Deutsche Bank AG (DB) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

I'm Mia, your Chorus Call operator.

Welcome, and thank you for joining the First Quarter 2018 Fixed Income Conference Call of Deutsche Bank.

(Operator Instructions) I would now like to turn the conference over to James Rivett, Head of Investor Relations.

Please go ahead.

Thank you, Mia, and good afternoon or good morning, everybody.

On behalf of Deutsche Bank, welcome to our Quarterly Fixed Income Investor Call to discuss the First Quarter 2018 Results.

As usual, our CFO, James von Moltke and our Group Treasurer, Dixit Joshi, will run through the presentation.

Also available for the Q&A session that will follow the prepared remarks is Marco Zimmermann, Head of Issuance, as we let Jonathan Blake go on vacation.

You should have access to the presentation on the Creditor Information section of the Deutsche Bank Investor Relations website.

Please be reminded of the cautionary statements regarding forward-looking statements at the end of this presentation.

With that, let me hand over to James.

Thank you, James, and welcome from my side, too.

Let me begin with a summary of the steps that our CEO, Christian Sewing, announced last week on Slide 1. These measures are designed to improve the sustainable profitability of the bank, which over time should help lower our funding costs and improve our credit ratings.

There are 4 key pillars to the priorities Christian outlined: First, we aim to increase the share of revenues coming from our more stable businesses of the Private & Commercial Bank, Asset Management and the Global Transaction Bank to roughly 65% by 2021 from roughly 60% today.

Second, to achieve our revenue objectives, we will look to accelerate the restructuring plans in our retail unit.

As a core part of the restructuring of our retail operations, the regulatory approval that we received recently for the capital waiver for our combined German retail entity allows us to expand the funding benefits from this business.

And we expect their approvals for the legal merger of these 2 units to occur before the end of the second quarter.

With the IPO of our Asset Management business now complete, DWS must execute on its clearly defined external growth start targets.

Third, we have also announced measures to reshape our Corporate & Investment Bank with the goal of focusing our resources on those areas that allow us to build on our position as the leading wholesale bank in Europe with well-defined core product strengths and global reach.

In terms of actions, we will refocus our corporate finance business on industries and segments in which we enjoy a leadership position while reducing our commitment to sectors in the U.S. and Asia where cross-border activity is limited.

We remain committed to offering global industry expertise to corporates, financial institutions and financial sponsors, whose activities closely align with the strength of the German and European economies.

We will scale back our activities in U.S. Rates by shrinking our balance sheet, leverage exposure and repo book in particular.

At the same time, we remain committed to our European Rates business, which given its scale and relevance generates more attractive returns.

We are undertaking a review of our Global Equities business with the expectation of reducing our platform.

This includes our leverage exposure in Global Prime Finance, where we will focus on maintaining our deepest client relationships.

Despite these footprint adjustments, we remain committed to our Corporate & Investment Bank, and our business with international corporates and investors will remain a core element of the group strategy going forward.

Finally, we have to manage our cost base more rigorously and have announced short-term and long-term measures to help us achieve our objectives to meet and potentially improve on the expense cap of EUR 23 billion for 2018.

And to change the forward trajectory, we have launched a series of actions, including a material reduction in our workforce in CIB and supporting infrastructure functions, more scrutiny of external vendor spend and rationalization of our real estate footprint.

We have also launched a Cost Catalyst program, which is intended to drive meaningful change in the expense culture of our bank, focusing on the organizational structures and processes that have historically led to poor cost decisions.

We will report relevant financial details associated with these intended actions in due course.

Although the headline results in the first quarter were disappointing, we did made considerable progress on our most important strategic milestones as we show on Slide 3. Most notably, we completed the IPO of our Asset Management unit, DWS.

We also reached an agreement to sell our retail banking unit in Portugal after announcing the sale of a majority of our Polish retail operations at the end of the last quarter.

And as mentioned earlier, the integration of Postbank with the Deutsche Bank Private & Commercial Bank is progressing well.

We made further progress on a number of large-scale regulatory as well as financial reporting changes, including the successful implementation of MiFID II and IFRS 9. And as Dixit will run through shortly, our balance sheet, capitalization, risk levels and funding profile are all extremely resilient and give us the flexibility to reshape our franchise.

Slide 4 shows a summary of our first quarter financial results.

Our reported net income of EUR 120 million was negatively impacted by a very high effective tax rate, which reflected tax effects related to share-based payments and nondeductible litigation provisions.

Income before income taxes, or EBIT, of EUR 432 million was supported by continued low credit provisions, given the benign operating environment and our strong underwriting standards.

Revenues of EUR 7 billion declined by 5% on a reported basis compared to the first quarter of 2017.

The year-on-year comparison reflects a relatively strong performance in the prior year period, especially in our Corporate & Investment Bank, and was negatively impacted by foreign exchange translation, primarily as the euro appreciated against the U.S. dollar by about 15% on average.

On a constant FX basis, group revenues were broadly flat compared to the first quarter of 2017, including a benefit from DVA.

Turning to noninterest expenses on Slide 5. I wanted to take a step back and show the progress that we have made on a longer-term view.

On a rolling last 12-month basis, we have reduced our total noninterest expenses by nearly EUR 14 billion since the fourth quarter of 2015.

A little over EUR 11 billion of this decline has come from the reduction in nonoperating items as we've worked through most of our major litigation issues and have been less burdened by pretax impairment charges.

Over the same period, we have reduced adjusted costs by 10% or EUR 2.5 billion to EUR 23.9 billion, including the impact of asset sales, FX translation and the wind-down of the non-core unit.

But we acknowledge the progress in reducing our adjusted costs has slowed in recent quarters.

And in light of the ongoing revenue weakness, we recognize that we need to reinvigorate our efforts on expenses.

Before handing over to Dixit, let us look at our adjusted costs in the first quarter of 2018 compared to the prior year period on Slide 6. On a reported basis, adjusted costs of EUR 6.3 billion were broadly flat but were up 4% or EUR 247 million, adjusting for FX.

Over half of the increase came from higher bank levies, where we further front-loaded our anticipated annual payments into the first quarter of 2018.

We are disappointed and surprised by the increase in bank levies that the bank is required to pay this year.

Excluding the bank levies, adjusted costs would have been 2% higher, reflecting the increase in IT costs as we continued our group-wide initiatives and launched several new platform investments in our retail operations relating to the Postbank integration, Italy and to support our Wealth Management franchise.

But even taking into account the higher bank levies, we are on track to meet the EUR 23 billion adjusted cost objective for 2018.

With that, let me hand over to Dixit.

Thank you, James, and welcome to you all.

Let us look at our Common Equity Tier 1 capital and risk-weighted assets on Slide 8. Our CET1 ratio was 13.4% at the end of the first quarter.

Common Equity Tier 1 capital declined by EUR 1 billion to EUR 47.3 billion as several technical adjustments, including the treatment of irrevocable payment commitments to the Single Resolution Fund and deposit protection schemes, the adoption of IFRS 9 as well as movements in OCI, were partially offset by the capital benefits from the IPO of DWS.

Net income generated in the quarter was not recognized in our CET1 capital, given the ECB's guidance.

Risk-weighted assets increased by EUR 10 billion to EUR 354 billion, principally driven by business-related RWA growth in CIB and increases in market risk RWA reflecting higher market volatility.

For the second quarter, our CET1 ratio will be impacted by approximately 15 bps from the proposed payment of the EUR 0.11 common equity dividend and the payment of approximately EUR 300 million of AT1 coupons.

These factors will be partially offset by the recognition of a further EUR 300 million benefit to CET1 capital in relation to the DWS IPO as the final legal entity restructuring was completed in April 2018.

As we discussed last quarter, we are still assessing the impact from some ongoing regulatory developments, including the treatment of guaranteed funds.

While the timing and the impact on our capital ratio remains uncertain, we no longer expect these impacts to occur in the first half of this year.

Our fully loaded leverage ratio on Slide 9 were 3.7% at the end of the first quarter.

Leverage exposure increased by EUR 14 billion on a reported basis, as the EUR 33 billion seasonal increase in pending settlements was partly offset by a EUR 20 billion reduction in securities financing, of which EUR 15 billion came from enhanced collateral recognition.

Moving now to our key liquidity metrics on Slide 10.

Our liquidity coverage ratio, or LCR, increased to 147% and represents an EUR 84 billion surplus above the requirement of 100%.

The increase in the quarter stems primarily from projected lower net cash outflows over the 30-day period, largely as a result of reduction in short-term wholesale funding.

Liquidity reserves of EUR 279 billion were broadly unchanged versus the prior quarter.

We maintain a large proportion of our reserves in cash, given the lack of attractive alternatives for liquid assets, especially in Europe.

Both our LCR and liquidity reserve metrics remain very robust and give us additional flexibility as we adjust our balance sheet and restructure the bank.

Turning now to our funding profile on Slide 11.

Our funded balance sheet reduced by EUR 12 billion versus the end of 2017 levels and remains a little over EUR 1 trillion.

The reduction was driven by a decline in the less stable funding sources, including unsecured wholesale funding.

As a result, the proportion of total funding from the most stable funding sources stood at 73%.

Slightly more than half of our total funding comes from retail and transaction banking deposits, 14% from our long-term debt and capital markets activities and a further 6% from equity capital.

With this, let us move to our funding plan for the current year on Slide 12.

Last quarter, we announced a funding plan for 2018 of between EUR 25 billion to EUR 30 billion.

Our current liquidity forecasting points to a requirement closer to the lower end of the range.

And as a result, we have already completed close to 50% of our now anticipated 2018 requirements.

Year-to-date, we have issued EUR 11.4 billion, primarily in senior TLAC-eligible format as well as some structured issuance.

The average spread was 58 bps above Euribor, down from 71 bps in the fourth quarter of 2017 and 55 bps below the average issuance spread in the previous year's first quarter.

As you may have seen, we today announced a liability management transaction to exchange various notes issued out of our Frankfurt and London branches for New York-issued debt.

This is in line with our recent approach of issuing our liquid U.S. dollar benchmarks out of our New York branch to more closely align our U.S. dollar assets and liabilities.

We also expect this transaction to help manage our potential U.S. tax liability under the Base Erosion and Anti-Abuse Tax provisions, also known as BEAT.

Separately, we expect the legislation to allow us to issue benchmark preferred plain vanilla senior debt to be passed in Germany in July this year.

We would anticipate issuing in this format with a benefit to our funding costs.

Let us now turn to total loss absorbing capacity, or TLAC, on Slide 13.

Our overall TLAC was EUR 124 billion, up by EUR 2 billion versus the prior quarter, driven by our plain vanilla senior debt issuance.

Our TLAC equates to 35% of our risk-weighted assets and 9% of our leverage exposure, representing a very comfortable EUR 40 billion surplus, above our most constraining 2019 requirement.

However, in the second quarter, we expect the surplus to reduce slightly as we have around EUR 6 billion of senior instruments rolling below the 12-month remaining maturity threshold.

We have not yet received the official letter from the Single Resolution Board with our 2018 final MREL requirement, but we do expect this to happen in the second quarter.

On Slide 14, you can see a summary of our credit ratings.

Currently, Fitch and DBRS have a stable outlook.

In December 17, Moody's placed the non-preferred senior ratings of the German banking industry, including our Baa2 rating, on negative outlook.

Moody's would most likely remove the 1 notch of government support from non-preferred senior debt instruments once the Bank Recovery and Resolution Directive has been transposed into German law.

Recently, Moody's affirmed all of our ratings but changed the outlook on our long-term deposit and preferred senior debt ratings, which currently stands at A3, to negative.

S&P has placed our issuer credit rating, which is also the reference for our preferred senior instruments, on CreditWatch negative.

A rating action would not impact our non-preferred senior rating of BBB-.

Obviously, we are disappointed with these developments as we do not think our ratings accurately reflect the strength of our balance sheet and our low risk levels, but we will continue to work with the agencies to allay their concerns.

Before moving on to Q&A, let me summarize a few key points.

We have already completed around 50% of our funding requirements for the year and are in a very comfortable position regarding the remainder of 2018.

The announced strategic actions around our CIB franchise are likely to decrease our leverage exposure and should allow us further opportunities to optimize our funding profile.

In addition, our strong TLAC provides flexibility regarding the timing of future issuance.

Our risk levels, measured either in terms of credit loss provisions or value at risk, remain at very low levels.

And we intend to continue to maintain a solid liquidity profile.

Looking forward, the ability to issue benchmark preferred senior debt is most likely to be granted in July of this year, which would further decrease our funding costs.

As James stated earlier, we expect the merger of our German retail units to occur in the second quarter, which should improve our AT1 coupon payment capacity, although it is too early to quantify the exact impact at this stage.

And we are increasingly optimistic that over time there may be legislative relief that creates a more level playing field across Europe for calculating available distributable items for the payment of AT1 coupons.

With that, let me now hand back over to James Rivett to moderate the Q&A session.

Thank you, Dixit.

Mia, let's open the lines up for questions, please.

(Operator Instructions) And the first question is from the line of Lee Street with Citigroup.

Three for me.

You just mentioned ADIs and potential changes.

Now obviously, there's a proposal out from the European Parliament to sort of equalize the definition across Europe.

If that were to go through, my question is, I mean, what changes would need to happen domestically in Germany for you to actually benefit from that and to actually increase your ADIs?

Secondly, on S&P, you're on a CreditWatch negative at the moment.

If you were to see your preferred senior go down to -- from A- to BBB+, is it possible to quantify or give any details on what you might expect the impact to be, vis-à-vis either corporate deposits or derivatives?

What could the potential impact be there?

And finally, obviously there's a lot in your -- put out there in your new sort of strategic plan.

Are you able to quantify at all how much your leverage exposure might get reduced here, for example, from the -- given the scaling back in U.S. Rates and roughly, what the timing of that might be?

That would be my three questions.

This is Dixit here.

Thank you for those questions.

So just to address the first two and then James will look at the last one.

On ADI, the amendments have been tabled, as you've noticed, in the European Parliament.

These are suggested amendments amongst a whole series of other amendments.

The timeline is we anticipate at the earliest would be through to the end of this year after further implementation.

Were the changes to go through as tabled, this would allow us sufficient flexibility to recognize local country reserves together with what we would traditionally have called ADI.

So suffice to say, I think for all intents and purposes, would give us a greater latitude and degree of freedom than we have today.

And to be clear, if that were to go through, nothing new would need to happen at the German level, just going through as a regulation that just becomes law in Germany?

That is my understanding.

The second point around the senior preferred rating at A-, we have been thinking about that.

What we have seen is over the past 2 years, since the introduction of the German bail-in legislation, which confirmed the creditor hierarchy, not many clients and counterparties, especially to your point on the derivative side, have actually embedded that into their credit criteria.

So they are still referring to the non-preferred ratings, which are the observable ratings that we've had.

So we don't anticipate it having a significant impact.

And on the third item, it's James, I was asked this question last year -- last week on the equity call.

The analyst asking the question gave a range.

And what I said was that we thought it would approach that range.

So I didn't want to give precise guidance on it.

But as a ballpark, I do think something approaching 10% of leverage exposure in CIB is a place to look.

It will take time.

We'd like to see much of this happen inside 2018.

But there may be some spillover as we run off positions and clearly work with clients to manage the transition.

Next question is from the line of Alexander Latter with PGIM.

It's actually James Hyde from PGIM.

First question is on the exchange offer.

Is this -- I understand the BEAT angle for this.

Is there any reasoning regarding the explicit bail-in ability?

I mean, are you -- does the exchange offer make these explicit, the bail-in-able under a SRB decision or anything like that?

That's the first question.

Secondly, as you pull out of a good part of the Prime Brokerage business, how much of your deposits are -- does that involve?

And thirdly, regarding the corporate relationships and the sectors, it's a bit difficult to work out which sectors you will stay in versus ones you'd leave.

Is there any color that you can give on that?

Sure, James.

I will address the first two and then, James, if you can do the last on the corporate BEAT.

So on the exchange offer, you would have seen that we have begun, in fact, issuance of benchmark dollar debt out of DB New York branch in the summer of last year.

And prior to that in May last year, we had announced the exchange offer around the SEC-registered 4.25% notes from issuances that were done in 2016, and these all have the same indenture and the same terms.

So we've issued in the region of $9.4 billion in about 10 tranches across 6 transactions out of DB New York branch since.

All of the notes would be pari passu irrespective of whether they're out of New York branch or Germany or London branch.

On the second point around Prime Brokerage and leverage reduction in Prime Brokerage, Prime Brokerage, as you know, is typically a business which nets down quite nicely in terms of balance sheet efficiencies due to the ability -- due to homogeneous collateral and the ability to net down by [ISN].

We don't anticipate it having any knock-on impact really on deposits from our perspective.

On the industry coverage, I think that was your question, which is the Corporate Finance footprint and where would we be stepping back from coverage.

I don't want to go into that in too much detail because we're essentially executing on these steps, and we want to manage the employee and client communications carefully.

But the principle, as we've, I think, outlined, is we want to be active internationally, globally in industries where -- that are core to the European and German economies.

An obvious example of something that's in the core would be the auto industry.

And obviously, German clients are active across a range of industries.

Technology is another example.

And here's the idea is that if there are industries which are largely domestic, let's say, in the U.S., then our unique selling proposition is more limited than if we're talking about a global industry like the automotive industry.

So that's perhaps a comparison I can draw to give you a sense of the direction that we're headed in.

The next question is from the line of Daniel Crowe with Autonomous.

Lee actually answered a couple of my questions or asked a couple.

I was just wondering, was there a hit to earnings in the widening of the LIBOR/OIS in Q1 '18?

And is this something that you expect to have an effect going forward?

Daniel, this is Dixit here.

It's one that clearly has been in the press for good reason for some time now, just given the widening.

But what I would point to is, firstly, we had begun to see LIBOR/OIS actually start widening in 2016 as a result of U.S. money market reform, which was the first set of moves.

We then saw a tightening in the first part of last year.

And then post BEAT, we started seeing -- or as a consequence of BEAT, we started seeing a widening once again.

But I would say that the LIBOR/OIS moves that have been happening are very different from pre-crisis in that they're not an accurate reflection nowadays of idiosyncratic or interbank credit concerns like they were pre-crisis.

And partly because central banks have injected a substantial amount of liquidity into the market.

That, together with implementation of, call it, the new rule book, whether that's LCR, internal stress, NSFR and all of the liquidity requirements which really forced banks to fund longer, has really meant that LIBOR sensitivity really isn't what it used to be.

And for all intents and purposes, interbank lending and borrowing is a fraction of what it used to be pre-crisis.

So it -- no doubt, the changes in the U.S. have had an effect.

You would also have seen it in cross-currency basis, which has moved the other way, i.e., pressure on LIBOR/OIS due to further native issuance in dollars has alleviated pressure on currency swap spreads because the issuances in currencies outside of the dollar now don't need to do as much.

We don't think that was a material driver for us in the first quarter.

Okay.

And can I just follow up?

And this may have been in your -- but I didn't see it.

Do you disclose your NSFR yet?

I know you gave the LCR.

No, we don't.

It's something though that we do monitor actively as part of our booking model and funding model considerations.

We do monitor very closely the implementation here in Europe.

As the rules haven't been finalized as yet and as they haven't been calibrated, we prefer not giving guidance at this stage.

That said, we do expect to adhere to the requirement above 100 when it gets implemented.

The next question is from the line of Robert Smalley with UBS.

I had three questions.

First, is referring back to a slide in the February 7 presentation.

So I guess, no good deed goes unpunished.

You had laid out payment capacity for AT1s.

2017 numbers were unaudited.

Have there been any material changes in those?

And also in there, there were some available reserve numbers.

Are those all carried in whole into 2018?

That's my first question.

Second was on Page 12 of this presentation, 2018 plan EUR 1 billion to EUR 2 billion in capital instruments.

Is that Tier 2 or AT1?

And then third, a larger question following up on a couple of others, prior management had said on a couple of occasions that there had been a lot of capital raised, but it hadn't been deployed yet.

Can we expect that capital to be deployed with the business plan, and so 12 months from now, we can say that all of that capital raised has been put back into the businesses?

Or is there a timeline for that?

Thank you for those questions.

On the first point on ADIs, we don't think that there have been material changes since the February 7 presentation.

Again, the ability post our Postbank integration, which happens later this month, our ability to -- that affords us greater flexibility regarding ADI.

I think that's quite positive and a change from before.

And we discussed the amendments to the CRR, which were those to go through as tabled, that would provide us again with additional flexibility around ADI.

On the second point around the forecast funding plan for this year in capital instruments, you would have seen that we do have a small shortfall in the glide path to the 1.5% bucket.

And so any capital instrument, i.e., AT1 issuance during the phaseout period would help us with both addressing the 1.5% bucket as well as getting us closer to the 4.5% medium-term leverage ratio target that we had put out.

We will remain opportunistic around issuance.

We had indicated previously on the last fixed income call that we do have some flexibility this year, depending on market conditions, to accelerate what we would have done in '19, '20, '21 into 2018, were we to choose to do that.

Okay.

So just to follow up on that quickly to be clear, you want to be opportunistic, but you will look at the AT1 market, depending on market conditions and where you can -- where you think you can come?

As any good businessman would tell you, I wouldn't rule out any options.

Good.

Sorry, didn't mean to cut you off.

No worries, it's James.

Just on the larger question about capital deployment, I would say that we're managing our capital carefully.

Obviously, the announcements that we made last week about the CIB footprint, they go to deleveraging.

Leverage exposure is one area.

But also there will be some degree of RWA that goes with that.

We are, in general, focused on redeploying our resources into the core areas that we have identified.

So you would expect not just costs and people, but also balance sheet and capital to follow that alignment of our resources.

The reinvestment though is something that we're -- was essentially paused on, given as we've called out in a couple of occasions remaining uncertainties in terms of the implementation of regulatory technical standards through the EBA and the ECB.

Until we've got better visibility, we'll remain cautious on sort of aggressively reinvesting capital.

Next question is from the line of Natacha Blackman with SG Corporate & Investment.

I have three questions.

The first question is on ADI.

So would you be able to just go over what exactly you mean by the flexibility regarding the Postbank integration?

And also regarding the parliament's suggested amendments, I know that there's -- potentially, you could include some capital reserves, which I see as a number of EUR 42 billion in the German GAAP accounts.

Is that the number that you could potentially include in your ADIs if that's adopted?

Secondly, on the dollar tender announced today, is there any MREL or TLAC compliance angle there, just to clear that up?

And then finally, on your capital issuance plans, you've been clear that you're looking to do AT1.

Are you thinking about Tier 2 as well?

So Natacha, thank you.

So on the first point around ADI, the amendments at table do allow you much more flexibility in that simply being restricted to the definition of available distributable items, you would be able to go beyond that to include general reserves as a part of your calculation.

And so when we talked about flexibility, I think were those rules -- were those amendments do get passed by year-end as they're anticipated, I think that would, for all intents and purposes, remove much of the angst around ADI.

On Postbank, once the merger is completed, Postbank holds general reserves as a subsidiary of DBAG.

And through the entity merger with our German retail business, we would have and be able to reassess the need for those general reserves in the retail subsidiary.

And so this does give us the ability to upstream, should we deem that necessary.

On the second point, on MREL and TLAC, very much the same as the existing debt stack, so the exchanges out of Frankfurt- and London-issued TLAC debt into TLAC debt issued out of DB New York branch.

So for all intents and purposes, exactly the same and pari passu with a similar place in the creditor hierarchy.

And the last question was just on the capital issuance, if you could look to do Tier 2 as well.

Yes, so we do have some flexibility, Natacha, around that.

As I said, the specific Tier 1 requirements around the 1.5% and the 4.5% leverage ratio are the 2 things that we would look at.

Again, we have the phase-in period during which to address those.

But again, we have some flexibility as to both Tier 2 and AT1, just given where we are funding plan-wise.

Also as I mentioned, the leverage reductions that we're anticipating as a result of Christian's announcements the week before again will give us more flexibility as we get through this year around capital instrument issuance.

I hope that helps.

Next question is from Jeffrey Berry with Fidelity.

Just one question.

You attributed part of the recent rise in LIBOR over OIS to the BEAT tax.

And I know the exchange announced today on sort of the longer-term funding is related to BEAT.

But I'm interested to hear a bit more about sort of the short-term funding structure side and presumably if the rise in LIBOR was due to reactions to BEAT.

This implies that the gross amount of funding in the short-term interbank market was going up.

So I'm interested on the DB side, if growth structure and funding was increasing, if you were changing legal entities that you were doing U.S. dollar CP, CD issuance from?

Or as you kind of suggested, if there was a sort of rotation from using the FX swap markets into other forms of short-term funding, any comments on that will be appreciated.

Yes, very happy to address that.

For us interestingly, we had looked at our booking model in the summer of last year and commenced issuing dollar debt out of New York branch, which we hadn't done prior to that.

And the main reason for that was to better align funding with where assets and liabilities were actually located, and namely in the U.S. for us from a U.S. dollar perspective.

So the $9.4 billion we've issued year-to-date, and I think of that, roughly $6 billion we've done last year, no doubt then helped as BEAT was announced towards the end of last year.

It turns out that the measures that we've taken to align our booking model more closely with our balance sheet actually helped with regard to BEAT as well.

So it's less about CP and CD issuance, especially since we typically long-fund our positions, whether that's because of LCR, NSFR or internal stress funding.

So it's not really -- it hasn't affected us in the main in the short end.

There's no doubt that as a result of BEAT, this will result in market-wide more native dollar debt issuance taking place.

And I think we're seeing some of that effect there.

You mentioned our exchange offer.

The exchange offer though doesn't in any way change our demand for dollar funding, i.e., we'll continue to fund the bank in the way we have.

But it's the booking entity that we're switching here as opposed to raising new dollar debt and having a commensurate impact on LIBOR/OIS.

I don't know if that helps.

Sure.

No, I mean, I guess, I understand the long-term funding component very well.

I was just curious if your attribution of BEAT to the recent LIBOR moves reflected changes you had seen within the bank on the short-term funding side.

But it sounds like the message is those changes may have already happened earlier or there were no meaningful changes over the last 3 months that would have contributed to that.

Yes, I think for us certainly at the short end, we haven't had to realign what we do in the short end in any material way so far.

(Operator Instructions) Next question is from the line of Aditya Bhagat with HSBC.

Two for me.

Just looking at the next 12 months or so and given all the plans that you have and moving parts with Postbank, is there a floor or a minimum level of core equity Tier 1 ratio that you would like to be operating at?

That's the first one.

And two, I know in 2017, you had mentioned greater than 13%.

Just checking if that's still valid.

And two, after Postbank integration, how do you think your liquidity reserves will change if there is excess liquidity there?

Is it possible for you to deploy that excess liquidity and utilize it as you see fit to and also reduce -- potentially reduce funding needs and improve your margins there?

I guess, the follow-up question to that is really how will that affect any rating agency's view, particularly S&P, on any changes you anticipate there if you do any?

Sure.

Thanks for your questions, Aditya, James here.

On the capital ratio that we're managing to, we haven't changed our guidance, which is to be comfortably above 13%.

I do think that in time, we would like to see a decline in SREP requirements if we're deleveraging the balance sheet and somewhat derisking the model.

So it is a discussion that we would have in more like the medium term.

But for now, we are looking to stay above 13% and manage to a goal over time to remain comfortably above 13%.

Aditya, this is Dixit here.

Just on the second point around the Postbank integration, it very much does give us further opportunities to optimize liquidity and funding.

As you can imagine, when you're optimizing 2 individual entities versus being able to optimize them jointly, that does create some opportunities for better funding.

So that's something that we're looking at.

We have that in our glide path.

And so to your comment on excess liquidity, we've already factored that into this year's funding plan.

And partly, and that's not the only reason, but partly that contributes to our guiding down to the lower end of the EUR 25 billion to EUR 30 billion funding for this year.

Regarding the ratings agencies, I'm not sure this would be the major factor.

As you've seen in the text regarding the negative watch, it's been much more around wanting to see what the glide path from here looks like regarding the strategic actions that we've indicated rather than our capital liquidity or funding robustness or strength of balance sheet or level of risk, whether that's credit or market risk or Level 3 assets.

And just on that, are there -- I know this is not what the rating agencies have spoken about.

But are there mitigants on the balance sheet side that you can have to appease rating agencies if they need that?

Or do you think that is not in question at all here?

We're always in -- we are in dialogue with them and always looking for ways to continue to reflect risks correctly with the rating agencies.

But when you look at our CET1 at 13.4% and you look at our balance sheet where we have a substantial amount of liquid assets and cash together with VAR at close to historic lows, Level 3 assets a fraction of what they used to be many years ago and credit loss provisions again very low, it's hard to derisk from here, given where we are.

So once again, when you read the text around the negative watch, it doesn't actually refer to the riskiness of the firm or the wherewithal to withstand the stress or the capital or liquidity funding position.

It's much more the strategic measures the firm is undertaking and getting visibility around those.

(Operator Instructions) And we have a follow-up question from the line of James Hyde with PGIM.

Yes.

So I just wanted a clarification on this whole point of the waiver given regarding the Postbank deposits.

And the previous question touched on that and still haven't got the answer.

We are talking about not just those deposits being able to be used for [PKG], Blue Bank, [Deutsche Bundesbank, Bank of Deutschland] or whatever you want to call it.

But we are talking about those deposits being deployable across the group for wholesale activities at DBAG and elsewhere within the liquidity framework.

Is that correct?

That's my first question.

It's probably more for Dixit.

Then secondly, probably for James, just want to -- I know the equity analysts have asked a lot about this.

But I am trying to make sense of what you're trying to do with just the scaler of EUR 300 million restructuring provision.

Now obviously, you are getting more flex on the ADIs.

But I do think that at some point for these ratings that, bottom line after one-offs, et cetera, is going to be important.

So I'm just -- what's different this time that EUR 300 million could suffice for this ambitious change?

That would be my second question.

Dixit here.

Very happy to address those points on Postbank.

So firstly, Postbank metrics are already included at the group-wide level.

If you look at our liquidity reserves, if you look at LCR, we already reflect Postbank liquidity as part of our group-wide measures.

So what would happen post the merger is we would have more flexibility to do -- to have more fungible liquidity to the extent there is excess liquidity within our PGK [Aquila] entity.

But we have a series of both legal entity, regional currency metrics that we would still need to abide by, which again, constrains you in many other ways around the organization.

But certainly, it would give us additional flexibility that we wouldn't have today.

I hope that answered the question.

And it's James.

On the larger question, so as I said last week, the -- we had built a plan for this year and guided the market earlier this year to assume about EUR 500 million of -- and so the scaler you referred to is bumping our restructuring charge in which severance is a part from that EUR 500 million to EUR 800 million.

And part of the answer is that within that EUR 500 million, we already contemplated some of the actions that we announced last week.

We've gone further, given a recognition around the environment for our company and the need to take more dramatic action.

But it represents, if you like, an extension of actions that we had been contemplating previously.

So I'd look at all or most of that EUR 800 million to be supporting those actions.

They do fall, as I pointed out on last week's call, not perhaps exclusively but certainly mostly outside of Germany, where the costs per employee separated are higher.

The other thing is we do want to be disciplined about establishing reserves for what we think is really going to happen.

I mean, there will be some amount of attrition as we go through this.

We have had a history, I think, of establishing reserves and then partially releasing them; in other words, finding that the estimates were higher than the reality.

And so we want to be -- we essentially rightsized the expectations we set at this point but certainly achieve our goals within that provision.

So that sort of implies that you do expect some of the franchise people to walk away, of their own free will, before you have to use these provisions?

There's always a degree of attrition in the franchise.

And so the question really is, how much of it is replaced versus not replaced?

And that's a lever that, I think, is an appropriate lever to draw on to get to the outcomes in the friendliest possible way for shareholders.

We're obviously very cognizant of adverse selection that can happen in that environment.

That's something that we work to manage as well.

So it's -- the number that we've cited is the outcome of a balancing of all those considerations.

And we have a follow-up question from Daniel Crowe with Autonomous.

And just kind of following on from what was just said there, to what -- you talked about managing your ADIs and your capital carefully.

I mean, how much does the limitation of ADIs impact your restructuring?

And I guess, that comes back to the question in the changes that might boost ADIs.

Is that something that holds you back a little bit?

Or are these costs just what you think they should be?

The latter.

I mean, when we do the analysis about kind of a forward look, we're obviously cognizant of ADI and living under the constraints we live today.

But we aren't holding back on the restructuring based on what we've announced so far, focused on the ADI constraint.

We've rightsized essentially for our expectations, measured against ADI but did not find that ADI would be anything of a constraint.

And of course, we want to be conservative in how we think about those buffers.

There are no further questions at this time.

I'll hand back to James for closing comments.

Thank you, Mia, and thank you, everyone.

The Investor Relations team is available to take any of your follow-up questions.

Otherwise, we'll speak to you next quarter.

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

Thank you for joining and have a pleasant day.

Goodbye.