Deutsche Bank AG (DB) 0 Q0 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

I'm Miabari, your Chorus Call operator.

Welcome and thank you for joining the fourth-quarter 2015 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, and good morning from Frankfurt.

I would like to welcome everyone this morning to the Deutsche Bank fourth-quarter and fiscal 2015 earnings call.

I have the pleasure to be joined by our Co-CEO, John Cryan, and our CFO, Marcus Schenck.

In a moment Marcus will take you through the analyst presentation, which is available on our website, www.db.com.

Then John will follow with some closing remarks before we open up the call to questions.

I would note that we will have a hard stop this morning around 9.20 CET as we must move on to the annual press conference that we are hosting after this call.

So I would ask for the sake of efficiency that questioners please limit themselves to your two most important questions, not six, and we can fairly get through as many people in the question queue as we can.

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

Yes.

Good morning and welcome also from my side to our full-year results call.

I will, as John mentioned, first walk you through the Q4 numbers and then John Cryan will comment on the progress with regard to the implementation of our strategy 2020.

We record a net loss for the quarter of EUR2.1b, with revenues of EUR6.6b and non-interest expenses of EUR9b.

For the full year revenues amount to EUR33.5b and non-interest expenses to EUR38.7b, leading to a net loss for the year of EUR6.8b.

Risk-weighted assets at year end were at EUR397b and leverage exposure were at EUR1,395b.

Core Tier 1 ratio ended up at 11.1% and leverage ratio at 3.5%.

The net loss is, as I will explain in a moment, a result of various extraordinary effects.

We had a strong first half of the year in revenue terms but a weak second half of the year.

Let me go into some more detail for the quarter, starting with the net income bridge on page 3. Turning first to revenues, at constant exchange rate revenues for the quarter are down EUR1.5b compared to Q4 of 2014.

We saw substantial decline in CB&S, driven by weak market environments, some loss of market share in specific areas and certain one-off effects.

PBC revenues were down EUR108m, mainly because of lower deposit revenues in an ongoing low interest rate environment.

NCOU revenues were down EUR0.5b, driven by valuation impact seen across both assets and liabilities in the quarter, as well as lower revenues from the operating portfolio following disposal in particular of Cosmo in the fourth quarter of 2014.

Loan loss provisions and the adjusted cost base are broadly unchanged year on year in the fourth quarter.

We booked EUR790m for restructuring and severance in the quarter compared to only EUR103m in Q4 of 2014.

This is almost all related to the restructuring in our PBC business, where we booked provisions for future severance.

On the litigation side, we charged another EUR1.2b compared to EUR0.5b in Q4 of 2014.

Currency movements were marginally beneficial for the Bank.

We recorded tax effect relative to last year to the tune of positive EUR0.4b, and as a result we closed the quarter with a net loss of EUR2.1b.

On page 4 we show the same walk for the full-year numbers.

As you can see, revenues for the full year were slightly up in constant exchange rates compared to 2014.

Nevertheless, CB&S is down EUR0.8b, driven by the fourth quarter performance that I've already mentioned.

This decline was offset by NCOU as well as GTB and AWM, where revenues developed nicely over the year.

Our adjusted cost position in 2015 improved a bit.

The adjusted cost base was reduced by about EUR150m at constant exchange rates, and loan loss provisions are lower by EUR185m.

Restructuring and severance is EUR0.6b, higher than in 2014.

And our full litigation cost of EUR5.2b compares to EUR2b in 2014.

Tax and currency movements were favorable for the full year.

Our net loss is then driven by the impairments we booked in Q3, which add up to a total delta of EUR6.3b.

We recognize that these extraordinary effects are real and should not be ignored.

But they are particularly high in 2015.

EUR6.5b impairments, EUR5.2b of litigation charges, both non-tax-deductible, and an additional after-tax EUR0.8b restructuring charge burden our P&L on an after-tax basis by a total EUR12.5b.

That is why we book a net loss of EUR6.8b for the year.

Page 5 shows, on the left-hand side, the breakdown of our Q4 non-interest expenses into the categories we announced end of October 2015.

Adjusted cost base as per fourth quarter amounts to EUR6.8b, which means an increase of about EUR100m at constant FX rate.

As in previous quarters, we have seen a reduction in cost from disposals to the tune of EUR100m, mainly driven by Cosmo following the sale which we completed in the fourth quarter of 2014.

Software amortization and impairment drive our costs up by EUR100m.

Within the remaining, we have various effects, which both increase our cost base by an additional EUR100m.

Bank levy charges are down quarter on quarter by about EUR155m.

This has mainly been caused by a true-up of the final BRRD invoice amount, which was lower than originally estimated.

This is more than offset by higher costs from operational losses, as well as higher other IT costs and professional services.

On the right-hand side we provide you with a further breakdown of our full-year adjusted cost base.

Compensation and benefits increased by 1% on an FX-adjusted basis, with reductions in bonus and retention offset by higher salary costs.

IT costs, our second largest cost category, with the increase mainly caused by higher software impairments and depreciation charges.

Professional service fees are up 3%, reflecting increased external support.

Bank levy and deposit protection charges are up by 50%.

Main driven is the switch from German bank levy to European BRRD-based bank levy.

The decrease in other is mainly influenced by the effect from disposal activities in our non-core unit.

Over to page 6, and a few words on litigation.

Our reserves have increased to EUR5.5b, which is EUR0.7b higher than at the end of September.

Contingent liabilities decreased from EUR2.6b at the end of third quarter to now EUR2.2b.

US mortgage reserves are also decreased slightly.

It is worth mentioning that we have resolved a number of matters in the fourth quarter, including the resolution of CDS antitrust matter and the settlement, or partial settlement I should rather say, of our OFAC US sanction violation, as well as settlement in relation to the DoJ tax program for Swiss banks.

Over to page 7. Common equity Tier 1 capital declined from EUR46.9b at the end of September to EUR44.1b at year end.

The capital reduction is due to the net loss of EUR2.1b, EUR0.5b higher DTA, AT1 coupon accruals of EUR0.1b, and EUR0.4b other effects, including the threshold effect from the 10%/15% rule.

The effect has more than offset the positive EUR0.4b currency effect.

AT1 capital remained constant at EUR4.6b.

Our risk-weighted assets decreased by EUR11b, despite a EUR3b increase caused by FX and a new treatment of our Abbey Life portfolio, to which we had to assign a higher risk weight.

It is now recorded at 370% risk weight compared to 100% before.

This added another EUR4b in RWA.

It should be noted in this context that we are starting to explore or strategic options for our participation in Abbey Life against the backdrop of a new regulatory treatment and the Bank's overall strategy to focus its perimeter.

Main driver behind the overall RWA reduction is the continued derisking of our non-core unit, which cuts EUR7b in RWA, and our low-risk profile in CB&S.

Op risk continues to rise, driven by litigation charges affecting Deutsche Bank and the sector.

CET1 ratio dropped from 11.5% to 11.1% at year end.

Clearly the driver is the reduction in Common Equity Tier 1 capital.

It should be noted in this context that the benefit from our sale of our stake in Hua Xia Bank, which we announced in December, is not yet reflected in these numbers since that will only be included at closing, which we expect to occur in the second quarter of 2016.

This would have added another 50 to 60 basis points on our CET1 ratio at the end 2015 on a pro-forma basis, i.e.

on this basis we see a pro-forma ratio of approximately 11.7%.

Please note that the ultimate impact at closing will then depend on our capital and capital composition at time of closing.

Let me make a few comments on the new SREP requirements.

The ECB notified us that we need to maintain a Core Tier 1 ratio of at least 10.25% in a phase-in basis, which increases to 10.75% in 2016 as we include the first stage of the phase-in in DB's G-SIB buffer, which we gradually have to recognize over the next four years.

As you can see on chart 9, we currently have material buffers over the required minimum on a phased-in basis.

This also means, all things being equal, that the Bank's minimum CET1 capital requirements will be 12.25% by January 19, once all buffers are phased in.

This compares to our fully loaded target of greater than 12.5% by 2018.

In this context, let me remind you that our target ratio includes the impact from expected RWA rule changes.

At the same time, recent guidance from the senior ECB official to industry representatives has been that there should be no double count of risk in SREP, i.e.

to the extent Basel IV RWA inflation is covering risk already considered by the ECB in its SREP decision for a given bank, which should lead to a reduction in the ratio requirement as and when the risk is recovered in pillar 1 RWA.

Please allow me to add another comment on recent regulatory news.

On January 14, the Basel committee published a final paper on the revised minimum capital requirements for market risk, known as the FRTB.

From our first review, we appreciate the recalibration has reduced some punitive elements in the form of [papers].

The outcome is directionally in line with our Strategy 2020 assumptions.

However, a lot of work is now before us as the rules will have to be implemented in national legislation by January 2019, and banks need to implement those rules in their system.

The official reporting under the new standards is now expected by the end of 2019.

Over to page 10.

Leverage exposure is almost unchanged on a reported basis.

At constant currency, leverage exposure dropped by another EUR44b in the quarter.

On an FX-neutral basis we reduced here the ForEx exposure by EUR130b during 2015.

This was mainly the case in CB&S, where leverage dropped during the year by about EUR85b at constant FX.

Leverage ratio declined to 3.5% at the end of the quarter.

Once again, adjusted for the Hua Xia sale, this would be 3.6%.

Before we move on to a more detailed review of the segmental results, allow me a few words on our funding plan and external rating.

As you will all have seen, fixed income markets have been volatile since the beginning of the year, meaning some issuers have postponed new issue.

We, however, issued a US dollar unsecured transaction, as well as our second Spanish covered bond, taking our year-to-date issuance to about EUR3.5b or 10% of requirement despite being in a quiet period for most of the month.

Our cost of funding remains competitive and the recent Moody's downgrade of our long-term rating had no material impact on our spreads.

Note that our short-term and deposit rating was actually upgraded, which we expect to have a positive impact on our funding over time.

Given our broad range of funding sources, we are confident of raising our 2016 requirement of up to EUR35b.

Finally, let me address our statutory capacity to pay 81 coupons in 2016.

Based on the preliminary 2015 financial, we believe we have sufficient ADI and payment capacity under German GAAP to pay 81 coupons.

Despite the forecast of operating loss on our HGB or German GAAP account, we believe we have sufficient general reserves available to cover any shortfall.

Let us now look into the segments for the last time actually in this structure.

As you will remember, starting with the first quarter of 2016, we will report in our new segment structure, as announced in October.

We intend to provide you with restated historic numbers ahead of our Q1 2016 release.

Let me start with CB&S.

With a negative EBIT of EUR1.2b, CB&S had a weak quarter.

Revenues fell by 30% and 25% after adjusting for CVA, DVA, FVA, reflecting a substantially weaker market environment, DB-specific issues in a few areas, and the fact that Q4 of 2014 was actually quite strong for the Bank.

Non-interest expenses went up, driven by FX, and EUR200m higher litigation charges than in Q4 of 2014.

For fiscal year 2015, we have incurred bank levy, single resolution fund charges of in total about EUR500m [EV net], which is about EUR250m higher than in 2014.

Excluding litigation, restructuring and severance, as well as goodwill impairments, remember these were EUR2.2b which we booked in the third quarter, the cost/income ratio for the year is 77%, marginally below the 2014 level, with revenues up 4% for the year, slightly down after adjusting for FX.

The sales and trading performance is shown on chart 13.

On the debt side we had a reasonable quarter, while on a reported basis revenues declined by 16% year over year, but were slightly lower after adjusting for CVA, EVA and FVA.

Rates performed well and saw material increase relative to Q4 of 2014.

FX was in line.

Emerging market debt was up by challenging markets and our exit from Russia.

In credit solutions we had a decent quarter, albeit lower than Q4 of last year.

All in all, we're actually pleased with our FIC performance for the quarter.

Equities had its second challenging quarter in a row.

Whilst the first half of the year was excellent, we continued weak performance in Q4.

The biggest drop was seen in equity derivatives, where a decline in deal volume was exacerbated by challenging risk management in certain areas.

Cash equities suffered from lower client activity.

We have lost some market share in this quarter due to difficult trading conditions, particularly in the US.

In contrast, prime finance performed well and continued to benefit from growth in client balances.

Origination and advisory revenues declined by 43%.

Some of this decline should be seen in the context of a very strong fourth quarter in 2014 performance, particularly in ECM and M&A.

In Q4 2015 in EPM a weaker market was compounded by a slight loss in market share.

In M&A we also experienced a decline in revenues and market share, mainly in Europe.

In debt origination, we were happy with our overall market share.

Overall for CB&S, this is a result of our conscious decision to abstain from a number of transactions in recent months, reflecting our increased focus on risk considerations.

These actions helped us to avoid losses on a number of transactions in both the equities and debt business even though we lost market share in several areas.

In order to regain strength in corporate finance, research and equities, a number of target investments will be made.

Let me move on to PBC, where revenues for the quarter were down 7%.

Most of the decline was attributable to other product revenues, which included a negative valuation impact of about EUR49m related to Hua Xia Bank, as well as to lower deposit revenues, reflecting the nearly zero interest environment.

Credit products, on the other hand, continued to perform well, mainly driven by higher loan volume, especially mortgages and consumer finance, and a modest overall margin increase in the portfolio.

LLPs continued to be low, reflecting the quality of the portfolio in a benign economic environment.

Non-interest expenses included a few material items.

In Q4 we booked an EUR0.7b provision for restructuring and severance related to planned headcount reductions in mainly our German businesses.

We also wrote down software of about EUR0.1b in light of our strategic decision on the use of the joint IT platform with Postbank.

Also please bear in mind in Q3 we booked a EUR2.8b goodwill impairment charge as well as EUR0.8b write-down of intangible assets related to Postbank.

And we also wrote down our stake in Hua Xia by more than EUR600m.

And PBC's EBIT for the year was impacted by a total of some EUR5b specific items, leading to a pre-tax loss for the year of EUR3.3b.

In comparison, 2014 was burdened by only [EUR0.6b] (technical difficulty).

Adjusted for all the items above, 2015 operating performance was actually better than in 2014 despite the more challenging market environment.

Looking into PBC's sub-segments, PCB is a [blue] bank in Germany, recorded in the fourth quarter a pre-tax loss due to the charges for restructuring of about EUR0.6b and the software write-down that I mentioned before.

Full-year revenues were broadly in line with prior year, with the decline in deposit revenues being compensated by strong growth in investment products and credit products.

The negative IBIT from Postbank is caused by some EUR80m charges for severance and EUR20m software amortization that was taken in the fourth quarter.

Fourth-quarter IBIT of our advisory banking international business of EUR22m includes the positive regular contribution from Hua Xia of about EUR110m, as well as the aforementioned negative Hua Xia valuation impact of about EUR50m.

Let us move over to GTB, which had a solid quarter with pre-tax profits of about EUR350m.

Volumes across most products held up mainly in the Americas and EMEA.

The increase in LLP is predominantly due to some specific trade finance provisions in emerging markets, which we expect to be partially offset by hedging gains in the coming quarters.

We do not see a general deterioration in the credit environment yet.

Overall, was strong year for GTB, with pre-tax profit of EUR1.4b, driven by business growth in continued low interest rate environment and high competition.

Fiscal year 2015 ROE holding up well at 12.2% due to increased profitability despite higher allocated capital.

The business also has good momentum going into 2016 on the back of several mandates won in Europe where competitors have pulled out.

Page 18 provides an overview for asset and wealth management.

Whilst IBIT for the full year in Deutsche Asset & Wealth Management is up by 23%, we had a weak fourth quarter.

On and adjusted basis, the full-year IBIT rose 34% and was broadly flat versus the fourth quarter 2014, including -- excluding the Scudder effect of EUR83m which we booked in the fourth quarter of 2014.

Despite the difficult market environment with subdued client activity, revenues for the quarter were up EUR176m relative to the fourth quarter of 2014, which had strong asset gathering in previous quarters and a high proportion of recurring revenue.

However, we have also seen an increase in non-interest expenses driven in part by transaction costs associated with higher asset volumes, compensation costs from investment and hiring, and a rise in other non-compensation-related costs, with partial offset from our cost phasing activities.

We are pleased to announce the sale of our PCS business in the US, which further helps to streamline wealth management in line with DB's Strategy 2020.

We expect this to become effective in the third quarter of 2016.

The non-core unit delivered RWA reductions of EUR7b in Q4, and the accelerated wind-down which we announced previously is progressing well.

Gains from disposals in the quarter were offset by specific valuation impacts across both assets and liabilities.

Litigation continues to be a material driver of NCOU performance.

Provisions increased by EUR500m this quarter.

Looking forward, incremental losses are anticipated from the derisking activity.

However, the execution of our accelerated non-core unit strategy is estimated to be accretive to our Core Tier 1 ratio.

And finally, fourth-quarter IBIT loss in C&A, which is shown on page 20, is largely driven by three effects, namely about EUR360m litigation charges allocated from CB&S to C&A center, about EUR170m negative valuation and timing differences.

These are partially offset by EUR142m positive impact from the offset of divisional accrual of bank levies, and about EUR150m of favorable FVA.

That completes my review of the financials.

And now let me hand over to John, who will provide you with further information on the progress we've made in the past months.

Over to you.

Thank you, Marcus.

Good morning, everyone.

I'll just give you a brief overview of my views on the fourth quarter, a little update on where we are on the restructuring and then something of an outlook for 2016.

Let me start with the fourth quarter.

The fourth-quarter results were in line with my expectations, although I appreciate that they're rather disappointing, especially to our staff.

The restructuring costs were within our guidance.

And although the litigation reserve during the quarter was again a burden, it was not unexpected, and I can cover that a little later, if you wish.

There was some revenue weakness and that is a disappointment and something of a concern, but it's something to which we are turning our attention.

Notwithstanding the loss, I'm actually reasonably optimistic because we've made substantial progress in the restructuring of the Bank in the fourth quarter.

As you all know, the new management team is all in place, all on board.

And we've revamped the management board structure so that all of the key businesses and functions are now represented.

We've restructured our reporting, as Marcus said.

And we'll commence in 2016 to give you the divisional breakdown on the new management structure.

We've eliminated a lot of those committees we talked about, which were slowing down decision-making.

And the business is now much better aligned to client type.

The main focus, certainly the main focus from my perspective in the quarter, was to take necessary actions to remediate and to limit future conduct risk.

As you may know, we've closed our market business in Russia and we've off-boarded, and no-one likes to do this lightly, but we've off-boarded a large number of clients, largely in higher-risk areas and that does inter-map to higher-risk countries.

And that's involved the closure of hundreds of thousands of accounts.

We've taken immediate steps to strengthen our KYC processes and our client on-boarding routine.

And that unfortunately has had, as an element of that, effectively a blanket prohibition on on-boarding certain high-risk client types.

We hope that's a temporary measure.

We've completed the Postbank squeeze-out and the separation work to separate Postbank from Deutsche Bank is well underway.

And we've made progress on a number of our various sale processes.

As Marcus mentioned, we've announced an important sale contract signing with PICC in relation to Hua Xia Bank.

And we've also sold our Alex Brown business, which, as Marcus said, would complete in about the third quarter.

So a number of concrete actions that demonstrate that the restructuring is underway.

And we continue to make progress on a number of other sale initiatives we have.

Turning to 2016 and outlook, as we said in October when we announced the revamp of our book of work, 2016 will remain somewhat challenging.

We've a lot of restructuring ahead of us this year.

We said it would take a couple more years to complete, but we're hoping that the bulk of it, and the most intense impact on our financial results, will be incurred in 2016.

In 2016 we will see the bulk of the impact on revenues, on costs and on capital, and I'll cover those three.

On revenues, as you know, one of our objectives longer terms is to try to balance out higher-quality, more stable revenue to reduce our reliance on our market performance.

So that will be a very long-term process.

At the moment, therefore, we are still beholden to client activity levels, the volatility levels and to markets.

So it's very difficult to give any sort of comforting precision in relation to outlook.

The markets do remain somewhat challenging and uncertain.

The positive point is, though, that in building our strategic plan, the one we announced in October, we didn't make any heroic assumptions about revenue development.

And in fact, we did expect as a consequence of some of the restructuring measures we were going to take, particularly slimming down some of our business lines, that we would lose revenue.

And we also expected the inevitable distraction that comes from this restructuring would impact motivation and morale and also would have some impact, and we've seen that.

The restructuring we hope is transient and not permanent, but it will take 18 to 24 months or so.

I know that's unsettling internally and that's an awful long time.

But I've been through this before, as some of you know.

And what we do intend to do is invest in our client-facing businesses.

We have lost a little market share in certain areas, and we do intend to invest to replace lost revenue and to build the businesses that we want to focus on and want to grow in the future.

The restructuring, in my view, is manageable.

On costs, 2016 will continue to be a challenge given that we're still focused on readjusting the business.

We do expect to incur around about EUR1b of restructuring and severance charges in the year.

That's in addition to the amounts that we've taken in the fourth quarter.

We also expect some upward pressure on our adjusted cost.

Around about EUR200m is expected from inflation on fixed salaries, and we've announced for many of our staff a change in the structure of their compensation.

We would expect around about EUR300m of additional software amortization.

And then on top of that, we've got some planned investments in our critical technologies and some of our regulatory infrastructure.

However, the cost savings that we've already invested in achieving should offset this pressure and we'd expect the adjusted cost base to be roughly flat 2016 on 2015.

But costs do remain under intense scrutiny, but it's not until 2017 that you see the adjusted cost base benefiting from the measures we're taking.

Litigation will remain a burden in 2016.

We cannot forecast it and we don't control the final bill.

But we do expect litigation in 2016 to be below the 2015 level, and we do anticipate settling some significant cases during the year.

On loan loss provisions, we would expect an increase from the current very low level for 2016.

Most of that's a market factor.

And in anticipation potentially of a question you might have, some specific concerns have been raised around the energy sector.

And our exposure to the energy sector is generally underweight in the industry at large and is biased towards investment-grade or well-securitized exposures.

And we've had no material impact in our 2015 results from loan losses or other losses in relation to that sector.

On the capital and balance sheet, we're all expecting continued excellent performance by our non-core operating unit in 2016.

We've asked them to target a reduction in RWAs of something in the order of EUR30b.

We did say that that would potentially if not likely involve some hit to our IFRS results.

We do expect that the decline in RWAs though to be quite offset by increases in operational risk charges.

We don't plan meaningful RWA reductions in global markets in 2016.

We see opportunities there, and there will be some inflation, but we do see reductions in global markets in 2017 and 2018.

The Common Equity Tier 1 ratio will decline slightly in the first quarter 2016.

That's largely in response to seasonal increases in RWA.

That should be the low point.

And we expect the CET1 ratio to increase after Q1 2016, partly, of course, because of the benefit, as Marcus mentioned, from the conclusion of the sale of the stake in Hua Xia Bank.

So I think the key point on capital from my perspective is we continue to think that, absent the fully unexpected and material external event, we see no need to raise capital at this stage.

And we continue to think that we can manage our risk within the capacity we have at hand.

Just a few closing remarks.

I think 2015 unfortunately will be marked as a year, to some extent, of some catch-up.

We really have turned up the heat on the restructuring.

2016 will continue in a similar vein.

But I have every confidence in the success of the turnaround.

The core strength is Deutsche Bank's brand and client engagement, and that continues to be extremely strong.

I've been very impressed by the depth of client relationship.

More importantly, I'm immensely impressed by the quality of the people, who are absolutely world-class colleagues, who remain committed, notwithstanding the rather off-cycle downturn that we've been going through.

We do expect some people to give up the fight; that's normal in these circumstances.

But you have our commitment as a management team to continue to invest in the business.

I'm very proud to lead the Company at the moment and look forward to your questions.

I remain unshakeably optimistic, but I'm prepared to be challenged in that when you raise your questions to Marcus and me.

So over to John, I think, as you're moderating the Q&A.

Operator, can we please open up the lines and begin the Q&A?

(Operator Instructions).

Jernej Omahen, Goldman Sachs.

Yes.

Good morning from my side as well.

Can I please ask two questions, at the risk of upsetting John, John Andrews this is?

So the first one would be on the capital ratios.

So we now know that the ECB wants you to have 12.25%.

Deutsche Bank is targeting 12.5% in 2018.

I think that I'm going to hazard a statement that every other large European bank is targeting a Core Tier 1 which is probably 100 basis points at least above what the supervisor is asking them to have, at a very minimum.

To what extent do you feel that a 12.5% Core Tier 1 target is still an appropriate target for 2018?

And secondly, on your FIC operations, so obviously the result is down year on year.

There was a currency tailwind, I guess, of around 10%, 11%, which makes that revenue decline or market share loss even more pronounced.

Can I please ask just if you could better explain or break down the moving parts within FIC?

So we know from all the competitors of yours that have reported so far that rates were very strong, and this is Deutsche Bank's forte.

And credit and securitization was weak everywhere.

Why is the negative impact of credit and securitization disproportionate at Deutsche Bank, it seems?

And can you give us a sense what the quantum of those number is?

Did Deutsche Bank make a loss in credit or securitization?

The composition of the FIC number, if we could have that as well please.

Thank you very much.

Jernej, it's John.

I'll take the first one.

On the capital ratios, I think we are reasonably comfortable that as long as we're above our minimum, there's no requirement to be materially above it.

I can see that the market may take a little more comfort if there's more of a buffer.

The point is, from then on in, we would expect to be building buffers.

So I think we remain with our target of 12.5%.

Clearly it's a minimum and we'd like to be higher than that, but realistically that's where we've calibrated the plan.

Jernej, Marcus.

I must admit I'm not entirely convinced I exactly understand your question.

But I'm happy --

Okay.

It's a very simple question.

If we could have -- if you could explain the moving parts within FIC.

How strong were rates, how weak was credit and how weak was securitization?

Yes.

And how come that Deutsche Bank's strength, which is rates, was offset what it seems disproportionately by the other two?

Okay.

So let me give you some direction on the sub-segments in FIC.

And I talk full-year numbers, so 2015 over 2014, and I can also highlight directionally how we did in the fourth quarter relative to Q4 2014.

So we actually did, we did very well in FX where we were up over 2014 to the tune of something like 25%.

We did very well in rates, where we were up by some 40%.

This is all reported over reported.

But there's clearly also some currency movements which is part of that.

We were slightly down in distressed.

We were up in credit flow by about 20%.

And we were also up emerging markets, but only marginally.

We did see a decline in what we call structured finance.

That's an area where we dropped a bit.

And, as I think I highlighted in my speech, this is partially also -- actually I delete partially because this is also a quant position which is where we were shying away from taking risk positions because we like distressed situations but we don't like destroyed situations.

And we didn't -- we were just less active in the market there.

So those are mainly the sub-segments on the FIC side.

That's very helpful.

Thank you.

Kian Abouhossein, JPMorgan.

Yes.

Thanks for taking my question.

John, you mentioned in your remarks you understand that staff are disappointed.

And clearly shareholders feel similar to staff, looking at what happened to the share price since your ad hoc statement.

Just wondering how you think about the share price.

And I understand you can't be specific, but more how important is it over 2016 or is it something that we need to turn off the screens and we just need to look through to the final stages of the restructuring plan?

The second question is, the EUR22b cost in 2018 and below on an adjusted basis, does that still hold?

And does flat revenues still hold that were given at the strategic update stage?

And just one more question, again on FICC.

I think the question to ask is more what happened in the fourth quarter, not in the full year.

And if I look at the fourth quarter, your fixed income numbers clean are down 35% and the street is down 12%.

So something has happened and I'm just wondering is there a structural issue, and I think that's what the investor base is asking, or is this more of a cyclical issue?

Because I do not know what I should think about 2016 Deutsche's FICC when I look at such a big decline.

If you could help me with that, that would be useful.

Thank you.

Kian, I'll certainly take the first one and Marcus may have to research the last one a bit because I'm not sure we came out with a 35% decline.

But on the share price, I know you've heard me say this before, we never want to be seen to be trying to manage the Company's share price.

And that's a product of what we do.

But I'm more than alive to the fact that it represents something of a bellwether for morale within the Company.

A lot of people have been with the bank for a long time and have been loyal to the bank and held on to their shares.

And so it's not something we regard lightly, but there's not much we can do about it other than to continue on with what we think is the right thing for the bank, which is to plough ahead with the restructuring, wring out these cost reductions, improve the efficiency, whilst investing in the client-facing businesses to try to maintain our revenue levels.

And unfortunately I think that's all we can say.

There's a degree to which our debt costs have a similar although less obvious effect, but the share price is concerning and we're going to have to try our best to demonstrate to the market that it should be rather higher.

So on your second question, yes, our cost target still holds.

I think we've always made it very clear that it's the minimum we need to achieve and that we would not claim that, with us achieving that target, the Bank would yet be in a position where we would say it is really already run in the most efficient way.

We do see more improvement potential beyond that, but what we think can realistically get done is what is reflected in our 2018 cost targets.

As relates to revenue, you mentioned we made statements in relation to revenues being flat until 2018.

I think we really made some specific statements on revenues.

Please bear in mind that clearly until 2018 you have to take into consideration that Postbank will have, in all likelihood, have left the Company.

We do see some upside to CB&S, which we think has the chance to compensate us exiting certain businesses, as we had announced, and we also do expect to continue to expand our positions in GTB, assets and wealth management.

So that is just how we think about revenues, but clearly I can't speak with confidence the interest rate environment and unfortunately we also cannot predict the overall market environment 2018.

Then on your last point, I must confess in cannot reconcile a 35% decline in FIC.

Yes.

We just take, we basically take some of the other adjustments out, such as -- this is all quarter on quarter.

So you're down 45% quarter on quarter.

We make some adjustments on debt etc, we get to 35%.

So I'm giving you the benefit of the doubt to get to 35%, but that's significantly lower than peers.

And I think that's a question in the market, so I'm just wondering if you could highlight, not just to myself but the investor base, to understand is there a structural issue in your fixed income business, considering you're going through a lot of restructuring which is impacting your business and will impact potentially to your business for 2016.

No, we do not see any structural deterioration in our FIC business.

I'd rather almost say the opposite, particularly also when I look at how we've done -- and that question will probably come anyway at some stage -- how we've done in the first weeks of the year, which have been quite turbulent weeks, but particularly in our FIC business, particularly in both rates and FX we've actually done quite well so far in the year.

So I cannot -- the structural deterioration of the business, I'd almost argue the opposite.

And again also just looking at reported revenues, and I know there's obviously a currency movement there as well.

But just taking some of the core products there, FX, we were flat quarter on quarter.

So Q4 2015 versus Q4 2014 in rates we actually doubled our revenues.

In structured finance we had the same story that I just mentioned when answering Jernej's question.

So we're down there, but down by some [20%].

And looking at the other sectors, they were more or less flat.

So credit was almost exactly the same as (technical difficulty) number.

So I cannot reconcile the statement that there's a 35% decline and I certainly cannot confirm to that.

That's quarter on quarter.

In your tables --

You mean Q3 versus Q4?

Yes, yes.

I really -- you were not the management team for full 2015.

So what I care about were your management team, the management team between fourth and third, and the restructuring started in the fourth.

So the market cares about the fourth.

Yes, okay.

So I apologize.

I answered that Q4 versus Q4 (technical difficulty) quarter.

But as a general message I would want to leave that we're absolutely okay with how our FIC business is performing.

And, as said, (technical difficulty).

So don't translate that (technical difficulty).

Very briefly, equity derivatives, any update following what we've seen in January, considering you had material issues now for two quarters in equity derivative?

I don't see any trends there yet.

(Technical difficulty).

It has been a disappointment if you see before, but we've made that very clear.

Not a situation that we find acceptable.

And the equities, John has also highlighted that, is a business that is dear to our heart and we do expect to make some targeted investments to (technical difficulty) that applies to of course the [repurchase] side, but also (technical difficulty).

Next question, operator.

Huw van Steenis, Morgan Stanley.

Good morning John, Marcus.

Just two questions.

One on Postbank.

I don't think we've really heard very much today.

As I look through the segmental disclosure you've got, it looks like Postbank made a material loss for Q4 and the full year, even excluding impairment.

So could you just give us a sense of what your current thinking is on that business?

And also what you felt the ROE was for the year, even taking out some of the one-offs?

And then secondly, in the non-core unit you're obviously talking about an increase in operational risk.

I was just wondering whether you want to give us a bit more color on that because I think the capital progression for this year does look quite challenging without some further asset disposals.

Thanks ever so much.

So Postbank, I don't have a, as you would call it, maybe a clean ROE.

We can deliver that to you, but we'd really have to strip out a bunch of numbers.

In general we've seen the business take some provisions for restructuring which we booked in the fourth quarter.

I do expect also in 2016 some burden from the restructuring program that Postbank management has suggested by the end of last year.

We have agreed a plan with them which includes certain measures in relation to the size of the branch network, in relation to the overall staff working at Postbank.

Both these issues are now in the process of being negotiated with employee representatives, unions.

And as far as the branch network is concerned, we also there need to involve our counterparty or our partner, Deutsche Post.

All of that is well underway in a very constructive manner.

You should also bear in mind that the Postbank IBIT in 2015 includes clearly also some material impairment charges for goodwill and then also, I think we highlighted that, about EUR800m of write-down of intangibles that were exclusively booked for impairment.

If you adjust for all of that, then we actually had a positive IBIT of more than, I think, EUR500m for the year.

Is that including the non-core unit losses as well?

No.

That is excluding the non-core unit.

Thank you for that question.

And I think I should also highlight that from next quarter on you will see Postbank in its future parameter, i.e.

it will be what we used to see as Postbank and we will add to that those parts of Postbank that are legally still in Postbank, but have so far been reported in our non-core unit, they will be folded bank into Postbank, into the segment Postbank.

So you will from next quarter on get a clean view on what the Postbank business really looks like.

So just on that, that EUR500m of positives would then be pretty much wiped out by the non-core unit.

So basically Postbank zero for the year?

No.

That will not be completely wiped out.

But it will be a reduction by a couple of hundred million.

Okay.

So I'm just looking at page 33 of your presentation.

It shows that the Postbank IBIT was minus EUR467m.

I think the negative impact from the NCOU on IBIT basis from the non-core unit is about EUR300m.

On page 33 it says EUR467m, but okay.

Middle of the page on page 33.

Let me just reconfirm that.

Yes, you're correct.

I was only referring to the liabilities there.

That's the EUR330m that I meant, yes.

Yes.

Sorry I interrupted you.

I apologize.

And you were saying in terms of the timing then or the implications of the timing, sorry.

The question I think, Huw, was as much about the operational --

Thinking.

Risk-weighted assets?

You're right.

I think in my remarks I intimated that what we save in NCOU we might in large measure give back on our operational risk assets.

We're still using an [Armour] model.

So I think we're one of the very few still standing with [Armour].

But the impact of, not only our own settlements but others, does suggest that we will be seeing a reasonably material increase in operational risk assets.

Okay.

Thanks very much.

And just, sorry, in terms of just your overall thinking on the timing of Postbank and how quickly do you want to close, is there any update you'd like to give?

Yes.

On that one I think I would just stick to what we have so far always said, at least up here in the room.

This is our clear target is to make sure that the deconsolidation is achieved so that Postbank is no longer part of the consolidated parameter of Deutsche Bank by the year 2018.

That doesn't mean that it will only happen as late as 2017.

So we're not ruling out that we could see an exit or partial exit this year.

But this is something which will be determined by, A, progress the Company is making on its restructuring, which I highlighted is something that in particular in this quarter is key and needs to be ensured, B, by the overall market environment.

And we will let you know when the right time is, but it will be some time in the next 24 months.

Thank you very much.

Daniele Brupbacher, UBS.

Yes, good morning and thank you.

Just coming back briefly to the RWA outlook, you mentioned that in global markets you actually were on a increased RWA this year.

Can you just tell us in a little bit more detail where you see opportunities there?

And then just on the NCOU reduction this year, I guess you still want to go below EUR10b by the end of the year.

How dependent is this really on market conditions or is this driven by more like negotiation rather than spreads or overall market conditions?

And you did also say, John, you said we lost a little market share in some areas.

Could you just tell us where that was and is that directly related to the restructuring or was it just, let's say, wrong positions in the quarter?

And just on the IB balance sheet, the EUR1.1 trillion, I guess within that balance sheet there is a sizeable position which is probably not so profitable and drags down your overall profitability.

Would you be willing to give us some indication in terms of how big that book is, what it is and how this front-book/back-book profitability looks like these days?

That would be very helpful.

Thank you.

On the NCOU, Daniele, I think you're right.

As the NCOU matures we're finding that we are being left with a mixture of financial positions and there are also still some equity investments.

We are progressing, for example, a process to sell our stake in Fort Elizabeth in New Jersey.

And we had readied a stake we have in a casino group, readied it for IPO.

We actually decided last week not to press the button on the IPO.

That was simply a market call.

We recognized that some numbers then went a little bit fail, so we probably don't get another shot for another few weeks, but we're intent on proceeding there with an IPO and our joint venture or other owners of the company are in line.

So, you're right.

Some of these are negotiated sales and they're effectively M&A exercises.

And then we have two or three very large and to some extent very complex positions whose run-off essentially requires the application of similar skills, so negotiated exits, because a lot of these are very, very long-dated and they wouldn't otherwise run-off by themselves in the time allotted.

So we are having to negotiate our way out of pretty sizeable positions.

So it's a bit hit and miss, but we still feel reasonably confident that we have these things held at the right value, which is critical, and that within the tolerance we set ourselves we should be able to get down below that EUR10b RWA target by the end of the year.

It's subject of course always to markets being there or partners being there with whom we can negotiate, but there's nothing that we can see today that suggests that that won't be the case.

On the RWAs in global markets, global markets is a business we ultimately want to grow.

So it's not in RWA reduction mode.

We have recognized and we're still really working through it, the issue with designating legacy RWAs relating to businesses we remain in, and new business, is that there's very little distinction between the two.

But essentially we're finding, in a lot of parts of fixed income, particularly in rates, that we find attractive pricing for new business.

So we're reasonably comforted that the new business is quite profitable.

And so to the extent we can, where we have old business that's taking up balance sheet and incurring RWA, we would like to exchange new for old.

And we recognize that it's not always easy to exchange out the old.

But the old is ultimately in run-off, obviously.

But I think our confidence comes from the fact that we do like the return on risk-weighted assets, on the current computation for risk-weighted assets, of a lot of the new business in fixed income.

And it's a slight frustration I guess, but we wouldn't be able to deploy as much capital as we could when we saw opportunities to do so.

Flies in the face of what Marcus said earlier about some of the decisions we took, which were well-thought-through and genuinely well-intended trading decisions in the second half of last year, where we were relatively cautious on deployment of risk.

I think on December 29 last year our VAR hit a low that we hadn't seen since about 2004 when the Bank was not as big as it is today.

So we were a little shy of risk deployment and with the passage of time some of that, not all of it, some of that has proven to have been the right decisions.

Some of it was just too cautious.

So I think we need to find the right balance, but at the moment I think caution is holding sway over an impetus to deploy more risk in a lot of our trading strategies.

Having said that, that's not the excuse ?- I'll cover this as the second point to that market share -- in some areas.

And I think we would admit that we have lost market share, for example, in cash equities.

We think that's attributable to unintended and certainly regretted erosions of some of our staff numbers in research and in sales.

And we recognize that to some extent that we've lost ground, for example, in some broker ratings.

But we are determined to reinvest to hire people who will, with a lag of a quarter or two or three or whatever it takes, try to restore our market position.

But we want to compete.

We think cash equities is a place we should be.

And if we're going to be there, we need to be there with full force and effect.

And we do want to invest in cash equities, for example.

The situation in derivatives I think is different because that relates to specific positions we have and some risk management issues we've had, particularly in Asia, in the context of volatility there.

So where we want to invest, we will invest and we can do so within the context of the plan.

Thank you.

Stuart Graham, Autonomous Research.

Hi.

Thanks for taking my questions.

I'm a bit confused still.

On the FIC and equity derivatives, I think that your credit solutions unit you used to make about EUR3b of revenues a year.

In equity derivatives I think you used to make around EUR1.2b.

Are you saying those sorts of numbers they could still make, so there's no structural shift down from rainmakers leaving or racy revenues you no longer want to write?

That's the first question.

The second question was on global markets where the old slide, the team from your strategy update talked about EUR40b of RWA declines and EUR10b of reinvestment, does that slide still hold or it sounds like you want to make some more reinvestment?

I'm not sure whether we should still be expecting that EUR28b net reduction in global markets' RWAs.

And then the final question is a very simple number one.

Can you say what the ADI was at the end of 2015?

I think it was EUR2b at the end of 2014.

Thank you.

Stuart, let me take the last one first.

Not yet.

Finally, we're still working through the numbers but, as I highlighted, that will not be an issue.

But we still need a few weeks to get the final numbers there.

So your first question was on equity derivatives, I think was to what extent that could still hold the historical about EUR1.3b.

Was that your question?

Well, I think credit solutions was EUR3b.

I think it was your single largest business.

And equity derivatives I think was EUR1.2b.

So I guess my question is are those run rates still achievable or has something changed because people left or people used to write business you no longer want to write?

So I would say, based on what we have seen in the last two quarters, and we see going into the year, I would say on credit solutions we don't see any structural change there.

On equity derivatives I've highlighted for Q3 and Q4 this business has come down.

And there, when I look at the full year 2015, this is more a EUR1b business than a EUR1.2b business.

Okay.

And I think your second question was in relation to RWA and whether we did see any change to our statements made in October.

Answer to that, no.

Now can there be some, within the numbers we gave you, some shift from one business to another business?

Sure.

This is the stuff that we have to do.

We have to maintain some flexibility.

But our target in terms of the overall size remains unchanged.

Okay.

Thank you very much.

Andrew Coombs, Citigroup.

Good morning.

I have two questions on capital and one on costs, please.

Firstly, I was looking at your guidance that you expect the Core Tier 1 ratio to be down slightly in the first quarter.

Could you just explain, is that because you expect a front-loading of the EUR1b restructuring you're guiding to for 2016, is it because you think the op-risk inflation will be front-loaded during the year, or is it because you envisage another weak, underlying quarter, or is it a combination of all three of those factors?

My second question would be going back to the opening question today.

You talk about a SREP fully-loaded ratio of 12.25%, your target of 12.5%.

Could you just explain how the BaFin counter-cyclical buffer factors into your thinking as well please?

And then the final question would just be on the PBC cost base.

Even once you strip out the restructuring and severance and the software write-downs, the cost base still appears to be elevated during the fourth quarter.

Could you just provide a bit more color on the cause of that?

Is it because investment spend has been front-loaded there.

Is there an element of seasonality?

I would be grateful for a bit more detail.

Thank you.

Okay.

Let me start.

First question, Core Tier 1 drop expected in the first quarter, main driver or I would say key driver for that would be that we typically would expect an RWA rise in the fourth quarter just by business activity.

And that will have the main, will be the main driver why we would expect Core Tier 1 ratio to come under pressure, relative to the 11.1% metric that we had at year-end.

On your second question, the BaFin actually is not relevant for us there.

We have to follow what the ECB gives us in terms of requirement.

And your third question on the PBC cost base, please bear two things in mind.

First of all, when you compare the ?- well, actually one core item you should bear in mind is that, whilst we have booked all the restructuring provisions, the restructuring has de facto not yet happened.

We started negotiations with employee representatives in November.

These discussions are now ongoing.

We would expect that we can start basically with implementing measures, i.e.

letting people go, closing down the first branches, most likely starting with the third quarter of 2016.

It just takes time.

In Germany, I keep saying that, restructuring is absolutely possible, but there are certain procedures that you need to follow.

And it simply takes some time.

So you do not yet see any benefit from any restructuring measure in that business.

The only thing that you see is always an inflation effect that we have, just by the sheer -- by the fact that the tariff scheme for the vast majority of the people would typically foresee a 2%, 2.5% increase in salaries.

So after any restructuring you would always see costs go up.

So in reality it will be the second half of 2016 when Postbank -- not Postbank, when PBC will start to really show better numbers.

Okay.

Just a follow-up on that, particularly on the capital point.

You see no risk of a national add-on to the ECB requirements, because we've obviously seen that in other regions already.

No, we don't see that.

Okay.

Thank you.

On the counter-cyclical buffer, the 12.25% is without the buffer.

And the buffer, if and when it comes in, would come in and give us one year's notice.

Because obviously you're saying, I know it's a maximum number, but 2.5% by 2019, it's a phased approach, but if you start back (inaudible) your thinking, your 12.5% target would need to be materially higher.

My understanding is the BaFin counter-cyclical buffer applies only to our German business.

But it would be higher, yes.

Okay.

Thank you.

Operator, and with apologies to everybody as one, we're going to have to make this the last question as we have to break for the annual press conference.

Jon Peace, Nomura.

Yes, thank you.

So at your October Investor Day in CB&S you said there would be a EUR1.1b net cost of deleveraging.

Is there any change to that number and how much of it do you think might hit 2016?

And then just very briefly on Postbank, it looks like your 2016 Group adjusted cost and RWA guidance doesn't assume a disposal this year.

Is that correct?

Thanks.

Question two, we provide you indeed a number which assumes basically Postbank is still part of the Group for the full year.

Again, don't misinterpret this.

Should we exit Postbank then we would obviously have to change that forecast.

But us making that forecast, please do not translate that into we rule out an exit in 2016.

There will be an exit over the next 24 months.

On the cost of deleveraging, I think our number still holds.

We expect that it will come in over the plan period of 2018.

And I don't think there's anything we can say other than we're not sure how it will be spread over those years, but flat would be as good a guess as any.

Great.

Thank you.

Operator, thank you.

And apologies to the handful of people left in the queue, but we do need to move on to the annual press conference here in Germany this morning.

Obviously the IR team is available to follow up with everybody who has open questions and needs to have a present discussion on our results.

Thank you for getting up early and dialing in and we look forward to continuing the conversation with all of you.

Thank you.

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

Thank you for joining and have a pleasant day.

Good bye.