move on to page 15. The underlying earnings power of the core bank in the quarter of almost EUR2b has exceeded last year's quarter by roughly EUR200m. We're now at EUR7.1b pre-tax adjusted IBIT for the core bank within the first nine months of 2014. I think this continues to reflect the underlying earnings power of our platform, even in difficult times.

Now let me move on to the segment results. CB&S, on page 17, delivered very strong revenues in the third quarter, continuing the trend that we saw in the first half of the year. Adjusting for CVA, DVA, FVA, CB&S revenues grew 12% year on year. Revenues reflected a strong performance in both debt and equity sales and trading and solid performance in origination and advisory.

However, the reported year-on-year cost trend is obviously disappointing. While we continue to make progress on OpEx savings, costs were negatively affected by regulatory required spend, platform enhancements and the CRD4 pay-mix adjustments that we have highlighted earlier this year. Year to date, the CB&S post-tax ROE, excluding litigation and cost to achieve, is 13.8%, broadly in line with our 2015 ambition.

On page 8 (sic), you see the debt sales and trading revenues were significantly higher year on year, up 18%, excluding CVA, DVA, FVA, reflecting the diversification of the CB&S platform and an uptick in volatility towards the end of the quarter. While European revenues continued to face macroeconomic-driven headwinds, the US saw higher revenues across most products. Foreign exchange revenues were significantly higher year on year, supported by increased volatility in September.

RMBS revenues were also significantly higher compared to a difficult prior year while credit solution revenues were stable. This was offset by lower revenues in rates and flow credit, despite a better year-on-year performance in the US.

In equities, equity sales and trading revenues are higher year on year, driven by higher client financing levels in prime finance.

On page 19, you see that our corporate finance revenues were in line year on year, as higher equity origination revenues were offset by lower debt origination revenues. Year to date, we continue to rank number five in global corporate finance with record market share, driven by higher market share across all key regions; continued momentum in the US with year-on-year market share gains in the US across all products.

PBC delivered an IBIT of EUR356m, as you can see on page 20, in the third quarter, slightly above last year's period. Adjusted for cost to achieve, the pre-tax profit was EUR454m, EUR24m up versus the third quarter of 2013. Positive development in revenues was driven by a volume momentum in lending products, especially mortgages.

Additionally, the income from our investment and insurance business increased by 15% year over year. This is combined with net new asset inflows of roughly EUR1b. On top of that, successful deposit campaigns at Postbank and PBC were launched with close to EUR6b additional retail funding. The campaign of PBC continues.

Non-interest expenses increased by 4% year over year, reflecting additional charges for loan processing fees, similar to last quarter, and higher technology investments, reflecting increased regulatory requirements.

Costs to achieve were, as expected, slightly higher compared to the third quarter 2013 and the second quarter 2014. We expect the full-year 2014 levels to be around EUR600m.

So let me quickly turn to the PBC divisions on page 21. Private and commercial banking revenues increased primarily in investment and insurance products compared to the third quarter of 2013, but were offset by higher costs from loan processing fees and infrastructure expenses.

Deleveraging at Postbank continued to have influence over revenues while costs remained stable despite negative impact from loan processing fee charges. As a result, Postbank IBIT increased, also benefiting from lower loan loss provisions.

Advisory banking international delivered a higher IBIT compared to the third quarter of 2013. Both Europe and Asia performed well, with year-over-year increased revenues in every single country.

On page 22, I turn to GTB. I think we can all say GTB had another very solid quarter with an IBIT of EUR338m. The stable year-on-year revenue trend is encouraging, with the adverse impact from low interest rates being compensated by strong volume, especially in Asia Pacific and the Americas. Non-interest expenses increased year over year. This relates to higher expenses to comply with regulatory requirements and increased revenue-related expense.

Furthermore, we continued to invest in our GTB business and enable business growth. The remaining increase is driven by higher cost to achieve our OpEx.

On page 23, we see the results of AWM. In this quarter, AWM net inflows increased further to roughly EUR17b, mainly across all business units, all regions and all client dimensions. Year to date, margins on fund inflows have exceeded outflow margins by 6 basis points. In particular, we saw sustained success of ETF, also supported by physical replication in Europe.

We saw further sustained success of flagship products, including global infrastructure fund offering. As a result of net flows and market performance, invested assets reached EUR1 trillion. Revenues increased versus prior quarter in last year, reflecting growth in recurrent revenues from increasing management fees and lending base. Non-interest expenses were broadly flat year on year as increased investments, CRD4 impact and increased regulatory costs partially offset savings from efficiency programs.

On page 24, we take a look at the NCOU. As you can see, the NCOU continued to de-risk in the third quarter and reduced total assets by EUR3b following further asset sales. In line with prior guidance, the pace of de-risking has slowed yet remains capital [accreditive]. However, as highlighted previously, the reduction of RWA from de-risking was more than offset by model-driven factors including an increase in operational risk and FX movements during the quarter.

In terms of financial performance, the third-quarter result includes a significant increase in current litigation reserves, as mentioned earlier.

On page 25, you can see that from a balance sheet point of view, the de-risking perspective of the NCOU has successfully surpassed all targets so far. And obviously we will continue now to focus on a further reduction of assets.

Now on page 26, consolidation and adjustments reported a pre-tax loss of only EUR43m in the third quarter of 2014, compared to a pre-tax loss of EUR153m in the prior-year period, and the improvement largely stems from better valuation and timing differences.

With that, I finalize and Anshu and I would be delighted to take your questions now.

(Operator Instructions). Kinner Lakhani, Citi Investment.

Yes. Good morning. I've got a few questions. The first one on PBC where the cost base was EUR6.7b in 2012. And if I look at the clean run rate for the first nine months, it seems to be at EUR7b. And at the same time obviously in the original plan, there was a gross cost savings target of about EUR1.5b I think, for PBC. It wouldn't be apparent to me that most of the regulatory spend would be in relation to this business. So could you explain why we haven't seen the cost savings or if we expect these to be very back loaded?

Second question on litigation, just wondering if you could provide us with any color as to what was the driver of the litigation charges in the quarter to help us understand where the reduction in the contingent litigation risk is coming from? I have in mind non-agency RMBS and FX as two critical issues that could be driving this.

Thirdly on NCOU, I can see that the outlooks in the NCOU seem to be different from the previous quarter, particularly in relation to fade-out as well as also the financial portfolio. So is this effectively a downgrade in expectations? Are you more cautious?

And finally, if you could talk to us on TLAC. How you feel -- your position for what we know today. And what investments you think that Deutsche Bank needs to make, ultimately, to meet TLAC requirements in terms of subsidiarization, etc. Thank you.

Okay. Thank you very much. On the NCOU I have to ask again -- the question we didn't quite get the point -- the fade out, you used the word fade out.

Yes. The outlook is different.

The fade-out. (multiple speakers) Okay. I got it, I got it.

Okay, let me start with the PBC. And I think, in analogy of the Group, we have the same effect that we still have significant cost to achieve that will burden 2014 as we've always said. And that's why you don't see how the net -- how the savings are really already impacting and the efficiency in PBC is incurring. We have the same problem at Group level, where obviously our OpEx cost to achieve are obviously not helping us to show improvement.

PBC is certainly less impacted by other costs like litigation and things like that, and therefore most of it, and by far most of it, are large programs, like our Magellan program that obviously have still high expense status. So obviously, we hope that to be reported and the lower cost base, as our CtA phases and its programs are then completed, we will see that our run rates and cost base improves.

On litigation, I'm really always sorry that -- and we have this discussion and the need of the market to get more transparency, but please understand that obviously we are in the situation that we don't want to disclose details on our numbers for certain purposes.

It is -- this quarter, was several topics. It was not one large topic, it was several topics, in which we had seen new information throughout the quarter of settlements of other banks, in which we have seen progress in some of the investigation that are going on. And, as you know, every time at the end of the quarter we then -- we reassess where we are at provision levels. You saw a movement from contingent into reserves, which basically tells you that these are topics that we had on the radar screen already. And that obviously by the fact that we got more concrete information, we could reserve for.

Based on our -- currently, we are reserved for the known topics. Some topics obviously are further down the process than others. FX is less down the process. Many other topics are further down the process and that's all I can say in terms of our provision. But we feel very comfortably provided for what we know at this point in time.

Now on NCOU, not really. We had declared the year 2014 as the year in which we wanted to dispose of operating assets mainly; in which we wanted the team to focus on that. Nevertheless, other de-risking occurred also quite substantially. All was capital accreditive.

We sold [DHF], we sold the Cosmopolitan casino, we're working on our other operating assets still and hopefully to have progress in that. And we have guided to say that, yes, obviously now we got the more stickier stuff, the longer-term stuff and therefore the pace would decrease a little bit. But we hope to pick up pace now again in the next year and that's when we can start and focus on assets.

We also will have the effect in the next year that some of our portfolios will just run off, naturally run off in the next year, so you should see some effects from that as well in 2015.

TLAC, obviously too early to say. Obviously, the proposal is not yet specific and concrete enough and there's a lot of work that still has to be happening and really, exactly defining what these rules are. So it's really early to say about this questions, structural changes -- honestly, until we don't have final rules it's very difficult to make any statement around that. And I think we are collaborating with the creating here a useful number and key metric that the market can look at. But it's just too early to tell, too many uncertainties and too many questions around definitions at this point in time. Thank you.

Sorry. Could I just come back on the PBC point? Because I guess the point I was trying to make is I was looking at expenses on your adjusted cost base metric, which already excludes cost to achieve and other exceptional items. And that's where I see that the cost base was about EUR6.7b in 2012 but (multiple speakers), in 2013, EUR7b.

You are right. That's why I said that the efficiency that are now connecting our new systems that are being now [finite and coded]. You don't see this in the numbers yet, because obviously these projects are still ongoing. On top of it, PBC had to deal with a couple of one-off charges. We had some legal costs -- some costs around processing -- credit processing fees, where there was a decision made by a court in Germany, where we had to reimburse fees to clients and things like that. So you have to see it in that light.

Okay. Thank you.

Kian Abouhossein, JPMorgan.

Yes. Thanks for taking my question. Three questions. The first one is can you just give us an update on Basel III rules, balance sheet reduction in respect to the leverage ratio. I couldn't see a slide in terms of where you are under your previous guidance on balance sheet reductions and how much more we should assume balance sheet will decline.

And in that context, just if there's any change in terms of CoCo issuance target of the EUR5b by yearend of 2015 at how you think beyond 2015 in terms of CoCo issuance.

The second question is on fixed income. On our numbers you're down 14% quarter on quarter, and that might look a bit weaker than some other peers. And I was wondering if you could give us some color of why that might be.

And the last question is any first views around SICAR because clearly some of the details have come out in terms of what the input assumptions will be, and I was wondering if you could make a comment there. Thank you.

Okay. If you look at the leverage detail they're laid out on page 7 of the presentation, I think we put the previous rules and the new rules, and you see how the numbers look like. Our old rules showed us at the end of the quarter at a 3.3% ratio, under the new rules we had the 3.2% ratio.

You see that the exposure measure increased, and that obviously the numbers I was referring to, towards the new exposure measure we had quite a successful de-risking. Obviously we're getting hit by the FX moves, that's obviously a significant impact on our balance sheet. And therefore, I think you can get the effects in detail on page 7.

Then on SICAR, we have no specific new information to be honest. We're working towards fulfilling, as a foreign banking organization, the different SICAR targets that we have in terms of when we have to be ready and when we have to submit. We have a large IT project to be able to provide all the information as required, and that's ongoing and it's in time and in budget.

If you think about the target on -- going back to your balance sheet reduction, maybe you wanted to have a number of a target that we have said, that we -- going back to the balance sheet reduction, maybe you want to check the number of the target that we have set. We did -- going back to the old EUR200b target.

Yes. Yes, I think you mentioned EUR200b roughly.

That's about the number. We did not want to give an as precise guidance as we just implemented the new leverage ratio. And I'm sure we'll give you, but I think the size you just mentioned is the size that we'll continue to work on, because obviously as we have said, it's our view that we have to continue to reduce our balance sheet and to provide more buffer versus the 3%. And as we have said in previous calls, we may expect even a change in the 3% as a target to be rather 4%. So I think the Bank is just preparing for that as well. So we will obviously do the --.

In terms of your fixed income question, it's -- our view is that it reflects at the end seasonality. The year-on-year performance is in line, and we feel that we are slightly better than the peer set from our point of view. Year on year we're up 18%, and this number we obviously calculate excluding CVA, FDA and EBA.

And just on CoCo issuance, any change from the EUR5b target? Any new thoughts beyond 2015?

As you know, we have issued the EUR3.5b of our total plan quite rapidly. And we have committed to do EUR5b until year end 2015. And there is no changes. But obviously we will continue to monitor the market for attractive opportunities. And now that all the issues around technicalities of this instrument are resolved, we would be able to react on short notice if required.

Thank you, Stefan.

Jernej Omahen, Goldman Sachs.

Good morning from my side as well. I have a -- I have three questions. The first one is on the foreign bank organization rules in the US. I think that the companies subject or banks subject to FBO need to submit a compliance plan by January 1. And I was just wondering whether Deutsche Bank has done this yet?

And secondly on that point, there was wide media reporting that a number of banks have requested for the deadline for compliance plan submission to be extended and can you confirm whether Deutsche Bank was one of those institutions or not?

The second question I have is on page 4. And again, congratulations from my side as well for having passed the stress test with such a substantial buffer. I was just wondering if the leverage ratio was part of that stress test as a binding constraint, let's say set at 3%, I guess, would be the minimum. What would your -- I guess the question is what was Deutsche Bank's post-stress fully loaded leverage ratio?

And the final question I have is on the non-core unit. So the losses now in the non-core unit are up 50%, so by half compared to this time around last year. And I was just wondering, I guess in a sense, at what point do we see a change in trend in that division? Thank you very much.

Okay, thanks for your questions, Jernej. Now let me go to the FBO rules. January 1, Deutsche Bank will submit its plan. There's no changes to us and I think we also cannot confirm, or I haven't heard any requests for delaying that. At least Deutsche Bank will submit the plan regarding to the FBO, and we're working on it.

On the post-stress fully loaded leverage ratio, obviously leverage ratio [this is so what's] the number that we were provided in the comparison, so the 2013 number. This is pre the capital rate that we did, that brought us more than EUR9b in regulatory capital. And that's obviously pre the balance sheet reduction action we have taken this year. That's why we have given the guidance at per year-end. We will be at 3%, and therefore from that perspective we're fine.

Obviously now we can discuss stress leverage ratios and things like that. But this is -- we have no numbers for you in that regard. And I think we would have to compute at the end the AQR adjustments to our leverage were about 2 basis points. So we had very minimal adjustments on the numbers, so the ratio would have been 2.97 if -- for the year end taken. But okay, so the calculation honestly on the stress itself, that's all we can say to the stress ratio. The reason we don't have a number is that the stress assumed obviously a static balance sheet, did not do any looks at what would happen at the balance sheet. And therefore obviously it's difficult to calculate some stress numbers.

So your other question on NCOU includes obviously the volatility from litigation and obviously parts of our litigation is reflected in the EUR1b of the NCOU. So the loss of NCOU would have been substantial -- substantially lower. If you go to page 36, I've provided you always with the structure of the very-difficult-to-understand P&L of NCOU. And on page 36 you can see how we develop.

If you look at the non-financial performance, it basically was at breakeven. And there you see the losses, and you see that a large part of the losses was with EUR591m, the litigation that obviously was legacy litigation and therefore gets booked in the NCOU. You see that our financial portfolio was -- had a small loss, and that de-risking activity even had a much smaller loss, that hence we continue to be successful. So no (multiple speakers).

Stefan, thank you very much. Just a short follow-up on the last answer. So the number I was referring to is net of litigation charges. So if we take the litigation out, NCOU lost EUR530m this quarter. It lost EUR460m the quarter before, and it lost EUR350m the year before. Right? So from your -- from where you sit, at what point does this turn?

At what point underlying terms? Well, (multiple speakers) --

Yes, so it's --

-- in our view, the NCOU is predicated on capital accretion. So we will probably continue to see, as we have more difficult assets now we will continue to see a loss pattern. What we are monitoring for is obviously to make sure that whatever action is taken, it's capital accreditive.

We have one problem that I've made you aware in the past, that as we de-risk assets, we have liabilities that still stand and cost. Some of these liabilities are old liabilities that carry a high coupon, and therefore so that effect will rather increase than decrease as assets that were providing their profitability cannot help us to cover some of the costs of these liabilities. But overall as the balance sheet of NCOU is reducing, we obviously then expect also to have losses from the asset side be reduced by losses from the liability side may stay. And we have to -- we will have to make a decision what we do with these legacy liabilities.

Second, let's not forget the NCOU to their sometimes complaint, carry also Group corporate allocated costs. They are part of obviously our overall organization. These -- this part of that cost that burdens the profitability is a couple of hundred million. And obviously over time this, the NCOU gets smaller, the charge will be smaller, the allocation is based on balance sheet and other indicators. And therefore obviously that part of the loss should be reduced as well. So the burden of carrying operating expenses for the Group.

Okay. Thank you very much.

Okay? Thank you.

Jeremy Sigee, Barclays.

Hi, thank you, good morning. Could I just ask a couple of follow-on questions around capital, please, and then thirdly a question on rates business? So just on capital, I wanted to ask about the currency hedging. So you show some of the FX impacts on both CT1 capital and RWAs and leverage. And it looks like the benefit you get on capital is a little bit less than the inflation you get on RWAs and significantly less than inflation in leverage. And I just wondered if you could talk around that, the extent to which you believe you're hedged against currency appreciation that we've seen?

The second related question, and it's similar to the earlier question about your medium-term targets for leverage exposure, I wanted to ask the same thing about RWAs. You're through the EUR400b mark now, and the growth strategy would imply that continues rising. I just wondered where you saw RWAs settling, a couple of years out from here?

And then final question, in the slides you said that rates business was weak in the quarter but your outlook comment suggested a pickup in September, October. I just wondered if you're -- as well as in the FX business, whether you're seeing volatility and volumes picking up in the rates business that gives you cause for more optimization on what's quite an important business for you?

Okay. Let me start with the capital -- the hedging that occurred, not any financial hedging, it's just natural hedging, only to be aware the way that our denominations in euros and dollars are on both capital and our RWA even it out. You see EUR1b in capital improvement versus EUR10b RWA. So technically in that sense we are just naturally hedged on Core Tier 1 ratio, and we've always been so. We have the right comparative amount of capital in RWA in the respective currencies.

You make a very good point, and the very good point is that this changes when you think about balance sheet and leverage. There obviously today the natural hedge is not as good, and therefore obviously that's something we will have to monitor and focus on because obviously there the capital tends to sit more in euros, where the balance sheet tends to sit partially also to a large extent in dollars. So we are less protected, let's say, on a natural hedge space in the leverage ratio. So something for us and for you to consider on a going-forward basis.

Then on the -- your question about the mid-term RWA target, I think I cannot give you. We went through the EUR400b. I tell you that obviously the way we see that certainly will be increases for example in operational risk RWA. I think this is known. There might be other new technical standards coming and changes -- I think I talked about this in my presentation -- that we expect.

On the other hand, we still have EUR60b RWA in the NCOU that obviously we expect over the next couple of years to turn. There might be situations in which the increases happen sooner than we can manage our decreases. That's something I cannot exclude; therefore, to now give you a number for our RWA on a quarter-by-quarter basis more difficult.

Longer term we've always said that we expect to be at EUR400b to EUR450b RWA. And obviously I say that, obviously based on current currency mix, just to also clarify that, because obviously we will, based on where we see the dollar going, obviously we will have -- could have significant impacts on RWA as well, which will not influence the ratio but which then you need to consider when looking at the growth of the number as well.

On the rates business, the FEA impact in rates relates to the market movements and the calculation refinement. Excluding this impact, lower revenues year on year were driven by ongoing subdued client activity in Europe with low volatility and low volumes. Continue to have uncertainty about the future direction of markets and we see that clients and investors are keeping on the sidelines. This obviously was partially offset by the strength in our municipal banking book in the United States. In the third quarter 2013 we saw elevated levels of new deals, so going back in the comparison, we had some special effects that we had much better client flow and higher volatility in the previous year.

And those comments about clients remaining on the sidelines, I understand that in 3Q but you're saying that persisted through September and October?

Yes.

Okay. Because (multiple speakers) we saw more of a pickup, but you're saying not in rates?

In FX we saw a pickup because of the rates movement. But don't forget in Europe we tend to see less activity and still subdued activity is certainly different in others.

Okay. Thank you very much indeed.

Daniele Brupbacher, UBS Investment.

Good morning, and thank you. Just a quick follow-up on the RWA, slide 6 there. You talked about the model increases, the EUR5b and the EUR4b which almost equals the EUR10b market risk reduction. Is that just a coincidence? Or is there more behind that? Was it a deliberate decision to keep the overall number flat just in a quarter where there are definitely some opportunities towards the end? Just interested to hear your thinking around these moving parts.

And then just to follow up the previous question, I think in the past you were saying that you would like to keep overall RWA flat at around EUR400b. I guess -- is that statement including or excluding some of the headwinds ahead, i.e. for example, the [op risk] RWA change you are foreseeing?

And then just a second question on litigation on page 107, the specific note on FX hasn't changed at all compared to the second quarter, the wording exactly the same. Can I read anything into this in terms of progress on that front? Has there been probably not much happening in the third quarter? Or is it just due to a rather generic statement which you have there on page 107?

Then very lastly on the management change, these announcements, basic question there really, why now? Why does that happen now, or why do you make this announcement now? Thank you very much.

Yes. Thank you. So let me start. The RWA excludes obviously any further model changes. As ever, we don't know. I told you that there's still some uncertainty around it. And again, I made you aware about the exchange rate effect on it as well, so just keep that in mind because we have a significant further strengthening of the dollar that will have an impact on that number as well. So take this number just as a guidance on today's view. RWA, operational risk, RWA, we all know will increase. We don't know yet exactly how much it will be, but we know that it will be more and partially more. But don't forget we are reducing on the other hand other types of RWA, as you can see now.

The coincidence question, obviously I would have preferred rather an increase of EUR10b and a decrease of EUR15b, so it's a managed number. We are working towards that. So it is not related to each other, it's just the numbers we get. We obviously manage and continue to manage our RWA down in the NCOU. And obviously we're also managing RWA down that carries low levels of profitability.

On litigation, don't take the comment on FX and the fact that we wrote the same comment doesn't imply anything or doesn't tell you anything. This is an early and still in the process of investigation that's going on. And we are providing as we move on and as we get new facts and learn new things, that it's -- so nothing to read into this. And I think that was your question (multiple speakers)?

Yes, thank you very much.

No, no, hold on, Anshu for your last question.

Don't you want the answer to your organization?

Of course, yes, of course.

No, look, we're very happy with the strategic direction that the bank is going in. But if you look back over the last years since we put this new team in place, it's very clear that litigation legacy, coping with all of that has proven to be more challenging for us in the industry than we would have thought. The first thing we're doing is to give that a dedicated resource at the Board level.

Second thing is you've seen with this quarter and certainly the way we look at the coming quarters as well, getting more efficient and dealing with the regulatory change, upscaling and making sure that that doesn't impact our cost discipline in a significant fashion, very important as well. And that has a lot to do with our asking Stefan to take a road which will really cut across the entire bank in a horizontal fashion making us more efficient.

So really it's an unchanged strategy, but wider bandwidth in terms of dealing with some of these challenges which puts us, we believe, in a very good position to tackling 2015.

Very clear. Thank you very much.

Huw van Steenis, Morgan Stanley.

Morning. Stefan, first question on the PVA adjustment, when would you expect to get clarity on that, because I'm conscious all the UK banks are already taking it through their balance sheets already.

And then as a result of that your leverage ratio really would have been EUR3.1b today if we used the EUR1.6b the EBA used. Again, does that put any tension on your expectations for hybrid issuance going into 2015 because on consensus numbers you clearly wouldn't get your EUR3.5m -- 3.5%, sorry, target

And then second, slightly more broadly, as you moved your new role, what other implications are there of the US Fed stress test and subsidiarizing the US in terms of the way you think about the size, shape and the way that you consider running the US operations? Thank you.

Let me first, where we are waiting just the final EBA paper which is not yet final on the PVA adjustment. And we just need to go into law at the end. It needs to become German law. We honestly, we have built it into our projections and we expect in the fourth quarter, that's how we think about it. But the first quarter is running off quite drastically, if I can say there's not much time left to year-end so we'll have to -- we have to see.

On the second question, sorry, I didn't quite get it.

Sorry, so just on the first though, so if you were to at 3.1% pro forma for PVA, are you likely to issue -- need to issue more than EUR5b of hybrid to get to 3.5%?

No.

(multiple speakers)

No. No. No, no, that's why in our projections we have always included the number. And that's why I also refer to the fact that in the stress test there was a number included also. So the EUR1.6b was the number that was included for us.

No, and the second one was on -- with the start of the Fed stress tests and the -- how creating a US subsidiary, what other changes are you expecting to make to the US operations in terms of the size of the business, the way you fund yourself, the way you construct yourself? Anything else that you're learning as you're going further into this process?

We -- as you know, firstly there's all this technical build around setting up obviously our IHC. That's ongoing work. Then we have a timeline on capitalization of this IHC, which as we've told you, we feel very confident about change to our plan. At the same time obviously we are moving assets that don't need to be US assets out. That continues as also an ongoing activity that's happening right now. And then we'll have to see, to learn.

Obviously you are absolutely right, this is a little bit of a change of structure and focus and how we will run our US business over time. But we don't really believe that this will impact our client franchise side or anything. It's more on how we in the background run and fund and technically run our business. So I don't think this will be having any marked impact. So that's our view.

We have also strategically I want to make very clear that US is one of the great opportunities for Deutsche Bank and that we are willing to invest into. So we'll put that plan together. But we are very confident that we have the capital we need and that we will be able to get the funding we need to run a healthy and profitable and very growing US business.

Thank you, Stefan.

Fiona Swaffield, RBC.

Good morning. I have two questions, please. Firstly on the bank levy, I think you mentioned it was a bit too soon, but there has recently been a -- I think a paper out on the resolution fund fee. Could you talk about the moving parts there, and whether we should be expecting a sizeable increase in the current levy?

And the second is just coming back to an earlier point on the leverage exposure. Could you update on exactly how much you think you've done? I think the plan was EUR250b and going back to the Q, the March presentation, you said you'd done EUR116b. And now obviously we've had a bit of up and down. So should we be looking for another EUR100b? I think you said EUR200b earlier. I wondered if you could clarify that? Thank you.

So let me quickly start with the last question. We've done about EUR200b. So now we have to move to the new definition, and that changes this then obviously a little bit, because of the difference now, the difference in the base measure. But if I go back to the old measure, it's about EUR200b that we've completed by the third quarter. So quite well in line with what we wanted to achieve.

The bank levy is mainly driven by risk sector, which is not yet known. And therefore we cannot really quantify how that measure is. It's the famous risk factor. We do believe that it's somewhat -- will be somewhat balance sheet based, and therefore we will -- we expect, we do expect an impact from it. And it could be several hundred million euros.

Thank you very much.

Alevizos Alevizakos, KBW.

Hi, good morning. I've got two quick questions. The first question is regarding the [valaris] calculation once again. You show there's been a decrease in the trading inventory which kind of makes sense, even though the end of the quarter was particularly strong. And I would like to know what's your standing position at the moment? So how much rating inventory you've got compared to your historic highs.

And the second question was on the operational RWA. One of your peers that also had a large provision in the quarter had a significant decline in the operational RWAs. However, I can see that your number went up in the quarter. And I'm just trying to understand, does that mean that there is some outstanding litigation that's not captured at the moment in the provisions and the contingent liabilities? Or does it mean that basically you got penalized because of the amount that you paid in the last 12 months? Thank you.

So let me start. As you can see on page 7 our trading inventory went down. And that's a management action that we took to reduce our trading inventory. I don't have a number here for you how much more can we influence. And that obviously is something we'll manage over the quarters. But if I look historically, our trading inventory since the beginning of the crisis is one of the areas of our balance sheet that we have significantly decreased. And what obviously was one of the big factors there was just turn in the trading inventory was increased quite significantly and therefore we have been able to keep our profitability up despite the fact our trading inventory has been lower.

Now on RWA, you have to consider this [ops] RWA calculation does not, number one, only include DB litigation, which has an impact on it, but does also include historic competitor litigation charges and therefore everyone when -- every time there is monumental settlements that you hear on obviously that will also impact our RWA. It will obviously as they fade out, that will obviously then take pressure off operational risk RWA. And this is what we see developing over the next couple of years, that this number will stay quite dynamic and will be a model-driven number.

So at the beginning it will continue to increase. That's what we predict for the next couple of quarters before then as these type and these large settlements decrease, both for DB and for the industry which could be in the longer period will decrease.

Our view is that all operational RWA for our peers also will be increasing based on the fact on how the math works. So our current situation is a combination of already booked charges and obviously the outlook that we have.

Okay. Thank you very much.

Andrew Lim, Societe Generale.

Hi, good morning. Got a few questions, please. On the trading book review, I was just wondering if you could give some insights as to your participation in the BCBS's review and how you stack up in terms of market risk-weight inflation versus your peer group?

My second question's on FX. We know that six banks are negotiating with the FCA on fines, two US and four European banks. But you're not one of them. And I just want to understand more clearly why that's the case, please.

And then in PBC client business, you say that part of the reason why your non-interest expenses went up is due to further charges from loan processing fees. And I just want to understand more clearly whether this is alluding to the fact that there's more one-off in nature? Many thanks.

Yes. To your last question, yes, it's one-off. There was a court decision and those who have claims back from clients, and this is more of a one-off nature. We expect a little bit more to come, but that's going to be it for the year. So I expect maybe a little bit more on the fourth quarter. But I think we will then have done all the repayments that this court decision requires us to do.

On your FX question, this is obviously not our decision. And it only should indicate to you that everything we know right now and that the investigation now that our severity or our involvement in it is smaller, otherwise we would have expected to be amongst these -- well, we should be in these six, I think we should clearly see good news at this point in time, but the investigation is ongoing and we will have to see and learn more about it.

And on your trading book review, as you know, this is still subject to QIS and rules that are far from final. Also BCBS has noted that the spirit is to enhance the calculations but leave RWA overall unchanged. That said, current proposals give a slight uptick. But it's too early to know.

Can you say how you fare versus your other banking peers?

No, we don't can say and again on the trading book there will be another impact study in 2015. And maybe at that point in time there might be some more transparency on this.

Okay, thanks. Thank you.

Robert Murphy, HSBC.

Morning, guys. Most of my questions have been answered. I've got a few follow-ups. On the FX litigation, have you actually made any significant reserves at all so far this year? That's my first question.

And then also on litigation, do you -- can you make a clear statement on if you expect any of the other issues to settle by the end of this year?

On the PVA charge, is there any reason to expect a different charge versus what we saw on the AQR, the EUR1.6b that you mentioned?

And then on leverage again, so it sounds like you're not expecting that much further decline in the leverage exposure from what you've said on the amount of reduction you've achieved, or is that the wrong impression? And then I guess the conclusion is, if so, then further improvement in your leverage capital will depend on retained earnings plus Tier 1 issuance? Thanks.

The wrong impression on leverage. Obviously we are really working, we expect a reduction again in the fourth quarter and we're working towards this reduction. So as you know, we're working on both sides of the equation. We're working on the CapEx side of the equation and we're working on the balance sheet side of the equation. And therefore wrong impression for sure. And if you would hear some of our colleagues in the Bank, there is quite some pressure on and quite some work, and good work done on both sides of this equation. I also refer to the plan on AT, alternative Tier 1 issuance still, etc., so you see that the Bank is taking it seriously and is moving ahead to build also a buffer.

Now on the FX litigation, as you know we were not disclosing any detailed allowance at litigation. I please ask for your understanding.

On potential settlement, I can tell you the Management Board would really wish that we can get this behind us as quickly as possible, but regretfully that's not on our decision and our timetable. As you know, I did give you a guidance a couple of quarters ago of the expectations that we expect further litigation expenses. But right now obviously the year is running by fast. I do want to make you aware though about one technical effect. As we don't close our books till about March 20 of next year, based on the statutory sequence of our year-end close according to German -- the German procedure and German law, we will have a large subsequent period. So that could still -- a litigation resolution happening in the first two months, even in the first three months of next year that may impact our results.

Now on your PruVal adjustment, that was based on the EBA draft. You know I told you the number was EUR1.6b. That's the number that was given you that's the range of EUR1.5b to EUR2b. So the number was within that range, and that was useful. But we still have to wait on how it gets issued and how then in especially the German wording of the technical things would really look like and how it's going to be put in place.

Great. And then just -- maybe just one follow-up on the new definition of leverage. I think you have a table in the report and most of it is coming from SFTs. Is that changing your outlook for the economics of some of your businesses? Or have you already anticipated that in your plans?

No, we obviously now change to run it on these metrics. We had known or had some idea, I had given you some guidance previously of what we expect and what definitions were. But we've looked at it for some time already so that's -- then it's not likely to change. Okay?

Thank you very much.

Andrew Stimpson, Bank of America Merrill Lynch.

Thank you. Hi, guys. Can I just, first one on pricing. I know in the past you said you won't be pricing or allocating capital down to desk level according to leverage. Can I -- I just wanted to check whether that's still the case and what your thoughts are then on LCR and SFR and TLAC on the same basis, and whether you think any of those will eventually get pushed down to desk level, do you think?

And secondly, on the CtA remaining, clearly you've had the CtA's been running well below the amount you originally expected. I just wanted to know whether that would be -- the remainder will be shunted into future periods, or whether that's just a permanent underspend.

And then thirdly, apologies if this is repeating a question, but the decline in contingent liabilities was greater than the amount of provisions you made. Maybe I misunderstood the answer to Kinner's question, but maybe you could explain what the other moving part is in the calculation there? Thank you.

On your last question, only to clarify that I had said in the text that it was on contingent, from a systematic point of view we go to the higher end of our estimates and provide quite ample room on the contingent. You cannot look at the one-to-one trend numbers when it goes into reserve, whereby for IFRS we are required to stay in the middle of the range and to make -- to get to a specific point. In that sense there will be never a one-to-one transfer. That's not mathematically -- and again, I'd also made you aware that any topic I have in reserve I cannot have in contingent liabilities and therefore the topics are quite straightforward and clean.

We think that on the overall the question on leverage on the longer term basis of course leverage will become a binding constraint for the Bank. And obviously we will include it into the way we steer the Bank. And it's certainly also part of our planning process that we do. So in that sense obviously that's something to look into the future.

So we want to include, only to say very clearly, we want to include the leverage. But obviously we all need to continue to focus on capital. So it's more -- please look at it as something that we add, as a second level or as an additional level of allocation instead of replacing our capital allocation of level.

So we expect on the CtA -- by the way, we expect to spend the entire amount, because these are projects that are ongoing and currently all the EUR4b is planned. And some of the planned spend might be postponed into 2015. But we do expect obviously, as it's usually in the seasonality that we will have a higher spend in the fourth quarter as well. So some catching up in the fourth quarter and there will be some moved into 2015.

Right, thanks. And just on TLAC, do you think that would -- do you think eventually that would be the same as leverage that just eventually it goes down to desk level?

It's too early too -- this is really too early, yes. Yes. Okay?

Fine. Thank you.

Thank you.

(Operator Instructions). Excuse me, there are no further questions at this time. Please continue with any other points you wish to raise.

Operator, thank you, and thank you everybody for joining us here on the call today. Obviously the Investor Relations team at Deutsche is available for any follow-up calls you have. Otherwise we wish you a very good day.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephones. Thank you for joining, and have a pleasant day. Goodbye.