Deutsche Bank AG (DB) 2017 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

I'm Yabaya, your Chorus Call operator.

Welcome, and thank you for joining the Second Quarter 2017 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 second quarter 2017 earnings call.

I'm joined today by John Cryan, our CEO; and James Von Moltke, our newly minted Chief Financial Officer, who's bravely undertaking this call 3.5 weeks into the role.

John will start today with some opening remarks and then James will take you all through the bulk of the analyst presentation, which has been available since this morning on our website, www.db.com.

(Operator Instructions)

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

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

Thank you, John, and hello, everyone.

Let me add my welcome to you to our second quarter earnings call.

We've continued to make steady progress on the implementation of our strategic turnaround plan and the many changes we've made so far is starting to bear fruit.

The bank feels very different today from how it was just 2 years ago.

But for all the changes we've made, there's still much to be done.

The results for the first half of 2017 show relatively little impact from charges relating to our legacy compared with what we experienced in 2015 and 2016 nor are they yet impacted by the financial effects of the Postbank merger, details of which we still expect to announce towards the back end of this year.

In the second quarter, we were operating against a macroeconomic backdrop that was actually quite constructive for us.

Growth expectations for Europe are improving and have now overtaken those for the U.S.A.

for 2017.

Geopolitical risks may have increased, but it's contained to certain hotspots, North Korea, Qatar, Brazil, to name a handful.

The revenue environment for us, on the other hand, was more challenging.

Client activity across many of our businesses remained muted.

Extremely low levels of price volatility, notwithstanding the geopolitical backdrop, drove low volumes of trading.

Even the exceptionally low price volatility in many asset classes failed to entice corporations and investors to trade.

Persistently low interest rates in the Euro area and the sea change in inflation expectations in the U.S.A.

both acted as brakes on our revenue in the quarter.

Overall, operating revenues fell short of our own expectations although the bank is now well positioned to benefit for an uptick in interest rates, in volatility and in client activity.

In the quarter, we saw solid performances in our retail banking operations and in our investment manager.

The stronger performance in retail banking reflects our ability to respond to negative margins on our deposit books with account and other fees and through the substitution of deposit products by investment products offering the prospect of higher returns for clients.

We've also substantially completed our branch closure program, and the attendant headcount reduction is well underway with just 11 branches that remain to be closed over the summer and the consequent expense reduction is starting to be seen.

Our asset management businesses continue to exhibit good investment performance across many asset classes and investment styles, and our passive funds remain a vital part of our product offering.

We continue on track to list our asset management group.

Precise timing will be influenced by market considerations and by the need to obtain final regulatory sign-off, and as I said earlier today, it's therefore unlikely that we'll proceed with an IPO in this year, 2017.

In our Corporate & Investment Bank, the second quarter was overall quite challenging, though our credit trading teams once again produced strong results.

Equities and U.S. rates trading results were disappointing.

The Equities business continues to need more investment in infrastructure and people, which we plan to make.

And we'll continue to invest in CIB to build market share and to strengthen our position in our core markets.

On management of the cost base, we saw the quarterly figure down 15% on the corresponding period last year, but this, of course, is also reflective of the absence this year of material net litigation costs or restructuring charges.

We're investing approximately EUR 2 billion a year on projects to change the bank, especially its IT infrastructure, and I would expect to have to invest at roughly this level for the foreseeable future.

This figure excludes the estimate of the cost of the Postbank merger, which we announced back in March and on which we have no further update.

On litigation and regulatory investigations, we have made significant progress in the quarter, concluding numerous settlements.

This is reflected in the net reduction and provisions in the quarter by around EUR 700 million.

The balance of remaining provisions was around EUR 2.5 billion at quarter end.

Unfortunately, we can provide no useful guidance as to the timing or impact of the resolution of our outstanding regulatory investigation litigation items for the rest of 2017.

And now for the detail of the quarter, I'll hand over to James who can walk you through these.

Thank you, John.

I'm very pleased to be hosting my first investor call as Chief Financial Officer of Deutsche Bank.

Let me start with the financial highlights on Page 3. For the second quarter, the group reported income before income taxes or IBIT of EUR 822 million and net income of EUR 466 million, both up materially from last year's second quarter.

While the revenue environment was challenging in the second quarter, as John noted, lower noninterest expenses drove the increase in profitability.

Quarterly net revenues of EUR 6.6 billion were 10% below last year.

This decline was driven by a number of factors, notably the market environment and the strategic and business decisions we have made.

In general, we will speak to our reported results.

Nonetheless, it is important to understand the underlying operating performance in the quarter because we incurred a number of nonoperating items.

For example, we recorded over EUR 340 million of charges in the second quarter from the impact of our credit spreads tightening and for a loss and cumulative currency translation impact related to a business disposition.

The comparison to 2016 was also affected by the absence of some one-off gains in last year's second quarter, the largest of which was the EUR 192 million gain from the sale of our interest in Visa Europe.

Even giving effect to these nonoperating items, the challenging environment contributed to a significant revenue decline, especially in our Corporate & Investment Bank segment.

The group's noninterest expenses in the quarter were significantly improved over the prior year by approximately EUR 900 million, reflecting both our cost control efforts and the absence of an impairment recorded in the prior year, a small net release of litigation reserves compared to a build last year and much lower restructuring and severance charges.

We are making progress on our controllable costs with adjusted costs down 6% year-over-year.

Our fully loaded pro forma CET1 ratio was 14.1 at quarter end with the increase predominantly from proceeds of the capital raise and related items.

The leverage ratio at 3.8% was also higher than last quarter, reflecting the capital raise, a decline from the first quarter on a pro forma basis due to an increase in cash balances as well as updated guidance from ECB on pending settlements that I'll discuss shortly.

The capital increase and our actions to build liquidity over the past several quarters have positioned Deutsche Bank with a CET1 ratio among the highest in our peer group and a strong and highly liquid balance sheet.

Turning now to Page 4. Before I speak to the second quarter in detail, I want briefly to look at first half results in order to highlight some important items that affected our net income relative to last year to better understand our operating performance.

Total net revenues declined by just over EUR 1.5 billion in the first half of the year.

This was more than offset by cost reductions.

Revenues in our business segments were down by over EUR 550 million, slightly over 1/3 of the first half decline, driven primarily by the weak environment and the absence of the prior year gain from the sale of our Visa Europe stake.

Nearly EUR 1 billion of the total revenue decline in the first half of 2017 was driven by the net impact of a number of nonoperating items, notably a year-over-year negative swing of approximately EUR 850 million in DVA and consolidations and adjustments or C&A, specifically related to the tightening of our own credit spread, a number of additional charges in C&A of which the largest were related to the sale of our operations in Argentina and Uruguay this past quarter and a small revenue loss from prior disposals.

These various charges more than offset the nonrecurrence of prior year losses from the NCOU, which was wound down at the end of 2016.

The revenue decline was offset by lower adjusted costs, lower litigation and restructuring and severance costs and the absence of a goodwill impairment recorded in the second quarter of 2016.

In addition, loan loss provisions in the second -- in the first half of 2017 have been low, reflecting the benign credit environment and recoveries.

Let me briefly discuss noninterest expenses on Page 5. Noninterest expenses of EUR 5.7 billion were 14% lower versus the prior year.

The 3 primary drivers of this were lower adjusted costs in the quarter, the absence of a prior year impairment of goodwill and intangibles, virtually no litigation expense and relatively low restructuring expenses.

I'll address all of these in more detail in the coming pages.

Turning to adjusted costs on Page 6. We continue to make progress with adjusted costs down 5% year-over-year on an FX-neutral basis and 11% versus the first quarter of 2017 on a reported basis.

The decline in quarterly adjusted costs was largely driven by the wind-down of the NCOU, business disposals and lower professional services fees.

And although the bank levy went up year-over-year, that reflected the absence of a refund received in last year's quarter.

One key underlying driver that the bank continues to make progress on is FTE reduction with a decline of nearly 4,700 over the last 12 months.

Turning to capital and RWA on Page 7. One technical point I would make, which some of you may have noticed is that we are referring to our CET1 capital and associated ratios as pro forma for the second quarter.

This simply reflects the fact that the new capital had to be approved by the ECB for regulatory purposes, which has occurred but only after the quarter ended.

Pro forma CET1 capital at quarter end was over EUR 50 billion with the increase mostly reflecting the proceeds of the capital raise and the additional benefit from lower deductions under the 10% threshold for items like DTA.

The net income we generated is offset for capital ratio purposes by the 100% payout ratio we must assume as per standard ECB guidance.

Risk-weighted assets stood at EUR 355 billion at quarter end, a EUR 3 billion decline from the first quarter 2017.

The decline was driven by the effect of foreign exchange offsetting EUR 4 billion of RWA growth in the businesses.

Turning to leverage on Page 8. The fully loaded leverage ratio was 3.8% at quarter end with a 40 basis point increase versus the first quarter from the capital raise, partially offset by increases in leverage exposure.

Leverage exposure rose 73 basis -- I'm sorry, EUR 73 billion on a reported basis and EUR 119 billion on an FX-adjusted basis, principally reflecting 2 items: a EUR 52 billion increase from cash and cash from deposit growth, and the proceeds of the capital raise; and a EUR 64 billion increase from a change in the treatment of pending settlements in the leverage exposure calculation per new ECB guidance.

Essentially, we must now include pending settlements in our leverage exposure on a gross basis in line with our IFRS balance sheet rather than netted against payables.

We do not expect the inclusion of gross pending settlements to be a permanent change as the application of draft CRR2 rules would allow us to revert to using net settlements, which we expect to occur in late 2020.

Let me turn to the segments, starting with the new Corporate & Investment Bank or CIB on Page 10.

This page highlights how the business segments in the new CIB have changed, and in particular, it highlights the new Financing segment.

Financing holds business previously reported in either loans and other products or the old Debt Sales & Trading that is related to financing transactions and generally held on our books.

The majority of the transactions in the new Financing segment came from Debt Sales & Trading.

So Financing is more of a banking book business than trading book and should produce relatively more stable results over time while the new FIC Sales & Trading will largely house trading activities.

It's also worth noting that the new CIB segment generates the majority of its revenues from relatively more stable businesses.

Let me now discuss the results of CIB on Page 11.

CIB reported IBIT of EUR 543 million in the second quarter, 18% above last year's second quarter on a reported basis.

This was despite quarterly revenues declining 16% to EUR 3.6 billion, but the revenue decline was offset by a 19% reduction in noninterest expenses and a EUR 100 million decline in credit loss provisions.

While revenues were affected by some nonoperating items, the largest driver was the challenging operating environment.

Noninterest expenses fell 19% to EUR 3 billion, mostly from the absence of the EUR 285 million impairment last year; a EUR 219 million decrease in litigation as there was a small release in the second quarter; and a EUR 177 million decline in adjusted costs, largely driven by reductions in noncompensation costs.

RWA of EUR 242 billion declined 5% from the prior year, reflecting derisking and favorable FX, which offset RWA increases from the residual NCOU assets being transferred into CIB at the start of 2017, and operational risks.

Let me now turn to the individual businesses in CIB starting on Page 12.

Global Transaction Banking revenues of EUR 975 million declined 12% from the prior year, which seems like a large decline at first glance, but there are a number of factors at play.

First, almost half of the year-on-year revenue decline was from increased funding costs incurred by GTB, the majority of which was related to changing our internal method for allocating liquidity-related funding costs.

Second, about a quarter of the revenue decline was from strategic perimeter and client reductions that most affected the cash management and Trust, Agency and Security Services businesses.

The remaining revenue decline was from the impact of margin pressure, which particularly affected trade.

In Origination and Advisory, revenues fell 7% to EUR 563 million, but it's worth noting the first half increase of 9% relative to 2016.

The major driver of the decline was debt origination revenues, which fell 24% in the quarter to EUR 311 million.

This reflected declines both in market issuance volumes as well as in the U.S. leveraged finance market where we changed our risk appetite.

Equity Origination revenues fell 7% to EUR 115 million as industry issuance volumes declined following a robust first quarter.

Advisory revenues increased 91% to EUR 137 million, reflecting a weak prior year quarter as well as the closing of a number of large transactions.

In Financing, revenues were down 5% with a good performance in asset-based lending and CRE being offset by lower revenues in investment-grade lending.

Let me now turn to the Trading units on Page 13.

In Fixed Income Currencies Sales & Trading, second quarter revenues declined 12% to EUR 1.1 billion.

The second quarter was challenging for Fixed Income with subdued client activity and low volatility in many areas.

Nonetheless, credit revenues in the quarter were significantly higher, particularly in the Asia distressed business.

However, all other businesses in FIC Sales & Trading recorded lower revenues in the quarter.

Revenues in rates were down slightly as stronger performance in European rates was offset by a challenging quarter for market making in U.S. rates.

Foreign exchange revenues declined as client flow and volatility were low, particularly compared to last year, which saw heightened activity around the Brexit vote.

Emerging Markets revenues fell as market conditions were challenging and client flow subdued.

FIG Asia Pacific was also down due to lower levels of client activity.

Equity Sales & Trading revenues declined 28% to EUR 537 million.

Declines in Prime Finance revenues accounted for the majority of the total revenue drop in Equity Sales & Trading.

As we've noted before, since the first quarter, we've had a significant recovery of client balances that we lost in the latter part of 2016 and our balance is now back to September 2016 levels, but were still lower than they were on average in last year's second quarter and average margins, while recovering, were also below last year's level.

Additionally, the benefits from recent balances was not fully reflected in our quarterly results as there is a time lag between balances returning and the associated revenues flowing through.

Cash Equities declined largely from sluggish client volumes, particularly in the U S. Equity Derivative revenues were down slightly as low volatility and reduced client flow in the U.S. offset our strong performance in Europe.

Nonetheless, despite the weaker revenue trends in the quarter, we continue to regain business that we lost last year and are encouraged by the pace of client reengagement.

We clearly have more work to do to improve our efficiency, grow our top line and improve returns in CIB and those issues remain a core focus for us.

Let's now turn to the Private & Commercial Bank, our new PCB segment, on Page 14, which combines the former PWCC segment and Postbank.

Second quarter PCB revenues of EUR 2.6 billion declined 7% from the prior year period.

That decline was entirely due to the absence of the EUR 192 million gain from the sale of the bank's interest in Visa Europe last year plus the absence this quarter in revenues from the PCS unit in the U.S. that was sold last September.

Excluding these 2 items, PCB revenues were essentially flat as loan growth and higher fee income from current accounts and investment products offset ongoing impact of the low interest rate environment.

There was also a gain from a distressed loan book restructuring in wealth management that more than offset a loss from the redemption of a legacy trust preferred security in Postbank, both of which you can see in the business segments on the next page.

PCB noninterest expenses declined 3%, largely from lower restructuring charges, while adjusted costs were flat as lower compensation costs were offset by higher investment and technology spend.

Looking at the individual business units in PCB on Page 15.

Revenues in Private & Commercial Clients or PCC declined 4% from the prior year to EUR 1.3 billion.

This decline was entirely driven by the absence of the EUR 88 million Visa Europe gain in last year's second quarter.

The ongoing pressure from low interest rates on deposit revenues was largely mitigated by growth in fee income from investment products, which has been a focus for PCC.

Revenues in Postbank decreased 20% from the prior year to EUR 726 million.

This was driven by the absence of Postbank's EUR 104 million gain from Visa Europe last year and a EUR 118 million loss from the termination of a legacy trust preferred security incurred in the second quarter.

Absent these 2 non-recurring items, Postbank's revenues increased versus last year driven by loan growth and higher fee income.

Wealth Management revenues increased 7% from the prior year to EUR 526 million.

Revenues benefited by a total of EUR 135 million from successful workout activities relating to a book of distressed loan, which more than offset the loss of revenues from the sale of the U.S. PCS business last September.

Excluding these 2 items, wealth management revenues declined from lower net interest revenues as a result of selected loan sale.

On Page 16, we show the results of Deutsche Asset Management excluding the impact of the Abbey Life gross-up from net revenues and noninterest expenses as Abbey has been sold.

Asset Management revenues in the quarter increased 7% to EUR 676 million from higher performance fees in Alternatives and improved management fees reflecting favorable market conditions.

Gross margin was also up in the quarter.

Noninterest expenses excluding the Abbey gross-up of EUR 442 million fell 4%, largely from the absence of restructuring expense in the quarter, which was partially offset by a 3% increase in adjusted costs from higher compensation expense.

Net new asset inflows were EUR 5.7 billion in the quarter.

C&A was negative EUR 265 million, the largest driver of which was the sale of our businesses in Argentina and Uruguay, which created both a loss on sale and a realized DTA loss.

Additionally, the increasing remaining items in C&A was largely from the absence of a EUR 73 million insurance recovery recorded in last year's second quarter.

Let me now turn to outlook.

As we've already noted, the operating environment in the second quarter was challenging with subdued client activity, low volatility and the persistent challenge of low interest rates.

So far, those trends have remained in place in the quarter to date.

But despite that near-term commentary, we remain broadly optimistic on the outlook with improving economic growth, particularly in Continental Europe, the growing likelihood of normalizing interest rates in the eurozone, which would drive significant additional revenues given our interest rate sensitivity.

Credit loss provisions were unusually low in the first half of 2017, and while we expect the benign environment for our portfolio to continue, provisions will likely be modestly higher in the second half of 2017.

We remain on track to achieve our EUR 22 billion adjusted cost target by 2018 and expect to produce lower adjusted costs in the coming quarters.

Litigation remains difficult to forecast.

And as a technical matter, any material litigation that settles as late as mid-March 2018 may impact our 2017 financials as a subsequent event, but we obviously anticipate that litigation expense will be higher in the second half than year-to-date, but below prior year's levels.

Restructuring expenses are also lumpy, and you should expect higher restructuring charges in the second half of 2017, likely in the fourth quarter.

Our guidance that 70% of the planned EUR 2 billion of restructuring expenses announced in March would occur in 2017 and 2018 has not changed.

In the meantime, we remain focused on repositioning the bank, which we do from a renewed position of financial strength with record liquidity, CET1 ratios that are among the highest of our peer group and a client franchise that has again demonstrated its resiliency.

As John has noted, we are on a multi-year journey but we are making demonstrable progress.

John and I would now be happy to answer your questions.

Operator, if we could start the Q&A.

(Operator Instructions)

(Operator Instructions) The first question is from the line of Kian Abouhossein with JPMorgan.

The first question is relating to your Page 24 guidance that you have given, outlook statements on CIB.

You indicated revenues will be slightly lower in CIB.

If I look at first half year-on-year, you were down about 10%.

If I look at the third quarter last year relative to the second quarter run rate this year, it's already EUR 900 million better.

So I'm just wondering what is the driver in the second half that you're seeing, which has to result in a material pickup in revenues in order to be slightly down year-on-year?

And the second question is if you can dig slightly more detail into the Equity Sales & Trading numbers, and in that context, if you can explain a little bit the Prime Brokerage improvements that you're seeing.

Is this new accounts?

Is this cash versus derivatives if you can explain it a bit more.

And in addition to that, can you also explain why you have not participated so well in corporate derivatives, which you haven't mentioned, which has been a big revenue driver for some of the U.S. peers considering your strategy is more to go towards more of a corporate-driven franchise.

So it's James.

I'll take the first part of the question and perhaps part of the second and then pass it on to John.

Firstly, on an outlook basis, I'd caution you that outlook is hard especially about the future.

But as we look at our numbers on a forward-looking basis, it's important to bear in mind that there's also the year-on-year comparisons that you'll see in the third and fourth quarters of the year and especially obviously the fourth quarter where Deutsche has suffered declines in revenues, given the idiosyncratic issues around the company.

In the -- just to answer your Equity question and particularly Prime Finance, we're looking at balances that have recovered, round numbers, 15% since the end of the year and the end of the year represented more or less the low point.

It was a little bit up from the low point in the fourth quarter, but more or less the low point.

As I mentioned in the prepared comments, there's a lag from regaining the balances to seeing the full impact of the revenues from recovering clients.

And lastly, generally, on clients, it is largely or mostly clients coming back to Deutsche Bank and that's obviously encouraging in terms of the signal about the client franchise.

I think, Kian, on the outlook for the full year, we always have to write something and it's quite difficult to work out what to write sometimes because the drivers of our revenues, particularly in Sales & Trading area, are largely driven by client volume and that's notoriously hard to predict.

We're not reading too much into July to date, but there hasn't been much of a change in the environment from what we saw at the end of the second quarter.

So volatility is still very low.

I mean, the VIX was plumbing new depths, it felt, in the past few days and client activity levels tend to be driven a little bit by volatility.

You raised a question on corporate derivatives.

I agree that they seem to have picked up in the U.S. We did okay in Europe in corporate derivatives, but we were sluggish in the U.S. comparatively.

But I think on the outlook, it's really just a question of activity levels and we just don't feel confident that we see them coming back with any particular time frame attaching to them.

But longer term, we do think they will come back.

And if I may, just one more follow-up very quickly, John.

You mentioned at the time taking over Deutsche that you wanted to reinvigorate, so to say, the Sales & Trading franchise at Deutsche Equities.

Is that something you had that is happening?

Is that something you have to shelve considering market conditions are also -- things have happened in the meantime, which impacted your business.

How should we think about that, that Equity franchise?

Yes, that's a good question.

Obviously, in the second half of last year, we did point out that Prime Finance had been a driver of the reduction in performance in that division and that's because there were questions about our creditworthiness, so forth, you know the story.

As James said, a large proportion of that has come back, but it's come back during the first half and it's not as active as it was this time last year for us yet.

Where I think there is a gap to the market, and I said this, I think, a couple of quarters ago, is in the area of electronic trading.

And so there we do need to invest to catch up a little bit in the technology that supports Sales & Trading in Equities.

And then we are investing in people and we've had to reconfigure that business quite a bit.

As it's commoditized and as it's become much more machine-based, we proportionately need fewer traders doing voice trading and more in a way of specialist sales and distribution.

So we've been slightly changing the focus of the Equities business and we were a bit hamstrung by the overall impact the company went through last year, but we're determined to get back there because that's clearly core to even the corporate-led investment banking idea.

Next question is from the line of Jernej Omahen with Goldman Sachs.

I have 2 questions, please.

So the first one relates to the exemption from the German bank separation act in regards to the integration of Deutsche and Postbank.

I think that at the time of the rights issue, John, you expressed an expectation that this would be obtained, I think, the wording was quickly.

And then I think the previous year postdating on the last conference call that the expectation is for this to happen over the course of the second quarter and I was just wondering if you can give us an update on that front.

And then, secondly, on Basel IV, obviously lots of moving parts and lots of meetings that didn't produce an outcome that was expected, i.e., completion of Basel IV over the course of the second quarter.

What is the expectation of Deutsche Bank on this front?

Should we treat your previous guidance as a worst-case outcome or as a base case outcome?

Where do you think Basel IV ends up for Deutsche Bank?

Okay.

Let me take the, what you called the German bank separation act.

Can I ask you a question?

Because on that, there were 2 aspects of the German bank separation act.

One was related to prime finance and the other, I suppose, has a tangential application to the merger with Postbank.

I mean, I can answer the merger with Postbank.

But whether you were referring to the other issue as well, which was the question of whether Prime Finance in the investment bank was going to be an issue.

Was it both or neither?

No, I think so -- I think I'm asking the same question for 3 quarters, so for the third time now since the rights issue was announced and the question relates to...

It may be the waiver on large exposures.

Yes, so the question relates to whether Deutsche Bank will be able to use the liquidity of Deutsche/Postbank for the purposes of the group treasury before the merger is legally completed, i.e., before the legal entity is extinguished?

Okay.

Well, on that one, we've rather moved away from applying for the waiver because the waiver will all be rolled into an approval for the merger.

So we'd like to grandfather effectively the Deutsche Bank subsidiary's ability to have its excess liquidity counted towards group ratios because it didn't seem to make much sense that we go through a process of saying something for Postbank when, A, we didn't need the liquidity and we don't need to show stronger ratios because they're already very, very high.

So we would leave it just until we get the approval for the merger.

And John, may I just ask, so we should expect this to happen by the end of this year?

Yes, no one's losing any sleep over that.

Well, yes, we wouldn't announce the merger if we didn't have approval for it.

So I guess, we seem to be on track to do it this year, although I shouldn't deprive regulators of their own jurisdiction to decide what to think of us, things like that, but I would expect it this year.

On Basel IV, I think there's still a whole variety of topics within Basel IV which are open.

The first, I guess, is that FRTB and I think the draft EU legislation has been issued although we then read the U.S. Treasury paper and we're not sure the U.S. is actually enamored of FRTB anymore so we need to see how quickly Europe actually implements it.

From our perspective, we've had the project running for quite a long time to make sure that we're ready for it, but that's the best I can offer you there.

Likewise, a little bit of uncertainty on operational risks.

As you know, we're one of the few banks left using the Advanced Measurement Approach.

And the new Basel replacement proposal, the Standardized -- SMA, it's called, I think is not yet agreed by Basel.

So again, we're not really sure where we're heading on that one, but we do assume that the AMA model at some stage is replaced by a more standardized approach.

On credit risks, again we were aware of these discussions in relation, in particular, I guess, to the output floor and that, as we said, would impact us in 2 ways.

One, it would have an impact, we assume, on our low credit risk assets, predominantly German mortgages.

And then it would have an impact on the counterparty credit risk that's embedded in our derivative contracts.

And on that one, there still seems to be some sort of a bid-offer between an output floor of about 70% of standardized versus 75% or so and I'm not aware of any concrete progress that's been made.

And so I don't think our guidance has changed very much on that one other than I think it would be fair to say we didn't really run -- rerun the numbers, but as time goes on obviously the impact of uncollateralized and non-daily margin derivatives will diminish somewhat over time, they're quite long dated.

But our older book, which is less compliant with the new rules would tend to run off and then be replaced by derivatives that are a little bit more compliant.

But I think the story there is, as we said at the time the rights issue, every indication we had at that time was that the implementation date would actually fall off the end of our normal planning period, i.e., 2021 and later and I've not heard that anything is proposed to bring it any further forward.

So I think it's still off the end of our planning horizon although I guess, for the fifth year, in 2018, we might need to think about how it's introduced.

We said it was about EUR 100 billion.

I guess, you could shave a little bit off given that the books matured and moved on, but we haven't rerun the numbers.

It was EUR 100 billion without Deutsche/Postbank, right, I mean assuming that is possible, right?

Yes, I think it was, that's right.

Although at the time of the rights issue, we didn't refine that number so I guess the impact on Deutsche/Postbank would impact the mortgage book there.

But we did stress the derivative book, although the legacy book does take a while to run off, it does run off over time.

And don't forget that the number that we did was run on a QIS from a book that now probably doesn't look much like the current book.

A lot of the contracts would have run off and we actually, in the context of running off the NCOU, would have got rid of some of the more offending contracts.

Next question is from the line with Jon Peace with Crédit Suisse.

So for my first question's about fixed income trading and I wonder whether you could just comment were there any sort of lumpy negative trading revenues in the quarter that might have made your sort of underlying run rate a little bit stronger than what was reported?

And then the second question is on the outlook for leverage assets and how quick -- well, first of all, how do you think those should develop going forward?

Is there some things you can do to bring your leverage assets down?

And how quick do you want to get to your 4.5% target, knowing that there might be some relief beyond 2020?

Are you giving yourself more time to get there?

Thank you.

It's James, I'll take both of those questions.

On FIC, I would say there are lumpy revenues in FIC in both directions, which is obviously not atypical.

And I think as we called out, we had a very strong quarter in credit products and so positive results in that book offset some lumpy items in the other direction.

But to your question, I think therefore our performance in the quarter relatively well reflects what you call the underlying performance to your question or the way it was phrased.

On leverage exposures, I think, yes, you answered the question.

We do give ourselves time to work towards the 4.5% target that we've set for a number of reasons, but I'll cite a couple.

First, I noted the pending settlements treatment, so some of the sort of backward motion in the first -- in the second quarter, sorry, we do expect to recoup over time.

There's also a lot of optimization that we think we can still do in respect of leverage exposures and the sort of prudent management of the balance sheet again over time.

And so we do think there's opportunity there in the years to come.

You ask, I think, a near-term outlook question, that's something we work on every day.

We are hoping and expecting markets to normalize over the back half of the year, and if that happens, you would see RWA and likely leverage exposure growth into the year.

And because we're not accumulating capital based on the 100% dividend payout ratio assumption I mentioned in my prepared remarks, you would consequently see both the CET1 and likely the leverage exposure or leverage ratio decline into the year-end, but those are predictable events largely driven by market growth.

Next question is from the line with Stuart Graham with Autonomous Research.

I had 2 questions.

The first one is on the Q4 call, you mentioned EUR 750 million to EUR 1 billion revenues that left the bank last year and should be returning.

I think on the Q1 call, you said EUR 100 million has returned, I think mainly in Prime Broking.

So can you give us an update for how much more returned in Q2 in CIB, please?

And then the second question is on the EUR 64 billion leverage ratio reclassification.

I'm a bit confused because I thought the whole point of the Basel leverage rules were that they were identical irrespective of which GAAP you're on, so it didn't matter whether you're U.S. GAAP or IFRS.

I mean, that number feeds straight into the FSB's G-SIB math so should be consistent across all banks.

So I just wondered why you were reporting on a different basis.

I think James has offered to take the second one first on the leverage ratio, but we're competing over it, but I'll let him do it since it's his first call for us.

We're competing talking about leverage ratio.

On the pending settlements, there are different practices in the marketplace in terms of how it's treated and that's in line with the relevant reporting standards.

So some banks report on a gross basis, some banks report on a net basis.

And in respect of that calculation, it is inconsistent globally reflecting how each jurisdiction treats it.

I point out the U.S. broker-dealers treat this on a net basis given the view that there is relatively little risk in the positions in regular way settlements.

So that's on leverage exposure.

I'm sorry, when you say broker-dealers, you mean the money centers.

Yes, exactly, the money center accounting within the broker-dealer balance sheet.

Yes, it's treated on net basis, and again, each firm is managing it consistent with their accounting practices.

And Stuart, just generally, we need to disabuse you of any notion that leverage ratio is comparable across institutions, and in just 2 areas for us, we still have a big add-on for rates business.

And the second there's another idiosyncrasy of ours, which is that no matter how much net income we pay this year, it doesn't get credited to our CET1 because of the ECB rule that says that given our situation last year of having paid that notional dividend, the minimum dividend against the loss, that leads to us having to assume that all of our net income this year is paid out as dividend, which is not the intention, but it doesn't get added to the CET1.

So unfortunately, although the intention was to create something simple and comparable across jurisdictions and across institutions, from our perspective, at least, there's nothing of the sort.

On the revenues lost and regained, I'm not sure that there was much of an uptick in the Prime Financing revenues attributable to the balances that had come back Q2 versus Q1.

But let me give you one of my favorite examples of demonstrating how, when balances come back, it doesn't necessarily have much of an impact initially on the P&L account.

In our transaction bank, our liability balances year-on-year up 25%.

Unfortunately, I think they're mostly in euros because they're not having any impact at all in a positive sense, that's for sure, on the revenues there.

So where we've seen these balances come back, they haven't come back with commensurate activity or net interest margin pickup yet, although it's clearly much better that they're back than not back.

You still feel confident that EUR 750 million to EUR 1 billion will come back at some point in time because it feels quite a long time ago now.

Yes, it does.

Well, there comes a point where there's no point in worrying what we had and what we've got now because we should just be out there trying to win new business rather than win back business from people we used to do business with.

So it's hard to say, but I wouldn't be anywhere near as bold as to say that we've got a high proportion of that lost EUR 750 million to EUR 1 billion of revenues.

Next question is from the line of Jeremy Sigee with Exane BNP Paribas.

Two questions, please.

So one is just coming back to a point you touched on, which is the GTB revenues rebasing down and I just wanted to be clear that what we're seeing for that 2Q number, the EUR 975 million, that's the new base level, it's not burdened by a full half years' worth of adjustments.

So that's the base level.

And if that is the case, is there any claw-back on that accounting treatment or is this just what it is going forward?

That's my first question.

My second question was a bit more sort of conceptually in a sense, which is how do you evaluate your cost progress against the backdrop of lower revenue outcomes because obviously those low revenues helped your costs to the extent that some of them are revenue related and weaker revenues more than offset the benefits of the lower costs and your cost/income ratio on an adjusted basis is unchanged versus 2Q last year at 83%.

So how do you evaluate your progress?

And I guess, leading on from that, do you at some point consider restating your target if the revenues remain weak in the way that you're describing?

So it's James, I'll take certainly the first and probably part of the second.

On GTB revenues, as I said in the prepared remarks, there were a number of different factors around funding costs and perimeter especially and also, to a certain extent, also risk appetite in that business.

I would say, short answer to your question, the second quarter represents a reasonably good base for comparison.

Some of those funding costs that we referred to were held in the C&A segment in the first quarter and so effort was undertaken to push those out to the businesses.

GTB received a significant amount for a number of reasons, methodology related.

But now that, that's in there, that's a good basis.

I will say part of those liquidity -- part of those funding costs reflected the much higher liquidity we're carrying.

And so over time, as we optimize and manage that liquidity, there could be some improvement.

But the goal of funds transfer pricing obviously is to recognize in the segment the funding costs and liquidity charges that are inherent in the business.

So some, but modest benefit likely to come to GTB over time.

Your second question about expenses, I think it's very early for me to make any new statements about our costs, especially accelerating beyond the EUR 22 billion commitment for 2018.

This is a commitment I understand I'm inheriting and one that shared by the whole management team, I certainly signed up for it.

To your question though about the variability of costs relative to revenues, I think we're all acutely aware of the need to make the cost base as flexible as possible, but that is a significant challenge, especially in areas outside the sort of transaction-related costs, and to some degree, compensation.

So we're aware of it but it'd be too early for me to make any new statements about that.

Jeremy, I know you guys like me to be appropriately nerdy every now and again, but on the costs, if I could just give you some stats on where we are, for example, on technology because we set some targets for you, which were nonfinancial but were related to the complexities of our systems.

You'll recall when I started back in mid-2015, we had 45 different operating systems and we set a target of getting that just down to just 4 in 2020, and we're currently at 33.

So it's down, I think that's 27% or something.

So there's plenty of room to go there.

That's operating systems.

But they host application systems, and at that time I started, we had over 1,000 reconciliations a day between operating systems.

We've got that down by about 1/3 and our target is to get it down to about 300 or so by 2020.

So plenty of scope for simplification there and cost reduction.

And on private cloud adoption, our plan is still to reach at least 80% by 2020 and we're not even halfway there yet, so there's room for improvement there.

And on our vendors, you may remember we had more than 56,000 vendors, which was some feat for 100,000 people in the company and we've got that down by almost 30% or so.

But there's still a lot of progress that we want to make in reducing complexity and I'm still of the view that there's a reasonably good correlation between complexity reduction and real costs and wastage reduction.

So I'm not changing the guidance for what we're targeting.

And just remember, the extra EUR 1 billion after 2018 that we're looking for, but we do see that there's scope to bring down the costs from the run rate that we're currently seeing.

I think it's interesting to hear those other stats because it's tricky just to interpret the P&L cost line given the revenue link, so thank you.

It is and don't forget that -- and again, not to exaggerate the point so wouldn't want you going away thinking we're going to halve our costs, but we've made redundancies in Germany through the Horizon program, the cost -- branch reduction program.

That's been taking place through the first half.

It's as I said in my remarks, it's almost down to 11 branches or something still to do.

And the full weight of that won't come through until the next quarter or two or even three.

Having said that, I also said we need to spend at least EUR 2 billion a year to fund this modernization program.

Otherwise, we'll slip in market share again.

And sorry, just on that point because you flagged the need to invest -- I don't know if you were referring that to the Equities thing, I noticed you were referring to that.

I mean, is that additional to -- is that included in your plans and budgets?

Or is that an incremental thing that you're going to have to find savings to fund?

I think the truth is it's probably a little bit of both.

We'll accommodate some of the cost of doing that within the general change the bank budgets, which we sort of refresh every year.

We've been prioritizing triaging.

We've obviously focused on not just efficiency gains, but we've -- we really focused in the past 2 years on control improvements as well as efficiency gains.

And we need to start investing more in sources of competitive advantage for the bank.

I think in the retail banking world, we've done a good job with the digitalization.

We've got mobile payments up and running in Germany, which is new.

We even got voice banking if you use Siri.

So we're stepping ahead in Germany.

I think we need to invest little bit more in CIB outside of just GTB, which has always been a business that is driven by competitive advantage from technology.

We've got to apply a little bit more investment to ourselves in trading area to help leverage the people there.

Next question is from the line of Andy Stimpson with Bank of America Merrill Lynch.

So first question is on net interest income.

The idea that net interest income would go up if rates do ever go up in Europe has been a powerful concept for the whole sector.

When I look at your net interest income so far this year, so first half '17 on first half '16, then it's down by EUR 1.4 billion already.

So how should we be thinking about that line going forward in the near term?

I know we tend to talk about revenues in terms of product lines, but clearly this year there's definitely been a focus on net interest income.

So maybe you can talk through how if rates don't go up for the next year in Europe how that works out.

And then, secondly, I thought the stats you just gave on technology were extremely helpful.

You made some progress there, as you said, so far and there's plenty to go.

Is there delay between making the progress, say, on the move towards cloud adoption and the costs actually coming through because clearly there's sometimes a difference between making the progress on the IT and then retiring the old systems, which is where you really get the cost saves.

Sure, it's James on the NII question.

There are a lot of moving parts in our NII line items.

Two that I would highlight are the RMBS exits and also Abbey that are in our historical numbers, but not in the current quarter or forward-looking numbers.

So that's a feature that makes the comparability tough.

I'd say the other thing is, again, I mentioned higher liquidity costs.

As we have built liquidity, there are also liabilities that we've been carrying and put on during the period of stress last year.

They resulted in slightly higher funding costs and we'd expect those to roll off over time.

If I look forward, a few things, without wanting to give specific guidance at all, but you mentioned the interest rate sensitivity that we've published and provide again on Page 24 of the investor deck.

We would expect over time some of that to flow into our income statement.

But of course, it's anybody's guess when the market rate environment and Central Bank actions, especially in Europe, really would lead to that outcome.

In the meantime, a number of our businesses, the liability businesses, of course, are suffering continued margin compression and interest rate -- or interest income declines from longer hedges that roll off and that's a process that's not yet complete.

So on a total revenue basis, the businesses work hard to offset that pressure from interest income.

But in the interest income line, it's still a headwind for at least the near term.

On the question of cost, I think there's not a great deal that I could add.

I think most of the opportunity is actually probably beyond 2020.

Because if we reach our target operating infrastructure by 2020, which we're reasonably on track to do.

We need to take stock again then of what the competitive landscape looks like because technological improvements are being introduced at a rate of 0 and it's very difficult, I think, to predict anything through 4 years out.

What I would suggest though is that to the extent we reduce the cost of running the bank, we probably have to shift some of that costs into the change budget, so where I can say we keep the EUR 2 billion at least for the period up till probably 2020.

After that, it may be that the banking world just has to continue to invest in technology to keep pace, very difficult to say.

But the competitive environment will come from outside the banking sector, I think, particularly in retail banking.

Next question is from the line of Giulia Aurora Miotto with Morgan Stanley.

Two questions on my side, one on revenues and one on dividend.

So on the revenue side, I just wonder how is the competitive market evolving in Germany?

And your strategy of rationalizing the branch network, is that affecting your pricing power?

Are you losing customers?

Obviously, we hear a competitor of yours that is quite keen on gaining new customers.

So if you can give us an update on that.

And then on dividend, so I know that obviously you're accruing more than you plan to pay, but I was wondering if you can provide an update on how you're thinking in terms of a normalized payout from 2018 and beyond?

Yes.

Well, let me take the responsibility for margins and revenues in the German market.

At the times we announced the rights issue, we had seen an improvement over the middle of last year.

As soon as we mentioned that, there hasn't been any further improvement.

So the situation, I think, is pretty stable.

And you're right, there is always competition for customers, which hasn't always been as intense in Germany as it has in other markets.

But we are with 20 million clients across our 2 banks and that's against an addressable market of something like 60 million.

So if we can't make money from that competitive position, then something's really wrong.

So I think we're very well positioned.

We need technology to produce better net margins because I don't think Germany will ever be a market that's typified by very high gross margins and that's partly because, as you have seen from our credit numbers, credit losses are not really a hallmark of the market.

On losing customers, I guess, in retail banking, you do that all the time, but our customer numbers are reasonably stable.

We have, as you know from some of our marketing, we've been trying to appeal to the younger customer with some of our more modern technology interfaces and that remains a focus.

The only other thing I would say on retail banking is that we continue to review the brand and we continue to review the pros and cons of advertising.

And I guess, in 2018, that's something we need to turn our attention to.

On the dividend, there's actually some news on the dividend, which is not from us.

I think it's an environmental change, which is that I believe that in the last day or so, a new interpretation of when a dividend -- a minimum dividend is required from the German corporation has been passed.

And to the best of my knowledge and we'll correct this or let you know in some detail, we think that if you are a regulated bank, the minimum dividend requirement, which you remember we were taken to court and then after the court -- first court ruled, we decided just to accept the ruling, we believe that, that's now been annulled by a statute or some act equivalent in Germany that we now have -- so that's taken out of the law in relation to banks.

So I think we're back to a position where we would be able to zero the dividend.

We haven't really made a decision on what we'll do.

We had, prior to this, obviously been working on the basis that the minimum dividend rule applied and that was going to be the basis, I think, for the recommendation for 2018, but -- sorry, for 2017 via paid in 2018.

But we were waiting till the outcome for the whole year was clearer before we made any sort of recommendation to the Supervisory Board who'll in turn make a recommendation to shareholders.

And we saw -- you will have seen that shareholders actually have had a say in the dividend level in Germany, which is I think possibly unique in the country.

But it seems to be the case that for banks that's now no longer the case.

Okay.

So you would consider zeroing the dividend for fiscal year '17 to be paid in 2018 if this goes ahead?

I think the better phraseology is it is now again an option for us, but we'll see how the year looks.

Our capital ratio is obviously quite strong so...

Yes, I would have seen.

It is on for zeroing.

In fact, I was asking if you were planning to start paying a higher dividend, but it doesn't seem the case.

Well, we came up with this deliberately unclear statement of a competitive dividend payout ratio for the financial year '18 paid in '19 at the AGM then.

So I think we stick to that.

Next question is from the line of Andrew Coombs with Citi.

Two follow-up questions, please, one on IT and then one on the leverage ratio.

On IT, thank you for the data that you provided.

What I wanted to ask is could you provide any indication of the size of your overall IT budget as a function of your cost base.

And secondly, you made the point about moving away from run-the-bank costs to then migrating more to change-the-bank costs over time.

Is there already some evidence of that coming through in that a lot of the maintenance spend you've indicated you may be able to reduce, but the EUR 2 billion investment it looks like your capitalized balances had been going up somewhat.

So does that mean that we're just going to see that flowing back through the P&L as a higher amortization charge in due course.

Second question, on the leverage ratio, if you take your numbers now, even if you give back the 20 basis points of benefit, it looked to be the lowest of any of the large global CIB peers.

With that in mind, how much of a competitive issue is that?

And more broadly, the 4.5% number that you target, previously that was a 2018 target, is it now fair to assume that is now a longer-dated target?

I might take the second question first, if I may, and then ask John to respond on the IT front.

We did not set a specific date for the 4.5% target, so I want to correct that impression.

You are correct that on a relative basis compared to the peer group, we would show up at the low end.

As I mentioned earlier in response to another question, I do think there are sort of optimization improvement sort of opportunities ahead of us.

We have, as an institution, focused more on optimizing the risk-weighted asset sort of load on the balance sheet.

And as we look forward in time, I think we will devote more or perhaps equal attention to leverage exposures.

I mentioned also that we are carrying some excess liquidity.

If you put just the liquidity and corporate bond portfolio against our leverage ratio, it represents a reasonably sizable component of that ratio.

Again, it's relatively not risky, but as we optimize around a number of items including the corporate liquidity portfolio, we do see some upside there.

On the IT costs, I direct you -- I don't know if you've got in front of you, Page 6, which is the adjusted cost schedule.

You'll see that the IT costs run just below EUR 1 billion per quarter.

But that's pure IT costs and there will be an IT element within professional services, for example, and then obviously within comp and ben.

That would be the run-the-bank budget plus the change-the-bank budget.

But in non-comp and ben expenses, IT would be a large proportion of our costs because real estate is, I guess, the other one.

So that's sort of indicative that pure IT costs, I think some quarters last year it was EUR 1 billion -- it runs between that sort of EUR 900 million to EUR 1 billion per quarter, but there would be professional services.

There would be a bit of occupancy maybe for some data centers and so forth, a little bit of comp and ben.

They're probably running EUR 5-ish billion a year, I guess.

I guess, my question is that if you take the OpEx, I mean the EUR 927 million at 16%, you add a bit on to the professional services fee, some of the compensation, you could be getting up to 25%, but that's prior to the capitalization number.

And I guess my question is even if you bring the OpEx number down, is the capitalization number going to creep up.

Yes.

Of course, on the software amortization number, you get to a run rate at some stage.

I mean, it does plateau out.

But you're right, I mean, IT should be one of our major costs.

We are an applied technology company and that's the way we need to see ourselves going forward.

Next question is from the line of Al Alevizakos with HSBC.

So question number one, going back to Prime Brokerage.

I was wondering, we were focusing a lot on the revenues that were lost on the Prime Brokerage, but could you give me an indication on the revenue multiple that Prime Brokerage has got to the remaining Equity businesses, i.e., what are the revenues that were lost in the cash business, in the derivatives business because of the Prime Brokerage AUM reductions since the last quarter of 2016?

And then on the second question, we focused a lot on the costs, but I would like to focus a bit on the revenues.

If you were to select 3 businesses, which will offer the largest revenue CAGR through 2020, what are those 3 would be?

Because we have seen competitors highlighting importance of businesses like GDP or wealth management, but to be fair, you've underperformed in those 2 businesses.

So I just really want to hear like your thoughts about the top 3 areas.

Sure.

On Prime Brokerage, I think we'll take that as a follow-up.

I couldn't, to hand, really create a link for you between the cash and derivatives revenue declines and the specific balance items in Prime Finance, what is market, what is idiosyncratic and what has to do with sort of the customer engagement around the Prime Finance business and hedging, if you like, and other activities.

On the revenue side, one thing I'd point out.

So one business that I think performed very well in the quarter is Asset Management and so there we are participating along with peers in a strong market.

In Wealth Management, that business is undergoing a significant repositioning, and as you say, the revenues are down adjusting for the recovery, the large recovery in the quarter.

And I would say that over time it will take us time to fully reinvigorate that business.

And so we would see the trend to be negative for a number of quarters while we rebuild and invest in that business to drive future profitability.

And lastly, GTB, as you point out, there are a number of businesses that banks see as strategic.

In the new regulatory world, we would look at GTB no less so as an attractive strategic business and one which Deutsche Bank is well positioned.

There, as I said in an answer to an earlier question, I actually do think the question is well put in terms of the quarter representing a basis again to which to compare future performance.

As John cited, it's a business that we will -- we will need to continue to invest in to preserve and grow market share.

But there, I would, looking forward, think about revenue development with some optimism in GTB given our competitive position and market offering, client base.

Our last question is from Andrew Lim with Societe Generale.

You talked about the constant changes in GTB, which drove funding costs more to that business.

Could you explain a bit more about why that happened and why you made that change, how much they amounted to and what other businesses they came from?

And then, secondly, on the CET1 capital, if I look quarter-on-quarter, it seems like it actually went down a little bit even though you had positive earnings.

Is that the correct observation there?

And could you explain exactly what happened?

Sure.

Again, on the last question, the CET1, we -- as we've noted, we are, based on ECB guidance, showing our ratios and CET1 capital on the basis of an assumption of a 100% dividend payout ratio.

And that's because there are 3 tests which you apply, one of which is the prior year's dividend, and given we were loss making in 2016, but paid a dividend in respect of '16, that assumption is 100%.

And so that underlies John's earlier comment that we really do not accrue capital for CET1 or regulatory purposes during the year until in 2018 our actual dividend sort of declaration is made.

On the funding charges in GTB, there were a lot of different items that went into it.

So I don't want to talk to individual sort of by amount and driver.

But first of all, it's not an accounting change.

It's really an internal methodology change for how the businesses are rewarded and charged for their balance sheet usage, and GTB in sort of the reallocation of firm-wide funding charges had a net drag.

One of the contributors was a change in our methodology for thinking about intraday liquidity usages in the businesses and there GTB had a higher charge that was partially offset by, on the other side of the balance sheet, liability benefits as we recognize the value of liability providers in the bank.

So there's really a net item flowing through there.

As I say, I'd correct you in terms of an internal methodology versus an accounting change.

And we have no further questions.

I hand back to John Andrews.

Thank you very much, everybody, for listening in on the call today.

We obviously stand by in the IR team to answer any follow-up queries you may have.

And we wish you a good rest of the day and rest of the earnings season.

Thank you.

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

Thank you for joining and have a pleasant day.

Goodbye.