James von Moltke: Sure. Happy to do that. So Chris, remember in the February call, we were talking about the model impacts. There are a number of different items, one big one, which is what we call the wholesale model review but then many other items, some of which are netting. And so there is a range of outcomes. But at this point, with better visibility into the discussions, we’d probably say that range is between 40 and 60 basis points of capital. If you take the midpoint of that, which is a pretty good place to be for modeling purposes, that 50 basis points actually represents about the capital — the organic capital generation that consensus would suggest we earn in the balance of the year. Now obviously, we’d like to do better than that.
But if you use that, essentially, earnings for the rest of the year would offset the model impact. And that leaves us sort of the gap to 13.2 to fund growth, a buyback and any other events during the year, uncertainties in the first two numbers, which we feel pretty good about. And to give you a sense that, therefore, the range of outcomes that Christian refers to, we think at this point is affordable based on the information we have.
Christian Sewing: To your second question, and Page 7, look, again, first of all, I really would like to say it is nothing else Chris, than the continuous development of our strategy and the confirmation of the strategy and the trajectory which we have taken over the last years. But of course, when you are in the middle of that, you see the client reaction, you see the momentum I was just talking about before also in the stable business. the foundation and the resilience, which we have found in the Investment Bank, and obviously, you always reconsider what else can we do. And let me start on the business side. So on the right-hand side of the slide. Number one, yes, momentum in the business is so important because it goes back to something which I always try to outline in this call and which I think sometimes gets still underestimated, but that is all about our people.
If they see these results, when you think about the momentum, the passion, the spirit in this bank, you can see that, in particular now in the Corporate and the Private Bank, it goes only into one direction, and that’s what we want to build on. We see growth rates, which are higher than that what we initially planned. Now then there are market opportunities. Also, as a result of the events which we have seen in our competitive environment also here in Europe, which obviously we would like to bank on. And you have seen the one or the other announcement over the last weeks that we will start to do some selective hiring. Very important either in the Corporate Bank platform or in capital-light businesses like the advisory piece. You also see that we are actually focusing on additional markets.
We have hired a team for Latin America in the O&A and financing business, which is important for us because a lot of German clients, corporate clients are actually there who want to have our help. So market opportunities are there. And all that gives us actually the opportunity again, with the momentum we see also when I look forward, and obviously, with the tailwind of the interest rates that we think the revenue growth numbers which we put forward are not only achievable, but we have a real chance to outperform that. Now secondly, obviously, on the cost management side, if you work on those EUR 2 billion, which we always laid out and where we gave details in last year’s IDD, and we always reconfirm the numbers, you then go deeper, you see there is more room.
And therefore, we also changed the governance in the Management Board. We have a clear allocation of cost management now in the management board, front to back, which will create further opportunities. And I think we also don’t only think about long-term or more long-term cost changes, but the reduction in force exercise which we kicked off in March, which will be actually then fully implemented in Q2 is something which shows you that we see now with all that what has happened with the sharpening of our businesses, but also implementation of front-to-end processes that we have more potential than we saw before. And hence, we believe that the additional EUR 500 million is the target and a goal which we should achieve. And thirdly, capital efficiency.
And to be honest, to criticize ourselves, I think we have done a very good capital management. But when it comes to capital efficiency in each and every sub businesses, we can further step up. And what I like about this exercise, which we, in our view, bring approximately EUR 15 billion to EUR 20 billion of risk-weighted assets over the next couple of years in risk-weighted asset reductions while not losing revenues over that is actually a more disciplined capital allocation. And that is on 2 or 3 items. Number one, yes, we will act on items which we see, for instance, in the German mortgage business. If the countercyclical capital buffer has been increased like it was, we obviously will act and will move capital out of this business and either shift it to higher rewarding businesses or we give it back to the shareholders.
Secondly, we have found ways to increase hedging securitizations. And thirdly, discipline is not only on the cost side. It’s in particular on the review of each and every individual reward when it comes to lending. And there, we need to step up. And I think that there are areas in our banks, also in the Corporate Bank, where we can do better when it comes to risk reward, that will be implemented. James will be all over about it. And those three items on top of that, what we have seen in Q1, and I really would like to focus on that again. It’s an 8.3% return on equity. But if you , so to say, the SRF, we are at 10%. We know exactly what happens with the SRF payments. It will go down. And we still have something in plan for ’24 and ’25, but it will go down.
So the 10% RoTE in the first quarter is a really good guidance because the first quarter is not an outlier quarter. If you now think about these three items, obviously, it is our target to outperform that in ’25. And this is the confidence we have. And with all that, what we really see in numbers in the first quarter was the whole trajectory, I’m really excited about that way and hence, very positive that we can achieve that outperformance. James, I don’t know whether you…
James von Moltke: No, nothing to add. Completely agree.
Operator: Our next question is from the line of Tom Hallett from KBW.
Thomas Hallett: So a few questions for me, please. Firstly, on deposits. We saw EUR 27 billion of outflows. But could you just give us a sense of how that evolved throughout the quarter, particularly in and around that market period? And maybe further out, what are you seeing quarter-to-date? And how do you see those deposit trends developing throughout the year? Secondly, you’re sticking to your revenue guidance. I’m just wondering what gives you the confidence that target still holds, given the miss in trading, given what we’re seeing quarter-to-date there? So maybe you could just provide a little bit an update by division, quarter-to-date dynamics, that would be helpful. And one final quick one. I’m interested in your discussions with regulators around the CVS issues and the wider banking crisis.
Do you envisage any change coming maybe through things like liquidity coverage ratio, definition changes or some sort of additional levies to ensure a wider scope for deposits? Any sense where you see change would be great.
James von Moltke: Sure. Thanks, Tom. It’s James. I’ll start. Maybe I’ll start where you finished, and we’ll come back to that with the liquidity metrics because we manage to the liquidity metrics rather than do absolute levels of deposits or funding, and I think it’s important to emphasize we were able to travel through a difficult quarter and especially March, while maintaining and, in fact, improving both ratios — liquidity coverage ratio and net stable funding ratio. And so it’s important to understand what that means. We ended the quarter in as good or better position to withstand a 30-day or a 1-year stress environment than we were at year-end based on that strong deposit base as well as the secured and unsecured funding position we are in.
And we think that’s a significant achievement for Deutsche Bank but also for the industry. I’ll talk about this when we go to your third question, but I think LCR and these other tools have withstood the test in the month of March. Turning to deposits. You mentioned the reduction in the deposits over the course of the quarter. The average deposits were down a little less than 2% over the quarter. And as you’ve seen, the spot level was down 4%, excluding FX. And that, as we look at sort of banks that have reported so far, we think is — and some market — sort of industry data through February is reasonably in line with what you’ve seen on both sides of the Atlantic so far. Now as we’ve talked about, there’s a lot going on in the deposit books.
Normalization in our case, from very high levels of deposits that we finished the year with. There was sort of a run-up in December, which is one of the reasons for the variance between the average and the spot. You’ve also seen a pickup in competition for liquidity as central banks did drained liquidity from the market and you do see some price-sensitive deposits leaving the bank. We’re just disciplined on pricing. And so that represents, if you like, a strategy outcome. We have seen clients shift deposits to higher-yielding investment alternatives, including but not limited to money market funds. And some of that, as we’ve pointed out, within our own system. So it didn’t leave the bank. It just went from deposits to other products. The other thing that happens in our deposit base is sort of usual ebbs and flows.
So if you’re a very large cash management bank for corporates and institutionals, there’s a lot of movement throughout the quarter which means that your specific question is a little bit hard to pinpoint. But I would — and what we’ve talked about is sort of 2/3 coming in the first, say, 9 or 10 weeks of the quarter and then 1/3 in the last 2 weeks, including the sort of episodic or idiosyncratic noise around our name. We think that 1% or 1.5%, which is what we’d estimate over those last 7 or 8 sort of business days of the quarter actually underscores the resilience of the deposit base and the relative absence of what I’ll call hot money at DB. Where did you see it? It was in the portfolios that are typically the most price sensitive and sensitive, if you like, to sentiment.
So in a sense, it’s not surprising to see that amount of reduction. And as we come back to your LCR question, I think it proves its value as a tool because the reality, why did the ratio stay constant, we don’t apply liquidity value to the — those funding sources, including deposits that are most likely to flow out in a stress scenario. So if I put that all together, Tom, we feel pretty good about the experience and the way we were able to manage through that environment. And credit to the teams. The communication, the client outreach and engagement, the work that was done in preparation, we feel quite good about performance through that period.
