Deutsche Bank AG (DB) 2015 Q1 法說會逐字稿

Operator, thank you and good morning to everybody.

On behalf of Deutsche Bank, I'd like to welcome you to the review of our first-quarter results and our strategy update.

We have much to cover this morning.

First Stefan Krause, our CFO, will briefly review key aspects of the first-quarter results, which as you know we released yesterday afternoon.

We do not intend to review the entire first-quarter analyst presentation, but we'll be happy to address any questions you have on the first quarter in the Q&A session.

We'll then turn it over to Anshu, who will review the presentation on our strategy update which was published this morning on the website.

So, without further ado, let me please turn it over to Stefan to discuss the quarter.

Stefan?

Thank you very much, John, and good morning to everybody.

Let me spend a few minutes on the first quarter before Anshu then, as John said, discusses our strategic announcements of today.

Overall, this was a strong quarter, excluding the additional EUR1.5b of litigation provisions that we announced last week.

Group income before income taxes was just under EUR1.5b.

The fully loaded core tier 1 ratio was 11.1%, and our leverage ratio was 3.4%.

And tangible book value per share of EUR41.26 was 7% higher than the fourth quarter of 2014.

Let me now address just a few issues on the quarter.

I'm not going to review the whole deck.

So I'm just going to focus on a couple of issues, and then I will respond to any questions you may have regarding the quarter in our Q&A.

Let's turn to page 4. The first quarter, as you can see, fully loaded common tier equity ratio decreased by approximately 60 basis points to 11.1%, reflecting RWA growth that I will just address shortly.

Our common equity tier 1 capital increased by EUR1.8b to EUR47.8b, driven by the positive impact of the strengthening of the US dollar.

Further litigation actions put pressure on our profits and capital ratios for the rest of the year, as we have told you a couple of times.

On page 5, you see our risk-weighted assets that increased by EUR37b to EUR431b, with FX movements accounting for almost 50% of the increase.

Credit risk RWA rose by EUR4.6b as a result of business growth, mainly in CB&S and GTB.

Market risk RWA increased by EUR6.3b, mainly reflecting business growth and the impact of a regulatory driven methodology change for the securitization framework.

Finally, operational risk RWA rose by EUR8.4b, primarily reflecting industry wide litigation settlements.

Let me add that whilst no impact on Group RWA, in the first quarter we also changed the allocation of operational risk RWA amongst our businesses, shifting EUR15b RWA from non-core to our core businesses, as well as making further allocation adjustments amongst them, notably shifting operational risk RWA from PBC to CB&S.

If we turn to page 6, the CRD4 fully loaded leverage ratio decreased by 10 basis points to 3.4%, driven primarily by the FX translation impact on our leverage exposure.

On page 7, we turn to costs.

It was a quarter with a decent underlying story.

The adjusted cost base in the first quarter of 2015 was EUR6.7b, about EUR700m higher than in the first quarter of 2014.

The two main items driving this increase were the US dollar and British pound appreciation, increased reported costs by approximately EUR500m, and as we previously highlighted, the full-year bank levy added a further EUR500m to our costs compared to previous year.

Excluding these two items, our adjusted expenses declined by EUR300m year over year, which includes about EUR200m from deconsolidation effects in NCOU.

Despite a solid first quarter, we expect the cost development to be difficult for the remainder of the year, mainly due to regulatory induced cost pressure.

Let me now turn to page 8, finally, on litigation.

Litigation charges, as we disclosed, were EUR1.5b.

While we regret the actions that led to this settlement, we are pleased to have put this issue behind us now.

Excluding IBOR, our litigation reserves would have increased by EUR500m.

Litigation charges, both timing and quantity, remain very difficult to predict, and we continue to be cautious with our near-term outlook on litigation.

Overall, we obviously are very pleased with the quarter, which showed revenue and underlying IBIT growth in all our core businesses and highlighted the diversity and the strength of our earnings base.

The first-quarter result shows the power of the DB franchise that drove our strategic thinking, strong revenues income from a good collection of businesses.

The quarter also highlights some of the challenges, particularly, obviously, our balance sheet growth and our cost issue.

With that, let me hand over to Anshu to address strategy.

Thank you, Stefan.

Good morning, everyone.

We'll start with slide 1 in the pack, with Strategy 2020.

I think the very first thing we say to you there is probably the thing which we've debated the most over the past few months, which is what kind of a bank do we want to be?

And after considerable debate, the conclusion of that process was a clear reaffirmation of our commitment to being a leading global bank based in Germany.

We remain totally focused in servicing our clients.

We remain global and we also remain universal, offering a range of products and services that our clients demand.

And if that sounds like a simple statement, let me assure you we spent a lot of time debating each and every word of what I've just said.

Having said that we reaffirm our core identity, we equally realize that profound change is required in order to retain this core operating model, and more importantly, to deliver value to you, our shareholders.

We must be more focused, we must reduce the span of our client coverage, emphasizing those clients who offer and value mutually beneficial partnerships with us, but also shrinking relationships with those that don't.

Yes, we remain global, but we must also reduce our footprint and focus on countries that are most essential to our clients and offer the greatest growth potential.

We do remain universal, but also must reduce our product perimeter, eliminating or reducing products that are increasingly unattractive in a leverage constrained world.

Critically, we must be proactive on regulatory and control matters, and we must execute on all these goals because that is how we will deliver value for our clients and to you, our shareholders.

Going forward to slide 2, I've talked about our unique positioning.

We see that as a long-term competitive advantage.

We are fortunate to have strong and unique positioning with a global business model based here in Germany, one of the world's strongest economies.

We have world-class capital markets, strong global businesses and cash management and trade finance, a leading retail bank in Germany, all with strong competitive positioning in Germany, Europe and globally.

We have a growing asset and wealth management business.

It's one that has lacked scale historically, but that's starting to change, and change fast.

Ours is not a franchise that you could build from scratch today, and we are very proud of it, and a lot of our strategy is about ensuring that we protect and grow that unique positioning.

With that, let me move now to tab 1, which is taking stock.

We do it only because our assessment of the journey that we have been on over the last three years had a lot to do with the decisions we've taken now, and which encompass Strategy 2020.

If you come to slide 4, you can see our self-assessment of Strategy 2015+, which indeed delivered many achievements.

We successfully began to address chronic underperformance in some core businesses, and as a result today have a much more balanced mix.

Stefan spoke very proudly of the operating performance of our core businesses in the first quarter.

Four businesses each yielding EUR1b plus is not something Deutsche Bank could have counted upon historically.

Critically, we substantially strengthened the capital ratio, and we started the journey of truly fixing our infrastructure controls and embedding deep cultural change.

We're under no illusions that's a multi-year journey, but we're committed to it.

In some ways, I don't think it would be an exaggeration to describe the last three years as Deutsche Bank almost re-earning its license to operate.

Slide 5 reflects that while we recognize a lot of good things happened, it's been a very challenging time during this period as well.

We faced numerous setbacks.

First and foremost, the scale of the regulatory change faced by the industry proved to be tougher than we had anticipated, and this wound up putting a lot of pressure on our ability to deliver value.

There's no doubt about the fact that the persistence of low interest rates in Europe remains a big challenge for the industry, particularly for us and our deposit taking businesses in PBC and our ability to grow margins in GTB.

When we face our own execution, there's no debate we could have done more and delivered more value.

And when we think about the issues which kept us from doing that, we feel that carrying a lot of optionality in our business model, and that was a conscious decision, proved to be a mistake.

It wound up being a big driver of complexity and costs over the last three years.

Slide 6 lays out our outlook in terms of the way we see the environment in which we operate, starting with the global economy we think will continue on a multi-speed approach; rapid growth in the US -- recovering growth, I should say, in the US, rapid growth in Asia, counterbalanced by the challenge of low rates and slow growth across the euro zone.

When it comes to market dynamics, we continue to see improved market conditions, with reasonably strong valuations here in Europe.

Clearly, we recognize the Fed turn which is coming and the potential for fat tailed economic and market risk which comes with that.

We have geopolitical risk as well, which is why you see that pie chart is half shaded.

But our central view remains that with the amount of QE and easing monetary conditions, things ought to be strong from an equity and credit market standpoint, albeit with an eye towards tail risks.

We see our competitive dynamics as a clear advantage.

Certainly, the events of the last four quarters, as we've seen a significant shift in tectonic plates here in Europe, have certainly seen our state market share on a very consistent basis, and we think this has a lot to do with our competitive positioning.

We don't think that's a matter of a quarter or two quarters.

We think this is something which will be a strategic benefit for times to come.

Regulation has been tough for the last three years.

We're under no illusions.

We think this will remain a key challenge.

There's a host of measures which have been implemented.

There's others which are on their way, TLAC, RWA harmonization and the like, so we certainly see this as an ongoing challenge.

With that, let me now shift and talk about what Strategy 2020 really represents.

Let me take you up to page 8 in the deck, which is the announcement of the six key decisions that comprise Strategy 2020.

First and foremost, reposition CB&S, our investment bank.

We'll do it through a reduction of our client and product perimeter, as well as a very significant gross leverage reduction of over EUR200b gross and a net reduction of between EUR130b and EUR150b.

We will reshape retail, initially by deconsolidating Postbank, but simultaneously by transforming our so-called Blue retail bank.

We have an intention to invest into digital technology and to drive enhanced client services and efficiency across the Group.

We intend to invest in global transaction banking and asset and wealth management, two areas with substantial growth opportunity for us.

We're looking to reduce our global footprint, and finally and critically, transform our operating model and head towards lower complexity, improved quality, higher agility and efficiency, to deliver EUR3.5b of fresh gross savings.

What will all that lead to?

Come to page 9, somewhat complex but important chart, that shows you what the bank looks like in 2020, and it's a pretty different portfolio of businesses; big changes in our client profile, mass retail sharply reduced, affluent, high net worth client base sharply up, corporates sharply up.

Mixed picture with institutions; a drop in our transaction relationships and an increase in long-term partner like clients, especially on the real money side.

Product profile also pretty heavily altered; a somewhat reduced sales and trading business, an increased lending business, an increased advisory business and cash management and asset management.

When we take a look at the regional profile, you see change as well.

We're optimistic about our home market and our ability to produce higher margins, so we see Germany growing.

We certainly see Asia growing.

We see the US as a cautiously optimistic place for us, complex place to do business but one where we see opportunity for ourselves.

Europe, for us, we are cautious about, given the overall macroeconomic conditions.

Slide 10 tells you what our medium-term ambitions are.

A leverage ratio greater than -- in line with or greater than 5%, probably the single most significant change in the messages that we've given you.

A return on tangible equity which has been targeted at 10%, and I don't have to remind you that that 10% looks very different from the ROE targets we've talked about, because it'll be coming off a substantially less leveraged bank.

A core tier 1 ratio of 11% or higher.

I've mentioned that we are targeting organic gross savings of EUR3.5b and a cost/income ratio of 65%.

Critically, we have an aspiration to deliver to our shareholders a 50% or better dividend payout ratio.

Now, let me walk you through the six steps which we will need to take to deliver these goals to you.

Start by talking about CB&S, there will be a significant repositioning of CB&S, as you can see on slide 11.

We've already done a lot.

We've completely exited our top five global commodities business.

We used to be a leader in CBS.

We've exited providing uncleared CBS.

We've cut back on the repo franchise very significantly and on long-dated uncleared derivatives.

Against that, we want to focus on our equity business.

We've had terrific momentum.

You can see that in the first-quarter results Stefan just talked about.

We intend to continue that and wind up a consistent top five player.

Our sales and trading business, on the fixed income side, will shrink a bit from the measures we've talked about, but we think we can do that while retaining a very strong global position.

This, after all, has been our strongest business over multiple decades now.

On the corporate finance side, we've got momentum.

Crucially, we think market circumstances are such that large corporate action will continue.

We recognize we're outside the market position where we would like to be.

It's not going to happen overnight, but a sustained, careful, long-term investment in corporate finance is also part of our plans.

We made no secret of the fact that we're in too many countries.

That applies to our investment bank as well.

You'll see us optimize our country presence.

You'll see us, as a theme, emphasize advice and solutions a bit over flow and you will see us push towards clients with whom we have multiple touch points, as opposed to those which are only unique in the business we do.

Slide 12 starts to get very granular.

When I've met you, you've always asked me, well, how are you going to cut balance sheet and maintain market share?

2014, I'll remind you, is the year where we demonstrated we could do that.

We did shrink our balance sheet significantly, and took market share at the same time.

This is a very significant ambition for the next five years.

Where will it come from?

Disposal of low-yielding assets.

We will take an EUR800m charge in order to dispose of between EUR80b to EUR90b.

These are primarily selling off long-dated derivative positions for which we do not expect a material run rate revenue impact.

We'll reduce our product perimeter.

We'll do fewer things, and in so doing save EUR50b to EUR60b.

We'll reduce our client perimeter.

We've talked about exiting relationships which are not as marginally profitable as our overall run rate, and in so doing save EUR40b to EUR50b.

And finally, we calculate that by doing nothing our derivative portfolio has a rollover of about EUR30b to EUR40b.

That, in total, is a shrinkage of EUR200b.

We reserve the right to reinvest a quantum of that, and of course that reinvestment will depend on market conditions and the returns that we are getting from this business.

Page 13 lays out even more granularly the other view, which is how will the product portfolio composition look like, and you can see substantial change.

You can see businesses that we are growing here; corporate finance, cash equities, equity derivatives and emerging market debt.

You can see businesses which are still important to our identity and product offering, but must shrink; rates and GLM, prime finance, flow credit, all products which our clients tell us they need, but clients which are challenged from a product position balance sheet standpoint.

You'll see us shrink them, yet maintain a critical threshold position.

We will maintain our foreign exchange -- our market leading foreign exchange business and our credit solutions business, and we will further reduce repo and long-dated uncleared derivatives.

So let me now come to our retail business.

A key part of today's announcement is the decision to deconsolidate Postbank.

Let's talk a bit about what the journey with Postbank has been like.

Over the last few years, since 2010 when we completed the acquisition, we cut the balance sheet by nearly 30%.

We reduced non-customer assets by almost half.

We grew shareholder equity by nearly 20%.

We doubled return on assets while improving the leverage ratio.

We eliminated non-core assets totaling over EUR42b, and we invested EUR1.2b in critical technology and platform improvements.

Simply put, Postbank is a different bank today, because of the effort we put in; leaner, safer, more focused and more efficient.

Why then, would you ask, are we looking to deconsolidate it?

Slide 15 gives you the answer.

We talk about multiple factors here, but let me hone in on the most important one.

Right at the beginning of the strategy process, our team felt that we needed to target a leverage ratio which would put us consistently with our top global peers.

Whether or not that gets adopted by Europe as the new gold standard, we don't know.

The determination we came to is for us to compete in our core franchise, which is global banking.

5% was looking like the minimum standard.

Problem for Postbank, of course, is when you take that EUR150b mortgage balance sheet, at a 5% leverage ratio, it would need an incremental amount of capital, which would make the bottom line returns unviable.

So Postbank's a very good bank, but the natural ownership rationale between Deutsche and Postbank no longer could withstand the changed regulatory circumstances, which also, by the way, constrain the level to which we can cross sell into mass retail and the ability to be able to cross deploy those deposits to fund wholesale assets.

As a consequence, slide 16, you will see that the Postbank deconsolidation process and timeline is laid out for you here.

A key step in the eventual deconsolidation of Postbank is our acquisition of an additional 2.7% of Postbank, which takes the ownership up over that critical threshold of 95% to 96.8%.

And now that we're above the 95% threshold, we intend to launch a squeeze out process of the minority shareholders at a Postbank general meeting which will take place between now and August 2015.

This is an important preparatory step which provides us with flexibility with regard to the domination agreement.

And also, in anticipation of the separation of Postbank from Deutsche Bank, we will cease all integration effort and revert to standalone operating models.

Our primary intention is to pursue a re-IPO of Postbank, and to launch the first tranche by the end of 2016.

Slide 17 talks about the Blue Bank.

And candidly, as we analyzed each component of our business, in many ways, as it became abundantly clear that the cross linkage between Postbank and Deutsche Bank did not make strategic sense any more, it was equally clear that the so-called Blue Bank made a lot of sense, and let me make a few points as to the reason why we feel so committed.

That client base is a natural client base for us.

It's core to Deutsche Bank's identity, has been since 1959.

I remind all of you that Deutsche has run this bank very successfully long before we acquired Postbank, for many, many decades, and we ran it very well.

It's a client base to whom we cross sell many of the bank's critical products, in particular DWS funds.

We're one of the leading sellers of insurance products into Germany.

And we feel that by applying digital technology we can enhance the productivity of this division.

In our opinion, it's a very key part of the portfolio.

It plays a key role in providing earnings diversification, and indeed funding, sticky funding benefits, which will help a number of our ratios.

Just as importantly, it keeps us firmly anchored in Germany and provides us a brand and identity benefit which I've talked about right at the top of my presentation.

All of that said, it's very clear that we do need to take steps to make this business much more efficient, and with that in mind we're looking to shut up to 200 branches, strengthen our omni-channel capabilities and really focus on the infrastructure platform underneath this business to bring you much more efficiency.

Slide 18.

We've talked about GTB.

Undoubtedly, over the last few years, it's a business with among the best KPIs of any of our divisions.

It's been very competitive from a cost/income ratio standpoint, indeed a leader within Deutsche Bank.

It gives us very high ROE.

The client relationships are those that we can cross sell into almost our entire investment banking segment, both in the financial institution side as well as the corporate side.

The only issue for us is we've not been able to scale it up as rapidly as we would have liked.

You can see on the left side of the page why that is.

We have grown our business 23%.

Global peer revenues have only grown by 12%.

So yes, we've grown, but the overall industry fee pool has been somewhat modest in terms of appreciation.

Our way of doing this is predominantly going to be geographic.

We have a strong platform in Asia and a growing one in the US, both markets where we see margins and market conditions being favorable to us.

Slide 19, Deutsche asset wealth management.

You heard us very candidly talk about the fact that we've not been as efficient introducing complexity across the Group.

Asset wealth management is a notable exception.

We've done a very good job in doing precisely that here.

And indeed, what that has done, it's given us significant improvement in IBIT, a dramatic shift from 2012 through now.

Much more importantly, strategically, we are now really building a critical mass platform on a global basis.

So we intend to commit balance sheet resources to support our clients' needs here and continue to expand key coverage in the high net worth and especially the ultra-high net worth space, cross selling into our corporate finance and investment banking platform at the same time, and to deliver innovative products and drive efficiency.

We recognize the need to invest in the overall platform, and that'll continue to be the case.

Global trends, demographic trends particularly, we feel play well for us in this critical business.

Slide 20, you see us talk about us rationalizing our footprint.

Our global network is very important to us and is a key differentiator.

As I travel around the world, particularly seeing multinationals, they will often tell me that they really value the relationship we provide them because we can clear and provide services to them in local markets, from Thailand through the Philippines, Vietnam, places like these, so we recognize the overall value of having a network as being more than the profitability of a given country.

That said, quite simply put, we're operating in too many countries and that is one of the leading drivers of complexity at Deutsche Bank, and so we're committing to rationalize our geographic footprint, which isn't just going to be a case of exiting countries.

In some cases, we may go from operating locations into rep offices.

We will also look to really deploy a hubbing strategy.

Clearly, we're very -- in a very good position of being positioned strongly in some of the world's biggest growth markets, such as China and India.

Slide 21 I know is going to be critical to everyone on this call, which is our commitment to transform our operating model.

And that work began simultaneously with the strategy process, and we now owe you much more detail, but let me at a very high level walk you through slides 21 and 22, to tell you how we're thinking about this.

Slide 21, reminding you that we have EUR1.2b left to run as part of our OpEx program; committed to deliver on that front.

We will get, we estimate, EUR3.3b in cost reductions merely through the deconsolidations we've talked about, principally Postbank, but also some of the NCOU exits which we have and the ones which we are contemplating.

So what we're offering you incrementally is our commitment to cut EUR3.5b of incremental cost against a cumulative CTA of EUR3.7b.

How will we do it?

Page 22, admittedly still very high level, gives you a sense of how we intend to go about it.

EUR1.3b of that will come from the narrow perimeter we've talked about, fewer countries, fewer products, fewer clients, and EUR2.2b through increased efficiency, and that will come through our target operating model review, which will change the way we run our overall platform, which would be a total savings, as I've said, of EUR3.5b, and will cost us EUR3.7b to achieve from a CTA standpoint.

Slide 23 lays out our journey to a 5% leverage ratio.

You can see we stand today at the threshold of 3.5%.

The Postbank deconsolidation is worth 40 basis points.

Interestingly, symmetrically, CB&S deleveraging would give us another 40 basis points, NCOU derisking 20, which takes us up to 4.6%.

We will definitely have some redeployment for growth, which is going to be a war chest we shall hold back and allocate based on businesses which are giving us incremental value.

And of course, a significant reliance on cumulative capital, net of that 50% or more dividend payout which we've talked about, which gets us to that 5% target.

Slide 24 is critical.

We spent a lot of time, as we talked about the kind of bank we want to be, to get the balance right between assets and liabilities.

And for those of you that are concerned about what the impact of Postbank would be, or the deconsolidation of Postbank would be on our funding profile, I think slide 24 shows you a pretty reassuring picture.

This is us simply taking our 2014 pro forma balance sheet and factoring in the impact of deconsolidation.

Remember, this does not include the deleveraging -- profound deleveraging, I should say, of the CB&S balance sheet and it assumes we do nothing else, and even then you see that we have a 72% stable funding source.

That is competitively quite strong.

Clearly, once you're done factoring in the future shape of the bank, which has a much smaller wholesale balance sheet, and then you can assume that we will really be targeting taking in more deposits through wealth management and through GTB, you will see that a robust and balanced funding profile was one of the key objectives for us as we thought about our strategy.

So then, in conclusion, let me take you to slide 25, which tells you about the timeline.

We stand today having announced our strategy.

We've begun the operating model review, which will go through a whole set of questions across the bank.

I'm not going to repeat them.

I've told you the steps.

You can see what needs to be done.

And critically, we expect to come back to you in the next 90 days with this detail.

Thank you very much for your attention.

It's been a long presentation.

With that, Stefan, thank you very much for the first quarter.

And John, we stand ready to take questions.

(Operator Instructions).

Kian Abouhossein, JPMorgan.

Good morning.

Thanks for taking my questions.

The first question I have is regarding cost savings, and I was wondering if you could give us a bit of timeframe around the cost savings achievements.

And in that context, if you could discuss a little bit gross versus net in terms of cost savings, because clearly this EUR3.5b is gross and you indicate compliance costs, some growth initiatives, etc., and in respect to that your revenue outlook to get to a 65% cost/income.

So, really, if you could give a little bit more meat around your cost targets and the revenue environment and the 65%.

The second question I have is regarding your execution of this program, because if I look at your historic cost savings plan, you don't really see that very well in the numbers and I'm just wondering if you can run me a little bit through your thinking how you're going to make sure that these targets that you set today will actually be achieved, in particular leverage, as well as in particular the cost savings plan, how you're organized in that respect.

And the third question is on risk-weighted assets, where you had some operational and market risk impact besides the dollar effect.

And I just wanted to see how should we think about risk-weighted assets, including Postbank, so assuming status quo, how they should develop over this year, assuming no dollar impact, just from regulatory headwinds that you're seeing on risk-weighted assets.

Thank you.

Thank you, Kian, for your questions.

Let me go through that.

The first question was the timeframe of the costs.

Of course, the first piece that Anshu announced, which was the remainder of our OpEx program, will occur in the year -- within the year 2015, and then the rest of obviously in the next three to five years.

As you know, the deconsolidation driven cost savings, we are targeting about 18 months to a two-year timeframe, and the rest will then come over time as we then implement the measures that Anshu announced.

Stefan, can I just interrupt you?

Sorry for that, but I think it would be good to have a little bit more timeframe around the EUR3.5b, considering five years is a long time to achieve those.

Well, we have at this point obviously not completed a bottom-up plan on which I could base any statements I do right now.

And we will obviously now, as the next step, plan in detail with our different business divisions and I will be able to tell you -- give you more detail up to 90 days, in the next 90 days, as we then, as the next step to our strategy development, now really plan the measures that we are announcing today in more detail and get a bottom-up plan.

I just ask you to bear with us.

On your question around the 65% cost/income ratio, it obviously will be achieved through cost efficiency.

Also, we are also assuming some modest revenue growth, yes?

And then, on your question around then (multiple speakers).

And modest means -- sorry, modest means GDP kind of growth?

Yes.

Okay.

So 2% or so, 1%, 2%, yes?

Yes, in that range.

Yes?

And now, going back to your growth, obviously part of the strategy is we're being selective in growing some areas, so there will be cost increases.

We do expect some more regulatory costs to hit us.

I also don't have any numbers for you at this point in time what the net impact will be.

This will be also then provided to you within the next 90 days.

And, Stefan, if I can have one more follow-up, on page 22, you clearly highlight the 15% of adjusted cost by 2020.

Now, doing back of the envelope calculation, I could get to something like EUR2.5b net cost savings.

That's good.

It's your calculation.

Please understand that I don't have -- I need a plan to base any statements on, and I don't have, so I can't give you a net guidance.

65% cost/income ratio is our target that we want to achieve, and just bear with us until we have done the bottom-up plan.

That's fair enough.

That would be fair.

Now, the second, on your RWA development, I've always told you that we expect significant increases in RWAs, so that has been part of our strategic thinking.

So, we expect further pressure from our operational risk, from obviously the industry litigation losses on operational risk, but we only expect moderate changes from organic developments.

So, we expect to peak in 2015 and then obviously, as litigation charges hopefully in the industry and for the bank start to ease off, then obviously the operational risk charge will also start trending down again.

We have said that.

Nevertheless, we did plan -- in our strategic thinking, we did plan some significant additional RWA increases to come from regulatory trends in terms of RWA harmonization and things like that, but also from our selective business growth, only compensated then from RWA that we will lose based on our disposals and our shortening of the perimeter.

Okay.

And if I have maybe one more follow-up on that, on your international retail operations, you mentioned the reduction on country presence, but can you be a bit more specific around your European retail operations?

Unchanged.

Status quo.

Okay.

Thank you.

Okay?

Kinner Lakhani, Citi Investment Research.

Yes.

Hi.

Good morning.

So, first question on the leverage ratio, which I think Anshu called the single most important change.

I guess my question is why 5%?

Why not 4%?

Why not 6%?

What's driving this big change?

And also, if you could maybe give us a target for where you think the RWAs will settle at on a two- to three-year view.

The second question, on NSFR stable funding as a result of the deconsolidation of Postbank, where are you now and where do you get to?

A few of your peers, including Barclays, have now disclosed NSFR ratios, so I would be grateful if you could elaborate on that.

Thirdly, you do talk about a commitment to China.

Is that the same as a commitment to holding stake in Hua Xia?

Thank you.

Kinner, let me take the question on leverage ratio.

Clearly we had a lot of debate and this is not science.

We see our global peer group as averaging right around that 5% number.

Some of the US firms are a bit higher.

Most of the Europeans are quite a bit lower.

We felt that a 5% average ratio is the right blend of still be able to give you a return on tangible equity which is acceptable, while putting us squarely in with our global peer group.

We don't expect Europe necessarily to go to 5%.

We think many of the European banking models, particularly those that'll remain mortgage and retail asset heavy, will really struggle to achieve 5%.

So, we think we will be in the top quartile, at the very least, of the Europeans and certainly with the pack in the US.

Okay.

Then you had a question around NSFR.

Our NSFR currently is around 105%.

And our assumption is that obviously, including the deposits that we have in our Blue Bank, we will be able to achieve the 100% requirement and we will fully comply with the requirement, obviously including a buffer, which will not be a problem based on the fact that we retain deposits and we shorten our balance sheet quite considerably.

And then you had a question regarding Hua Xia, and there's no comment around our Hua Xia stake today.

Anshu said committed to China.

Okay.

If I could just follow up, just on the dividend payout aspiration, 50%, what's the timing on that?

Sorry, I didn't get the question.

Again?

Just on the dividend payout aspiration of 50%; what's the timing on that?

That's like all these ambitions that we've lined out.

It's obviously the timeframe three to five years.

Okay.

Great.

And sorry, the RWA target, I don't think you had given a number.

No, we don't give RWA target, but you can assume that we did include in our projections this time around all our expected regulatory changes, and that's giving you guidance that we expect RWA to grow and RWA density for the bank to increase.

Thank you very much.

Thanks.

Jernej Omahen, Goldman Sachs.

Yes.

Thanks a lot.

Good morning from my side as well.

I have three questions, please.

The first one is on capital, and I think we all understand the ambition of Deutsche Bank to get to a 5% leverage ratio.

What is less clear is how come the core equity tier 1 target is at 11%, which I believe is where Deutsche Bank already is as of now.

So, Stefan, when you talk about risk-weighted asset inflation, just back of envelope, reverse solving how much incremental capital a 5% leverage ratio implies gives us roughly 25% risk-weighted asset inflation, to tally the 5% leverage with an 11% core equity tier 1. Can you please give us a bit more color on that?

And a second question on capital is so Deutsche Bank's subsidiary in the US, which was subject to CCAR this year, and I obviously concede that only a fraction of assets are included in that, but still, that subsidiary didn't pass the CCAR or the US stress test this year.

How confident are you that it will be -- that this subsidiary will do better this year and that you can have the bank, the US bank, in a position for the holding company to meet all the US requirements and hence pass the test when it is subjected to it on January 1, 2018?

And the final question that I have is on Deutsche Postbank.

What does deconsolidation mean?

Do you mean that you're going to go below 50%?

Do you plan to IPO it and keep the controlling stake?

I think that deconsolidation I guess in this context would mean, as we would understand it, going below 50%, but I guess that if you do that that would be a capital deduction for the stake in a financial company.

Anyway, thanks a lot.

Yes.

Let me take at least the conceptual part of the first question, and then I'm going to have Stefan pick up from there.

You've correctly noticed that we're laying out a very ambitious goal to cut, at least gross, over EUR340b of balance sheet, and yet we are targeting our core tier 1 to remain constant.

And of course, what that tells you is that there will be a significantly higher RWA density at Deutsche Bank in years to come, and that's not a surprise.

We see that.

That will come largely because of RWA harmonization, model changes and so on, which as Stefan said, we've been guiding you towards all along.

But certainly, even if you take a look at our business mix change, if you go back to the CB&S page, and if you look at the businesses which are being deemphasized, such as repo, such as rates, those tended to be high balance sheet, low RWA, and that change in business mix will take the RWA density up.

And then very critically, by the way, and we've talked about this non-stop, now you're going to get to see it happen, EUR150b of Postbank mortgages which are being deconsolidated are actually very high-quality assets and commanded relatively low RWAs.

So, we are finally following through on what we've been arguing for a very long time but weren't successful, which is to convince people that holding large quantities of low-risk assets should not be viewed with the suspicion that it is.

Now you're seeing the reverse of that, the exit of that.

So, the two sets of assets which are being reduced on high CRD4 leverage, but relatively low RWA.

And I'll, Jernej, answer your questions around US CCAR.

As you know, it was a smaller subsidiary in the US that underwent a CCAR test this year.

It was very well capitalized, as you'll remember from the comparison.

So, it was not the capital that created the issue and it was the classical non-passing of CCAR in the first time around on qualitative things.

As you know, we have announced that we have a quite sizable program, remediation program, in the United States to address our internal controls and the concerns around reporting and data and things like that.

So, that program is underway and we're quite comfortable that that program will be concluded in the near future, which will put us in a position to also address the qualitative issues that were addressed during the CCAR process on this small subsidiary this year.

At the same time, obviously, we're building the IHC, which will be then the relevant entity that will go through then the obviously larger CCAR test.

We have some time, as you also pointed out, until that entity will go through the CCAR test and we are quite comfortable that on the qualitative side, as well as on the capital and quantitative side, we will comply by the time and obviously be able to have a positive result on CCAR result, and the team is working quite hard to get there.

On Postbank, you are asking us a question.

Of course, yes, the consolidate means that we at least in a first step have to get below the 50% ownership threshold, but obviously our ambition is to do a complete re-IPO of Postbank over time.

So, as you otherwise quite correctly pointed out, that it would not make sense to have a larger financial interest in another bank based on our new regulatory measurements around ownership and minority ownership of other financial institutions.

As Anshu announced today, we as of today, because we have surpassed the 95% ownership threshold, are in a very good position to do a squeeze out.

And after the squeeze out, we will start the process of re-IPO'ing Postbank.

Okay.

Stefan, can I just follow up on -- so Deutsche Bank is committing that you will not have control in Deutsche Postbank by the end of 2016?

No.

We will -- obviously, the IPO process we cannot commit at this point in time what steps we will take.

Obviously, initially, we will obviously bring below 50% so we can deconsolidate.

But obviously we have no interest in -- let's not forget the IFRS framework also has the control aspect of it, so obviously we will give up all control over the entity as well.

Okay.

So, just a final question from me, and thanks for your patience.

Just on this Deutsche Postbank issue, typically, when you own all of an asset, 100% of an asset, you would want to sell it to a strategic investor so as to get the premium of ceding control to someone else, whereas here Deutsche Bank is deciding to go below 50%, lose control, deconsolidate, and yet do it through a process that will yield a lower proceed for the shareholders.

Why does that make sense?

Well, it's the basis of our thinking right now, to follow the IPO route, and that's what we underlined the plan.

So, that -- we obviously don't rule out any alternative, but at this point we want to make sure that the plan assumes the path that we feel is the most -- the safer path at the moment.

Thanks very much.

The big benefit from Postbank doesn't come from the sale price, necessarily.

The big benefit comes from the RWA release.

Stefan, I guess that depends how much you sell it for.

Yes, of course, but let's say that the assumption -- but the big push will be the RWA.

Thank you very much.

Thank you.

Jon Peace, Nomura.

Yes, thank you.

I have two questions, please.

The first one was on your ROTE target of greater than 10%.

Do you feel that's a little cautious, or is it a function of just the amount of equity you plan to hold?

In other words, with that 5% CET1 leverage, do you still imagine the vast majority is common equity or do you plan to issue a lot more AT1 within that?

And then the second question was on Postbank.

I believe you were targeting more than EUR1b of synergies from owning the business.

Could you just remind us how much of that you'd achieved already, and so as you deconsolidate it, how much should we back out and from which entities?

Thanks.

Jon, let me take your first question.

And here the simple answer is we've sat down and really iterated the model for this new strategy.

Once you move to a 5% leverage ratio, it constrains the amount of balance sheet you can have.

Impose upon that a cost/income ratio which is, of course, our attempt to figure out the right ambition to run the bank given the mix of businesses we've got, and the ROTE falls out of those two key assumptions.

Simple fact is for our business model, which is headquartered out of Europe, we feel a 10% ROTE is about where you would come out.

And clearly, if you go back to the kind of leverage ratios we've run historically, there would easily be a 200 basis points or thereabouts uplift if you were not targeting the 5% leverage ratio.

So, that's really the box in which we thought about it, the cost/income ratio, size of balance sheet, mix of businesses.

That's where we come out and we think it's going to be pretty realistic (inaudible).

So, on the Postbank synergies, we had set out EUR1b, about.

Some of it were related to revenue synergies and some of that related to cost synergies.

Our lifetime synergies are about EUR500m.

Most of them obviously will be realized or were realized on the revenue side, and some of it obviously was already achieved, the cost cutting as well.

So, we clearly will have some dis-synergies, but honestly, the way that we look at the cooperation between the Blue Bank and Postbank in the future, and much of the systems that were now renovated will be able to be used and mirrored for both organizations, we don't think these are sizable dis-synergies that we have to consider.

That's great.

Just, sorry, to revisit that first question, do you plan on issuing more AT1 or should we model you still around that EUR5b level?

And thank you for your answers.

That depends a lot on how TLAC develops.

We are very much hopeful that we will get legislation coming out of -- well, Germany has it already.

If we get a harmonized European solution which allows investment grade debt to then qualify as TLAC usage, if we get that, we will then be moderate in our usage of further subordinated debt issuance.

Great.

Thank you.

Omar Fall, Jefferies.

Good morning.

Firstly, you don't need me to tell you that there will be deep skepticism as to the delivery of the incremental cost savings and benefits from the investment spend.

So, what comfort can you give us that the CTAs and investment costs will be at least paced so as not to burden the P&L and that you'd retain potential for positive operating leverage?

I know you haven't done this on a bottom-up basis yet, but does management at least have a broader commitment to protect the P&L over this period, because a cynic would say that you're announcing an additional EUR6b of expenses across the P&L today for a very uncertain outcome, if we look at the track record from the last strategy?

Secondly, when you looked at the options for retail, can you give us more color on what the key parameters were for you ultimately not to decide to do more?

In particular, if you could follow up on your succinct answer to an earlier question that you're not doing anything to European retail, why not?

Thirdly, what happens to the Magellan IT program, please, and the EUR1b that's been invested there?

Is the EUR300m of CTA on slide 21 related to an unwind of that?

And then lastly, sorry to be short-termist, but many of your peers have highlighted momentum across primary and sales and trading.

Their idea is continuing into Q2 and in some cases even accelerating.

Is that an assessment you would share?

Thank you.

Okay.

Let me start with the skepticism around cost cutting.

It's not like we are unhappy with what we achieved.

Regretfully, our reported cost base obviously didn't show what the market was expecting it to show, mainly based on cost developments that were unforeseen in 2012.

For example, the implementation of the fixed salary component in CRD4 is one of the larger drivers of the difference, and then additional implementation in terms of systems, IT deployed controls, etc., around our regulatory remediation and our implementation of new regulatory requirements.

I think you saw that in the industry.

I think we're not singled out as a bank that had to face these additional costs.

On the other hand, we did deploy these EUR4b that we invested in terms of our OpEx program quite well and we did achieve, and we reported to you, that the OpEx program overall is quite successful and has achieved its targets demonstrably as we track it in our financials.

We can come to a conclusion the bank has gotten much better in terms of addressing and running these type of programs.

The bank has done much better in terms of tracking and looking at efficiency of CTA spend.

And that's obviously why we take the positive view that we will be able to do some more.

We explained that there are new topics.

We've made some decisions around perimeter.

We've made some decisions, obviously, we will deconsolidate.

We will take some complexity out of the bank.

That's all what Strategy 2020 is about.

And therefore, obviously, we are very confident that the investment that we are doing in terms to achieve these other EUR3.5b gross savings will be as successful as the OpEx program is.

I know that sometimes these perceptions are related to reported cost numbers that have yet to show the benefits that we are quite comfortable will be shown in the near future, as the impacts now are more seeable.

And obviously, especially one-time costs should start to lower within the next two years.

So, in that sense, I think we're quite comfortable to achieve this.

We obviously, on the other hand, also want to invest in some of our businesses.

And therefore, obviously there will be a mixed picture of cost decreases and cost increases in those areas in which we invest.

And obviously we're making the assumption that regulatory further development will also cause us to add controls, to add systems, to add additional requirements on the regulatory side that we will obviously have to do.

Now, in terms of your Magellan IT, well, Magellan is a good platform.

It has delivered.

Parts of Magellan are in use at both banks, and there is no reason that what has been now modernized will benefit both banks and will obviously be useable between the two banks.

So, in that sense, we will continue to be able to develop that.

Now, you asked me about some guidance in terms of the CB&S.

So, April revenues have been broadly in line with expectations and the usual seasonal patterns that we observe at this time of the year.

FX has continued to perform well, obviously reflecting the ongoing levels of volatility and obviously the strengths of our franchise.

The first quarter of 2015 was a strong quarter for the industry, and although it's still early in the year, we broadly expect 2015 to reflect equal equivalent seasonality than we had in prior years, with a strong first quarter.

Let me take the question regarding keeping Blue Bank retail and how we thought about that, because we spent a lot of time looking at it.

And the very simple answer is we see very strong model contributions from retaining retail once we deconsolidate Postbank, and that has multiple reasons.

I talked about that during my main presentation, but let me highlight those for you again.

This is a client base which confers brand advantage to Deutsche Bank.

It's a client base to whom we can cross sell a number of our institutional products.

We've already made the decision to move a large part of our Mittelstand SME coverage to the branch network.

We think we can do a lot more in the future with that.

And then, frankly, the opportunity to introduce digital technology will allow us to stay in the business but reap significant efficiency from it.

And then finally, strategically, that funding benefit which we get from the installed, sticky, deposit base gives us very good balance as a Group.

So, this is the basis in which we chose the model that we've put in front of you, as a better balanced model and a more radical alternative of doing a complete vertical split.

Thank you.

And just going back to -- that's great on Blue Bank.

That's very clear.

But what about the European retail franchises?

We've turned those around.

That business was a challenge right after the crisis.

We've put good management in.

Again, they are very focused businesses with good management, and candidly we are seeing both Italy and Spain turning around from a macro standpoint and market circumstances coming our way.

So, they are not huge businesses, but they make -- they do make a very important contribution.

We're very happy with them.

Okay.

Thank you very much.

Daniele Brupbacher, UBS.

Good morning.

I would have just two follow-up questions, one on risk-weighted asset inflation.

Can I just very specifically ask about capital floors and the December 2014 consultative document from the Basel committee?

Would your statement that you expect significantly higher risk density also include a capital floor on either the various RWA buckets or the overall risk-weighted assets, because I think there could be quite a significant impact?

And then just the second question, sorry, again coming back to costs, you made a lot of statements, of course, and that's very useful.

But just for me to understand better, is it fair to -- if we model this, the last program you gave a dynamic element as well and you said we should assume a 65% marginal cost/income ratio on additional revenues.

And is that still how we should think about the connection to the topline, up or down?

And is it fair to summarize your statements along the lines that the cost inflation outside of the cost cutting program should come down meaningfully now, going forward?

You talked about those CRD4 regulatory costs, etc.

Or is there anything I'm missing here which could still keep those other cost inflation items at stubbornly high levels?

Thank you very much.

Daniele, thank you for your questions.

On the Basel committee question, obviously, as you know from the public discussion, there's no conclusion on this.

The floor discussed ranges from 65% to 95%.

So, ultimately, we feel that we'll get a set of rules, revised rules, on how to calculate RWA and on which these floors will apply, but it's too uncertain to make any statements around this at this point in time.

Now, on cost -- marginal cost/income ratio, we did, as far as I recall, not give a 65% marginal cost/income ratio, but we gave you a 65% reported target.

And on further cost information, please keep in mind that I don't have yet, and this is what's going to occur as the next step, any detailed plan.

So, I would abstain of making further comments than the ones made on cost at this point in time.

Okay.

Thank you.

Stuart Graham, Autonomous.

Morning.

I have a few questions, please.

First, could you explain why you've chosen to set the goals at 2020?

I think a lot of people were expecting 2017 goals.

Recently, I had you at 10% return on tangible in 2017.

So, the first question is why does it take so long?

Then the second question is I guess the first plan didn't turn out how you had hoped and the management team is pretty much unchanged, with the exception of a new role for Mr. Krause.

So, I guess why should we believe this team will deliver this time around when it didn't first time around?

And then the third question was on the compensation ratio in Q1.

It was very low at 33%, which I don't think we've ever seen a compensation ratio like that before.

Has something changed in the way you're accruing?

Is there a new policy on compensation?

Thank you.

Well, we have set ourselves, Stuart, on your question on the 2020 goals -- we by the way told you that we will achieve them midterm, so that doesn't mean that we have now calibrated these targets to all happen at the end of that period of time.

And obviously, as we told you, at the moment we need to ask you to bear with us for the next 90 days when we deliver now the measures and do the bottom-up plan, when we will be able hopefully to give you some more specific guidance on that.

2020 was only the timeframe we felt is a reasonable timeframe to implement this next phase of the strategy, because obviously some substantial -- and don't underestimate; these are substantial decisions we took that will take some time to implement until you see the full effect.

And we wanted to have 2020 as the date in which then everything is completed, as outlined today by Anshu.

On the compensation ratio, no, we didn't change anything.

Just consider we had obviously good revenues and a very strong revenue development, and that impacted, obviously, the ratio.

We have obviously much more in fixed as a result of CRD4, and therefore the methodology is showing much less volatility because the bonus component is just smaller.

But no change in our methodology.

Okay.

Stuart, let me take your question regarding the last three years.

I would not agree with your assessment that the plan did not work out.

If you think about the starting point that Deutsche Bank had in 2012 versus where we are in 2015, much has been attained.

We've totally turned around the mix of our businesses.

We've reshaped the investment bank.

We've de-risked and cut a huge amount of our balance sheet and our risk-weighted assets, and yet, unlike many of our peers, kept a very strong competitive position.

We have cut our run rate cost base significantly.

Clearly, we've also had major challenges which we've openly admitted.

So, I would say that combination definitely gives us a lot to be proud of, yet very sober realization that not all that we want to deliver has been delivered.

Why should you have confidence that we can deliver?

A, because take a look at what we have done in the last three years.

We are resolutely focused on achieving the incremental amount.

But secondly, this time around, a lot of our delivery isn't just organic.

There are some very clear strategic steps.

The deconsolidation of Postbank is a one-step move which will really give us a very significant gain in terms of the balance sheet.

The perimeter narrowing, both in terms of clients, regions and in terms of products, again, will be decisive implementation which will give us a real leg up.

So, this is not all operating efficiency, although there's a very significant amount of that.

Please wait.

In just a few months, we will be back to you with strong detail in terms of what the target operating model will look like.

That's fair.

Could I just ask one small follow-up?

Stefan, could you maybe say what your carrying value of Postbank is?

What's it in your book at, please?

No, we're not disclosing that.

Sorry, Stuart.

Okay.

All right.

Thank you.

Huw van Steenis, Morgan Stanley.

Yes.

Good morning.

Three questions.

First, Stefan, would you be able to give or actually give any time of by when you hope to achieve the 5% leverage ratio and increased dividends, if you think you can do it before 2020, because I'm conscious today, in addition to all the new costs and deleveraging slippages, you also in your Q1 release highlighted you have a -- you increased your contingent liability for litigation, presumably on the DOJ, to EUR3.2b?

So, you've got at least, probably, EUR8b or EUR9b of headwinds.

So, would it be fair to say that by 2018 or 2019 you'd hope to hit your 5% leverage ratio?

I think second, organizationally, will you be moving the assets out of the investment bank which you intend to de-lever into the non-core unit, or will you be doing that through the desks?

And could you perhaps provide an explanation of why you're doing it if you're not moving it?

And then lastly, in terms of the Postbank costs to exit, are there any capitalization of IT assets which you will need to write down?

What's the incremental cost of building out treasury?

Perhaps you could share with us a little bit more about the costs of the Postbank separation project, because it's surprisingly light today in terms of the materiality of -- presumably, of those numbers.

Thanks.

Thank you.

On the leverage timeframe, please understand that we have to now complete the plans.

We outlined the measures.

Some of them are quite short term in the sense that obviously we hope to achieve the deconsolidation of Postbank quite rapidly within the next two years, and then obviously the winding down of the CB&S assets should also be.

But as Anshu showed you on the chart, obviously we are relying also on some of our retained earnings over time, so I think that chart should give you a little bit an ability to estimate yourself.

On the contingent liability increase, let's not forget that when we do contingent liability increases, we always -- because we have no ability to estimate, we take quite high ranges.

And these were not single large issuances.

There's a lot of small issues why the contingent liabilities were increased in this quarter.

On the Postbank costs to exit, obviously we're planning about EUR300m of costs to carry out all the disposals, for which approximately EUR200m earmarked for Postbank.

But obviously, at this point in time, this is a rough estimate and take it as such, please.

Regarding the de-risking of the CB&S balance sheet, that will all be done off the desks.

Let me remind you the only time we move assets to NCOU is if we wind up discontinuing the business, and at least at this point we're not looking at any further discontinuation.

So this will just be deleveraging done by the trading desks themselves.

Okay.

Thanks.

Al Alevizakos, KBW.

Hi.

Good morning.

Thanks for taking my questions.

I've got a couple of questions, primarily on leverage and on CB&S.

My first one is on leverage.

Once again we saw this quarter, because of the FX movement, there was a mismatch on the leverage assets, which increased by EUR101b compared to the equity had increased only EUR1.9b.

Can I assume that the changes in the plan, with the huge deleveraging that you plan, is going to also help so that the US dollar assets are going to reduce more so that it actually kind of improves that mismatch that we've previously seen?

And secondly, do I understand correctly that you suggest that out of those EUR200b that you are taking off in gross terms from the CB&S, the actual impact annually was only EUR600m of revenues?

Thank you very much.

So in terms of the leverage question, we did assume, by the way, on the plan, obviously, the movement of the exchange rates as we see them happening right now actually happened a little bit faster than we had assumed in our strategic plan, so we did assume a strengthening of the dollar.

And it's not correct.

We are investing in the US.

We want to grow our business in the United States.

So we are not planning to reduce US assets.

But when we made the 5% commitment in our plan, we already foresaw that obviously there will be some pressure from FX in terms of the value of our dollar assets in terms of in euro terms.

On the EUR200b of CB&S, it's true.

These were all the assets that obviously -- where profits were taken some time ago, and they are not -- therefore not having a big impact on our P&L.

That is correct.

Okay.

So just to --

Yes.

So there will be an EUR800m one-time deleveraging cost.

If you go back to slide 12, we lay it out for you very clearly.

EUR80b to EUR90b which is the disposal of low-yielding assets, that's a one-time unwind.

We estimate it'll cost us EUR800m to do that.

In addition, it's the other reduction, which is going to be EUR600m per annum of foregone revenues which we hope to re-earn through other activities.

Okay.

And if I just may have a follow-up on the leverage, so what you're suggesting is basically that you will increase the equity that's being kept in US dollars, effectively, just to make sure that, for example, the leverage of the US unit is going to become more stable given the rules that are going to be introduced in the US with the intermediate holding company.

Is that correct?

Of course, yes, we obviously will have allocated more capital to the US as the FBO, as we're planning to grow in the US.

And that's correct.

All right.

Thank you very much.

Jeremy Sigee, Barclays.

Morning.

I've got three questions, which are effectively follow-ups or clarifications of earlier points.

So, firstly, did I understand correctly that you -- if TLAC works out the way you're saying, you would envisage issuing relatively limited extra AT1?

So it's currently 30 bps in your leverage ratio, so the implication is you're going to stay around that sort of limited level of AT1 and the bulk of the 5% new leverage ratio will be pure equity.

That's the first question.

Secondly, just clarifying the profile of restructuring charges, I just wanted to firstly ask, the extra bps, you talk about EUR1b on digital, EUR1.5b to grow GTB and AWM, and the EUR0.8b to exit CB&S assets.

Are any of those included in the EUR3.7b CTA charge that you mention, or are they additive?

And what approximate timing do you expect the total restructuring charges to start materializing?

I assume fairly front-end loaded in this current year, with some follow-on.

And then, third and final question, could you talk a bit more about the countries that you envisage leaving?

I appreciate you probably don't want to name them, but could you describe them in terms of what kind of countries do you envisage exiting, either in terms of which parts of the world or what sort of operations those might look like?

Do they have branch networks?

Are they typically single office countries?

That kind of thing would be helpful.

Let me take questions one and three.

No, we're not expecting a huge amount of further subordinated debt issuance, so the 5% is going to be predominantly equity growth in terms of capital.

On question three, you're quite right in assuming we will not give out any details at this point about country exits, even along the lines of the questions you've asked.

We'll be back -- that'll all be part of the second wave of disclosure in that 90-day window that we've talked about.

Okay.

You asked about the restructuring costs and, no, these are additive to the EUR3.7b and are built into our direct cost investments.

And in terms on the timing, and please understand that we don't have a detailed plan yet, our view currently is that CTAs will peak over the next 24 to 36 months.

And I guess some front-end loading in the profile of the charges?

I guess, once you've done your detailed plan, I guess then there'll be --

Then we'll tell you more.

But some of it might, yes.

Okay.

Thank you very much.

Dirk Becker, Kepler.

Yes.

Good morning.

I have a question regarding your two growth divisions, asset and wealth management and GTB.

You still have financial targets for the current year for these two divisions, EUR1.7b for asset and wealth management, EUR1.6b to EUR1.8b for GTB.

Are you walking away from these targets today, or are you still committed to them?

And then secondly, I have a question on Postbank.

You spoke very positively about Postbank, but at the end of the day, it's a bank which generated 4% ROE last year which is struggling with big overcapacities and with the low interest rates.

So, would you agree this will be a tough sell when you IPO it and you will probably get less than the stated book value of the bank?

Let me answer your Postbank question.

Obviously, it's too early to tell and obviously conditions in -- by the time of IPO, at the moment difficult to predict.

On the other hand, Postbank has done a good job in terms of its cost base.

It has proposed also to develop further its fee business and strengthen that.

And obviously we still have some NCOU Postbank assets that obviously we can dispose of ahead of time.

So, in that sense, overall, I think we're not concerned about the IPO of Postbank at all.

AWM and GTB targets, obviously we're now focused on delivering on Strategy 2020 and not delivering on previous targets, but I can tell you that, as you see, the quarter results of both businesses have performed quite well.

So there's, for us, no reason to believe that they're not on track to continue to grow as we had devised in the previous plan.

Okay.

Thank you.

Fiona Swaffield, RBC.

Hi.

Could I ask two questions?

One is on the NCOU and the additional cost reductions from that.

I think the costs are running about EUR1.2b, EUR1.3b underlying, if you analyze Q1.

Are you assuming it's going to zero, because I think in the past you said there were some stranded costs?

Could you talk us through how the NCOU will pan out in the next couple of years?

And then, on basically the costs from the deleveraging, the EUR600m, could you talk us through what your assumptions are there and how you came up with that number?

Thanks.

So, Fiona, thank you.

On NCOU, as we have always told you, obviously the bigger part of the costs of NCOU are always related to the operating assets, and obviously you see as we deconsolidated some and sold some of these operating assets that costs have gone down.

There is an allocated cost from the Group, because as a part of the Group, there's a quite sizable allocated cost from the Group which obviously, even if that costs would slightly starting come down on an allocated basis, it's still cost the Group has and allocates to the different business divisions.

So that might be a reduction for NCOU, but that might not be a reduction for the Group.

And then obviously the NCOU, as we told you, will continue to operate for quite a while.

We'll now have some sticky longer-term assets.

We told you that the pace of de-risking will slow down, and therefore obviously the operating costs of NCOU, the direct costs will stay around.

But the larger base, which is the operating costs, should be reduced.

So we have -- on page 30 of the deck, by the way, we have P&L details on the NCOU, where you can see these trends I talked about.

Now let's clarify again.

We need EUR800m one-time cost for the EUR200b reduction and it's EUR600m revenue sacrifice we expect this to bring.

So I need to clarify these two numbers.

The EUR800m we will need is disposal cost.

The EUR600m will be then ongoing revenue reduction from that, because obviously we're picking low-yielding assets.

The number was actually quite well calculated by our investment bank, so we're quite comfortable that that's a reliable number.

Thank you.

Andrew Stimpson, Bank of America.

Thanks, guys.

Hi there.

So, just three questions from me.

Your payout ratio is already above 50% from the last few years, and obviously for 1Q 2015 it was accrued 100% because of the new rules.

So, just looking at deleveraging, the growth in GTB and asset and wealth management balances out about half of the reduction in CB&S, from my quick numbers.

So, pairing that with your risk-weighted asset inflation comments as well that you've made today, I just want to check on the timing of the -- how you're going to grow those ratios.

It sounds to me more like a lot of the progress is going to come towards the backend of that five-year plan.

So, obviously, if you do hold the dividend constant, that implies a little retained capital this year, certainly.

And then, number two, coming back to Stuart's question on the cost accrual, there might not be a change but there's not been a huge revenue quarter for a while, I suppose.

So can you just remind us how you accrue for comp, whether it's on a quarterly -- is it a quarter of a full-year forecast, or is it -- and therefore we should expect a 4Q true-up, or is that just a comp ratio that you used as an input for the quarter?

And then lastly, if the ECB came out and said that you only needed a 4% leverage ratio, would you be inclined to revise that 5% leverage target or is it something that you just want to get ahead of any European regulator and you're more comparing that to peers, as you suggested earlier in the call?

Thanks, guys.

Okay.

Let me start on your bonus accrual question, the first one.

Obviously we do quarterly accruals.

We have formulas that are based.

Obviously we have a plan for the full year that's also based on this formula, and we accrue throughout the quarters.

And obviously, in case of significant deviations, we will do adjustments on the formula; we'll react to changes there.

So we generally don't have a large 4Q true-up.

We have some, but not a large true-up.

Okay.

Then on your payout ratio, please take this as a guidance we're giving of what the ambition is for the Board with the strategy, and please understand that at the moment, because I don't have a bottom-up plan, I cannot give you further guidance on timing.

We will be back to you shortly with that information.

Okay.

(Multiple speakers) the question on leverage ratio.

Quite simply, we are targeting 5%.

That's now part of our new strategic set of parameters.

European regulation is only one factor, in that we see ourselves as competing with the top-end global competitors and it's out of that desire that we are targeting 5%.

Great.

Thank you very much.

Amit Goel, Exane.

Hi.

Thank you for taking my questions.

Just three main questions, the first one relating to costs.

I appreciate you haven't done the bottom-up review yet, but in that case, I just want to try and understand better the EUR3.5b number, basically how you come up with that number, the conviction you have on it.

And then, do you have a sense of the kind of revenue impact it could have?

And then also, within that, would I think about the basis being your kind of 2015, your total year cost base as a starting point, or would it be some sort of annualization of Q1, or would it be based on a 2014 cost base?

So that's the first part.

The second question relates to the litigation and the increased contingent liabilities, just to get a sense of potential timing for that to come through.

And the third part of my question relates to what you're seeing in terms of pricing within the IB, and how you think about the RWA inflation and I guess the implied RWA inflation when you price, I guess, longer-dated swap products or other things within the IB, given the uncertainties about the RWA inflation that we're going to see?

Thank you.

Amit, let me take your cost question, and please understand that we really have no detailed planning on which I can base statements that I make to you at this point in time.

We will obviously, as I told you, come back to you shortly.

The size of the EUR3.5b, obviously we did a lot of industry benchmarking and looking at efficiency in the industry.

It will not impact revenue significantly, because obviously our view is other than obviously the perimeter changes that they have a revenue impact, but obviously the perimeter changes we are selecting for a reason.

There might be revenue but no IBIT impact.

So, in terms of the efficiency, most of what Anshu showed you in the structuring is a EUR2.2b efficiency improvement, and that should have obviously no revenue impact at all.

So, think about it in those terms.

Let me get back to you shortly, as soon as we have planned out the measures that we're announcing today.

On the contingent liabilities, as you know, we are not -- and I can reiterate it again, regretfully, we're not in control of timing of certain litigation issues to come to resolution.

That obviously is also for us, I would say, an unsatisfactory answer, but there's nothing we can do about it.

The contingent liabilities that we put on the books, our view is obviously that we will have another heavy litigation year in 2015 and then we will see some in 2016.

But as I told you also with our projection of the operational risk RWA, we see this to slowly taper off then over time.

On your question about the pricing of risk-weighted -- higher risk-weighted assets in terms of our customer business, there, there is some good news.

Certainly, in the last nine months, as we've seen the industry consolidate, the one positive that's coming out of it is that our peer group is starting to price in balance sheet cost and RWA cost at the margin, and we think that will continue.

So, much more of that is being passed through now (multiple speakers) before, with a resultant modest improvement in margins, especially in products which consume a lot of risk-weighted assets.

Okay.

Thank you.

Just, sorry, on the point about the basis for the cost reduction, is that still to be decided in terms of -- the EUR3.5b, is that relative to 2014 or the 2015 full year (multiple speakers)?

We look at our 2014 cost base, obviously, yes --

Okay.

-- when we did these assumptions.

But let me give you then some more details.

It's approximately 15% reduction from our 2014 cost basis.

Okay.

Thank you.

Thank you.

Andrew Lim, Societe Generale.

Hi.

Morning.

Thanks for taking my questions.

On page 23, I've got a big difficulty understanding how you get 40 basis points improvement in the leverage ratio coming from Postbank deconsolidation, and I was wondering if you could explain how you achieved this.

But we you go back to, is it page 14, Postbank today has a balance sheet of only EUR155b.

If we take that as a leverage exposure, that's only about 10% of the Group.

So, to get a 40 basis point increase in the leverage ratio, you're basically implying you're IPO'ing Postbank with zero capital, which obviously can't be the case.

So, I just can't make the maths square at all.

It just doesn't make any sense.

And then, perhaps together with that, if you could explain what the return on equity is for Postbank.

It doesn't seem to be disclosed on slide 14.

I'm guessing, from my own math, something like 5.5% for the ROE.

And if that's the case, how does that square with your expectations for what you should sell with the IPO Postbank had?

Presumably then you'd be achieving a sell price much lower than the EUR6.2b that you bought Postbank for back in 2010.

And if that's the case, there's a risk of taking a loss on -- a capital loss on sale.

So, perhaps you could share your thoughts on that.

And then thirdly, on FX, obviously we've had the IBOR fine settlements come out a lot higher than expected, and then part of the fine seems to be relating to an issue about delay in disclosure of data and so forth.

I'm just wondering what kind of read across that has for FX.

Because earlier on, let's say late last year, you said that the FX fine for yourselves might be lower than expected since you're not part of the initial group to settle with regulators, and I was wondering if that's still something you want to stick by in light of what's happened with the IBOR fine.

Many thanks.

Okay.

Let me start with your FX fines.

As you know, we have always told you, and you also know it out of the public statements in the press, that at the moment our FX situation is much more favorable than obviously our comparative LIBOR situation and IBOR situation was.

And therefore, obviously we don't expect at this point this to be some but not be as material or big impact as this.

Certainly we will analyze what the higher IBOR settlement will mean for our projections.

We have started to look into it.

We see this inflation of fines occurring.

And therefore, obviously we will and have taken that into account when we took our reserves or we planned for contingent liabilities.

On the Postbank question, our math shows that the reduction does bring the 40 basis points.

So it's difficult now to compare numbers.

There is -- so it's not on capital impact.

It's a balance sheet reduction of EUR145b is a significant improvement in the leverage ratio.

We show that on the color coding of page 23.

So I don't know how you get to your numbers, and probably maybe we should talk afterwards so we can compare notes, because to do this now here on the fly may be difficult.

And there was your question -- and the ROE.

Please understand that on the sale of Postbank, obviously, for obvious reasons, we cannot provide any further public disclosure.

Okay.

Thanks for that, Stefan.

I'd just like to point out, and maybe we can just take this offline later on, that -- you're saying that the leverage ratio for Postbank is 3.1% and for Deutsche Bank today it's 3.5%.

So if you deconsolidate 100% of Postbank, it's very difficult to see how you get a 40 basis point increase in the leverage ratio given --

Let us take this offline.

Let's --

Yes.

Sure.

Okay.

All right.

Thanks.

Excuse me, Mr. Andrews.

There are no further questions at this time.

Please continue with any other points you wish to raise.

Great.

Operator, thank you very much, and thank you, everybody, for participating on today's call.

We appreciate your patience.

And then obviously we'll be available to follow up with any questions here in the IR department.

Have a very good day.

Thanks.