Deutsche Bank AG (DB) 2016 Q4 法說會逐字稿

Welcome and thank you for joining the fourth-quarter 2016 analyst conference call of Deutsche Bank.

(Operator Instructions)

I would now like to turn the conference over to John Andrews, Head of Investor Relations.

Please go ahead.

Operator, thank you very much.

And good afternoon from Frankfurt.

I'd like to welcome everyone to our fourth-quarter and full-year 2016 earnings call.

I'm pleased to be joined today by both John Cryan, our Chief Executive Officer; and Marcus Schenk, our Chief Financial Officer.

John will open with some brief comments and then Marcus will take you through the analyst detail -- the analyst presentation in more detail.

As always, the presentation is available on our website at www.db.com.

As we did last quarter and every quarter, I would ask for the sake of efficiency and fairness for questioners please limit themselves to their two most important questions so that we can give as many people a chance to participate in the Q&A session as possible.

Let me also provide the normal health warning to pay particular attention to the cautionary statements regarding the forward-looking comments and you will find those at the end of the investor presentation.

With that out of the way, let me hand it over to John.

John?

Thank you very much and good afternoon, everyone.

I intend to keep my remarks very brief.

I know Marcus tends to take you through the numbers in quite some detail.

Let me start with the Group financial highlights set out on page 2. I'd just pick out some numbers.

We're doing this in the afternoon this quarter so you will have had a chance probably to look to the numbers in some detail.

But a quarter on the face of it, which was in very difficult circumstances for the bank towards the top of the P&L doesn't look very bad.

We've reported positive [draws].

Our net revenues for the quarter are up on the -- for the corresponding quarter of the prior-year a bit by just 6%.

But the quarter was overshadowed by mitigation charges and impairment charges that totaled EUR2.6 billion, which drove the loss for taxes for the quarter, the EUR2.4 billion, and that EUR2.4 billion reversed the EUR1.5 billion or so profit we've managed to make before taxes in the first five months, yielding a loss of about [EUR800 million] for 2016 as a whole.

And then we have tax judgment on top of that because of non-tax deductible items leading to a net loss of about EUR1.4 billion.

So disappointing overall results.

However, there were some signs that I take as positive.

First is we managed to keep our reported revenues for the year at EUR30 billion.

That was roughly our target.

I admit that on an underlying basis, we are a little shy of that but nevertheless so was 2015 to some extent and there's some good news which I will cover in a second.

On the capital front, we managed to reduce our risk weighted assets to the EUR358 billion level.

I would also suggest that, that is a tad lower than we were actually expecting.

Some of that reflecting a drop off in business volumes that we saw, mainly because of idiosyncratic factors that were impacting the bank towards the end of the year.

But the fully loaded CT1 ratio of [11.9%] is something in the order of an EUR11 billion buffer again the minimum regulatory requirement.

On costs, as you know, during the year, we saw the operating environment deteriorate even from the first quarter and we took additional measures to protect the cost base for 2016 without sacrificing any of the investment we were making to make sure that the longer term strategic cost base was reduced and that comes to a little in the overall reduction of costs.

We're still on route to that adjusted cost amount of EUR24.7 billion towards our target of getting it to EUR22 billion and below.

On the next page, we've covered just some of the litigation matters that we managed in the course of 2016 and frankly, also in January 2017 to put behind us.

There are actually a couple of dozen major issues that were of concern to management and to our Supervisory Board and we settled within that, a large proportion of them and we are quite well advanced on the ones that are not yet fully put behind us.

So I think we are quite pleased with the progress we have been able to make.

The big issue was obviously the civil case with the DOJ regarding RMBS which we managed to settle just before Christmas.

That really was the most significant case because for the whole of the fourth quarter, there was considerable uncertainty in the market and there was speculation in relation to how we were to cope with the opening demand of the DOJ of that EUR14 billion arc.

Anyway, that is now behind us and that is paid and we do have some [consumer] relief to deliver.

I think we feel reasonably confident that we are on top of that.

The other cases, without reading them all out, some of them we were concerned about and we're pleased to have them put behind us.

Our reserve at the end of the year, just to confirm, we have actually now paid EUR3.1 billion to the DOJ.

Our reserve, as of today, obviously would have come down from actually settling.

So that is positive.

I think the other positive highlights that I would just cover while I am doing the talking is the NCOU because I think we are very pleased with the way that we managed to meet our targets for that by the end of the year.

On page 4, we set up some of the metrics of its performance over its lifetime and we've now dissolved that as an operating segment so we won't see that in 2017 and going forward.

We've simply let the residual assets go back to the original [CET] operating divisions -- very pleasing.

It was a division that's impacted the results for the fourth quarter.

A lot of what happened in the fourth quarter was obviously teed up in earlier periods but there is an impact on contra revenues from NCOU which we won't see in the future.

There is an impact on the credit loss provision line which we obviously won't see in the future but there is a positive impact on RWAs.

And the CET1 benefits of the NCOU over its lifetime was something in the order of 2%, 2 percentage points or so.

Good to get that one behind us.

On current trading, for those of you who listened to the press conference this morning, you would have heard that we were optimistic on a couple fronts.

One, obviously, we've got a number of these challenges now behind us.

But also, I think we've seen, particularly since Christmas time when we managed to put the RMBS case behind us, we have seen a recovery in our business volumes and we've seen customers coming back to us.

And although it is always early to make long-term prognostications for the year, we are all in the bank much better, and we are seeing a lot more client engagement and so far this year, we have been pretty pleased with the progress we have been able to make.

It looks as though we've got a decent foundation and with a lot of the one-off costs behind us that have been driving these negative overall results for the past couple of years, we are sitting here in early February this year in a very different mood from the one we were in a year ago, feeling a lot more confident and optimistic for the outlook for the rest of the year and actually for the delivery of our overall strategic plan.

With that, I will hand over to Marcus, who can take you through a lot of the detail.

Thanks, John.

Welcome and to the people in the US, good morning, also from my side, to our Q4 2016 results call.

Allow me an apology right from the start.

I will be talking for quite a bit and in fact, may be a bit longer than usual given its full-year review.

Let me start by guiding you through the net income bridge for the fourth quarter over last year.

Excluding C&A and a constant foreign exchange rates, revenues for the Group increased by EUR0.9 billion versus the prior-year quarter.

This includes EUR0.8 billion related to a gain on sale from our Hua Xia Bank in the fourth quarter of 2016.

Looking at the divisions, Global Markets revenues were down EUR41 billion in Q4, with higher Debt Sales & Trading revenues offset by lower Equity Sales & Trading revenues.

For CIB, we saw an uptick in revenues of EUR36 million.

The stronger performance in Corporate Finance was counterbalanced by lower transaction banking revenues, driven by lower balances and the weak interest rate environment.

PWCC revenues were up 400 -- sorry, EUR504 million year over year, which includes a EUR694 million higher contribution from Hua Xia, driven by the aforementioned sale, which was, in part, offset by lower revenues from the by the Private Client Services, or the PCS business in the US, after that unit was sold in September last year.

Asset Management revenues were down by EUR36 million year over year.

Revenues profited from an increase in performance and transaction fees, offset by negative fair value adjustments of guaranteed products and reduced management fees as well as the reduced assets under management.

Postbank revenues were up by approximately EUR200 million, driven by ceased revenue burden from an adjustment to Bauspar interest provisions in the fourth -- which we booked in the fourth quarter of 2015.

Non-Core Unit revenues were also up by EUR200 million year over year, reflecting the de-risking gains whilst moving on with the overall write-down of the segment, as John has described.

C&A reported EUR400 million revenues compared to prior-year quarter, with the main driver being negative effects from valuation and timing differences off our Treasury portfolio.

The provisions for credit losses increased by EUR113 million, driven by provisioning primarily in our shipping portfolio.

The adjusted cost base improved by EUR465 million year over year, mainly from lower performance-related compensation.

Restructuring and severance expenses were approximately EUR618 million lower prior year quarter, and litigation expenses increased by about EUR400 million, mainly reflecting the DOJ RMBS settlement as well as smaller impacts from the recent settlements with US and UK regulators regarding the Russian equities matter.

Impairments increased by EUR1 billion, primarily related to the sale of Abbey Life.

Income tax expenses were up whilst we saw a favorable FX movement.

As John pointed out, this overall leads to a [net] loss of the quarter of EUR1.9 billion.

The following slides shows the net income bridge for the full year, representing our preliminary results at constant exchange rates.

Global markets revenues were down EUR1.5 billion compared to prior year, primarily driven by idiosyncratic factors, in particular, the impact on our client franchise from the DOJ -- or from the RMBS leak, as well as the delivered exit strategies announced in Strategy 2020 as well as market underperformance due to our business mix.

I will come to that in more detail later.

CIB recorded lower revenues by EUR0.5 billion despite the fact that revenues from Advisory and Equity Origination and Corporate Finance significantly improved in the second half of the year.

Transaction banking revenues continued to suffer from low interest rate environment in Europe and depressed trade volumes.

PWCC revenues were up EUR233 million year over year.

Again, this includes the impact from the disposals of the Hua Xia Bank and the PCS units.

Excluding this, revenues declined approximately 7% year over year, reflecting reduced activity of our clients in more volatile markets as well as the continued low interest rate environment.

Asset Management revenues for the year was slightly up and Postbank revenues were also up by EUR254 million.

The Non-Core Unit revenues were down by EUR1.2 billion year over year, which was in line with our de-risking strategy for the segment.

C&A reported EUR623 million lower revenues compared to prior year.

Provision for credit losses increased by EUR429 million, driven by provisioning, primarily driven in shipping, as I mentioned, but also in the previous quarters as in the oil and gas portfolio.

The adjusted cost base improved by EUR1.2 billion year over year, mainly from lower performance-related compensation.

Restructuring and severance expenses were EUR277 million below prior year.

Litigation for the full year were also EUR2.6 billion below prior-year level and so were the impairments by EUR4.5 billion since we had, as you would remember, those extraordinarily high impairments which we booked in the third quarter of 2015.

Income tax expenses were slightly better for the full year and FX movements for the year were also favorable.

With that, we expect a net loss for the full-year 2016 of EUR1.4 billion.

Let me highlight again that these are preliminary results, in particular, our litigation costs may change either way until we publish our final numbers for 2017 on March 17 -- sorry, the final numbers for 2016, of course.

The next page provides an overview of our noninterest expenses for both Q4 as well as the full-year 2016.

For Q4, and at constant exchange rates, it increased by EUR300 million to overall EUR9 billion.

The reduction of adjusted costs of [EUR465 million] got offset by higher non-operating costs such as the EUR1 billion impairment on goodwill and intangible assets triggered by the sale of Abbey Life as well as high litigation of EUR400 million, including a tax from DOJ settlement.

Restructuring and severance expenses was down by EUR680 million and on a full-year and FX adjusted basis, noninterest expenses hence came down by EUR8.5 billion.

Let's look into our adjusted cost base over -- for the next page, which EUR1.2 billion below prior year.

You see five categories with the following year-over-year movements at constant exchange rates.

Comp and benefits were down EUR1.1 billion, driven by the lower performance-related compensation.

IT costs remains our second-largest cost category, which increased by EUR322 million, half of which is due to higher depreciation of self-developed software.

Professional service fees were up EUR106 million, influenced by regulatory implementation projects.

Occupancy costs were EUR61 million higher, mainly driven by an impairment charge of EUR86 million books in the fourth quarter.

Bank levy and deposit protection cost decreased by EUR119 million due to UK Bank Levy and [Double] Taxation Release as well as reduced deposit protection cost in Germany.

In addition, other costs came down EUR415 due to lower operational losses, reduced amortization for intangibles, divestments in the Non-Core Units, and reduction in staff-related non-comp expenses.

What you also see on the slide is our headcount developments.

Compared to last year, headcount decreased by around 1,400 FTE, including about 2,000 who were internalized.

The main drivers for the reduction were Strategy 2020 measures, as announced in the last year, including the successful sale of the Private Client Services as units in PWCC.

On our next slide, we show our capital position.

Common Equity Tier 1 capital decreased slightly from EUR42.9 billion at the end of Q3 to EUR42.7 billion at the end of December.

Negative net income was offset by the Hua Xia Bank disposal benefits as well as favorable FX movements.

AT1 capital remained constant at EUR4.6 billion.

Risk-weighted assets decreased substantially by EUR27 billion compared to prior quarter to now EUR358 billion at the end of the year.

Main drivers here were the following.

Non-Core Unit de-risking effects which contributed EUR9 billion; EUR10 billion from the disposal of Hua Xia and Abbey Life ; EUR5 billion CIB risk-weighted assets optimization initiatives, for example, by our securitizations, hold-for-productions and client rationalization ; and EUR8 billion RWA reduction in Global Markets; and then EUR3 billion Group-wide operational risk weighted assets reduction, reflecting progress made on systems control and governance.

That said, there were unfavorable EUR6 billion FX effects, which, however, [are] Core Tier 1 ratio neutral.

We need to recognize that some of the RWA reductions, in particular, in CIB and Global Markets were related to the stress the Bank went through in Q4.

We actively managed our positions to strengthen capital and liquidity as we were suffering from adverse client reactions.

The situation has profoundly changed since the announcement of a settlement with the DOJ, but I will come back to that later on.

As a result, Core Tier 1 ratio improved by 11.9% per quarter end on a fully loaded basis.

The phase-in ratio is at 13.5%.

The positive results, which reflects our disposal activities, disciplined capital management, as well as business volume reductions.

The following page shows that we went -- that we maintain significant capital buffers versus our Pillar 2 requirements, which also operate as [MDA] trigger.

What you see reflects the old and new requirements the ECB has set following the completion of their Supervisory Review and Evaluation Process, or in short, the SREP for both year end 2016 and January 1, 2017.

The 13.5% phased-in Core Tier 1 ratio per year end and 2016 is well above the required 10.76% and end of last year, the ECB notified us of our Pillar 2 requirements for 2017.

Targeted to maintain a Core Tier 1 ratio of at least 9.51% on a CRR/CRD 4 phase-in basis compared to which we recalled 12.76% per January 1 of this year.

In more detail, the SREP minimum requirement for 2017 is composed as follows, a minimum Pillar 1 requirement of 4.5%; an additional Pillar 2 requirement of 2.75%; a so-called capital conservation buffer of 1.25%; the countercyclical buffer of currently only 0.01%; and lastly the G-SIB buffer, which for Deutsche Bank, right now at 1%.

Let us take a look at the development of our leverage exposure, which only slightly decreased by EUR7 billion in Q4 2016.

The [walk] shows you the details.

The biggest reduction item were portfolio movements, reflecting deleveraging of business assets most notably in our securities financing transactions, SFT, just over EUR20 billion of the reduction is in the equity business whilst the rest is in our debt business.

In equity, the reduction is less principally in the US as we have seen counterparts react to the DOJ leak.

On the debt side, we have seen similar dynamics but much less pronounced.

Around a third of the debt reduction is client lift.

Again, principally in the US with the rest reflecting expected seasonal slowdown plus some specific factors.

For example, our efforts to migrate derivatives [CofAs] towards cash margining allows us to also unwind transactions by which we were borrowing securities to place as margin.

On the other hand, we've seen a material increase in assets health at Group center which reflects the buildup of the cash elements of our liquidity reserves.

The reported leverage also rose because of unfavorable FX movements, notably in US dollars.

Before we move onto the financial results, a few words on funding and liquidity.

The left-hand side of my slide 13 shows you that we continue to maintain a well-diversified funding profile; 72% of our funding comes from more stable funding sources.

This number has been stable for several quarters now.

Our total funding sources increased by EUR20 billion to a total of EUR977 billion.

In line with our 2016 funding plan, we raised EUR13.8 billion at three months [your] LIBOR plus 129 basis points with an average tenor of 6.7 years.

For 2017, we already recorded issuances of EUR3.5 billion.

With a very strong performance on the liquidity side, we reported a liquidity reserve of EUR218 billion per year end versus EUR200 billion per end of September of 2016.

The liquidity coverage ratio had moved up to 128%.

The Bank showed a strong resilience in relation to its funding and liquidity position on the back of one of the most challenging quarters and years.

And we are seeing the turnaround post the DOJ settlements reflected in the performance of the last four weeks.

Let me now turn to a new slide, which gives an overview of our balance sheet composition and the funding structure.

Our IFRS headline [trigger] of EUR1,591 billion is a gross figure before any netting.

Adjusting for legally binding netting agreements, primarily in derivatives as well as offsetting cash collateral and pending sediments brings the total funded balance sheet down to EUR1,077 billion.

While it's not a direct US GAAP equivalent, this allows for a much better comparison with those of our peers who report on the US GAAP.

You might recognize that this number does not tie back to the EUR977 billion shown on the previous slide.

Let me briefly explain the difference.

Our balance sheet overview is a straightforward representation of our IFRS balance sheet adjusted for the largest netting items which are commonly applied, for example, in US GAAP or leverage exposure calculation.

Derivative mark-to-markets, derivatives cash margins, and pending settlements amounting to the EUR1,077 billion.

With our external funding overview, which is the EUR977 billion you've seen also eliminates those liabilities which do not provide us with structural funding.

However, this slide gives an overview of the funding structure of our balance sheet and you can think of this in a few broad categories.

First, our deposit funding more than covers our loan book by EUR90 billion, with excess deposits also being held as liquidity reserve as a buffer against any stress-related deposit outflows.

The loan to deposit ratio stands at only 82%.

Second, our cash and securities positions, including reverse repos substantially exceed the volume of short-term wholesale liabilities with the excess being supported by our long-term debt and equity, which at EUR243 billion, represents more than 20% of our funded balance sheet.

And then third, there have been a number of remaining sundry items that substantially offset each other.

Let me also add some further color on a couple of specific asset side items.

Of the EUR409 billion of loans, two-thirds are German mortgages for other high quality corporate loans.

The cash position of EUR193 billion represents an unusually high level and not something we expect to persist.

This is a consequence of actions taken during the fourth quarter to enhance available cash balances as a precautionary measure in the light of more challenging funding conditions during the height of the RMBS speculation.

We hope this gives you a better sense of our balance sheet.

With that, let me now move into the segments.

Starting with Global Markets, where we reported an IBIT of only EUR16 million for the full-year 2016 and a loss of EUR737 million for the fourth quarter.

Revenues were down EUR38 million in Q4, a decrease of 3% year on year and a small increase of 2.4% excluding CVA/DVA/FVA.

On a full-year basis, revenues were down EUR1.6 billion, or 14%.

There are three main factors driving this relatively disappointing revenue development.

First, with Deutsche Bank specific aspect are the deliberate exit strategies which we announced in October 15, particularly in areas like securitized trading and RMBS as well as the emerging markets country exits.

These explain about the quarter of the full-year Global Markets revenue reduction and given they were concentrated in debt, around half of the full-year fall on that side.

Strategy 2020 impacts are much, much less impactful in the fourth quarter as we had already initiated many of these actions in Q4 2015.

Second, DB idiosyncratic factors and in particular, the impact of our client franchise on the RMBS leak in September.

We saw reductions in client activity levels and balances along with elevated funding costs and this impacted our equities business in particular this quarter.

Whilst it is difficult to measure precisely, we think that this accounts for about one-third of the full-year Global Markets revenue reduction with similar impacts in both debt and equities.

For the fourth quarter, these factors account for almost all of the year-on-year delta and equities with a slightly smaller effect on the debt side.

Three, we think our business mix has harmed as well, as market revenue pools have been lower in areas where we are strongest in debt such as FX and emerging markets whereas areas where we have less presence, either because of our geographical mix or as a function of our strategy has seen better revenue pool developing.

Examples here would be slow credit and securitized products, particularly in the US, as well as US rates.

Equity revenue pools are also materially down this year.

The business mix impact has two effects.

First, it impacts our full-year period on period compared to performance and broadly explains the remainder of the reductions not due to the two DB specific factors above.

Again, this is less of a factor in the quarter when strong performance and credit in Asia helps drive an outperformance versus a relatively weak third quarter last year -- or the year before.

Secondly and this is harder to measure, when taken alongside two DB specific items above, we think business mix helps explain the relative underperformance we have seen versus our US peers.

This is a trend we have now seen for a number of quarters.

Global markets cost for the quarter decreased by 11% primarily due to lower litigation charges as well as lower comp as well as non-comp expenses and the impact of currency movements.

Global Markets RWA decreased by EUR158 billion.

This is -- were at, sorry, were at EUR158 billion.

This is EUR3 billion lower year on year.

Global Markets continue to make substantial progress towards its permanent reduction objectives and is now completed approximately 90% of our country optimization strategy.

Global Markets is also approximately 50% complete, with its Strategy 2020 risk-weighted asset reduction announced in October of 2015.

Let's take a closer look at our Sales & Trading units.

In Debt Sales & Trading, we have seen increase of 11% in fourth quarter revenues.

This was driven by strong performance of our credits in Asia Pacific local markets businesses, partially offset by weaker performance in our Emerging Markets businesses.

A few comments on specifics.

Revenues in our FX business were higher year over year, driven by higher client activity as a result of increased volatility around US elections.

Rates revenues were flat year over year ; we saw solid client flow in Q4, offset by challenging conditions at the quarter end.

In credits, we had another strong quarter.

Revenues were higher year over year, driven by strong performance in financing and solutions, commercial real estate, and distressed businesses, particularly in the US.

Our Emerging Market debt revenues were lower year over year, driven by underperformance in Central and Eastern Europe as well as Middle East and Africa.

By contrast, our Asia-Pacific Global Markets revenues were significantly higher year over year due to favorable conditions in Asia and a difficult quarter in the year before.

Equity Sales & Trading revenues were 23% lower versus prior-year quarter.

Cash equity revenues were lower year over year, driven by lower commissions, especially in Europe.

Equity Derivative revenues were higher year over year compared to a challenging prior-year quarter, mainly due to a more favorable trading environment.

Prime Finance revenues were significantly lower year over year, reflecting higher funding costs and what we mentioned before, lower client balances on the back of all the noise around Deutsche Bank in Q4.

2016 was a challenging year for us, particularly in the first and the fourth quarter; however, we have seen a marked turnaround in client sentiment post the DOJ settlement with activity levels returning.

We will take time to fully recover but we are pleased with the progress in January thus far.

With that, let me now outline the key highlights for the Corporate and Investment Bank where we report an IBIT of about EUR300 million for the quarter and expect EUR1.7 billion for the full-year 2016, which represents an increase of 17% compared to prior year.

Revenues are marginally up comparing Q4 2016 with Q4 2015.

This reflects a strong performance in Corporate Finance, which was counterbalanced by lower transaction banking revenues.

On a full-year basis, revenue has declined 7%.

Provisions for credit losses increased to EUR244 million for the quarter and EUR672 million for the full year.

The significant increase is primarily driven by the shipping portfolio, where that industry continues to suffer from persistent structure oversupply, reduced global demands, and the secondary effects from the absorbency of a major shipping liner earlier this year.

Noninterest expenses for the quarter decreased by 3% to EUR1.3 billion and by 18% to EUR5.1 billion on a full-year basis.

Excluding impairments, litigation, restructuring and severance, adjusted costs were down 6%, reflecting lower compensation costs, saving some active cost management.

Looking at the revenue development on the next page across CIB in detail, the page outlines the aforementioned revenue, the increase in Q4 2016 compared to the general development in 2016 as well as the full-year decrease compared to 2015.

Trade Finance and Cash Management Corporate's revenues for the quarter are down 9% compared to prior year.

The performance has been impacted by persistent low interest rates in Europe, subdued trade volumes, combined with ongoing portfolio management measures, including refinement of our client risk appetite and country exit initiatives.

Underlying margins remained flat and business remains strong.

Institutional Cash and Security Services revenues were also 6% down for the quarter.

Institutional cash revenue continued to be impacted by ongoing business impairment decisions and country exits whilst performance and security services remains very stable.

Equity origination is up 6% in Q4 versus prior year.

We see quite a strong momentum in IPOs, with a pipeline building particularly in the US, taking the momentum also into 2017.

Debt origination developed quite nicely and is up 57% for Q4 2016.

The leverage loan market returned to more normalized market dynamics against unseasonal weakness in Q4 of 2015 where we saw notable slowdown in market activity and in liquidity.

M&A Advisory revenues for the quarter were also up by 15% year over year, particularly due to weaker Q4 2015 but also reflecting stronger momentum in the markets.

Market activity has been stronger with Deutsche Bank acting, for example, as lead advisor in several high-profile transactions globally.

Let's move to the Private Wealth and Commercial Clients.

In PWCC, revenues were up 3% for the full year of 2016 and 27% in the fourth quarter.

This, however, included the impact from the sale of Hua Xia Bank in Q4 2016, which had a revenue contribution of around EUR750 million.

In Q4 2015, we recorded a positive contribution of up to EUR62 million.

In comparison, this also impacted by the sale of the PCS unit in September of 2016 which led to the conservation effect for both revenues and costs.

Excluding Hua Xia and PCS, revenues declined by approximately 7% for both the fourth-quarter and full-year 2016, reflecting reduced activity of our clients in more volatile markets and in continued low interest rate environment.

Provisions for credit losses came in nearly flat comparing Q4 2016 with Q4 2015 and even 15% down, looking at the full-year numbers, reflecting the good quality of our loan portfolio.

Noninterest expenses were down 20% for the full year and 31% in the quarter.

The decline primarily reflects significant charges in 2015 related to goodwill impairments, restructuring and severance, and a software write-off, which we had in the fourth quarter of 2015.

Excluding these factors, noninterest expenses remained almost flat compared to prior year.

Higher costs for investments in digitalization were mainly offset by lower compensation-related expenses.

We saw net outflows of invested assets in the fourth quarter amounting to EUR24 billion.

This was mainly in wealth management in October 2016, following the negative market perception of Deutsche Bank.

However, we saw reduced outflows in November and December and we're now starting to see inflows in January.

Looking into PWCC subsegments, the next slide shows the revenue development in both the private and commercial clients side as well as Wealth Management.

Please note that the revenues from Hua Xia are not part of the PCC revenues.

Revenues in our Private and Commercial Clients business units were down 7% for the full year, and 6% for the quarter.

Please bear in mind that these revenue declines occurred in a period with significant restructuring activities in Germany, which took its toll on the organization.

In Q4 2016, revenues from investment and insurance products were down 18% year over year, while reflecting the reduced client activity and the lower interest rate environment led to a 17% decline in deposit revenues compared to the prior year quarter.

Credit product revenues, however, increased by 2% compared to Q4 2015 and by 3% in 2016 on the back of higher volumes.

Revenues in our Wealth Management business declined by 10% over the course of 2016 and by 21% in Q4.

Both declines were impacted by the aforementioned PCS deconsolidation.

Excluding PCS, Wealth Management revenues decreased by 7% in both full-year and Q4, mainly reflecting the impact of the more challenging market environments, on client activity, negative Deutsche Bank market perception and some strategic de-risking activities.

However, there is good revenue momentum during Q4 2016 across Wealth Management Asia-Pacific, Germany and in the US which continues in January.

With that, let's move to Deutsche Asset Management.

We finalized the sale of Abbey Life to Phoenix Life Holdings at the end of 2016.

This, however, affected the results where we recorded an IBIT loss of [EUR0.8] billion for the quarter and an IBIT loss of EUR0.2 billion for full-year 2016, driven by the impairment of EUR1 billion from the Abbey Life sale which also comes, however, with an RWA relief of EUR4 billion.

Asset Management reported revenues were down 8% for the quarter but nearly flat for the full year 2016.

When adjusting for the Abbey gross-up, revenues were down 4% on the quarter.

Higher performance and transaction fees in the alternatives business were more than offset by negative fair value adjustments of guaranteed products and reduced management fees.

Noninterest expenses increased as a result of the EUR1 billion impairment, which was partially offset by lower compensation costs.

For the full year 2016, asset management recorded net asset outflows of EUR41 billion compared to prior-year.

A third was driven by liquidity products yielding single digits basis point returns.

Just over 20% came from passive products, mainly reflecting broad market trends as investors repositioned their exposures.

In the US, market investors pulled basically money from currently hedged ETFs.

Despite the challenging 2016 outflows, the average fee margin improved in 2016 compared to 2015.

As we received strong inflows in dividend strategies and corporate bond funds, the prospect of our ETF performance in 2017 are positive.

Especially with a number of our fixed income ETFs have now switched from synthetic to physical replication.

Postbank.

Postbank reported an IBIT for the full-year of 2016 of EUR367 million; however, the last quarter was burdened by one-off charges for litigation, restructuring and severance as well as negative contribution from Postbank Non-Core Unit and hence, and it was an IBIT loss of EUR2 million.

Revenues for the quarter were up 34% to EUR0.8 billion, whereas we've seen 8% increase to EUR3.4 billion on a full-year basis.

Key driver was ceased revenue burden from an adjustment to Bauspar interest provisions in Q4 of 2015 and the sale of certain investment securities.

We saw a stable development in provisions for credit losses despite rising loan volumes, reflecting benign economic environment in Germany and good portfolio quality comparing Q4 with prior-year levels.

On a full-year basis, we saw a decrease of 13%.

Noninterest expenses were down 12% to EUR763 million for the quarter due to cost control and lower expenses for strategic initiatives.

Postbank realized savings in non-compensation direct costs besides regulatory cost-driven inflation while expenses for compensation and benefits remained broadly flat.

Further efficiency improvement was driven by clients or oriented end-to-end process optimization as well as streamlined digitalized processes.

When comparing noninterest expenses on a full-year basis, it is important to keep in mind the impairment charges that occurred in 2015 which explain nearly 50% reduction -- the nearly 50% reduction year over year.

As highlighted earlier, we are pleased to confirm that the Non-Core Unit has successfully reached its target of consuming less than EUR10 billion of risk-weighted assets.

The division is now closed effective January 1, 2017, which marks the end of a successful strategy to resolve these legacy assets.

In the quarter, there was a significant amount of de-risking activity, including the disposal of Maher Port Elizabeth and the sale of our equity stake, or remaining equity stake in Red Rock Resorts as well as further bond and structured asset sales.

The IBIT performance in the quarter was driven by the resolution of litigation matters, specifically in relation to our legacy RMBS business, where we have taken a further provision of EUR1.1 billion on the basis of our resettlements with the US DOJ.

Excluding litigation charges, the NCOU burdens the Group in 2016 by EUR1.5 billion.

Again, the good news is that this will no longer be the case in 2017.

The cost reallocated to the Group -- the question we often get, is approximately EUR300 million and we are aiming to further reduce this.

The remaining EUR5.5 billion of [IFRS] assets will be now transferred to our core divisions, primarily into Global Markets and PWCC with negligible ongoing asset-driven IBIT impact expected.

Let me skip the next page on C&A to provide you with some final comments on outlook.

As John noted, we have another year of restructuring ahead of us, but against the backdrop of what looks like an improving operating environment.

In terms of costs, we anticipate that litigation will remain a burden in 2017 as we continue to work on resolving legacy matters.

We clearly made good progress last year with some of our largest matters and continue to do just this week, with the resolution of the Russian mirror trading issue with two key regulators.

While I can't provide any meaningful forecast, I want to caution you from thinking that 2017 is a year with no legacy litigation drag.

In particular, we do expect a number of civil litigation matters that need to get resolved.

2018 should then be the first year where this normalizes.

In terms of our adjusted cost base, we are still confident that we will hit our 2018 target of adjusted costs of around -- of maximum EUR22 billion.

We will begin to see cost reductions flow-through from investments made last year as well as from the impact of expected headcount declines this year as we will maintain our hiring restrictions and expect to conclude our previously German retail branch closings, mainly in the first half of 2017.

We expect credit costs to improve in 2017, in part with a successful write-down of non-core unit as well as the good overall quality of our credit portfolio.

For Q1 2017 specifically, we expect risk-weighted assets to rise as business volume increased, notably from the seasonal rise in activity in our markets business, which we already see evidence of in January.

In terms of capital, this remains a clear focus for us and we remain committed to achieve at least 12.5% Core Tier 1 ratio by 2018.

We expect sufficient preliminary AT1 payment capacity for the 2017 coupon without utilizing previously established so-called German GAAP [340] reserves.

Whilst we are just one month into the year, the trends in the operating environment are positive.

January saw improvements across basically all businesses.

In particular, Global Markets was running meaningfully ahead of last year most notably in rates and credits.

We have also seen a meaningful client activity pick-up in January.

This reflects not only clients reacting to the improved outlook, but also from re-engagement by those clients who did reduce their activity with us in reaction to the turmoil from the RMBS speculation dispute into the fourth quarter.

With a resolution of this matter, we are confident that the client re-engagement will continue but it will also take some time.

In Corporate Finance, the high yield market experiencing one of its strongest starts to a year ever in the US and we also seeing meaningful pick-up in EMEA.

The leverage loans market is experiencing the carryover of the momentum from 2016.

Investors have strong cash positions and our pipeline is building strongly in that space.

Deutsche Bank is bringing a good share of the deals and the wallets.

In ECM, year-over-year January revenues nearly doubled; robust increase admittedly is also due to a very weak January 2016.

Deutsche Bank is benefiting from the expected [wave] of IPOs, as the markets have persisted from what is called the Trump bump.

In M&A, volumes are already higher than last year; in particular, strong activity coming out of EMEA.

As mentioned earlier, Deutsche Bank has been mandated on some key M&A deals.

Our M&A numbers are up 21% in year-over-year revenue.

The slow recovery from the asset reduction initiatives and other permitted de-risking activities will see revenues decline which will set the new normal in [GTB].

Though some upside is expected to be seen from US interest rate hike.

Deposits are expected to be flat but we have seen a reduction of our payment volumes in comparison to January 2016 due to the perimeter exits.

Client behavior and reactions are much more positive and stabilized following the DOJ confirmation though it is too early to assess the full reaction.

In PWCC, we also saw an encouraging start in the year across all business units.

We have good momentum in PCC Germany, mainly driven by higher client activity on the Investment & Insurance side as well as a strong pipeline in the Commercial Clients segment.

The same holds true for the various countries in PCC International, supported by higher volumes and material deposit inflows.

Also, Wealth Management had a strong start in the year, in particular in our Asia capital markets business, which has had the best start into the year ever.

Asset Management started well into 2017, with EUR5 billion net inflow so far in January across all regions led by US and EMEA.

A large portion is driven by liquidity money market products but also a strong start for passive ETF products in both US and EMEA.

As you could see, we start into the year with a positive momentum in all divisions and we approached 2017 with a continued determination to pursue our restructuring, maintain our financial strength, and engage our clients in what looks like an improved operating outlook.

I know this has been long, quite detailed.

Let me now hand over to John who will moderate the Q&A session.

Operator, if we can begin the Q&A, please?

(Operator Instructions)

Jernej Omahen, Goldman Sachs.

Good afternoon from my side as well.

I guess for the first question, it's fair to kick it off by saying, well done on settling the US litigation issues, and on stabilizing the institution.

But I guess as a consequence, the debate is now going to shift from the financial stability aspect to the topic of profitability.

I have just one question on this.

And it goes as follows: Even post-settlement and stabilization, the funding costs for Deutsche Bank have risen and are higher today than at the time the restructuring plan was initially announced just over a year ago.

The balance sheet constraint, I guess, is higher than what you must have thought at the time of the announcement.

If we take all the bad things out from the results or litigations, we get to just below 5% return on equity.

So thinking about profitability in 2017 and 2018, when the starting point without litigation, without restructuring costs is 5%; when the funding costs are higher; when the balance sheet is a constraint, how do we get from just below 5% to the 10% target or even perhaps just 7% or 8%?

That would be my first question.

Maybe the second one purely on regulation.

You talked about the Trump effect on the revenue side of the equation.

It seems to be that there is a stalemate at the Basel Committee currently on finalizing Basel III and I thought if you could share any thoughts with us on that?

Thanks a lot.

Jernej, Marcus.

Let me start and then John, you add.

So on your first question, which is obviously one which would probably warrant almost a longer discussion, let me highlight the core points.

First, we are seeing at least relative to where we were three months ago, a tightening in our funding cost, but you're right.

It's higher than -- and I think you are referring to what it looked like in October of 2015, and we clearly have to do more to bring that down.

With more and more clarity kicking in on, particularly on the litigation front, we would expect this to come down further.

That is the first point.

Secondly, we have not yet seen a lot of structural improvements on the cost side.

I was highlighting that our targets to, excluding Postbank, gets to an adjusted cost base by 2018 if to be below the EUR22 billion number; and in fact with that, you shouldn't interpret this as we're targeting to be 21.9%.

No, I don't want to hand out the number but we clearly think we need to and can be more aggressive on that side, in particular, utilizing -- and that is why we put in place a, I would say, a qualified hiring freeze.

We can utilize the natural turnover that we do have in the bank.

That cost save will give us quite some uplift.

Most notably, quite frankly, you will also see this in our retail business, and we do expect the revenue position of the bank that we had experienced in 2016 not to be representative for the coming years.

As we've mentioned several times, we already in January are now seeing or just from the way clients interact with us but also me just looking into the daily numbers, that the situation is turning and I think that is the most important point.

The 2016 profitability was heavily negatively impacted by a lot of noise and by very poor development on the revenue side, which we do expect to turn.

And that, combined with our cost measures, we do believe will medium-term, now whether that is 2018, we'll have to see, that's through our targets, but I would say medium-term, we're clearly convinced we can take this bank to 8% to 10% return.

On the regulation side, Basel III/IV, I think the market calls it IV, the regulators call it III, you all know what we are talking about.

I think what would be good is if we finally got clarity on what the outcome is.

Be it that there is no outcome, be it that there is a specific outcome.

Right now, when asked what do we think it will mean for us, I would say it is still more likely that we will get some conclusion from the Basel Committee.

In terms of what it means numerically for us, at this stage, we would still stick to what we have communicated in October 2015, namely it probably represents about EUR100 billion increase.

It's a contribution on the market risk side from the FRTB slightly lower than what we had expected back then, but it might be slightly higher on the credit side.

And the one thing where we are certain, if and when they come to a resolution now on Basel IV, I think the implementation will be much, much later than what we had originally thought.

The new Commission has communicated that they would consider an implementation not before at the beginning of 2021, maybe even as late as 2022 and even then, there might be a phasing period which could take it, looking at it today, it could be a 7- to 10-year time horizon, which is very different compared to what we had anticipated 17 months ago where we were still of a view that everything would kick in, in 2019.

Long-winded answer; I would say our best cases, we will get a resolution in Basel.

It will mean an increase, but it will come only sometime in the next decade.

Can I just add a little comment on your funding cost point, Jernej?

You shouldn't forget that the funding cost increase from spread increase that we saw, particularly in the fourth quarter, doesn't have a dramatic impact on our overall cost of funds, because although the funded balance sheet is around about EUR1 trillion, we're only talking about a non-deposit fraction of that.

We're now funding spreads with (inaudible) we didn't lock them in -- we did not actually issue.

We have seen a tightening.

We are not happy that it's tightened enough.

I actually think this Company has always been extremely credit-worthy.

We just need to be able to show that.

Very long liquidity.

And one thing which I would add, just not to overdo the optimism, if you think about our deposit business, we're actually getting some tailwinds now because, less so in euros, but certainly in dollars, the shape of the yield curve is actually now enabling us to make money from our liabilities.

So the change in yield curve, I think, over time, will, to some extent, countereffect the effect over time of replenishing our spread-affected funding.

Thanks for that.

John.

Maybe if I just come back to your question very briefly.

So it appears to be the case that Deutsche found it cheaper than any of your competitors, particularly in the investment banking space.

Did I understand your answer correctly?

Do you expect that to return at some point in the future?

That is why we turn up to work every day.

No, I really do.

We are Europe's leading bank.

We should fund that a rate to project that.

Okay.

Thanks a lot.

Jon Peace, Credit Suisse.

Thank you.

I think, Marcus, you said this morning that fixed income trading was up 40% in January, which would be a terrific acceleration and put you on the first-quarter 2016 run rates, and I just wondered, is that all client business?

Or was there anything unusual or lumpy in there?

And then my second question was on Deutsche Postbank.

What is the book value of that business at the moment?

Because I think it's a bit less than the equity you allocated to us in the financial data supplement.

I think it's a little bit less than EUR5 billion, and I just wondered, what is your sensitivity around the disposal of that business?

How much of a write-down are you prepared to accept?

What sort of CET1 accretion are you ideally looking for?

Thank you.

Okay.

Let me take the first question -- sorry, the second question first.

We have not and don't plan to disclose the book value of our Postbank assets because, although it's a helpful metric to disclose, in particular, when an M&A track is also an option, which is why I suppose to find it difficult to comment on a write-down, an acceptable write-down.

I think the only data that's we can point to is that this business has rounding EUR40 billion of risk-weighted assets, which where about EUR40 billion would leave the bank in case of the disposal be that via a market and exit through the capital market or through an M&A deal.

And I guess one thing is also clear, and John has never made a secret out of that: we would only be selling this asset if it gives us meaningful capital relief and hence we will certainly accept a major write-down.

But I really ask for your understanding that, from a negotiation point of view, it wouldn't be terribly smart for us to disclose the book value.

On your first question, on the debt side, yes, I did mention that January has seen an almost exactly 40% increase when comparing January 2017 with January 2016.

There's nothing unusual there.

It's [cleaning of] all client activity.

Some of that is by an old position.

Let me in this context also highlight, because we don't want to only throw out selective positive metrics, although quite frankly, the pick-up that we are seeing is in almost every business.

Where it is still pretty slow; it's in Equity Sales & Trading, where it is flattish to slightly down relative to the January 2016 numbers.

This is predominantly driven by the fact that it just takes some time until you, in a way, bring back, particularly those Prime Brokerage benefits, which I think we have been fairly clear, some of which we lost in those unfortunate six weeks between September 14 and at the end of October.

But there is reengagement and we are gradually seeing this turn.

So on the equity side, I would be more cautious.

It will take more time.

The debt side has reacted much, much faster.

Great.

Thank you.

Kian Abouhossein, JPMorgan.

Thanks for taking my question.

First of all, congratulations on the NCOU.

That seems to be, by far the best performing business meeting and budget, I assume, for the year.

I wanted to understand the risk-weighted assets movements in the Group going forward, because when I look at your capital generation, it has been mainly through shrinkage of risk-weighted assets.

And it looks like that has been your focus for the fourth quarter.

And I wonder, 2017, is that going to be a year of, well, let's re-engage and generate profits.

I know January started well.

But still, is that going to be the focus?

Or is that going to be the key issue is capital build up and that could mean potential further shrinkage?

And that takes me to the risk-weighted assets question, considering that you used to have or still have a target of EUR320 billion by 2018 ex-Postbank.

If that is still relevant, that target as you view now at Postbank?

And the second question relates to the cost base.

If I adjust for variable compensation, I'm looking at roughly a cost of EUR25.8 billion run rate.

It's probably even a bit lower, I would think.

And your original target was EUR26.5 billion.

You're running roughly EUR1 billion lower, and I wonder is it now time to maybe reconsider the below-EUR22 billion target and give a more updated target at this point?

Thank you.

I guess I'll give it a first shot and then John, you add.

So on your first question, RWA development in 2017 and focus.

On the side of risk-weighted assets, we would expect those to actually go up.

The reason, when you would take as a stopping point, the end of 2016 situation.

And let me highlight and I will come back to 2017, what really happened in the fourth quarter.

In a way, it's quite simple.

You had a EUR30 billion reduction when you look at the whole Group.

EUR10 billion is from the disposal of Hua Xia and Abbey.

EUR10 billion, I'm rounding a bit, is from the NCOU.

And EUR10 billion is in CIB end markets.

This third EUR10 billion in CIB end markets, if you look at this as, this was a reduction in business volume, which we don't think is sustainable, as in, will come back.

And we are actually seeing quite a bit of that already in the first month.

So you should make the assumption that there will be an increase in that space, which will also take the risk-weighted assets back up a bit.

So I think this is more a level which I think is sustainable, or more sustainable throughout the year.

Now, there will always be some movement up or down.

We will see some increase on the side of operational risk assets against the backdrop that the litigation settlements that we have in Q4 will actually only impact our operational risk-weighted assets with a one-quarter delay, so there will be some uplift.

It's a long-winded answer to highlight that EUR358 billion will probably grow by EUR10 billion-plus in the very near future.

And is then more representative for how you should think about Deutsche Bank in 2017.

We still need to manage two items in parallel, which is the capital build up until the end of 2018 where we need to be or want to be at least at 12.5%.

And we are committed to that and do everything that is necessary.

But at the same time, we also want 2017 to be a year where, from a profitability point of view, we see an improvement.

I don't think John or I want to sit here 12 months from now having to explain another year where we incurred a loss.

We will do our utmost to make sure that is not the case.

Now, on the cost side, your second point, you rightfully observe that it looks like we are a little bit ahead of the curve, or ahead of our own targets, which is why I said in my remarks, the max EUR22 billion target for the adjusted cost base including Postbank.

We made it our targets, until we update that target, which we are not doing today.

But made it very clear, I think, throughout the meeting that this is an upper limit and we definitely expect to do better.

We will to our utmost to do better, but today, we are not yet in a position to give out a more specific number there.

We are still working on that.

Stuart Graham, Autonomous Research.

Thanks for taking my questions.

I have two questions on capital first.

The first question is on RWAs again.

At the October 2015 strategy update, you talked about EUR40 billion of RWA inflation mainly due to operational risk over the period 2015 through 2018, and that was due to industry loss data and it had nothing to do Basel IV.

I think so far we have had less than EUR7 billion of that.

So my first question is, how should we think about that original EUR40 billion guidance and within that, what, if anything, are you assuming from the ECB's Trim Project?

The second question, then, is on the SREP ratio, which I think is a fully loaded SREP.

Fully loaded is 12.76%, which I'm calculating by taking the disclosed 11.76% and adding a Pillar 2G of 1%.

So I guess the 12.5% CET1 target was based on a 25 basis points buffer on the old fully loaded of SREP of 12.25%.

So I guess I'm struggling to understand why 12.5% is still the right target on a fully loaded basis?

Shouldn't it be more like 13%?

That's my second question.

Thank you.

I take the questions in reverse order.

So let me start with -- I don't know where our asset level is going to be in 2019 because we have not received our SREP letter for that year.

What we do know is the levels we need to achieve in 2017, where the requirements that we need to be is 9.51%.

Now you can look at this and look at the developments that we will see with the phasing in of the capital conservation buffer as well as the G-SIB buffer, which will gradually take that number up.

At the end, again, people will probably notice the G-SIB buffer will, over time, double from 1% to 2% and the capital conservation buffer will also double from where it is now.

Now it is at 1.25% and it will go to 2.5%.

These are the movements that we know which will move over time until 2019 should move the MDA up mathematically, just (inaudible) would move it to 11.51%.

How big then the add-on from the Pillar 2 guidance is, quite frankly, we don't know.

And which is why we would stick to what we have been saying so far, namely, we want to be at least at 12.5%.

It doesn't suggest we want to be at 12.51%, but we want to be at least at 12.5% ; however, these are the facts that we know today.

On your first question regarding the operational risk-weighted assets, you rightfully point out that we had in October of 2017 said that we are expecting a good portion of the EUR100 billion to come from op risk.

Some of that will be driven by the industry and our own losses, and as I highlighted, the market should expect some increase in operational risk-weighted assets in the year 2017 on the back of the large RMBS settlement and other settlements that we had.

I don't want to throw out a number, but it is probably -- it can be a high single-digit number, which we will see this year.

The outcome from Basel, we don't know.

We actually think what we are hearing is that the impacts on operational risks right now looks a bit more muted than what we had anticipated in October of 2015.

On the credit side, on the other hand, I would say there is still some items which are open there that could be somewhat downside in a sense that the number might be lower.

On balance, we would still stick to the EUR100 billion that we had highlighted.

Just to clarify that, so you finished the year with risk-weighted assets of EUR258 billion.

You're saying there will be some bounceback in CIB and go to market, so that's maybe EUR10 billion; then you've got the operational risk which is maybe that's EUR8 billion, so it is kind of EUR18 billion of RWA increase-ish; and then ECB Trim Project, do you have any clarity around that?

First of all, it's timing-wise, it's quite some time until this will really start to kick in and will potentially start to have an impact.

We don't know in what direction.

We don't expect that to have an impact in 2017.

Okay.

And then you are basically saying your SREP ratio, you're managing the Bank on the phased-in, not the fully loaded, because you don't know what the fully loaded is going to be in 2019 yet?

Well, in 2019, phased-in, and fully loaded will be the same.

There is no difference.

But you don't know what the Pillar 2G will be at that point.

That is correct.

That is correct.

Daniele Brupbacher, UBS.

Thank you.

Good afternoon.

I would just like to briefly come back to MDA (inaudible) level that we've just discussed.

You said (inaudible), ECB doubles, that is 125 basis points; and if G-SIB doubles to 2%, that is another 100 basis points.

My calculation would be a 225 basis point increase compared to the 9.51%.

So am I wrong assuming it would increase on a (inaudible) basis to 11.76% to be higher?

I just wanted to clarify that.

And then I wanted to ask about the [restated] assets in Global Market.

Obviously, a big success in reducing non-Core, but I was just wondering within the Global Markets, you also said and yesterday announced certain reduction targets, I think it was EUR30 billion or something; it's obviously a net number and I was just wondering how you think about, let's call it, recycling of existing RWAs.

There must be some RWA which is relatively unprofitable.

Whether you can get out of these positions and reinvest that money at much higher levels.

And then John, just regarding the interest rate sensitivity, that was very useful in terms of how you think about it and what your exposure could be.

Would it be somewhat possible to be more specific around what a, let's say, 100 basis-point parallel shift of the US yield curve would mean at least in the banking book?

I'm not talking about the second order impact in terms of trading (inaudible)level, so that would be extremely helpful.

Thank you

On the first question, the 9.51% is still on a phase-in basis.

So when you do the math in the -- and we are happy to send you a sheet where actually, maybe we can actually put this on the web.

You -- on a fully loaded basis, you will then in 2019, gets to 11.51%.

Yes, and the second subpart of that was the recycling of low return RWA, and that is very much part of the strategy for Global Markets.

In fact, we are having the guys in markets formalize that a bit more by setting aside a PFE for us and the senior management of the Company, what assets are actively legacy or back book.

And then we will see a recycling.

To some extent, you take our ForEx business, they are recycling almost daily, weekly, but there would be the ability for us to recycle throughout the Group some of the risk-weighted assets with a capital capacity that's freed up on some of the old back books.

On the interest rate sensitivity, it is very broad arithmetic, but you took all of our spread-affected funding and you had a parallel shift of 100 basis points, you could do some quick arithmetic and get something like EUR0.5 billion, but it is not great arithmetic.

We wouldn't expect a parallel shift, anyway, but it is that order of magnitude.

Thank you.

Magdalena Stoklosa, Morgan Stanley.

Thanks very much.

Good afternoon.

My first question is more structurally about the evolution of your fixed business from here.

We've heard about better client engagement but trading environment, but within your fixed portfolio going forward, where are you likely most to commit some balance sheet?

And how you are going to think about it more strategically?

And on the industry level, if you were to take a stab at the magnitude of the Global and the Fixed revenue growth this year, what would your guesstimate be?

That is my first question.

And my second question is a follow-up from my predecessor.

The interest rate sensitivity.

Of course we are kind of looking at a revenue split, which is almost 15% NII.

So would you be able to give us a slightly more context in terms of your sensitivity to age to short end rate, both in the US and in Europe?

And also the level and the potential upside driven by the steepness of the yields, be it points or in the US?

Thank you.

Magdalena, let me take a crack at the evolution of the fixed income business.

The big profit driver within our overall complex of fixed income trading has always been our Credit Solutions business, our Credit Trading house, first and foremost, when it comes to driving a profit line.

That would be generally the area in which we would allocate capital.

Now within fixed income comes our ForEx business.

It doesn't have much elasticity in demand.

It is a very large, very stable business, but it is one we like, and we like the returns in there.

In rates, I think it is fair to say a lot of the business that we used to write, a lot of the long-dated business, some of complex and non-linear rates products that have really gone out of fashion, and that is more now of almost a securities business, centrally cleared, daily margins.

And the margins there have fallen.

In January, our old CIB derivatives books are running off and they are being replaced by a little bit more liquid and materialized types of insurance.

But credit, I think, is the area where we have a lot to of value and where we're one of the market leaders and where we are seeing at the moment, a fair amount of client engagement.

I think it's very complementary to our client franchise out of the CIB.

On interest rates, I admittedly don't have for you broken down into currency and then shorter and longer end of the curve, what does it mean.

Maybe at least directionally helpful is, when you look at a shift in the overall curve by 100 basis points, then for our stable businesses and only for those, you can actually give a reasonably reliable guidance, that represents an upward shift in the curve by 100 basis points and it represents about EUR600 million higher revenue for the bank.

So in our Global Markets business, it's quite dependent on how you are positioned and it is much more difficult and can actually vary the answer depending on the position of the Bank, which is why I would shy away from giving any guidance there.

But for the stable businesses or where we take deposits, 100 basis points shift is roughly equivalent to a EUR600 million improvement.

Can we, and I'm sorry to be drilling on this, but particularly your euro sensitivity, because there is friction in the market you could argue your LIBOR has shifted up quite significantly over the last month.

And if we assume some normalization from the negative and minus 40% of the ECB, that short end of the curb, particularly within Postbank, particularly within your banking book, in Germany, and in Western Europe in general, what would that sensitivity be?

Because it would be very helpful for us as a context of how to sensitize the revenues going forward in those banking books?

So we need to come back to you there.

The only reliable data I can give you now is what I said before.

Okay.

Thank you very much.

Andrew Coombs, Citi.

Good afternoon.

One question on the slide 17, you've got the markets revenue outlook.

And then, a second question on slide 34 with the litigation.

Let's start with the Global Market revenues.

I am intrigued by your comments, particularly on Prime.

You said 2016, quick to cover equities will take longer time.

So with that in mind, can you give us an idea of the magnitude of the move in Prime Finance decline balances over the past couple of quarters?

And perhaps, how much of that related declines actually switching Prime brokers are permanent rebased and lower?

And then my second question, on slide 34.

You've made a lot of progress on settling some of the outstanding litigation cases, so I was slightly surprised at the contingent litigation liabilities have increased from EUR1.6 billion to EUR2.2 billion.

Can you elaborate on what's driving that?

You mentioned increased civil claims, but would be interested in your commentary.

Thank you.

So maybe I start with your first question, which I understand is related to our Prime Brokerage business.

In terms of balances that we lost in this tricky time period, I would say it is in the high teens percentage points that we have lost.

And we are now -- or since then, we have seen a recovery of around a quarter of what we had lost.

On the contingent liabilities, we don't break them down.

A lot of them are related still to legacy positions where we've received suits against us of a civil nature, but relating to scenes that you will be familiar with.

(multiple speakers) The other item I would like to add maybe to the contingent liability movement, because we are -- sometimes, this excites people.

The increase that we have seen in contingent liabilities is all outside of the United States.

Thank you.

(technical difficulties)

You are breaking up.

Andrew, we cannot hear you.

I will come back.

Thank you.

Fiona Swaffield from RBC.

Good afternoon.

I had two questions; one was on leverage exposure, and what we should look at going forward?

Because I think if you take out Postbank, you're already past your goals.

Is there scope to reduce the leverage further and are there more efficiencies going on?

And what the plan would be there?

And the second is, you helpfully gave the impact or estimated impacts from business exits and other moving parts under Global Markets.

If you look at PWCC revenues, how much do you think the decline in 2016 was just due to idiosyncratic risk in that division?

Thanks.

I'll do the easy one, which is the first one, and I will let Marcus do the second.

On leverage exposure I do think there is scope for a reduction in our CIB for leverage.

The two areas that I would highlight, one is our liquidity pool.

There will come a day when we don't need to run such enormous balances to placate our creditors.

We should be able to take that down materially.

Then we have, as we mentioned before, significant add-on in our derivatives book, which I think is really a response to the fact that there is limited confidence in terms of our contract administration systems, and over time, that will come off.

That's still quite a sizable amount.

I think it's shy of EUR150 billion or so.

Your second question was related to what we estimate to be the impacts from the DB idiosyncratic move -- effects on our revenues.

So we gave you where we think this is for markets.

So again, just for sake of making sure that it is clear, markets for the full year, we had a reduction in revenues to the tune of EUR1.6 billion, of which EUR400 million we would attribute to conscious decisions to back book in terms of exiting geographies and business segments.

And the remaining EUR1.2 billion is, a bit more than 60% of that, is what we think is DB idiosyncratic noise.

The equivalent metric for PWCC, and again, there is no science behind it, but it is slightly shy of EUR100 million has probably been the impact, largely in the Wealth business.

Thanks very much.

Al Alevizakos, HSBC.

Thank you for taking my question.

I've got one question more technical and one more strategic.

I'm going to start with the more technical one.

On the back half, you just said, what you just said, Marcus -- I'm just interested to know on operational risk.

I know that we are going to take additional RWA in 2017 because of all the settlement that just happened.

But I am just wondering, after how many years, actually, can you reduce the operational risk?

There may be specific losses that happened in the past.

So for example, LIBOR, it was a 2012 event.

When will you be able to deduct it over the operational risk pool for the overall industry and for yourself?

And then the second question is about the overall strategy for the investment bank.

I do understand that you are trying basically to regain some market share; however, given that you have to keep on cutting costs and compensation and defer basically a lot of the bonuses, what actually makes you comfortable in the current market that you can retain all your top performers, compared to some of your peers that actually they've got, let's say, more capital, and they are coming in quite aggressively?

Thank you.

Let me take the second one first.

On strategy, it is our intention to pay people market rates.

The cost excess in our investment bank has always been administration systems.

We run far too many booking systems, far too many booking models, and we gave optionality over the way we did things to people and we are imposing the Deutsche Bank way of doing things.

We are standardizing, we're computerizing, and the general administrative expenses of the Bank should come down significantly.

The constraint would have been more in terms of capital resources, not RWA capacity, but that's as it's shown is plentiful, so I don't see any constraint over growing that business quite significantly in the course of the next year or two.

When your question with regards to operational risk and when that starts to roll off, typically there would be something like a 10-year timeline roughly for that.

So we would expect actually in 2018, the first items being starting to be taken out of our historical log, so to say, but as you can see, it is still going to take quite some time until this (inaudible) leads to a more material reduction in operational risk.

And then also we need to see what the outcome in Basel is going to be, because it could be that the entire operational risk regime may actually in the way we operate to be much more tied to size as measured in revenues and become more proportionate to that.

But given today's rules, we would start to see first things roll off in 2018, but we will have this for quite a while in our RWA.

Thank you very much.

Thanks.

And operator, let me apologize in advance.

We are 95 minutes into this, which is the length of your typical Hollywood film.

And I know John and Marcus have an obligation, so we have time for just one more question.

Andrew Stimpson, Bank of America.

Thanks for squeezing me in.

First question on risk-weighted assets.

It was really helpful commentary around the rebound you expect in markets and then on operational risk.

But I'm just wondering about market risk-weighted assets on slide 45 of the presentation pack.

It looks like, I guess that would make it kind of Christmas-time or late December.

You had a big, what I would consider, a [value] exception.

I am just wondering if that's going to [fade] through to some market risk-weighted assets that isn't to do with client activity, and when that might feed through, if that is the case?

And then secondly on -- I suppose this is a question about leverage.

On the -- the LCR is 128%.

It is a bit higher than it used to but it is not exceptionally high versus many of your peers.

John, I know you said that you would expect that to come down.

But given it is not that high as opposed to your peers, how much do you think that can really come down?

And is it high because of the c-cost?

I think once that's done, it's going to come down, because by (inaudible), if that doesn't come down, and you do see some of your security financing transactions balances come back, then that's going to place some pretty significant backwards pressure on your leverage ratios.

I'm just trying to think of how to pair that with the business [grace] you're talking about in general, please.

Thank you.

On the liquidity buffer, I was being aspirational as to there being a time when we wouldn't need quite so much.

I don't think it will be in the course of 2017, necessarily, although we will see how that turns out.

But I wouldn't expect to see that come down too much.

We do need to make sure that it doesn't grow much beyond where it is today.

Despite spots in the Appendix, it will not have an impact on the market risk-weighted assets going forward.

Okay.

Maybe I will follow up on that later.

Great.

Thank you everyone for your patience and apologies to a small handful who could not get in their Qs given the extended commentary we had to do today, given it was a full-year results.

Obviously, the IR team is available for any follow-up questions you may have and we wish you a good rest of the day.

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

Thank you for joining and have a pleasant day.

Good-bye.